Harvard Case - Xerox and Leasing in the Copier Industry
"Xerox and Leasing in the Copier Industry" Harvard business case study is written by Adam Brandenburger, Vijay Krishna. It deals with the challenges in the field of Negotiation. The case study is 3 page(s) long and it was first published on : Feb 12, 1990
At Fern Fort University, we recommend that Xerox continue to aggressively pursue its leasing strategy as a core component of its competitive strategy. This strategy should be further enhanced by leveraging technology and analytics to optimize lease terms, manage risk, and enhance customer service.
2. Background
This case study examines Xerox's foray into the copier leasing market in the 1970s. Xerox, initially a dominant force in the copier industry, faced increasing competition from Japanese companies like Canon and Ricoh. To maintain its market share and profitability, Xerox adopted a leasing strategy, offering customers the option to lease copiers instead of purchasing them outright. This strategy, while initially successful, presented Xerox with several challenges, including managing a large and complex lease portfolio, navigating changing market dynamics, and adapting to technological advancements.
The main protagonists in this case are:
- Xerox: The established industry leader facing fierce competition.
- Canon and Ricoh: Japanese competitors challenging Xerox's dominance.
- Customers: Businesses and individuals seeking efficient and affordable copying solutions.
3. Analysis of the Case Study
Porter's Five Forces Framework:
- Threat of New Entrants: High, due to the relatively low barriers to entry in the copier industry.
- Bargaining Power of Buyers: High, as customers have numerous options and can easily switch suppliers.
- Bargaining Power of Suppliers: Moderate, as the industry relies on a limited number of component suppliers.
- Threat of Substitute Products: Moderate, as alternative technologies like digital printing and online document sharing emerged.
- Competitive Rivalry: High, as the industry was characterized by intense competition and price wars.
Financial Analysis:
- Leasing provided Xerox with a consistent revenue stream: This helped mitigate the cyclical nature of the copier industry.
- Leasing allowed Xerox to offer more affordable access to its technology: This attracted customers who might not have been able to afford outright purchase.
- Leasing facilitated the rapid obsolescence of older models: This encouraged customers to upgrade to newer, more profitable models.
Marketing Strategy:
- Xerox leveraged its brand reputation and strong customer relationships: This helped secure initial adoption of its leasing program.
- Xerox focused on providing comprehensive solutions: This included not only the copiers but also maintenance, supplies, and service.
- Xerox targeted specific customer segments: This allowed for tailored marketing campaigns and pricing strategies.
Operational Challenges:
- Managing a large and complex lease portfolio: This required robust systems for tracking leases, managing payments, and handling defaults.
- Adapting to technological advancements: Xerox had to constantly innovate and upgrade its product offerings to remain competitive.
- Balancing cost efficiency with customer service: Xerox needed to find the right balance between minimizing operating costs and providing excellent customer support.
4. Recommendations
Embrace Technology and Analytics: Xerox should invest in advanced technology and analytics to optimize lease terms, manage risk, and enhance customer service. This includes:
- Predictive analytics: To forecast lease demand, identify potential defaults, and optimize pricing strategies.
- Automated lease management: To streamline lease administration, reduce errors, and improve efficiency.
- Customer relationship management (CRM): To personalize customer interactions, track service history, and identify cross-selling opportunities.
Develop a Flexible Leasing Model: Xerox should offer a range of lease options to cater to different customer needs and risk profiles. This includes:
- Short-term leases: To attract customers seeking flexibility and lower upfront costs.
- Long-term leases: To provide stability and predictable costs for businesses with long-term needs.
- Customized lease options: To tailor lease terms to specific customer requirements and industry needs.
Focus on Customer Service: Xerox should prioritize customer satisfaction by:
- Providing prompt and reliable service: This includes timely maintenance, repairs, and support.
- Offering proactive support: This includes anticipating customer needs and providing solutions before issues arise.
- Building strong customer relationships: This involves fostering trust, understanding customer needs, and providing personalized service.
Leverage Strategic Alliances: Xerox should explore strategic alliances with complementary businesses to expand its product and service offerings. This includes:
- Partnerships with software companies: To integrate document management and workflow solutions with Xerox copiers.
- Collaborations with IT providers: To offer comprehensive IT solutions that include hardware, software, and support.
- Joint ventures with other industry players: To access new markets, technologies, and resources.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies: Xerox's core competencies include product development, manufacturing, and customer service. These recommendations leverage these strengths to enhance its leasing strategy.
- External customers: The recommendations focus on meeting the evolving needs of customers seeking flexible, affordable, and reliable copying solutions.
- Competitors: The recommendations aim to position Xerox competitively against Japanese rivals by offering innovative leasing models and superior customer service.
- Attractiveness: The recommendations are expected to enhance Xerox's profitability by optimizing lease terms, reducing operational costs, and increasing customer retention.
6. Conclusion
Xerox's leasing strategy, when effectively implemented and continually adapted, can be a powerful driver of growth and profitability. By embracing technology, fostering customer relationships, and leveraging strategic alliances, Xerox can solidify its position as a leader in the copier industry.
7. Discussion
Alternative Options:
- Exiting the leasing business: This would have simplified operations but would have also resulted in lost revenue and market share.
- Focusing solely on selling copiers: This would have reduced the complexity of the business but would have limited Xerox's ability to compete with rivals offering leasing options.
Risks:
- Technological obsolescence: Rapid advancements in digital printing and document sharing could render Xerox's technology obsolete.
- Economic downturn: A recession could lead to a decline in customer demand for copiers and leases.
- Increased competition: New entrants or aggressive pricing strategies from rivals could erode Xerox's market share.
Key Assumptions:
- Continued demand for copiers: The recommendations assume that there will be continued demand for copiers, particularly in businesses and organizations.
- Technological advancements: The recommendations assume that Xerox will be able to keep pace with technological advancements in the copier industry.
- Customer preferences: The recommendations assume that customers will continue to value flexibility, affordability, and reliability in their copying solutions.
8. Next Steps
- Develop a comprehensive technology strategy: This includes identifying and implementing the necessary technology and analytics solutions.
- Pilot test new lease models: This allows for evaluating the effectiveness of different lease options before widespread adoption.
- Strengthen customer service capabilities: This includes investing in training, technology, and processes to enhance customer satisfaction.
- Establish strategic alliances: This involves identifying and negotiating partnerships with complementary businesses.
By taking these steps, Xerox can enhance its leasing strategy and position itself for continued success in the evolving copier industry.
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Case Description
Describes Xerox's "rental only" policy for its machines during the period when it had a monopoly of the plain paper copier market and how that policy changed once it was faced with entry by IBM, Canon, Kodak, and others. Data on the breakdown of Xerox's revenues between sales and rentals are included.
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