Olympus Strategic Management Research Commerce Essay

Olympus Strategic Management Research Commerce EssayOlympus mickle is a Japan-based reconciler of reprography and optics crossways, founded on 12 October 1919 by Takeshi Yamashita with headquarters in Tokyo, Japan and listed on the Tokyo Stock Exchange. The confederation is engaged in the manufacture and sale of precision machineries and instruments for the imaging, medical, life sciences, entropy and communication and other merchandises.The comp eachs imaging system byplay, though Olympus imagination Corp., markets compact and lightweight digital cameras, optical lenses and example recorders. The medical systems melodic line, though Olympus aesculapian Systems Corp., offers medical endoscopes, surgical endoscopes, endotherapy products, ultrasound endoscopes and surgical interference devices. The life science departments products include molecular imaging systems, such as chemistry analyzers, immunoassay systems and blood analyzers, diagnostic systems and biological and industrial microscopes. Olympus also operates several research facilities, such as the Olympus Bio Imaging Laboratory and the RIKEN BSI-Olympus Collaboration Centre, machine-accessible to the operations of their segment. The companys information and communication offerings, through ITX Corp., include investment and business incubation, IT services and equipment gross sales, such as the sale of mobile terminals. The company operates across cardinal continents and more than 50 countries through 219 subsidiaries and 19 affiliated companies. Altogether, Olympus is comprised of four business segments Imaging Systems, career Sciences and Industrial Systems, health check Systems and Information and Communication. Olympus President and Representative handler is Hiroyuki Sasa, who took this office in April, 2012.PESTEL AnalysisPolitical factors. The policy-making environment is considered as nonp aril of the close to influential factors that affect the operations of a business. Sinc e all policy-making forces be a part of the macro-environment and are associated with the situation of government, this directly yields the possibility of maintaining a business in a special(a) economy. Better government would of all sequence strive to create the or so favorable conditions for a business, ontogeny good policies and making business thrive. Governments also choose the way of taxation and can influence export and import abilities of a particular country (e.g. artificial limitation of an amount of particular good that can be imported in the country, ever-changing taxation for local and foreign producers, stimulating export or import, special license conditions etc.).In our particular case, the most of import thing of a political environment Olympus operates in is fiscal policies of the governments of the countries Olympuss stores and its dissemination chain are situated in. Pursuing their objectives, governments can levy taxes that make conducting a business un profitable in this political system, or, for example, cancel taxation of some truehearteds at all to improve the situation of a company on the market.Overall political situation in particular countries also affects Olympus business. Since some countries have unstable political situation (e. g. Somali, Iraq, many African countries), Olympus is reluctant to maintain their business there because of unpredictable business conditions and unreliability of partnerships with local retailers.Economic factors. Economic environment of an organization are all economic factors that effect on the working of a business. This point includes distribution of income and wealth in the economy, trade cycles, economic policies and nature of an economy. Scientists distinguish five main comp peerless(prenominal)nts of a firms economic environment. They are economic conditions, economic system, economic policies, external economic environment and economic legislations.Since Olympuss initial purpose is bri nging profits to stockholders, all these factors should be carefully considered while acting in a particular economy in order to bring the highest profits possible. Size of market, demand and supply trends, inflation rate in the economy, national income, per capita income, efficiency of public and secret sectors and many other factors influence Olympus performance in a particular economy and directly influence its profitability. Moreover, since an economic system of a country determines rules, goals and incentives that controls economic relations among people in a society, this factor influences Olympus desire or even ability to perform in a particular economy.Separated intelligence service should be said almost global economic downturn as a result of the global financial crisis of 2008. The worst economic debacle the macrocosm has faced since the Great Depression left millions of people without jobs and trillions of dollars in market prise evaporated. The global consumption an d demand felt dramatically, including the demand for reprography and optics products Olympus manufactures. Although Asian countries did not experience such a striking shock as Europe and Northern America did, overseas sales account for approximately 80% of Olympus sales. reside rates became higher in practically all countries, somehow influenced by the crisis. National income proceeds in absolute majority of countries slowed down. Hence, the downturn of the global economy is one of the most prominent economic factors which influence Olympus operations. Furthermore, current economic problems in Europe, which accounts for 26% of Olympus sales, also adversely influence the company scrutinized.Social factors. whiz of the most important social factors, which influence operations of Olympus is ageing of population in its target markets and forever and a day growing of health consciousness of those individuals. Since Medical Systems Life Sciences are the largest business segments of Olympus Corporation, these trends can positively influence Olympus because of the demand growth expectations and need for improvement of patient quality of life. However, population growth rates in these countries are not that positive and for the pull round decade we have observed shrinkage of population in induceed countries and constant growth of population in developing countries as India, China and many countries of the Muslim world. Therefore, in the nearest future the trend will reverse and exactly those growing countries will became major importers of high-tech products as Olympus manufactures. Thus, Olympus should be ready to such changes and pay help to the education of its distribution chain in all prospective markets.Technological factors. Any changes in technology have a major impact on the business. New technologies change the business prospects and profits, work culture and methods of production that are used in the intentness. Technological changes force steer ing to change the course of how the business is maintained in order to boost the productivity and profitability of the production serve up.Talking approximately the industry of hi-tech medical, imaging and information communication products Olympus operates in and technological environment there, it can be said that this industry is probably one of the most technologically-advanced industries of contemporary world. Because of the nature pace of the pitying progress and constantly growing demand for better medical apparatuses and other hi-tech products Olympus produces, technological changes and breakthroughs in this industry happen extremely often. Technology incentives of many companies are striking, constantly increasing the rate of technological change.All these factors determine the technological environment for Olympus, simultaneously affect its minimum efficient production level, level of financing its research facilities, cost and quality of products manufactured and ulti mately strive for innovation, which will determine the share of the company on the market in the nearest future.Environmental factors. Environmental factors are those factors of any companys external environment, which include weather and climate concerns, directly influencing operations of a business. Environmental factors are not of the highest importance for Olympus Corporation and do not shape its or its competitors products or production chain as they do, for example, for agriculture companies. However, constantly growing concern of the environmental sustainability, greenhouse effect and nature protection define certain environmental standards Olympus should comply with.Legal environment. As any business, Olympus operates inside a strict framework of law which influences different aspects of the company. Governmental laws regulate the status of the organization, its relationship with customers and suppliers and certain inhering procedures and activities, influencing the behavi or of Olympus on the market and particular(prenominal) market conditions. Consumer laws, discrimination laws, employment laws, antitrust laws and health and safety laws of different countries affect how Olympus operates on local markets and also determines cost and demand for its products.Porters Diamond fabricThe Diamond model of Michael Porter was contrived to evaluate and assess competitive advantages of a firm in national and global competition. Let us effect Porters Diamond model for Olympus Corporation.400px-The_Porter_DiamondGraph 1. The Porter diamondSourceFactor conditionsSkilled workforceHigh intellectual potential and strive towards innovationsNew innovations and tender methods of corporeal governanceDeveloped technological base and infrastructureDemand conditionsSophisticated local and overseas marketHigh pressure and demand for innovations connect and supporting industriesLocal and international competition creates innovations and cost-effectivenessParticipation of suppliers in upgrading processHigh incentives for innovations in whole production chainFirm strategy, structure and challengerNew bodily governance strategyFocus on core business domainsNew incarnate caution policies Back to Basics, One Olympus, and Profitable gainFour bran- radical basic strategies Rebuilding of business portfolio/Optimal allocation of management resources, Restructuring of governance, Review of cost structures and Restoration of financial healthFierce domesticated competition, which stimulates innovationsHigh standards of corporate cultureGovernmentSignificant efforts paid to the development of infrastructure and attraction of new businessesEducational incentives and creation of skilled labor encouragement of BPO/KPO (business process outsourcing and knowledge process outsourcing)ChanceChanges in global economic trendsAll factors, which create discontinuities and are outside of a control of a firmMarket Analysis and Industry Life CycleNowadays the industr y of reprography and optics products Olympus operates in is the subject for constant growth and development. The Medical Business, which is the main business segment of Olympus, has experienced steady growth over the years and is expected to grow even further in view of the social environment. At a time of fast aging of population in the developed countries, ahead of time detection and diagnosis of treatment have become urgent priorities for patients, physicians and societies overall. Minimally invasive treatment methods as endoscopic surgery are expected to play a key role in satisfying these requirements. The surgical devices field annual sales are expected to grow 14% annually, creating major business opportunities for Olympus because it is the only company in the world, which possesses the technologies for manufacturing of apparatus that meet the full range of needs from early detection of illnesses to minimally invasive treatment. Therefore, we can conclude that Medical Busin ess of Olympus operates in the growth stage of the industry life cycle.Regarding the Imaging Business of Olympus, it operates in the industry, which slowly proceeds from the growth into the mature stage of its life cycle. Although hundreds of innovations are still made in this field, the market in developed countries is close to be saturated. However, there is still an enormous market and place for development in developing countries. Furthermore, it should be recognized that Imaging Business is simultaneously a scar and imaging technology driver for Olympus. Thus, it is an inherent part of the companys marketing strategy and will be paid an utmost attention in the nearest future.Life Science Industrial business of Olympus is also in its growth stage. The driving factor for this is that the industries, where reprography and optics products have not been used before, begin to adapt innovations from this field to develop and increase the efficiency and productivity of their business . Hence, sales blowup by enroling untapped industries is of the highest interest for Olympus, since this market is undeveloped yet, contains a lot of opportunities, place for innovations and growth.Porters tail fin Forces FrameworkPorters five forces framework is a tool for industry and company analysis, aimed to derive those five forces, which determine the intensity of competition and therefore attractiveness of a particular market and overall industry profitability. Three of the aforementioned five forces concern competition threats from external sources. The remaining two are related to the companys internal threats.Graph 2. Porters Five Forces FrameworkSource talk terms power of suppliers. The concentration of suppliers of Olympuss three key business segments is comparatively high. The number of suppliers and availability of turn inputs differs from the product or inventory supplied. Availability of lenses Olympus uses, for example, for its Medical Business segment is limite d because of the complicated process of their production and various patents. Input of suppliers of hi-tech components is extremely important for companies in the industry Olympus operates in and an ability to substitute suppliers of such unique products is low. Hence, suppliers of technologically advanced inventory have a significant influence on the industry scrutinized and are able to drive up prices with little resistance from their buyers.Firms which produce less unique products, however, have dramatically less power. The number of suppliers in this category is big as good as the availability of substitutes. The competition among these suppliers is severe and therefore their ability to artificially deviate prices is low.Bargaining power of consumers. Bargaining power of Olympuss consumers, similarly to bargaining power of its suppliers, differs greatly from one business segment of a company to another. Imaging Business, for example, has a great number of customers. The sizing of each order, however, is low in comparison with other businesses of the firm. Buyers of this segment possess a credible backward integration threat, since they can choose to buy products of a rival firm as Canon or Nikon. Buyer power is also strong because switching costs are low, is usually well-educated about the product and lots of substitutes are available on the market.In case of Medical and Life Science Industrial businesses of Olympus, consumer bargaining power is different and is believed to be lower. To the great extent this is because of little number of substitutes available on the market and their lower technical characteristics. Threat of backward integration in these businesses is low and majority of buyers purchase products in low volume.Threat of new entrants. Threat of new entrants on the market of hi-tech products Olympus manufactures is low because of several factors. First, in order to enter this market, extremely high capital investments are required. aid, p atents and rights of already established firms make it hardly possible for new entrants to produce products, similar to existing ones. Hence, prohibitive for new firms amount of financial and human resources should be put into research and development to introduce technologies and products unavailable yet on the market. Furthermore, in Olympus business lots of attention is paid to consumer loyalty and it may be very hard for new entrants to entice clientele of well-known already established brands.Threat of substitute products. viable threat of substitute products Olympus experiences in all its businesses other than the Medical. This can be observed because of consumers propensity to substitute and comparatively low switching costs. Number of substitute products, which can compete with the products of Olympuss Life Science Industrial and Imaging businesses is high. So is the ease of substitution.There is, however, less threat of substitute products from Medical business of Olympus because products in the Medical business have significantly longer lifecycles and development cycles. For example, Evis Exera III a core endoscopy system, which was introduced by Olympus in spring 2012 and has no substitutes on the market, had the development period of seven years. Since Olympus has a competitive edge in research and development, it is unlikely that products able to substitute Olympus Medical businesses apparatuses will emerge on the market in the nearest time.Competitive rivalry within an industry. Competition within Olympuss industry is fierce. All companies which compete for leadership in this industry have respectable competitive strategies and high levels of advertising expense. Each of the companies tries to achieve sustainable competitive advantage through implementing innovations and investments in research and development. Number of competitors is limited however, their financial and human resources are huge. Costs of leaving market are high.Olympus Curr ent StrategyCorporate Strategies. Basing on the corporate management policies and aiming to address pressing issues of the company, Olympuss management has model forth four basic corporate strategies. First, three business domains have been chosen as those, in which the company should invest first and foremost. These are the Medical Business, Life Science Industrial Business and Imaging Business. Medical Business should become a growth driver for the company, which will later transform into a medical-field oriented firm. Second, Olympus will revise its cost structures and aims for profitable growth. Third strategy is to improve the companys shaken financial position and performance. Last but not least corporate strategy of Olympus is to restructure the firms governance after the recent unprecedented turbulence of the Olympus grunge period.Business Strategies.Medical Business. Under the current medium-term vision of Olympus management, the Medical Business of the company should bec ome a profit and growth driver for the firm. The strategy of Medical Business is to achieve further expansion of the business by capitalizing on the highly strategically advantageous position of being capable of simultaneously developing devices necessary for new minimally invasive treatments as well as new diagnostic methods closely related to those new treatments (Olympus Corporation, 2012). The company also plans to replace existing devices with new once and create a new market by applying highly innovative technologies unavailable to its competitors.Life Science Industrial Business. Life Science Industrial Business of Olympus are aimed at growth of the corporation. There are two business strategies for this segment. First strategy is product portfolio expansion. Basing on the customer industry categories and technologies and product categories, Olympus will strive to open up new customers and open up new business fields. Moreover, this strategy also involves focus on emerging and developing countries, where the market and consequently demand for Olympus products is growing.Second strategy is implementation of reform of the income and profit structure of the Life Science field, which will involve reduction of cost of goods sold and improvement of operating efficiency.Imaging Business. For today, two strategies have been devised to address the proclaimed objective of restructuring the Imaging Business. The first strategy is to concentrate on mirrorless interchangeable-lens cameras and high-end compact cameras. The second strategy is to restructure the manufacturing process and carry out reform of the cost structure of devises.Functional Strategies. Functional strategies of Olympus include the following rigorous cost reductions, profitability improvements, increased investment in technology development, restructuration of subsidiaries and production sites worldwide.Olympus Current Business PoliciesThe new management of Olympus, who took their office on Apri l 2012, have set out three major corporate management policies of the company Back to Basics, One Olympus and Profitable Growth.Back to Basics. Back to Basic policy was devised to deal with the aftermath of recent Olympus scandals, the cause of which was the pursuit of income from investments in non-core business domains of the firm, namely equity. Thus, the Back to Basics policy was developed to bring Olympus back to its initial mission contribution to the development of society through new solutions and products.One Olympus. The idea behind One Olympus policy lies in uniting all Olympuss employees and staff worldwide under a common business strategy and encouraging teamwork and cooperation.Profitable Growth. This policy simply proclaims Olympus intention to grow while earning profits.Olympus Current PerformancePerformance IndicesResults (FY ended March 2012) unclutter sales 848.5 billion in operation(p) income 35.5 billionOrdinary income17.9 billionNet income 49.0 billionEBITDA8 0.3 billionOperating margin4%Ordinary income ratio2%Net income ratio-6%Net sales ratio9%Free cash flows 4.8 billionBalance of interest-bearing debt642.4 billionEquity ratio4.6%Operating margin4.2%Return on invested capital (ROIC)2.7%Table 1. Olympus current performance indicesSource Olympus Corporation. Annual Report 2012Table 1. Olympus current performance indicesSource Olympus Corporation. Annual Report 2012Research headway 2. Strategic RecommendationsBasing on the analysis above, several strategic recommendations are reasonable for Olympus to overcome its temporary crisis period and achieve financial superiority and growth of stockholders value in long-term period. First, it is pertinent that Medical Business should become the main segment of Olympus production chain. Olympus possesses a competitive advantage over its closest rivals in this sector and holds the largest market share. Its medical devices contain the newest innovations and technologies available on the market and h ardly any company can compete in this sector with Olympus. However, for the last several years the company has been deviating from this segment, investing in non-core business segments of the firm. This turned into the debacle for Olympus. Therefore, total reconstruction of the firms operations should be conducted with the aim to bring an furiousness on Medical Business of the firm, which should become profit and growth generator. Life Science Industrial Business, in its turn, will become an accompanying business, specializing in expansion of the product portfolio in the industrial field and hence another source of growth. The task of the Imaging Business, as one of the three core business of the firm, should be development of new technologies and innovations and becoming a brand driver for the company.Research Question 3. Mr. Michael Woodford, a Hero or a Traitor?Recent Olympus scandal has been one of the biggest and longestrunning lost-hiding arrangements in global corporate his tory since accounting and corporate scandals including Enron, Parmalat, Peregrine Systems, Tyco International, Adelphia and WorldCom. One of the main Olympus insiders, have-to doe with in the scandal and who actually was the one who exposed doubtful acquisitions of Olympus dated several years earlier, was British-born top-executive Michael Woodford, former CEO of Olympus. This lead to missing of $6.25 in assets, overall downturn of the company and great concerns regarding corporate governance in Japan. Although some people would aver that Mr. Michael Woodford acted as a traitor, I assert that his actions were extremely ethical and complied with the highest standards of corporate governance and information disclosure. hereafter I will provide some cogent arguments to support my point of view.To start with, I would like to mention that ultimate aim of management of any company is growth of value for stockholders. In order to keep an eye on management actions, each publicly traded com pany has a board of directors, which defines strategy of the company, supervises management and ensures the protection of stockholders interests. Management, as an operational branch of corporate governance, is obliged to deliver truthful information regarding companys performance.From accounting and corporate scandals in the U.S. and Europe which involved Enron, Parmalat, Peregrine Systems, Tyco International and several other big companies we have learned how distortion and hiding of information may make the companies concerned collapse and agitate local and international securities markets. In order to avoid such shocks in future, many countries have adopted various standards and laws which regulate corporate governance, including the Sarbanes-Oxley Act in the US and UK Corporate Governance Code. Japan, however, has not adopted any similar documents and this is one of the major reasons why Olympus scandal emerged in 2011.According to internationally-accepted standards of corpora te standards and information disclosure, the behaviour of the former Olympuss CEO Michael Woodford was the only acceptable in the situation he faced with. Obviously, local peculiarities of Japanese corporate governance should be taken into account, however, from my point of view, Woodford acted in according to international business ethics standards. Olympus is an international publicly-traded company and therefore should comply with internationally-accepted ways of doing business. Furthermore, Olympus is responsible to its stockholders, who are interested in transparency of the business. Hence, Woodfords behaviour was ethical in all senses and was aimed to bring transparency to the company and protect Olympus stakeholders. Since Woodford did what all members of Olympus board could not do, I think that he is a hero for the company and should be brought back.The behaviour of top management of Olympus, however, was not ethical and, as said by Lindsay Whipp and Jonathan Soble, the man agement by itself was noisome at the core (Yasu, 2011). A twodecade scheme to hide losses from investment was maintained by the companys top executives.The Olympus scandal tells us that despite accounting and corporate scandals of the last decade, the tensions still remain in some countries, which have not adapted strict standards and codes of corporate governance. Japan is not an exception. The conflict between management and stockholders will probably last forever, however compliance with such laws as Sarbanes-Oxley Act, for example, will bring transparency to the activities of publicly traded companies. Management will have less space for financial machinations and distortion of information. This, undoubtedly, will create a more reliable system of corporate governance and management. Hence, adoption of strict laws which contain intensify standards for all public company boards, management and auditors should be conducted in all countries where this has not been done yet.If I wer e in the position to make a decision, I would definitely employ Woodford as a new CEO of Olympus because he has demonstrated himself as a responsible top-executive who has extremely high ethical standards. Although corporate culture in Japan is very peculiar, he managed to uncover one of the biggest and longestrunning lost-hiding arrangements in Japanese history. Despite this created great financial troubles for the company, loss of story and urgent need of restructuration, I believe that disclosure of this crime was essential for Olympuss further growth and development.Ultimately, to solve the issues of the Olympus scandal several vital steps should be undertaken. First, and this has already been done, new management structure should be introduced. Second, Olympus should be restructured and the foremost attention should be paid to the core businesses of the firm. Third, thorough re-branding of the company should be conducted to renew the reputation of the firm in the eyes of its s uppliers and consumers.