87354232-xerox-case
TRANSCRIPT
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INTRODUCTION
Xerox is a multinational corporation serving the global document-processing and financial
services market. The business revolves in over 130 countries by its developed, manufactured
and marketed copiers, duplicators, facsimile products, scanners and other products. Xerox case
study center on the document-processing activities of the company. The case discuss on the
management control system and its trends that helps Xerox to overcome its obstacles in
maintaining its market share. It also looks on how Xerox have become today and are they still
using the same management control system or not.
PROBLEM STATEMENT
During 1970 till 1980, several problems have occurred in Xerox due to lack of appropriate
management control system. The issue started when a patent for the plain paper copier have
expired, thus inviting new entrant. Xerox market share dropped from 96 percent to 45 percent
due to the attack of competitors that had offered a low price. The Japanese firms were selling
their product at Xerox’s manufacturing cost. Next is in 1970s, Xerox emphasize on the important
of accuracy and rigid system than listening to the customers.
SOLUTION
The first question asked was to outline the management control system at Xerox and identify
the key elements that make the system work. Based Xerox case study, prior to 1970 the
management control is influenced by the analytical era where it highlights accuracy and rigid
systems more than listening to the customer. At that time the company set unrealistic target,
use the number of people as the controller and inadequate data analysis. Besides that, the
reporting and planning process was too long and the structure is more bureaucratic and the
reporting formats were not even consistent between divisions. There are few issues that arise
during 1970 until 1980. First is the original patent for the plain paper copier expired that lead to
new entrants enter the market. Xerox market share decrease due to competition from 96
percent to 45 percent. The issue is worsening when the Japanese firms are offering their
equipment at Xerox’s manufacturing cost.
In 1982, David Kearns, the chairman derived with a solution by developing a corporate
revitalization plan called ‘Leadership through Quality’ (LTQ). It was a mixed of competitive
benchmarking and also employee involvement. The key elements of LTQ are employee
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involvement and competitive benchmarking by implementing the best practice to improve
performance. Another element is quality improvement process where it focuses in meeting
customer requirement. Meanwhile in 1990s, Al Senter comes with his strategy to change the
culture of Xerox. He emphasize that the Finance Executive Council (FEC) as the central focal
point for finance function in Xerox. The FEC consist of senior Corporate Finance staff and the
chief financial officers from Xerox operating organizations. Al also changed to standard
reporting with informal reporting system as it complements the formal reporting, set proper goal
to be aligned with the strategy imposed and highlight on the technological innovation as the key
for success.
The key element for Al strategy is by having open communication, active participation
and regular interaction with the line management to enhance the formal reporting with informal
reporting system. Next is to have top-flight and well trained people employee and be on the
cutting edge of information technology. Value added is one of the key elements that make the
system work as Al said’ if we can’t add value, then we don’t belong to Xerox’.
The second question asks about the recent trends in Xerox that is influencing the management
control process in the company. It is stated in the case that during the analytical era of the
1970s, Xerox had a culture where accuracy and rigid systems were more important than
listening to the customers. To make it worse, during this year’s some good people left the
company and Xerox faced new competitors for market share.
Xerox need to implement new trends because of the original patent for the plain paper
copier expired in 1970, sending an invitation to potential competitors such as IBM, Kodak,
Canon, Minolta and others. Japanese competitors were well known for their effective and
efficient use of resources. It shows where they can sell their equipment at Xerox’s
manufacturing cost. These further put a stress within Xerox’s management.
To retaliate to this issue, Xerox entered into a joint venture with Rank Organization PLC,
forming Rank Xerox Limited in 1956. This gave Xerox market access to Europe, Africa, and the
Middle East. Further in 1962, Xerox formed a partnership with Fuji Photo Film Company in
Japan. This gave them access to enter into Japan and Asia market. By making these
arrangements, it gave them the opportunity to expand their market globally.
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Because of the significant market share losses, David Kearns, the organization's
chairman, had made the necessary changes to survive and sustain in the current business
market. The changes began within the company itself. Kearns identified the factors which
needed change and systematically implemented the required change elements to ensure
success. He acknowledged the inefficiency and inconsistency of the existing reporting and
planning process which was highly bureaucratic. He developed a corporate revitalization plan
called ‘Leadership through Quality’ (LTQ).
This strategy served as the cornerstone of the new Xerox culture. The three major
components of LTQ are employee involvement, competitive benchmarking and the quality
improvement process which focuses on meeting customer requirement. By focusing on these
components, Xerox was able to improve competitiveness and organizational effectiveness in
utilizing its resources.
From the reporting perspectives, there was a new trend adopted by Xerox whereby the
monthly reporting was replaced by quarterly reporting. The management decided to replace the
previous system after considering the cost versus benefit analysis of it and felt that monthly
financial reports in full detail from all the units was not necessary. Other than that, an informal
reporting system had also evolved. It involves open and honest communication rather than
hammer that was more informative and it also centered on problems and business risks for
Xerox to take proper actions of. They also maintained a standard of ‘no surprises’ and promoted
trust among the controller. Eventually the informal channel complemented the formal channel of
reporting.
Question 3 asks an opinion on how important is organizational culture and individual
personalities in the Xerox control process. Organizational culture conveys the beliefs and ideas
of the goals that need to be pursued by and the appropriate standards of behavior the members
of the organization utilize to attain their respective organizational goals. On the other hand,
individuality simply means that people choose to express themselves differently based on their
personality and it plays an important role in to ensure organizational growth.
In relation to this case, Xerox has mainly two individual who had contributed a lot to the
changes of their organizational cultures. Al Senter, being the Vice President of Finance in Xerox
firmly believes in the active participation of the business controllers in decision making as
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compared to the rigid system implemented before in Xerox. Other than that, he also is
encouraging open communication between the staff and the department.
The second individual plays an important role in changing Xerox’s organizational culture
is none other than David Kearns who became chairman in 1982. He introduced ‘Leadership
through Quality’ strategy in Xerox. The three components of this strategy which are employee
involvement, competitive benchmarking and the quality improvement process later became the
cornerstone of the new Xerox culture and gave it the competitive muscle to regain market share
and made improvements in the company operations.
The success of Kearns approach can be seen through some examples found in the
1990 annual report, such as an increase in customer satisfaction levels, revenues rose by 9
percent to a record $13.6 billion, profits increased by 23 percent to $599 million, improved return
on assets and $1.1 billion cash was generated at that time.
The fourth question asked on how Xerox today. Since 1 July 2009, Ursula M.Burns has leads
Xerox as the world’s leading enterprise for business process and document management. She
is the first African American woman to head a company the size of Xerox. Xerox is now a leader
in business process and IT outsourcing when they purchase Affiliated Computer Service. Now
they are still maintaining the legacy in innovation as research and development is one of the key
for their success today.
Xerox structure is almost the same as previously only that it is now expanding. Xerox still
maintains its joint venture with Japanese photographic firm Fuji Photo Film Co. in Fuji Xerox.
Currently Xerox hold 25% of Fuji Xerox’s shareholding. In 1983 a joint venture formed between
Dr. Bhupendra Kumar Modi and Rank Xerox created Modi Xerox or now it is called Xerox India.
Xerox is the major shareholder of the company and aims to buy the remaining shareholders.
NewField IT is a wholly owned subsidiary of Xerox. The subsidiary provides supports in IT
sections.
Xerox operates under the guidance of six core value which is satisfy customers, deliver
quality and excellence in all aspect, requires premium return on assets, use technology to
develop market leadership, value our employees and behave responsibly as a corporate citizen.
Now, Xerox uses Lean Six Sigma as it is more data driven, result-oriented approach to process
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improvement. The combination of tools and processes of Lean and Six Sigma creates a
powerful engine to improve quality, efficiency and speed in every aspect of the business.
Meanwhile in ACS, they promote achievement-based compensation to motivate and
reward the employees that are outstanding in their jobs. Next, the also use business
reengineering in their work process that governed by Six Sigma principles. They also
emphasize on core technologies in giving the best to its customers, world-class infrastructure,
global production model and also strategic business unit.
To answer the question on how accounting play their role in this case, we first look at the
purpose of the accounting which is to record, classify and report financial transactions. The
purpose of any accounting system is to provide managers across the organization with
information that facilitates many areas. One of the areas is control of activities and expenditure.
On the other hand, management accounting is a system of measuring and providing operational
and financial information that guides managerial action, motivates behaviors, and supports and
creates the cultural values necessary to achieve an organization’s strategic objectives.
To relate it to Xerox, for example, they hold one of the world’s largest portfolios of
intellectual property. Yet that number of patents was declining relative to competition. Part of the
cause was that Xerox’s filing time for patents had grown above the industry average. To
address this competitive disadvantage, an internal Lean Six Sigma team which is one of the
accounting systems was applied. One of the basic assumptions of Lean Six Sigma is that all the
activities of the organization should add business value. Lean Six Sigma involves define,
measure, analyse, improve and control process (DMAIC) to uncover opportunities to remove
non-value-added activities. The streamlined process drastically cut patent filing time, well within
the industry benchmark of six months.
CONCLUSION
Xerox continues to expand its rich patent portfolio filled with innovation that helps simplify,
speed up and create more efficient ways for work to get done in enterprises around the world.
Today, it boasts of having the competency to manufacture and market various office related and
document-management products such as color and black-and-white printers, copiers, digital
production printing presses and several related consulting services and supplies.
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The up-to-date and highly technological-savvy products are the results of Xerox famous
research center named Xerox Palo Alto Research Center which is at present located in Palo
Alto, California. Currently, Xerox is also the top distributor of cut-sheet paper and a noteworthy
contender in the development and supply of office papers in the United States. With a total
workforce of more than 50,000 personnel and having operational hubs in many countries,
Xerox, since its humble beginning in 1946, is still headquartered in Rochester, New York.
REFERENCES
Hilton R.W, Platt Managerial Accounting. International Edition, McGraw Hill 9th Edition
http://www.knowledgebank.irri.org/economics/index.php/the-role-of-accounting
http://college.cengage.com/accounting/ansari/management/1e/students/modules/mod11.pdf
http://www.managementstudyguide.com
http://en.wikipedia.org/wiki/Xerox
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