Nikon recently announced the cancellation of the DL Series of premium compact cameras which attracted a lot of attention. While it likely didn’t garner as much attention there was also an announcement regarding a shift in Nikon strategy.
This shift in Nikon strategy was cited in its “Notice of Restructuring” back in November 2016 and also referenced in a recent financial update. Here is a key phrase from that recent Nikon financial announcement (my bold face type addition):
“As announced in “Notice of Restructuring” released on November 8, 2016, Nikon Group is currently under a fundamental company-wide restructuring to improve its corporate value as shifting from a strategy pursuing revenue growth to one pursuing profit enhancement.”
A company focused on “revenue growth” may have continued with the launch of the DL product line. A company looking for ‘profit enhancement’ would not.
The words seem simple enough, “shifting from a strategy pursuing revenue growth to one pursuing profit enhancement”. The impact of this shift in Nikon strategy could be very significant in terms of future Nikon product development and how it conducts its business.
Only the Nikon executives in that corporate boardroom that made this fundamental strategic decision know for sure what they intend to do, but we can certainly ponder the ramifications.
Potential for larger sensor Nikon mirror-less cameras
Personally I think this is a non-starter for Nikon – at least in the foreseeable future. Recent comments from Nikon executives have focused on the capability and performance of Nikon DSLRs, with only passing references to ‘monitoring’ the mirror-less camera market. There have been specific comments from Nikon executives about Nikon ‘staying the course’ in terms of its current DSLR and mirror-less product lines. In the short term this helps to conserve cash.
As long as Nikon can produce its DSLRs cost efficiently vis-a-vis its competition and generate their target per unit contribution margin, the company can maximize its profitability. It can also eliminate research and development costs associated with larger sensor mirror-less cameras. The marketing assumption made with this kind of strategy is that consumers are ultimately buying image quality and camera functionality rather than the guts in the camera. The other assumption would be that they really don’t care whether a camera is mirror-less or not.
Large format Nikon camera
I doubt that we will see this type of product from Nikon any time in the near to mid-term. It would likely represent a higher outlay in research and development dollars in terms of a body and associated lenses than Nikon can afford to make. Again, a company focused on revenue growth may go down this road, not one focused on profit enhancement.
Frequency of product updates
As seen with the Nikon 1 product line we may see Nikon spreading out the launch of new models to reduce its research and development costs as well as marketing expenses. In a declining market like digital cameras this makes financial and strategic sense. Holding off launching a new model until there are significant points of differentiation makes far more financial sense than the incrementalism currently in play in the digital camera market. Holding a product longer as current before introducing an updated one can allow a company to get a higher return on investment from its research and development investments. The key point, of course, is whether it can fend off competitive offerings with its ‘older’ product during that period between product launches.
We may see Nikon begin to eliminate some low volume products or some that have some overlap with more current models. With the Nikon 1 system we could see the 10-30mm non-PD lens eliminated in favour of the 10-30mm PD version. If sales of the 10-100mm PD zoom are insufficient to cover marketing costs we could see that lens also disappear from the product line.
On the DSLR side of Nikon’s product offering we could see fewer generations of DSLRs being offered to consumers. For example, how much sense does it make to offer both the D3400 and D3300 models? Or having both the D7200 and D7100 available? Some of this may be due to inventory still being in stock in various countries of course. Focusing more on profitability rather than revenue growth may indicate more emphasis on stringent inventory control, thus reducing the need for downstream ‘fire sale’ pricing.
I think the latest Nikon 1 product releases are examples of this approach. Earlier models of the Nikon 1 product line were subject to significant price drops because Nikon overproduced the number of cameras and had to blow them out later. The pricing on the V3, J5 and CX 70-300 has been much more consistent with very few ‘deals’ to be had after the models were released. This approach helps to maintain per unit contribution margins.
One thing is for certain, interesting times lay ahead.
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