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Page history last edited by PBworks 12 years, 9 months ago




Xerox + Fuji Xerox


Xerox invented the market. They originally tried to sell their technology to GE, IBM, Kodak, RCA, but was rejected. Xerox built their position with patents, and a monopoly. They entered the global market with a joint venture with a British company. The JV was called Rank Xerox, who effectively had worldwide distribution rights. Xerox bought back the rights for the western hemisphere. RX set up subsidiaries in Mexico, Italy , Germany , France and Australia. Then, they wanted to enter Japan, but ran into government interference. 27 companies competed for rights to Xerox in Japan, but the winner was Fuji, the film company, based on personal relations. Rank Xerox insisted on a JV rather than a simple license to Fuji Photo film. Japanese government pressure to increase value of JV, and they had to include manufacturing, not just sale and marketing. Key was the exclusive rights to the patents, and the ability to learn the manufacturing from Xerox. 5% of sales and 50% of profits goes to RX. Management of JV was mostly all Japanese. Key to Xerox system of business was the trademark rental system they had developed (not selling copiers). Import restrictions, and requirements to source locally led to development of local industry. Japanese market needs copier because typewriter is difficult.


The JV was originally seen as unimportant to Xerox. They outsourced the negotiations to their international JV partner, RX, who in turn created another JV with a film company. Eventually, the patents on the Xerox machine expired, and lots of competitors entered the market. They later would be saved by this Japanese JV, who would go on to be more profitable. Its interesting that the company Xerox initially gave up the low – end of the market, and thought they could survive on just the higher end models. They saw their main competitors as just IBM and Kodak, when in reality the main threats were going to come from Canon, and other Japanese. Over time, the FX joint venture increased in value to the company. Xerox took control of the RX English joint venture, which, by the way, never was more than a sales and marketing division. The Japanese, however, learned how to innovate and make cheaper and higher quality machines for lower prices.


The issue today is that Fuji-Xerox is an independent organization that is wondering if it still needs to be constrained by the old Xerox restrictions. For example, they are only allowed to sell in a small geographic area. They claim that it limits their economy of scale, a valid argument. Xerox is likely afraid that FX will leave the JV if they become too independent. Xerox no longer has technology patents to license, although they still have the name. (Who ever heard of a Fuji copier? Everyone knows Xerox).



The problem of Outsourcing production is that you then don’t have the tools for learning. How do you then learn how to become more efficient? How do you learn without the challenges of mnfg? Some act as if mnfg is not important, and that they need brand management more important than mnfg….but how would Xerox respond to this idea? Note: star bucks is not just a brand manager and deliverer of coffee, they actually brew on site. Its small scale, but they still control the “manufacture” of the product.


At the time that Xerox formed the alliance with Fuji, Xerox had many options about how to enter the Japanese market. Rather than forming a formal JV, they could have licensed the technology. Upon reflection, I think Xerox was very lucky to have made the decision that they did, and to have made the strategic alliance with Fuji Xerox. Many companies in the US are in a position today where they must choose between outsourcing production to a cheaper producer offshore, or to form a joint venture overseas. It is clear to me that the easier short term solution is to license the technology and enter into an outsourcing agreement. Xerox, on the other hand, has taught me the value in going the more difficult route of forming a formal joint venture with an offshore company. If Xerox had followed the outsourcing route, they would have lost the connection with the production of their products. As technology changed over the years, and as Xerox lost their patent protection and their monopoly, they faced greater and greater competition. They needed to innovated, but for many years they had forgotten how to do so. By keeping their ties to the production in Japan, they were able to make it through those years and to keep on developing new products for their future. I realized that the joint venture benefited both parties. On one hand, Xerox was able to benefit from being closer to their competition in Japan, as well as insight into Japanese management techniques and efficiency / quality focus. Fuji Xerox benefited from marketing their products under the Xerox name brand, and having access to US market and innovation. The joint venture continues today because both parties still gain value.


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