Management of Technology and Innovation in Japan

Designing the Product Architecture for High Appropriability: The Case of Canon 13
running costs of Canon printers were higher than those of Epson (Row 1 and 2). It
is suspected that Canon was aiming for high profitability through consumables as
it did in the copier business. Second, Canon’s high running costs were adjusted in
the latter half of the 1990s, reversing the cost position against Epson (Row 3).
This shift is verified in our comprehensive analysis of running cost comparisons
with more models and data points (see Appendix 1 for details).
Table 1. Historical running cost comparison of ink jet printers
Year
1. Personal use
competition in
1993
2. Early color compe-
tition in 1994
3. Year-end sales
competition in
1998
Canon Epson
Model Running cost Model Running cost
BJ-10v Lite Y6.0 (B/W) MJ-500 Y3.2 (B/W)
BJC-600J Y18.1 (Color)
BJ-F600
Source: Appendix 1. The cost of paper is excluded.
MJ-
700V2C
Y1.0 (B/W)
Y11.2 (6 colors) PM-770C
Y7.6 (Color)
Y2.8 (B/W)
Y14.0 (Color)
It is, therefore, premature to conclude that Canon sold the body of its printers at
a low price and made all profits from consumables. The facts were not that simple.
In the first half of the 1990s Canon’s average running cost was clearly high, as
was reported correctly in previous studies (Miyazaki 1999, 2002; Fujiwara 2002).
There were two main reasons. One was the difference in head design. While Epson
printers used a permanent head with consumable ink, the printing head and ink
were in one disposable cartridge in Canon printers. Another obvious reason was
Canon’s strategic intent for profiting from the consumables business.
In the first half of the 1990s at Canon it may have been the intentional emphasis
of product development during the design and engineering phase to maximize the
strategic focus – the after-sales demand for consumable exchange parts. The difference
in head technology mentioned above must not have been a technological
issue alone; it must have reflected the business strategy of that time. However,
there was a downside – incurring high running costs. Canon started to feel the heat
from rival competitors and the threat of third parties who could erode the profitable
consumables business. What was the response of Canon to this pressure? As
the following time-series analysis indicates, Canon began to tweak added value
between the body and cartridge of the printer, to reduce running costs and profitability
from consumables, or to add separate attractive features to the product in
order to control the ability to gain profits. It was a translation of the change in the
competitive dimension of the market into the change in product design.
manufacturers. Missing information is supplemented from various sources. The obtained
information is summarized in Appendix 1. All the tables and figure in the paper
are based on the Appendix.