Source: Changing Strategic Direction, Peter Skat-Rordam


  Differentiation Strategies


When Canon entered the copier business in the 1970s, it changed the logic of how to run a copier business. The company successfully expanded its photocopier business in the USA by using competitive innovation.

The dominant player, with a 93% market share in 1970, was Xerox, which offered a very broad range of copiers, with frequent introductions of new models. These machines were costly, so the traditional revenue model didn't work. Xerox began leasing machines, which included service agreements and paper supplies. Sales were conducted through an extensive direct-sales organization which typically targeted central staff functions, because the Xerox concept was based upon centralizing copying with its big machines.

Canon entered the market with smaller, cheaper machines for decentralized copy locations. These products were distributed through office-product dealers, who were also made responsible for service. Canon thus avoided the cost of establishing a large sales and service network. Copy machines were simply sold, not leased, so Canon also avoided the cost of leasing.

Canon later became the  Leader Download PowerPoint presentation, pdf e-book of the small offices market that has been ignored by Xerox, by aggressive sales to this segment with a new line of products called personal copiers. Xerox had difficulties in responding because its business set-up (cost structure) was designed for a specific type of business and could not easily be changed.


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