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Xerox and Fuji Xerox

Srinivas Gunta
Assistant Professor
Strategic Management
Discussion questions

1. Why was Fuji Xerox incubated? How has the


relationship between Xerox and Fuji Xerox changed
over the years?
2. What would you recommend that the Codestiny
taskforce do?
3. Should Fuji Xerox be considered as an alliance in
the spirit and the meaning of the term? More
fundamentally, can alliances and acquisitions be
viewed as different ways of reaching similar goals?
Srinivas Gunta PGP 2011-12 Strategic Management II
Xerox: The early years

Xerox: 914 and operating model


Machine rental scheme
Phenomenal growth: Fastest in US to $1bn. sales

Forms Rank Xerox


Rationale for JV?
Advantage for Xerox?
What happened in 1964 in terms of marketing
rights?
Srinivas Gunta PGP 2011-12 Strategic Management II
Fuji Xerox: The early years

Fuji Photo Film the only non-electronics suitor


Why did Rank enter into an agreement with Fuji?
Why did Rank insist on a JV?
What role did Fuji Photo Film play?
FXs subcontractor. Primarily manufacturer. Why?
1971: FX combines Mfg. & Mktg. under one roof
What made FPF become passive?
What happened to Rank Xerox equity structure in
1969?
Srinivas Gunta PGP 2011-12 Strategic Management II
Planning for resources

Partnerships
Why enter partnerships?

51:49 JV between NHPC and OHPC

Srinivas Gunta PGP 2011-12 Strategic Management II


How should they move in future?

What do you think of the codestiny task force?


What do you make of the relationship options in
marketing?
What do you make of the relationship options in
research?
What do you make of the relationship options in
development and manufacturing?

Srinivas Gunta PGP 2011-12 Strategic Management II


Pop Quiz

1. Kobayashi believes that goals of Xerox & Fuji Xerox


can be described as mostly compatible and partly
conflicting. Do you agree? Justify. (8 marks)
2. Which option in Exhibit 11 under Research options
should Codestiny task force recommend? Justify. (8
marks)

3. In Exhibit 11, under Marketing options, what


depicts the relation followed in 1970s? Why? (4
marks)

Srinivas Gunta PGP 2011-12 Strategic Management II


Xerox and Fuji Xerox

Successful alliance?
Reasons for alliance?
Changes in the reasons?
Who is controlling whom?
Is Fuji Xerox better off alone?

Srinivas Gunta PGP 2011-12 Strategic Management II


Acquiring and Allying: Similar?

What should Praja Rajyam have done?

Srinivas Gunta PGP 2011-12 Strategic Management II


HP-Compaq vis--vis ArcelorMittal

HP-Compaq ArcelorMittal
Characterized as merger Characterized as takeover
Post-event name: HP Post-event name?
Target smaller than acquirer Target larger than acquirer
Compaq: #2 in PCs in USA Arcelor: Global #1 in Steel
Deal offer: $24 billion Deal offer: $32.4 bn. (2006;
(2002) Original offer of $23.3 bn.)
US firm taking over another Dutch firm taking over
US firm Luxembourgese firm

Srinivas Gunta PGP 2011-12 Strategic Management II


HP-Compaq vis--vis ArcelorMittal

HP-Compaq ArcelorMittal
Opposition within the board Geo-political opposition
and from substantial (France, Spain); Bid from
number of shareholders Russian firm Severstal
Fortune Global 500 2011: Fortune Global 500 2011:
28th, $126 bn., $8.76 bn.; 74th, $83 bn., $2.92 bn.
Revenues higher than IBM
(2011)

Srinivas Gunta PGP 2011-12 Strategic Management II


When to do what : Pretty neat, eh?

Any issues with the above framework


of Dyer, Kale & Singh?

Srinivas Gunta PGP 2011-12 Strategic Management II


Planning for resources

Srinivas Gunta PGP 2011-12 Strategic Management II


Various ways of skinning the cat?
CSB KEY
Strategic group 1

Strategic group 2

Strategic group 3

PSB Strategic group 4

PSB Pooling strategic block


CSB Complementary strategic block
HB Hybrid block or continuum block

Within each block, the relations can be


anywhere on the continuum of fully
connected to star structured.
HB

My interpretation of Nohria & Garcia-Pont (1991) Global Strategic Linkages and Industry Structure Strategic Management Journal, 12(S1): 105-124

Srinivas Gunta PGP 2011-12 Strategic Management II


Tech. Familiarity & Mode of Engagement

Bilateral Alliances

Unilateral Alliances M&A


Internal R&D Embodied Acquisition

High Technology Familiarity Low

Srinivas Gunta PGP 2011-12 Strategic Management II Research by Ashwin, IIM B


Transaction Costs & Mode of Engagement

Bilateral Alliances

M&A
Unilateral Alliances
Internal R&D Embodied Acquisition

High Transaction Costs Low

Srinivas Gunta PGP 2011-12 Strategic Management II Research by Ashwin, IIM B


Paradox?
Bilateral Alliances
Unilateral Alliances M&A
Internal R&D Embodied Acquisition

High Technology Familiarity Low

Bilateral Alliances
M&A Unilateral Alliances
Internal R&D Embodied Acquisition

High Transaction Costs Low

Srinivas Gunta PGP 2011-12 Strategic Management II Research by Ashwin, IIM B


Framework

High M&A Internal R&D


( Hierarchy)
TRANSACTION
COST Bilateral Alliances

Low
(Market) Embodied Technology
Unilateral Alliances
Acquisition

Low High

TECHNOLOGY FAMILIARITY

Srinivas Gunta PGP 2011-12 Strategic Management II Research by Ashwin, IIM B


Organizational Design and Control

Bartlett, Ghoshal & Birkinshaw, 2003. Developing Coordination and Control:


The Organizational Challenge. Transnational Management: Text, Cases &
Readings in Cross-Border Management, 4th ed. McGraw-Hill: 339 355

Srinivas Gunta
Assistant Professor
Strategic Management
Why have alternate paths?

Why is an
international division
preferred initially?
Who calls shots in
different models?
Why did Grid not
work as prescriptive
model?

Srinivas Gunta PGP 2011-12 Strategic Management II


Orientations & Approaches

Headquarters orientation
Ethnocentric
Polycentric
Geocentric

Strategic approach to managing businesses


Multinational (Early European models)
International (Early US models)
Global (Early Japanese models)
Srinivas Gunta PGP 2011-12 Strategic Management II
Organizing as a Decentralized Federation

Multinational
What is achieved?
What orientation?
What sort of control?
What about synergies?

Srinivas Gunta PGP 2011-12 Strategic Management II


Organizing as a Coordinated Federation

International
What is achieved?
What orientation?
Who calls the shots?
What was the relation
Fuji Xerox had with
(Rank) Xerox in the
early 1970s?

Srinivas Gunta PGP 2011-12 Strategic Management II


Organizing as a Centralized Hub
Global
What is achieved?
What orientation?
What does
subsidiary do?
How does it
compare to
coordinated
federation?

Srinivas Gunta PGP 2011-12 Strategic Management II


Common pitfall across the models?

No scope for
interaction
amongst the
subsidiaries

Srinivas Gunta PGP 2011-12 Strategic Management II


How is this an improvement?
Multidimensional Perspectives
Local responsiveness
Global efficiency
Best practice transfers
Distributed, interdependent
capabilities
Frequency & Content of
interactions goes up
Flexible integrative process:
Management as orchestrator
Centralization
Formalization
Socialization
Srinivas Gunta PGP 2011-12 Strategic Management II
Understanding the Being

Anatomy
Formal structure and responsibilities

Physiology
Interpersonal relationships and processes

Psychology
Individual attitudes and mentalities

Srinivas Gunta PGP 2011-12 Strategic Management II


Transnational: Integrated Network Model
Anatomy
Microstructural tools such as
committees
Physiology
Formal and informal channels of
communication
Psychology
BHAGs
Formalization
Actions of senior managers
Tough to change

Srinivas Gunta PGP 2011-12 Strategic Management II


The Strategy Structure Paradox

Heard of Chandler?
To implement a strategy, you need a structure
Structure follows Strategy
What would happen when you need to
change strategy?
Strategy follows Structure
Why? What does that imply?

Srinivas Gunta PGP 2011-12 Strategic Management II


Which one makes sense and why?

Anatomy Physiology Psychology

OR

Psychology Physiology Anatomy

Srinivas Gunta PGP 2011-12 Strategic Management II


House of Tata:
Acquiring A Global Footprint

Srinivas Gunta
Assistant Professor
Strategic Management
Why is internationalization tough?

Distance matters!
CAGE distance Pankaj Ghemawat

Cultural
Administrative
Geographic
Economic

Srinivas Gunta PGP 2011-12 Strategic Management II


Discussion questions

Does the Tata group contribute positively in


the internationalization efforts of its group
companies?
What is the role of Tata group center?
What do you think should be the guiding
principles in deciding on internationalization
decisions such as the Jaguar and Land Rover
deal?
Should Tata Motors go for JLR?
Srinivas Gunta PGP 2011-12 Strategic Management II
Some additional issues

Is growth important?
Is globalization necessary?
How did Tatas prior international forays fare?

Srinivas Gunta PGP 2011-12 Strategic Management II


Section F Surprise Quiz No. 1
Name:________
Roll number:___
1. Page 5, 3rd line of the case reads to disaggregate
their value chains... Explain what it means and
illustrate with an example from the case. (8 marks)
2. I dont think you can drive too many things
centrally in the Tata system (page 10). How/ Why
is it different from GE? (8 marks)
3. Provide 2 different reasons for (or) against Tata JLR
deal. (4 marks)
Srinivas Gunta PGP 2011-12 Strategic Management II
Tatas over the years

Srinivas Gunta PGP 2011-12 Strategic Management II


Tatas and the group center

Srinivas Gunta PGP 2011-12 Strategic Management II


From Exhibit 5
1800.0

1600.0

1400.0

1200.0

Tata Motors
1000.0
Indian Hotels
TCS
800.0
Tata Steel
Tata Tea
600.0
Sensex/10

400.0

200.0

0.0
Sep-99
Feb-00
Jul-00
Dec-00

Sep-04
Feb-05
Jul-05
Dec-05
Nov-98

Nov-03
Aug-97
Jan-98
Jun-98

Apr-99

May-01

Mar-02
Aug-02
Jan-03

Mar-07
Aug-07
Oct-01

Jun-03

Apr-04

May-06
Oct-06

Srinivas Gunta PGP 2011-12 Strategic Management II


Recasting Exhibit 5
450.0

400.0

350.0

300.0

Tata Motors
250.0
Indian Hotels
TCS
200.0
Tata Steel
Tata Tea
150.0
Sensex

100.0

50.0

0.0
Sep-99
Feb-00
Jul-00
Dec-00

Sep-04
Feb-05
Jul-05
Dec-05
Nov-98

Nov-03
Aug-97
Jan-98
Jun-98

Apr-99

May-01

Mar-02
Aug-02
Jan-03

Mar-07
Aug-07
Oct-01

Jun-03

Apr-04

May-06
Srinivas Gunta PGP 2011-12 Strategic Management II Oct-06
Tata Sons Shareholding Structure (% held)
90
80
70
60
50
40
30
20
10
0
Tata Tata TCS Tata Indian
Motor Steel Tea Hotels
Srinivas Gunta PGP 2011-12 Strategic Management II
2003-07: Major Tata Co.s Performance

Companies Net Total Total Net Income


Income: Assets: Liabilities: Margin:
CAGR CAGR CAGR CAGR
Tata Motors 50.94% 6.97% 25.22% 18.23%

Tata Steel 32.30% 31.19% 29.87% 8%

Tata Tea 39.96% 17.31% 19.2% 30.56%

Indian Hotels 67.52% 11.59% 9.91% 35.58%

Srinivas Gunta PGP 2011-12 Strategic Management II


Tata Motors vis--vis peers: 2007 D/E
180
M&M
160
140
120 Tata

100
80
Ashok
60 Leyland
40 Maruti

20
0
Debt/equity
Srinivas Gunta PGP 2011-12 Strategic Management II
Tata Steel vis--vis peers: 2007 D/E
180
Tata Arcelor Mittal
160
140
120 Nippon
100 SAIL

80
60
40
20
0
Srinivas Gunta 1st Qtr
PGP 2011-12 Strategic Management II
Tata Tea vis--vis peers: 2007 D/E
250 Tata

200

150
HUL

100
Nestle

50

0
Srinivas Gunta PGP 2011-12 Strategic Management II
Indian Hotels vis--vis peers: 2007 D/E
100 Indian Hotels

90 Shangri-La Asia
80
70 Hongkong & Shanghai

60
50
40
30
20
10
0
Srinivas Gunta PGP 2011-12 Strategic Management II
What are Tatas up to?

Buy 30% of EBI; sell it the next year


Management contracts in hotels along with
presence in Gateway cities and even think
of acquiring a chain
Low-end Nano and High-end Jaguar

Srinivas Gunta PGP 2011-12 Strategic Management II


Growth strategies Consistent?

Huge differences in growth strategies


Between entrepreneurs and managers
Between emerging economy firms and developed
country firms
5 ways in which resource-starved developing
countries lead rich nations (by C K Prahalad)
Affordability; Leapfrog technologies; Service
ecosystems; Robust systems & Add-on
applications
Srinivas Gunta PGP 2011-12 Strategic Management II
Srinivas Gunta PGP 2011-12 Strategic Management II
Reverse innovations become possible

Tata Nano to Pixel


Godrej Chotukool Refrigerator; Mitticool
GEs ECG machine GE MAC 800
P&G Vicks Honey Cough
Nestles Low-cost Low-fat dried Noodles
(Maggi)
Tata Swach
Srinivas Gunta PGP 2011-12 Strategic Management II
The Competitive Advantage of Nations

Srinivas Gunta
Assistant Professor
Strategic Management
Competitive Advantage
Is competitive advantage inherited or
created ?
How far does home environment go in
contributing towards creating and sustaining
competitive advantage ?
Universally companies achieve competitive
advantage through acts of innovation in
adopting new technologies and by new ways
of doing things. Agree?

Srinivas Gunta PGP 2011-12 Strategic Management II


Determinants of Competitiveness?

At National Level
Labor cost
Interest rates
Exchange rates
Economies of scale

What is meant by national competitiveness?

Srinivas Gunta PGP 2011-12 Strategic Management II


Sustaining Competitive Advantage

Global approach to Strategy


Making a current advantage obsolete

Srinivas Gunta PGP 2011-12 Strategic Management II


Nations in Context of Globalization

WTO Factor mobility & Outsourcing


Entry barriers?
SEZs and FTZs

Srinivas Gunta PGP 2011-12 Strategic Management II


Borderless World by Ohmae

Customer
Company
Competition
Currency
Country

Srinivas Gunta PGP 2011-12 Strategic Management II


Role of Governments?

IT and beauty

Srinivas Gunta PGP 2011-12 Strategic Management II


Determinants of National Competitive Advantage

Srinivas Gunta PGP 2011-12 Strategic Management II


Section A Surprise Quiz No. 2

Roll number:__
1. Take an industry where India is competitive (e.g.
S/w services, Pharma, Textiles, Gems & Jewellery,
Auto components) and analyze it with respect to
the four determinants in Porters diamond. (12
marks)

2. Having done the above, do you agree with the


framework of Porters diamond? Justify. (8 marks)

Srinivas Gunta PGP 2011-12 Strategic Management II


Across Industries
Export performance post 1990-91

18
Value (in U.S. billion $)

16
14
12
10
8
6
4
2
0

91 93 95 97 99 01 03 05
19 19 19 19 19 20 20 20
IT Gems & Jewellery Readymade garments
Year
Srinivas Gunta PGP 2011-12 Strategic Management II
The Top 8 Indian S/w Exporters
Yr.\Rank 1 2 3 4 5 6 7 8
1980-81 TCS TUL Computronics Shaw Wallace Hinditron Indicos ORG
1985-86 TCS TUL PCS Hindistron Infosys Datamatics DCM DP COSL
1989-90 TCS TUL COSL Datamatics TI Digital PCS M-BT
1993-94 TCS TUL HCS HP Digital ICIM Wipro Pemtafour Patni
1994-95 TCS TUL Wipro Pentafour Infosys Silverline Fujitsu Digital
1996-97 TCS Wipro NIIT Pentafour Infosys
1997-98 TCS Wipro Tata Infotech Pentafour Infosys Satyam Tata IBM CMC
1999-00 TCS Wipro Infosys HCL Satyam NIIT
2000-01 TCS Infosys Wipro Satyam HCL Patni

Srinivas Gunta PGP 2011-12 Strategic Management II


Across Industries: Turnover
120
100
80
60
40
20
0
TCS (IT) Ranbaxy Gokaldas Bharat Forge Rajesh Exports
(Pharma) (Apparel) (Auto) (Jewellery)

Srinivas Gunta PGP 2011-12 Strategic Management II


Across Industries: Net Profit
120
100
80
60
40
20
0
TCS (IT) Ranbaxy Gokaldas Bharat Forge Rajesh
(Pharma) (Apparel) (Auto) Exports
(Jewellery)
Srinivas Gunta PGP 2011-12 Strategic Management II
Thank You!!

Srinivas Gunta PGP 2011-12 Strategic Management II