Three-Year Management Plan
2017 to 2019
January 31, 2017
Canon Marketing Japan Inc.
Masahiro Sakata, President

1.Review of Long-Term Management
Objectives Phase Ⅲ
・Long-Term Management Objectives Phase Ⅲ (2016 to 2020)・2016 General Overview

2. Three-Year Management Plan (2017 to 2019)・Environmental Changes & Expansion of Business Opportunities
・Growing Sales
・Improving Profits

３. Strategic Investment &Policy on Dividends to Shareholders

The Relationship of the Long-Term Management Objectives Phase
III and Three-Year Management Plans

2015

2016

2017

2018

2019

2020

Long-Term Management Objectives PhaseⅢ

Planning

Three-Year Management Plan(2016 to 2018)

Planning

Rolling
every year

Fixed 5 years plan

Three-Year Management Plan(2017 to 2019)

Planning
Three-Year Management Plan(2017 to 2019)3

Long-Term Management Objectives Phase III(2016 to 2020)

4

Image of Achieving our Mission and Vision
Mission: Help solve social issues
Vision: Deeply understand customers and grow with them

Create results together with customers
Create “Imaging & IT” solutions
CANON
Group

Customers

IT

Strengths of manufacturer’s
sales companies

Customer baseTechnical skills

Key Management Indicators
Net Sales

Operating Margin

Ratio of sales fromgrowth areas¥800billion¥40billion

Over50％

SG&A expenses to
net sales

30％ or less 5

Six Basic Policies and Priority Strategies
1

Become the “true partner”of our customers

2

Maintain the high profitability base of Canon’s Profitability Growth Areas

3

Turn Canon Growth Areas into core businesses

4

Expand IT solution business using the Groups’ collective abilities(Improve solution skills and promote cooperation)(Independent Growth Areas)

5Aggressively implement business structure / process reforms

6

Become a corporate group where employees work more energetically66

Growth Scenario Categories & Strategy Overview
Strategy Overview

Key Products and Services

Canon’s
Profitability
GrowthAreas Achieve and maintain No.1 market share of key
products
 Increase productivity by reforming sales andservices

MFP and LBP
Cameras, Inkjet Printers,
Digital X-ray camera (CXDI)

Canon’s
GrowthAreas

 Expand the network camera business• Cooperate with Axis and Milestone• Enhance solutions
 Expand the production printing business area
• Upstream and downstream processes ofcommercial printing• Package printing, industrial printing area

Network Cameras, Projectors,
Production Printing, Business
Inkjet Printers, Commercial
Imaging Equipment, DreamLabo,
Machine Vision

Independent
GrowthAreas(BeyondCanon)

 Strengthen and expand IT solutions in all
businesses
 Change from entrusted development businessto solution proposing Sier Expand cross-industry solutions (security,
outsourcing, etc.)
 Turn Industrial Business Unit into a commercial
firms Strengthen solutions in the medical business

IT Solutions
Industrial Equipment(semiconductors and nonsemiconductors)
Medical Solutions, Infection
Control, and Dispensing
Equipment
7

7

Shifting Weight to Growth Areas
800¥billion

8,000

800

7,000
700

646

6,000
600

500
5,000
400
4,000

194

50
%

37
%

44

300
3,000

200
2,000

Beyond
CANON
40%

408

50
%

63
%

100
1,000
0

2015
2015年
キヤノン収益向上領域
Canon’s Profitability

2020
2020年
キヤノン成長領域
Canon’s Growth Areas

独自成長領域
Independent Growth Areas

Growth Areas

8

2016 General Overview

92016 General Overview- Progress of important business management indicators Sales decreased while profits increased. It was a rough start for the initial year for Phase III of our Long-Term
Management Objectives.
In particular, B-to-C sales declined more than anticipated, and despite a review and revision to the initial plan for thestart of the year in the 3rd quarter, we were unable to achieve our planned figures for the year.
There was an upturn in operating profits due to the company-wide reduction in SG&A expenses and the increase in the
proportion of highly profitable businesses.
Percentage operating profits were the highest ever recorded, at 4.4%.
Our policy is to improve ROE by increasing profits. ROE exceeded the planned level due to the upturn in profits.

Plan at start of year

Recent plan

Actual results

Sales¥660 billion¥638 billion¥629.3 billion

SG&A
expenses

32.0%

31.5%

31.5%

Operatingprofits¥27 billion¥27 billion¥27.7 billion

Operatingprofits

4.1%

4.3%

4.4%

Profit attributable toowners of parent¥17.7 billion¥17.7 billion

ROE

6.3%

（Highest ever recorded）¥18.2 billion

6.5%

10

10

2016 General Overview- Progress of weight shift towards growth areas Percentage sales in independent (“Beyond Canon”) growth segments showed a year-on-year increase lead by SI,
security business and industrial devices sales.
While there was growth in network camera sales, percentage sales Canon growth segments remained at a constantlevel.
Percentage sales for Canon profit improvement segments showed a year-on-year decrease, as we were unable tocover the slump in B-to-C revenues with B-to-B sales. The profitability of these segments showed a year-on-year
improvement due to improvements in productivity, etc.

Independent
Growth Areas

Canon’s Growth
Areas

Canon’s
Profitability
Growth Areas

Actual resultsfor 2015

Actual resultsfor 2016

Targetfor 2020

30%

31%

40%

(¥193.8 billion)(¥196.6 billion)(¥320.0 billion)

7%

7%

10%

(¥44.0 billion)(¥44.5 billion)(¥80.0 billion)

63%

62%

50%

(¥408.2 billion)(¥388.2 billion)(¥400.0 billion)
11

2016 Topics (1) Establishment of ITS company (business unit)
・An ITS business unit was established in order to increase and expand IT solutions businessacross all business operations.
・An Educational Industry Sales Group was established within the ITS business unit with theaim of expanding business by consolidating the various education-related sales
departments scattered throughout the Group, at a level that transcends individual businesssegments.
・A Security Solution Planning Division was established with the objective of increasing salesof security-related products within the group across all sales channels, as the Security
business segment is one that is expected to see significant growth in the future.

 Launch of various projects and formulation of policies towards 2020
・Various projects were launched, including a call center project, a digital marketing / EC (Ecommerce) project, and an after-care service innovation project.

 New business initiatives
・We entered the drone market by investing in Prodrone Co., Ltd., a drone manufacturer withhigh level technological capabilities.
・ We also invested in a FinTech-specialized fund and venture-oriented fund for venturecompanies utilizing next-generation IT; with the objective of forming cooperative
partnerships with venture companies.
12122016 Topics (2)Augmentation of network camera business・Started partnerships with Milestone Systems, Fujitsu and NEC Corporation.

Progress and new initiatives for IT solutions business・Transfer of security solutions such as the ESET series and the FortiGate UTM (Unified
Threat Management) system is progressing well.
・ Transferal of service orders for the West-Tokyo Data Center is also progressing
smoothly.

 Maintaining No.1 share for interchangeable-lens digital cameras,
compact digital cameras, inkjet printers and laser printers1313

Three-Year Management Plan
(2017–2019)14

Environmental Changes & Expansion of Business
Opportunities
Market maturation, low birth rate and aging population→
Rising demand for high-efficiency solutions in society and businessNeed for workflow improvement at companies→ Intensifying use of outsourcing and cloud systems for concentration on main business/services→ Improving work efficiency and bolstering sales capabilities through proactive utilization of IT at small-to-medium sizedbusinesses

Need for reduction of medical costs accompanying social aging→ Solutions for reducing costs at medical institutions through utilization of IT technologies

Technological advancement and evolution →Increased investment in new business opportunities and expanding security needs
Incorporation of IT technologies through technological innovation→ Investing in IoT and robotics, etc., in various industry segments→ Investment for revolutionizing points of contact with customers in the financial sector utilizing FinTech technologies

Reforming and revolutionizing business models→ Investing in new businesses that utilize AI, 3D technologies and digital marketing, etc.

Rising demand for improved security→ Bolstering security against increasingly sophisticated cyber attacks

Advancement of business and higher efficiency in society through utilization of imaging
technologies→ Utilizing high-resolution images (i.e. 4k & 8k)→ Deploying monitoring and security/protection solutions utilizing the data of network camera for marketing applications→ Developing new businesses utilizing drones
15

Conversion to a New Customer-Centric Framework
 By converting to this new framework, the company will shift from being an organization composed simply of products
and channels into an organization that is able to provide solutions catering to both the needs of the market and theneeds of the customers.
 By consolidating all of the Group’s resources, we will thoroughly solve the issues being faced by customers withpowerful, unified capabilities.

New framework (conceptual image)Current situation
Main/flagship products
×
Channels

Network cameras

Professional imaging

MedicalImaging creation

Industry

Professional

Distribution

Production printing

Manufacturing

Small-to-medium
scale business
operators

Finance

Major companies

Education

Imaging Systems

Specialist fields

Business / officePublicIT Solutions

Personal

Business Solutions

Individuals

IT infrastructure & solutions
IT security / outsourcing

Industrial / Medical

Services and support

Product planningGroup headquarters

16

Expansion of Growth Areas by Resource Shifting & Intensification
 Based on our Long-Term Management Objectives III, in January 2017 we implemented measures seeking to shift
and consolidate resources.
 By shifting large numbers of personnel who until now had been engaged in profit improvement segments to work on
Canon’s Growth Areas and Independent Growth Areas, we will seek to expand the scale of sales turnover.

Augmentation of Medical IT
resources
 Sought to consolidate andstrengthen links between various
Medical businesses scatteredthroughout the group

Augmentation of network
camera business Consolidated network camera
business and shift necessary
personnel(Organized Canon ITS Medical into Medical
segment)

Consolidation of Business Process
Outsourcing (BPO) businessresources Consolidated resources towards
expansion of outsourcing business(Organized Canon Biz Attenda into Business
Solutions segment)

Establishment of integrated Group
service & support capabilities

Establishment of new imaging
solution co-creation project Established an organization formaintaining (and improving)
optimal service and support
capabilities for the entire Group Launched a project for creating
new solutions together withcustomers based on Canon’s
Imaging technologies

In January 2017 we implemented large-scale organizational restructuring,
shifting approx. 1,000 members of personnel in total

17

Core Themes in the Three-Year Management Plan (2017 to 2019)

Growing sales

Improving percentage profits

Achieving growth throughattack & reform

Conversion to a muscularbusiness structure/model Seek to expand business tomarkets and customers that wewere unable to offer solutions to
until now, by shifting to aframework that caters to market
and customer needs.

 Seek to further improve
profitability of B-to-C, Document
Businesses and other Canon’s
profitability Growth Areas.

 Seek to expand business byshifting manpower, funds andother resources from Canon’s
profitability Growth Areas toCanon’s Growth Areas andIndependent Growth Areas.

 Implement fundamental structuralreforms and seek to reduce SG&A
expenses.

18

Group Targets (Consolidated)(Billions of Yen)

Actual Results

3-year Management Plan

2016
Net sales

2017

2018

2019

629.3

645.0

670.0

700.0

-

(+2.5%)(+3.9%)(+4.5%)

27.7

28.8

30.6

34.0

(4.4%)(4.5%)(4.6%)(4.9%)

28.7

29.6

31.8

35.2

(4.6%)(4.6%)(4.7%)(5.0%)

18.2

19.8

20.7

23.0

(ratio)(2.9%)(3.1%)(3.1%)(3.3%)

EPS

¥140

¥153

¥160

¥177

ROE

6.5%

6.8%

6.9%

7.1%

(%)

Operating income(ratio)Ordinary income(ratio)Profit attributable to owners of parent

Free Cash Flow
（accumulated 3 years）

22.0（2014-16)

27.0（2017-19）

19
19

Targets by segments(Billions of Yen)
Actual Results
3-year Management Plan
2016
2017
2018
2019
OperatingOperatingOperatingOperating
Net sales
Net sales
Net sales
Net sales
incomeincomeincomeincome
%

ratio

%

ratio

%

ratio

%

ratio

Business
Solutions

334.6

12.1

345.0

12.3

354.0

12.9

371.7

13.9

-

3.6%

+3.1%

3.6%

+2.6%

3.6%

+5.0%

3.7%

IT
Solutions

128.8

4.0

130.0

4.1

143.0

5.0

153.1

6.3

-

3.1%

+0.9%

3.2%

+10.0%

3.5%

+7.1%

4.1%

Imaging
System

159.2

10.9

161.0

11.0

161.5

11.4

161.7

11.6

-

6.8%

+1.1%

6.8%

+0.3%

7.1%

+0.1%

7.2%

Industrial /Medical

32.2

0.2

33.5

1.2

37.4

1.3

40.6

2.0

-

0.6%

+4.0%

3.6%

+11.6%

3.5%

+8.6%

4.9%

Other

-25.5
629.3

0.6
27.7

-24.5
645.0

0.2
28.8

-25.9
670.0

0.0
30.6

-27.0
700.0

0.2
34.0

-

4.4%

+2.5%

4.5%

+3.9%

4.6%

+4.5%

4.9%

Total
-Consolidated-

20

Targets by Growth Areas(Billions of Yen)

3-year Management Plan

Actual Results

Canon's Profitability
Growth Areas

Canon's Growth Areas

2016

2017

2018

2019

（Composition
ratio）（Composition
ratio）（Composition
ratio）（Composition
ratio）

388.2

387.2

384.0

381.7

(61.7%)(60.0%)(57.3%)(54.5%)

44.5

55.1

64.6

75.2

(7.1%)(8.5%)(9.6%)(10.7%)

Independent Growth
Areas

196.6

202.7

221.4

243.1

(31.2%)(31.4%)(33.0%)(34.7%)

Total

629.3

645.0

670.0

700.0

21

21

Growing Sales

22

22

Group IT Solutions Sales Targets

金額単位：億円

Monetary units: Billion yen

2016 (actual) 2019 (planned)
ITS segment(SI, IT infrastructure, Embedded Solutions &IT products)

Other segments(Small-to-medium sized businesses,
Medical, Document Solutions, Security, etc.)

Between-segment sales
Group IT solutions total
Consolidated Group sales
Group IT solutions percentage sales

128.8

153.1

73.2

93.3

- 27.0175.0- 27.0
219.4

629.3
28%

700.0
31%

23
※ 2020年：18年以降2年間の平均伸び率・伸び額

2323Growing Sales

Major-Company-Oriented Segment-Specific Solutions Strategy

Finance

Manufacturing

Distribution

PublicEducation

Deepen markets with industry-specific solutions
Resolve customers’ business management issues
Expand customer base

IT technologicalcapabilities＆ Customer base24

Growing Sales

Expansion of Cross-Industry Solutions

Seeking to optimize resources within the Group and provide comprehensive and high value-addedcross-industry solutions

IT security
CAGR (2016-19): 11%

Major & mid-sized

Outsourcing
・ESET
・FortiGate
・HOME
・GUARDIANCAGR (2016-19): 16%

MDS

BPO

(Document-related)(Office-related)

Small-to-medium scale- Commercial printing- Core/mission-criticalbusiness form printing- Document digitalization

Scenarios by customer demographic

Maximum channel utilization

Provision of total outsourcing

Business expansion by Group strategy
MDS : Managed Document Service- Business process
outsourcing- Floor machine
management

Customer base

BPO : Business Process Outsourcing

25

25

Growing Sales

Expansion of Cross-Industry Solutions

Contributing to the resolution of various customer issues, primarily through Canon ITS’s extensive
range of IT solutions

IT Platform Services (Data centers, cloud integration)
We provide a full chain of services, from infrastructure selection to design and system operation. We cater tocustomer needs through a combination of our own SOLTAGE cloud, public cloud services such as AWS, and ourown top-class domestic data centers.

Development infrastructure solutions (Web Performer)
By providing super high-speed development tools that generate web applications automatically without the needfor programming, we achieve co-creation style development between the user and IT divisions, and provide
system-building support that responds flexibly to environmental changes.

Application of mathematical techniques (FOREMAST)
Through the provision of FOREMAST, a demand prediction solution that applies mathematical techniquesdeveloped by our R&D division (one of the Company’s strengths), we offer consulting and system-building
support for solving issues in the manufacturing and sales fields.

IoT & Digital Marketing Solutions
We create new services and offer solutions aimed at solving customer issues making comprehensive use ofdigital data and digital technologies.
26

Growing Sales

Medium-& Small-Business-Oriented Solutions

Achieve business growth by offering solutions to resolve
issues that are specific to small-and-medium-sized businesses
IT maintenanceservices

Customer issues
in IT investment &utilization

Security
solutions

IT asset
Information leakmanagement
countermeasures
Lack of dedicatedpersonnel
Anti-virus
Workflowcountermeasuresefficiency
Evaluation of
deployment benefits

CloudsolutionsTask-specificsolutions27

Growing Sales

Expansion of Medical IT Business

Augment Medical IT business through transfer of control
of Canon ITS Medical
Medicalsolutions
Medicalimaging systems

Cloud
infrastructure

Document
solutions

Canon MJ
Canon LCSAZEElectronic＋

Canon ITS
Medicalmedical chartsITinfrastructure

3D image
analysis

Expansion of hospital
market share
28

CAGR (2016-19): 11%

Growing Sales

Expansion of Production Printing Business We have set our growth and expansion segment as the commercial printing segment, and new entry segment as theindustrial printing segment; and have established an organizational structure for expanding our business in theseareas.
 From this year onwards, we will seek to make a good start towards expansion, armed with our wide-ranging productlineup (with the addition of Océ products), accumulated know-how and powerful salesforce (with increased numbersof personnel).

Growth & expansion segments
Existing business areas
CAD, POP& others

Growth & expansion segment

New entry segment

Commercial printing

Industrial printing

Data printing
services
Core

Banners
Posters
Trans-promo
Various notifications &notices

CAD
Parts design drawings
Construction
blueprints

GIS

Wallpaper

Businessforms

Wrapping paper

Industrial
materials

DM Catalogs
POP

Newspapers
Books
Manuals

Labels
Product
packaging
29

CAGR (2016-19): 46%

Growing Sales

Augmentation of Network Camera Business This market is showing continued growth. By making maximum use of Group resources, while at the same timegathering together our various strengths (including our customer base and sales capabilities) and augmenting themthrough business alliances, etc., we will seek to expand our operations in this business area.
Agriculture

Canon MJ Group

Network technologies
Extensive lineupVideo management
Software infrastructure-Customer base &sales capabilities- Solution proposal
capabilities- System integration- Maintenance support- Image analysis software- Industry vs. applicationspecific products & services- BI / Deep learning- Cloud service linkage

Alliance partners

Become able to cater to all manner of markets- Sensor technology- Lens technology- Image processing
technology

Accumulate & consolidate Group resources

Advanced technologicalcapabilities

Medical &Nursing careFinancial &Insurance
Public &Infrastructure
Plant &
Factory
Buildings &Offices
Shops &
Distribution
30

Growing Sales

New Initiatives Towards Augmentation ofimaging Solutions
Imaging solution co-creation project
Co-create new imaging solutions together withcustomers
Co-create imaging solutions through utilization ofCanon’s imaging technologies and partnerships
with external partners

Drone solutions business
Create new solutions through utilization of drones andimaging / IT technologies

Partnership with Prodrone Co., Ltd.
Establish dedicated organization and seek todevelop business from this year onwards
31

Improving Profits

32

Improving Profits

Enhancing Profitability of B-to-C Businesses

Further expansion ofmarket share• We will seek to expand ourmarket share in theinterchangeable-lens digital
camera market, with a central
focus on mirrorless cameras.
• We will also seek to increase
the proportion of high valueadded inkjet printers that wesell, as well as to further
increase our market share inthis area.

Reform of processes andincreased productivity• Optimal placement ofsalesforce• Reform service framework• Augment CRM & digitalmarketing efforts

33

Improving Profits

Improving Profitability of Document Businesses

MFP(Multi Functional Products)

We will seek to shift our sales activities from small-to-medium sized businesses (one of ourstrengths) to mid-to-large sized businesses, and increase our share in the intermediatespeed printer zone (for which our percentage share is currently low).
We will utilize information from the MFP remote service NETEYE (which makes use of theInternet) and efficiently strengthen the guard of our printers through target approach.

LBP(Laser Printers)

We will seek to further augment our sales activities with respect to task-specific application
markets that make heavy use of color printing in their work processes; such as POP (Pointof Purchase) advertising in the retail distribution industry, and the medicine pouches, labels
and information sheets used by pharmacies. This will lead to further highly profitable ink
cartridges sales.

MaintenanceservicesBy expanding use of NETEYE to the LBP and LFP segments, we will achieve reductions inservice costs and expand sales of consumables.

We will also seek to increase the efficiency of our maintenance services and shift service
personnel to growth segments, which will lead to increased profitability.
34

Improving Profits

Advancement of Fundamental Structural Reforms

 We will implement thorough, fundamental, Group-wide reforms with the aim of eliminating waste and improving
business management efficiency.

Fundamental reform of workflow processes& building of next-generation IT systems

By 2019:
Cut percentage
SG&A expenses
to 30% or lessof salesConstruction of an optimal Group organizational
structure for after-sales service & call centers

Reform of logistics locations & framework

Consolidation (& elimination) of business locations

35

Strategic Investment&
Policy on Dividends toShareholders

36

Strategic Investment


We will prepare ¥40 billion of capital for strategic investments such as M&A investments in order to accelerate
our growth strategies with our new framework.

¥40 billion

M&A
Capitalinjection
Alliances

Accelerate
growth of
BeyondCanongrowthsegments

Expandbusinessareas forCanon
growthsegments① System infrastructure(including IT security)② Business Process
Outsourcing (BPO)③ Industry/task-specificsolutions④ Core technologies for
digital business① Network cameras② Production printing③ Business-use imaging
devices37

Policy on Dividends to Shareholders

We will pay dividends to shareholders based on a dividend payout ratio of at least 30%, while also taking into
overall consideration issues such as medium-term profit outlook, investment plans and cash flow.
2016 was the third consecutive year to see a dividend increase, with the actual dividend payout rising to ¥50
per share (from the predicted payout amount of ¥45 per share announced in October.)

40
24

24

2012年
2012

2013年
2013

2014年
2014

45

2015年
2015

50

50

2016年
2016

2017年
2017

Units: yen（予想）(Forecast)38

Canon Marketing Japan GroupThe performance and future projections made in this document are based on information
available at the present time, and include potential risks and inaccuracies.
Owing to various factors, actual results may differ substantially from these projections.
All estimated/actual performance figures are for consolidated performance.
*Fractions of less than 100 million yen are rounded off in this document.