A competitive advantage is an accretion of features that differentiates a business from its rivals and places it in a unique position in the market that is superior to its competitors (Ogbor, 2009, p. 253). According to Lamb, Hair, and McDaniel(2008, p. 39)“it is a set of unique features of a company and its products that are perceived by the target market as significant and superior to the competition.It is the factor or factors that cause customers to patronize a firm and not the competition.” There are three forms of competitive advantages: Cost;Product/Service Differentiation; and Niche Strategies.
There are three areas for developing and implementing a business competitive strategy that yields sustainable advantage. Ogbor(2009, p. 254) highlights these as: a company has to decide on the attributes of the product or service it offering to win a competitive edge, such as reduced costs and prices, a better quality product or service, a broader product diversity, top-qualitycustomer service, as well as a prominenceon a specificmarket niche.Abusiness has to cultivate skills and expertise, in addition to competitive capabilities that differentiate the company from its market rivals, and the company must try to shieldthe business from the influences of competition.
This paper will presents a situation analysis of the company Canon, it will demonstrate how Canon, through the use of sustainable competition advantage strategies has been able to maintain its position as a market leader in the field of copier machine and products as well as assorted electronic products.
Sustainable Competitive Advantage
From a strategic managementevaluation, the recipeto success in business is to establish a unique and inimitablecompetitive advantage: one that creates value for the customers and is difficult for competitors to duplicate. A company has a competitive advantage when it has an edge over rival firms in attracting customers and defending against competitive moves from rivals (Ogbor, 2009, p. 253). However, nurturinga competitive advantage alone is not enough: the key to business success is establishing a sustainable competitive advantage. Sustainable competitive advantage is about how a firm builds long lasting strategies to sustain its competitiveness in the marketplace. A sustainable competitive advantage is also about the firm’s ability to insulate the business from the actions of rivals and other threatening competitive developments.
According to Lamb, Hair, and McDaniel(2008, p. 41), a sustainable competitive advantage is the key to having a competitive advantage whereby a company has the ability to sustain a particular competitive advantage. The authors define sustainable competitive advantage as a competitive advantage that cannot be copied by the competitor. Heene & Sanchez(2010, p. 127) adds that sustainable competitive advantage refers to the implementation of a value-creating strategy that is not susceptible to duplication and is not being implemented by competitors at that moment. Therefore, abusiness’s sustainable competitive advantage is dependent on the speed and rate at which rivals can imitate the market leader’s strategy and plans.
Canon Sustainable Competitive Advantage
According to Ogbor(2009, p. 253) for a company to be sustainable, a firm’s competitive advantage must pass through two important tests: durability and imitability.Durability of a sustainable competitive advantage is the rate at which a firm’s capabilities and underlying resources decrease in valueor become obsolete. New technology can make a company’scompetitive advantage or distinctive competence obsolete or irrelevant. On the other hand, imitability is the rate at which a firm’s capabilities and underlying resources can be duplicated by rival companies.
To the extent that a firms’ distinctive competency gives it competitive advantage in the marketplace, competitors will do what they can do to learn and duplicatethat capabilities andset of skills. Competitors’ efforts may range from “reverse engineering” which involves the taking apart of a competitor’s product so as to establish how it is functions, to poachingworkforcesfrom the market rivals, to absolutepatentcontravention. A firm’s competitive advantage or core competence can be effortlesslyreproducedto the degreethat it is replicable, transparent, andtransferable. Transparency is the swiftnesswith which rival firms can graspthe connectionof capabilitiesand resources supporting a successful firm’s strategy.Transferability refers to the capabilityof rivals to gather the resources and expertisethat is necessitousto support a competitive advantage. Replicability,on the other hand, refers to thecapabilityof rivals to use duplicated resources and capabilities to imitate the other firm’s success.
Also, resources that are distinctive or superior to rivals’ resources may become the basis for sustainable competitive advantage and action. However, in order to serve as potential sources of sustainable competitive advantage, the firm’s resources must meet four requirements. As Heene and Sanchez(2010, pp. 126-127) writes, “to have the potential of sustained competitive advantage, a firm resource must have four attributes: it must be valuable, in the sense that it exploits opportunities and , or neutralizes threats in the firms environment; it must be rare among a firms’ current and potential competition; it must be imperfectly imitable; and there cannot be strategically equivalent substitutes for this resource that are valuable but neither are imperfectly imitable…”
The sustainable competitiveness of Canon laid on its strengths. The company had invested highly on its research and innovation through technical innovations, it had a well laid out marketing expertise and channels, and possessed a highly efficient and low-cost quality manufacturing.The sustainability of Canon competitive advantage can be discussed through the use of three main approaches and sources of competitive advantage. These are Sustainable Cost Competitive Advantage, Sustainable Products/ Service Differentiation, and Sustainable Niche Competitive Advantage.
Sustainable Cost Competitive Advantage
Sustainable cost leadership can be obtained through several ways. These are: from frequentlyprocuring low-pricedinputs, setting up of a scale of plant operations that is efficient, and conceivingproducts for ease of manufacture, as well asavoiding marginal customers and controlling overhead costs (Lamb, Hair, & McDaniel, 2008, p. 39). The authors add, “Having a cost competitive advantage means being the low-cost competitor in an industry while maintaining satisfactory profit margins.A cost competitive advantage enables a firm to deliver superior customer value.”Canon has been able to maintain its sustainable cost competitive advantage through several strategies that it has employed to ensure its prices are always affordable and below competitor price while at the same time maintaining a high-quality standards of its products.
Canon has achieved a sustainable cost competitive advantage through several ways. First, Canon has heavily invested in product refinement, constant product design and redesign which was a strategy intended to enhance customer satisfaction and provision of products necessary to catch up with competitive offerings. The use of cutting edge technology enabled the company to offset the high cost of labor, thereby allowing the company to offer competitive prices.
Canon also achieves a sustainable cost competitive advantage by employment of efficient labor and labor practices that allowed employees to make changes in the production process where inefficiency has been noted. Additionally, the company has established a culture where the working force is held in high regards. This ensured that the workforce felt as part of the company and individually responsible for the success of the company, and they donot regard themselves simply as employees of Canon. This gives them a sense of ownership and in extent promotes efficiency among the employee thereby decreasing the marginal cost of labor per output.
The company has also heavily invested in reengineering. This entails fundamental rethinking and redesign of businesses process to achieve improvements in critical measures of productivity (Lamb, Hair, & McDaniel, 2008, p. 40). Canon has continually involved itself in reorganizing of the company from functional departments such as sales, engineering, and production to cross-disciplinary teams.
Another source of sustainable cost competitive advantage for Canon is production innovation. The company has continually involved itself in new technology and simplified production techniques which help lower the average cost of production. The use of computer aided manufacturing and designs has helped Canon to reduce their production cost.
Sustainable Products/Service Differentiation
For the reason that cost competitive advantages are conditional to continual erosion, product differentiation provides a longer lasting or sustainable competitive advantage. The durability of this strategy makes it more attractive to many top managers. This form of competitive advantage occurswhen a business delivers something differentiated that is of value in the market beyond simply extendinga low price (Lamb, Hair, & McDaniel, 2008, p. 40).Canon has since its inception generated sustainable competitive advantage through the use of product differentiation. This it has achieved through product reliability, a strong dealer network,image, service and brand name.
Diversification was a key strategy for Canon as a tool to facilitate their growth. It began by diversifying into television lenses and micrographic equipment. And later this was extended to copy machines, , strobe-integrated cameras, electronic calculators, home VCRs, and auto-focusing cameras.
Another source of sustainable competitive advantage for Canon was obtained from its insistence on quality products presented into the market at the lowest cost with the best delivery. This was achieved through the philosophy of the production system that organized the manufacturing of each product in a way that the minimum amount of resources, time and energy is used. The employment of this philosophy ensured that Canon continually produced high-quality goods at a minimum production cost which was transferred to the customer in the form of an affordable price.
Canon continuously engaged in new product introductions with a stream of state-of-the-art technological innovations throughout the seventies. Many of its innovative products, which enabled the company to grow quickly in its early years especially the seventies, were attributable to the use of technology and the capacity for managing rapid technological change. In 1973, it added color to the New Process (NP) system; in 1975, it added laser beam printing technology, and in 1978 it introduced a high volume copiers model. In 1979, Canon introduced the NP200 model that was recognized for its efficiency and productivity during the Leipzig. This was achieved as a result of Canon’s pursuance of a strategy of decentralization of R&D, whereby each product divisions has its own personnel. These individual divisional teams were boosted by a corporate technical planning and operation center that was responsible for long-term strategic R&D and a main research center. This allowed for continual innovation of products across the company on a continual basis.
Product differentiation: comparing Canon second-generation copier with the equivalent from Xerox, it was economical, more compact, and more reliable and still had the same or better quality of copies. It first developed the New Process 1100, and then introduced the second-generation of the NP system within two years (NPL7). Which was an improvement of the NP1100 as it simplified developing and cleaning, eliminated complex fusing technology and made toner supply easier through a new system developed to use liquid toner. These were products that boosted of attributes that were unique to these products only.
The company also placed a high sense of importance on continued growth of Canon through diversification into new products. This ensured adaptation of the company to environmental changes. New products translated into more revenue and ensured that the company survived in an era of extreme competition.
Sustainable Niche Competitive Advantage
A niche competitive advantage seeks to target and effectively serve a single segment of the market(Lamb, Hair, & McDaniel, 2008, p. 41). For small companies with limited resources that potentially face giant competitors, niching is the only viable option.Canon achieved this through first introducing its products in the Japan market before distributing them to other parts of the world. It had created a niche for itself in the Japanese consumers which no other company could eat into.
Other strategies that Canon employed so as to maintain its competitive advantage included:
Canon recognized that its continued market success depended on its ability to exploit new research into marketable products quickly; it therefore worked hard to reduce the new product introduction cycle through cross-functional programme that was referred to as TS1/2 whose purpose was to cut development time by 50 percent on a continuous basis. This ensured that the product turnover was high ensuring that a new product was always in the market ensuring constant product differentiation and sales.
Continual use of patents by Canon that would prevent copying of the technology for a specified period of time was another source of sustainable competitive advantage. The first product to be licensed was the first copier, the New Process 1100 which had close to 500 patents protecting it. The second major product that Canon patented was the Personal Copier. The research and the cartridge technology was patented and protected against any form of copying. Additionally, Canon technology was not licensed to other manufacturers. This enabled them to gain a sustainable competitive advantage as no other company could profit from the same technology.
Canon also advanced the sustainability of its market competitive advantage through its marketing strategies. It ensured that before it introduced a new product into the global market, enough information had been gathered about the product from the domestic market, and any learning from the domestic reaction to the product they would draw changes that needed to be done before the product was taken into the international market. Additionally, it reduced its risk by introducing a new product through known channels first.
In conclusion, through the uses of sustainable cost competitive advantage, product differentiation and sustainable niche competitive advantage, as well as other strategies such as use of patents and non-licensing of its product, Canon has been able to create a strategy that will continuously ensure its market leadership.
Chaston, I. (2012). Strategy for Sustainable Competitive Advantage: Surviving Declining Demand and China’s Global Development. New York: Routledge.
Clark, D. N. (2007). Resource-Based Theory: Creating and Sustaining Competitive Advantage. Oxford: Oxford University Press.
Enz, C. A. (2009). Hospitality Strategic Management: Concepts and Cases. New York: John Wiley and Sons.
Ghoshal, S., & Ackenhusen, M. (1998). Strategy: process, content, context: an international: Case 10: Canon: Competing on Capabilities . International Thomson Business Press, London.
Heene, A., & Sanchez, R. (2010). Enhancing Competences for Competitive Advantage. Emerald Group Publishing.
Lamb, C., Hair, J., & McDaniel, C. (2008). Essentials of Marketing (6, illustrated ed.). New York: Cengage Learning.
McGrath, R. G. (2013). The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business. Harvard Business Press.
Ogbor, J. O. (2009). Entrepreneurship in Sub-Saharan Africa: A Strategic Management Perspective. AuthorHouse.
Porter, M. E. (1998). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press.