xerox & fuji xerox

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Xerox and Fuji Xerox Group No 8 Ruchi Sao 13PGP048 Geeta Hansdah 13PGP079 Trisha Gajbhiye 13PGP116 Bhavana Ziradkar 13PGP118 Sai Shilpa 13PGP125

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Xerox and Fuji Xerox

Group No 8Ruchi Sao 13PGP048 Geeta Hansdah 13PGP079Trisha Gajbhiye 13PGP116 Bhavana Ziradkar 13PGP118Sai Shilpa 13PGP125

05/03/2023 Indian Institute of Management Raipur 2

Xerox’s International Expansion

Funded by Haloid Corporation in 1946.

Renamed as Xerox Corporation in 1961 with the introduction of 914 copier in 1959.

50/50 JV with Rank Organization of Britain in 1956 with 66% of profits of Rank Xerox.

By 60s, established subsidiaries in Mexico, Italy, Germany, France & Australia.

In 1964, right to market xerographic products in the Western hemisphere.

Refused xerography licenses to Japanese firms on the grounds of commercially immature technology.

Out of 27 companies, Fuji Photo Film (FPF) was chosen for partnership in Japan.

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Establishment of Fuji Xerox

Fuji Xerox- 50/50 JV between FPF & RX in 1962. Disapproved by Japanese Govt. as solely a sales

company , hence later became a contracting partner with Rank Xerox with exclusive patents in Japan.

Exclusive rights to FX to sell in Japan, Indonesia, South Korea, the Philippines, Taiwan, Thailand & Indochina.

FX paid royalty of 5% on revenues from the sales plus 50% of its profit to RX.

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Development of Fuji Xerox’s Capabilities

Xerox machines were disassembled & studied to determine the equipment & supplies necessary for production.

3 FPF engineers spent two months touring Xerox & RX production facilities.

Imported machines were sold first, then assembled products finally the domestic production of copiers.

Expansion of product line – faster version of 914 & a smaller desktop model, 2400 (in 1967).

Establishment of sales subsidiaries throughout FX’s licensed territory.

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Contd…

By late 1960s, FX’s market declined due to : Threat from substitute technologies- electrostatic

copier from Ricoh. Scheduled expiration of Xerox’s core patents between

1968 & 1973 Transfer of FPF copier plants to FX in 1971 along with

construction of a 160,000 sq.-foot manufacturing & engineering facility by FX.

Addition of 1% in the share of Xerox from RX to an increased 51% control of the JV-making it a subsidiary of Xerox.

Xerox received 66% of RX’s profit & 33% of FX’s profit.

The Rise of Fuji Xerox

• FPF engineers began modifying Xerox designs to the needs of the local market.

• Fuji Xerox managers wanted to go beyond adaptation to develop their own products.

• They envisioned a high-performance, inexpensive, compact machine that could copy books.

To strengthen Fuji Xerox:

• Transfer of production facilities to Fuji Xerox• Direct relationship between Fuji Xerox and Xerox

The continued strengthening of Fuji Xerox technical capabilities lead to:

By the late 60's, the Fuji Xerox development group had produced four experimental copiers, each with projected manufacturing costs approximately half of those of the smallest Xerox machine.

"It's small, but it's a Xerox!“

In 1970, developers at Fuji Xerox took a working prototype to Rank Xerox, London.

• Slow (5 copies per minute or c.p.m.)• Substantially smaller • Lighter• Great performance

In comparison to Xerox’s other models this machine was :

This demonstration boosted the technical reputation of Fuji Xerox. For the first time, Xerox allowed Fuji Xerox to have a small budget for R&D.

In 1973, Fuji Xerox introduced the FX2200, the world's smallest copier, with the slogan, "It's small, but it's a Xerox!"

Competitors

In 1970, Canon was the 1st Japanese company to enter the PPC (Plain Paper Copier) market for lower end.

These machines were developed in-house and did not infringe on any Xerox patent.

In 1972, Canon introduced copiers with liquid toner. Liquid toner copiers were smaller, less expensive than

Xerox. By 1975, eleven companies viz. Minolta, Copia, Sharp,

Toshiba etc. entered the PPC industry in the Japanese market.In terms of copiers installed in Japan

Fuji Xerox RicohCanon Konica

In terms of copy volumes

Fuji Xerox RicohCanon Konica

Declaration of independence

In 1975, the company launched its Total Quality Control program.

The focal point of the campaign was the development of dantotsu, "Absolute No. 1 Product." 

The marketing and engineering departments were given a seemingly impossible task:

To develop a compact, 40 c.p.m. machine, to be manufactured at half the cost of comparable machines and with half the number of parts of previous models, and to do it in two years.

• Two years later, the FX3500 was ready. • By 1979, the FX3500 had broken the Japanese record for

annual sales of copiers sold in one year.• In 1980, Fuji Xerox won the Japanese Government's

prestigious Deming Prize, awarded annually to a company achieving outstanding quality for its effort to develop the FX3500.

Independence born out of necessity

The FX3500 project came after Xerox had canceled a series of low- to mid-volume copiers on which Fuji Xerox was depending.

Code-named SAM, Moses, Mohawk, Elf, Peter, Paul and Mary, each was cancelled in mid-development, even though Fuji Xerox needed models of this type in its product line.

“As long as I am responsible for the survival of this company, I can no longer be totally dependent on you for developing products. We are going to have to develop our own."

- Tony Kobayashi

Xerox’s Lost Decade

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New Competition

Prior to 1970, Xerox had a virtual monopoly because of its xerography patents.

By 1975, 20 PPC manufacturers operated worldwide.

The manufacturers included:• Reprographic companies : Xerox, Ricoh, Copyer, A.B. Dick, AM

and 3M• Paper companies : Dennison, Nashua and Saxon• Equipment companies : IBM, SCM, Litton and Pitney Bowes• Photographic equipment companies : Canon, Konica, Kodak and

Minolta• Consumer electronics companies : Sharp and ToshibaSavin had licensed Ricoh to manufacture machines with liquid-

toner technology.

These machines were introduced in 1975 and were instant success.

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Contd…

Many Japanese competitors entered US targeting low end of the market.

IBM and Eastman Kodak entered market and targeted the mid and high volume segments.

IBM introduced Copier 1 in 1970, Copier 2 in 1972 and Copier 3 in 1976.

With introduction of Copier 2 IBM began to take away market share from Xerox.

Eastman Kodak introduced high-end Ektaprint 100 copier in 1975.

Ektaprint series was well accepted by market and gained reputation for highest-quality image reproduction.

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Xerox’s Stagnation

In 1971, Xerox developed first super high speed colour copier.

Xerox’s mid-volume 4000 and 3100 series failed due to reliability problems.

In 1978, Rank Xerox purchased 25000 Fuji Xerox’s FX2202 copier machines.

Xerox Corporation refused to purchase Fuji Xerox’s machines.

Rank Xerox formulated defensive marketing strategy grabbing the opportunity of late entry of Kodak in Europe.

Because of Rank Xerox’s success with FX products, Xerox began to import FX2202 and later FX2300 and FX2350.

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Courtroom Battles

Xerox was involved in a series of courtroom battles in 1970s.

Xerox sued IBM for patent infringement for Copier 1 in 1970 and IBM countersued.

Xerox won some of the suits and firms settled on agreement of exchange of patents and $25million payment to Xerox.

Two American firms, SCM Corporation and Van Dyk Research sued Xerox for alleged antitrust violation in 1973 and 1975 respectively.

Both the companies lost their suits in 1978-1979. In 1973, Federal Trade Commission (FTC) initiated action

against Xerox charging that the firm controlled 95% of plain paper copier industry.

FTC charged action against Xerox stating pricing, leasing and patent licensing practices violated the Sherman Antitrust Act.

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Contd…

In 1975, Xerox settled out of court by signing consent decree with the FTC.

Xerox agreed to license more than 1700 past and future patents for 10 years.

Competitors were permitted to license up to 3 patents free of royalties, to pay 0.5% revenues on next 3 and to license additional patents royalty free

Xerox also agreed to forgive past patent infringements, to cease offering package-pricing plans on machines and supplies.

Kodak, IBM, Canon, Ricoh and other Japanese firms secured Xerox licenses under this arrangement.

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Adjusting the relationship

Original agreement adjusted in 1976 and

1983.

Interim agreements to adjust policies on procurement and third

party relations.

Royalty structure on xerographic sales was

revised and set to decline

annually between 1983 and

1993.

Fuji Xerox would

receive a manufacturing license fee from

1983.

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Turning around Xerox

Development of the 10 series,

new family of copiers.

Xerox’s Leadership through

Quality program,

1981.

Importing from Fuji

Xerox and learning

their production practices.

Diversify out of

copiers by acquiring financial services

companies.

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Xerox and Fuji Xerox in the 1990’s

Canon’s continued to gain market share and dominated the low end laser printers.

Canon introduced twice as many products as Xerox with lesser R&D costs.

Canon was planning to enter the mid and high volume copiers

which were Xerox’s forte.

Xerox and Fuji Xerox’s became critical to

competing with Canon.

The Canon challenge

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Change of Scenario after 1980’s

Sr. Parameter Scenario1 Revenues FX grew at a faster rate than Xerox2 Financial contribution Net earnings of Xerox grew from 5%

to 22% from 1981 to 1988 3 Low end copiers FX was the source to Xerox and Rank

Xerox4 Sales contribution by FX Grew from $32 million to $620 million

(1980-1988)5 Heavy investment in

R&D by FX in 1980Lead to production of many low end models which were exported to or manufactured by Xerox or Rank Xerox

6 Number of models sold in Japan

Only few were designed by Xerox

Contd.

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Contd.• 30% of low volume models sold by Xerox and Rank Xerox

were from FX

1980

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Contd.

Canon growth

FX contribution to Xerox and Rank Xerox

Intensified the

necessity to

cooperate on

research,

product development,

manufacturing and

planning

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Strategy Summits

Objective to make top management come together and discuss issues that affected them jointly

It included people from all lines- copiers, printers and systems and would be held twice a year

FX’s organizational structure resemblance with that of Xerox’s

• Corporate research group- Benefited both FX (good at development and hardware design)and Xerox (excellent in basic research and software capabilities)

• Developmental and manufacturing organization -harder to implement in both

• Marketing organization - extremely different as they operated in different territory

Company launched joint products where collaboration was high and thus eliminating overlapping activities

Functional collaboration through exchange of personal, lead to trust and coordination build up

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Codestiny III task force

Objective – To develop a framework for cooperation between the two companies in 1990• They wanted enter worldwide low end market• Expansion in Asia- knock down kits from FX to Britian to

Asia for sale & Rank Xerox and FX possessing different marketing strategy

• How Xerox group should manage low end laser printer business in US- FX’s policy to mark up costs and Xerox’s was to get an acceptable profit marginsConsisted of top planners from each company

FX Issues to be discussed

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What role did FX play in Xerox’s global strategy?

How did that role change in the 1990’s and beyond (after the case period)?

Question 1

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A manufacturing and marketing unit for the Asian market

Transfer of production facilities to Fuji Xerox.

R&D partnership.

TQC initiator.

Competitor watchdog.

“It’s small, but it’s a Xerox”.

What role did FX play in Xerox’s global strategy?

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Change in role after 1990

Expansion of Fuji Xerox to Asia-Pacific market.

Established Xerox International Partners to sell low-end printers in North America and Europe.

R&D partner for Xerox Corporation.

Acquired China/Hong Kong Operations from Xerox Corporation in 2000.

75% share held by Fuji Photo Film and 25% share by Xerox.

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Was FX a successful joint venture in 1990?

How do you measure its performance?

Question 2

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Performance measures

Revenues -FX grew at a faster rate than Xerox

Financial contribution- Net earnings of Xerox grew from 5% to 22% from 1981 to 1988

Low end copiers- FX was the source to Xerox and Rank Xerox

Sales contribution by FX- Grew from $32 million to $620 million (1980-1988)

The leadership Through Quality program enabled in achieving goals• Increased Market research and competitive benchmarking

• JIT manufacturing to decrease cost• Faster product development• Development of state of art technology• A devotion to quality in all areas10 series developed by FX helped Xerox win

back market share

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What were the key success factors in this alliance? What were the changes after 1990?

Question 3

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Key Success Factors in the alliance

The trust built up between the companies. Continuous rising capabilities of Xerox Group’s

competitors, particularly Canon, thereby leading to their growth.

50-50 ownership structure between Xerox and FX. Total Quality Control Program initiated in both the firms. Development of the 10 series by FX helped Xerox gain its

market share thereby strengthening the alliance. Flexibility in the contract agreement between both the

firms. Effective collaboration and sharing of technology between

the firms.

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Changes after 1990

1990 •Acquires management and property rights of four Asia-Pacific countries from Rank Xerox.

1991 •Jointly with Xerox Corporation, establishes Xerox International Partners to sell low-end printers in North America and Europe.

1998 •Acquires full ownership of Fuji Xerox Korea Co., Ltd.

2000 •Acquires China/Hong Kong Operations from Xerox Corporation.

2001 •Consolidated to Fuji Photo Film Group with equity increase to 75% owned by Fuji Photo Film and 25% by Xerox Corporation.

2006 •With the establishment of FUJIFILM Holdings Corporation; FX becomes affiliated with the new company.

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Refer Exhibit 11 – select one option for reorganization for each functional area and explain why it is better than the other options.

Question 4

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Functional area- Marketing

Independent and overlapping

• 2 separate companies with some coordination on business direction and strategy & no geographic constraints

Independent and Separate• Concentrate effort on licenced territory with multinational

business as required• Target market and territories differ hence FX and XC marketing

should be differentSeparate with exceptions

• Same as before but with overlapping activities

Coordinated global product mandates

• Worldwide and exclusive responsibility for products or product ranges manufactured under special licenses

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Functional area- Research

Independent

• Each pursues own interest and becomes self sufficient

Coordinated• Coordinated group research program of XC & FX, with both self-

sufficiency and overlap• As both Xerox and FX have expertise in different areas hence its

should be coordinated effort for maximization of opportunityJoint

• Single research organization without overlap

Complementary

• Separate organizations operating on exclusive projects

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Functional area- Development and Manufacturing

Independent• Each development and manufacturing organization supplies its

own marketing organizationComplementary without overlap

• Assign development roles to each organization, with no overlap allowed in development projectComplementary with overlap

• Same as B but with overlap in development projects

Joint• Single development and manufacturing organization with individual projects targeted to needs of separate marketing organizations

• With minimum cost as compared to other option catering to individual market needs

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Thank you