Anne Mulcahy – Leading Xerox through the

perfect storm
 Agenda
 Introduction to Xerox

 Insights to the case

 Continuing trend – analysis of strategies of different leaders

 Emergence of Anne Mulcahy

 Possible Turnaround Strategies

 Zeroing on the perfect strategy

 Implementation of the perfect strategy

 Concluding Remarks
 Xerox- world's leading document management
technology and services enterprise

• Built on the foundation of one of the most successful product launches ever

• In 1959 introduced the first product, 914 copier

• By 1970 enjoyed a 95% share of the plain-paper copier market

• Model corporate citizen with heavy investments in R&D

• Palo Alto Research Center (PARC) established in 1970 originated many

technologies that launched the information revolution

• Adopted a slow but exacting multi-stage process from initial research to

model introduction
 Facts of the case – The Perfect Storm

• Experienced overwhelming success initially

• Breeding of anti-monopoly pressures and confrontation with several lawsuits –

forfeiture of patents and agreeing to license its technology

• Emergence of new and aggressive competitors like Canon, Minolta, Ricoh and
Sharp

• Loss of market share coupled with unpreparedness for price competition

• Unable to adapt to smaller margins and reduced profitability

• Heavy expenses, shrinking market share, compounded losses, lack of revenues

and weak cash flows
 Strategies over time
 Products of relatively inferior quality compared to its competitors

 Market share in copier came down sharply from 80% to just 13% in 1982

 In 1982,David T. Kearns took over as the CEO

 Average cost of Japanese machines was 40-50% of that of Xerox

 Operating cost was high

 Launching a program referred to as ‘Leadership through Quality’

 Management layers were cut

 Greater authority delegated to lower levels

 Employees were allowed to participate in decision making

Contd.
 In 1980’s Xerox bought Kurzweil, Datacopy and Ventura companies that specialized
in optical character recognition, scanning and fax machines

 It also diversified into financial services, insurance and investment banking

 Allaire succeeded Kearns as the new CEO in 1990

 In 1992 Xerox entered into various tie-ups with Dell Computer Corporation and
Microsoft

 Company announced a major restructuring program (3 geographically defined

organizations selling products from nine product divisions)

 Eliminated 10,000 jobs and divested the insurance business.

 In 1997 Allaire further reorganized the nine divisions into four divisions and forayed
into new businesses such as production printing and developing retail channels.
Contd.

 Thoman replaced Allaire as the CEO in April 1999 though Allaire

continued as chairman.

 Thoman further consolidated four geographically oriented customer

administration centers (handled billing and collections) into three customer
centers.

 Customer facing order entering personnel from over 30 customer business

units were moved to the three customer centers.

 Thoman continued to buy out partner stakes in overseas joint ventures

(Fuji’s share in Fuji Xerox)
Results
 Commissions reduced significantly.

 Sales representatives began losing their accounts.

 Sales staff attrition increased by a considerable amount.

 In a bid to find new businesses it cut prices hence lost out on margins.

Further trouble:
 Dominance in production printing ended with entry of Heidelburg.
 Financial crisis in Latin America
 Low Morale causing massive defections
 Doubtful and misclassified accounts in Mexico gave Xerox a bad name
 Reasons for Downfall

• Sales force failure: Reorganizing the Sales force

• Failure to tap the opportunities generated through innovative product concept

• Faulty accounting standards and improper balance sheet filing leading investors
to lose hope and loss of creditworthiness.

• Reporting future cash flows of leased machines in the present financial year
(1999). This increased the valuation of the company temporarily but once the
company failed to live up the expectation, investors left the company

Strategic Failure attributed to two main reasons:

 a. failure to commercialize the technology;
 b. failure to protect the resulting intellectual property.
 The Making of Anne Mulcahy
• Graduate from Marymount College with a joint major in English and Journalism in the year 1974

• Started her career in Xerox as a sales representative hounding the streets for the early years

• Struck a proper work life and family balance after marrying Joe Mulcahy

• Promoted to Vice President for human resources in 1992

• Led GMO, Xerox’s new venture in web and retail sales and launched a small office and home office
(SOHO)

• Became COO in May 200 taking charge of internal business including operations, solutions and
world wide business services

• Was named CEO of Xerox Corp. in 2001 to which she remarked:

 "I took on this position feeling equal parts excitement and dread,"
 Anne Mulcahy’s initial efforts as a leader

• Assembling her team and improving communication amongst her

executives

• Extensive fact finding tours in the business, visiting employee operations

and major customers

• Fully understand the challenges facing Xerox

• Provide her team with confidence that the company could survive in spite
of her personal doubts

• Made people publicly accountable for their results, set realistic

expectations despite the tremendous pressures
 Three possible strategies

 Implement cost cutting while continuing to fund R&D and field sales and
service, in order to restore credibility in Xerox brand.

 Make deep cuts in R&D, product development, and field sales and service
in order to save the company.

 Follow the recommendations of outside advisers and declare bankruptcy

and then initiate an aggressive turnaround plan.
 Turn around strategy

 Sale of assets (Chinese operations, Fuji Xerox)

 Improve communication with employees and improve decision making

process for top management.

 Stream line processes such as billing process.

 Cost reduction through employee involvement.

Contd.

• Innovation

• Pushing into services

• Adaptive and opportunistic

• Layoff

• Outsourcing

• Value to customers
Results

 The company generated profit of $978 million in 2005.

 Mulcahy became one of the world’s most respectable leaders.

 She was named the fifth most powerful women in the world by Forbes
magazine.
 SWOT Analysis
STRENGTHS
 Strong brand

 Strong product development capability

 Distribution channels

 Dominance on the copier market

WEAKNESSES
 Weak operating performance

 Dependence on third party manufacturers

 Stagnant revenues from the office segment

Opportunities

 The color market

 Launch of carbonless paper

 Outsourcing revenues

Threats

 Intense competition

 Paperless offices

 Economic slowdown
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