Olympus Strategic Management Research Commerce Essay

Olympus Organization is a Japan-based producer of reprography and optics products, founded on 12 October 1919 by Takeshi Yamashita with headquarters in Tokyo, Japan and detailed on the Tokyo STOCK MARKET. The business is engaged in the make and deal of precision machineries and devices for the imaging, medical, life sciences, information and communication and other markets.

The company's imaging system business, though Olympus Imaging Corp. , markets compact and compact digital camera models, optical lenses and tone of voice recorders. The medical systems business, though Olympus Medical Systems Corp. , offers medical endoscopes, surgical endoscopes, endotherapy products, ultrasound endoscopes and medical procedures devices. The life science segment's products include molecular imaging systems, such as chemistry analyzers, immunoassay systems and bloodstream analyzers, diagnostic systems and biological and industrial microscopes. Olympus also manages several research facilities, such as the Olympus Bio Imaging Laboratory and the RIKEN BSI-Olympus Cooperation Centre, connected to the operations of their portion. The business's information and communication offerings, through ITX Corp. , include investment and business incubation, IT services and equipment sales, like the sales of mobile terminals. The company runs across six continents and even more than 50 countries through 219 subsidiaries and 19 associated companies. Entirely, Olympus is comprised of four business sections: Imaging Systems, Life Sciences and Industrial Systems, Medical Systems and Information and Communication. Olympus President and Consultant Director is Hiroyuki Sasa, who got this office in April, 2012.

PESTEL Analysis

Political factors. The political environment is recognized as one of the very most influential factors that have an impact on the operations of any business. Since all political forces are an integral part of the macro-environment and are from the situation of government, this directly influences the opportunity of maintaining a small business in a particular economy. Better government would always make an effort to create the most favorable conditions for a business, developing good regulations and making business thrive. Governments also choose just how of taxation and can impact export and import talents of a specific country (e. g. man-made limitation of some particular good that can be imported in the country, changing taxation for local and overseas producers, revitalizing export or transfer, special certificate conditions etc. ).

In our particular circumstance, the most important thing of a politics environment Olympus performs in is fiscal policies of the governments of the countries Olympus's stores and its distribution string are located in. Pursuing their goals, governments can levy fees that make doing a small business unprofitable in this political system, or, for example, cancel taxation of some firms by any means to improve the situation of a company on the marketplace.

Overall political situation specifically countries also affects Olympus business. Since some countries have unstable political situation (e. g. Somali, Iraq, many African countries), Olympus is unwilling to keep their business there because of unpredictable business conditions and unreliability of partnerships with local retailers.

Economic factors. Economic environment of an organization are all financial factors that effect on the working of an business. This point includes distribution of income and wealth throughout the market, trade cycles, economical policies and aspect of an economy. Researchers distinguish five main the different parts of a firm's economic environment. They are simply: economic conditions, economical system, economic insurance policies, international monetary environment and financial legislations.

Since Olympus's preliminary purpose is providing profits to stockholders, all these factors should be carefully considered while performing in a particular economy to be able to bring the best profits possible. Size of market, demand and offer fads, inflation rate throughout the market, nationwide income, per capita income, efficiency of general population and private industries and a great many other factors effect Olympus performance in a particular economy and directly influence its profitability. Furthermore, since an economical system of a country determines "rules, goals and incentives that adjustments economic relationships among people in a society", this factor affects Olympus desire or even ability to execute in a particular economy.

Separated phrase should be said about global economic downturn consequently of the global financial meltdown of 2008. The most severe financial debacle the humankind has encountered since the Great Depression kept millions of men and women without careers and trillions of us dollars in market value evaporated. The global use and demand experienced dramatically, including the demand for reprography and optics products Olympus manufactures. Although Parts of asia didn't experience such a striking shock as European countries and Northern America does, overseas sales take into account roughly 80% of Olympus sales. Interest levels became higher in practically all countries, somehow influenced by the turmoil. National income expansion in most countries slowed down. Hence, the downturn of the global market is one of the very most prominent economical factors which influence Olympus functions. Furthermore, current monetary problems in Europe, which makes up about 26% of Olympus sales, also adversely affect the company scrutinized.

Social factors. Among the most crucial interpersonal factors, which effect procedures of Olympus is ageing of inhabitants in its goal marketplaces and constantly growing of health awareness of those individuals. Since Medical Systems & Life Sciences will be the largest business segments of Olympus Organization, these movements can positively influence Olympus because of the demand growth goals and need for improvement of patient standard of living. However, population growth rates in these countries are not that positive and going back decade we've witnessed shrinkage of inhabitants in developed countries and regular growth of inhabitants in developing countries as India, China and many countries of the Muslim world. Therefore, in the nearest future the style will invert and exactly those growing countries will became major importers of hi-tech products as Olympus manufactures. Thus, Olympus should be ready to such changes and pay attention to the development of its distribution chain in all potential markets.

Technological factors. Any changes in technology have a significant impact on the business enterprise. New technology change the business prospects and revenue, work culture and methods of production that are being used in the industry. Technological changes push management to improve the span of the way the business is preserved in order to improve the production and profitability of the development process.

Talking about the industry of hi-tech medical, imaging and information communication products Olympus works in and technological environment there, it could be said that industry is probably one of the most technologically-advanced industries of modern day world. Because of the nature pace of the individual improvement 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 stunning, constantly increasing the pace of technical change.

All these factors determine the technological environment for Olympus, all together affecting its minimum efficient production level, degree of financing its research facilities, cost and quality of products created and ultimately shoot for innovation, that will determine the talk about of the company on the market in the nearest future.

Environmental factors. Environmental factors are those factors of any company's exterior environment, such as weather and environment concerns, straight influencing operations of a business. Environmental factors are not of the best importance for Olympus Organization and do not form its or its competitor's products or development chain as they certainly, for example, for agriculture companies. However, constantly growing concern of environmentally friendly sustainability, greenhouse result and nature protection define certain environmental criteria Olympus should comply with.

Legal environment. As any business, Olympus manages inside a strict framework of law which influences different aspects of the business. Governmental laws regulate "the status of the organization, its relationship with customers and suppliers and certain internal techniques and activities", influencing the behavior of Olympus on the marketplace and specific market conditions. Consumer laws and regulations, discrimination laws, occupation laws, antitrust regulations and health and safety laws and regulations of different countries have an impact on how Olympus operates on local marketplaces and also establishes cost and demand because of its products.

Porter's Stone Model

The Diamond style of Michael Porter was contrived to judge and examine competitive advantages of a firm in national and global competition. Why don't we construct Porter's Diamonds model for Olympus Organization.


Graph 1. The Porter diamond


Factor conditions

Skilled workforce

High intellectual potential and strive towards innovations

New improvements and new methods of corporate governance

Developed technological bottom and infrastructure

Demand conditions

Sophisticated local and overseas market

High pressure and demand for innovations

Related and supporting industries

Local and international competition creates inventions and cost-effectiveness

Participation of suppliers in improving process

High incentives for innovations in whole creation chain

Firm strategy, composition and rivalry

New corporate and business governance strategy

Focus on main business domains

New commercial management plans: Back to Essentials, One Olympus, and Profitable Growth

Four new basic strategies: Rebuilding of business collection/Optimal allocation of management resources, Restructuring of governance, Overview of cost buildings and Restoration of financial health

Fierce home competition, which stimulates innovations

High benchmarks of commercial culture


Significant attempts paid to the introduction of infrastructure and attraction of new businesses

Educational bonuses and creation of skilled labor

Encouragement of BPO/KPO (business process outsourcing and knowledge process outsourcing)


Changes in global monetary trends

All factors, which create discontinuities and are beyond a control of a firm

Market Evaluation and Industry Life Cycle

Nowadays the industry of reprography and optics products Olympus works in is the subject for constant development and development. The Medical Business, which is the key business section of Olympus, has experienced constant growth over time and is expected to grow even more in view of the cultural environment. At the same time of fast ageing of society in the developed countries, early on detection and medical diagnosis of treatment have become urgent priorities for patients, medical professionals and societies overall. Minimally intrusive treatment options as endoscopic surgery are expected to play a key role in satisfying these requirements. The surgical devices field annual sales are expected to increase 14% annually, creating major work at home opportunities for Olympus since it is the sole company on the globe, which possesses the technologies for processing of apparatus that meet up with the full selection of needs from early detection of conditions to minimally invasive treatment. Therefore, we can conclude that Medical Business of Olympus runs in the "growth" level of the industry life pattern.

Regarding the Imaging Business of Olympus, it runs in the industry, which slowly arises from the "growth" into the "mature" level of its life cycle. Although a huge selection of innovations are still manufactured in this field, the marketplace in developed countries is close to be saturated. However, there continues to be an enormous market and place for development in growing countries. Furthermore, it ought to be recognized that Imaging Business is together a brandname and imaging technology driver for Olympus. Thus, it can be an inherent part of the company's marketing strategy and you will be paid an maximum attention in the nearest future.

Life Science & Industrial business of Olympus is also in its "progress" stage. The travelling factor because of this would be that the establishments, where reprography and optics products havent been used before, commence to adapt innovations out of this field to develop and increase the efficiency and production of these business. Hence, sales enlargement by getting into untapped sectors is of the best interest for Olympus, since this market is undeveloped yet, contains a whole lot of opportunities, place for innovations and development.

Porter's Five Causes Framework

Porter's five makes framework is a tool for industry and company evaluation, aimed to derive those five pushes, which determine the depth of competition and therefore attractiveness of a particular market and overall industry profitability. Three of these five forces concern competition threats from external sources. The rest of the two are related to the business's inner threats.

Graph 2. Porter's Five Forces Framework


Bargaining vitality of suppliers. The focus of suppliers of Olympus's three key business sections is comparatively high. The amount of suppliers and option of alternative inputs differs from the merchandise or inventory offered. Availability of lens Olympus uses, for example, for its Medical Business segment is limited because of the complicated process of their production and various patents. Type of suppliers of hi-tech components is really important for companies in the industry Olympus operates in and an capability to substitute suppliers of such unique products is low. Hence, suppliers of technologically advanced inventory have a substantial impact on the industry scrutinized and have the ability to drive up prices with little amount of resistance from their buyers.

Firms which produce less unique products, however, have considerably less power. The amount of suppliers in this category is big as well as the option of substitutes. Your competition among these suppliers is severe and for that reason their capacity to artificially deviate prices is low.

Bargaining power of consumers. Bargaining electricity of Olympus's consumers, similarly to bargaining electricity of its suppliers, differs greatly from one business segment of an company to another. Imaging Business, for example, has a lot of customers. The size of each order, however, is low in comparison with other businesses of the company. Buyers of this segment have got a credible backward integration hazard, since they can choose to buy products of a rival firm as Canon or Nikon. Buyer ability is also strong because moving over costs are low, is usually well-educated about the product and a lot of substitutes can be found on the marketplace.

In circumstance of Medical and Life Technology & Industrial businesses of Olympus, consumer bargaining power is different which is believed to be lower. To the fantastic extent this is because of little variety of substitutes available on the market and their lower complex characteristics. Threat of backward integration in these lenders is low and most potential buyers purchase products in low amount.

Threat of new entrants. Risk of new entrants on the market of hi-tech products Olympus manufactures is low because of several factors. First, in order to enter the forex market, extremely high capital ventures are needed. Second, patents and rights of already proven businesses make it barely easy for new entrants to create products, similar to existing ones. Hence, prohibitive for new businesses amount of financial and recruiting should be placed into research and development to present systems and products unavailable yet on the marketplace. Furthermore, in Olympus business plenty of attention is paid to consumer commitment and it could be very difficult for new entrants to entice customers of well-known already founded brands.

Threat of alternative products. Feasible threat of substitute products Olympus encounters in every its businesses other than the Medical. This can be seen because of consumers' propensity to swap and relatively low turning costs. Range of alternative products, which can compete with the products of Olympus's Life Research & Industrial and Imaging businesses is high. So is the ease of substitution.

There is, however, less risk of alternative products from Medical business of Olympus because products in the Medical business have significantly longer lifecycles and development cycles. For instance, Evis Exera III - a central endoscopy system, that was created by Olympus in spring 2012 and does not have any substitutes on the marketplace, had the development period of seven years. Since Olympus has a competitive edge in research and development, it is improbable that products in a position to swap Olympus Medical businesses' apparatuses will emerge on the market in the nearest time.

Competitive rivalry in a industry. Competition within Olympus's industry is fierce. All companies which compete for leadership in this industry have powerful competitive strategies and high levels of advertising expense. Each one of the companies tries to accomplish sustainable competitive gain through implementing improvements and ventures in research and development. Volume of competitors is limited; however, their financial and recruiting are huge. Costs of giving market are high.

Olympus Current Strategy

Corporate Strategies. Basing on the corporate management policies and aiming to talk about pressing issues of the company, Olympus's management has established four basic corporate strategies. First, three business domains have been chosen as those, in which the company should invest to start with. They are: the Medical Business, Life Research & Industrial Business and Imaging Business. Medical Business should become a growth driver for the company, that will later enhance into a medical-field focused organization. Second, Olympus will revise its cost constructions and goals for profitable development. Third strategy is to enhance the company's shaken budget and performance. Finally commercial strategy of Olympus is to restructure the firm's governance following the recent unprecedented turbulence of the Olympus scandal period.

Business Strategies.

Medical Business. Beneath the current medium-term eye-sight of Olympus management, the Medical Business of the company should become a profit and growth driver for the company. The strategy of Medical Business is to achieve further extension of the business enterprise by "capitalizing on the highly strategically effective position to be capable of together developing devices necessary for new minimally intrusive treatments as well as new diagnostic methods strongly related to prospects new treatments" (Olympus Corporation, 2012). The company also plans to displace existing devices with new once and create a fresh market through the use of highly innovative technologies unavailable to its rivals.

Life Science & Industrial Business. Life Research & Industrial Business of Olympus are targeted at growth of the corporation. You can find two business approaches for this segment. First strategy is product portfolio growth. Basing on the customer industry categories and technology and product categories, Olympus will strive to open up clients and start new business domains. Moreover, this plan also involves concentrate on emerging and producing countries, where in fact the market and therefore demand for Olympus products keeps growing.

Second strategy is implementation of reform of the income and revenue structure of the life span Science field, that may involve reduced amount 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 focus on mirrorless interchangeable-lens camcorders and high-end compact cameras. The next strategy is to restructure the production process and carry out reform of the price composition of devises.

Functional Strategies. Practical strategies of Olympus are the following: rigorous cost reductions, profitability advancements, increased investment in technology development, restructuration of subsidiaries and creation sites worldwide.

Olympus Current Business Policies

The new management of Olympus, who had taken their office on April 2012, have lay out three major commercial management guidelines of the company: Back again to Principles, One Olympus and Profitable Progress.

Back to Essentials. Back to Basic insurance policy was devised to deal with the aftermath of recent Olympus scandals, the cause of which was the quest for income from ventures in non-core business domains of the company, namely equity. Thus, the Back to Basics policy was developed to bring Olympus back again to its initial objective - contribution to the development of contemporary society through new solutions and products.

One Olympus. The theory behind One Olympus coverage lies in uniting all Olympus's employees and staff worldwide under a common business strategy and motivating teamwork and co-operation.

Profitable Progress. This insurance policy simply proclaims Olympus goal to grow while earning earnings.

Olympus Current Performance

Performance Indices

Results (FY finished March 2012)

Net sales

848. 5 billion

Operating income

35. 5 billion

Ordinary income

17. 9 billion

Net income

- 49. 0 billion


80. 3 billion

Operating margin


Ordinary income ratio


Net income ratio


Net sales ratio


Free cash flows

- 4. 8 billion

Balance of interest-bearing debt

642. 4 billion

Equity ratio

4. 6%

Operating margin

4. 2%

Return on invested capital (ROIC)

2. 7%

Table 1. Olympus current performance indices

Source: Olympus Organization. Annual Report 2012

Table 1. Olympus current performance indices

Source: Olympus Corporation. Annual Report 2012

Research Question 2. Strategic Recommendations

Basing on the evaluation above, several tactical recommendations are realistic for Olympus to overcome its temporary problems period and achieve financial superiority and development of stockholders' value in long-term period. First, it is relevant that Medical Business should become the primary segment of Olympus production chain. Olympus offers a competitive gain over its closest competitors in this sector and holds the largest market talk about. Its medical devices support 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, buying non-core business sections of the firm. This turned into the debacle for Olympus. Therefore, total reconstruction of the firm's operations should be conducted with desire to to bring an emphasis on Medical Business of the organization, which should become earnings and development generator. Life Technology & Industrial Business, in its convert, will become an accompanying business, specializing in expansion of the merchandise stock portfolio in the industrial field and therefore another source of growth. The duty of the Imaging Business, among the three center business of the company, should be development of new systems and inventions and becoming a brand driver for the business.

Research Question 3. Mr. Michael Woodford, a Hero or a Traitor?

Recent Olympus scandal has been one of the biggest and longestrunning lost-hiding agreements in global corporate background since accounting and corporate and business scandals including Enron, Parmalat, Peregrine Systems, Tyco International, Adelphia and WorldCom. One of the key Olympus insiders, involved in the scandal and who actually was the one who subjected doubtful acquisitions of Olympus dated many years earlier, was British-born top-executive Michael Woodford, previous CEO of Olympus. This lead to lacking of $6. 25 in property, overall downturn of the company and great concerns regarding commercial governance in Japan. Although some individuals would aver that Mr. Michael Woodford acted as a traitor, I assert that his actions were extremely honest and complied with the best standards of commercial governance and information disclosure. Hereinafter I'll provide some cogent quarrels to support my perspective.

To start with, I'd like to say that ultimate aim of management of any company is development of value for stockholders. To keep an eyes on management activities, each publicly exchanged company has a panel of directors, which defines strategy of the company, supervises management and ensures the protection of stockholders' passions. Management, as an operational branch of commercial governance, is obliged to provide truthful information regarding company's performance.

From accounting and corporate and business scandals in the U. S. and Europe which included Enron, Parmalat, Peregrine Systems, Tyco International and many other big companies we have learned how distortion and concealing of information could make the companies worried collapse and shook local and international securities marketplaces. In order to avoid such shocks in future, many countries have used various expectations and laws which regulate corporate governance, like the Sarbanes-Oxley Act in the US and UK Corporate Governance Code. Japan, however, hasn't implemented any similar documents and this is one of the major reasons why Olympus scandal surfaced in 2011.

According to internationally-accepted requirements of corporate benchmarks and information disclosure, the behavior of the previous Olympus's CEO Michael Woodford was the only suitable in the problem he faced with. Obviously, local peculiarities of Japanese corporate and business governance should be taken into account, however, from my perspective, Woodford acted in relating to international business ethics benchmarks. Olympus is an international publicly-traded company and for that reason should adhere to internationally-accepted means of conducting business. Furthermore, Olympus is in charge to its stockholders, who are interested in transparency of the business. Hence, Woodford's behaviour was ethical in all senses and was directed to bring transparency to the company and protect Olympus stakeholders. Since Woodford performed what all associates of Olympus mother board cannot do, I think that he is a hero for the company and should be cut back.

The behavior of top management of Olympus, however, had not been ethical and, as said by Lindsay Whipp and Jonathan Soble, the management alone was "rotten at the core" (Yasu, 2011). A twodecade design to hide losses from investment was preserved by the business's top professionals.

The Olympus scandal says us that despite accounting and corporate scandals of the last decade, the tensions still stay in some countries, which have not adapted rigid standards and rules of corporate and business governance. Japan is not an exception. The issue between management and stockholders will probably last forever, however compliance with such laws as Sarbanes-Oxley Act, for example, will bring transparency to the actions of publicly traded companies. Management will have less space for financial machinations and distortion of information. This, doubtlessly, will create a far more reliable system of corporate and business governance and management. Hence, adoption of strict lawful restrictions which contain enhanced criteria for all general public company planks, management and auditors should be conducted in every countries where it has not been done yet.

If I were in the positioning to produce a decision, I would definitely utilize Woodford as a new CEO of Olympus because he has showed himself as a sensible top-executive who has extremely high ethical standards. Although corporate culture in Japan is very peculiar, he were able to uncover one of the biggest and longestrunning lost-hiding arrangements in Japanese background. Despite this created great financial troubles for the company, loss of reputation and immediate need of restructuration, I think that disclosure of the crime was needed for Olympus's further growth and development.

Ultimately, to solve the problems of the Olympus scandal several essential steps should be undertaken. First, which has already been done, new management framework should be presented. Second, Olympus should be restructured and the most important attention should be paid to the key businesses of the organization. Third, detailed re-branding of the company should be conducted to renew the reputation of the organization in the sight of its suppliers and consumers.

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