Management of Technology and Innovation in Japan

Designing the Product Architecture for High Appropriability: The Case of Canon 5
in terms of shipment unit shows Canon at 29.7%, Ricoh at 29.5%, and Fuji-Xerox
at 22.0%. As the top 3 manufacturers hold over 80% of the market, it is clear that
these three dominate the domestic market (Nikkei Sangyo Shinbun, August 13,
2003). As for the ink jet printer, the domestic market share is in an oligopoly
situation controlled by Seiko Epson (50.8%) and Canon (41.7%) (Nikkei Sangyo
Shinbun, July 29, 2003).
If the operating margin trends of 4 representative manufacturers of business
machines (Canon, Ricoh, Seiko Epson and Fuji Xerox) are compared in the latest
5 years, it shows that Canon has been the only company with a return on sales
consistently higher than 10%. As the content of business machine operations in
each company varies, it is not possible to precisely conduct a comparative analysis.
Nonetheless, it is safe to conclude that Canon consistently demonstrates higher
profitability than competitors.
Cartridge Technology that Sustains Copier’s High
Profitability
In order to understand the uniquely high profitability of Canon’s business machine
products group, it is helpful to take a look at the example of its small-size personal
copier, which found family and personal uses.
Canon developed the first-in-the-world personal copier PC-10 in 1982. The
market loved the model, and it contributed greatly to the company’s growth. The
distinctive feature of this small-scale personal copier is Canon’s home grown “cartridge
technology.” The cartridge technology combined the central functions of
the copier, packaging, image development device, charger, photoconductive drum,
consumable toner, and cleaner functions into one cartridge. Then the all-in-one
cartridge is replaced with toner’s expiration. The unique technology of Canon
eliminated periodical inspections and toner refills, and enabled the development of
the personal copier market for the first time in the world. As Canon’s advertisement
stated, “simple-maintenance and support-free” became possible. Also, the
technology made the product significantly more compact. The cartridge method
was successfully transferred to laser-beam printer (LBP) product lines.
Prior to the PC-10 the plain-paper copiers, or PPCs, were for business organizations
only, and the countrywide network of after-sales service providers supported
maintenance of the installed equipment. It was a norm that copiers came with
maintenance services. Photoconductive drums needed to be replaced when they
reached their expiration; toners needed to be replenished and disposed; charger’s
wires tended to attract dust and therefore needed to be cleaned periodically; cleaners
needed to be replaced; and so on. In other words, using PPCs necessitated periodical
checks, maintenance, replacement of consumables, and timely repairs
when needed. Those conditions were undesirable for family or personal uses. It
was either unfeasible to establish such a network to support family and personal
users or unprofitable to do so. With the cartridge technology Canon made it possi-