COMPANY OVERVIEW

Xerox Corporation (Xerox) is a technology and services enterprise. The company develops,
manufactures, markets, services and finances a range of document equipment, software, solutions
and services. Xerox offers digital monochrome and color systems for customers in the graphic
communications industry and enterprises, as well as various prepress and post-press options. The
company also provides office systems and services, including monochrome devices and color devices;
color devices with an embedded controller, including a family of CopyCentre, WorkCentre, and
WorkCentre pro digital multifunction systems; DocuColor printer/copiers; color laser, light emitting
diode, solid ink, and monochrome laser desktop printers; digital copiers; and light-lens copiers and
facsimile products. In addition, the company provides paper sales, wide format systems, small
office/home office, Xerox technology enterprises, and value-added services. It primarily serves small
to medium sized commercial customers, as well as government, education, and other public sector
customers. Xerox Corporation markets its products through direct sales force, as well as through a
network of independent agents, dealers, value-added resellers, and systems integrators.
(http://finance.yahoo.com/q/pr?s=XRX)

Innovation Historical Highlights

Xerox has invented many new technologies and products throughout its history. The
historical highlights of Xerox is shown below: (http://www.xerox.com/innovation/xig_brochure.pdf)

▪1942 Carlson, inventor of xerography, receives patent or electrophotography, the

technology the revolutionized the world of imaging.

▪ 1947 Haloid acquires license to Chester Carlson¡¦s basic xerographic patents from Battle
Development Corp, a subsidiary of Battle Memorial Institute

▪ 1948 The word ¡§Xerox¡¨ is trademarked

▪ 1949 The first xerographic copier, the model A is introduced

▪ 1959 The Xerox 914, the first automatic, plain paper office copier, is announced.

Haloid purchases all worldwide patents on xerography from Battle Memorial Institute.

▪ 1970 Xerox Palo Alto Research Center opens in Palo Alto, California

Electrostatic printing is introduced

▪ 1973 Xerox PARC invents prototype of the world¡¦s first personal computer, the Alto, with
innovations including the first what-you-see-is-what-you-get-editor, first commercial use of a mouse,
graphical use interface, and bit-mapped display

▪ 1975 Xerox agrees to license existing xerographic patents

▪ 1977 The industry¡¦s first laser printer, the Xerox 9700, is introduced

▪ 1983 Large-format digital color printing is introduced.

▪ 1990 DocuTech Production publisher first digital copier/printer, invented print on-demand market.

▪ 1991 5775 color copier printer, first digital Xerox color system is launched.

▪ 1996 Xerox creates dpiX as a wholly owned subsidiary to manufacture and market high-resolution,
flat panel display screens developed at PARC.

▪ 2002 DocuColor 2240 launched featuring chemical (EA) toner for improved cost and performance

▪ 2003 Xerox joins Microsoft and others as a founding sponsor of the Information Work Productivity
Center at MIT; the center is to study how organizations can take advantage of technology to increase
productivity.

Xerox Corporation received the 2003 IEEE Corporate Innovation Recognition award for its
pioneering work that created the DocuTech product line and resulted in the $30 billion print-on-
demand industry.

▪ 2004 Xerox receives ¡§Basey Award¡¨ for Categorizer Software from XRCE.

Xerox awarded First Ever Innovate in France Award.

▪ 2005 Wall Street Journal Honors Xerox technologies.

Xerox is a creative and innovative company. Xerox consistently innovates, markets and creates value
for its customers. Xerox produces superior products and solutions using them for establishing new
businesses, or licensing and selling to other entities.

Intellectual property management department in Xerox plays important role in protecting Xerox¡¦s
technological right and selling these rights to the other corporations. Xerox uses its technology as a
core competency.

Innovation in Xerox

Xerox has six innovation centers around the world, each provides their own unique perspective.

„X The Wilson Center for research and Technology

Founded in 1960, The Wilson Center for research and Technology is Xerox¡¦s first research center. It
is recognized internationally for its pioneering on xerography. The Wilson Center for research and
Technology provided the technical foundation and intellectual property protection for four
generations of Xerox.

„X Imaging and Services Technology Center

Founded in 2003, Imaging and Services Technology Center focuses on digital imaging and document
solutions and services. Expertise in the center includes digital imaging, electrical engineering,
computer science, data mining, and social sciences.

„X Xerox Research Centre Europe

Founded in 1993, XRCE operates in Europe. The center coordinates research, engineering, and a
customer showcase for Xerox research and technology. The center also connects European scientific
community to collaborate projects and partnerships.

„X Xerox Research Centre of Canada

XRCC founded in 1974. It enables the flow of leading-edge imaging and consumable materials from
research concepts to supplier solutions. XRCC focuses on material design, synthesis, characterization,
and evaluation.

„X Palo Alto Research Center

PARC is the birthplace of Xerox¡¦s DocuPrint network printing software, the dual-beam lasers used in
many Xerox products. PARC has delivered lasting value for Xerox, for instance, as laser printing
became a multibillion-dollar business.

PARC is founded in 1970. It is an integral part of Xerox Research. PARC was incorporated in 2002 as
an independent research business.

„X The Xerox Engineering Center

The XEC works with Xerox¡¦s other research centers all around the world to ensure that R&D and
engineering efforts are executed to bring more value to customers. The business result is the
optimization of Xerox¡¦s RD&E investments.

SWOT Analysis for Xerox

According to Datamonitor, a leading business information company, Xerox is a dominant

player in the copier market, but faces threat due to an introduction of low cost products in the
market (Datamonitor: Xerox May 2005).

Strengths Weaknesses

Dominance in the copier market Dependence in third party manufacturer

Distribution strategy Lower share in services

Brand reputation Low research and development spending

Opportunities Threats

Growth in the color painters market Competition from low cost products

Launch of first carbonless paper Mature industry

Increased spending on outsourced document services Economic slowdown

Threat of substitutes

Strengths

Dominance in the copier market: Xerox is one of the oldest companies in its industry.
Moreover, it is the sales leader in digital color presses with 60% of the high-volume target.
 Distribution strategy: Xerox sells its products and solutions through a worldwide sales force
totaling approximately 9000 employees and through a network of independent agents, dealers, value
added resellers and system integrators. In addition, Xerox¡¦s strategic alliance with Electronic Data
Systems (EDS) is designed to integrate EDS¡¦ information technology services with its document
management systems and services to provide customers with full Information technology network.

Brand reputation: Xerox brand is known from everybody. Xerox has a reputation for quality and
innovative technology, with a wide breadth of product offerings and has a large customer base each
of which is important in terms of gaining a competitive advantage.

Weaknesses

Dependence in third party manufacturer: Xerox outsources approximately 50% of its overall
worldwide manufacturing operations to Felxtronics, a worldwide electronics design, fabrication,
assembly, and test company.

Lower share in services: The fast growing value added services segment remain a relatively
small portion of the overall revenue of the Xerox, driving less than 10%. Low share in the services
market could mean significant revenue loss for the company.

Low research and development spending: Xerox reduced its research and development
budget in its new operating plan. R&D investments at Xerox are targeted 5% of revenues, down from
the 5.5% to 6% levels over the last five years. R&D is strategic specifically in technology focused
industry. Lower R&D expenditure with the increasing competition in the industry could hamper
future growth of Xerox.

Opportunities

Growth in the color painters market: Digital printers are expected to grow from $14 billion in
2002 to more than $58 dollar in 2007. Xerox expects that businesses will print about 159 billion
pages in color by 2007. Color pages can deliver five times the revenue of black-and-white pages.

Launch of first carbonless paper: Xerox launched the industry¡¦s only carbonless paper on
February 2005. The new Xerox Premium Digital Carbonless paper makes it possible to quickly and
economically add colorful logos and highlights to each sheet of an invoice, contract, receipt or claim
form.

Increased spending on outsourced document services: The U.S. document outsourcing

market is estimated to have grown from $27.8 billion in 2000 to over $50 billion in 2005. Outsourcing
of document management is likely to lead to reduce cost of document management, enhanced
control over the correct version of forms, easy document revisions, timely document distribution,
and improved information control.

Threats

Competition from low cost products: Xerox has many competitors in the industry, including
Canon, Ricoh, and Heidelberger Druckmaschinen that offer low cost products to the industry.
 Mature industry: Increased technology has influenced the office equipment industry. In 2003,
the office equipment industry was valued at about $11.4 billion. However, it is expected to rise to
approximately $13.8 billion by 2007. It is also expected that growth will decline in the coming years.

Economic slowdown: A downtown economy would decline the page output rate in the
commercial printing market. As a result, Xerox¡¦s sale is affected negatively. At the same time, any
such downturn would likely see corporations tightening the new equipment purchases particularly in
color printing. Companies might wish lower-end copier devices.

Threat of substitutes: Digital age led companies to distribute the documents electronically,
rather than hardcopy. Documents can be created and edited electronically. Such substitution would
diminish the demand and lead to fall Xerox¡¦s revenues.

Intellectual Property Management

Rivette and Kline (2000) examined how companies can manage and deploy their patents not
just as legal instruments but also as powerful financial assets and competitive weapons that can
enhance companies¡¦ commercial success and increase shareholder¡¦s wealth. The authors cited the
ideas of Richard Thoman, Xerox¡¦s CEO in 2000, about the intellectual property. Thoman believes
that one of the strategic key¡¦s to Xerox¡¦s future is something so intangible, so invisible to
traditional bottom-line thinking and corporate practice, that it does not show up in the balance
sheet. Thoman declares that his focus will be intellectual property. Management of intellectual
property is how value added is going to be created at Xerox. He admits that companies which are
good at managing intellectual property will win.

Xerox has established a new business unit to create profit and competitive advantage from
the company¡¦s asset. Jan Jaferian, vice president of intellectual property at Xerox, believes that if
companies only use their patents to protect companies¡¦ products, they are missing all manner of
revenue-generating and other opportunities.

Xerox Strategy

Xerox¡¦s formulated competitive strategy is ¡§competing on technology, product quality, and

product capability¡¨ (Chesbrough & Rosenbloom, 2002, pp: 539). The authors formulate the
competitive strategy by which the innovating firm will gain and hold advantage over rivals. Strategy
requires careful, analytic calculation and choice where there is a great deal of reliable information.
Firms should select effective strategies. For instance, the choice by Xerox to pursue a strategy other
than the development and marketing of the personal computer and laser printers was likely an
ineffective strategy for Xerox (Hitt, Ireland, and Hoskisson, 2005, 7-8).

Porter¡¦s 5 Forces

Before submitting the final paper, I decided to find the industry average by using Porter¡¦s 5
forces. Then, I will find Xerox¡¦s average after I examine the company in detail and compare Xerox¡¦s
score with the industry.
For Office Equipment Industry

I assign the numbers based on my research and my knowledge about the industry. The assigned
numbers are out of 7.

„³ Intensity of rivalry: Office equipment industry is a competitive industry. There are many big
companies in this business. Therefore, I gave 6.

„³ Threat of new entrants: Since office equipment is a technology intense industry, I gave 2 for
this section.

„³ Threat of substitutes: Digital age may hinder the sales of office equipment products. People
might prefer using digital format of the documents rather than hardcopy. Hence, I gave 5 for the
threat of substitutes.

„³ Bargaining power of buyers: The customers who are willing to increase efficiency of their
office works should purchase an office equipment product, so I gave 4 for this force.

„³ Bargaining power of suppliers: There are many potential suppliers to manufacture an office
equipment product. Therefore, I gave 2 for the force, bargaining power of suppliers.

The average score of the industry is: (6 + 2 + 5 + 4 + 2) / 5 = 19 / 5 = 3.8

The outside of the inner pentagon shows the potential profitability of the office equipment
industry.

Xerox¡¦s competitor: Canon

I selected Canon as a competitor of Xerox because in its 20-year battle with Xerox, Canon¡¦s
slogan was ¡§Beat Xerox.¡¨

Canon was founded in 1937 and is headquartered in Tokyo, Japan. The company sells its products in
a wide range of geographical areas, including the United States, Germany, France, and Far East.
Canon manufactures plain paper copying machines, digital multifunction devices, laser beam
printers, bubble jet printers, cameras, and steppers. The segments and the subgroups that Canon
operates are:

1) Business Machines

a) Office Imaging Products

i) Office Network Digital Multifunction (MFDs)

ii) Office Copying machines

iii) Personal use copying machines

iv) Full color copying machines

b) Computer peripherals

i) Laser beam products

ii) Inkjet printers

iii) Image scanners

c) Business information products

i) Micrographic equipment

ii) Personal computers

iii) Calculators

iv) Document scanners

v) Workstations

2) Cameras

a) Single lens reflex cameras

b) Compact cameras

c) Digital cameras

d) Digital video camcorders

3) The Optical and other products

a) Stepper for semiconductor chip production

b) TV broadcasting lenses

c) Medical Equipment

Canon has a wide variety of product span. It manufactures products that Xerox does not. For
instance, Xerox does not produce personal computers and calculator.

SWOT Analysis for Canon

According to Datamonitor, Canon has a strong brand image, however the company faces the threat
of decline in revenues from increasing sale of counterfeit products (Datamonitor: Canon November
2004). The SWOT analysis of Canon is shown in the table below.

Strengths Weaknesses

Strong brand image Dependence on Hewlett-Packard

Wide range of productsLack of product differentiation

Research and development The company¡¦s photocopier segment

Cost reduction strtegy

Opportunities Threats

Digital single lens-reflex cameras market Increase in Canon counterfeit products

China market Highly cyclical semiconductor industry

Positive US economic outlook Rapid technological change

Increase in competition

Future Studies

By submitting the project, I will elaborate the intellectual property management of both
Xerox and its competitor, Canon. I will analyze both companies¡¦ strengths and weaknesses in
technology as well as IP management. In addition, I will summarize the key findings. I will include
Balance Scorecard based on the key findings about Xerox. Finally, I will recommend short and long
term strategies about management of technology, innovation, and IP after I finish analyzing the firm,
industry and the competitor.

References

Datamonitor, (May 2005). Xerox Corporation

Datamonitor, (November 2004). Canon Inc.

Hitt, M., Ireland, R. D., and Hoskisson, R. E. (2005). Strategic management competitiveness and
globalization (6th ed.) Mason, OH: Thompson/Southwestern.

Rivette, G. K., & Kline, D. (2000). Discovering new value in intellectual property. Harvard Business
Review, 54-66

Chesbrough, H., & Rosenbloom, R. S. (2002). The role of the business model in capturing value from
innovation: evidence from Xerox Corporation¡¦s technology spin-off companies. Industrial and
Corporate Change, 11, 3, 529-555

Xerox Innovation. Exploring the Unknown Leading to the Future

(http://www.xerox.com/innovation/xig_brochure.pdf)