FujiXerox Alliance Strategy - Case Study Example

FujiXerox Alliance Strategy Name of client Course Name of Tutor (8 May 2012) 1. Introduction 1.1. Fuji Photo Film Co. Ltd profile and industry level data Fuji Photo Film was formed in 1934, in Japan. The company was originally, a cinematic film producer. It has since evolved, and now manufactures and markets information and imaging products. With an estimated capital of 40 billion Yens, Fuji Film leads Japan’s photographic films making industry. It comes second in the world, after world leader Eastman Kodak. In 2006, Fuji Photo Film changed its name to Fujifilm Holdings Corporation. Its businesses are run under this company name (Fuji Photo Film Co. Ltd., 2011 & Fujifilmholdings.com, 2012). The company owns a 75% stake in Fujixerox, its joint venture with Xerox Corporation. 1.2. Xerox Limited profile and industry level data Xerox Corporation began its life as Haloid Company in 1906. It was primarily a manufacturer of white paper. Its transformation to Xerox Corporation happened in 1961. Xerox manufactures photocopiers, fax machines, software, scanners, and electronic printers among other document machines. It also provides document outsourcing services. It leads the document outsourcing market. In market segments where it is not the leader, Xerox appears in the leading pack of competitors. Xerox faces competition from Canon, Kodak, Ricoh and Hewlett-Packard among others. Its services business competes with Hewlett-Packard, AON, Accenture and Genpact. Dell and IBM compete with Xerox in its computer services business. The Corporation owns 25% of Fujixerox, a joint venture it co-owns with Fuji Film Holdings (Xerox Corporation, 2012). 2. Rationale for Xerox and Fuji Photo Film alliance [Fuji Xerox] The reasons that bring companies together in alliances vary from a partnership to another. These may include; to enjoy economies of scale, spread risks, share operational costs, penetrate into new markets, share technology, experience and expertise among others. FujiXerox was formed to enable Xerox penetrate the Japanese market. Fuji Films benefited from Xerox’s technological expertise. Together, the two companies sought to confront competitors as a team (Cessares, 2004). 2.1. Alliance design Any alliance between companies needs to be backed by the individual companies’ goals and strategies (Harbison & Pekar, 1998). These goals and strategies guide companies in choosing their partners and how to structure those partnerships (Cessares, 1996). Xerox faced difficulties penetrating the Japanese market before the alliance. Competitors from Japan were also eating away at its market share at an alarming rate (Cessares, 2004). Fuji films presented an opportunity for Xerox to have its products marketed by a company with an advantage in the local market. Fuji films on the other hand, needed a partner with technological expertise to manufacture innovative products (Cessares, 2001). Fuji and Xerox formed a co-specialization alliance. They shared their skills, expertise, capabilities and resources to meet the common goal of the joint venture. Xerox shared its technology and expertise (Cessares, 1997). Fuji benefited the venture through its intimate knowledge of the target market and customers. Co-option was the other logic for the alliance. The alliance was set to boost the companies’ competitiveness in their respective industries. Fujixerox was the vehicle that would take on Kodak, Canon and other competitors (Cessares, 2004). The companies initially settled on a 50/50 ownership deal. This enabled Fujixerox to thrive. This was as a result of the autonomy that the balance of power gave it. The other reason it that the two companies shared resources, technology and expertise without fear. However, Xerox sold half of its stake to Fuji and now owns 25%. Fuji Films owns 75%. 2.2. Alliance management The relationship created by the alliance is that of a supplier and a dealer. Xerox supplies the products while Fujixerox distributes and markets them in the Japanese and other markets. The responsibilities of each party to the deal are clearly mapped out to avoid conflicts. This has also enabled the companies to maintain business and competitive boundaries. They have managed to check competition between themselves, and jointly improve competitiveness against other firms. Relationships among managers have been maintained through multiple contact points. Their operations are intertwined, and managers make decisions collectively. The Corporate Executive Committee makes major decisions affecting the Fujixerox and its affiliates. Other committees have specific functions (Fujixerox corporate profile, 2011). Fuji Film’s authority in decision making, however, has been enhanced by its majority ownership (Cessares, 2004). 2.3. Alliance Capability Fujixerox’s organizational structure is customer-focused. It is comprised of function-based committees who oversee satisfaction of customer needs. To ensure fairness and transparency in management, the alliance formulated information disclosure guidelines. There are rules that regulate in-house sharing of information and communication. The alliance partners also share essential pieces of information for the smooth running of the venture. The alliance utilizes the resources, skills and expertise of the two parent companies to remain competitive (Fujixerox corporate profile, 2011). 3. Alliance performance 3.1. Individual firm level Fuji Film has been registering a marginal decline in its revenues. Document solutions, is the company’s highest source of income. In the financial year that ended on 31 March 2012, it earned 973.3 billion yens from document solutions alone (fujifilmholdings.com, 2012). Fuji Film’s impressive earnings are as a result of technological benefits that it enjoys from its alliance with Xerox. These have improved its competitiveness against Kodak and other competitors. Xerox has also registered a consistent increase in its earnings. Its performance graph has had an upward curve since 2008 (Xerox Corporation, 2012). The company’s individual performance is also boosted by the performance of Fujixerox. 3.2. Alliance level Fujixerox has been termed by many as one of the most successful alliances ever to be formed. In the year 2010, its earnings before taxes amounted to 560 billion yen (Fujixerox Corporate Profile, 2012). The success of this company can be attributed to the harmonious relationship between the two parent companies. Over the years, they have pooled their resources and capabilities to create a successful entity (Cessares, 2004). The companies have been able to face competition jointly and improve their competitiveness in the market. The alliance enjoys economies of scale and shared risks. 4. Evaluation of the alliance and its performance So far, the alliance between Fuji Films Holdings and Xerox Corporation has been immensely successful. Both parent companies have been able to realize their goals. The equal power sharing deal and clear demarcation of roles gave the joint venture some autonomy and stability. Competition was aimed at other firms and not each other. The shift in shareholdings has also meant a change in power. Fuji Films has earned considerable authority from the acquisition of Xerox’s 25% shareholdings. The joint venture remains beneficial to both parent companies. Substantial earnings are earned from it, as well as boosting competitive advantage over other competitors. The alliance continues to assist the firms to compete collectively against individual companies such as Canon. The future looks bright for the alliance. It has the capacity to venture into diversified fields and remain competitive in the industry. However, the alliance is likely to suffer in future. FujiXerox’s 50/50 ownership ensured its survival. With the change in ownership, decision making may problems may arise. Fuji Photo Films may seek to assert its authority and probably pursue strategies and goals uncommon to both parties. If this happens, FujiXerox may not be in a position to contribute positively to both parent companies’ growth. References Cessares, B 1996, The Alliance Revolution: The New Shape of Business Rivalry, Harvard University Press, Cambridge. Cessares, B 1997, Competing in Constellations: The Case of Fuji Xerox, Strategy & Business, First Quarter, Issue 6, Viewed 6 May 2012, < http://www.strategybusiness.com/article/896> Cessares, B 2001, Xerox and Fuji Xerox:From the Corporate Intensive Care Ward, Lessons about Partnerships, Associated Press, Viewed 6 May, Cessares, B 2004, Alliance Strategy: Managing Beyond the Alliance, Viewed 6 May 2012, Fujixerox Corporate Profile, 2011, Viewed 6 May 2012, < http://www.fujixerox.com/eng/company/company_profile/pdf/t01_e01.pdf> Fujifilmholdings.com, 2012, Company Profile, Viewed 6 May 2012, http://www.fujifilm.com/about/profile/fact_sheet/ Fuji Photo Film Co. Ltd. 2011, Viewed 6 May 2012, Fujixerox.com, 2012, Financial Performance, viewed 6 May 2012, < http://www.fujixerox.com/eng/company/profile/history/corporate.html> Harbison, J & Pekar, P 1998, Institutionalizing Alliance Skills: Secrets of Repeatable Success, Strategy & Business, Second Quarter, Issue 11, Viewed 6 May 2012, Xerox Corporation, (2012), Viewed 6 May 2012, Read More