Nikon Corporation Business Strategy Analysis

by Jason Shaw
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Introduction

            Nikon Corporation is the Japanese multinational corporation that is headquartered in Tokyo, Japan, specializing in the imaging and optics products. With an approximated workforce of about 26,125 employees, based in Japan, Nikon Corporation is one of the most reputable company that is involved in the imaging products (56.9%), instruments (7.8%), precision equipment (33.2%) and others (2.7%) (Nikon, 2010). Nikon Corporation has branches in America, Europe, Africa, Asia, Middle East, Oceania and United States. Since it was founded in July, 1917 the company has contributed unanimously towards the improvement of the photography, the optics and imaging industry towards customer satisfaction. Its range of products include; camera lenses, cameras, microscopes, binoculars, ophthalmic lenses, steppers and measurement instruments (Suzuki et al., 2000).

Success of Nikon Corporation

During the 3rd quarter ended in December 31, 2014, the company’s total assets increased by 48, 560 million yen from the past fiscal year to 998,075 million yen. This can be attributed to the increased cash and deposits approximated at 9,827 million yen, inventories by 27,113 million yen, and accounts receivable by 11,056 million yen. On the other hand, total liabilities increased by 20,745 million yen from the previous fiscal year to the 423,448 million yen. This was attributed to the increased accounts payable and notes by 15,106 million yen (Nikon, 2015). Comparing the increased total assets and liabilities, it’s evident that total increase in assets was more than the total increase in liabilities signaling a positive growth for the company.

In third quarter of the year ending March 31, 2015, the precision equipment business posted a substantial decline in the income for the Q3 and the three quarters total year on year owing to the decline in sales. Similarly, the imaging products business income and sales decreased for the Q3 and three quarters total year on year.  However, the overseas sales in the microscope solutions business increased. As of 31st march, 2015, the company’s net income was 46,824.0 million yens reflecting an increase of 4,365 million yens as compared to the previous year (Nikon, 2015). The increased income reflects the company’s success. The expansion of the company to reach out to seven continents is an indication of not only the increased market share for the company but also indicates how the company has been successful. It’s clear that without success the company could not be able to expand to the seven major continents. This can be attributed to the company’s diverse ways of responding to the different regions in order to faithfully respond to their needs.

Nikon Corporation Business Strategy Analysis

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Despite relatively flat revenues for the company in 2015, the company has been able to grow the net income by 10.28% from 42.46 billion yen to 46.83 billion yen. This reflects a net profit margin of 3.02%. Looking at the growth rates, the Nikon Corp’s dividends per share and the earnings per share excluding the extraordinary items increased by 3.23% and 10.25% respectively on a year to year basis (Nikon, 2015). Furthermore, when measuring Nikon Corp on the five year annualized basis, the dividends per share growth of the company is above the industry average in relative to its peers. The earnings per share of the company growth of the Nikon Corporation is in line with the industry average. Nikon Corporation’s cash reserves were increased by 101.07% in 2014. Nikon Corp earned 115.27 billion coming from its operations for the cash margin of 11.76%. Furthermore, during this same period, the company generated 31.87 billion cash from the financing while the 43.19 billion was spent on the investment (Zuba-Surma et al., 2007). The increased net income, profit margin, growth in dividends, cash reserves, and among others as depicted above represents Nikon Corp’s success in the market.

Business Reasons Behind the Success of Nikon Corporation

Restructuring of the organization so as to conform to the medium-term management plan. In order for the company to keep pace with the rapidly expanding markets, the company has restructured its organization to ensure company system that promotes worksite decisions (Matsuyama, Ishiyama, & Omura, 2004). This includes establishment of the Corporate Strategy Division to effectively oversee all the businesses and allocate the resources in order to benefit the whole organization.

Corporate Social Responsibility (CSR) that support growth. As the global enterprise, the company is mindful of the business environment and the human rights and acts in the global common interest (Jacques, & Kepos, 2012). The CSR is practiced through selling implicitly trustworthy products, contribution to the social environment, offering of the scholarships, acting ethically, responding faithfully to the needs of the customers and among others. This has led to the success of the company.

In 2014, the company initiated the organizational redeployment designed to developing a framework for the support of the structural reforms that enables sustainable growth and the realization of the more resilient corporate structure. For instance, for the Medical Business, the company established the Medical Business Development Division (directly overseen by the president) to promote the faster business development and develop clear leadership and organizational structure for the business (Frigault, 2009).

Excellent management of the inventory. The company through its excellent supply chain weekly pans for the manufacturing and sales through quantifying trends in the worldwide manufacturing and sales based on the projected demand and the shortening lead times between the sales and manufacturing (Zuba-Surmak, 2007). Additionally, through its finely tuned forecasts, the company delivers products that are better tailored to the regional needs in a timely manner with nothing wasted.

Cost reduction. The company is involved in the aggressive reduction of the upstream costs by actively involving those that are working in the manufacturing, sales and the service departments, and the analysis of the entire supply chain to design the optimal processes. Additionally, the company increases output through deepening of the collaborations between the worksites in USA, Japan, and Europe and among others (Takahashi, & Omura, 1998).

Design Creation and Protection. The company’s intellectual property divisions strives to produce the designs that are highly differentiated from the other companies’ products. The organisation is also active in the production of environmentally-friendly goods to reduce the environmental effects during the product lifecycle (Oswald, 2012). This is achieved through; reduction of the CO2 emissions and waste reduction. This has led to the increased popularity of the company hence making it a success.

Strategic Analysis

Value Chain Analysis

The value chain is the system of moving the product or the service from the suppliers to the customers. An effective value chain enables the companies to cut the costs, delight the customers and renovate inventory, which helps the companies to develop the competitive advantage in the competitive market. Nikon Corporation has realized the need to develop effective and flexible distribution network. While developing the solid corporate foundation so as to better adapt to the changes and seize the business opportunities, Nikon Corp put great efforts to innovative its supply chain to meet the customer needs. The general life cycle of the Nikon’s products starts from the receiving of the raw materials, and then to the material component and product manufacture and the transported to be used by the customers after which they are disposed or recycled.

As stated in the Nikon’s 2011 annual report, the company’s priority in the Nikon Imaging Company is to strengthen the procurement capabilities. The company’s value chain objective is “to pursue the greatest possible production-cost reductions.”  (Lorente et al., 2012). To do this, the corporation has set up a specialised organisational team to improve the efficacy of intensive acquisition agreements while reducing the expense of the procurement phase.

In order to realize the high levels of the customer satisfaction, the company developed Basic Procurement Policy, Green Procurement and CSR Procurement. Under Basic Procurement Policy, the company shall conduct the sound corporate activities while at the same time complying with the laws, norms and the social responsibilities (Davidson, and Abramowitz, 2002).  Nikon Corporation has established an open-door procurement that it purchases the goods and services from the global suppliers. Based on the open-door procurement, the company selects the top suppliers from the fair and free competition. Additionally, the company insists building of the partnership relationships with the suppliers. Lastly, Nikon Corporation adopts the green procurement with consideration of the environment.

Nikon Corporation has been working with the several suppliers around the world. For instance, in Europe, Nikon Holdings Europe B.V, is in charge of the centralized supply. The company has also several centers and divisions companies that are responsible for the selling, importing, and serving of the instruments and cameras (Schultz et al., 2001). In Middle East and Asia-Oceania, the company has no centralized supply. The Nikon Holdings Hong Kong Limited is the Headquarter in these areas. Most imaging and equipment segments divisions are responsible for the importing, selling and the serving of the equipment and cameras. Additionally, Nikon’s Information Systems, Corporate Planning, and Business Administration Headquarters are found in Japan (Castano, 2009). In the USA, the Nikon American Inc. is the one responsible for the centralized supply.

As the global company, Nikon Corporation competes for the product leadership, and its value chain is one of the essential elements for the competitive advantage (Thaler, and Vogel, 2006). The key to the success is whether the supply chain can be able to adapt the market changes and the customer needs. The company’s synchronized supply chain strategy is intended to deliver the products to the right place and at the right time in a consistent manner. The company’s significant benefits to the implementation of the synchronized value chain strategy include reduced supply chain costs, increased customer-service levels, learner inventories, and the faster time to the market and quicker response to the market pricing pressures hence creating a competitive advantage.

Nikon Corp’s manufacturing centers are located in Asia (Korea, Japan, and Indonesia). The Synchronized Supply Chain Strategy starts from the UPS managing Nikon’s Freight through the ocean and air, directly to Kentucky and Louisville. The Louisville and Kentucky are usually the all-point connection for the UPS’s worldwide operations and the major Center of the UPS Supply Chain Solutions.  At this point the merchandise is packaged to the accessories such as chargers and batteries. The packages are then distributed to the retailers across the USA or exported to the Caribbean or Latin America retail outlets and distributors.

Nikon’s end-to-end distribution is managed by the UPS Supply Chain Solutions via the stop keeping unit (SKU)-level visibility and the IT system. The SKU is a string of alpha and numeric characters that identifies products in a unique manner. Nikon Corp’s customer service and supply chain management have experienced significant improvement. With its excellent value chain, the company is now able to inform the retailers about the delivery times of the products. The company has now the visibility of the product distribution and the ability to adjust the product availability based on the needs. Therefore, the company has a better grasp of the sales opportunities hence giving the company a better competitive advantage.

VRIN Evaluation

VRIN is a tool that identifies four firms attributes that it must possess so as to have sustained competitive advantage. These resources include; Valuable, Rare, Imperfectly Imitable and Non-Substitutable (Elsenhardt, & Martin, 2000). VRIN analysis on the Nikon Corporation suggests that the company currently possess the suitable competitive advantage in the industry. Nikon Corp’s differentiated and unique product is valuable and it’s currently very rare in the industry. Additionally, given the company’s barriers to entry, brand equity and the technological difficulties and propriety knowledge, Nikon Corporation’s position is quite costly to imitate by the competitors. The company is organized strategically to effectively position its brand, capture its value, and the capturing of the revenue.

Nikon’s ability to manage their customers effectively is the source for both the cost and differentiation advantages. Unlike other competitors in the industry that rely on the relationship and trust in the management of the customers, Nikon Corporation uses the data about its customers to manage them. This company’s capability allows it to make correct decisions. It is also a remarkable skill, in addition to being useful, in that very few organisations are able to handle the consumer experience successfully utilising data-based knowledge so thoroughly. Is the company costly to imitate? Yes, it is costly to imitate at least in the near future owing to the unique products and technology.

Leadership Evaluation

Nikon through its excellent leadership has developed products of the high quality throughout the years whereby the core technology centers. Based on the company’s leadership philosophy and the CSR Charter, the Quality Control Committee deliberates and makes the decisions on the fundamental policies that are related to the quality control and the vital issues involved with the implementation. Through its leadership, the company is able to manage and coordinate the IT and corporate resources that helps the company to achieve the efficiencies of the scale for the code management. Although Nikon Corporation does not have the change advisory board, the company has an infrastructure team that is responsible for the management of the factors related to the change management and the Perforce policies and the procedures for the use of the tools.

The internal control system that is based on the financial instruments and Exchange Act was introduced by the company to ensure that there is credibility of the reporting system. The Nikon Group conforms to the fundamental framework for the internal controls that is indicated by the standards of the Financial Service Agency. The company’s Thailand factory has the excellent communication with the Japanese Headquarter. Additionally, the company has developed their own way to make the products better.

Detailed Analysis

Business Strategy

Nikon Corporation’s growth strategy, which is noted in several aspects of their mission is largely routed in the forward thinking and innovation. The company intends to grow its products based on the technological strides. The strides that will dynamically contribute to the advancement of the company in the industry. An example of the business strategy has already been implemented in the prosumer level with the addition of the HD movies capability to two of the company’s Digital SLR cameras.

Nikon Corp business strategy takes the full advantage of all the media outlets. For instance, for print, the company takes the full advantage of the thousands of the Photography, hunting and gaming, sport, and the imaging related magazines that are available internationally (Wachman, Niu, and Farkas, 1997). The concentrates most of its resources on the print and internet advertising, Google Ads, utilizing banner advertising and the cross-promotion with the retailer websites for the internet advertising (Kusaka, 2005). During the relevant programming, the Televisions and radio promotions are also used. Additionally, as part of the business strategy, the company has restructured its business organization into the divisional system (progressing from the 15-year old in-house company systems) in order to respond to the rapidly changing environment and to achieve the sustainable growth.

Nikon Corporation positions most of its products across each of the product line by the user and by application or use. Each of the product line is specific to the skill sets of the customer in each class and it’s tailored upon to effectively suit the foreseeable application of each of the product by the users (Nikon, 2008). Each of the company’s product is then aligned among the other products in each category based on the same strategy. Generally, each of the product category has the range of the products that are suitable for the users based on skill and usage. This business strategy has played a unanimous role in promoting the company’s competitive advantage in the industry.

In order to increase market share of the Imaging Company, Nikon has declared the steady introduction of the new products that have distinctively superior technologies as part of the Medium Term Management Plan. In order to ensure strong presence in the emerging markets, the company has moved to strength its brand. Nikon has an already well established brand in Russia, India, and China where the company consistently command a very strong market share (Castano et al., 2009). Despite of its business strategy of strengthening its brand in the emerging markets, the company remains relatively weaker in areas of South and Central America, Africa, Middle East, and the other parts of the Southeast Asia.

On the part of the IC steppers and scanners, Nikon Corporation has set the goal of the mass production of the EUV by 2019. Additionally, in order to improve the existing technology, the company is working on the miniaturization. The company is working on the expansion of the market share by Arf immersion scanner (Palero et al., 2008). This is a device that can achieve miniaturization by using the liquid of the high refractive instead of the lenses. Drawing from the market competitiveness, the company expects to achieve 40% market share for the Arf immersion scanners. However, the company can gain competitive advantage through focusing and allocation of the resources that are vital to the core consumers as well as the whole industry. Therefore, development of the relevant technology and its implementation in a manner that is cost effective, affordable, and that can spawn future innovations and developments is important for the success of the business strategy of the company.

External and Internal Analysis of the factors that may lead to downfall of the company one of the factors that may lead to the downfall of the Nikon Corporation is the availability of the professional products at the retail store levels. With the average price of $1500 for the pro lenses and $2600 for the least expensive pro level camera, the risk of the stocking of these products is too great and too costly. Additionally, the company do not offer branded retail stores in the market. This therefore forces the customers into purchasing online or rely on the retailers for the special order products. This can be time consuming and risky to the consumers. In furtherance, Nikon Corp’s sport optics line lacks diversity. All these factors if not well managed can affect the overall performance of the company.

Other internal factors that may affect the success of the company is the rapid technological advancement and the economic factors. The economic factors can have an impact on the strategic decision of the Nikon Corporation. Since Nikon Corporation is a global company, factors such as instability of the host countries, interest rates, inflation rates and among others can hinder the prosperity of the company. For instance, in 2010, the earthquake and flooding affected the economy of the company. This led to the decreased net income and net sales of the company dramatically.

Suggestions

Due to the technological and economic factors that may affect the future success of the company, it’s advisable for the company to carry out technological innovations so as to have increased opportunities to use the new parts and the raw materials. Another important suggestion for the company to overcome the economic challenges when competing is to shorten the product development lead time. The company should thoroughly clarify all the processes that are related to the product development in addition to reviewing and reforming the processes involved.

Nikon should also design and implement the distribution strategy in order to improve the customer service. The distribution strategy should be able to deliver the products to the customers in an efficient and timely manner. In the light of the unpredictable economic environment, the company should consider launching multiple initiatives in Europe because it offers a competitive market. Lastly, the company should enhance its E-business strategy to ensure that the resistance to change is properly addressed. This should be done in regard to analysis of the different risks prior to the implementation of the strategy.

Conclusion

Nikon Corporation has developed the competitive advantage over the other companies in the industry in addition to benefiting from the effective marketing strategy. However, in order to ensure continued success in future, the company should address the technological issues, economic issues, and among others to curb the challenges of the ever-changing business environment. Despite of the challenges, the company through its excellent leadership and organization culture will continue to prosper.

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