Memorandum

To: Dr. Sherman, MBA Professor

From: Greg Carlin, Max Karnaukhov, and Julie Seitz, MBA Students
Date: April 17, 2000
Re: Xerox and Fuji Joint Venture

Fuji Xerox, the joint venture between Xerox and Fuji Photo Film, was originally intended to be a
marketing organization to sell xerographic products manufactured by Fuji Photo Film. The
Xerox Corporation had no direct relationship with Fuji Xerox, but would participate in the
profits of the joint venture. Over time, Fuji Xerox evolved into a fully integrated operation with
strong research, development and manufacturing capabilities. In response to this, it has been
said that Fuji Xerox has been the most successful joint venture ever between an American and
Japanese firm. This memo will contain insights that support that, display the role that Fuji Xerox
plays in Xerox’s global strategy and evaluated their plans of reorganization.

Xerox’s Global Strategy

In the years to follow the joint venture of Fuji Xerox, Xerox had languished and met increasing
troubles within their markets, while Fuji Xerox was become more autonomous and very
successful. As Xerox began to rejuvenate, it hinged on Fuji Xerox for guidance and partnership
in functional abilities. Xerox's global strategy was to combine "American ingenuity with
Japanese manufacturing." Xerox gained the functions of quality programs, product technology,
and global positioning from Fuji. These utilities were the foundation of the partnership.

Xerox first developed "Xerox's Leadership through Quality program," which was derived from
the experience of Fuji. The program stressed high employee involvement to accomplish the
major goals of increased research, JIT manufacturing, product and technology development, and
underlining quality. These aims directly mirrored those set by Fuji back in 1973.

The goal of developing product technology is another aspect that Xerox adopted from Fuji. The
practice of benchmarking is systematically tracking costs and performance in all areas of
operations against the best in the field. Xerox applied this approach and it infused the
organization with new vision and determination.

The final combining factor of the strategy lies in geographic orientation. The mere location of
Fuji productions is centralized in the South Pacific. This is key in distribution efficiencies as it
had once been divided up between Fuji Xerox and Rank Xerox, located in Britain, which caused
too many problems. Xerox understood that Fuji Xerox was instrumental in their global strategy
as they had been extremely successful to date and this was based in part on initiatives that Xerox
could implement for its desired need to change.

Xerox and Fuji – The Most Successful Joint Venture

Currently the global business environment requires companies to use alliance tactics in order to
create competitive advantage upon its rivals. Companies usually realize the lack of their
operational and technological effectiveness in the market without allied partners. There are
many companies that think they can operate in the market effectively alone. However, these
companies don’t wish to undertake the high costs and risks essential to pursue technologies and
markets with uncertain profits (Parkhe, 1996).

According to Kenichi Ohmae, “The Global Logic of Strategic Alliances”, the joint venture
between Rank Xerox and Fuji Film created the most successful joint venture. Fuji Xerox
Company earns about $7.5 billion a year (Annual Report, 1998) in operating revenues and
attracts the best talent of Japan to work for them (Ohmae, 1989). There is more to look at when
determing the success of such a joint venture though and this memo proposes two gauges; the
ability of companies to shift competitive strength on each other (Hamel, Doz, Prahalad, 1989),
and the ability of each company to challenge one another (Ohmae, 1989).

The first approach focuses on how the companies influence each other’s internal skills. At the
time when Xerox Corp. turned its sights on the Japanese market, it had already established
subsidiaries in such countries as Germany, France, Italy, Mexico and Australia. While, Xerox
concentrated heavily on globalization, it lost a big part of its market share in America to Canon.
Canon attacked Xerox in the US market with its new liquid toner copiers and medium to low-end
copiers, because Xerox’s barriers to entry in the US market were very weak.

As mentioned earlier, Fuji Xerox infused Xerox to adopt the Leadership Through Quality
program, which was based on the experience of Fuji Xerox (Xerox and Fuji Xerox Case). Xerox
launched the total quality management program and also adopted new employee exchange
training programs. Almost six months later Xerox introduces its new 10th series of copiers. Its
financial results shoed an insurgence in sales growth and decline in production cost of nearly
40% in the same year. Xerox slowly regained its market share from Canon, and continued to
grow domestically and globally. This “share of mind” approach has definitely created a positive
effect on the relationship between the two companies, and made them stronger, not just as a
separate entity, but as a union.

The second approach includes such aspects of challenges as autonomy and employee motivation.
No doubt that at the very beginning of Fuji Xerox’s life as a joint venture, Xerox gave Fuji
Xerox the autonomy to do their business in Japan on their own, even though it was a 50 percent
venture share. As Yotaro Kobayashi, Fuji Xerox’s president and CEO, pointed out, “the degree
to which Xerox let us run was very unusual” (Xerox and Fuji Xerox). Moreover, Xerox’s
approach allowed Fuji Xerox to develop an unbeatable competitive position in Japan and
structure an effective environment in the company that led Fuji Xerox to become a company on
its own and a joint venture unlike any seen before.

Today Fuji Xerox continuously adapts to the changing environment, and so influences Xerox to
adapt to such an environment. Currently Kaboyashi announced a new mission statement for Fuji
Xerox that reflects the global nature of the company and the company’s philosophy. He also
changed the company’s management structure and created ten new values for Fuji Xerox that
applies to both Xerox Group and Fuji Film companies. Fuji Xerox has become an effective
change leader for the Xerox Corporation that has breathed new life into a company that had been
facing near disaster.
Facing Reorganization
From the success of Fuji Xerox and the disappointments seen in Xerox over the years, the time
has come for top management of the two companies to look at ways of reorganization. The task
force assigned this, Codestiny III, was charged with no less than restructuring the strategic
relationship between the companies (Xerox and Fuji Xerox).

The options for reorganization were identified in three areas, marketing, research, and
development/manufacturing. The options within each area set the parameters for reorganization,
whether that was as independent units, complete joint cooperation or gray areas in between that
revolved on complementary actions and exceptions to the rules. It is this last option that we feel
is most appropriate for Xerox and Fuji Xerox. The success seen in Fuji Xerox and turnaround at
Xerox was based on the ability of Fuji Xerox to take the basic structure of Xerox and rework it to
make it more efficient. While Fuji Xerox enjoyed the level of autonomy they had, they all did
well in their ability to learn from Xerox and teach them new insights. This established strong
relationships between the two companies that fostered a new competitiveness within the
industry. It seems that such a strategy has not been seen before that has produced such good
results and in that, it would be a mistake to deter far from that plan of action.

Fuji Xerox and Xerox Corporation should continue to keep the level of autonomy it has
developed that allows them to competitively work off one another while at the same time using
that ability to strengthen each company and any weakness they may have.

References
Arvind Parkhe. “International Joint Ventures.” Handbook for International Management
Research (Eds., Punnett, Betty J., and Oded Shenkar). 1996

Kenichi Ohmae. “The Global Logic of Strategic Alliances.” Harvard Business Review. March-
April, 1989.

Doz, Yves L., Prahalad, C.K., and Gary Hamel. “Collaborate with Your Competitors – and
Win.” Harvard Business Review. January – February, 1989.

Yotaro Kobayashi, “1998 Annual Report,” Insights (Fuji Xerox Company, Japan, May 1999).

Gomes-Casseres, Benjamin, and Krista McQuade. “Xerox and Fuji Xerox.” 1991. Case 4-1, in
Managing Across Boundaries: The collaborative Challenge.