strategy implementation_ anne mulcahy
DESCRIPTION
A case of xerox turnaround storyTRANSCRIPT
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LOGO
Anne Mulcahy: Leading XEROX through the Perfect Storm (A)
Submitted By: Group 5
Amit Baweja (306)Neeraj Gupta (320)Nishant Kumar (335)Kshitij Shukla (356)Marie Françoise Marcaggi (386)Tamara Mareschal (389)
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Contents
INTRODUCTION1
XEROX: HISTORY2
REINVENTION3
NEW STRATEGY4
NEW LEADER5
CHANGING LEADERSHIP AGAIN6
ANNE MULCAHY7
SURVIVAL?8
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Company Logo
Contents
THE OCTOBER 23 MEETING9
THREE STRATEGIES10
TURNAROUND STRATEGY11
EXECUTING THE PLAN12
THE BANKERS14
FINANCIAL CONDITION15
LEADERSHIP16
STRATEGY IMPLEMENTATION17
S.E.C13 Q n A18
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Company Logo
Introduction
• Anne Mulcahy: COO of Xerox Corporation• First Annual loss in 5 years• “Xerox’s business model is unsustainable”• Rumours by Reuters about company going to
declare bankruptcy• Stock prices fell to $6.88• Facing liquidity crunch• $ 18 bn in debt• Market capitalization dropped to $5 bn
• Outside advisors pressurizing to file bankruptcy to relieve Xerox from debt
• Mulcahy trying to avoid bankruptcy and get time to implement plans to restore the company’s former image
The Perfect StormThe Perfect Storm
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XEROX: History
• Started in 1959 with the model 914 copier
• 95% share of the plain-paper copier market share by 1970
1959 1968
Sales $32 mn $1.1bn
Employees Strength 900 24000
Get me 5 Xerox of my resume !!! Get the
notes Xeroxed !!!
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XEROX: History
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XEROX: HistoryCompany Logo
PARC
Idea of “Windowing” Computer Application
GUI
Computer Mouse
Ethernet Protocol
Laser Printing
Bit Mapping
OOC Languages
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Company LogoCompany Logo
Entry of new player like Canon, Minolta, Ricoh and Sharp
Monopoly of XEROX gone
Lawsuit Filed in Federal Trade Commission
Due to Overwhelming Success
REINVENTION
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Entry of new Players
License tech to Competitor
Lawsuit Filed
Anti-Monopoly Pressure
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REINVENTION
TEAM XEROX
Leadership through Quality
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REINVENTION• Profit growth very low, stalled in early 1990s
• Finding difficult to cut cost because• Employment level fixed by Union Contracts• Production was vertically integrated
• CEO Paul Allaire in 1992 created • Three geographically defined sales organizations selling
products from nine product divisions organized around market segments
• Individual balance sheet, income statement • Eliminated 10000 jobs and divested insurance business.
Company Logo
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REINVENTION
Company Logo
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NEW STRATEGY
Organized into four business division.
Production Printing and Retail channels business were two new division
Each Division used latest technologies in networking, color ink and digital processing
XEROX desktop printing business in direct competition with H-P
Company Logo
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NEW LEADER Late 1990’s investor expectation for XEROX ran high
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To Spark Profit & Stand
Expectation
Investor Expectation
High
Board brought Richard
Thoman as president
Get rid of slow and
cumbersome bureaucracy at
XEROX
Thoman excellent
performance at IBM
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NEW STRATEGY
Richard Thoman (CFO IBM) appointed as President.
4 Geographically oriented customer administration consolidated into 3 customer business center
Build service business through acquisition and buy out partners stake in overseas joint ventures
Fuji shares of Fuji Xerox
Stock price went up from $30 to $ 60.
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NEW STRATEGY
Issues due to reorganization: Sales reorganization led to
• Disrupted customer relationship• Sales team member lost year old client relationship• Sales team members left XEROX for another company
Administration Changes led to• Increased billing issues• More complicated pricing plans
Sales team looking for new business, had to cut prices sharply leading to decrease in profitable contacts
External Issue End of domination in production printing (Heidelberg, canon etc) Global financial crisis (ASIA to Latin America) Market Shift towards less margin product
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Early 2000 Stock declined from $60 to $20
CHANGE OF LEADERSHIP
AGAIN
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Thoman was just elected so there was no successor
Allaire suggested the name of Alan Mulcahy, president of General Marketing Organization (GMO)
Allaire resumed as CEO and Mulcahy as new President and COO
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CHANGING LEADERSHIP AGAIN
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ANNE MULCAHY
Started in sales (10 yrs) Early 1980, promoted to Management,
charged with organizing a sales team Promoted to VP HR in 1992 Joined Barry Rand (VP Worldwide Ops)
team in 1996 Became Chief Staff Officer in 1997,
reporting directly to CEO, Allaire Not much interested in the role of Chief
Staff Officer so grabbed an opportunity at GMO (Web & Retail sales)
Company Logo
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ANNE MULCAHY Launched SOHO (Small office and home
office) Venture in Desktop Printing Competed with Industry Leader H-P
Became COO in May, 2000 Assembled the team – met 100 top
executives (Leadership) Extensive fact-finding tours Visiting employee operations & major
customers Except SEC, dealt with everything Realized that everyone was unaware of
the seriousness of the situation XEROX was in
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ANNE MULCAHY
Leadership traits of Mulcahy Be informed Be calm and confident Provide clear direction Develop an action plan Leverage your supporters
Initial plan Save each dollar Personal attention to customer Incentive and benefits to sales team
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SURVIVAL?
• Liquidity crisis increased due to shrinking profits
• XEROX turned to short term debt to shave interest expenses
• The tactic of taking short term debt vehicles backfired due to drying up of commercial paper market
• Standard & Poor cut the company’s bond rating to A- and then to BBB, 1 step above junk
• Mulcahy publicly stated, “ The Business Model of Xerox is Unsustainable.”
Company Logo
THE BUSINESS MODEL OF XEROX IS
UNSUSTAINABLE
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SURVIVAL?
• Reuters reported rumors that Xerox was planning to file for bankruptcy protection
• Despite every setback, Mulcahy was firm on her stance to save the company
Company Logo
Company chose not to comment on thisCompany chose not to comment on this
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THE OCTOBER 23 MEETING
• Allaire, Mulcahy, and the executive team along with key advisors attended the meeting
• Agenda – Discuss ways to generate cash, restructure the business model, and invest for the future
• Opinions– CFO Romeril: Cut dividend from 20 to 5 cents, saving $ 400 mn
per year– External Advisors: File Chapter 11 bankruptcy– Ursula Burns: Less chance of protecting Xerox’s R & D budget
and field sales force
Company Logo
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THE OCTOBER 23 MEETING
• According to chief strategist Jim Firestone, Xerox faced “The Perfect Storm”.
• Suggested 3 options:– Sell assets and cut costs, continue to fund R & D and field sales
and service, to save the brand Xerox– Make deep cuts in R & D, product development, and field sales
and service– Declare Chapter 11 bankruptcy and then come up with an
aggressive turnaround plan
Company Logo
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LOGO
Anne Mulcahy: Leading XEROX through the Perfect Storm (B)
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THREE STRATEGIES
Implement asset sales of ‘live wood’ and painful cost cutting while continuing to fund R&D and field sales and service
Make deep cut in R&D, product development and field sales and service in order to save the company
Follow the recommendations of outside advisors to file for Chapter 11
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TURNAROUND STRATEGY
Sale of Productive assets to generate $2 -$4 billion in cash Sell China operations to Fuji Xerox Sell Portion of Fuji Xerox Sell equity stakes in its inkjet business Sell equity in PARC Sell Xerox financing division
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TURNAROUND STRATEGY
Cost Reductions Cut dividends Cut SGA by $600 million Cut $200 million in supply chain and
manufacturing cost. Eliminate world-wide service staff
organization. Restructure R&D cost. Cut Infrastructure and overhead by $200
million
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TURNAROUND STRATEGY
Strategy focused on Improved cash flow and profitability Strengthening core strategy Future focus on high-value, high-end
business
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EXECUTING THE PLAN
Senior Management focused on Gaining alignment around goals Implementing a clearer decision-making
process Communicating to employees Stopped issuing statements if nothing concrete
to say Establish clear responsibilities and lines of
accountability Hired consulting firm to analyze their business
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• Early 2001 announcement of cumulative $170 million in charges to correct accounting issues.
• Former employee sued Xerox for wrongful termination.
• He also informed SEC that wrongful accounting practices were being practiced throughout the company.
• Failed to file its 2000 Annual report on time.• Restatement of accounts from 1998 to 2000• After second quarter of 2001, eliminated
quarterly dividend• Fired KPMG as auditors and hired
PricewaterhouseCoopers.
Securities and Exchange Commission (SEC)
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THE BANKERS
$7 Billion credit line was held by a consortium of 58 banks.
Fully Utilized the credit line, and only a year left to renegotiate the revolving credit line.
Bankers petitioned to shut down the R&D.
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LOGO
XEROX: Financial Conditions
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FINANCIAL CONDITION3rd QUARTER 2000
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PROFITABILITY RATIO
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SHARE PRICE MOMENT
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PROBLEM
Xerox' total debt is $17 billion, including a $7 billion credit line
$2.6 billion in debt comes due this year
Cash in hand only $1.7bn
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FACTORS AFFECTING PROFIT
External Factors1)The strength of the dollar against
European currencies.2)High competition from Japanese rival3)Y2k fear4)Severe economic downturn in Brazil
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ASSET DISPOSITION
Goal:- To generate $2 to $4 bn in asset area
Option Revenue
1) Sell China and Hong Kong operation to Fuji Xerox
$550mn
2) Sell portion of Fuji Xerox to Fuji Photo film
$1.3bn
3) Outsource parts of manufacturing operations
4) Sell around engineering service business
5) Leverage asset of PARC by seeking Joint Venture with non-competitive partners.
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COST REDUCTION
Goal:- To reduce additional $1 billion in costs
Option Revenue
Cut dividend to 5 cents $ 400 Million
Cut infrastructure and overhead
$ 200 Million
Cut in supply chain and manufacturing costs
$ 200 Million
Cut SGA $600 Million
Narrow down research and development investment
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LOGO
LEADERSHIP
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A Leadership Story A group of workers and their leaders are set a task of clearing a road through a dense jungle
on a remote island to get to the coast where an estuary provides a perfect site for a port. The leaders organise the labour into efficient units and monitor the distribution and use of
capital assets – progress is excellent. The leaders continue to monitor and evaluate progress, making adjustments along the way to ensure the progress is maintained and efficiency increased wherever possible.
Then, one day amidst all the hustle and bustle and activity, one person climbs up a nearby tree. The person surveys the scene from the top of the tree.
And shouts down to the assembled group below…
“Wrong Way!”
(Story adapted from Stephen Covey (2004) “The Seven Habits of Highly Effective People” Simon & Schuster).
“Management is doing things right, leadership is doing the right things” (Warren Bennis and Peter Drucker)
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Personal Characteristics of an Excellent Leader
Anne Mulcahy was an excellent leader. This is because she had following traits of a leader.
She had: A vision and purpose Clear goals Strong commitment An understanding of change Active listening skills Confidence to take risks
She was: Excellent communicator / listener Able to speak clearly and effectively Resourceful Realistic
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The Art of Listening – Rather than wasting time on putting out fire, find out the source of fuel leakage
Instinct – Create clear accountabilityVision – Never forget real goalsResearch and Development – Keep
focusing on innovationCustomer Focus – Even in bad times, talk
to customersCommunication – Get people aligned
around a common set of objectives
Personal Characteristics of an Excellent Leader
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Behavioral Leadership Theories:Lewin Studies
Assume that there are distinctive styles that effective leaders use consistently, or, that good leadership is rooted in behavior.Basic Leadership Styles
Autocratic Style - the leader uses strong, directive, controlling actions to enforce the rules, regulations, activities, & relationships; followers have little discretionary influenceDemocratic Style - the leader takes collaborative, reciprocal, interactive actions with followers; followers have high degree of discretionary influenceLaissez-Faire Style - the leader fails to accept the responsibilities of the position; creates chaos in the work environment
Anne Mulcahy used democratic style of leadership, as evident by her way of decision making. Even in dire circumstances, she used to consult every opinion.
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Behavioral Approach: Michigan Study
High consideration(employee centered)
and
Low structure(job centered)
High structure(job centered)
and
High consideration(employee centered)
123
4Low consideration
(employee centered)
and
Low structure(job centered)
High structure(job centered)
and
Low consideration(employee centered)
Initiating structure(job centered) HighLow
Con
side
ratio
n(e
mpl
oyee
cen
tere
d)High
Low
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Fiedler’s Contingency Theory
Fiedler’s Contingency Theory - classifies the favorableness of the leader’s situation. Leader’s effectiveness is based on situational contingency which is based on 2 factors: Leadership Style and Situation Favorableness
Least Preferred Coworker (LPC) - the person a leader has least preferred to work with over his or her career.
Task Structure - degree of clarity, or ambiguity, in the group’s work activities. Position Power - authority associated with the leader’s formal position in the
organization.
Leader-Member Relations – quality of interpersonal relationships among a leader and group members
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Contingency Leadership Model
Question 1Are leader-member
relations good or poor?
Question 2Is the task
structured or unstructured?
Question 3Is position power strong or weak?
AppropriateStyle
Situ
atio
n
1 Task
2 Task
3 Task
4 Relationship
5 Relationship
6 Relationship
7 Either
8 Task
EndStart
Strong
Weak
Strong
Weak
Strong
Weak
Strong
Weak
Structured
Structured
Unstructured
Unstructured
Good
Poor
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Hersey-Blanchard SituationalLeadership Model
ImmatureEmployees
Low High
High
Low
MatureEmployees
Willing/Able Unwilling/able Willing/unable Unwilling/unable
4 3 2 1
Leader’s concern with task
Leader’s concern
with relationship
SOURCE: Adapted from P. Hersey and K. H. Blanchard, Management of Organizational Behavior: Utilizing Human Resources, 3rd ed. (Upper Saddle River, N.J.: Prentice-Hall, 1977),170.
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As a transformational leader,
I inspire and excite followers to high levels
of performance.
Developments in Leadership Theory
As a transactional leader, I use formal rewards
& punishments.
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Evans and House Path Goal TheoryThe theory states that a leader's
behavior is contingent to the satisfaction, motivation and performance of his subordinates
Identifies 4 types of leader behaviors: Directive Path Goal Clarifying Achievement Oriented Participative Supportive
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Leadership
“Good leaders don’t ask more than their constituents can give, but they often ask–and get–more than their constituents intended to give or thought it was possible to give.”
John W. Gardner,
Excellence, 1984
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LOGO
STRATEGY IMPLEMENTATION
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• Strategy for sustainability– Helped prioritize activities which looked at long term
effects rather than short term gains.
• Implement asset sales of ‘live wood’ and painful cost cutting while continuing to fund R&D and field sales and service.– Sale of Productive assets to generate $2 -$4 billion in
cash– Cut $200 million in supply chain and manufacturing cost.– Cut dividends, Restructure R&D and service staff.
Q1)What strategy is the general manager trying to achieve?
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• Marketing– Service staff and sales staff
• Manufacturing– Reduce costs– Stream line R&D– Focus on high end high value products
• Finance– Sell assets and equity in profitable ventures to generate
cash– Reduce dividends.
Q2)Which functional policies need to be implemented?
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• Making people aware of the situation at hand.• Made people publicly accountable for results and
established realistic goals.• Encouraged senior management to engage each
other directly.• Gave full support to sales staff.• Offered generous development and training benefits.• Started “Customer Officer of the Day” initiative at
corporate headquarters on a monthly basis.• Focus on remanufacturing.
What management systems and organization processes needs to be implemented?
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What misfits exist in the company?
• Not all the stakeholders were aware how big and serious the situation was.
• Did not plan for the competition in time i.e. strategy did not change.
• Reorganized sales force from geographic focus to industry focus.– Led to disgruntled staff.– Unhappy customers.– Loss of big clients.
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Strategic Survival of company
Organizational
Interpersonal People should not feel demotivated
What are strategic, organizational and Interpersonal considerations?
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Company was in a big trouble, where its survival was at stake.
All decisions and implementations had to be done immediately.
The number of stakeholders were huge.
Thus decision should not be taken alone.
Should the general manager make key implementation decisions alone?
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Turning Great Strategy into Great Performance
The strategy of the company should be clearly stated in a simple way and communicated to all the stakeholders
As Xerox is going through a rough patch, the turnaround strategy should be based on real achievable goals keeping into mind the core competencies
Resource deployment should be monitored regularly
Mulcahy should continue motivating the people so that they can work towards saving the company
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