Xerox's Downfall: How Market Leadership Was Undermined by Innovation Gaps

A Term Paper for the Course Subject

AE 05 – International Business and Trade

Submitted by:

Adorador, Kim Justin C.

Casi, Francine Rose P.

Mallorca, Cherryl A.

Parillo, Alleanna Marielle R.

Regorre, Aica Jinella P.

Submitted to:

Mr. Salvador B. Silva III, MBA (Course Professor)

December, 2024
 INTRODUCTION

Xerox Corporation, a global leader in document management and business solutions, has pioneered

printing and imaging technology development. Founded in 1906 as the Haloid Photographic Company,

Xerox revolutionized how businesses operated with the invention of the first plain-paper photocopier in

1959, the Xerox 914. This Innovation transformed office productivity and established the company as a

household name.

Over the years, Xerox has diversified its portfolio to include cutting-edge digital printing, document

management software, and IT services, catering to businesses of all sizes across the globe. The

company remains committed to fostering Innovation, sustainability, and Excellence, ensuring it stays at

the forefront of technological advancement in a rapidly evolving digital landscape.

This term paper explores Xerox's rich history, including its groundbreaking innovations and the evolution

of its business strategies. It also delves into the challenges that led to periods of failure, analyzing key

factors such as market competition, mismanagement, and strategic missteps. Additionally, the study

evaluates how Xerox adapted its strategies to maintain relevance and regain market share in a rapidly

evolving industry by applying certain strategies. By examining these aspects, this paper aims to provide

insights into the lessons that can be learned from Xerox's journey, offering valuable perspectives on

corporate resilience and Innovation in the face of adversity.

Company Profile

Xerox Corporation is a globally recognized leader in workplace and document management solutions.

Headquartered in Norwalk, Connecticut, the company operates across multiple sectors, including printing

technology, digital services, and IT solutions. Founded in 1906 as The Haloid Photographic Company,

Xerox initially focused on manufacturing photographic paper and equipment. Over the years, it has

become synonymous with Innovation in office technology, famously introducing the first plain-paper

photocopier, the Xerox 914, in 1959.

Xerox began by focusing on photographic paper and supplies, but by the mid-20th century, it pivoted

towards xerography, revolutionizing the photocopying industry. In the 1970s, Xerox made another major

leap by founding the Palo Alto Research Center (PARC), a hub for groundbreaking innovations such as

the graphical user interface, Ethernet, and laser printing. However, despite these technological

advancements, Xerox struggled to capitalize on these developments, failing to commercialize them

successfully. The company's decline was further exacerbated by strategic and managerial errors,

particularly in its approach to emerging technologies and competition in the computer market, leading to

missed opportunities and financial difficulties.

Core Business Areas of Xerox

Printing Solutions. Advanced digital printing systems, multifunction printers, and production printing

technologies. Managed IT Services and cybersecurity. IT infrastructure management and robotic process

automation.Global Business Services, the company is focusing on improving internal efficiency and

scalability by leveraging centralized processes and shared platforms.

Global Presence

Operating in over 160 countries, Xerox provides solutions to diverse sectors, including healthcare,

government, and financial services. Its broad reach allows the company to deliver impactful solutions

globally.​
 PRODUCTS/SERVICES OF XEROX THAT FAILED IN THE MARKET

Xerox Star (1981)

The Xerox Star was the first personal computer to feature a graphical user interface (GUI), a mouse, and

icons for navigation, laying the foundation for modern computing.

The Star was priced at a staggering $16,000, making it inaccessible to most businesses and consumers.

Competitors like IBM introduced personal computers for $1,600, offering similar utility at a fraction of the

price. Moreover, Xerox failed to market the product effectively and did not capitalize on the

groundbreaking potential of the GUI, leaving companies like Apple and Microsoft to dominate this space.

Laser Printers

Xerox pioneered laser printing technology, which could have been a cornerstone for its business. Xerox

did not aggressively market its laser printers or build suitable sales channels. The company focused on

selling high-margin, high-cost products, while competitors like Hewlett-Packard entered the market with

affordable laser printers such as the LaserJet. HP’s strategy captured market share rapidly, leaving Xerox

behind.

Ethernet and GUI Technologies

These were revolutionary technologies developed by Xerox's Palo Alto Research Center (PARC).

Ethernet became a standard for networking, and the graphical user interface revolutionized computer

interaction. Xerox lacked the strategic foresight to commercialize these innovations. The company

allowed competitors like Apple, Microsoft, and HP to capitalize on these technologies. For instance, Steve

Jobs famously visited PARC and implemented the GUI in Apple products, cementing Apple’s dominance

in the market.
Xerox Business Services (1990s)

Xerox expanded into non-core areas such as financial services, insurance, and business process

outsourcing, aiming to diversify its revenue streams. These ventures were a significant departure from

Xerox's core business of document solutions. The company lacked expertise and struggled to manage

these divisions effectively, leading to financial losses and reputational damage.

APPLICATION OF PORTER’s FIVE FORCES

The Five Forces Model, developed by Michael Porter, is a framework used to analyze the competitive

forces within an industry. Here is an analysis of Xerox's competitive environment using the Five Forces

Model based on the information provided:

Competition in the Industry - High

Xerox faced intense competition in the document management industry. Major competitors of Xerox

include Canon, HP, Ricoh, Konica Minolta, and many more. Xerox provides a large selection of products

and services they want. Also, competitors offer something similar. This results in price competition and

aggressive marketing strategies. Xerox must concentrate on Innovation to stay competitive, especially

regarding sustainability and digital transformation.

Bargaining power of Suppliers - Moderate

Xerox relied heavily on specialized components like toner, hardware parts, and software, making it

dependent on a network of expert suppliers. These components were essential for manufacturing

high-end copiers, printers, and digital solutions. Suppliers of licensed technologies often held significant

leverage, enabling them to charge higher prices, which could impact Xerox's profit margins. While Xerox
managed this dependency through its size, strategic alliances, and investments in Innovation, its efforts to

efficiently manage supplier relationships were unsuccessful.

Competitors like Canon and Ricoh developed leaner, more cost-effective supply chains, allowing them to

reduce costs and maintain consistent quality. This gave them a competitive edge over Xerox, whose

weaker supply chain strategies left it more vulnerable. Moving forward, Xerox's focus on maintaining

strong supplier relationships and reducing risks through strategic investments in Innovation remains

crucial to ensuring a stable and efficient supply chain.

Bargaining power of Buyers - High

Buyers in Xerox's markets, both individual consumers and businesses, had substantial bargaining power

due to the availability of alternatives. With companies like Canon and Ricoh offering cheaper, more

efficient options, customers were no longer tied to Xerox. Additionally, as businesses shifted to digital

solutions, the need for traditional copiers and printers decreased, further diminishing Xerox’s leverage.

Threat of Substitution - Moderate

The digital revolution significantly increased the threat of substitutes for Xerox's traditional products.

Cloud-based document management systems and electronic communication tools replaced physical

printing and copying. The trend toward paperless offices reduced the demand for Xerox's core offerings,

making substitutes more attractive to cost-conscious and environmentally aware customers.

Nevertheless, Xerox has counteracted this by expanding into digital transformation services and IT

solutions, partially reducing this risk.

Xerox initially enjoyed a dominant position in the copier industry, protected by its patents on xerography

technology. These patents created high barriers to entry, preventing competitors from entering the market

and helping Xerox establish its dominance. However, when these patents expired, the barriers to entry

significantly lowered. This allowed competitors like Canon and Ricoh to enter the market with more

affordable and efficient products, eroding Xerox’s market share. Additionally, Xerox’s inability to capitalize

on its groundbreaking innovations, such as those developed at its Palo Alto Research Center (PARC), left

opportunities open for newer players in the industry.

APPLICATION OF 7Ps

Product

Multifunction devices (MFDs), copiers, printers, and document management systems are just a

few of the items that Xerox provides to cater to the needs of companies of all sizes. Their

products serve office settings, production printing, and digital document management. Apart from

hardware, Xerox offers software solutions that assist businesses in streamlining operations and

automating procedures. Xerox wants to assist businesses in increasing productivity and efficiency

by concentrating on producing printing devices that are high-quality, dependable, and adaptable,

as well as tools to boost corporate productivity.

Price

Utilizing a value-based pricing approach, Xerox places its goods in the middle to upper price

range, contingent on the particular product and service level. This strategy considers the value

provided while guaranteeing that clients receive top-notch solutions. Particularly for printing

services, Xerox provides a range of pricing methods, including cost-per-page pricing, to meet
 various corporate demands. The organization employs subscription models for managed print

services, which provide enterprises with adaptable and expandable choices. Companies can

avoid significant upfront expenditures by leasing more expensive equipment from Xerox. Custom

pricing is also offered for large businesses or particular industries, providing solutions suited to

particular needs. For customers who need several machines or long-term service agreements,

Xerox offers volume-based discounts to serve larger enterprises better. This ensures

cost-efficiency and flexibility in their services.

Place

Xerox has a strong global presence, operating in over 160 countries, allowing the company to

reach a diverse customer base across developed and emerging markets (Xerox, 2023). Xerox

can efficiently distribute its products worldwide by utilizing a network of authorized resellers and

retailers to serve small enterprises and individual consumers, in addition to direct sales forces

aimed at major corporations. Customers who want to buy online can also use the company's

handy e-commerce option. Xerox maintains a strong presence worldwide by ensuring its products

are available to a broad spectrum of consumers in numerous geographic regions.

Promotion

Xerox effectively combines digital and traditional marketing techniques to sell its goods and

services. To reach a wide audience, the company advertises through various platforms, such as

print ads, trade exhibitions, internet media, and trade journals, by creating whitepapers, case

studies, and blog entries that illustrate how its solutions can solve corporate problems, particularly

document management and workflow automation. Xerox also makes use of content marketing. To

draw clients, Xerox discounts equipment upgrades, bundled service packages, and seasonal
 promotions. Additionally, the company sponsors conferences and business-related events and

forms strategic alliances with other tech companies to increase brand awareness.

People

The people component of Xerox's operations prioritizes its workers and clients, acknowledging

the value of knowledgeable staff and solid client connections. To guarantee high levels of

professionalism and experience, the organization makes training investments in its staff,

especially for those in customer-facing positions like sales and service. In order to deliver prompt

assistance, Xerox prioritizes customer support and provides a variety of support channels, such

as phone, online chat, and remote troubleshooting. Furthermore, Xerox depends on its

technicians, advisors, and salesmen as brand ambassadors who are essential in informing clients

about the advantages of its goods and services and guaranteeing that they get the ideal answers

for their requirements.

Process

The procedure used by Xerox is made to provide customers with smooth and effective

experiences in both purchase and service delivery. The business uses an organized sales

process, starting with preliminary questions and progressing to solution customization to satisfy

particular client requirements. Xerox uses cutting-edge production processes to guarantee that its

products are long-lasting, high-quality, and energy-efficient. Additionally, the business has built

procedures for maintaining and repairing devices, from routine toner replacements to remote

troubleshooting for business customers. Additionally, Xerox is dedicated to Innovation and is

always refining its procedures. For example, it has integrated automation and artificial intelligence

(AI) into its document management systems to increase efficacy and efficiency.
Physical Evidence

The tangible components that support Xerox's brand and product line are physical evidence. In

order to establish a consistent brand identity, the company's unique branding, including its logo,

colours, and messaging, is widely used on its packaging, websites, marketing materials, and

goods. Additionally, Xerox keeps branded showrooms and offices where clients may try and

experience its products directly. The gadgets' elegant and practical designs reflect the company's

dedication to quality and user experience. Furthermore, the physical state of Xerox's devices,

including their ease of use and maintenance, as well as its websites, product brochures, service

touchpoints, and other customer connection channels, all demonstrate the brand's dependability

and quality.

APPLICATION OF PESTLE

Political Factors

Stability- Currently, Xerox operates in regions with political instability due to internal and external

conflicts. If the company understands and manages these issues well, it may have difficulty

achieving its growth goals. This could also make management hesitant to invest in new projects

or expand their operations.

Transparency- Xerox faces challenges due to corruption and a lack of transparency linked to

political instability. Because of corruption, dishonest practices are becoming more common, and

important activities like licensing and contracting have become harder. Law enforcement is

weaker, which reduces trust in businesses and the government. The rise in bureaucratic

corruption is slowing economic growth, leading to fewer opportunities for companies like Xerox.
 Trade Policies - for Xerox, trade policies play a critical role in determining where it can expand its

business internationally. As trade agreements become more flexible or free, it becomes easier for

companies like Xerox to enter new markets. The region being considered for expansion is

currently making it easier for foreign businesses by reducing trade restrictions, which boosts its

appeal as a destination for Xerox's international growth. This change in trade regulations creates

better conditions for Xerox to expand operations and increase its market share in that region.

Economic Factors

Economic growth rate - when Xerox decides to expand into new countries, it needs to consider

how fast the economy in those countries is growing. Countries with a high growth rate offer more

chances for long-term success. On the other hand, countries with slow economic growth may

lead consumers to be more careful with their spending, which could affect how much Xerox

earns. A strong economy helps businesses grow, while a weak economy can make people spend

less, impacting sales and profits.

Inflation - rising inflation can negatively affect Xerox's revenue because it reduces the purchasing

power of money. As inflation increases, people and businesses are less likely to spend on

products and services, which can lead to lower sales for Xerox. In simpler terms, when prices go

up and money does not stretch as far, consumers tend to spend less, which can hurt a company's

ability to grow its revenue.

Demand and supply labour- Xerox's success depends greatly on having a skilled workforce. The

company needs to understand the demand and supply of labour—meaning, how many skilled

workers are available and how easy it is to hire them. If the labour market is tough or if workers'

unions are very strong, it could create problems. For example, unions might demand higher
 wages or even strike, which could disrupt production. Therefore, Xerox needs to monitor labour

market trends and adjust its hiring and talent management strategies to ensure it has the skilled

workers it needs without facing unnecessary disruptions.

Social Factors

Consumption Behaviour - consumption behaviour is closely related to economic factors. When

people have more money to spend and want to improve their lifestyles, it creates growth

opportunities for Xerox. It is easier for the company to introduce new products to customers

willing to spend more, leading to higher revenue. However, modern consumers are becoming

more demanding, so Xerox must pay attention to their spending habits and preferences. This will

help the company adapt its marketing strategies effectively.

Social Equality - Social Equality, or how society is divided into different social classes, affects

Xerox's business strategies, especially in marketing and managing employees. In countries with a

strong respect for hierarchy (where some people have more power and influence than others),

Xerox's business culture should fit with that by having a clear and formal structure in the

workplace.

Demographics - demographics, or the study of population trends, is important for Xerox's

strategy. A high population growth and a rising number of young people are good signs for Xerox

when targeting younger consumers with its products and services.

Technological Innovation - technological innovations play a big role in shaping markets and

industries. For Xerox, staying updated on emerging technology trends can help the company

develop new products, understand how long products will last, and identify what features

consumers like most. By looking at how people feel about new digital technologies, Xerox can

determine if moving to e-commerce (selling online) is better than opening physical stores.

Research and Development - research and development (R&D) is a key factor for Xerox's growth

and ability to innovate. By focusing on R&D, Xerox can create solutions that meet consumer

needs and stay competitive. However, the company needs to ensure that it fully understands how

emerging technologies can benefit its customers and drive business success. In markets where

disruptive technologies are a factor, Xerox must make significant investments in R&D. The

company needs to remember that these investments take time and do not necessarily lead to

quick profits, so it should have a long-term outlook.

Technological Infrastructure - Xerox should focus on expanding into countries with strong

technological infrastructure. When a country has a solid tech infrastructure, it makes it easier for

Xerox to cut costs, innovate, and create value. However, a well-developed tech infrastructure also

means that competitors can easily copy Xerox’s technological advances, which could make it

harder for the company to maintain a long-term competitive edge.

Legal Factors

Employment laws - For Xerox, it is important to ensure that their work environment meets safety

standards and that direct and indirect discrimination is avoided. This is not just about legal
 compliance but about building a strong employer brand that attracts and retains talented workers.

A reputation for treating employees fairly can help Xerox compete in the "war for talent", as skilled

workers are in high demand. In simpler terms, Xerox must ensure its workplaces follow local

worker rights, safety, and fairness laws. By doing so, they can attract and keep the best

employees, which is key for long-term success.

Consumer Protection laws - in the digital age, consumer privacy laws are especially strict, and

businesses like Xerox must follow these rules closely when handling online transactions to avoid

legal trouble. Xerox must make sure it follows all rules that protect consumers, including rules on

privacy, refunds, and pricing, to avoid legal problems and maintain customer trust.

Intellectual Property laws - intellectual property laws protect businesses like Xerox by ensuring

that their inventions, trademarks, and patents are safe from being copied by others. This

protection helps Xerox maintain a competitive edge in the market because others cannot easily

imitate its innovations. By following these laws, Xerox can secure its ideas and products, allowing

the company to grow and maintain its unique position.

Environmental Factors

Environmental Regulations - environmental regulations are strict in many countries, and

businesses like Xerox are under pressure to reduce their environmental impact. To meet these

regulations, Xerox should focus on responsible production, encourage eco-friendly habits among

its customers, and work on improving its image as a sustainable brand. By following

environmental laws and reducing harm to the planet, Xerox can avoid negative publicity and

maintain trust with customers and other stakeholders.

operates have the technology and infrastructure to support renewable energy. Some

governments offer subsidies or financial incentives for businesses to switch to renewable energy,

which could help Xerox invest in these sources and meet its sustainability goals. This would allow

the company to be more environmentally responsible and save on long-term energy costs.

Industry Norms for Recycling, Waste Management, and Resource Use - in many regions,

industries are adopting the principles of a circular economy, which focuses on recycling materials

and reusing resources to minimize waste. Some countries have strong systems to make recycling

easier, and sometimes, consumers are even involved in the process. Xerox can exploit these

trends by focusing on recycling, reducing waste, and optimizing resource use. It helps the

environment but also lowers Xerox's production costs by using materials better. In simple terms,

Xerox should look into using renewable energy and take advantage of recycling practices to help

the environment and reduce costs.

OTHER REASONS WHY XEROX FAILED

Xerox's rise as an innovator in the photocopying industry was unmatched, but its decline in the

international market is a cautionary tale of missed opportunities and internal inefficiencies. Despite

groundbreaking innovations and a strong start, Xerox needed help to adapt to changing market dynamics

and technological advancements. Its failure can be analyzed through three critical categories:

organizational, strategic, and management shortcomings. Each was pivotal in limiting Xerox's ability to

leverage its potential and compete globally.

significant role in its failure to adapt and compete effectively in international markets. One of

the main issues was the isolation of the Palo Alto Research Center (PARC) from the rest of

the organization. PARC produced groundbreaking technologies, such as the graphical user

interface and the computer mouse, but these innovations needed to be connected to Xerox's

core operations. This lack of integration prevented PARC's ideas from being effectively

commercialized, allowing competitors like Apple and HP to capitalize on Xerox's inventions​.

Additionally, Xerox suffered from a rigid corporate culture that resisted change and focused on

preserving traditional business methods. This "non-adaptive" culture made it difficult for the

company to respond to rapidly evolving markets and technologies. Rather than embracing

Innovation and transformation, Xerox prioritized short-term stability, which hindered its ability

to evolve and remain competitive​.

The need for more alignment between its sales-driven approach and research-focused

divisions further weakened the company. Xerox's sales teams prioritized xerography

products, often overlooking the potential of digital innovations developed at PARC. This

internal conflict created barriers to leveraging its advanced technologies in new markets.​

2. Strategic Failure - Xerox made a critical error by acquiring Scientific Data Systems (SDS) at

a steep cost, intending to break into the computer market and compete with IBM. However,

this acquisition needed to be better aligned with Xerox's vision of becoming a leader in digital

communications. SDS's niche market and operations were incompatible with Xerox's existing

technology base, and the acquisition resulted in significant financial losses. The inability to

integrate SDS's operations with Xerox's Palo Alto Research Center (PARC) further weakened

this strategic move​.

Another failure was Xerox’s hesitance to commercialize its groundbreaking innovations. For

instance, the company developed the graphical user interface and the personal computer at
 PARC, but management feared these technologies would cannibalize copier sales.

Consequently, competitors like Apple and HP capitalized on these ideas and captured the

market, leaving Xerox behind. Similarly, Xerox invented the laser printer but failed to

dominate this market, allowing HP to emerge as the leader due to better execution and

strategy​.

Xerox also should have paid more attention to the lower-end copier market, leaving it

vulnerable to competitors like Canon and Ricoh, who introduced cheaper, more efficient

alternatives. This oversight eroded Xerox's dominance in its core business. Additionally,

Xerox's reluctance to transition from analogue to digital products during the early stages of

the digital revolution further diminished its market position. The company's overreliance on its

traditional printing business while ignoring the shift toward digital and cloud-based solutions

resulted in losing relevance in the evolving global market.​

Finally, Xerox's focus on short-term financial metrics over long-term strategic goals prevented

it from investing adequately in product diversification and Innovation. This shortsightedness

limited its ability to compete effectively as the global market became more technologically

driven.

3. Management Failure - Xerox’s leadership made several key mistakes that contributed to its

decline in the international market. First, the company’s managers were too focused on

short-term profits and avoided taking risks. This meant they rejected innovative ideas, like

those from the Palo Alto Research Center (PARC), such as the graphical user interface and

personal computers. They feared these technologies would hurt copier sales, so competitors

like Apple and HP took advantage of Xerox's unused ideas and dominated new markets​.

Leadership was also divided, with some pushing for bold innovations while others stuck to

traditional, safe strategies. For example, decisions about new products were moved from

visionary leaders like Jack Goldman to managers focused only on costs and market data.
 This shift stopped Xerox from fully using PARC's advanced technologies, like the laser printer,

to grow the company.​

Another mistake was poor financial management. Xerox spent much money acquiring

companies like Scientific Data Systems (SDS), which did not need to match its goals. These

acquisitions drained resources without bringing real benefits. Additionally, the company did

not need to adapt to changes in the market, such as the rise of digital technology.

Competitors like Canon and Ricoh embraced new trends, like cloud-based services, while

Xerox stuck to its ageing copier business​.

Lastly, Xerox became too dependent on its success with copiers, falling into a "competency

trap." This means they were so good at one thing that they ignored other innovation

opportunities. Xerox could not compete in a rapidly changing world by not investing enough in

new technologies and failing to diversify its products.

RECOMMENDATION

Xerox must take concrete steps to regain its competitive edge and avoid past failures. First, it needs to

improve the commercialization of its innovations. Historically, technologies like the graphical user

interface and Ethernet developed at its Palo Alto Research Center (PARC), were not effectively brought to

market. To address this, Xerox should create a dedicated team to bridge the gap between Innovation and

commercialization, ensuring its technologies are accessible, affordable, and widely marketed.

Partnerships with leading technology firms can accelerate product launches and help Xerox capture

market opportunities more efficiently.

Additionally, Xerox should diversify its offerings beyond traditional printing and copying products to adapt

to the digital era. By expanding its digital transformation and IT services, Xerox can position itself as a

cloud-based document management and workflow automation leader. Investing in software development
and emphasizing sustainability—through energy-efficient products and recycling programs—can further

strengthen its brand and align with modern consumer expectations​.

Xerox must foster better integration between its research and development divisions, such as PARC, and

its core business to resolve internal organisational issues. Streamlining operations can ensure that

innovations are better aligned with market demands. Enhancing collaboration between sales and R&D

teams will also help prioritize forward-looking products over short-term sales objectives.

Lastly, Xerox should focus on strengthening its customer base by investing in marketing strategies and

modernizing its supply chain to improve cost efficiency. By implementing these changes, Xerox can

rebuild its reputation, attract new markets, and adapt to an ever-changing industry landscape.
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