Log in

ISM Article

Konica and Minolta Squeeze Into One

24 Feb, 2003 By: Dick Norton imageSource

Konica and Minolta Squeeze Into One

On January 7, 2003,
it was announced that Konica Corporation and Minolta Corporation would merge
their operations during 2003. There is a great deal of overlap in the markets
served (office imaging products, cameras, optical products, and medical and
graphic products) by the two companies. So, on the surface, and from a product
viewpoint, this merger could proceed very smoothly.

The new corporate
group created as a result of this integration of management takes "The
Creation of New Value" as its managerial philosophy, the concepts of being
an "Innovative Corporation That Continues to Create Impressions in the
Field of Imaging" and "A Global Market Leader That Offers Advanced
Technology and Reliability" as its managerial visions, and "The
Essentials of Imaging" as its corporate slogan.

It is obviously the
aim of this merger that the combined capabilities of Konica and Minolta will
result in a stronger market presence and therefore a larger market share than
the sum of the two companies individually. In fact, the combined corporation has
already set out an interim target for growth. The estimate for combined net
sales of the two companies in fiscal year 2002 is 1.1 trillion yen
(approximately 9.2 billion U.S. dollars); the target for fiscal year 2005 is 1.3
trillion yen (approximately 10.9 billion U.S. dollars). Operating income is
projected to be 63 billion yen in fiscal year 2002 (approximately 528 million
U.S. dollars); the target for fiscal year 2005 is 150 billion yen (approximately
1.2 billion U.S. dollars).

The Sequence of
Events Each corporation is currently organized into separate operating groups or
companies. Each of these groups has responsibilities for individual products
such as office products, cameras, etc. In April 2003, Konica Corporation will
establish their operating groups as separate companies and will become a holding
company for those corporations. Although it will be held by Konica, Minolta will
continue operating in much the same way as they do today.

In August 2003, the
Konica Corporation will change its name to Konica Minolta Holdings Incorporated.
At that time, the separate operating groups at Minolta will begin to report to
Konica Minolta Holdings but, there will be no merging of similar operations.

In October 2003, the
companies will be reorganized. At this time, operating groups serving the same
markets will be merged. This will mean that certain functional groups will be
subsumed into other functional groups. The planned new corporate group will
consist of the new integrated holding company, six business companies, and two
common function companies.

Fumio Iwai, the
current president of Konica Corporation will become president of Konica Minolta
Holdings. Yoshikatsu Ota, the current president of Minolta Corporation, will
become Vice President of Konica Minolta Holdings with direct responsibility for
the office products group. The Board of Directors will consist of an equal
number of directors from Konica and Minolta as well as directors from outside
the companies. It is not possible to tell at this point whether the Konica or
Minolta team will have more control over the combined office products operation.
However, we assume that, since Konica is the larger of the two entities and in
better financial shape, Konica management will end up with a stronger hold on
the combined operation.

Product Presence The
principal area of business is placed in the field of input and output devices in
networking for corporate customers focusing on MFPs (multi functional
peripherals) and printers. Emphasis will be placed on such growing fields as
color MFPs and printers, and the high-speed digital copiers. The color output
devices and on-demand printing, as well as the polymerized toner business, will
be positioned as strategic fields.

The research and
development and direct sales forces will be reorganized and strengthened with
the goal of increasing the level of customer satisfaction. Konica Minolta
believes that by improving market presence, in addition to the impact the group
has on the market, it can anticipate an increase in sales.

Commentary While
this announcement is being made at a very high level without many specific
details, it is not possible to forecast exactly what this merger means for the
market in general and for Konica and Minolta dealers in particular. However,
there are certain inferences we can draw based on the prior history of the two

It has been almost
three years since Konica and Minolta announced that they would partner on the
development and manufacture of products. Each of the companies was to
concentrate on its perceived strength; Konica on high speed black and white
digital engines and Minolta on color products. This certainly made a lot of
sense given the capabilities and success of these two companies in these areas.

However, it is our
impression that neither company really got behind the other company's products.
For example, Minolta has been slow in moving into the Konica manufactured
high-speed engines and Konica has also been somewhat slow in capitalizing on
Minolta's color products. If the two companies cannot mesh, they will run the
risk of falling victim to the "us and them" mentality that so often
plagues these agreements.

Of greater
significance to us is distribution. The joint development agreement of three
years ago was a tacit acknowledgment that things needed to change at these two
companies in order for them to be competitive in the future. We believe that the
companies were absolutely correct in concentrating on their respective
strengths, however, the changes seem to be limited to product only. Distribution
was as much of an opportunity for improvement as their product lines were and
was never fully addressed.

As a merged
operation, Konica Minolta Holdings will have an even greater challenge in
managing its distribution system. First, since neither company has been a market
leader that attracts dealers easily, each company has had to adopt policies and
practices that can make them more attractive to dealers. For instance, exclusive
territories have been the norm rather than the exception; individualized
programs for high performing dealers have also been a common practice. And, both
corporations have extensive direct sales and service operations. The merged
operation will have redundancy in virtually every market in the United States.
They will need to rationalize this distribution very quickly to prevent the loss
of customers as well as key employees and dealers as they go through the merger

Since the merged
organization intends to change its brand name immediately, they will forgo the
luxury of maintaining separate identities as physical operations are merged. If
not addressed, at the time of merger, there will be no exclusive territories and
dealers and branches will not be able to differentiate based on brand because
they will all be selling Konica Minolta brand.

The net result of
all this could mean significant changes in the dealer distribution network. We
do not see exclusive territories being a practice in the merged company either;
Konica Minolta Holdings will need as many distribution outlets as possible in
order to maintain and improve market share and reach the revenue goals set by
the corporation.

We believe that a
significant upgrade in the systems' sales and service capabilities of the
independent dealers of both Minolta and Konica is critical. These capabilities
will be essential for the success of any company, regardless of size, in the
network environment of the future.

Lastly, this merger
is another indication that the copier market is well into its mature phase. We
have seen other non-manufacturing vendors and a few niche manufacturers
disappear but this merger means that the industry is down one full line
manufacturer. The copier market is taking on more and more of the textbook
characteristics of a mature market-consolidation, commodity products and
services, and extreme price competition.

Norton is the president of the Saratoga, CA-based market research firm
DocuTrends. Norton can be reached at rcn451@aol.com or 408.253.2763.

WebinarCase Studies and White PapersSand Exchange Blog

imageSource Magazine Quick Links
Upcoming Events
ITEX Expo & Conference
©2015 Questex, LLC. All rights reserved
Reproduction in whole or part is prohibited
Please send any technical comments or questions to our webmaster