OSI was a start-up commercial reseller that was competing against larger, better financed, better known competitors in the office equipment market, a market in which there was traditionally very little product differentiation and significant price competition.
Alter OSI’s overall product offering to make it more compelling, profitable and sustainable, while creating a barrier to entry for OSI’s competitors.
Created an innovative, industry-first strategic alliance that enabled OSI on an exclusive basis to represent Canon USA to larger commercial accounts. (At that time, Canon was OSI’s primary supplier, and had in excess of $1 billion in US sales.) Contacted Canon, sold it on the concept of the alliance, and negotiated the terms of the agreement. The features of this alliance had benefits for Canon, for OSI’s customers, and for OSI, but only disadvantages for OSI’s competitors:
For Canon, the alliance provided a way to better penetrate larger commercial accounts and to positively influence the quality of the service provided to these accounts. This increased Canon’s sales while protecting and enhancing Canon’s brand.
For OSI’s customers, the alliance provided a way to obtain a reasonably low price, the quality and responsiveness of service provided by OSI, and the
comfort of a major manufacturer (Canon) providing protection against OSI not performing.
For OSI, the alliance provided a way to bundle its product offering, differentiate that bundle (commodity product plus the features described above), and then compete against other dealers based on the strength of this unique, bundled offering. This enabled OSI to penetrate larger accounts, preserve its capital (because it never had to take title to the items being sold), maintain its profit margin (because the strategic alliance guaranteed OSI best wholesale pricing), create an impenetrable barrier to entry for its competitors (because the alliance was exclusive), commit its customers to multi-year contracts, and transform Canon from a neutral by-stander, not caring which dealer obtained the business, into al strong ally, biased in OSI’s favor.
With the strategic alliance in place, OSI was able to sell to multiple national accounts, becoming one of Canon’s top three resellers in three product categories:
- 2nd largest reseller of Canon calculators (out of approximately 500 competitors).
- 2nd largest reseller of Sharp teller equipment (out of over 50 competitors).
- 3rd largest reseller of Canon electronic typewriters (out of more than 300 competitors).
OSI generated industry-leading sales and financial performance of 32% pre-tax profit and maintained its competitive advantage and profit margins for almost a decade.
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