NINE MILE

Management Consulting

The Relationship between

Xerox & Fuji Xerox
February 2013

www.ninemileco.com
Copyright © 2013. All Rights Reserved. The Nine Mile Management Consulting Group

While Xerox never formally supported FX’s vision in the beginning – FX 1|Page . Ultimately. Xerox participated in the activities of FX through RX. (2) focusing around a set of values and norms (TQC) that positively infiltrated through all aspects of Xerox. Xerox wanted uniformity and status-quo across the organization. and a strong understanding of their value creation/appropriation dynamic within Xerox.e. FX had a clear vision with “aspirations to be a global company in marketing.Nine Mile Management Consulting Group February 2013 The Relationship between Xerox & Fuji Xerox Fuji Xerox (FX) was a 50-50 joint venture between Rank Xerox (RX) and Fuji Photo Film (FPF) in 1962 to pursue the Japanese market. and Understanding of Value Creation & Value Appropriation Even with Xerox’s limited direct-involvement in FX’s early activities. but no real linkages in terms of resources or information flow was seen. low-end copiers). By 1988 however. (4) promoting a shared culture of cooperation and technology transfers. established a Total Quality Control (TQC) philosophy. FX’s successes within Xerox’s evolving global strategy can be attributed to the following determining factors: (1) a strong vision for the company with formalized expectations. these successes within FX translated into a stronger joint-venture relationship – FX served as a vehicle for change in the organization while Xerox benefited via the adoption of many of FX’s strategies. Expectations. FX accounted for over one-fifth of Xerox’s net earnings. and (5) adopting a long-term company focus. Asia-Pacific competition. and by 1989 all Xerox’s and RX’s mid-to-high volume copiers were FX designs. In this early global structure. (3) a responsive attitude towards endogenous market shifts. it established itself as a technically competent member of Xerox with development of the FX2200/FX3500.” 1 The initial perceived conflicts between Xerox and FX were a result of an expectations shortfall on the dimension of efficiency (both internally and externally) – while FX reacted responsively to these value creation challenges (i. Vision. manufacturing. and research.

”1 TQC allowed FX to achieve high product quality. 1 Product”1 or “dantotsu”1) cannot be underestimated as a driving and solidifying force behind the organization. minimal defects. This adoption of a common set of values and norms led to many positive benefits that permeated the organization – i.e.Nine Mile Management Consulting Group February 2013 remained true to their internal company goals and strived towards them by investing in long-term R&D. minimizing product complexity/parts. While Xerox defensively attempted to maintain their market position via litigation of patent infringements with little product development attempts. FX realized the need for copiers to serve the low-to-mid-range market. As FX’s influence on Xerox’s bottom-line began to increase. and developing an understanding of their competitors and consumers by analyzing competitors’ products/systems. Canon. the market was being saturated by 11 Japanese companies leading to an erosion of Xerox’s position. and improve margins through cost-control – all endeavours to retain competitive positioning against its largest rival. The Xerox 10 series ultimately responded to this market demand through cooperation between Xerox and FX – becoming its most successful line of copiers. Ultimately Xerox began to follow suit and sought new competitive positioning opportunities. reducing product costs (“[copier] machine manufactured for half the price”1). 2|Page . Responsiveness towards Endogenous Market Shifts FX realized early on the significance of the growing number of entrants in the Japanese marketplace for copiers – by 1975.000 employees going through “off-site training to unite the entire organization behind the quality effort. Xerox implemented this as a global strategy with 100. Adopting Common Values & Norms FX’s TQC movement (“Achieving No. product design (FX2200/FX3500). and manufacturing capabilities (Xerox 914 copier).

FX continued to strive towards its vision and continued development of the FX3500. Comparison of Xerox-FX Joint Venture to GM-Daewoo – Contrasting Outcomes While the Xerox-FX joint-venture was a success.Nine Mile Management Consulting Group February 2013 Culture of Sharing. From these examples. For example. the dynamic of the Xerox-FX relationship changed and the balance of power shifted towards FX. the GM-Daewoo venture proved to be on the 3|Page . When FX was able to prove its capabilities and earn its position within the Xerox organization (as demonstrated through bottom-line returns). Cooperation. and reluctant to import FX’s products – FX on the other hand always imbued cooperation. & Technology Transfers The lack of direct communication. while Xerox cancelled many R&D projects (7 in middevelopment). Long-Term Company Focus The long-term focus achieved by FX and later adopted by Xerox also helped the organization to achieve success against rivals. information. It was through this framework of cooperation that furthered the Codestiny discussions and technology agreements – but true acceptance of cooperation from Xerox only occurred when it was willing to take constructive feedback and began ‘benchmarking’ performance against FX’s operations. While Xerox was reluctant to acknowledge FX’s R&D and product design capabilities (those traditionally associated with Xerox’s US HQ). it becomes clear that by-and-large the successes of the Xerox-Fuji Xerox relationship comes from the direction of FX. With this slight power shift came openness from Xerox (through previously established cooperative communication channels) to establish many of the strategies that FX adopted – ultimately leading to further cooperation and success. and resource flows early on in the joint-venture was due to the structure of the organization itself – with RX acting as an agent for communications with FX.

The contrasting outcomes between Xerox-FX and GM-Daewoo are outlined below: Table 1: Mapping Expectations in the Xerox-FX Venture: Casual Attributes of Perceived Shortfall Endogenous Factors  Sharing product design capabilities (Xerox 10 series).  Renegotiation discussions regarding decline of royalty paid by FX and FX begins to receive manufacturing license fee. GM not promoting conditions (labor unions. Exogenous Factors  Sharing of strategic market assumption in regards to AsiaPacific region. Nature of Perceived Shortfall Efficiency (Value Creation)  Reinforcement of strategic Equity alliance through adoption of (Value TQC and uniting organization Appropriation) behind the quality effort.  Dialogue to improve interfaces: Codestiny discussions. top management summits. 4|Page . need for low-end copier. Daewoo – decisions made quickly be few top executives. economy & currency.  Mutual learning through adoption of TQC. technology sharing deal with Suzuki Motor Co.Nine Mile Management Consulting Group February 2013 “road to nowhere. Pontiac LeMans aggressively South Korea’s expanding enough. wages. Daewoo – wants to shift technology leader to compete (Value focus to compete directly against against Japanese leads to Appropriation) Japanese. Europe. Efficiency (Value Creation) Nature of Perceived Shortfall  Mismatch of sources of value  External imbalance created: appropriation: GM – relies on US Daewoo’s desire to be a Equity sales. Table 2: Mapping Expectations in the GM-Daewoo Venture: Casual Attributes of Perceived Shortfall Endogenous Factors Exogenous Factors  Internal conflicts and poor  Deterioration of external cooperation.  Differences in management  Diminishing benefits of location decision-making: GM – advantage for manufacturing.”2 The Value Creation-Appropriation framework suggests that perception gaps and shortfalls between expectations and intermediate results ultimately lead to joint-venture failure2.  Joint analysis to determine best strategy to compete against Canon. prolonged decision-making. technology transfers.

ultimately led to their respective success and failure. The partnership did not necessarily form through an advantageous merging of distinct capabilities between the two companies. the relationship became increasingly strained. The value proposition based on market conditions suggested South Korea as an advantageous location based on low-wage labour – but when such conditions were no longer present due to a fledgling economy and poor vehicle quality.Nine Mile Management Consulting Group February 2013 In both the Xerox-FX and GM-Daewoo cases. By the same token. 5|Page . but rather was dependent on external market conditions. resources. which lead to significant levels of cooperation. the GM-Daewoo venture failed because of the lack of appropriate responsiveness to internal and external shifts in the value creation framework. and information began to flow throughout Xerox’s organization. and how each company handled these shifts. the perceived and actual lack of value creation through both shifts in internal and external factors. The Xerox-FX joint-venture succeeded because of the ability to understand the value creation/appropriation link between the two. By clearly understanding the value creation role of FX within Xerox as a generator of novel ideas and approaches with product design. R&D. While Xerox-FX was successfully able to respond to value creation challenges induced by internal/external factors. GM-Daewoo did not – ultimately leading to contrasting outcomes. Instead of both companies resolving to work through these conditions – each had different aspirations of the joint-venture which further widened the expectations shortfall. and manufacturing – a reciprocating exchange of ideas.

Gomes-Casseres & K. 1991. 2. 2. 391156. B. 173-182. Arino & Y. Harvard Business Review. Doz: Rescuing Troubled Alliances Before it’s Too Late. European Management Review. 6|Page . McQuade: Xerox and Fuji Xerox.Nine Mile Management Consulting Group February 2013 References 1. 18. 2000. A.

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