Cognex Corporation

About the Company

• Manufacturer of machine vision systems, software and
sensors
• Used in automated manufacturing to inspect and
identify parts, detect defects, verify product assembly,
and guide assembly robots.
• Headquartered Natick, Massachusetts, USA.
• Offices in more than 20 countries.
• Founded by Dr. Robert Shillman with his two
students: Marilyn Matz, Bill Silver.
• Initial investment of $100,000.
• Machine Vision Technology.
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• Dataman: Company’s first product, used optical
character- recognition system, developed by Silver
in 1982.
• Entry of competitors.
• In mid- 1980s, Cognex decided to target original
equipment manufacturer- build Cognex 2002 and
various other products for them.
• 1989- IPO.
• Share prices moved to $33.50 from $2.75 per
share.
About Dr. Robert Shillman
• Academician at MIT.
• Had an “idea that computers can see”.
• Management attitude “work hard, play hard”
• “Dr. BOB”- now President, CEO and Chairman
of Cognex.
• Named Inc. Magazine’s Entrepreneur of the
Year in 1990
• Received Achievement Award in Leadership
from Automated Imaging Association in 1992.
Human Resource Management
• Unique corporate culture.
• “Work Hard, Play Hard”.
• Cognoids.
• Innovative reward programs.
• President’s Award.
• Various incentives at 3, 5, 10 years of completion
of service.
Products
• Machine Vision Systems- helps in tight limits on
speed, cost, reliability, size and safety.
• Consists of software and hardware components
that are customized for specific manufacturing
needs.
• Systems are programmable in C or point and
click interface.
• Check Point Series.
New- Product Introduction
• Provides an edge over others.
• High accuracy products PatMax.
• Programmable machine vision systems
• Launch of microprocessors which made the
products run on customer’s PCs.
• 1998- Introduction of Modular Camera
Networkfor products made in continuous
processes.
The Machine Vision Industry

The Machine Vision Industry

Factory- Floor
OEMs Customers
Cognex Early Days
• Initial target of end- users but the strategy was
not profitable
• Focus on OEMs in the Semi conductors and
Electronic industries
• OEMs had technical knowledge
• High R&D cost due to miniaturization
• Cognex was first to enter semiconductor market
Cognex and General Signal
• In late 1986, Cognex stuck a deal with General
Signal’s Electrogas Division, which made test
equipment for silicon wafers.
• General Signals bought a piece of Cognex to get
access to the technology.
• Cognex had two- thirds of markets by 1990.
• Major Customers: IBM, Nec, etc.
• High profits as sales grow to 50% in 19899 to
$16 million, profits jumped 56% to $3.7 million.
• Profits by selling to competitors: $ 200 million
market of late 1980s.
Early and Mid- 1990s
• Fantastic growth in market:
▫ Number of units shipped grew 21.3% from 16,372
in 1995 to 19,868 units in 1996
▫ Industry revenue reported a gain of 16.3% ($ 894
million) in 1995 to $ 1040 million in 1996
• Market leaders: Market share of 38% in OEM
market. The company grew by 60% .
• Close competitors: ICOS and AISI, with 32%
combined market share.
The 1998 Market
• Majority of customers are still OEMs.
• Base still lies in semiconductor and electronic
inspection.
• Market size:
▫ OEM Market: $170 Million
▫ Factory Floor Market: $150 Million
• Identifies various industries for growth
opportunities.
• End user revenue grew to 43% of its total revenue
in 1998, from 32% in 1997.
Troubles Times
• Revenues for 1998 decreased by 22% to nearly
$122 million from $155 million due to decreased
volume from the company’s OEM customers by
34%.
• Reason: worldwide slowdown in the production
and use of chips, resulting in a slowdown in the
purchase of capital equipment for both
semiconductors and electronic products, began
in 1996.
• Cognex tried to diversify through:
▫ Acquisition: Isys Controls, Mayan Automation,
and business relationship with Rockwell
Automation.
▫ Product Diversification: Automotive, Consumer
products.
Changing Market
• Vision changing from technology to application.
• Provides most value- added benefits to
operations through application engineering.
• Machine vision tends to be demand inelastic.
• Current trends in personal- computer and
machine vision industries do not complement
each other.
Competition
• Increased use and availability of information
technology has also resulted in increased
competition.
▫ Nikon
▫ Electro Scientific Industries
Opportunities for Growth
• Machine Vision is not widely known outside of
the semiconductor and electronic industries.
• Use of machine vision helps in cost cutting.
• Business is concentrated in US (41%), Japan
(46%), and European Markets (11%).
• Good reputation, strong work force,
commitment to customer service and R&D-
strong base of Cognex.
• Strong customer base.
Customer Service And R&D
• Emphasis on strong customer relationship.
• Education and training programs.
• Feed back
• Outsource manufacturing operations by January
1997.
• Protects its investment in R&D with the use of
patents, copyrights, and trade agreements
Cognex’s Vision of future
• Surviving the crash of 1996-97, the company needs
to insulate itself against any such further volatility.
Strategies for the same can range from expanding
globally to diversifying its target market.
• Diversification in customer
• Marketing capabilities.
• Decoupling of hardware and software solutions.
• Expand globally.
• High profits in industry
Present Challenges in Case
• Crash of 1996.
• Change of market trend towards application
from technology.
• Demand inelasticity.
• Current trends in personal computer and
machine vision do not complement each other.
• Competition
Mission
• Cognex Mission Statement:
• To be the standard around the world for excellence in machine vision
and to exceed the expectations of our customers, employees,
shareholders and neighbors.
• Cognex Values: Cognex has identified 10 core values as key to our
success:
▫ Customer First:
Customer satisfaction is our top priority. We listen to our customers, and
then we do whatever they need, whenever and wherever they need it.
▫ Excellence:
At Cognex, good is not good enough; we strive for excellence in everything
that we do.
▫ Perseverance:
We take on the most difficult challenges, and we do not stop until the job is
done right.
▫ Enthusiasm:
We enjoy what we do; we approach each day's challenges with energy and
excitement.
▫ Creativity:
We delight in being different from the rest and in taking creative approaches to
solving problems.
▫ Pride:
We derive great satisfaction through our individual accomplishments and those of
our company.
▫ Integrity:
We adhere to the highest ethical standards in our relationships with customers,
fellow employees, vendors, and shareholders.
▫ Recognition:
Cognex's success is due to the hard work and dedication of our employees and
vendors, and we acknowledge their contributions in both tangible and intangible
ways.
▫ Sharing: 
When Cognex wins, we all win. We share our success with everyone who contributes
to it. We believe that the biggest reward for success is the chance to succeed again.
▫ Fun: 
We work hard, and we play hard. We celebrate often to recognize our
accomplishments and to motivate ourselves to achieve even higher levels of success
in the future.
Corporate culture & basic values of the
company
• Unique corporate culture.
• “Work Hard, Play Hard”.
• Cognoids.
• Innovative reward programs.
• President’s Award.
• Various incentives at 3, 5, 10 years of completion
of service.
SWOT Analysis
• Strength:
▫ Good reputation
▫ Strong sales force
▫ Commitment to customer service
▫ R&D
• Weakness
▫ Business is concentrated in US (41%), Japan
(46%), and European Markets (11%).
▫ Dependent excessively OEMs
 ▫ Restricted to semiconductors and electronic items
• Opportunities
▫ Unexplored markets
▫ Untapped customers
▫ Unexplored Industries
▫ Use of machine vision helps in cost cutting.
• Threats:
▫ Competition invited by high profits margins
▫ Current trends in personal computer and machine
vision industries do not complement each other.
Business History
Cognex Corporation was founded in 1981 by Dr.
Robert J. Shillman
The company produced its first vision system,
DataMan, in 1982. 
In early 1987, the company became profitable for
the first time in its history.
Cognex went public on the NASDAQ exchange in
1989
In 1989, Cognex opened its first international office
in Munich, Germany. 
In 1990, Cognex established a Tokyo-based
subsidiary, Cognex KK
In 1995 the company also made the first of many
acquisitions when it purchased Acumen, a U.S.
based developer of wafer identification equipment
for the semiconductor industry. 
1996- cognex acquired Isys Controls
1997- cognex acquired Mayan Automation
1998- business relation with Rockwell Automation
2004, Cognex introduced its first handheld vision
product—an ID code reader called DataMan
• May 2005- largest acquisition to date when
Cognex purchased DVT Corporation
• In May 2006, Cognex acquired AssistWare
Technology, Inc., a developer of Lane Departure
Warning Systems, and entered the emerging
market for machine vision systems in vehicles.
Current Areas of Operation
• Automotive
• Consumer products
• Electronic
• Food and Beverages
• Medical
• Pharmaceuticals
• Solar
• Other Industries
Business Strategy
Developing new products
Developing user friendly products
Building a worldwide sales and support
infrastructure in order to access more market
Research, Development, and Engineering
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PEST
• Political:
▫ patent, trademark, copyright, and trade secret
protection. As on Dec, 2007:
 264 patents
 174 patent applications pending.
 Use of trademark registrations in the United States
and in other countries: Cognex», VisionPro», In-
Sight», Checker», and SmartView», as well as many
common-law marks, including, among others,
DataMan TM
▫ Large number of legal proceedings
Economic
• 2007: approximately 65% of our revenue was
derived from customers located outside of the
United States.
• Intend to continue to expand operations and
might enter international markets, such China
and Eastern Europe
Technological
• High expenditure on R&D
• failure to develop new products and to respond
to technological changes
 Threat of new entant is
blocked by the patents.
Competitors are local

Threat of substitution can arise

suppliers.

in situation when the company

fails to respond to technological
changes, distribution channel
and due to poor market analysis.
Porter’s 5 Force Model

dominated by Cognex
Competition in the
industry in

company believes in

Bargaining power of
customer is high as
custom er is king.
Present Challenges
• Insulate against industry wide volatility.
▫ Diversify the product
▫ Diversify from OEMs
• Marketing needs to be improved
• Decoupling
• Expand into Europe to minimize the dependency
on Japan.
• Technological Advances
• Competition