Olympus Strategic Management Research Commerce Essay

Olympus St rungic Management Research Commerce turn asideOlympus Corpo ration is a Japan- primed manufacturer of reprography and optics products, founded on 12 October 1919 by Takeshi Yamashita with home in Tokyo, Japan and listed on the Tokyo Stock Exchange. The attach to is sedulous in the manufacture and sale of precision machineries and instruments for the imaging, health check, life sciences, info and colloquy and separate foodstuffs.The comp tout ensembles imaging system descent, though Olympus imaginativeness Corp., merchandises compact and lightweight digital cameras, optical lenses and voice rec rolls. The medical systems parentage, though Olympus medical exam Systems Corp., offers medical endoscopes, surgical endoscopes, endotherapy products, ultrasound endoscopes and surgical treatment devices. The life science subdivisions products embarrass molecular imaging systems, much(prenominal)(prenominal) as chemistry analyzers, immunoassay systems and transmi ssion line analyzers, diagnostic systems and biological and industrial microscopes. Olympus likewise operates several investigate facilities, such as the Olympus Bio visualise Laboratory and the RIKEN BSI-Olympus Collaboration Centre, connected to the trading operations of their segment. The companys information and communication offerings, with ITX Corp., include investment and business incubation, IT services and equipment sales, such as the sale of mobile terminals. The company operates across six continents and more than 50 countries by dint of 219 subsidiaries and 19 affiliated companies. Altogether, Olympus is comprised of four business segments imaginativeness Systems, Life scholarships and Industrial Systems, medical Systems and Information and Communication. Olympus President and Representative music director is Hiroyuki Sasa, who took this office in April, 2012.PESTEL AnalysisPolitical factors. The political environment is considered as one of the most influential factors that imprint the operations of a business. Since every(prenominal) political forces atomic number 18 a tell of the macro-environment and atomic number 18 associated with the web site of g everywherenment, this flat influences the possibility of chief(prenominal)taining a business in a location economy. mitigate government would al charges sieve to bring out the most favorable conditions for a business, exploitation good policies and making business thrive. Governments similarly choose the way of taxation and support influence export and import abilities of a busy country (e.g. artificial limitation of an amount of especial(a) good that pile be imported in the country, changing taxation for local and outside producers, stimulating export or import, special license conditions etc.).In our particular case, the most important thing of a political environment Olympus operates in is fiscal policies of the governments of the countries Olympuss stores and its distribution chain are situated in. Pursuing their objectives, governments fecal matter levy taxes that make conducting a business un utile in this political system, or, for example, cancel taxation of or so firms at all to improve the situation of a company on the grocery.Overall political situation in particular countries also affects Olympus business. Since some countries fix unstable political situation (e. g. Somali, Iraq, many African countries), Olympus is reluctant to maintain their business there because of occasional business conditions and unreli world actor of partnerships with local retailers.Economic factors. Economic environment of an nerve are all sparingal factors that effect on the working of a business. This point includes distribution of income and wealth in the economy, trade cycles, frugal policies and reputation of an economy. Scientists distinguish 5 main components of a firms economic environment. They are economic conditions, economic system, ec onomic policies, planetary economic environment and economic legislations.Since Olympuss sign purpose is realiseing utilitys to stockholders, all these factors should be carefully considered spot acting in a particular economy in order to bring the spicyest profits possible. Size of market, carry and supply trends, inflation rate in the economy, national income, per capita income, efficiency of public and private sectors and many other factors influence Olympus performance in a particular economy and instantly influence its profitability. Moreover, since an economic system of a country sics rules, goals and incentives that controls economic relations among people in a society, this factor influences Olympus desire or scour ability to perform in a particular economy.Separated nib book should be said about global economic downturn as a result of the global fiscal crisis of 2008. The worst economic slaughter the humankind has faced since the Great Depression left millions of people without jobs and trillions of dollars in market honor evaporated. The global consumption and pauperization felt dramatically, including the demand for reprography and optics products Olympus manufactures. Although Asian countries did non experience such a striking concussion as Europe and Northern America did, overseas sales account for approximately 80% of Olympus sales. Interest rates became higher in a good deal all countries, somehow influenced by the crisis. National income festering in absolute major(ip)ity of countries s showtimeed 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. One of the most important societal factors, which influence operations of Olympus is ageing of population in its target markets and eer growing of health consciousness of those individuals. Since medical exam Systems Life Sciences are the largest business segments of Olympus Corporation, these trends can positively influence Olympus because of the demand crop expectations and sine qua non for feeler of patient quality of life. However, population growth rates in these countries are not that positive and for the last decade we hire observed shrinkage of population in developed countries and constant growth of population in developing countries as India, China and many countries of the Muslim world. Therefore, in the hot future the trend pass on reverse and exactly those growing countries allow for became major importers of sophisticated products as Olympus manufactures. Thus, Olympus should be ready to such changes and deliver precaution to the tuition of its distribution chain in all likely markets.Technological factors. Any changes in engineering science have a major impact on the business. New technologies ch ange the business prospects and profits, work destination and methods of occupation that are apply in the assiduity. Technological changes force counsel to change the course of how the business is kept up(p) in order to procession the productiveness and profitability of the issue process.Talking about the industry of advanced 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 coeval world. Because of the nature pace of the human 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 increase the rate of technological change.All these factors determine the technological environment for Olympus, at the same time affecting its minimum efficient production level, level of financing its research facilities, toll and quality of products manufactured and ultimately filter out 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 temper tinges, directly influencing operations of a business. Environmental factors are not of the highest greatness 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 breastplate define certain environmental standards Olympus should comply with.Legal environment. As any business, Olympus operates within a exigent framework of law which influences different aspects of the company. Governmental laws regu late the status of the organization, its kin with customers and suppliers and certain internal procedures and activities, influencing the behavior of Olympus on the market and specific 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 beatThe Diamond model of Michael Porter was contrived to evaluate and assess combative advantages of a firm in national and global competitor. Let us construct Porters Diamond model for Olympus Corporation.400px-The_Porter_DiamondGraph 1. The Porter diamond solutionFactor conditionsSkilled workforce soaring intellectual potential and strive towards innovationsNew innovations and impertinentfangled methods of integrated plaqueDeveloped technological base and understructureDemand conditionsSophisticated local and overseas market high-pitched press ure and demand for innovationsRelated 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 rivalryNew in collectived plaque strategyFocus on core business domainsNew integrated concern policies Back to introductorys, One Olympus, and Profitable GrowthFour forward-looking basic strategies Rebuilding of business portfolio/Optimal allocation of circumspection resources, Restructuring of governance, refreshen of cost structures and Restoration of financial healthFierce domestic competition, which stimulates innovationsHigh standards of bodily cultureGovernmentSignificant efforts remunerative to the study of infrastructure and attraction of new businessesEducational incentives and creation of skilled labor hike of BPO/KPO (business process outsourcing and knowledge process outsourcing)ChanceChang es in global economic trendsAll factors, which create discontinuities and are outside of a control of a firmMarket Analysis and Industry Life Cycle directly the industry of reprography and optics products Olympus operates in is the subject for constant growth and development. The medical transmission line, which is the main business segment of Olympus, has experienced steady growth over the days and is anticipate to grow even further in view of the favorable environment. At a time of fast aging of population in the developed countries, early staining and diagnosis of treatment have change state urgent priorities for patients, physicians and societies overall. Minimally invasive treatment methods as endoscopic mathematical process 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 possesse s 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 rail line 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 make full 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 concurrently a brand and imaging technology advertizer for Olympus. Thus, it is an inherent part of the companys marketing strategy and will be paid an utmost upkeep 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 expansion by entering 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 Five Forces FrameworkPorters louver 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 afore followed five forces concern competition threats from external sources. The remaining two are related to the companys internal threats.Graph 2. Porters Five Forces FrameworkSourceBargaining superpower of suppliers. The tautness of suppliers of Olympuss three key business segments is comparative ly high. The number of suppliers and availability of comforter inputs differs from the product or inventory supplied. Availability of lenses Olympus uses, for example, for its Medical Business segment is limited 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 switch 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 well 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 Oly mpuss consumers, withal 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 size of distributively order, however, is low in comparison with other businesses of the firm. Buyers of this segment possess a credible backward integrating 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 educated about the product and lots of substitutes are open 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 open on the market and their lower technical characteristics. curse of backward integration in these businesses is low and majority of buyers purchase products in low volume.Threat of new entrants. Thre at 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 great investments are required. Second, patents 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 out of stock(predicate) 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 inveigle clientele of well-known already established brands.Threat of substitute products. possible 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. hail of substitute products, w hich can repugn 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 bimestrial lifecycles and development cycles. For example, Evis Exera III a core endoscopy system, which was introduced by Olympus in dance 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. agonistic rivalry within an industry. Competition within Olympuss industry is fierce. All companies which contend for leadership in this industry have powerful competitive strategies and high levels of advertising expense. Each of the companies tries to achieve sustainable competitiv e 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 Current Strategyembodied Strategies. Basing on the corporate management policies and aiming to brood pressing issues of the company, Olympuss management has enclothe 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 beseem a growth driver for the company, which will posterior 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. cash in ones chips but not least corporate strategy of Olympus is to res tructure the firms governance after the recent unprecedented turbulence of the Olympus malicious gossip period.Business Strategies.Medical Business. Under the current medium-term vision of Olympus management, the Medical Business of the company should locomote a profit and growth driver for the firm. The strategy of Medical Business is to achieve further expansion of the business by metropolisizing on the super 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. Fi rst 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 side by side(p) 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 April 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 vulgar business strategy and encouraging teamwork and cooperation.Profitable Growth. This policy simply proclaims Olympus intent to grow while earning profits.Olympus Current PerformancePerformance IndicesResults (FY ended blemish 2012)Net sales 848.5 cardinalOperating income 35.5 trillion sustainage income17.9 billionNet income 49.0 billionEBITDA80.3 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% flurry 1. Olympus current performance indicesSource Olympus Corporation. Annual Report 2012Table 1. Olympus current performance indicesSource Olympus Corporation. Annual Report 2012Research perplexity 2. Strategic RecommendationsBasing on the analysis above, several strategic recommendations are commonsensible 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 hardly any company can compete in this sector with Olympus. However, for the last several years the company has been deviating from this segment, investiture 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 emphasis 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 inquiry 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 history since accounting and corporate scandals including Enron, Parmalat, wandering(a) Systems, Tyco International, Adelphia and WorldCom. One of the main Olympus insiders, involved in the scandal and who in reality was the one who exposed doubtful acquisitions of Olympus dated several years earlier, was British-born top-executive Michael Woodford, occasion 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 estimable and complied with the highest standards of corporate governance and information disc losure. Hereinafter 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, apiece publicly traded company 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 dependable 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 straining 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 be 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. check to internationally-accepted standards of corporate standards and information disclosure, the behaviour of the former Olympuss CEO Michael Woodford was the only welcome in the situation he faced with. Obviously, local peculiarities of Nipponese 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 shipway 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 protec t Olympus stakeholders. Since Woodford did what all members of Olympus board could not do, I think that he is a shooter 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 management by itself was rotten 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, acceptance of strict laws which contain enhanced standards for all public company boards, management and auditors should be conducted in all countries where this has not been done yet.If I were 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 reputation 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 reclaim the reputation of the firm in the eyes of its suppliers and consumers.