Motives for Establishing the Joint Venture between Fuji and Xerox
Conflicting policies between Japan and the West prompted the merger. Japanese companies wanted to acquire Xerox’s xerography licenses, but the strategy proved commercially infeasible. Later, Xerox identified Japan as a viable market. However, their venture into the region was restricted by the Japanese regulation, which required the company to sell its products through a joint venture with a local firm. It thus followed that the merger facilitated the exploration of the Japanese market, which could not be achieved by either of them working individually.
Differences in the products offered by Fuji and Xerox necessitated for diversification. Initially, Xerox globally held rights to xerographic. The merger included the company giving rights to Fuji to produce the Xerox copiers in Japan and sell them to the Asian market. Fuji would then pay royalties and half of its proceeds to Xerox. Fuji thus diversified from photographic film to making copiers. On the other hand, Xerox expanded its market segment. Therefore, while Fuji realised horizontal growth , Xerox benefited from market diversification. Davies and Hodbey assert that diversification as one of the strategies embraced by firms for either defensive or offensive reasons (78). Therefore, the merger between Fuji and Xerox enhanced profits, while the firms enjoyed economies of scale. The variances between the needs in the Eastern and the Western markets were an inspiration towards the merger. Xerox mostly concentrated on Europe and the U.S. as its main customers base. The regions had almost homogeneous qualities from the clients’ tastes, methods of product distribution, and economic development. Fuji had more experience in the Asian market, and could easily detect trends. As a result, each firm could adjust accordingly to changes in competition in their respective regions. For instance, Xerox did not find the need to manufacture small copiers but rather focused on large-scale users, while Fuji ascertained that small copiers were indispensable in the Japanese market. Merging reduced the need for extensive research about markets. Thus, the likelihood of successful entry into unexplored regions was improved.
Factors that Influenced the Negotiation and Implementation Phases of the Joint Venture between Fuji and Xerox, and their Impact on Success
Joint venture between Fuji and Xerox was founded on trust. The President Rank Xerox was acquainted to the Chairman Fuji Photo Film (Allaire and Gomes-Casseres 3). The two belonged to different industries, and despite Fuji being Japanese companies applying to merge with Xerox, the latter felt that the relationship between the two leaders provided a strong foundation for the merger to thrive. The friendship implied that the companies would be dedicated to ensure protection of each other’s interests, and striving for collective financial and operational success. Therefore, the enthusiasm is evident in the several instances they dedicate towards settling their differences.
The provision for Fuji Xerox to operate autonomously was a marketing capability for the merger. Fuji was located in Japan, with new domestic entrants into the market. They posed a notable threat since they understood the needs of the local people than Xerox did. Fuji could identify the imminent intensified competition in time, and recommend strategies to counter it. Accordingly, the independence granted to Fuji during the negotiations contributed to success.
Fuji and Xerox emphasised on the need for quality products in order to satisfy the market that was expected to grow exponentially. The merger would face vigorous competition from firms, such as Canon. High quality production endorses marketing competency (Pride and Ferrell 272). Engineers from Fuji Photo Film that were initially to manufacture copiers for Fuji Xerox’s Eastern market had to receive training from Xerox. Consequently, the products’ quality could not be compromised. The process of local production in Japan was systematic, whereby Fuji Xerox could at first import fully manufactured copiers from Xerox, later assemble imported parts locally, and finally manufacture the entire products with the assistance of the skilled engineers. Eventually, Fuji Xerox took over production from Fuji Photo Film so that it could bear full responsibility of the production process. Therefore, the firms’ commitment to high quality production during negotiations impacted on the merger’s success.
National Culture Distances between Fuji and Xerox
Natural culture distances between Fuji and Xerox were primarily due to the differences in the culture prevalent in their domestic countries. The Hofstede model provides five areas in which the differences can be categorised, including individualism, power distance, masculinity, uncertainty avoidance, and long-term orientation (de Mooij and Hofstede 88). Differing organizational cultures between merging firms can be constructive or destructive. As a result, Fuji Xerox management should be decisive on the most appropriate approach to adopt to ensure less conflict and more productivity.
Both Xerox and Fuji seemingly had equal levels of individualism. The people at the top management levels felt more independent during the first steps towards merging. The merger was actualised when the two leaders agreed based on their personal friendship. Decision making then shifted to merger’s directors. However, distinct contribution of the two firms demanded that each would present its opinion. The level of individualism then became more interdependent, where managers of each firm consulted before presenting the firm’s position on various issues. The arising conflicts between the two teams led to the formation of Codestiny Task Force.
While the cultures of both firms were inclined towards uncertainty avoidance, Xerox was extra evading ambiguities. They conducted due diligence in their engagements. Xerox, for instance, was concerned about Fuji’s insistence about the market of small copiers, and Fuji had to convince about the profitability the merger would thereby achieve. Xerox also feared about the capacity Fuji Photo Film to manufacture the copiers, and the former had to assure the latter that the subcontracted company would perform to expectation.
The two firms had a notably equal level of long-term orientation. They were conscious that the economic environment was dynamic, therefore, instituted measures to remain sustainable and profitable. The decision to form the merger was triggered by the individual firms willingness to prepare for the future that was about to experience intense competition and globalisation. Each of the two firms had objectives that determined the most suitable strategy Fuji Xerox would embrace to capture a larger market and optimise the cost of production.
Steps for Bridging Gaps between Fuji and Xerox, and Successful Implementation of the Joint Venture’s Goals
Gaps between Fuji and Xerox arose due to the ideological differences prompted by access to distinct information sources, varying objectives, and widening level of profitability between the two. The gaps usually led to mediation by a task force. However, the compatibility was not consistent, and it could thus adversely affect the merger’s sustainability (Millar et al. 497). It then necessitated that the force was contracted for three times.
One of the steps for bridging gaps would have been establishing a platform on which information could be freely shared. Fuji was knowledgeable about the policies and markets in Asia, while Xerox had familiarised itself with the conditions in Europe and the U.S. Despite the two working in a merger, they shared information discriminatively. For instance, Fuji invested heavily in research and development, while still relying on the basic research Xerox conducted. Eventually, it developed new technologies that made it an innovation leader in the industry. The two could have avoided differences if Fuji shared market information it gained from its research.
Another step would have been instituting a permanent dedicated team to redefine Fuji Xerox’s objectives. The two firms had vague goals, hence, the firms’ leaders initiated a framework to enhance cooperation between them, and thereby commissioning the third Codestiny Task Force. One of the conflicting strategies was that Fuji desired to exploit the low end market, while Xerox aimed at the high end. Another management issue was that Xerox considered their relationship as asymmetric. Therefore, an overhaul of the entire merger mission was paramount.
Lastly, the two should have restructured their financial engagements. Xerox suffered due to court battles and ineffective strategies. Fuji, on the other hand, employed strategies that made it grow its profits. Availability of reserved capital meant that it could venture into research and improve its production capacity, thereby developing at a higher rate. The success of either of the two determined the fate of Fuji Xerox. Subsequently, Fuji had to rescue Xerox to avoid the collapse of the merger. In spite of Fuji contributing more to the revenue, the proceeds and shareholder wealth were not adjusted accordingly.
Works Cited
Allaire, Paul, and Benjamin Gomes-Casseres. Xerox Corporation and Fuji Xerox: Harvard Business School, February 22, 1991, Class Comments. Boston, MA: Harvard Business School Pub. Corp, 1991.
Davies, Andrew, and Michael Hodbey. The Business of Projects: Managing Innovation in Complex Products and Systems. New York: Cambridge University Press, 2005. de Mooij, Marieke, and Geert Hofstede. “The Hofstede Model: Applications to Global Branding and Advertising Strategy and Research.” International Journal of Advertising, vol. 29, no. 1, 2010, pp. 85–110.
Millar, Carla, et al. “Sustainability and the Need for Change: Organisational Change and Transformational Vision.” Journal of Organizational Change Management, vol. 25, no. 4, 2012, pp. 489-500.
Pride, William M, and O C. Ferrell. Foundations of Marketing. Boston: Houghton Mifflin, 2009.