Canon primes itself

By N. N. Sachitanand

BANGKOK: India is not the only place boasting of an old kingdom called Ayodhya. Eighty kilometres north of Bangkok lies Ayutthaya which for four centuries, till its destruction in 1767, was the capital of the Thai kingdom preceding the present one. During its long existence, this old kingdom was witness to over 40 wars with neighbouring Burma. (The scenario is repeating itself today as the Thai and Burmese armies have a standoff at the northern border over the issue of amphetamine tablets from Burma's drug factories flooding Thailand). Like Hampi in Karnataka, what remains of the old Ayutthaya are a number of ruins and some well preserved Buddhist temples with towering inverted bell shaped stupas in which worship is still carried on.

However, Ayutthaya has had a resurrection in the past four decades, this time as a global manufacturing hub, particularly for Japanese companies. One of the leading investors in the sprawling hi-tech industrial estate is Canon which has established a state-of-the-art factory to make bubble jet printers, copiers and bubble jet facsimile machines. The paid-up capital of Canon Hi-Tech (Thailand) Ltd. (CHTL) is 1.3 billion baht (about 43 bahts fetch a U.S. dollar now).

It is interesting to note that though Thailand consumes only 20,000 bubble jet printers per month, this is the Canon's largest bubble jet printer facility, with a capacity of 1.3 million units per month. It accounts for 80 per cent of Canon's global output of printers in terms of volume and 70 per cent by value. Obviously, the argument which MNCs routinely use - "not sufficient domestic market" - to shy away from investment in India, does not hold good here. If one has to find the logic of Japanese investments in Thailand, one has to look elsewhere. Like the excellent infrastructure - broad smooth roads, no power and water shortages, no militant trade unions (the Canon factory has only a joint consultative council), short turnaround time of vessels at the ports and handsome tax breaks (Canon has got a seven year corporate tax holiday). Just about 12 months from getting the Board of Investment Promotion Certificate in December 1990, CHTL was in production.

CHTL accounts for 1.2 per cent of Thailand's total exports. About 44 per cent of its output goes to the Americas, 32 per cent to Europe, 15 per cent to Japan and the remaining mostly to Asia. And, it is not as if CHTL was just a CKD assembly factory. In fact, 64 per cent of the components are now procured from within Thailand itself. The domestic parts vendors include two wholly owned subsidiaries of Canon within the estate itself - Canon Engineering (Thailand) Ltd. (high precision moulding dies and injection moulded plastic parts) and Canon Precision (Thailand) Ltd. (micro motors and metal stampings).

However, it is not these matters that make Mr. Yoshikatsu Tanikawa, President of CHTL, swell with pride. It is the string of national awards that the factory has won in the areas of safety, productivity (there are only 4,600 employees making on an average 896,000 printers, 69,000 copiers and 73,000 fax machines per month), quality and environmental conservation that make him justifiably proud. CHTL has now undertaken a new project called Time and Space Saving by Half which involves incorporating global Internet-based supply chain management and introducing cell-based production system instead of the conventional conveyor belt assembly lines.

Global objectives

The Ayutthaya factory truly lives up to the spirit of Canon's corporate philosophy, "kyosei", enunciated in 1993, which is aimed at contributing to world prosperity and at the same time achieving harmony among people, technology and nature. Canon's global environmental objectives include achieving more than 90 per cent recycling and reuse of materials going into its products, improving the energy and resource efficiency of products by 35 per cent (1998 as base) and eliminating emissions of gases that exacerbate global warming and reducing industrial wastes to less than 5 per cent of the 1990 levels.

Canon has come a long way since it started in Japan back in 1934 as a manufacturer of "Kwanon" brand cameras. Although it is still popularly known as a camera company, the fact is, it is now a total imaging solutions vendor, providing the whole pyramid of products - cameras, copiers, scanners, printers, fax machines and projectors for all types of customers ranging from the individual at home to the professional shop to the corporate office. Among the new products it has introduced in the last couple of years are the wide format bubble jet printer, the wireless portable bubble jet printer working on Blue Tooth protocol, the LCD projector and the CCD scanner. Canon is one of the original patent holders of the bubble jet printer and was the lead global vendor in 2000 with a 36 per cent market share. In Southeast Asia, Canon is a clear No. 1 in all countries except the Philippines. In India, because it was a late entrant, its market share is just 12 per cent compared to Hewlett Packard's 70 per cent.

The demand for bubble jet printers in India is now around 40,000 per month and growing at the rate of 43 per cent per annum. It has almost totally replaced the dot matrix printer in the SOHO sector. According to Mr. Ravi Bhatia, President of Canon India, the company is aiming at increasing its market share in 2001-02 to 20 per cent, with a total sales of one lakh units.

Future strategy

The focus of Canon India's future strategy will be to enhance customer access for purchase, service and consumables. The number of resellers will be expanded from 800 to 1,500 by the end of this year and 3,000 by the end of 2002. Besides expanding the channel base to B and C cities, special corporate channels and graphic arts channels will be put in place. Wide format products will be sold direct by the company. It is proposed to start a "dial a cartridge" service.

The fax machine market in India was 1.25 lakh units and the growth rate is 15 per cent per year. Canon, which introduced the colour fax last October, has a share of 12 per cent of the fax market, which it wants to increase to 25 per cent next year. Canon India will be adding flat bed scanners to its product portfolio this year. The Indian scanner market is around one lakh units per year and Canon hopes to sell about 12,000 in 2001-02. In the Indian copier market, which is about 34,000 new machines per year (there is a large grey market for second hand machines), Canon has an 18 per cent share.

Mr. Bhatia said Canon India's turnover would grow in 2001-02 to Rs. 130 crores from Rs. 100 crores in 2000-01. The main growth would come from system products whose sales would climb from Rs. 12 crores to Rs. 62 crores. Consummables are also showing a big growth from Rs. 25 lakhs per month last year to Rs. 100 lakhs per month this year.

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