Strategy Assignment

1. Executive Summary

There are people who describe the market place as a battlefield. Only those who are
strong can survive. However, in the today’s highly competitive environment, one needs
not to be strong, but, to be able to think and plan strategically.

Fuji Xerox operates in office equipment industry that is highly competitive. Large
multinational companies such as Canon, Hewlett-Packard and Ricoh are fighting to gain
market share. In order to survive and prosper in the market, Fuji Xerox needs to engage
in strategic planning. A strategic plan is important as it acts as a road map for carrying
out the strategy and achieving long-term results. Sun Tzu, in the Art of War says that:
“With careful and detailed planning, one can win; with careless and less detailed
planning, one cannot win; how much less chance of victory has one who does not plan at
all! From the way planning is done before hand, one can predict victory or defect!”

In this assignment, a proposed strategic plan for Fuji Xerox will be formulated. First, the
strategic position of Fuji Xerox will be assessed through internal and external
environmental scanning. SWOT and Porter’s Five Forces are among the tools used to
analyze the business environment which Fuji Xerox is operating. Then Fuji Xerox’s
strategic objectives will be identified and its current use of corporate-level strategies and
business level strategies will be analyzed. Strategic options that are available will be
evaluated and the most feasible one will be applied as its future strategy.

The strategic plan does not stop here. Fuji Xerox must have an appropriate structure and
corporate culture to support its future strategy. A detailed implementation plan will be
formulated and strategy will be monitored through a set of control activities.

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2. Strategic Analysis

2.1 Past Strategy And Structure

Fuji Xerox was established in 1962 as a 50/50 joint venture between Fuji Photo Film and
Rank Xerox to market the Xerox brand in the Pacific Rim. According to Jeff Kennard,
Assistant to the President of Fuji Xerox 1977-1982, when Fuji Xerox was established in
1962, it was suppose to be Xerox’s window on Japan and Japanese competition and also
to be the company’s primary source of competitive intelligence (Gertler, 1999). But the
offshoot had been neglected in early 1960s due to its incapability in technical aspects and
being treated as “just little company in Japan”. Although Xerox did not control Fuji
Xerox, this joint venture has been thoroughly “Xeroxised” that is to say, it followed the
strategy and adhered to the cultural norms of the US parent.

The Xerox strategy at the time was to concentrate on high end of the market: larger,
higher-volume, expensive machines that, in the US, were sold directly by very large
corporate sales and service operation. The company had consciously abandoned the low
end of the market due to its inferior profit margins. Little attention was paid to controlling
costs, since these could be passed on to the buyers.

Fuji Xerox, however, found itself in a market which the demand for smaller, cheaper
machines was significant and was being served entirely by its domestic rivals. Morever,
due to their high volumes and associated economies of scale, the competition had an
important cost advantage over Fuji Xerox. At the same time, Fuji Xerox did not have the
internal resources to support a sufficiently large direct sales and services operation to sell
large machines at the high end market. In contrast with US, dealers and stores was the
most important avenue to the Japanese market. This meant that price was the central
competitive issue in local market, rather than price in US. As a result, Fuji Xerox, like the
parent, began to lose share to Japanese competitors in the Japanese market during the
1960s and early 1970s.

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Nevertheless, Fuji Xerox moved fast. According to Kennard, Fuji Xerox rather rapidly
concluded that “the culture has to change”. The process proceeded on two fronts: strategy
towards the market and internal practices and relations

Strategy Towards The Market

The new strategy entailed developing a line of smaller, lower-cost and lower margin
machines which will be more suited to the local market demand. In 1973, Fuji Xerox
engineers successfully created a prototype which was smaller and lighter compared to
Xerox’s model and earned themselves a small R&D budget from Xerox. In the year 1973,
Fuji Xerox came out with FX2200, the world’s smallest copier at that time. Subsequently
in 1977, Fuji Xerox created FX3500 which has broke the Japanese record of annual sales
of a copier. FX3500 was Fuji Xerox’s “declaration of independence” which proved that
Fuji Xerox no longer depends on Xerox to develop products.

As Fuji Xerox focused most of the attention in the low end market, the sales effort also
gradually shifted to concentrate more on dealers and stores. Only large customers were
handled through a direst sales and service force while others through third party
distributors. This distribution approach not only eliminated the need for costly service but
also allowed it to rapid market entry.

Internal Practices And Relations

Internally, Fuji Xerox instituted a new (to Xerox) approach of doing business which it
called, ironically, “The New Xerox Movement”. It reflected many of the principles of
Japanese business practice, which included greater production flexibility, a commitment
to total quality and a rather different labor relations style.

With its astounding product breakthrough and no less startling management,

manufacturing and technology practices, Fuji Xerox has became quite successfully at a
time when the rest- Xerox and Rank Xerox was catastrophically losing market share

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precisely to Japanese competitors. Fuji Xerox then came to the rescue by offering to sell
low end copier to Xerox and Fuji Xerox to stem the advance of competition. Besides that,
Fuji Xerox’s total quality control (TQC) program served as a model for Xerox to change
the way it developed, manufactured and marketed its product. Eventually, Fuji Xerox
became the agent of Xerox’s transformation.

Through 1980s, Fuji Xerox has contributed a significant portion of Xerox’s group
worldwide revenues. Besides continued to involve in production of low-end copiers, Fuji
Xerox has established Corporate Research Lad at Ebina Plant to engage in the
technological fields of digital xerography, electronic devices and production. Since then,
Fuji Xerox has developed a collection of products ranges from office-use printers, copy
machines and multifunctional machines to high-end output solutions that meet the
demands of many different printing and publishing applications.

In 2001, due to Xerox’s company liquidity problem, Xerox has sold half of its stake in
Fuji Xerox to Fuji Photo Film. The changes in ownership, however, did not alter the
product and technology agreements between Xerox and Fuji Xerox. Fuji Xerox will still
continue to provide color office product technology to Xerox and collaborate with Xerox
on research and development. Xerox maintains its agreement with Fuji Xerox to provide
high-end production publishing and solid ink products.

Today, based on its "Open Office Frontier" business vision in 2002, Fuji Xerox is
progressively transforming its core business of copier operations into an office services
business that provides customers with diverse document management support services. In
this way, the company is seeking to create new value in line with customer needs. To
augment its global competitive capabilities, Fuji Xerox is strengthening its development
and manufacturing bases and stepping up its cost-reduction programs.

2.2 Macro Environment Forces

2.2.1 Political/Legal Environment

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Government is playing an important role in business world. For example, China's

government decision to join WTO has been attracted billions of dollars in foreign direct
investment. In addition, investment and tax policies has also been unified for Chinese and
foreign firms across China (Kotler, Swee, Siew & Chin, 1999).

Because of the development of technology and deregulations of trade barriers in global

trade agreement on 1995, globalization has long been a trend in all business aspects.
Competition has no longer been locally but globally (Article Studying, 2002).

2.2.2 Economic Environment

Asia's economic is like roller coaster that shows no signs of stopping. The past five years
have seen an economic crisis in 1997, recession in 1998, a bounce-back in 1999/2000,
and a downturn and recession in 2001. Yet, one cannot ignore that Asia’ stake in global
economy has increasing over years.

Japan's economic growth has accelerated in 2004, continuing the recovery it began in
2003. Japan's real GDP rose by 2.5% in 2003 due to surge in export demand, led by
exports to China. Domestic consumer spending in Japan also has been strengthening this
year (US Department of State, 2004). At the mean time, China exhibits remarkable
economic growth. China is now the seventh largest economy in the world. Despite the
U.S. and global economic downturn, China's GDP performance continues to be the
strongest among the world's larger countries (Asia-Pacific Economic Update, 2002).

2.2.3 Natural Environment

In today’s business climate, companies must accept increasingly responsibility for the
environment. They are gradually held accountable for their effluent, packaging material,
waste handling and other environmental fallouts from their manufacturing and marketing
activities (Kotler, Swee, Siew & Chin, 1999). Now, more and more companies are taking

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a proactive view toward environmental protection. This is partly due to a growing green
movement among consumers and also pressure from government that has begun to take a
more active role in protecting the environment.

2.2.4 Technological Environment

Technology change is accelerating in a pace which is not being anticipated. It provides

unlimited opportunities for innovation. Researchers today are working on startling range
of new technologies that will revolutionize our products and production process.
Development of computer hardware, software and digital technology have create a
variety of new solutions to many aspects of human lives such as communication,
education, media arts and office printing and scanning. Besides that, it also has
substantial impact on shopping behavior and marketing performance (Kotler, Swee, Siew
& Chin, 1999).

2.3 Office Equipment Industry Analysis

Fuji Xerox operates in the office equipment industry, selling array of office equipment
products ranging from color to black-and-white, digital and paper, across networks or on
a desktop, in a commercial print facility, for the small office or the multinational
enterprise. However, in this study, attention will be focused on medium to low end
market where Fuji Xerox derived most of its revenue. The competition of low-end
business is increasingly intense and the profit margin is shrinking.

2.3.1 Porter’s Five Forces

The competitive state of the office equipment industry exerts a strong influence on how
Fuji Xerox develops its strategies to earn profits over time. By applying Porter’s five
forces model of industry attractiveness to the office equipment industry, Fuji Xerox’s
manager can gauge its own firm’s strengths, weaknesses and future opportunities.

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2.3.1.1 New Entrants

Entry into this office equipment industry would be quite difficult for several reasons.
First, new firms will face insurmountable barriers in the form of technology patent. Huge
research efforts are needed to develop an alternative to those patented technology.
Besides that, a substantial amount of capital is required for research and development to
produce a wide range of office equipment products. Small firms that lack of funds are
effectively barred from entry (Pitts & Lei, 2000).

Besides that, this industry that make up by large multinational companies which have
been in the market for quite a number of years discourage new entrants to enter the
industry. Large companies like Fuji Xerox and Canon enjoy substantial economies of
scale in production of copiers, printers and other office equipments. This cost advantage
deters entry of other firms seeking to produce these products. Despite that, firms that plan
to enter this industry will definitely face aggressive retaliation by these large players.

The brand identity of product and services offered by existing firms in the industry served
as another entry barriers. Brand identity is particularly important for infrequent purchased
products like copier and printers that carry higher dollar cost to buyer. In most cases, a
brand will signify in customer’s mind that product is reliable and worth value paid. As a
result, new entrants often encounter significant industries in building brand identity, since
to do so they must commit substantial resources over a period of time.

2.3.1.2 Bargaining Power Of Buyers

Buyers are increasingly knowledgeable about copiers, printers and other office
equipments and have sufficient information to evaluate competitive offerings, therefore
their bargaining powers grows. Many buyers (especially organizations) are purchasing
more and more office equipments for their companies and these organization buyers tend
to be more price-conscious when shopping for office equipments. In addition, low

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switching costs has forced competitive pricing among and therefore the industry
profitability is low.

2.3.1.3 Bargaining Power Of Suppliers

In general supplier power can be evaluated as low, since parts and raw materials for
production are available from several sources in the world market. Besides most of the
high quality parts and components are manufactured and assembled independently in-
house.

2.3.1.4 Rivalry

The rivalry is exceptionally intense in this market. Profit margin is shrinking and all firms
like Canon, Sharp, Ricoh and Hewlett-Packard, all offered the same type of equipment.
Besides that, competitive rivals in this industry are of roughly equal size, therefore there
is a danger of intense competition as one competitors attempt to gain dominance over
another. However, office equipment industry involves low fixed cost, so motivation to
resort to cutthroat pricing to maintain volume during industry downturns would not be
intense. Also office equipment industry involves few exit barriers, so competitors
experiencing profits problems could exit fairly quickly.

2.3.1.5 Substitutes

In this industry, the threat of substitutes is less severe, therefore the potential to depress
industry profitability is low. Copier and printers are essential to any firm which operates
in the business environment. Although there is emerging trend of “paperless office” that
involved the distribution of documents completely by computer, without the need for a
hard copy, however it is widely believed that the true paperless office will never become
a reality as our society still need to physically hold information (Article Studying, 2002).

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 High Capital Requirements

Potential New  R&D
Entrants  Brand Awareness
 Economies of Scale
 Technology Patent
 Promise of Aggressive Retaliation
 Availability of Parts
 Brand Identity
and Component
 In-House Assembly

Rivalry
Bargaining Power  Rivals: Canon, Bargaining Power
of Suppliers Ricoh, Sharp, HP of Buyers

 Increased Buyer
knowledge
 Price Sensitivity
 Low Switching Costs
 Paperless Office Substitute
Products or
Services

Figure 2.1 : Porter’s Five Forces Model

2.4 Critical Success Factors

Office equipments such as copiers and printers are often being evaluated by the customer
in terms of four properties: price, speed, reliability, and service. To outperform
competitors in this office equipment industry, firm need to offer competitive pricing,
quality products and fast services.

Although customers in this segment tend to be more price-sensitive, yet, most of the
customers still loyal to companies with good reliability records for these products,
because a defect on a copier is usually rather costly, especially when the loss in
productivity is taken into account.

Since the office printer, copier and fax markets not growing as fast as they were several
years ago, brand is also becoming increasingly important for vendors to gain and retain
market share. Most products now have very similar feature sets and price points and are
being sold through the same channels. If a vendor is not closely managing critical aspects
of its brand such as awareness, consideration and customer satisfaction they are in
jeopardy of losing valuable market share.

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3. Strategic Choice

3.1 SWOT Analysis

3.1.1 Strengths

Being an icon of innovation for years and a dominator of the copier market, the word
Xerox became synonymous with copying: people did not copy documents, they
“Xeroxed”. Fuji Xerox, the joint venture that markets Xerox brand throughout Asia,
enjoys the strong and favorable brand name. In the view of customers, the brand stands
for quality, state-of-art technology and good service. Many competitors especially
Japanese brand maybe not have such a strong brand image when compared with Fuji
Xerox.

There are also advantages being a pioneer in the copier market. Besides provides a strong
foothold in the copier industry, it also allows Fuji Xerox to expand easily to other market
segments such as printers, fax machines and others office equipment market. New
products and services are expected to gain acceptance fairly quickly by customers from
all around the world included the Pacific Rim.

In terms of products and services, Fuji Xerox offers the most extensive product line with
greatest number of functions. From copy machines, laser printers, fax machines to digital
publishing system, anything related to document processing products, you named it and
Fuji Xerox has it. This complete array of products allows Fuji Xerox to satisfy the many
varied of its clients, provides Fuji Xerox an edge over its rivals.

In addition, Fuji Xerox’s strong technology base encourages product innovation and
product development. FX Pato Alto Laboratory researched software and Information
Technology in collaboration with Xerox. The result of this is the development of several
market-winning, highly innovative products, including laser and continuous feed printers,
multifunction devices, digital networked publishing systems, as well as award-winning

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software solutions that are designed to support the entire document management
workflow.

3.1.2 Weaknesses

All this years, majority of the Fuji Xerox’s revenue is generated from Japan. Sales were
concentrated in domestic market than other region in Pacific Rim. As the market size of
Japan started to remain constant, Fuji Xerox’s effort to expand market share will be very
difficult.

Besides that, being a dominator in copier market might not be a good thing at all.
Although Fuji Xerox has declared to be “The Document Company” in 1992 to engage in
Document Solutions operations comprising copying machines, printers, fax machines,
and consumables for document service applications in offices, yet, until now Fuji Xerox
still been focusing most of its effort to the copier market while this market is maturing.

3.1.3 Opportunities

According to CAP Ventures, demand for colour copier in domestic market is growing at
the rate of 16% annually. Since color provides higher margins than black-and-white
products, the growth is favorable as it provides a lot of space for Fuji Xerox’s colour
copiers. On the other hand, printing market is growing steadily as more companies
choose less expensive printers over copiers.

Recent studies by research firms indicate that the colour inkjet printer market is growing
(Menezes, 2000). This will be partly contributed by the demand for photo-quality colour
for use with digital cameras, particularly in home sector.

Multifunctional devices have also shown promising growth in previous years and many
of the manufacturers are convinced that multifunctionals are the key to market growth in
future.

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3.1.4 Threats

Fuji Xerox faces intense competition in the office equipment industry. Fuji Xerox needs
to compete with Japanese companies such as Canon, Ricoh who are offering competitive
products with low cost. This has been a big threat since the customers in the medium to
low-end market tend to be more price-sensitive.

Besides the fierce competition, the Japan market in which Fuji Xerox derives most of its
revenue is maturing. There is little room for market penetration. Furthermore, the copier
market in which Fuji Xerox pioneer in, has reached the mature stage in its product life
cycle.

There are also threat of high-tech commoditization exists in copier industry. The threat to
Fuji Xerox is presented by the personal copier segment being quite different, eroding
existing competencies technologically and in markets, threatening profits, market share,
and revenues (Article Studying, 2002).

Another more significant threat is the development of Internet/Intranet that brings the
development of “paperless office” (Article Studying, 2002). There are more ways for
document sharing as the network is developing. Therefore, the demand for copiers and
printer may decline.

3.2 Strategic Objectives

According to Fuji Xerox’s financial statement, Fuji Xerox has achieved 962 billion of
revenue in year 2002, where approximately 74% came from business in Japan, 11% from
Xerox and 15% from the Asia Pacific region.

Fuji Xerox’s strategic objective is to increase its revenue by 10% within 3 years plan
where sales from Asia Pacific region is expected to rise about 5% in this time span.

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Besides that, Fuji Xerox plan to increase its market share by 8 percent with its current
product in current market within 3 years time while defending its current market share.
In addition, Fuji Xerox’s strategic initiatives are expected to result in more than 90 billion
yen worth of cost reductions in year 2005-2007.

3.3 Corporate Strategy

3.3.1 Strategic Business Units

Fuji Xerox’s strategic business unit comprised of 13 different countries in Asia which
incorporated Australia, China, Indonesia, Hong Kong, Korea, Malaysia, New Zealand,
Philippines, Singapore, Taiwan, Thailand, Vietnam and also Japan. To manage its
business effectively, BCG Matrix is used to enable Fuji Xerox to classify its business by
profit potential, develop separate strategies and assign appropriate funding to each of
them.

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Market Growth Rate

Stars Question
2 Marks Region
5
1- Japan
High

3 6 10 9 2- China
12 3- Malaysia
4 13 11
4- Singapore
7
8
5- Australia
6- Philippines
Cas Dogs 7- Hong Kong
h 8- New Zealand
Cow 9- Indonesia
1
Low

10- Korea
11- Taiwan
12- Thailand
13- Vietnam

High Low

Relative Market Share

Figure 3.1: Boston Consulting Group’s Growth-Share Matrix

Growth-share matrix shows that Fuji Xerox’s portfolio is not so healthy. A few of SBUs
are located in the Star Quadrant. Fuji Xerox can take initiatives to “build” by increasing
the SBU’s market share. Fuji Xerox China is one of the stars that operate in a high-
growth market with a small market size. Efforts can be pump in so that this region can be
profitable and become Fuji Xerox’s future cash cow.

For the in Cash Cow Quadrant, the objective is to “hold”- to preserve the SBU’s market
share. Japan is a strong cash cow as it continues to yield a large positive cash flow. Most
of the Fuji Xerox’s revenue is derived from Japan market.

3.3.2 Transnational Strategy

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In order to survive in the global marketplace, Fuji Xerox has gradually moved from multi
domestic strategy to pursue transnational strategy. Considering the need to compete with
low-cost competitors such as Canon has forced Fuji Xerox to look for greater cost
economies. At the same time, variations in customer needs and government regulations
across countries mean that Fuji Xerox has to be responsive to local demands.

To deal with cost pressures, Fuji Xerox has build manufacturing facilities in Shenzhen,
Shanghai, and Tao Yuan of Taiwan, China to fill global demand and realize scale
economies. At the same time, the company augments the centralized manufacturing of
components with assembly plants in each of its major global markets. At these plants,
Fuji Xerox started its localization plan, tailoring the finished product to local needs. Thus
Fuji Xerox is able to realize many of the benefits of global manufacturing while showing
local responsiveness by differentiating its product among national markets.

3.4 Business Level Strategy

3.4.1 Differentiation Strategy

By taking into account of intense competition in office equipment industries, it’s core
competencies and stakeholder expectations, Fuji Xerox has chosen to pursue
differentiation strategy in its market. Fuji Xerox seeks to provide unique and better
product and services at around the same price of competitors’ offer to achieve higher
market share. Fuji Xerox has shown uniqueness and improvements in its product by
making huge investments in R&D. For example, the new image-fixing methods of
DocuCentre Colour 400CP/320CP digital colour multifunction machine allow high
productivity and reduced warn up times.

Besides that, differentiation strategy is achieved using marketing-based strategy. Since its
inception in 1962, Fuji Xerox has identified the "world of documents" as its domain.
Since then, the efforts undertaken by the company to excel in the area of harnessing the

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power of documents has gained much recognition and led to strong top-of-the-mind
brand recall in the Asia Pacific region.

However, competitive advantage through differentiation is hardly able to be achieved on

a static basis. With the copier market witnessing a transition of analogue to digital
technology, Fuji Xerox need to act fast by tuning its R&D effort to take advantage of the
trend to electronic imaging solution with networking capabilities.

Despite that, easy imitation of the sources of differentiation is also one of the
shortcomings in this strategy. For example, the improved performance of digital colour
multifunction machine that allows superior energy-saving can be easily catch-up and
copied by competitors. With less than four months time, competitors are expected to
come out with a new product that provides similar improved features.

3.4.2 Strategic Planning Gap

By comparing the strategic objectives stated above and Fuji Xerox’s current business
situation, there is a strategic planning gap between Fuji Xerox’s future desired sales and
projected sales. To fill in the gap, Fuji Xerox’s corporate management has to develop or
acquire new business.

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Sales

Desired Sales
10 Billion

Strategic
Market Penetration Planning
Gap

Current Portfolio
9 Billion

Time

Year 1 Year 2 Year 3

Figure 3.2: The Strategic Planning Gap

Basically, there are 3 ways to fill in the gap.

Intensive Growth Opportunities. By using product/market matrix as a framework, Fuji

Xerox will be able to identify further opportunities to achieve growth within Fuji Xerox’s
current businesses. Initially, Fuji Xerox management would consider whether it could
gain more share with its current products (market penetration strategy). From the BCG
matrix, Fuji Xerox can choose those SBUs which are operate in a high growth market
such as China and to consider to invest more funds in the market in order to gain more
market share.

Next, Fuji Xerox can think about finding and developing new markets for its current
products (market development strategy). For example, selling copiers and printers in third
world countries like Myanmar. In addition, Fuji Xerox might consider to develop new
products of potential interest to its current markets (product development strategy). For
instance, develop new environmentally conscious products that can help customers to
reduce their own environmental impact.

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Current Market Product

Markets Penetration Development
Strategy Strategy

New Market (Diversification

Markets Development Strategy)
Strategy

Current New
Products Products

Figure 3.3: Product/Market Expansion Grid

Integrative Growth Opportunities. Fuji Xerox can consider to build or to acquire

businesses that are related to current business through forward, backward or horizontal
integration. For instance, Fuji Xerox might acquire dealers or stores (forward
integration).

Diversification Growth Opportunities. If all the strategies above still inadequate to reach
the desired sales, Fuji Xerox can consider of diversify its business through identifying
opportunities outside the present business. For example, Fuji Xerox might produce office
furniture (horizontal diversification strategy).

After considering all of the strategic options, Fuji Xerox should focus at the market
penetration strategy in China market. This strategy is meant to be less risky and the
probability to achieve success is quite high.

3.5 Strategic Option/ Direction

3.5.1 Market Penetration - Protect And Build In China

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China is the economic frontier of the 21st century. According to Mr. Li Wen, president of
the Warner Group, China's economy has a bright future and the growth potential is huge
(Multinational Companies Adjust Strategies to China, 2004). Currently in office
equipment industry in China, there are four strong competitors which are Fuji Xerox,
Sharp, Minolta and Ricoh.

To become the market leader in the industry, Fuji Xerox must find ways to gain market
share and at the same time constantly protect its current market share through good
defensive and offensive actions.

In a study conducted by J. D. Power Asia Pacific in 2003, black-and-white single

function copiers is found to be dominantly used in offices in China. Fuji Xerox, the
global leader in the copier market can take advantage in this situation to sell copiers to
the new and potential buyers. By using its marketing program, Fuji Xerox can try to
convince those non-copier users to start using this product in their businesses.

Besides that, the study has found out that demand for a second copier among offices has
increased significantly. Fuji Xerox can make use of this trend by encourage current
customers to purchase multifunction machines which can provide additional tasks to
enhance their document processing efficiency and improve the quality of document
making.

To increase current product’s market share in China, Fuji Xerox can try to attract
competitors’ customer to switch to its brand. An excellent price versus performance ratio
and service quality will enable Fuji Xerox’s products to further penetrate in the China
market.

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4. Strategic Implementation

Once the strategic option has been chosen, Fuji Xerox must then devote considerable
effort to ensure that managers and employees are united in their efforts to execute the
strategy. Any given strategy requires a particular form of organization structure to best
lead support to implementation.

4.1 Multidivisional Structure- Geographic Division Structure

Fuji Xerox operates in a number of geographical regions. Thus, geographical division

structure suits Fuji Xerox well as this structure allows Fuji Xerox to develop competitive
advantage in particular regions according to that area’s customers, competitors and other
factors.

Fuji Xerox which has entered China market utilized this form of multidivisional
structure. A separate organization subunit and management team for China has been set
up by Fuji Xerox to respond to the needs of the market. By getting closer to customers,
Fuji Xerox is well aware of how to meet the demands of local clients, how to improve the
performance of its document processing products, and provides custom solutions to its
clients. By applying this structure, Fuji Xerox in China is able to display a high level of
specialization based on the market it serves and this has been consistent with Fuji
Xerox’s shared values to place customer at the core of their operation.

Because of this structure, Fuji Xerox in China enjoyed a high degree of decentralization.
Managers here enjoy a considerable authority and leeway to run their operations. All
necessary functional activities such as administrative, marketing, financial and other
value adding activities can be tailor to support the own regional strategy (in our case, the
market penetration strategy).

4.2 Corporate Culture

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Fuji Xerox has instilled a defined set of 10 shared values and corporate culture as another
means of supporting effective strategy implementation. In Fuji Xerox, customers are
position as the primary objective of business operation. By able to understand its
customer and market well, expand market share in China is not an impossible task. High
proportion of direct channel of sales and services are established to routinely obtain
customers’ need and view to its business.

As a member of the global community, Fuji Xerox also believes that there are a must to
take responsibility for the protection of the planet and its natural resources. Therefore, in
the 10 shared values, Fuji Xerox has positioned environment as second of prime
importance. Fuji Xerox has striven to boost awareness of this throughout the company by
formulating the Corporate Behavior Guidelines in 1988 and the Employee Code of
Conduct in 1997. With regard to environmental conservation, Fuji Xerox has continued
to develop advanced product recycling systems and new energy efficient products.

Besides that, shared values have guide employees in Fuji Xerox to maintain high ethical
standards and constant make effort to improve themselves. Fuji Xerox will be successful
or fail in China market depends on the ability of its employees to expend their full
potential to creatively provide unequalled value to customers and society.

In short, Fuji Xerox’s well defined and widely understood values lay the foundation for
smoother strategy implementation-market penetration in China.

4.3 Control Activities

Control activities that are taken by Fuji Xerox included Employee Code of Conduct and
ethical training. Code of Conduct and ethical training are established to guide employees’
behavior to ensure they have a high sense of ethics. To make certain that all employees
are conform to ethical standards, daily inspections and self audit is conducted by the
heads of each division and departments in a continual basis.

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Besides that, customer satisfaction survey is conducted to monitor the satisfaction of

customer regarding the products and services offered by Fuji Xerox and also to serve as a
performance metrics to evaluate the performance of employees. This satisfaction survey
is used as a key reference to improve customer satisfaction.

4.4 Action Plan

To accomplish the strategic objectives, Fuji Xerox has outline its “game plan”

Target Market: Low-end products to individual or small businesses; high end

products and services to large corporate customer
Positioning: Sell solutions, not products
Product Line: Extensive product line with greatest number of functions
Price: Competitive Pricing
Distribution Low-end copiers and printers handled by retailers, dealers or
Outlets: value-added resellers; high-end products are sold through a direct
sales force that specializes in customer guidance and consultation.
Sales Force: Expand by 10% to better respond to client’s needs
Service: Widely available and quick service
Advertising: Heavy advertising for brand awareness; develop a newly
advertising campaign that supports the positioning strategy;
increase advertising budget by 20%
Sales Promotion: Participate more on dealer trade shows; increase the sales
promotion budget by 10% to develop point-of-purchase display in
retailer and dealers outlet
Marketing Increase expenditures by 15% to monitor competitor moves;
Research: conduct customer satisfaction survey to improve knowledge of
customer satisfaction level and to locate disgruntled customers

4.4.1 Action Programs From Year 2005-2007

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Date Action

Aggressive advertising on television, magazines and newspaper to

Jan 2005
create brand awareness

April 2005 Conduct seminar on environmental issues

Aug 2005 Develop point-of-purchase display in retailer and dealers outlet

Sept 2005 Produce and distribute product brochures to potential customers

Dec 2005 Assign third party to conduct customer satisfaction survey

Obtain a list of disgruntled customers from the survey and visits

Jan 2006
them in person to listen to their opinions
March 2006 Insert promotional flyers in newspaper
Run a series of advertisements emphasizing the high efficiency
June 2006 and quality as well as environmental features of products to raise
interest of existing and potential customers

Sept 2006 Participate in dealer trade shows

Conduct exhibitions to introduce company’s environmental efforts

Nov 2006
and improve appreciation of wider public

Dec 2006 Assign third party to conduct customer satisfaction survey

Obtain a list of disgruntled customers from the survey and visits

Jan 2007
them in person to listen to their opinions
Release to local newspaper and magazines about company’s latest
April 2007
environmental efforts

July 2007 Conduct collaboration programs with customer

Dec 2007 Review the marketing plan

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5. Conclusion

China began its economic reforms and open-door policy in December 1978. Since then,
multinational companies are beginning to accelerate their investment in China on a large
scale, and have integrated with China's economic and social activities in every sector.
One of them is Fuji Xerox, the global-leading provider of document processing products.

Fuji Xerox officially entered the market of mainland China in 1980. In 2001, Xerox sold
its operation in China to Fuji Xerox. Inheriting Xerox's incomparable technology
strengths and its long-term cooperative relationship with the Chinese government and
other clients, Fuji Xerox will continue to follow, and render its full support to China's
economic growth and need for information technology and services.

To ensure the market penetration strategy in China is unbeaten, Fuji Xerox possesses
several strengths to outperform its rivals in the China market. This included the notion of
providing solutions, rather than products. China is looking for products tailored to its
market. Foreign firms that project a "take it or leave it" attitude will not succeed.

Besides that, Fuji Xerox utilize line-extension strategy by offering the most extensive
product line with greatest number of functions; this enables it to satisfy the many varied
demands of its clients. In addition, the strength of Fuji Xerox also lies in its ability to
perceive the demands of clients in the printer market, ways to satisfy their demands and
to improve the performance of its printers. As a result, Fuji Xerox is capable to provide
well-tailored individual solutions to its clients.

Furthermore, strong technology base firmly supports for Fuji Xerox's leading position in
the market. Having inherited the managerial strengths and product innovation of US
Xerox, Fuji Xerox has successfully combined the American tradition of focusing on
continued technology improvement with the Japanese flexibility and high efficiency in
marketing.

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6. References

Article Studying, 2004 (Online), Cited on 10 September 2004, Available from:

http://www.boraid.com/english/eList.asp?id=50

Avery Susan, 2001, Manufacturers To Face Off In 2001, Purchasing, Vol. 130, Issue 2

John L. Thompson, 1997, Strategic Management: Awareness and Change, 3 rd Edition,

International Thompson Business Press, UK

Document Solutions, 2004 (Online), Cited on 15 August 2004, Available from:

http://home.fujifilm.com/info/ir/pdf/annualreport/fujifilm_ar_2003_09.pdf

Fuji Xerox Asia Pacific, 2003, Cited on 12 September 2004, Available from:
http://www.fxap.com.sg

Fuji Xerox China, 2003, Cited on 12 September 2004, Available from:

http://www.xerox.com.cn/default.aspx

Fuji Xerox Co. Ltd, 2003, Cited on 12 September 2004, Available from:
http://www.fujixerox.com/eng/

Gerry Johnson & Kevan Scholes, 2002, Exploring Corporate Strategy, 6th edition,
Prentice Hall, UK

Gertler, Meric S, 1999 (Online), New Industrial Geography, Cited On 28 August 2004,
Available from: http://site.ebrary.com/lib/staffordshire2/Doc?id=5002849&page=235

Katsuhiro Umemoto, Atsushi Endo & Marchelo Marchado, 2004, From Sashimi to Zen-
In: The Evolution of Concurrent Engineering at Fuji Xerox, Journal of Knowledge
Management, Vol 8, No 4, pp 89-99

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Menezes Joaquim, 2000, Inkjet Market On Upswing, Computing Canada, Vol 26, Issue 7

Mitsumori, Yaeko, 1999, White Goods Go Eco, Computing Japan, Vol 6, Issue 8

Multinational Companies Adjust Strategies to China, 2004 (Online), Cited on 15

September 2004, Available from:
http://www.chinawindow.com/china_market/china_industry_reports/multinational-
companies-a.shtml

Philip Kotler, Swee Hoon Ang, Siew Meng Leong & Chin Tiong Tan (1999), Marketing
Management: An Asian Perspective, 2nd Edition, Prentice Hall, Singapore

Porter, M.E., 1980, Competitive Strategy, New York: Free Press

Quick MBA-knowledge to your business, 2003 (Online), Cited on 8 August 2004,

Available from: http://www.quickmba.com/

Sustainability Report, 2003 (Online), Cited on 8 August 2004. Available from:

http://www.fujixerox.com

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The Xerox Corporation, 1996 (Online), Cited on 8 August 2004, Available from:
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US Department of State, 2004 (Online), Cited on 31 August 2004, Available from:

http://www.state.gov/r/pa/ei/bgn/4142.htm#econ

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7. Appendices

7.1 Critical Incidents in Fuji Xerox History (1962-2002)

Year Critical Incident

Fuji Photo Film and Rank Xerox establish Fuji Xerox as a joint venture,
1962
capitalized at 200 million yen (equity ratio: 50/50).
Launches the Fuji Xerox 2200, the first internally developed copy
1973
machine.

1975 Launches Total Quality Program (TQC).

Launches the Fuji Xerox 3500, a compact, high-speed, and high-
1977
performance copy machine.

1978 Begins export of the Fuji Xerox 2202 to Rank Xerox.

1979 Fuji Xerox 3500 breaks the Japanese Record for annual sales of a copier

Receives The Deming Prize in recognition for its excellence in quality

1980
control.

1982 Establishes Corporate Research Lab at Ebina Plant

Establishes Xerox International Partners (XIP) with Xerox to market

1991
desktop and work group printers worldwide.

1992 Declaration of “The Document Company”

2001 Xerox sells half of its stake in Fuji Xerox to Fuji Photo Film.

2001 Purchases China operations from Xerox.

2002 Launches "Open Office Frontier" business vision.

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