Nikon has dominated the world of high-end, top quality cameras for decades but has seen a fall in sales of 60% in the past couple of years with the consequent reduction in profits. The big problem Nikon faces is that they don’t make anything else. So as it enters the decline stage of its business life cycle, you have to wonder, “what’s the cause of the decline?”.
Well, the answer is in our pockets or bags. Many of us carry smartphones that include a decent camera these days – and they quality of the cameras is getting better all the time. Combined with the trend of device convergence, people just don’t see the need to carry both a camera and a phone.
This is a good example of two risks faced by businesses. One is concentration – while it’s good to focus and to be excellent at one thing, if that one thing is no longer needed by your target market, you’re going to be in trouble. The second risk is one that all businesses face, changes in the macro-environment. In this case, a change in technology combined with a change in the social environment, i.e. in effect, consumers were happy to sacrifice a little quality in their pictures for the convenience of carrying only one device and it’s a device they never leave home without. Plus, you can’t take a selfie with a Nikon!
It also underlines the effect of Porter’s 5-Forces Model. Here we have the force of new entrants in the photography market and also the effect of a substitute product (most people don’t buy a phone because they need a camera, it just comes with it).
The Nikon experience shows that nothing lasts forever and even big, global companies have to be aware of what’s going on around them in their business environments. How much more true that is for the smaller businesses that, as bankers, we lend to all the time.