Coevolution Of Manufacturing And Service Industry Functions | Chihiro Watanabe & Bernadetta Kwintiana Ane

A dramatic surge in information technology (IT) around the world is subjecting firms to a new paradigm, thereby resulting in a lower operating income to sales (OIS) ratio for Japan?s leading electric machinery firms. The only exception to this trend is Canon, which has demonstrated a clear contrast with rival firms by increasing its OIS. This corresponds to another contrast with respect to diversification strategy. Contrary to a trend of reduced dependency on diversification by Japanese electric machinery firms, only Canon has increased its diversification. The above suggests that Canon has constructed a sophisticated business model that enables it to increase OIS in an information society and such success can be attributed to its diversification strategy. By following such a strategy, Canon has succeeded in developing new functionality by means of wide-ranging inter-technology spillover in manufacturing processes that leads to spillover technologies in the marketplace, thereby constructing a self-propagating structure. This business model can be identified as a coevolution between manufacturing and service industry functions and can offer a new insight for manufacturing industry amidst the current paradigm shift from an industrial society to an information society. Given the significance of survival strategy for manufacturing industry in a new paradigm, this paper examines the mechanism of Canon?s diversification strategy and demonstrates the significance of its business model in a new paradigm.