From being known as a camera and copier company, with a minuscule market share in the IT space, the turnaround has finally happened for Canon in India. In the last two years, the company has moved aggressively and has captured the number two position in the inkjet printer and the scanner markets. Srikanth R P analyses Canon’s strategy, which has made it a potent force in the peripherals market

Under Alok Bharadwaj Canon has junked old strategies, and is now rolling new branding and product plans

2002 was a momentous year for Canon in India. Apart from posting 33 percent growth for the calendar year, and ending with an impressive Rs 202 crore in revenues, the company acquired close to one lakh customers. More importantly, growth has been witnessed across all business segments. The inkjet printer business grew by 313 percent, the scanner business grew by 656 percent, the fax business by 180 percent and digital copiers grew by 242 percent. (See Box - Winning Numbers)

Canon’s latest product range—multifunctional devices (MFDs)—added to the rich haul, with a growth rate of 251 percent. While sceptics may say that the high growth rates are because of a small base, the important thing to note is that the company has moved into the number two position in two important segments—inkjet printers and scanners—and is now behind leader HP, according to research firm IDC India. For instance, Canon’s market share in the inkjet printer segment zoomed from 3 percent in 2001 to 14 percent in 2002. In the scanner segment too the same story is repeated as the company increased market share from 1.1 percent in 2001 to 18 percent in 2002.

Down memory lane
Compared to the bright scenario today, uncertainty was the prevalent mood two years ago. Back in 2000, the Internet was driving the PC boom, which in turn led to an explosive demand for related peripherals, such as inkjet printers and scanners. But in this phase of increased demand, the only two big players in the Indian inkjet printer market were considered to be HP and Epson. Canon had the technology and the products in place, but in terms of market share it was relegated to the sidelines.

The situation worsened during the beginning of 2001 as Canon went on losing market share to more established rivals. It was then that Canon embarked on a major restructuring exercise to change things. The company recruited Alok Bharadwaj, an industry veteran with more than 17 years experience and a reputation of building businesses from scratch.

The new Canon
Bhara-dwaj, director and general manager, Consumer Imaging & Information Division & Value products for Canon India, had a tough task on hand as the market itself was going through a bad patch when he joined the company. Additionally, Canon had to reorganise its channel strategy for facing competition, as most other players had well-entrenched channel bases. Bharadwaj clearly knew Canon’s strengths and weaknesses. Because Canon was not a market leader, he knew that he had to do something different, rather than just react to the strategies of the market leaders-a policy that Canon followed earlier. For instance, if HP appointed a distributor in a particular region, Canon followed suit. Bharadwaj threw this strategy out of the window and took the initiative to place a Canon sales person in every Indian state. Previously, the sales operation used to be controlled from Singapore. Now it was controlled right here in India.

Canon India also changed the distributor model and gave it a regional thrust. Currently, the company has four regional distributors—Compuage in the West, Wellwin in the South, Supertron in the East and Tech Pacific in the North. The regional distributor model was an essential part of its strategy as Canon wanted its distributors to build up its brand image. In return, the company gave them protected margins and also went a step further in insuring stocks against price fluctuations.

At a time when distributors were surviving on extremely thin margins and were treading dangerously between highly volatile prices and slackening demand, Canon’s strategy sent a positive message to the market. Naturally, distributors were happy and were instrumental in boosting the Canon brand in IT. The company also paid special attention to building up its distribution strategy along the four pillars that are considered crucial for any good channel strategy. Other than the familiar pillar called the reseller, the company identified three more strategic pillars for growth. These were corporate dealers, assemblers and the retailers.

While resellers provided Canon with volumes, corporate dealers brought in margins. Retailers acted as the face of the company and interacted directly with the end-consumer. The white box players (assemblers) who had a dominant market share in the PC segment provided Canon with the reach to sell across the length and breadth of the country.

Branding & product strategy
But though Canon managed to get its distribution structure in place, the brand image of the company had still not registered well in the mind of the consumer. Says Alok Bharadwaj, director & general manager, Consumer Imaging and Information Division (CIID) & Volume products, “Our brand was associated in the consumer’s mind more as a camera company rather than as an IT firm. Though we had the best products in our stable as far as technology was concerned we found out that the customer did not want to buy a particular technology, but a particular brand. We talked to various management consultants and finally reached a decision that to succeed in this market place we needed to send an emotional message rather than a functional message. Our recent brand campaigns are an effort in that direction and the results have been extremely positive.” Further, initiatives were taken to open exclusive Canon Care service points.

From his experience with Motorola Bharadwaj knew that in an industry where products became obsolete very quickly the launch of new products was critical for the long-term brand image of the company. He also knew that customers had a misconception that if a company did not launch new products, it was not very sound technologically.

Accordingly, Canon India decided on an aggressive strategy to launch new products constantly. Additionally, the company ensured that new products that were launched internationally were released at the same time in the Indian market. In line with this vision, in 2002 Canon India launched 47 new products. This strategy has paid off and has not only enhanced the company’s brand image in the market but has also expanded the market for its products.

Canon also took a decision to restructure its business into volume (consumer and mass office products) and value (high-end networked solution products). This has helped in sharpening the focus on individual segments.

Looking ahead
Having put in the basic building blocks for a strong foundation, the focus this year will not only be on maintaining market share captured in the last year but also on increasing revenues from the consumables segment. Though the consumables segment has registered a growth rate of 45 percent the number is insignificant if you consider Canon India’s small base. Bharadwaj wants to correct this anomaly by taking aggressive steps to tackle counterfeit products.

Additionally, the company is also looking at launching a consumable product that can be used in every Canon device, such as faxes or MFDs. 2003 will see Canon India focus on three core areas—inkjet printers, consumables and MFDs. After the successful turnaround, it will be the year that Canon will start playing challenger to the leader. Bharadwaj has successfully executed the turnaround. Now the ball is again in his court as Canon India aims for greater glory.