20 K. Sakakibara and Y. Matsumoto the PM-770C (Y59,800). The BJ-F600 was competitive with regard to the body price, featured lower running costs than the PM-770C, andoffered the same resolution of 1440 x 720 dpi as the PM-770C, which was the best in the industry at that time. Despite the superior product attributes, fewer units of the BJ-F600 than of the PM-770C were sold during Year-End Sales of 1998. In this hardship Canon added its BJ-F200 in March 1999. It was 35% smaller and 32% lighter than the BJC-430Lite and the complement model for the F600. The price was set low at Y34,800. It was most likely intended for “family photoquality” application (Nikkei Sangyo Shinbun, November 8, 1998). The size of the F200 was obviously chosen with the family market in mind. A comparison with the F600 is shown in Table 6. The resolution of the F200 was reduced to 720 x 360 dpi although a new automatic function that analyzed and adjusted the color and the contrast of digital color photo images was added. Its running cost was higher than that of the F600 for both black and color ink. It is suspected that the reduction of the body price was one of the major objectives during the transition from the F600 to the F200. The separate color ink tanks/heads in the F600 were simplified into all-in-one color and black ink tanks/heads (Refer to the icon change in Table 6). The change in product architecture suggests that the intent was not only to reduce the price of a printer body but also to make sure that Canon prospered in that tough competitive market. Instead of emphasizing promotional activities to sell the superior quality F-600, Canon changed the product architecture, employing a technological product development solution, to attempt to maintain its profitability. Table 6. Evolution of Canon products: high resolution (2) Model name (launching date) BJ-F600 (11/98) BJ-F200 (3/99) Price - body only (Y) Y54,800 Y34,800 Resolution (dpi) 1,440 x 720 720 x 360 Running cost (Y) Replacement cartridge style Source: Appendix 1 and 2. Y1.0 (black) Y7.4 (4 colors) Y11.2 (6 colors) Separate head, separate color ink Y3.7 (black) Y24.6 (color) Separate head, all-in-one color
Designing the Product Architecture for High Appropriability: The Case of Canon 21 The Approach of Epson We have examined the product architecture of Canon that centered on the exchange cartridge technology. What was the approach taken by Epson? Epson succeeded to reduce running cost by separating ink tank and printer head for the first time in the MJ-500 model. This product architecture did not change during the 1990s. For this reason, there was nothing to observe in the relationship between the product architecture designed in the product development phase and the ability to control profitability. Recently, when Canon incorporated separate color ink tanks into its printers, Epson also employed this design choice. However, the approach taken by Epson was very different from the one Canon took. This contrast characterized those two manufacturers. It was the end of 2001 when Epson introduced the top “Colorio” (“Stylus” in the U.S. market) model PM-950C, which was equipped with separate color ink tanks. Six separate color ink tanks were used, which improved the resolution to 2880 x 1440 dpi. This resolution was much better than the one of the previous PM-920C model. The PM-950C became the celebrated top product for photographic quality printing, which appropriately enhanced the reputation of Epson. Table 7 compares the PM-920C and the PM-970C. Because no running cost information was available for the PM-950C from Epson data sources 5 , the PM-970C was used in the comparison instead. The PM-970C was Epson’s top product that replaced the PM-950C in 2002. It used the same ink tank modules and the same exchange mechanism as the PM-950C. The body price was the same as for the PM-950C as well. Thus, the PM-970C is an appropriate substitution for the PM-950C in this analysis. Being able to replace different color ink cartridges separately gave the impression that the running cost of the PM-970C was lower than that of the PM-920C. However, the running cost of the PM-920C per A4 page using the high-quality color mode was Y30.7, and that of the PM-970C was slightly higher: Y32.1 (Table 7). This increase in running cost was even greater, because the figure used for the PM-970C was based on an L-size photo sheet (equivalent to A6), which is smaller than an A4 size sheet. In general, running cost improves when the cartridge becomes exchangeable by individual color. Nevertheless, in Epson’s case it was the opposite. Based on interviews with industry experts, we speculate that a large sum of development cost for improving its ink materials was behind this unusual phenomenon. After the introduction of its 920C Epson took a tremendous step to improve ink materials to achieve dramatic print resolution. It is speculated that, to avoid a rapid increase in running cost due to this development, the company separated each color in a separate cartridge. 5 Traditionally Seiko Epson had been outspoken about competitive benchmarking of running costs. For its 950C, however, we suspect that the company played it down.