Alliances: Competitors click in for a better profile: Kodak and Canon hope to prosper by pooling skills

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The Independent Online
KODAK and Canon are both household names in photography. By adapting their know- how, both have also entered the photocopier business. It seems odd, then, that they should have launched a strategic alliance.

But not as odd as all that. In the automobile industry such relationships are rife. For instance, the leading US companies have joined forces to develop an electric car, while some firms - like Rover and Honda in the UK - have started to co-operate with the Japanese 'enemy'.

Similarly, Apple has linked with Sony to take on Microsoft in the market for integrating business equipment with computer systems.

The justification is that nobody has all the answers when technology is developing all the time. It is becoming increasingly hard for one company to bear the costs of research and development and marketing and sales, and then deliver an ever-more sophisticated product at the right price. As a result, businesses are identifying their own core strengths and those of their competitors and seeking alliances.

Although the partnership route is not without its difficulties, more and more companies seem to prefer it to going alone. As Mike Mansell, Kodak's manager for the UK office-imaging business, says: 'There is little sense in investing huge amounts of capital in areas outside your core expertise if a good complementary fit with a business partner can be identified.'

Mr Mansell feels such a fit should allow the partners to achieve both a stronger business position and a maximum return on capital investment. But he cautions against putting all your eggs in one basket, pointing out that Kodak has a number of arrangements with such companies as IBM, Lotus, Olivetti and Unisys.

Nevertheless, at a time when the parent company, Eastman Kodak, has announced another round of job cuts, the link with Canon is seen as an important potential boost to profitability.

In the UK, the company's office-imaging arm has consistently produced double-figure growth. But for this to continue in a sector still dominated by Rank Xerox, it needs to transform a strong market position into 'an extremely powerful' one. Hence the tie-up with Canon.

Although this may appear to be a case of two direct competitors getting into bed with each other, the companies have identified a number of distinguishing characteristics that they feel make them a well-suited couple.

For instance, Kodak believes its basic strengths are design and development allied to customer service and support, while Canon's are manufacturing and distribution. And although both are strong on marketing, they have different sales channels, with Kodak selling direct and Canon via dealers. Finally, the products are complementary in that Canon deals with the low to medium-volume end while Kodak serves the upper reaches.

Moreover, the two companies have had an informal relationship since the late 1980s, under which they market each other's products in their own territories. This suggests, says Mr Mansell, that they recognised the benefits of alliances earlier than most.

Doubters might feel that such cosy arrangements would make the companies softer than if they were conducting all-out war with each other. But Mr Mansell is adamant that they are still rivals in many ways.

'We don't want to compete on project development. But if you've got two salesmen going for the same customer, keen competition helps there. You lose a lot of the energy of an alliance if you don't compete.'

Perhaps the strongest fear is that a friendly alliance can become an unfriendly takeover. It is for this reason that those seeking to enter such arrangements do so from positions of strength; it is not a way of patching over problems. 'Canon could eat us. If they do, we deserve to be eaten,' says Mr Mansell.

(Photograph omitted)

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