Canon Inc.

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Canon Inc.

7-1, Nishi-shinjuku 2-chome
Shinjuku-ku, Tokyo 163
Japan
(03) 3348-2121
Fax: (03) 3349-8957

Public Company
Incorporated: 1937 as Precision Optical Company
Employees: 44,401
Sales: ¥1.35 trillion (US$9.39 billion)
Stock Exchanges: Tokyo Osaka Nagoya Kyoto Fukuoka Niigata Sapporo Luxembourg Frankfurt

Although it scarcely predates World War II, Canon has already become one of the world’s leading manufacturers of optical electronics. Its principal products are 35-millimeter cameras—including the ubiquitous AE-1—and photocopiers, but it also produces calculators, laser printers, facsimile machines, electronic typewriters, and optical equipment for medical applications.

The history of Canon dates back to 1933, when a young gynecologist named Takeshi Mitarai worked with some technician friends to develop cameras. Their first major invention had applications that ranged far beyond the medical field. In 1934 Mitarai and his colleagues developed Japan’s first 35-millimeter camera, closely patterned after the German Leica 35-millimeter camera, the industry standard. They named it the Kwanon, after a Buddhist figure representing mercy. In 1937 they incorporated their venture under the name Precision Optical Company.

In 1941 Precision Optical made a significant contribution to Japanese medical imaging technology when it developed the nation’s first indirect x-ray camera, which played a major role in preventing spread of tuberculosis in Japan. When Japan went to war with the United States, the Japanese economy was entirely given over to supporting the military.

The company barely survived World War II. It was unable to manufacture its mainstay 35-millimeter cameras for the duration of the war, and only Mitarai’s tireless efforts kept it afloat in the economic desolation that followed Japan’s surrender in 1945. With raw materials rationed and capital scarce, Mitarai had to scramble just to keep his production lines going and the company’s finances in order. He also drilled into his workers the importance of producing high-quality products, but his most important move may have been persuading the Allied occupation forces to stock Precision Optical cameras in their post exchanges and ships’ stores. This arrangement laid the groundwork for Canon’s later success as an exporter; U.S. servicemen bringing their cameras home with them gave the company its first foothold in the U.S. market. In 1947 Precision Optical changed its name to Canon Camera Company Limited, using a transliteration of the original Kwanon. The company changed its name to its current form in 1969.

Another international breakthrough for Canon occurred in the early 1950s, when news photographers covering the Korean War found that the best Japanese lenses were every bit as good as German lenses, the traditional industry standard. The export market began to open up, and Canon prospered throughout the decade. The company created an American subsidiary, based in New York, in 1955 and two years later it formed a European subsidiary, Canon Europa, headquarterd in Geneva. In 1956 Canon added an 8-millimeter movie camera to its product lines, and in 1959 it became the first company in the world to manufacture an 8-millimeter camera with a built-in zoom lens.

By the early 1960s Canon had become the dominant Japanese producer of middle-priced cameras, leaving the higher end of the market to Nikon. The company continued to grow, more than tripling in size between 1959 and 1963. In 1964 it ventured into business machines when it introduced the Canola 130 electronic calculator, the first in the world to use the now-standard ten-key keypad. In 1970 Canon and Texas Instruments produced the Pocketronic, the first all-electronic hand-held calculator. Canon became an innovator in the field of photocopying when it introduced its first plain-paper copier in 1968. Until that time Xerox had dominated the copier market with its own process, known as xerography.

In spite of these engineering successes, however, Canon was plagued by weaknesses in marketing strategy in the late 1960s and early 1970s. Although it was a part of the spectacular overall penetration of the U.S. market by Japanese calculator makers, the company failed for the most part to distinguish itself from its competitors. It also frittered away its technical advances by failing to exploit their sales potential before rivals could catch up to them. This problem affected its copier lines as well as its calculators. In 1972 it developed the “liquid dry” copying system—so named because it uses plain paper and liquid developer but turns out dry copies—but doubted its own marketing strength and feared that competitors would infringe on its patents. Therefore, instead of selling the system itself, it licensed the technology to other manufacturers, effectively wasting its earnings potential. These mistakes hindered Canon’s financial performance, and in 1975 it failed to pay a dividend for the first time since World War II.

Into this leadership void stepped Ryuzaburo Kaku, the company’s managing director. He won approval from Mitarai, who was still chairman and president, to change management and sales practices. Under Kaku, Canon began to streamline its operations and chain of command and market its products more aggressively. In 1976 the company introduced its revolutionary AE-1 35-millimeter camera, which used a microprocessor to focus automatically and set the length of exposure, with an advertising blitz led by television commercials featuring tennis star John Newcombe. “It was a big gamble because 35-millimeter cameras had never before been advertised on TV,” Mitarai said, but it paid off handsomely. According to Fortune, January 12, 1981, by 1981 the AE-1 had become so popular that one industry analyst called it “the Chevrolet of the 35mm market.” Kaku’s emphasis on faster new-product development led to laser beam printing technology in 1975 and a new retinal camera that made pupildilating drugs unnecessary in 1976. In 1977 Kaku was named president of the company, succeeding Mitarai, who remained chairman.

In 1982 Canon introduced the first personal copier, so called because all the essential reproduction components were contained in a cartridge that users could replace themselves. Again, it was accompanied by a massive ad campaign, this time starring actor Jack Klugman. In less than a decade, Canon’s salesmanship had undergone a radical change from passive to highly aggressive. When Canon overtook Nikon as Japan’s camera sales leader in the early 1980s, former Nikon chairman Kyojiro Iyanaga explained his rival’s success by saying “We still make the best cameras. Canon just outmarketed us.”

Canon continued to introduce new products in the 1980s to compete effectively in mature markets. Much of its success, however, came in new markets, such as integrated office workstations and desktop publishing systems. Often that meant challenging large companies that were well entrenched in their markets. In 1982 it came out with an electric typewriter, initiating a one-on-one competition with International Business Machines (IBM). Within a year, it captured 11% of that market, while IBM’s share shrank from 26% to 17%. In 1983 it took on Xerox with a laser printer that offered similar quality at one-third the price. Canon also engaged Ricoh in a rivalry over facsimile machines in the early 1980s and laid the groundwork for a future duel with IBM in the computer business. It began a research push aimed at developing optical integrated circuits for personal computers of the future, and in 1984 Canon Sales started marketing the Apple Macintosh in Japan. Canon also joined with Apple to develop software for the Japanese market. Later in the decade, the company’s optical chip efforts paid off when former Apple chief Steven Jobs chose Canon’s chips for his new Next computer. In 1989 Canon acquired a 16.7% interest in Next Incorporated, along with the exclusive right to market the Next in Asia, for $100 million.

Canon has experienced sharp sales and profit growth since its low-water mark in 1975, prospering in a time when, as Ryuzaburo Kaku himself has put it, rival corporations resemble “warring feudal lords” like those who battled to control 16th-century Japan. Between 1975 and 1985, its annual sales grew sevenfold, to $3.3 billion, and its profits showed a twentyfold increase, to $136 million. Although the company’s founder named its first product after a pacific figure from Buddhist mythology and preached to his workers that producing quality products contributed to peace and the advancement of civilization, in fact, Canon had to fight for its survival in these difficult years that followed World War II. Mitarai’s sermons were actually stump speeches on the importance of workmanship at a time when “Made in Japan” meant shoddiness. Canon has always had to fight for its market share, and its aggressive marketing continues to make it successful.

Principal Subsidiaries

Dai-ichi Seiki Kogyo Co., Ltd.; Canon Virginia Inc., (U.S.A.); Canon Electronics Inc.; Canon Seiko Co., Ltd.; Oita Canon Inc.; Canon Components Inc.; Canon Inc. (Taiwan); Canon Business Machines, Inc. (U.S.A.); Canon Giessen GmbH. (Germany); Canon Bretagne S.A. (France); Copyer Co., Ltd.; Canon Precision Inc.; Canon Chemical Co., Ltd.; Canon Sales Co., Inc.; Canon U.S.A., Inc.; Canon Europa N.V. (Netherlands); Canon (UK) Ltd.; Canon France S.A.; Canon Latin America, Inc. (Panama); Canon Australia Pty. Ltd.; Canon Singapore Pte. Ltd.