Issue: Canon and the Japanese Yen

About 2 weeks ago, Canon announced that it would be taking advantage of a weak yen and move some of its production back to Japan. Hmm… is that the only thing here?

image

CFO Toshizo Tanaka

Of course not, as Chief Financial Officer Toshizo Tanaka said it, “There are two reasons behind our decision to shift a part of our production back to Japan… ” Yes, first would be the perceived stability of the yen and second, in countries where Canon has production bases, the gap in labor costs compared to Japan has narrowed. And a key contributor to this is actually the rising wages outside of Japan coupled with the advancement in factory automation technology by the company.

Did they make the right move?

Yes especially for the second reason. But for the first one, while “Abenomics” may be doing well, you would never know how big a fluctuation a sudden shake up would result (even for partial relocations) – not just for the current year but beyond – so, be proactive and flexible.

In connection with this, it is important to note that 80% of Canon’s revenues come from outside of Japan; thus, unless the currency is truly favorable, the shift in its manufacturing should not include products that are responsible for their returns – instead, strengthen your bases.

image

As for its production boost at home, thoroughly consider the market for digital single-lens reflex cameras. Like, how are its sales compared to that of smartphones (now, with improved camera quality)? DCs should not be the only ones that are gauged with smartphones, you know, but most anything that has a “camera.”

See. Though demand could be created through innovation, since the camera is up against the smartphone which is more of a necessity, the camera developed should be at least 3 steps ahead of the phone in innovativeness to really boost demand.

What’s your take?

Advertisements