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 obstacle s 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.
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.
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 1 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.
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 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 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.
Xerox continues to expand its rich patent portfolio filled with innovation that help s simplify, speed up and create more efficient ways for work to get done in enterprises ar ound 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. 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.
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