Anne Mulcahy – Leading Xerox through the perfect storm

byGroup 7

Abhra Chatterjee (110)Avishek Chattopadhyay (111)

Firoz R V (145)Prashant Shukla (155)

Dalsher Singh Dhillon (156)

Agenda Introduction to Xerox

Insights to the case

Continuing trend – analysis of strategies of different leaders

Emergence of Anne Mulcahy

Possible Turnaround Strategies

Zeroing on the perfect strategy

Implementation of the perfect strategy

Concluding Remarks

Xerox- world's leading document management technology and services enterprise

• Built on the foundation of one of the most successful product launches ever

• In 1959 introduced the first product, 914 copier

• By 1970 enjoyed a 95% share of the plain-paper copier market

• Model corporate citizen with heavy investments in R&D

• Palo Alto Research Center (PARC) established in 1970 originated many technologies that launched the information revolution

• Adopted a slow but exacting multi-stage process from initial research to model introduction

Facts of the case – The Perfect Storm

• Experienced overwhelming success initially

• Breeding of anti-monopoly pressures and confrontation with several lawsuits – forfeiture of patents and agreeing to license its technology

• Emergence of new and aggressive competitors like Canon, Minolta, Ricoh and Sharp

• Loss of market share coupled with unpreparedness for price competition

• Unable to adapt to smaller margins and reduced profitability

• Heavy expenses, shrinking market share, compounded losses, lack of revenues and weak cash flows

Strategies over time

Products of relatively inferior quality compared to its competitors

Market share in copier came down sharply from 80% to just 13% in 1982

In 1982,David T. Kearns took over as the CEO

Average cost of Japanese machines was 40-50% of that of Xerox

Operating cost was high

Launching a program referred to as ‘Leadership through Quality’

Management layers were cut

Greater authority delegated to lower levels

Employees were allowed to participate in decision making

Contd. In 1980’s Xerox bought Kurzweil, Datacopy and Ventura companies that

specialized in optical character recognition, scanning and fax machines

It also diversified into financial services, insurance and investment banking

Allaire succeeded Kearns as the new CEO in 1990

In 1992 Xerox entered into various tie-ups with Dell Computer Corporation and Microsoft

Company announced a major restructuring program (3 geographically defined organizations selling products from nine product divisions)

Eliminated 10,000 jobs and divested the insurance business.

In 1997 Allaire further reorganized the nine divisions into four divisions and forayed into new businesses such as production printing and developing retail channels.

Contd.

Thoman replaced Allaire as the CEO in April 1999 though Allaire continued as chairman.

Thoman further consolidated four geographically oriented customer administration centers (handled billing and collections) into three customer centers.

Customer facing order entering personnel from over 30 customer business units were moved to the three customer centers.

Thoman continued to buy out partner stakes in overseas joint ventures (Fuji’s share in Fuji Xerox)

ResultsCommissions reduced significantly.

Sales representatives began losing their accounts.

Sales staff attrition increased by a considerable amount.

In a bid to find new businesses it cut prices hence lost out on margins.

Further trouble:Dominance in production printing ended with entry of Heidelburg.Financial crisis in Latin AmericaLow Morale causing massive defectionsDoubtful and misclassified accounts in Mexico gave Xerox a bad name

Reasons for Downfall

• Sales force failure: Reorganizing the Sales force

• Failure to tap the opportunities generated through innovative product concept

• Faulty accounting standards and improper balance sheet filing leading investors to lose hope and loss of creditworthiness.

• Reporting future cash flows of leased machines in the present financial year (1999). This increased the valuation of the company temporarily but once the company failed to live up the expectation, investors left the company

Strategic Failure attributed to two main reasons: a. failure to commercialize the technology; b. failure to protect the resulting intellectual property.

The Making of Anne Mulcahy

• Graduate from Marymount College with a joint major in English and Journalism in the year 1974

• Started her career in Xerox as a sales representative hounding the streets for the early years

• Struck a proper work life and family balance after marrying Joe Mulcahy

• Promoted to Vice President for human resources in 1992

• Led GMO, Xerox’s new venture in web and retail sales and launched a small office and home office (SOHO)

• Became COO in May 200 taking charge of internal business including operations, solutions and world wide business services

• Was named CEO of Xerox Corp. in 2001 to which she remarked: "I took on this position feeling equal parts excitement and dread,"

Anne Mulcahy’s initial efforts as a leader

• Assembling her team and improving communication amongst her executives

• Extensive fact finding tours in the business, visiting employee operations and major customers

• Fully understand the challenges facing Xerox

• Provide her team with confidence that the company could survive in spite of her personal doubts

• Made people publicly accountable for their results, set realistic expectations despite the tremendous pressures

Three possible strategies

Implement cost cutting while continuing to fund R&D and field sales and service, in order to restore credibility in Xerox brand.

Make deep cuts in R&D, product development, and field sales and service in order to save the company.

Follow the recommendations of outside advisers and declare bankruptcy and then initiate an aggressive turnaround plan.

Turn around strategy

Sale of assets (Chinese operations, Fuji Xerox)

Improve communication with employees and improve decision making process for top management.

Stream line processes such as billing process.

Cost reduction through employee involvement.

Contd.

• Innovation

• Pushing into services

• Adaptive and opportunistic

• Layoff

• Outsourcing

• Value to customers

Results

The company generated profit of $978 million in 2005.

Mulcahy became one of the world’s most respectable leaders.

She was named the fifth most powerful women in the world by Forbes magazine.

SWOT Analysis

STRENGTHSStrong brand

Strong product development capability

Distribution channels

Dominance on the copier market

WEAKNESSESWeak operating performance

Dependence on third party manufacturers

Stagnant revenues from the office segment

Opportunities

The color market

Launch of carbonless paper

Outsourcing revenues

Threats

Intense competition

Paperless offices

Economic slowdown

THANK YOU