Within this paper two companies will be discussed concerning their business decisions of diversification. The first company, Circuit City, was unsuccessful at broadening their business, and eventually had to shut down the business. The other company, Canon, was successful at broadening their brand and scope of the business. This paper will compare and contrast their businesses, outcomes and reasons for the differences. Circuit City was established by Samuel S. Wurtzel in 1949 as the Wards Co. that sold Televisions and home appliances. Over the course of time, it expanded into a national retail powerhouse that rebranded itself Circuit City in 1984. When the store was still operating, it was the “nation’s second-largest consumer electronic retailer” (Mui, 2008, p.D1). When it closed in January 16, 2009, it had 567 stores to close and 34,000 employees out of work. (Haynes, 2009, p.D1). In 2007, the company “posted nearly $320 million in losses, its second consecutive annual shortfall. (Mui, 2008, p.D.1) In 2008, the companies “most recent quarterly showed that it had assets of $3.4 billion with $2.3 billion in liabilities.” (Mui, 2008, p.D1). Circuit City did not have much of an international presence, but it did have stores in Canada which did not account for much of its business. In the economic downturn, “Circuit City neglected to improve its web presence, just as other on-line retailers like Amazon.com were hitting their stride” (Hamilton, 2008). The Circuit City brand was purchased by Systemax, which uses the brand to sell electronics as an online retailer under CircuitCity.com. However, Circuit City did not use the web to market itself, and as a result of its lack of foresight, the company closed for business as an on-site store. In comparison, Canon was developed in Tokyo, Japan in 1935 with the main product being high-quality cameras. In 1955, Canon, Inc made its first strides towards globalization by opening an office in New York City. In fact, “by 1967 exports already topped 50 percent of the company’s total sales” (Canon Inc, 2012). In the 1970’s, Canon expanded its product line to printers and other office equipment, which was a success and allowed the company a huge amount of growth when compared to similar companies that focused on their camera product line. Canon also has a lithography line for industries that service hospitals imaging. In the Fortune Global 500, Canon ranked 93rd in Market Capitalization in 2009. In 2010, Canon had Net Sales of $45.76 billion and a net income of $3.04 billion. In a recent article by Osawa, “the company posted 14% rise in fourth-quarter net profit.” (2012, p.B.5) Also, “net profit increased to 61.44 billion yen from 53.96 billion yen a year earlier” (Osawa, 2012, p.B.5) They had 197,386 employees in 2010 (Canon, Inc, 2012). Canon has a great export business, and does business in the United States, Europe, Asia, and Oceania. Canon has a huge presence with ebusiness. For instance, Canon USA, the domestic arm of Canon, Inc., has developed a new website that for ecommerce that has an updated comparison tool, streamline checkout process and improved search. (Brohan, 2010). When Circuit City filed for bankruptcy in November of 2008, it blamed the tightened credit and rapidly declining consumer spending that was associated with that time period. However, Circuit City was very successful in the 1980’s and 1990’s, but they were very slow to adapt to the competition’s lead. Circuit City’s most prevalent competition at the time, Best Buy, moved ahead with its online presence and “was more aggressive with moving into the gaming world” (Hamilton, 2008). Best Buy was also more successful at securing big in-store promotions with big names like Apple Computer. In September of 2008, Circuit City reported “a loss of $239 million” (Hamilton, 2008). In March of 2007, Circuit City announced that they were going to lay off its highest paid hourly employees in a bid to help manage some of its finances. In addition, Circuit City had a revolving line of credit with Bank of America that was based in part on the value of its inventory. Mui says, “as inventory levels fell and value decreased, its line of credit shrunk, as well, which in turn limited its ability to buy new inventory, keep its shelves stocked and draw in shoppers” (2008, D.1). The bankruptcy that Circuit City filed allowed them to terminate leases before the Christmas season, but this wasn’t enough to bolster them through the drastic low holiday sales. On January 16, 2009, Circuit City agreed to close all of its stores and after that point they liquidated what was left. Currently, the Circuit City brand lives on in the form of online retail which was purchased by Systemax. In contrast, Canon has been able to take a company founded on providing high quality cameras, to diversifying very early in the office supply line. In the year 1955, Canon released its first camera in the United States. In 1972, Canon introduced its first revolutionary copying system, which transferred to fax machines and personal copiers in the 1980’s. Also, in 1980 sales in the U.S. exceed $500 million. In 1984, “a semiconductor division was formed at Canon. Canon U.S.A. is named manufacturer of the year by NOMDA” (Canon U.S.A., 2012). By 1995, Canon U.S.A. held $7 billion in consolidated sales. In 1998, Canon developed its first digital radiology system the CDIX-11. Canon continues to develop quality cameras through these time periods to today, and lends these skills to environmental technology, medical, semiconductor, and broadcasting equipment. They have been one of the most prolific inventors. For instance, they “were ranked number four worldwide among all companies issued U.S. patents in 2010” (Canon U.S.A., 2012). Canon, Inc.’s diversification from cameras to photo copiers and semiconductors to radiology systems has led them to being one of the most successful companies in the world. The company has been very successful despite challenges of the earthquake and the tsunami that occurred last year. One of the reasons that Circuit City was not successful was that they diversified into selling used cars in 1991. Carmax was a used car auto superstore concept that was supposed to revolutionize used car retailing large selection, low price with no haggling. The company added 27 of these auto stores from 1997 to 2000, and saw a profit finally in 2001. This company is still profitable today, however chief executive James A. Marcum who was in office during the bankruptcy of the company said,” ‘We’ve also tried to implement too many disparate initiatives and at times have not focused on the right things” (Mui, 2008, p.D.4). Second, Circuit City became too complacent in comparison to competitors and did not secure prime real estate for its locations and missed out on promotions with computer giants like Apple. They did not try to market themselves on the web like their competition was doing at the time. The last thing that made Circuit City unsuccessful was the way they handled restructuring the company in 2007 when they fired their best employees. That same year “CEO Phillip Schnoover received about $7 million in compensation” (Hamilton, 2008). This is not the type of management that is going to please loyal customers. One of the primary reasons that Canon was so successful at their diversification is that they took their profits from selling cameras and tried to penetrate the business machine market. With the innovation of the 35-millimeter camera, and emphasis on new product development led to laser beam printing technology in 1976. Canon continued to innovate and find new markets with products integrated office work stations and desktop publishing systems. The second reason that Canon has proven so successful despite a distressed economy is that they were able to use their profit from the home office product line. Simms states, “Canon’s prowess boils down to a few basic concepts: It is focused on only a small number of business lines in which it’s a market share leader, and is a consistent cost cutter” (Simms, 2011). They are very successful at the home office line, Simms states,
“In printers, it not only has a brand, but it is also the supplier of printers and ink cartridges to the world’s largest brand, HP. Together, the two companies hold 61% of the market for laser and ink-jet printers by volume”(2011).
The third reason that they are so successful is that they have such vision for the future and are constantly looking for new innovations and inventions. As this paper has already mentioned, they constantly rank high among companies that are seeking patents for their products. One recommendation for Circuit City to make the diversification venture would have been to focus more on the core brand of selling appliances at the stores. They branched out with selling cars, and lost focus on updating the stores and putting finances back into the main stores. They should have focused on staying relevant and aggressive with their merchandise and electronics to draw more of a wide base of customers. Another point is that they should have kept more of their larger appliances that people always need, even in the times of a recession. The second recommendation for Circuit City to make their venture work would have been to take some cues from other competitors and make themselves more marketable on-line. In today’s technological age, it is very important to have a presence on-line and to have features that draw people that are constantly hooked up to their Smart phones. Retailers need to have an edge on their competitors and one of these ways is to create marketing for themselves with apps to the phones to match prices or give instant product information. This may have driven more business so that they could have had more money for their core stores in order to fund the diversification. In conclusion, while Circuit City and Canon have different outcomes with their diversification ventures, they began their businesses with good ideas and ability to make viable decisions. The issue here is that after a business has success with their initial product, they need to stay competitive and continue to make viable business choices with the core brand along with doing a good job with the diversification venture. While it’s exciting to develop great ideas into new ventures, companies need to make sure that they don’t lose their primary focus during the diversification process. If a company chooses to ignore their core values in order to rush into a diversification, solely for the purpose of diversifying, they run a huge risk of losing the big picture, and as Circuit City demonstrated, their company.

References
Brohan, M. (July 15, 2010). Canon U.S.A. clicks on a redesigned e-commerce site. Internet Retailer. Retrieved from: http://www.internetretailer.com/2010/07/15/canon-usa-clicks-redesigned-e-commerce-site
Canon,Inc.(2012).CanonHistory.[DataFile].Retrieved from: http://www.canon.com/topflash/history/index.html Canon. U.S.A.(2012). Canon U.S.A. History.[Data File]. Retrieved from: http://www.usa.canon.com/cusa/about_canon/history Hamilton.A.(November 11, 2008).Why Circuit City busted, while Best Buy boomed. Time Business.Retreivedfrom: http://www.time.com/time/business/article/0,8599,1858079,00.html Haynes.D. (January 17, 2009). Circuit City shutting down, leaving 34,000 out of work. The Washington Post, pp.D.1. Mui, Y. (September 30, 2008). Circuit City posts wider loss. The Washington Post, pp.D.4. Mui, Y. (November 11, 2008). Circuit City files for chapter 11 protection; credit hard to come by as sales drop, stores close. Washington Post, pp.D.1. Simms, J. (January 28, 2011). Japan inc: heed this Canon. Wall Street Journal (online). Retreivedfrom: http://search.proquest.com.libdatab.strayer.edu/docview/847637655?accountid=30530 Osawa, J. (January 31, 2012). At Canon, elder gains wider leadership role. Wall Street Journal, pp.B.5.