In the Frame

Wednesday, July 1, 2009 - 09:33

The new head of Canon Australia, Kenji Kobayashi, is facing a range of issues in the quest to make the imaging solutions giant the best company in Oceania. By Jason Day

It's a tough environment for Japanese multinationals these days. A combination of the home country's recession-stricken businesses, consumers scaling back on foreign goods and falling global trade is squeezing the world's second-largest economy.

Government data shows that for March imports fell 36.7 per cent on year and exports plunged 45.6 per cent. That gave Japan a trade surplus, at Y11billion, for the second straight month. While a trade surplus usually signals health for Japan's export-oriented economy, the result highlights distress as the drastic drop in imports outpaces the severe slide in exports.

Weak overseas demand for Japanese cars, electronics and other high-end goods has also forced companies like Toyota and Sony to cut production and jobs, and has unsettled the broader economy.

Canon, founded in Japan in 1937, is a household name for imaging solutions for business and consumers. Part of a global reach that stretches across all regions, Canon Australia contributes to the giant's worldwide revenue of some $AUD64 billion in 2008. It has a big stake in how its operations are being run in the wake of disconcerting economic times.

New man
Kenji Kobayashi took over as Managing Director of Canon Australia in September 2008. With over two decades in the company and senior positions in places such as The Netherlands, Italy and Hong Kong, he is charged with managing strategic direction and vision.

Asked about his leadership style, you get an inkling of the personality that makes Kobayashi such an approachable figure. "I am not just the quiet, smiling Japanese where nobody knows what he's thinking," he smiles. "My management style is very open-minded, discussion based and avoids politics. I've found this style works well with Australian culture; it has been a good combination."

Given global financial crisis and business and cultural differences, that combination will have to deal with its fair set of challenges.

"Ultimately, my aim is to grow and make Canon the No.1 brand in all business and consumer imaging categories in Australia, particularly in terms
of customer service," says Kobayashi. "That is my No.1 wish."

Worldwide, Canon has enjoyed seven years straight of growth in both sales and profit, something unsustainable for 2008. But despite the global downturn, Canon Australia does occupy a position for other companies to envy. Kobayashi confirms that, somewhat surprisingly, local sales year on year increased in the March quarter, a result in contrast to the recession-led impact in, say, the US market.

A big advantage that Canon does enjoy is that it is externally debt free, with any borrowings sourced from headquarters in Tokyo. The result of a strategic move internationally about a decade ago, it means that Canon Australia is not expending energy hunting around for expensive and hard-to-get credit.

Local challenges
Kobayashi is to the point when outlining some of the challenges he faces. One of these - a theme as it turns out - surrounds customer service by Canon and its affiliated representatives. He believes it is Canon's service-coverage strategy that will be the key to success in the Australian market.

"Australia is a very large country, much larger physically than Japan and Hong Kong. It has taken me a while to get used to this. The sheer size and distances raise the issue of establishing and improving on our coverage of the sales and service channels."

Kobayashi points out that the flipside to relying on business partners - no matter how good or well trained - inevitably means that some key customer accounts will not be satisfied, as they want only direct Canon support.

"Naturally, if we had 100 per cent coverage by our own people, it would be best, but this can't be justified economically," he says.

A second challenge for Canon is a factor that Kobayashi has found unique and didn't expect from the Australian market. While he acknowledges that customers in Australia will pay a premium for particular features - for example, a waterproof digital camera that fits in with an outdoors lifestyle - price and entry points are a huge factor.

"In our Australian product categories, the size of the market at entry level for product models is much bigger than in other countries. As such, I find that it is very competitive on price at the lower end of model ranges," he says. "The Australian market doesn't simply want cheaper products; they demand good quality products and features at a reasonable price.

"Ultimately, as Canon doesn't want to compete solely on price, creating value for customers in such a price-oriented market is the challenge."

Creating value
Canon revenues are split about 60:40 between consumer products - such as digital cameras, camcorders, printers and consumables - and the business group, which includes products such as large format printers, multifunction devices and related business services. Kobayashi believes having these two customer markets is one of the company's strong points; how they handle each is imperative.

"Without knowing a customer's expectations, we cannot create value," he says. "If we don't create value, we cannot survive. Customer satisfaction is paramount, and we must continuously work to improve it."

While the impact from the economic downturn is likely to play itself out for some time yet, Canon locally is travelling okay. Kobayashi reveals that while the retail market was expected to drop significantly, it has held up, and quite a few Rudd Government stimulus dollars have probably made their way
into Canon accounts during the March quarter. However, the corporate market has slowed, as wary companies reduce expenditure and investment.

"We're finding that companies say they will keep going with their multifunction unit or printer for another 6-12 months instead of getting a new one."

Which makes for Kobayashi's belief that it is in the services area, the selling and servicing of hardware, managed print services and so on, that Canon must build and create value.

"If we rely on hardware sales too much, we are not then in a position to avoid the consequences of a maturing market where prices drop. Sustainable growth for the future of Canon involves an expansion of our service business."

Working towards the days when the economy bounces back is also on the agenda, and fits in with Kobayashi's passion for continuing to satisfy the customer during down times.

"It is very important to recover quickly after the market improves," he says. "For me, this is an opportunity. I want to use this period to establish a base for future growth.

"In tough times, you often find you're unable to take opportunities. But I believe the changes I propose will be understood by my people."

Canon aim to drive 10 per cent of profit back into research and development. And they have runs on the board: Canon has ranked among the top-three US patent recipients for the past 17 years.

"Our R&D team is very strong and active. While most activity operates out of our headquarters in Tokyo, we have our local research team in Australia, Canon Information Systems Research Australia (CiSRA), which develops customised solutions for local customers, and exports digital imaging technologies for use in Canon products worldwide.

"For us it's very important to continue to innovate in the technology field, because our customers are expecting new technology. We must provide for the fulfilment of this expectation."

Canon technology aims to realise the company's corporate philosophy of kyosei. Kyosei is an ideal for a society in which people, regardless of culture, customs, language or nationality, live and work for the common good.

"The idea is that employees and customers identify Canon, not with the original country's company - Japan - but as a global company," says Kobayashi. "And while kyosei is a word for working globally, of course the instrumentation is very different in each market." And for this Canon head, that means to live and work closely together with local people in the Australian market.