The Excellent Global Corporation Plan Based on the corporate philosophy of, the Excellent Global Corporation Plan is a medium- to long-term management plan with the goal of building a corporate group that continues contributing to society through technological innovation, aiming to be a corporation worthy of admiration and respect worldwide. In the five-year first phase of the plan, which began in 1996, Canon inculcated in the Group the concepts of profit orientation and total optimization, introducing production reforms by means of the cell production system, and cash flow-based consolidated business performance evaluation. In the second phase of the plan, which began in 2001, they have aimed to become No. 1 in all our businesses and strengthen our research and development capabilities. During this phase they have achieved tremendous results, including development reforms and the in-house manufacturing of key components. Strategy 2005...

Cannon has formed some strategies for 2005 and achieved some out of them. Integrating development, manufacturing, and production to achieve competitive advantage Canon's relentless pursuit of reforms has entered a new phase: greater cost efficiency through the integration of development and production. Their next challenge is "prototype-less design"; namely, striving to eliminate the need for physical prototypes. Furthermore, while pressing forward with reforms in parts procurement, They are putting t hier strength into factory automation to further enhance in-house production.

In this way, Canon aims to establish a highly competitive production system by seamlessly integrating development, production engineering technologies, and manufacturing technologies. Boosting R&D capabilities to create new businesses In 2005 Canon will accelerate the development and commercialization of display devices. In particular, They will speed up preparations for mass production at SED Inc. , the joint venture company they have established with Toshiba Corporation. Meanwhile, they will promote the development of autonomous Group companies, notably sales companies and manufacturing subsidiaries in North America and Europe.

They will also continue to promote activities giving rise to Canon's next-generation businesses, pursuing their search for new business domains while exploring new development and commercialization of proprietary key components. Enhancing global sales and marketing Economic globalization and dramatic advances in information technology are greatly changing the structure of markets around the world. In line with these changes, Canon U. S. A. , Canon Europe, Canon China, and Canon Sales in Japan have carried out the restructuring and consolidation of Group companies in their respective regions to increase the efficiency of sales networks, and to upgrade information systems and distribution networks.

In 2005, they are aiming to complete the sales and marketing structure reforms they have pursued till date. Fulfilling corporate social responsibility Social responsibility begins with awareness on the part of each individual. With regard to environmental responsibility, they aim to achieve the goals set forth in Factor 2, a comprehensive benchmark indicator of the environmental sustainability of the Canon Group culminating in 2010. To ensure continued sustainable development for the company, they will further strengthen corporate governance and compliance. Charting a course for healthy growth through selection and concentration on R&Phase II of our Excellent Global Corporation Plan, a blueprint of long-term management objectives to be met in 2005, contains four goals, one of which is "building up R&D strength to enable Canon to continually create new business opportunities. In fiscal 2004, research and development expenses totaled yen 275.

3 billion, an increase of yen 16. 2 billion from the previous fiscal year, corresponding to 7. 9% of consolidated net sales. Because the sales growth rate exceeded growth in research and development expenses, the ratio of such expenses to net sales declined compared with fiscal 2003. Looking at figures for individual business segments in fiscal 2004, investment in business machines was yen 120. 9 billion, or 43.

9% of total research and development expenses, while investment in cameras was yen 35. 5 billion, or 12. 9%. Canon has achieved tremendous results in its quest to become a truly excellent company through a strategy of selection and concentration. While working to bring Phase II to a successful conclusion, they are also making thorough preparations to pursue healthy growth, our new target for Phase III, which begins in 2006. Future Concentration Canon's future strategy was to create a resilient global organisation and to make the company a leader in the imaging industry.

Canon would make further efforts to improve products and increase profitability by raising the quality of digital engineering systems, developing technologies to enhance production efficiency and creating new key components and devices. Fuji Mit arai, President and CEO, CANON says that " We at Canon view technology as the origin of our profit. Looking to Canon's development from 2010 through 2020, we are working to identify fields for further growth" Future Strategy... Fast development of new-products Refocusing on the Color printing machine market High-compression PDF conversion technology- business machines Full-color document data typically contain 30 to 40 times more digital information than monochrome data. Files become extremely large when users employ JPEG and other conventional compression methods to store or transmit files in their original, high-resolution condition. This creates problems because it takes considerable time to send them over a network and places a heavy burden on servers.

Canon's high-compression PDF conversion technology makes it possible to compress image files to a fraction of the size that would normally be required. For example, using JPEG compression, scanning an A 4-size color document filled with text and photos at 150-dpi resolution would create a file of about 2 MB in size. However, using Canon's groundbreaking technology, the file is compressed to about one-tenth this size without deterioration in image quality. The secret is that Canon's technology can successfully separate the text from the background and compress them separately. Using this technology, photographs remain clear and alphanumeric characters are reproduced crisply. Therefore, this technology maintains high image quality even as it significantly reduces the volume of data.

This breakthrough is differentiating Canon's network MFDs from those of competitors. Canon has created "FINE: Full-photolithography Inkjet Nozzle Engineering," which offers a rich repertoire of capabilities for picture-perfect results. Achieving this level of quality required each individual dot to be printed at a smaller size and with greater accuracy. However, as the ink droplets become smaller, variations in droplet size and dot placement have an adverse effect on overall image quality. FINE is based on new concepts for the ink ejection mechanism and an innovative manufacturing technology for the nozzles. Born of advanced semiconductor manufacturing technology, FINE print heads have an array of 6, 144 nozzles, or 23 per millimeter in our iP 8500.

Each of the nozzles in this unit can eject a maximum of 24, 000 ink droplets of only two pico liters each per second. Moreover, our PIXMA iP 5000 is capable of ejecting ink droplets of only one pico liter. Using these advanced Canon ink jet printers, the droplets hit the paper with a high degree of accuracy and achieve both high levels of image quality and speed. Large-Scale Concave Mirror Technology Demand for LCD displays is expanding globally. The key to manufacturing LCD display panels is the photo lithographic technology that enables microscopic pixel patterns to be printed on glass substrates.

There are several photo lithographic methods for this, but from the point of view of productivity, optical mask of the desired microscopic pattern, which is then used in conjunction with a concave mirror to expose the pattern on glass substrate. To manufacture increasingly large LCD panels that have large areas to be exposed requires large-scale, ultrahigh-performance concave mirrors. Canon has been a pioneer in applying optical technology and has been successful in manufacturing the world's largest concave mirrors with a diameter of approximately 1. 5 meters and with the highest levels of surface precision.

This has made it possible to manufacture 48- inch wide-screen LCD TV panels with a single exposure. To upgrade the global SCM system In parallel with these marketing strategies, we are working to upgrade our global supply chain management (SCM) strategy. We are working to make a complete shift to a weekly production / sales system that matches actual demand from our sales companies and meets schedules for delivery to customers. CONCLUSION Optics, Electronics, and Imaging Avoiding Individualism, Adopting Technology, Constant Innovation, Diversification, Collaboration, Rapid Expansion. Focus on R&D & Promotion Our R&D Structure Canon carries out research and development at worldwide R&D centers, with bases in each region possessing their own particular core technologies. Canon promotes cooperation among its global network of research and development centers in all areas, from basic research to product development.

In Japan, the centers carry out basic R&D in such areas as nanotechnology and biotechnology and, moreover, each business unit has research and development centers that engage in product development. Another important feature of Canon's research and development is its emphasis on environmental issues. In 2004, Canon positioned its Leading- Edge Technology Development Headquarters with the aim of creating core technologies that will give birth to next-generation, major businesses. As the next step in this process, we will complete a new state-of-the-art technology research center at the Canon Headquarters in Shimomaruko, Tokyo in 2005.

In 2004, we built a new ink jet printer development laboratory in Japan. We plan to open a production engineering technology research center with the aim of accelerating the development of production engineering technologies and moving toward even higher levels of automation and fully unmanned facilities. In Europe, building on its advanced technology development, Canon has achieved solid results in developing solutions, including the creation of sophisticated customized tools for digital MFDs. In the United States, in addition to advanced development using Extensible Markup Language (XML) in the area of basic research, we have worked to develop solutions that facilitate the linkage of XML digital products with networks. In Australia, we have established a strong track record in the development of digital image processing technologies, while in Asia we have focused on developing technologies and software that address user needs in each country and region in terms of language, ethnicity, and culture. Canon also engages in cooperative research worldwide with industry, academia, and government.

Top 10 Corporations Receiving U. S. Patents in 2004 (Preliminary count) Rank Organization Number of Patents 1 IBM 3, 2482 Matsushita Electric 1, 9343 Canon 1, 8054 Hewlett-Packard 1, 7755 Micron Technology 1, 7606 Samsung Electronics 1, 6047 Intel 1, 6018 Hitachi 1, 5149 Toshiba 1, 31010 Sony 1, 305 (Source: United States Patent and Trademark Office) Research and Development Focal Points and Future Steps Canon is centering its production and development reforms on prototype-less designs and common platforms. In our prototype-less design, which is based on a cutting-edge 3 D-CAD infrastructure, we are drawing fully on simulation, analysis, and measurement technologies to shorten product development lead times and reduce costs. All the process improvements we develop in this area will then be employed throughout Canon's business domains.

Another of our activities to speed up development is concurrent engineering. Our Toride Plant in Japan, which is due for completion in 2005, will house our top-of-the-line copying machine manufacturing operations. All aspects of these operations, from design through prototypes, full production, quality assurance, and delivery functions are scheduled to be located in the same new building at the Toride Plant. In addition, Canon takes a proactive stance toward cooperating with other companies rather than relying exclusively on internal development to boost research and development efficiency. Our prototype-less design is made possible by our 3 D-CAD infrastructure. CMOS sensors sustain Canon's strong competitive position in digital SLR cameras.

Canon's Worldwide R&D Centers.