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Ricoh Canada Inc.

Report

Industry: Digital Imaging and Document Management

Submitted by: Mary Ianniello

Student No. 500549719

Course: BUS 800

Section: 051

Professor Knud Jensen

Due by November 17, 2016

Introduction
This report is focused on Ricoh Canada Inc. They have a head office in Toronto, Ontario, but
headquarters are located in Japan by their parent company Ricoh Company Ltd. Ricoh is a public
company which operates in more than 200 countries and employs over 109,000 people. They
have worldwide sales of US$23 billion. After becoming a dominant played in the Canadian
market Ricoh was able to attain 25% market sales. In 2013, Ricoh Canada Inc. had come to the
realization that their market was about to face extinction because the industry is advancing into
services. The problem they are facing is not knowing what services to further develop.

Analysis

Ricoh is in a market that is facing saturation but growing towards services, with clear low threats
of entry (3.1). To further expand they are not in the services market nor do they have direction on
how to get there but while doing so they do not want to only be known as the printer guys.
Creating SMART goals would help give them a competitive advantage (11.0). This growth could
cause failures, their strategy should also include a plan handle potential failures (9.0). Driving
forces that are moving the industry into extinction are shifts in technology, user behaviour, and
corporate behaviour (4.0). Shifts in technology and corporate behaviour together create Ricohs
problem because corporate behaviour includes paperless offices, cost effectiveness, greater
accessibility throughout office(s), and efficiency (4.0) which is all reliant on technology.

The appendix has further insights on what could potential drive Ricoh out of business if they do
not act quickly and follow the trend into services. Businesses are looking towards sustainable
workplaces by becoming paperless and relying on digital documents; this shift caused the
printer/copier market to decline by 3% (2.3). Other issues contributing to Ricohs problem is
having cool technology with no experience on how to use it and having production in Japan
which could stall innovation and production (11.0). Ricoh is unsure on the investment amount
needed to shift into services (13.0); however their financials show they have net working capital
to provide for services (11.0). They could have advanced much sooner had they had a research
and development team, who could have analyzed the shift into services and notified Japan sooner
to commence innovation (13.1). These problems are putting Ricoh at a disadvantage and creating
more threats for them in the industry.

Alternatives

1. Grow into services faster


a. Ricoh would just jump into the service area blindly, not knowing what to do or where to
start, but at least they would have market presence.

Pros Cons
- Presence in market - No knowledge or experience
- First mover advantage - Lose customers
- Could decrease profits
- Untrained sales force

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- Cost to train sales force
- Still waiting on Japan for innovation

2. Install a Research and Development sector


a. Had they had a R&D team, they could have realized the trend sooner. Installing one could
give them better insight on consumers, where the market is headed, and cool technology
they could be using.

Pros Cons
- Realize future growth quicker - Expense to company
- See trends earlier - May result in cutting costs in other areas
- Realize shifts in technology - Still have to rely on Japan for the creation of
- Understand user behaviour the service

3. Merge or acquire a company in services


a. Ricoh could merge with or acquire a company that has experience and knowledge in
services, making the process easier for them.

Pros Cons
-Eliminates potential competitor - Expense to company
-Other company has knowledge in services - Termination of employee (Ricohs or theirs)
-Faster way to enter into services - Could hurt brand image
-Saves Ricoh time on product and process
innovation for services
-Ricoh has experience in acquisitions
-Would not have to wait on Japan
-Using both companies resources would make
them a market leader
-Increase sustainability
-Have net working capital
-In good financial standing

Recommendations

The scope of Ricohs business is analyzed on three criteria: product, vertical, and geographical.
Product scope is Technical Services, Professional Services, and Managed Services. Ricohs
vertical scope is product in Japan. Their geographic scope is based on the different type of
accounts they sell to and where each are located. Expanding their product scope is where they
can gain a competitive advantage. Ricoh is currently in an industry that is approaching the end of
the maturity stage (7.0).

Based on the alternatives above, the most advantageous choice for Ricoh would be alternative
three merge or acquire a company in services. This alternative has the most pros and could help
them achieve a competitive advantage. Ricoh is already a dominant player in the market and they
do not want to lose that position; merging or acquiring another company can keep them in that

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position and/or differentiate them further from competitors, hopefully creating no close threats in
the industry. Alternative three gives them the competitive advantage to return back to the growth
stage and rise with the growth of the industry in services and maintain the profits they receive
from current business ventures.

By a merge or acquisition the company could share resources creating an economy of scope,
which ultimately lets businesses waste less and use fewer resources, concurrent with their goal to
grow sustainably into services. Sustainability was a factor consumers were looking for when
searching for a supplier (1.5). Economies of scope also create cost advantages due to sharing
resources. Increasing the use of technology helps decrease the administrative costs. This
alternative would increase transaction costs and decrease administrative costs, thus helping
Ricoh grow in size and scope of the market.

By diversifying their business, Ricoh is able to advance faster into services, reduce risk of
failures, and gain a competitive advantage. Costs related to diversification are reliant on net
working capital available (12.0) to put towards organic growth in the development of services or
a merge with or acquisition of another business. Diversification can be proven good on 3
essential tests:

- Attractiveness test: services is an attractive industry


- Cost-of-entry test: would depend on the arrangement between both businesses
- Better-off test: Ricoh would gain a competitive advantage by acquiring a company
focused on services because it eliminates their weaknesses in the service areas.

How this alternative can fit with 3 factors:

- Objectives
o Ricohs objective is figuring out a strategy to move them into services while still
remain a profitable dominant player in the market. This alternative can attempt to
keep them dominant and profitable in services, while decreasing development
time.
- Competitive advantage
o It would take away a threat in the market while increasing their profits.
- Capital
o The cost is unknown but Ricoh is still in good financial standing (12.0), giving
them the opportunity to pursue this option.

The SWOT analysis (10.0) lists many weaknesses for Ricoh, choosing this alternative can solve
many of them. It can increase their market share in services while turning them away from
extinction. It will allow them to gain experience in services while decreasing the time and cost of
training. At lastly, it can bring innovation to North American instead of relying on Japan.

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