Threats

When analyzing companies' internal and external environments, threats are as important as opportunities. It is important that companies identify threats to their business in order to develop strategies that can counteract them. The biggest business fails can be attributed to the fact that companies were unable to anticipate their threats.

Reduced number of suppliers

Regarding its raw materials, Olympus relies on a very reduced number of suppliers. This is a strong disadvantage in business management. If a company relies on few suppliers, these suppliers will dictate the rules in this relationship. They can impose the prices they want, the supply quantities they want, and the delivery schedule they want because they know their client depends on them. In order to reduce dependency on its suppliers, Olympus must increase the number of suppliers for its business.

Reduced investments in research and development

The lowering level of sales has also reduced Olympus' ability to invest in its research and development process. Innovation is an important factor that determines the success of companies in the imaging and communication industry (Greenfeld, 2012). Therefore, it is important to invest in developing new products that are able to address customers' changing needs and preferences.

Unfavorable conditions in Japan

These unfavorable conditions refer to natural and economic factors. The natural environment plays an important role in the way companies do business. Olympus cannot influence natural environment factors. Some of these factors cannot be anticipated, making it difficult for Olympus to develop a strategy in such conditions. Economic factors are also of great importance in their influence on Olympus' activity.

Camera phones

The development of the camera phones segment is an important threat to Olympus' activity. It is only normal that people's interest in Olympus' products would reduce because of the camera phones business. This means that Olympus must adapt to this trend and invest in producing such items.

Strategic Recommendations

Developing a flexible strategy

In order to improve its position on the market, Olympus must secure its current situation. This means that the company requires a flexible strategy in order to reach this objective. Flexible strategies allow companies to adapt to the effects of different environmental factors. In addition to this, a flexible strategy helps companies reduce the negative effects of such factors. In a globalized business environment flexible strategies are necessary. Natural environmental factors in Japan also require such a strategy.

Addressing the camera phones sector

The success of camera phones and the increasing demand for these products recommend that Olympus manufactures and sells them also. It is likely that customers' interest for digital cameras will not significantly increase in comparison with current levels. This means that if Olympus does not expand its range of products the companies' sales are also likely not to increase. Therefore, in order to increase its sales and profits, Olympus must develop products that are in demand. This mostly refers to camera phones, but also to other devices that can be used for taking pictures.

Increasing investments in research and development

In order to reach the objective of expanding its range of products, Olympus must increase investments in research and development activities (Bilton, 2012). Regarding the camera phones sector, the company has a great advantage in the fact that it is not difficult to gain know-how in this area. Research made by other companies can be very useful for Olympus. However, Olympus must invest in developing innovative technologies that can be applied to camera phones.

Increasing the number of suppliers

This is an important strategic action that can have a significant influence on Olympus' financial situation. Basically, by increasing its number of suppliers, Olympus reduces its dependence on them. In this case, Olympus can establish the rules of the relationship. It is Olympus that establishes prices, supply quantities, and delivery schedules. If a supplier does not accept the price level, or is in the position of not being able to deliver the material, the company can address other suppliers. In addition to this, by purchasing smaller quantities from an increased number of suppliers prevents the company's inventory of being affected by the relationship with suppliers.

Developing lower cost products

The telecommunications industry is approached by numerous products that are of low price levels. Their quality is not high, in accordance with prices. However, these products represent a great percentage of sales on the telecommunications market. This means that an important number of customers with reduced incomes are interested in purchasing such products. This is a market sector that Olympus does not address and that would be of significant impact on the company's financial situation. It is important that Olympus invests in producing such items at a low cost. This is intended to help the company increase its sales, but also to expand its business in other market segments.

Conclusions

Olympus Corporation is an important player on the imaging and communications market. However, the company's situation is not at its best. This can be attributed to some of the strategic decisions of its managers. Probably one of the most important factors that have determined this situation is represented by the fact that Olympus is not able to successfully address market changes.

The fact that an important number of customers are interested in purchasing camera phones instead of digital cameras is an issue that should be speculated by Olympus. In addition to this, the company should increase its focus on the benefits of the process of globalization. This refers to outsourcing some of its processes and activities to countries that are able to provide skilled workforce that can work for smaller salaries. This is intended to help the company reduce its production costs and reduce the prices of its products. This would also help Olympus increase its investments in the research and development process.

The company's current situation...

The fact that the company's sales have reduced worldwide is also preventing it from significantly investing in research and development. In a business like communications, innovation is very important. In order to maintain and improve its position on the market it is important that Olympus focuses on developing innovative products based on customers' needs and preferences, and in accordance with their price ranges.
Competition in the communications industry has strengthened. In order to maintain its relationship with these competitors, Olympus must make significant investments in expanding its business on international level. The company already sells in most world countries, but international business development should not be limited to exports. This also refers to establishing production plants in key areas. This is intended to reduce production and transportation costs. Marketing investments should also be increased. This mostly refers to promotional activities. In order to be purchased, the company's products have to be on customers' TVs, radios, and computers. The marketing strategy must be different for each line of products. This is because each line of products addresses different customers segments, with different needs, that have a different preferred communication channel. In order to maximize efficiency, it is important to address each customer segment on its preferred communication channel. The pricing strategy also requires revisions. There are product lines for which the company cannot reduce prices because of the significant production costs. But there are also other product lines that can be manufactured at lower costs, allowing price reductions.

In addition to this, investors' influence in management should be reduced. The pressure on the company in order to maximize profits for its shareholders determines it to not focus on the customer. It is important that Olympus understands the influence of customers on its performance.

Appendix: Olympus Corporation Financial Statements

Currency in Millions of Japanese Yens

As of:

2010

JPY

2011

JPY

2012

JPY

2013

JPY

Revenues

883,086.0

847,105.0

848,548.0

743,851.0

TOTAL REVENUES

883,086.0

847,105.0

848,548.0

743,851.0

Cost of Goods Sold

474,842.0

459,420.0

464,743.0

365,653.0

GROSS PROFIT

408,244.0

387,685.0

383,805.0

378,198.0

Selling General & Admin Expenses, Total

271,901.0

277,257.0

280,648.0

281,958.0

R&D Expenses

36,021.0

38,711.0

33,113.0

28,410.0

Depreciation & Amortization, Total

40,173.0

35,786.0

34,526.0

32,753.0

OTHER OPERATING EXPENSES, TOTAL

348,095.0

351,754.0

348,287.0

343,121.0

OPERATING INCOME

60,149.0

35,931.0

35,518.0

35,077.0

Interest Expense

-12,413.0

-12,744.0

-14,026.0

-13,942.0

Interest and Investment Income

1,862.0

1,672.0

1,734.0

1,843.0

NET INTEREST EXPENSE

-10,551.0

-11,072.0

-12,292.0

-12,099.0

Income (Loss) on Equity Investments

22.0

Currency Exchange Gains (Loss)

1,367.0

2,615.0

-1,954.0

Other Non-Operating Income (Expenses)

-6,156.0

-7,281.0

-7,661.0

-10,103.0

EBT, EXCLUDING UNUSUAL ITEMS

45,115.0

20,767.0

15,871.0

10,943.0

Impairment of Goodwill

-2,334.0

Gain (Loss) on Sale of Investments

-3,327.0

-856.0

20,184.0

Gain (Loss) on Sale of Assets

47,674.0

1,316.0

Other Unusual Items, Total

-924.0

27.0

-25,616.0

-13,301.0

Legal Settlements

-1,231.0

Other Unusual Items

1,140.0

-8,598.0

-4,470.0

EBT, INCLUDING UNUSUAL ITEMS

86,204.0

19,938.0

-9,495.0

19,142.0

Income Tax Expense

38,266.0

15,625.0

39,282.0

10,900.0

Minority Interest in Earnings

-175.0

-447.0

-208.0

-222.0

Earnings from Continuing Operations

47,938.0

4,313.0

-48,777.0

8,242.0

NET INCOME

47,763.0

3,866.0

-48,985.0

8,020.0

NET INCOME to COMMON INCLUDING EXTRA ITEMS

47,763.0

3,866.0

-48,985.0

8,020.0

NET INCOME to COMMON EXCLUDING EXTRA ITEMS

47,763.0

3,866.0

-48,985.0

8,020.0

Source: Business Week.

Reference list:

1. Business Overview (2014). Olympus Corporation. Retrieved April 7, 2014 from http://www.olympus-global.com/en/.

2. Bilton, N. (2012). BITS: New Entrants in Wearable Technology. The New York Times. Retrieved April 7, 2014 from http://query.nytimes.com/gst/fullpage.html?res=940CE7DA1E3DF93AA35754C0A9649D8B63&ref=olympuscorporation.

3. Grenfeld, K. (2012). The Story Behind the Olympus Scandal. Business Week. Retrieved April 7, 2014 from http://www.businessweek.com/articles/2012-02-16/the-story-behind-the-olympus-scandal.

4. Olympus Corporation (2014). Business Week. Retrieved April 7, 2014.