Strategic alliances and growth: Fuji Xerox case study

Fuji Xerox

Sub-Strategic Alliances & Growth.

The joint venture between Xerox and Fuji Photo Film to form Fuji Xerox was considered by many to be one of the most successful joint ventures between an American and Japanese company in history. The purpose of the strategic alliance was to overcome growing competition in the global marketplace. Fuji Xerox is only one portion of the Xerox Group, which is comprised of several larger divisions. Much of the competition that Fuji Xerox hoped to overcome was based in Japan. When Xerox began to see competitors such as Canon and Ricoh growing exponentially through exports, they realized that they had to make major changes in order to remain competitors of scale.

Fuji Xerox uses a single point design and manufacturing approach, similar to Canon's. However, externalities and additions in key export locations now call for local manufacturing and development in the U.S. Up to this point, Fuji Xerox has been allowed to operate with a considerable amount of autonomy. Now, there is considerable concern over this relationship between Fuji Xerox and the Xerox Group. The question is whether Fuji Xerox should continue to remain autonomous or whether it should fall under closer management from the Xerox Group.

The merger between Fuji and Xerox presents several cultural challenges. Throughout the joint venture, the Japanese way of management and compensation remained largely Japanese. Parts are procured from a relatively small number of vendors with whom the company develops an intimate relationship. Xerox managed to differentiate itself from competitors by choosing not to participate in the lower priced copier market. It targeted the mid to high volume segments of the market. There are very few competitors in this segment of the market compared with a low end copier market.

Choudoin, (1991) found several important factors in forming a successful merger. The first is to clearly identify the intended goals and motivations of each party for the joint adventure. Partners must have something to gain from the suggested merger. In the case of Xerox and Fuji, Fuji would gain access to a market that it wanted to enter. Xerox would experience the greater stability and the ability to narrow its market, thus reducing the heat from competition. Fuji gained access to a market that allowed it to expand its business into an area that was compatible with its research and development.

Choudoin also found that benchmarks, profitability, and key measurable variables also need to it be established early on in the merger. Both companies need to discuss short-term and long-term strategies. As with any other company, these goals must be measurable, definable, and in explicit terms. Monitoring mechanisms must be set up to assure that the merger is viable and maintaining its goals. Managers must understand the transformation process and the resistance that they may encounter from employees. Establishing these ground rules earl on sets the tone of the merger. It helps to establish respect and control in the relationship and the establishment of boundaries.

Q2. What principal reason success FUJI -XEROX.

When the Fuji Xerox merger was first proposed, Xerox was losing ground to competition and new rivals on the market. Its entry into the plain paper copy market made it in instant and success in the American business scene. However, it wasn't long until competition began to eat away at the Xerox empire. These competitors not only produces the same type of plain paper copier, they produced high quality, lower cost machines than Xerox. Xerox was facing a crisis and they needed a savior. Fuji Photo Film manufactured photographic film, second only to Kodak, and it was roughly the same size as Xerox. While Xerox struggled to defend itself from competitors, Fuji wish to diversify its business away from silver-based xerography. Ir began to experiment with Xerography and plain paper technology. Fuji Xerox was formed to satisfy the needs of both of these similar corporate interests (Gomes-Casseres, 1997).

One of the key a reasons for success of Fuji Xerox is that they will co-dependent in their business strategy. This is particularly true in the case of Xerox, who was facing increasing competition and increasing risk from that competition. Fuji seemed to be the perfect partner to resolve the strategic problems Xerox was facing. Both companies had something to gain from the alliance. Fuji had the chance to enter into Xerox's plain paper technology. Xerox had the ability to overcome competition utilizing the research efforts of Fuji as a steppingstone. Similar interests and strategic gains were an important factor in the success of the merger. However, there are other factors that also made the merger a success.

The companies realized that the success of an American and Japanese Company depended on a formal structure for doing business. In the early nineties Mr. Allaire and Mr. Kobayashi formed a "Co-Desitny Task Force" to develop a formal framework for cooperation between the two companies (Gomes-Casseres, 1997). This formal structure gave both companies a voice in the strategy of the joint venture and a formal system for resolving disputes and conflicts. This formal system allowed both companies to fully utilize the resources of the other for the collective good of the division.

Choudoin (1991) found that in the early part of the relationship each company should be given more freedom to create an environment that allows both companies to thrive and develop. It needs to remain flexible enough to respond to changes in the external environment. One of most difficult aspects of the relationship to define is the percentage of managerial decision making each company will have. Co-Destiny Task Force allowed Fuji and Xerox to meet all of these requirements and establish a framework for a lasting partnership.

Fuji Xerox was a successful merger, although it did have several challenges to overcome. The first is that the Xerox technical people did not speak fluent Japanese. The language barrier was in difficulty they had to be overcome. Few Xerox technical people could speak Japanese and did not know enough to speak it professionally.

Founders (2011) explored the reasons why business mergers fail. In these failures, one can find the keys to success. One of the reasons for business failure is because the business model of one company is archaic. When Fuji and Xerox first discussed the partnership Xerox was a failing company. It was being overrun by the competition. Xerox had to redefine itself and update its business model in order to be an attractive partner for Fuji.

One caveat to avoid is the merging of two companies with large economies of scale before the merger. They can become dysfunctional and lose the personal relationships that built their success with customers and employees alike. Fuji and Xerox realized that this could be a possibility when they first decided to discuss the merger. Two large companies with economies of scale creates an even larger company with an even larger economy of scale. However, there are disadvantages to this approach.

Larger companies often have trouble responding to changes within the marketplace as quickly as smaller companies (Founders, 2011). This can put them in a disadvantage in cases where the market is saturated with competition. However, Xerox managed to differentiate itself through positioning and price. One of the main challenges of Fuji Xerox was to maintain the quality of customer relationships that it had before the merger. Economies of scale can be beneficial, but when the merger will create a company that is too large management can become disconnected from the daily workings of the company and this can cause it to lose focus.

Founders (2011) discussed the importance of cultural synergy between the two companies. They must have similar values. This is an interesting topic to discuss between Xerox and Fuji. One was an America company and the other Japanese, two cultures that are very unlike each other. Fuji and Xerox made it work by taking and open minded approach to cultural issues that they knew would be there right from the beginning.

Perhaps the greatest reason for the success of Xerox and Fuji is recognition right from the beginning of the challenges that they knew they would face. Both companies felt that has something to gain and from the partnership, but they also knew that it would not necessarily be easy. They met the challenges head on and developed a plan for defining and managing the issues that they knew would arrive. They chose not to run away from them and ignore the issues but to define them clearly and to develop a plan. Fuji and Xerox are an excellent examples of how mergers can work when both companies are willing to take an honest look at their strengths and challenges and meet them head on.

Q3. How management XEROX-FUJI-XEROX relationship contribute success ?

The relationship between Xerox and Fuji management was not always a pleasant one. In the beginning, Xerox executives treated Fuji Xerox with a type of condescending neglect. That is, until Xerox's sales continued to fall and Fuji Xerox came to the rescue with a series of new technology that saved both companies. After that, Fuji Xerox was treated as a valuable asset of the Xerox Group (Gomes-Casseres, 1997).

Gomes-Casseres (2001) cited several reasons for that success of the Fuji Xerox merger. The first is alignment behind a common strategy. Fuji Xerox sold under the Xerox name and considered itself part of the Xerox Group. The two companies had different product lines, but they unified under a single business strategy. One of the worst mistakes management can make is to get in power struggles with each other. Fuji Xerox aimed their strategy at defeating outside rivals, instead of becoming entangled in power plays with each other.

Gomes-Casseres also cited a clear division of responsibility between the partners as a key to a successful partnership. Partners cannot encroach on each other's business. Fuji was successful in its own product line, and Xerox was successful in its own product line. Both were specialists in their own field, but neither of them was familiar with the other ones market. Formal agreements that clearly divide partnership responsibilities are an important part of having a successful relationship after merger. The development of a formal partnership structure by a committee was a successful way to formally ensure that division of responsibility remained throughout the alliance.