Fuji Xerox: The Most Successful Long-Term Strategic Alliance - Essay Example

Fuji Xerox: The Most Successful Long Term Strategic Alliance Contents Contents Introduction: Strategic Alliance 3 Creating a Long-Term and Successful Strategic Alliance 4 Fuji Xerox Co. Ltd 5 Background of the Two Corporations 5 History: Strategic Alliance of Rank Xerox and Fuji Photo Film 6 First Two Decades of Advancements, Developments and Innovations 6 Factors behind the Success of Xerox Corporation and Fuji Co. Ltd's Alliance 8 Conclusion 10 Bibliography: 11 References: 11 Introduction: Strategic Alliance According to Wikipedia, "strategic alliance is a formal relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations." In simple terms, strategic alliance is an arrangement between two companies who have decided to share their resources in a particular project. One of every four strategic alliances is a failure. Rundi Lunnan a researcher at BI Norwegian School of Management who has over a period of five years conducted a study of over 100 strategic alliances says that a short term success is no guarantee to a sustainable competitive advantage over a long period of time (Innovations Report, 2007). However, the 4:1 success ratio of strategic alliances has not deterred companies and business enterprises from continuously forming strategic alliances. The most viable reason for this continuation of forming strategic alliances despite the frequent failures may be the present era's increasingly competitive environment. Business firms and companies in every industry are searching new and more effective ways to increase and sustain their competitive advantage. In this search for new mediums to augment the competitive advantage, most of the companies have realized that, owing to a variety of reasons e.g. cultural and social differences, change in consumer's needs and wants and today's accelerating technological advances, significant improvements in performance and competitive advantage cannot be achieved alone ( Whipple J.M. and Frankel R., 1999). Per se, the traditional response of acquisition to enhance the performance and competitiveness of a company is no longer the only alternative. Strategic alliance is the new alternative that facilitates the merging of partnering companies or firms' individual strengths and expertise while also compensating for the participating companies internal resource scarcities without them having to make the required investments for the actual ownership. The most fundamental aspect for a strategic alliance to be a successful, is finding the right match in which experience, expertise, knowledge and strategic resources of the participating companies will complement each other. However, in the business arena today, the researchers have found out that newly formed strategic alliances are more vulnerable to failure than those which have lasted for some time (Lunnan R and Haugland A.S., n.d1.). According to Steve Steinhilber, the vice-president of Strategic Alliances at Cisco, "companies worldwide launch more than two thousand strategic alliances every year, about the quarter of them are complete failures and more than half never deliver as promised" (Steinhilber S, 2008). However, amidst these strategic alliance failures there is the "Fuji Xerox", the strategic alliance between the Japan's Fuji Photo Film Co. Ltd and America's Xerox Corporation, which can be said to be the most successful long term strategic alliance, till date. Hence this paper has been developed as report that envisages the evolution of this strategic alliance between Fuji and Xerox and how it became the most successful strategic alliance as "Fuji Xerox". In the course of understanding the factors that facilitated and made this venture the most triumphant long term strategic alliance, the report perhaps, will also be able to shed some light on the essential building blocks of successful alliances and how to establish them. Creating a Long-Term and Successful Strategic Alliance Achieving success is easy, but to be able to sustain that success for a long period of time is what makes up for a true business alliance excellence. Drawing from his experience as the chief of the Cisco's Strategic Alliances group,Steve Steinhilber has underlined three essential features that assist in creating and sustaining a long-term and successful strategic alliance. Having the right framework: the articulation of how a strategic alliance will help a company achieve its business goals and thereby identifying and finding the right partners that will assist in attaining those goals. Having the right organization: this means that the alliance organization should be staffed with the right people, with the organization constantly honing their expertise and cultivating their skills. Having the right relationships: right relationships mean the cultivation of trust among the key internal contacts and employees within the alliance organization (Steinhilber S, 2008). Moreover, in order to achieve a long-term success through a strategic alliance the organizations should establish their alliance or mutual relationship based on 'co-operation' and not 'competition'. This kind of relationship can be developed through a working process that involves elements such as learning and creating environment and by having a systematic perspective. Learning and creating environment will enable the alliance partners to build a mutual relationship that will enhance the strategic fit between the organizations for a long term. In fact, the future success of a strategic alliance is held within the spheres of co-operative learning and creating between the allies (Morrison M. and Mezentseff L., 1997). Fuji Xerox Co. Ltd Fuji Xerox Co. Ltd established in 1962 is the alliance between Japan's Fuji Photo Film Corporation and America's Xerox Corporation. Background of the Two Corporations Fuji Film Co. or the Fuji Photo Film with its headquarters at Tokyo, Japan was established in 1944 as a photographic film manufacturing company. Today, it has a total of 293 investment companies all over the world. Recently, the company was placed at number 277 on the list of "World's 500 Strong Corporations." On the other hand Xerox Corporation formerly founded as in Rochester, N.Y. as The Haloid Company in 1906 is the pioneer of copier machines and today is the world's leading copier manufacturing business enterprise. The company comes into being as the manufacturers and providers of photographic paper. In the year 1948, the company announced the development of xerography and 13 years later in 1961, the Haloid Xerox Incorporation changed its name to the present Xerox Corporation. On 2nd of March, 2009, Xerox Corporation was ranked number one among 1400 other companies, in the computer and photocopying industry by the FORTUNE magazine's annual reputation survey (Fortune Magazine, 2009). In September 1962, the two companies Rank Xerox and Fuji Photo Film came together and launched a joint venture the- Fuji Xerox Co. Ltd. History: Strategic Alliance of Rank Xerox and Fuji Photo Film In 1962 to the Fuji Xerox was established in Japan. The main motive this strategic alliance was that in the 60's, the Japanese government did not allow the establishment of companies solely owned and capitalized by foreign companies. The joint venture started off with the Fuji Xerox selling its photographic printing products in Japan and to foreign markets. In accordance to the strategic alliance Xerox authorized its sole possession of Static electro photocopying technology to Fuji Xerox. In return, Fuji Xerox paid Xerox with the amount 5% net sales income generated from the sales. This technology authorization was originally stipulated for 10 years; however, in regard to the venture's success the stipulation period was further extended. It was in this year that, Fuji Xerox launched its first product the "Fuji Xerox 914".In 1965, Fuji Xerox entered the Philippines market and later in the year, the company established a joint venture and appointed agents in the other Asia Pacific regions. In 1966, Fuji Xerox opens its first showroom as "Xerox Knowledge Inn" (Fuji Xerox, 2009). First Two Decades of Advancements, Developments and Innovations From 70's onwards strategic alliance saw more developments both in the strategy aspect and products as well. In 1971, Fuji Xerox acquired the Iwatsuki Plant and Takematsu Plant from Iwatsuki Kohki and Fuji Photo Film, respectively in order to establish an integrated manufacturing and sales organization. In the same year the Ebina Plant also began its operations. By 1974, the alliance had increased its capitalization to 10 billion yen. 1977 saw the establishment of the "Setsutaro Kobayashi Memorial Fund", followed by the establishment of Fuji Xerox Office Supply Co., Ltd in the year 1979. In the same year, with local capital the Fuji Xerox also established sales subsidiaries in major zones of Japan, which later expanded into a nationwide network. As for the products of the 70's decade, in 1973, the company launched the Fuji Xerox 2200, the first internally developed copy machine. In 75' the Fuji Xerox 6500 a full color copy machine and Fuji Xerox 125 system in the market of medical equipment. The Fuji Xerox 210 a high resolution facsimile Telecopier machine was launched in 77'. While in the year 1978 the Fuji Xerox 3500, the high-speed, high-performance ad compact copy machine, Fuji Xerox 2080, an A1 copy machine and the Fuji Xerox 9700EPS electronic printing system were launched. The Fuji Xerox 3500 broke all sales records in Japan and for which the alliance company was also awarded with the prestigious Silver Coin Award by the Japanese Government (Fuji Xerox, 2009). The 80's saw Fuji Xerox making more advances both in terms of competitive advantage and in the innovations of new products. The decade started off with Fuji Xerox receiving, "The Deming Prize" in recognition for its excellence in quality control. In 1982, the company entered into the education field by establishing Corporate Research Lab at Ebina Plant. In the same year, Fuji Xerox also established the Suzuka Fuji Xerox Co. Ltd and Fuji Xerox Distribution Co., Ltd. The year 1984 saw the Fuji Xerox developing the world's first adhesion-type amorphous silicon image sensor. During the same year, it also opened the Tsukahara Training Center and established Fuji Xerox Information System Co., Ltd, followed by the establishment of Fuji Xerox Engineering Co., Ltd. In 1987, the Fuji Xerox wins more allocades in the form of Nikkei Quality Control Prize in the All-Japan QC Circle Gold Prize Contest received by the Ebina Quality control circle. In the same year the Document Management center at its Headquaters. During 1988, the company started experiments of Shiki Satellite Office and Kumamato Resort Office and to add to the establishments; under the venture 'business program' the Fuji Xerox establishes Fuji Xerox Career Net Co. Ltd, Fuji System Brain Co. Ltd. and Protex Co. Ltd. By 1989, Fuji Xerox had increased its capitalization to 20 billion yen, in this last year of the decade it also established the Fuji Xerox Learning institute Inc. The 80's saw more of the Fuji Xerox innovations, in the likes of Fuji Xerox 4800 (1980), Fuji Xerox 8000INS an information processing system using the Ethernet (82'), Fuji Xerox 1100SIP a PC for AI2 development (83'). In 1985, it licensed the Smalltalk-80 AI programming language to other companies, in the same year, it launched the first AI workstation in Japan, in the form of Fuji Xerox 1121 and also the Fuji Xerox 6800 a full color PPC. In 87' the Fuji Xerox Xero Printer, world's first machine with both print and copy functions and Fuji Xerox 1161. In 1988 it launched Shakaru hand-held machine, the 5080, the full color digital EC-10, the multifunctional 8083-J star workstation and the high speed multifunctional 5075/5055 copy machine. This was the summary of the developments and advancements made by Fuji Xerox in its first two decades (Fuji Xerox, 2009). Factors behind the Success of Xerox Corporation and Fuji Co. Ltd's Alliance These two decades of developments and innovations gives an idea of the success met by the strategic alliance of the two corporations as Fuji Xerox and the factors that led to this long-term success. At a glance it's just a summary that underlines the advances made by Fuji Xerox in developing and expanding its business and the innovation of new products in two decades from the time the strategic alliance between the two corporations was established. However, paying a bit more attention to the details of the two decade summary will reveal that the two corporations identified and complemented the resources of each other and at sometime in the 70's the Fuji even came to the rescue of Xerox. This was in the beginning of 1970 when new competitors started to emerge. Most of these companies were from Japan who produced low-cost machines with high costs. By 1971 the Xerox share of global copiers had plunged to 60 percent, from 93 percent. This led to Ricoh, the leading company of Japan becoming the top seller in the American market in 1976. At this juncture Fuji Xerox which was initially a marketing outlet for Xerox products came to the rescue with a series startling breakthroughs in terms of products and as well as in the spheres of management, manufacturing and technology. This development further enhanced the strategic alliance between the two companies and by 1990 the Fuji Xerox had become "a critical asset of Xerox," as put by Xerox C.E.O. Paul A. Allaire (Casseres G.B, 1997). This turn of events that lead to the Xerox regaining its leading position in the market can be traced back to 1979, when David Kearns, then CEO of Xerox visited Fuji Xerox and took a close look at the strategies and products management of the company. The visit introduced the Xerox executives to the practice of "benchmarking" a system that tracks the performance and costs in all areas of operations against those who are best in the field. This led Kearns to reflect on Xerox's own benchmarking practice and accordingly instill Xerox with new determination and vision. The other, and in fact the most important factor for the success of the strategic alliance between Xerox and Fuji was the unique relationship between the two corporations. Since Xerox did not fully control the Fuji Xerox, not only did Fuji Xerox benefitted from the technological flow from Xerox but it also enjoyed good degree of autonomy. Yotaro Kobayashi, now the chairman of Fuji Xerox, credits a good deal of the company's success to this autonomy. He recalls, ""The degree to which Xerox let us run was very unusual," (Casseres G.B, 1997). Later in the 80's efforts were to strengthen cooperation manufacturing, planning and product development. William Galvin, the vice chairman of Xerox and Kennard, the Xerox director of Fuji relations worked together to initiate "strategy summits". These crest management meetings that were twice annually contributed immensely to a constructive relationship between the two corporations. According to Kennard, "Whenever a problem came up, we established a process to manage it. The trust built up between the companies has been a key factor in the success of this relationship. It enables one to take on short-term costs in the interest of long-term gains for the group." Conclusion The main goal of a strategic alliance is to satisfy a customer's want of integrated solutions to their problems, this is what pushes the companies and corporations to work together and form a strategic alliance so as to be able to create differentiated offerings. In addition to this equally important is the strategic alliances' capability to harness important forms of business value, which includes innovation of new products and accelerated growth (Steinhilber S, 2008). These goals the Fuji Xerox has been able to achieve very successfully, making it the "most successful long term strategic alliance" in the history of business strategic alliances. Two decades of its advancements, developments, and innovations is enough to prove this fact. In 2006 the Fuji Xerox announced that it will establish an integrated R&D center in 2009 at Minato Mirai 21, Yokohama-shi (Fuji Xerox, 2009). Bibliography: Lunnan R and Haugland A.S., (No Date), "Predicting and Measuring Alliance Performance: A Multi-Dimensional Analysis", Strategic Management Journal, BI Norwegian School of Management. 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