Market Structure Analysis Canon Inc. Company

TABLE OF CONTENTS

ABSTRACT 1

CHAPTER 01- INTRODUCTION 1

CHAPTER 02 - INDUSTRY MARKET STRUCTURES 2

CHAPTER 03 - CANON IN AN OLIGOPOLY MARKET 3

ONLY A FEW LARGE FIRMS 3

PERFECT OLIGOPOLY VS. IMPERFECT OLIGOPOLY 4

FIRMS ARE INTERDEPENDENT 4

RIGID PRICING 4

NON-PRICE WAR 5

CHAPTER 04 - CANON IN A MONOPOLY MARKET 6

CHAPTER 05- CONCLUSION 7

REFERENCES AND BIBLIOGRAPHY 8

LIST OF TABLES

Table 1: Market Structure Comparison 2

LIST OF FIGURES

Figure 1: Market share of Canon compared to others 3

Figure 2: Price Variation of famous Canon 300D 5

ABSTRACT

Working in Canon Japan for six years in different levels, gave me a fair bit of insight into the strategies deployed by a multinational company (However to protect employee regulations and business ethics, information included in this report is limited to what is already published). This report identifies the dominant market structure of Canon and whether the strategies used by this company are in line with the theories of similar market structures.

The report is lined up in a way that the first chapter explains and compares different market structures in the world. Then the dominant market structure for Canon is identified in the second chapter and the strategies are explained with illustrations. The final chapter is a finding of how Canon has successfully engaged in multiple market structures and pros and cons of the same.

CHAPTER 01- INTRODUCTION

"make it possible with canon" (Canon Japan Inc. home page, slogan) is dominating the imaging film and digital camera industry for decades, after immerging as a modest idea in a small apartment in the Roppongi area of Tokyo Japan. (Canon global page, 1933)

Why is Canon able to dominate the industry? Why do some products of Canon have a market price not defined by the normal law of demand and supply? Why is that price wars are not visible in some parts of Canon operations? Questions of this nature can be answered by studying the market structure in which the company is operating in. (John, 2006)

The company in concern could be argued as an interesting choice to do a research on market structures due to several factors. One being its global nature, Canon is operating in different market structures in different parts of the world, which gives the opportunity to discuss and compare more than one market structure. Further, the vast number of products and operating in multiple plants makes it more interesting in the detailed analysis of the market features.

CHAPTER 02 - INDUSTRY MARKET STRUCTURES

Let's begin by understanding the economic term 'market structure'. Emeritus (1996), the former head of Economic Cluster says, the structure of a market can be referred to the number and characteristics of the firms in it. The following market structure table (Table 1) summarizes the four types of market structures and identifies their mutual differences.

Market Structure Perfect Competition Monopolistic Competition Oligopoly Monopoly

Number of suppliers Infinite Many Few One

Price influencing Power None Somewhat Limited owing to competition Absolute

Product Type Homogeneous Differentiated Homogeneous/Differentiated Unique product, No close substitute

Market Entry Barriers None Somewhat low Somewhat high Extremely high

Basic Competition Price Product Attributes Product attributes, Promotion, etc. No competition

Table 1: Market Structure Comparison

(Source: Ishani, C. S (2011) Market Structure Table)

CHAPTER 03 - CANON IN AN OLIGOPOLY MARKET

Considering the market features listed in Table 1 above, it can be argued that Canon operates in an Oligopoly market. Few large firms with differentiated products where firms are interdependent and instead of price wars, non-price strategies being employed, are the characteristics of the camera industry. To verify the above point of Canon operating in an Oligopoly market, an analysis was conducted in the next sections, to show that the strategies used by Canon are in line with the theories applied to an Oligopoly market. (McGuigan, et al., 2003, pp. 517-539)

ONLY A FEW LARGE FIRMS

To understand this characteristic, Bloomberg (2010) data from a market share analysis of Cameras was used as illustrated in Figure 1 below.

Figure 1: Market share of Canon compared to others

The market share data clearly shows that few large firms dominate this industry. Further, Canon is dominating the market with Nikon being the only other significant competitor in the camera industry. Because of the two firm nature of the market, it can also be argued that Canon is in a Duopoly market. Canon-Nikon Duopoly has been a known example of a famous Duopoly market structures