Implementation, Strategic Controls, and Contingency Plans

 

Table of contents Executive summary Introduction Vision and Mission Statement for Xerox Company Xerox overall strategy Key problems faced by Xerox Strategic alternatives for Xerox Processes to address tasks of strategic management Roles played by management to direct the process The role of the Board of Directors in running the company Corporate governance issues for Xerox Company analysis SWOT analysis Financial Strategy and Analysis Summary Recommendation for future action Conclusion References A Helping Hand Executive summary The purpose of this research project is to inform the reader of how Xerox Company can be a good investment opportunity. Extensive research has portrayed Xerox as a company that has established a firm control in the services and technology industry through its marketable products like for instance copiers and digital printers. The company has in its growth, continued to partner with other firms like for example Fujifilm and Flextronics in order to increase its average return and its size. It is through the new leadership that the company has been able to place great emphasis on the employee voice and customer service through the Management by Objective and other relevant ethically focused processes. Xerox Company has had higher standards of business operations because of its repeated investment in the company and not only has it developed Information Technology based systems which have enhanced its ability to save money, but it has also been able to implement its products as well. This has enabled the company to save 120 million dollars last year. Xerox decided to reestablish its authority in the supply of office equipment after being faced with setbacks arising from legal issues. However, Xerox remains an excellent organization that any stakeholder can have advantage in investing in. A financial analysis of Xerox Corporation Introduction Xerox Corporation is a company based in the United States of America that develops and markets a variety of document equipments and services. It also offers digital systems like publishing and printing systems, digital copiers, fax machines, basic and advanced multi functional devices and digital presses. In addition to this, the company deals in workflow and software solutions that include personalized documents, route and scan digital information and print books. Xerox conducts its operations through 3 reportable segments which are production, office and other. Xerox Company has its presence which is felt in one hundred and sixty (160) countries worldwide. Xerox, as a corporation, was established in 1906 and it currently has its headquarters based in Connecticut. The company has over the years created relevant technologies in the printing equipment and therefore this has enabled it to become a market leader in the United States of America. Xerox Company has been able to give its clients products that have industry standards through their innovative solutions and that its name XEROX is sometimes substituted to mean photocopy. Moreover, Xerox Company has got product lines which suit different market segments like for instance Developing Markets Operations, Office and other equipments like facilities for lease. The Company’s products therefore include Photo copiers, LCD monitors, multifunction printers, workflow software known as FreeFlow, large digital printers and Xerox phaser printers. Xerox Company has established a new corporate strategy that has allowed it to become a major market leader in color printing and as such, the company has heavily invested in distribution networks and technology in order to make the company retain its position as a market leader in medium and small offices by acquisition of the GIS (Global Imaging systems), inc. further, Xerox Company is striving to be a major supplier for big corporations. Xerox mission and Vision Statement Xerox mission statement is based on their strategic intent of helping people in finding better ways of doing great work through leading in products, document technologies and services that enhance their customers’ business results and work processes. Xerox company therefore operates on six core values of succeeding through satisfied customers, delivering excellence and quality in everything they do, requiring premium return on their assets, , using technology to develop market leadership, valuing their employees and behaving responsibly as corporate citizens. Xerox Overall strategy Xerox Corporation aims at establishing digital solutions in order to attain its full benefits for the business and corporate reeducation is therefore a major step forward in helping Xerox Corporation to attain computer revolution. Old methods of selling office equipments and later enjoy annuity income obtained from the sales of toner, paper and service have quickly receded. One of the examples of inroads digital technology is the ease through which PC printing is easier in an office. Not only has Xerox Corporation recognized the need for overhauling its electromechanical machines but it has also pursued an ambitious plan aimed at digitizing the corporate paperwork of the world by attempting to capture a large part of the printing and photocopying business. Xerox is therefore calling itself as “The Document Company” to signal the shift that it is not only a mere copy machine producing company and this is reflected in its new logo which has an a single X that is partly printed through digital style squares. This strategy started in 1990 when the company introduced mammoth machines known as Docutechs which cost to around 300, 000 US dollars each. These documents could easily scan the paper documents and later convert them into digital codes of 1’s and 0’s. The coded pictures or texts which are in digital form can then be easily modified, printed, sent over computer networks and be stored. These machines have therefore proved to be a big success for Xerox through increased sales which are expected to hit 1.5 billion US dollars this year. However, despite of acquiring these Docutechs, Xerox still relies on its traditional stand alone copiers which account for 80 per cent of the company’s major non-financial service revenues of greater than 14 billion dollars. By the year 2005, digital products had already accounted for the major sales of its business. Key problems faced by Xerox Xerox Company experienced various problems experencied by other companies in the 1980’s in a hanging economy which had declining profits and declining market shares. The Xerox company therefore coped with its problems through mananing change which altered the way leadership viewed business and leadership styles which addressed business issues and problems. This application of these processes therefore led to a more successful business ooperation. Other organizations have also used similar strategies in shaping management for leadership structures which were more committed to achieving quality than responding to other crises. Such efforts included reducing the workforce which was applied by around 500 Fortune companies. This processs comprised a shift from the corporate culture through various ways through consequence and sometimes through deliberation. Xerox company faced a decline in profits despite having been the market leader in plain paper copiers and it was not even ready for the influx of competition that came from Japan. The company therefore resorted to a survival strategy that comprised improvement of quality both as a process for internal change and as a marketing goal which eventually helped the company to revitalize its approach towards human resource management, operations and marketing all over the world. This method is known as leadership through quality and it corresponded to another management style called total management quality. Strategic alternatives open to Xerox Indeed, a majority of companies are today struggling with looking for new ways in dealing with issues of human resource management just like Xerox did and innovation has been encouraged as the ultimate solution towards such problems. When faced with disasters, majority of companies will tend to be more innovative because that will be the only option or lest they die. The use of innovation by Xerox Company therefore helps it in solving problems through the use of incentives, relation of teams which are responsible forgetting specific innovations, the establishment of innovative strategies and increasing emphasis on development and research. Introduction of team techniques like for instance like total quality management and management cycles are also solutions towards coping with a company’s problems. The challenge that Xerox Company and the management faces is challenging, complex and not unique at all. Xerox company has always been depending on the its highly trained sales employees to get a profit on their current products and they had not even focused on new products until they developed the e-book. It was this revolutionary product that provided the company with new opportunities because the product yielded costs by allowing a publishing company to produce a large booklet at low costs, something that could not have earlier on been achieved. The innovation of this product therefore resulted in a significant decrease in costs incurred for publishing because this covered 20 per cent inclusive of the paper and binding all together. The possibility of creating an increased profit margin arose. The Book-in-Time solution also provided Xerox Company with efficient solutions for publishing organizations running on demand short books. Printing or publishing companies which were incapable of achieving large economies large economies of scale using large print turns were threatened by this innovation which was capable of providing a cost effective and low print run books. Social and Ethical Responsibility of the Company In its Annual Report in 2007, the Company highlighted its strategy in meeting both social and environmental obligations as a way of doing business and strives to maintain highest standards in order to preserve and protect their environment and enhance the safety and health of their employees and the communities in general. Xerox Company therefore has clear cut guidelines for safety governance and environment health that are readily available on its website, www.xerox.com . The policies of Xerox Company are created in such a manner as to ensure that the company’s business processes and practices which include manufacture, design maintenance, distribution, recycling or reuse, procurement, marketing distribution and other related services are of help to the environment and does not endanger or damage it. The company has therefore positioned itself well in the market to be a supplier and manufacturer of eco-friendly printing solutions for many organizations. In the year 2007, Xerox company spent US$148 million to sustain re-engineering as compared to US$161 million that was spend in the year 2006 to meet environmental compliance. Tons of papers are each year used for printing and when they are destroyed, they have adverse effects on the environment. Xerox Company has therefore developed ne solutions aimed at cartridge free printing and even went ahead in implementing other programs that include the collection of related used equipments after the end of use period. The waste free packaging procedure allows clients to be able to return the materials used in packaging and therefore this technological innovations helps in the creation of an erasable paper which copiers are capable of cutting down sharply the harmful effects that the paper causes on the environment. Financial overview of Xerox Company According to Appendix 1, Xerox Company posted strong financial yet again in the year 2007because of the technological innovations which the company has over the years continued to offer to its clients through both software and products which allow companies to enhance their operations and therefore cutting down on cost. In the year 2006, Xerox Company’s sales increased from 9.75 per cent to US$8192m as compared to 400m got in the year 2005 and US$4,803m obtained in 2006. The administrative and general expenses alongside the selling have increased by 7.58% to 312 million US dollars after showing a decrease of -2.48% in 2006. Xerox Company has posted a substantial growth of 77.97 per cent from its income which arose from continuing operations that currently stand at US$ 1,438 million as compared to 808 and 830 million US Dollars that was gained from the year 2005 and 2006 respectively which emerged because of the readjustments in income tax during the earlier years’ payments. In 2007 however, the provision of income tax has been 400 million US dollars which implies an increase o 238.89 per cent compared to last year. Because of selling of the non-profitable assets for the company in the year 2005, income obtained from discounting operations was US$ 53 million. However, Xerox Company has showed a decline in its net income because of the provision for income tax that has been credited to the income of last year and the debit entry that was made to this provision in 2007. Ratio analysis The Xerox Company’s financial statement analysis during the 2005-2006 is contained in Appendix II and this analysis has been divided into 3 different areas of analysis namely, solvency, profitability and liquidity. Liquidity ratios are meant to evaluate a company’s ability in paying its liabilities for short obligations. The current ration for Xerox Company has remained stable for values ranging from 2.00 in 2005 and in 2007, a value of 2.10. Any current ratio that is above 1 is a clear indicator that Xerox’s current assets are higher than its current liabilities and therefore the company will have no problems in settling its current liabilities in any case they decline. A more focused quick ration which indicates a lover value in 20007 of 1.77 will still imply that the value will be higher than one and thus enhancing the outcome of the current ratio. This therefore implies that Xerox Company shall have no problems regarding liquidity. A company having higher current assets implies that it may also encounter problems with its high inventory and receivables which may eventually cause problems for an organization in future. This is confirmed by the low receivable turnover ratio which was calculated to stand at 3.33 in the year 2007. This is clearly represented by the high value of receivables that Xerox Company has in its annual report which stand at, 2,457 and 037 million dollars in 2007 and 2006 respectively. The average collection period is approximated to about 100 days and this seems to be extra ordinarily high for a company dealing with the production of software and office equipment. Similar results are also obtained from low inventory turnover that stands at 4.26 indicating an improvement from 4.06 and 4.01 in the years 2006 and 2004 and therefore portraying that Xerox Company may be holding onto large quantities of finished products. This may prove difficult for the company to sell such products. The average age of Xerox Company’s inventory is about eighty five days which has reduced from the 89 and 91 days in the years 2006 and 2005 respectively. This is also a clear indicator that Xerox Company may still be holding on large quantities of inventory and therefore experiencing difficulties in transforming its completed sales. The solvency ratios for the company give a good evaluation for Xerox Company’s capability in generating enough funds to use in paying off its debts. A high total assets or total debt is an indicator that the company has got high liabilities of between 17, 228 million dollars in the year 2007 and this represents a ratio of 73.18 per cent as compared to 32.91 and 33.15 per cent in the years 2006 and 2005 respectively. Xerox Company is however making sufficient net income which it uses to pay interest payments which indicate times interest ratio standing at 1.96, 2.22 and 1.76 in the years 2007, 2006 and 2005 respectively. The profitability ratio for Xerox Company implies that the pricing strategy means that there is a high profit margin for the company’s sales with a GPM (Gross Profit Margin) ratio standing at 40.30 per cent in the year 2007. The net profit margin obtained by Xerox Company of 6.59 per cent in the year 2007 indicates that the organization is incurring a higher selling, administrative and general expenses. However, the asset turnover for the company remains healthy at about 73 per cent in the year 2006 and 2007 and the return on assets shows a slight decrease of 4.82 and 5.57 per cent in the years 200 and 2007 respectively. Company analysis Xerox, as company has got its own internal strengths and weaknesses and the environmental opportunities and threats that the company faces. Through the SWOT analysis, Xerox managers can quickly and effectively create an overview of the company’s strategic situation. This is because an effective strategy is obtained from a good fit between the company’s internal resources and its external situation. Xerox Company, known as a supplier for printers, photocopiers and other document systems provides one of the broadest document industry’s portfolio of offerings. Strengths, Weaknesses, Opportunities and Threats for Xerox Company Location of factor | Type of factor | | Favorable | Unfavorable | Internal | Strengths -Strong R and D capability-strong brand image.-wide product portfolio. | Weaknesses-Litigations.-Weak Financial performance.-High dependence on third parties.-High Dependence on mature markets.| External | Opportunities-Color peripherals market.-Expansion in midsized and small business markets.-Acquiring of XMPie and Amici. | Threats -EU WEEE directive.-International Business risk. -Intense competition.| Xerox company therefore has numerous strengths ranging from : the company has a strong corporate brand that is synonymous with its items i.e. Printers, fax machines and copiers through which it provides a variety of software solutions, document equipment and services and it also gives its clients a 100 per cent of recycled paper. Xerox Company also develops efficient solutions for organizations in the world through provision of environmental initiatives and technical support and thus helping companies achieve their environmental targets. Xerox Company has got a robust environmental focus through which it has developed into its own strategies of operations that are focused on initiatives that have saved it from a lot of funds. Xerox Company is known for its reputation for high quality management and innovation and it heavily invests in development and research in order to update itself with market requirements for ever changing products that have both technological and environmental features and benefits. The benefits arising from recycling of copiers, toners, papers and other equipment through the company’s internal policy ensures that these environmental solutions are passed to its customers. Some of Xerox Company’s weaknesses is that it carries out its operations in a fast paced, ever changing dynamic which places a high pressure on the development of products that focus on the innovative feature design and they as a group, invest only 1-2 per cent on Development and Research budget on their product line dealing with environmental developments and therefore opting to focus on the major driver of the market that is an advancement feature. Some of the opportunities that the company could seize is that it can achieve a competitive edge in the market place by focusing on research and development aimed at environmental features of products which will help the company to meets its higher environmental product grades. Since the company already gives support to organizations in order to meet their environmental needs, these could be included as a benefit package for organizations to enhance their environmental stratagem. However, the growing pressure on organizations to be carbon neutral and have tangible and efficient strategies in their operations has an effect on each level of the demand and supply chain in each and every business. This is a threat to the company. This may result in Xerox Company investing more funds in research and development of products and components which are environmentally focused which may provide them and eventually determine a greater competitive edge to attract the future client. Because of the harsh economic conditions that companies are facing, most of them have opted to realign, reassess and streamline their operations through reducing their operational costs of their practices and this leads to a reduction of budgets across the board. This eventually leads to having adverse impacts on office equipment, technical support and office solutions. Together with environmental commitments, organizations may opt to recycle and reuse instead of renewing the current products. Because of the downturn in sales because of financial constraints, new businesses may restrict budgets and put pressure on design and development alongside innovation of environmental research and development and new product features which are crucial for today’s retail and corporate consumer. This is because emphasis is placed on all products ready for market on the capacity and technical features which enable them to be reused and recycled. Conclusion Xerox Company should consider reviewing its receivables collection, credit terms and inventory management policies. Failing to hold the company’s inventory into sales could land Xerox Company into problems because its heavy reliance on external financing facilities could result into higher interest payments for the company. The company is however performing well because it has been capable of transforming positive cash flows from its operating activities and the company is further operating at high profit margins despite of the heavy competition it faces at the market. However, Xerox remains a valuable company that one can invest in because it has a commanding lead in the field of office technology and it has exhibited an effective marketing strategy through provision of ground breaking items through a continuous expansion of the customer base. The company’s stock is quickly and frequently making returns for its investment for the company’s shareholders. Through dedicated leadership and strategic management, the company has been able to restructure its priorities by placing employee culture and customer service before and everything else. Xerox as a company, also appreciates the importance of its workers as being a valuable line of communication for customer satisfaction and the general public image. Xerox has apart from investing highly in development and research also created a strong public image in order to create innovative new products that suit the customers. It is through these information technology based products that Xerox has been able to streamline its business operations and therefore helping the company to save substantial amounts of money.