Case: Xerox Corporation

In late 1970’s and early 1980’s Xerox had gone through some organizational problems. We have

recognized the followings:

Symptoms and problems

In 1975 the company signed a consent decree with the Federal Trade Commission in which Xerox had agreed to license other companies wanting

to use its process. Previously Xerox protected its process by solid wall of patents. As a result its monopolistic market share was seriously eroded.

In 1982, due to increasing competition Xerox cut of its price on many copier models, as a result the company suffered a drop

in earnings.

Xerox’s share of plain paper copier market slipped from 95% to 45% in 1982

Xerox’s attempts to lessen its dependence on the competitive copier market by moving into the broader

automation area had been less than spectacular.

Two of the executives from the office products division resigned to form their own company.

White collar salaries had become a huge problems & seemingly intractable cost of doing business.

The anticipation of a booming market for office automation brought dozens of companies into

competition with Xerox.

2. Analysis of data

As a result of signing a consent decree, Xerox’s market share was reduced

drastically

In 1982 it suffered a drop in earnings

At that time the condition of the US economy wasn’t that much flourishing

Xerox had reduced its workforce in 1981 & 1982

Xerox’s share of the plain paper copier market slip from 95% to 45% in 1982

The office automation market didn’t develop quickly

Competition was very stiff

3. Application of methodologies:

SWOT analysis of Xerox

Strengths

Strong brand name

Its sales and service staff was the largest in the industry

The company had many financial resources to fund challenging new

product development

Weaknesses

Lack of expertise in marketing complex office product and system

Xerox reduces its workforce twice in 1981 & 1982 and two of the key

executives from the office product division resigned.

Opportunities

Office automation system market was expected to grow in large extant. Analyst saw that Xerox was in the best position to capture large piece

of this growing market.

Xerox diversified its product line and redefined its customer base.

Acquisition of Crum & Forster expanded Xerox financial services.

Threats

Booming market for office automation brought dozens of

companies into the competition.

Xerox needed to implement some strategy to get momentum back.

4. Overall Analysis

Top level

Middle level

Lower level

The strategies that Xerox had dealt with in late 1970s and early 1980s were not appropriate. Xerox needed to plan more carefully. Midlevel

manager should have got some more authority while dealing with their work.

Xerox expected to emerge as a leading company in “Office of the future market”. But its decision of reducing its workforce was contradictory with its goal. Whenever a company thinks to be the market leader, it

must expand its production and workforce.

Xerox in expertise in marketing complex office products and system revealed its inefficiency in marketing planning to be successful in large market place. A group of marketing researchers can formulate all the

marketing planning for the company’s different products.

Xerox acquisition of Crum &Forester was not that much a bad decision as analyst were thinking off. Indeed, it diversified company’s product

line and gave it another opportunity to earn profit.

Question Answer

1. What are the major strategic planning issues that Xerox had dealt with in the late 1970s and early 1980s, following its consent decree with the Federal Trade Commission?

Major strategic planning issues:

Positioned itself to become a major competitor in the “office of the future” market by creating an office products division

Steep price cutting on many copier models in response to increased competition especially from the Japanese

Lessening its dependence on the competitive copier market by moving into the broader office automation area.

Answer

In 1982, Xerox acquired Crum and Forster ,an insurance holding company

Diversified its product line and redefined its customer base

Experimented new distribution technique

Independent distributors and dealers were contracted to sell products not only to end users but also to original manufacturers

Opened 30 retail shops throughout US

Most businesses develop strategies at different levels .Corporate level strategy is the set of strategic alternatives from which an organization chooses as it manages its operations simultaneously across several industries and several markets .Evidence of corporate level strategic planning at Xerox are given below

Xerox had traditionally been a single product line company, selling copiers to large businesses through its sales & service force .This changed as it diversified its product line and redefined its customer base .The Company revamped its copiers, offering a wider range of products to smaller businesses as well as larger companies.

2. What evidence do you see ere of corporate level strategic planning? Business unit level planning? Functional level planning?

Answer

Xerox experimented with new distribution techniques to meet the marketing problems associated with the company’s new concepts.

In September 1982, Xerox announced to acquire Crum and Forster, an insurance holding company, as a process of diversifying its business.

By 1982, Xerox had opened approximately 30 retail stores throughout US. These outlets were named” the Xerox store” and were designed to make small business operations comfortable in a store with a familiar name and reputation. In addition to selling Xerox equipment these outlets also carried brand name equipment of other manufacturers

Business level strategy is the set of strategic alternatives from which an organization chooses as it conducts business in a particular industry or market. Such alternatives help the organization focus its competitive efforts for each industry or market in a targeted and focused manner. Evidences are :

Recognizing that the copying industry wasn’t going to continue to grow at its previous rate, Xerox positioned itself to become a major competitor in the “office of the future” market by creating an office products division.

Xerox cut its price on many copier models in response to increased competition from the Japanese.

Xerox attempted to lessen its dependence on the competitive copier market by moving into the broader office automation area.

c. Every business has many functional departments, like accounting, finance, HRM, marketing, operations, to operate smoothly in larger business area. All the departments take necessary planning to fulfill its objectives. We have seen functional level strategic planning in Xerox over all planning process:

Xerox’ HRM reduced its workforce twice in 1981 & 1982.

Marketing division experimented with new distribution techniques. Independent distributors and dealers were contracted to sell products not only to end users but also to equipment manufacturers.

Finance department helped Xerox customer finance their purchase of Xerox equipment.

3. What is your analysis of the Crum and Forsters acquisition from a business portfolio standpoint?

Answer

In September 1982 Xerox announced to acquire Crum & Forster, an insurance holding company. By acquiring it Xerox diversified its operation.

From a business portfolio standpoint we can say that Crum and Forster is a question mark business unit because of its low market share (15th largest) but high market growth.

The company perceived the acquisition as an expansion of Xerox financial services, so it was a related diversification.

STAR QUESTION

CASH COW DOG

HIGH LOW

HIGH

LOW

Market growth rate

Relative market share

Pursuing a strategy of related diversification has 3 primary advantages. Firstly it reduces an

organization’s dependence on any of its business activities and thus reduces economic risk. Even one or two of the firm’s businesses may incur loss, the organization as a whole

may still survive because the healthy businesses will generate enough cash to

support the others .Secondly by managing several businesses at the same time an

organization can reduce the overhead costs associated with any one business.

Thirdly, related diversification allows an organization to exploit its strengths and

capabilities in more than one business .When organizations do these

successfully they capitalize on synergies, which are complimentary effects that

exist among their businesses.From these points of view the acquisition

of Crum and Forster gave the Xerox a sharp edge to diversify the business.

To be a dominant company in the office of the future, Xerox took many strategies. By creating an office product division, Xerox positioned itself to become a major competitor in the office of the future market. Though Xerox experienced drop in earnings, it maintained its position in the market by cutting down price and trimming its workforce. Xerox experimented with new distribution techniques. Independent distributors and dealers were contracted to sell products not only to end users but also to equipment manufacturers. Xerox opened retail stores to maximize its selling. From a strategic perspective, profit is not very important for a company’s survival. The important factor is selling. Xerox implemented many strategies to increase its selling.

4. From a strategic perspective, how would you have evaluated Xerox’ quest in 1982 to be a dominant company in the “Office of the future”?

Answer

Before developing a strategic planning for Xerox I would have asked him some important questions:

In which market segment the company will give more attention?

Will the company stop reducing its work force?

How much money will it spend in its research process?

Answer

5. Had Xerox CEO David Kearns asked you in 1982 to develop a strategic plan to take the company into the

1990s, what questions would you have asked him?

How much money will it spend in its research process?

Will it allow its marketing department to take aggressive strategy to compete with others?

What is the expectation of top management from its mid and lower level managers?

What should be the main objective of the company earning profit or building long term profitable relationship with the customers?