What Will Canon Do?
By Don Dixon and Pete Basiliere, Gartner
Canon has been the market leader in market share and revenue in the copier and multifunction product (MFP) market for a decade. Then, on Aug. 27, 2008, Ricoh announced a definitive agreement to acquire Canon’s major distraibution channel, IKON Office Solutions (a printer and copier supplier that operates in North America and Western Europe) for approximately $1.6 billion. With such a loss, it will be nearly impossible to organically regain its former market share position in this mature market. Coupled with other recent acquisitions by its competitors, Canon's ability to maintain its dominant position in the office and workgroup segments of the market is questionable.
There are several options that Gartner believes Canon might currently consider, listed in order of increasing risks and benefits:
- Continue business as usual — Canon management might believe that refusing to partner with a competitor is the best option available because that is how the company has been successful in the past. However, in an increasingly competitive market, the kinds of design and manufacturing advantages that set Canon apart from the competition are giving way to services and other ways of adding value best met only through partnerships.
- Expand its indirect sales channel — Canon could aggressively expand its indirect distribution and aggressively expand Canon Business Solutions to make up for the loss of distribution. Canon is likely to pursue this option in whole or in part, regardless of whatever else it does.
- Buy Océ — Océ is a trusted provider of its own brand of MFPs, as well as competitive OEM brands. Canon would gain Océ's robust line of production monochrome and color equipment, as well as its managed print services operation, which has a good reputation.
- Buy Lexmark — This option for Canon, though less likely, would provide the company with a very capable solution-selling organization that is vertically astute. However, this course is unlikely because it could complicate Canon's business with HP, contribute only modestly to its lucrative A3 sales, and raise regulators' objections.
- Embark on a joint venture with HP — A joint venture (modeled after the successful Fuji Xerox/Xerox partnership) would be a mutually beneficial relationship, and would match or surpass any existing print vendor in size, credibility and potential.
These options do not cover the universe of choices that Canon has at its disposal. However, Gartner believes that these scenarios are compelling and most likely to significantly complement Canon's current capability.
If Canon fails to quickly adapt its distribution channel and develop its MPS capability, the company will fall victim to erosion of its installed base (the lucrative source of aftermarket and supplies revenue) and will ultimately lose its ability to deliver first-class national-account sales and service excellence in North America and Western Europe. Canon's historical aversion to acquiring companies to expand its capabilities makes the partnering options less likely. However, a deal with HP would likely be more appealing to Canon's conservative leadership in Japan because Canon already does business with HP, which reduces the risk that would be involved in such a deal.
If you are a Canon customer buying through IKON you can expect that Canon will still be able to meet its obligations in terms of sales and service of all its equipment until the Ricoh/IKON deal closes (in 4Q08). Nevertheless, monitor the situation closely as the acquisition comes to fruition.
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Join Don Dixon and Pete Basiliere at the Print & Imaging Summit
Dec. 3-5, 2008
Printing and imaging is the last bastion of savings in tough economic times. Get the cost-cutting knowledge you need by attending the Vision Events Print & Imaging Summit this Dec. 3 - 5 in Bonita Springs, Fla. Here’s a taste of what you’ll experience:
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