Xerox Case Study Analysis

Raja Kurapati

Marketing 508 - 08/04/05

Xerox Case Study Analysis

Xerox's "Book In Time" is a revolutionary product, presenting some new opportunities for the company. It is simply a matter of costs. The Book-in-Time equipment allows for a publishing company to produce a 300-page book for $6.90, something which could have been previously reached only for lots larger than 1,000 copies. A significant decrease in publishing costs, given the fact that these cover up to 20 % (including the paper and binding the book), would create the possibility of an increased profit margin.

Book-In-Time solution provided by Xerox is one of the most efficient solutions for publishing companies running on demand for short-run books. The advantage gained by larger publishing and printing companies that may have achieved economies of scale with large print runs would be evenly compensated with the significant cost saving short run Book-In-Time technology.

Based on the analysis of the on demand conversion potential, several long-runs can be targeted by the Book-In-Time technology. For example, subscription reference have a 100% conversion potential, downside being it just covers 1% of market share. College, University press and Professional textbooks all have a demand conversion potential of 50%. Clearly conversion potential is a key component in estimating market size for Book-In-Time technology. In this sense we can estimate market size for on demand market would be 240,000 books per year. Details enclosed in appendix - 1

At the moment, Xerox had two clear distinct options. First option is to stick with what is best at printing, copying and delivering exclusively the Book-In-Time technology. Meaning, selling Book-In-Time equipment to all those elements of the value chain that may be interested. This includes publishers and printers (See Appendix - II for break even analysis).

Major advantage with this option is the fact that Xerox operates in the market it fully knows, dominates and controls. As a market leader, having gained clear edge over main competitor IBM, Xerox can consolidate its position with the introduction of innovative new product "Book-In-Time solution" that could significantly reduce the publishing costs.

Additional advantage with this option we see is that, as SteenBurg laid down the facts, this option provides a real synergy for the company, integrating several pieces into a significant system and allowing the company to gain more rather than operating them separately. Importantly, unlike other very successful products of Xerox, Book-In-Time solutions fits on a specific niche, operating most efficiently only for run lengths 1,000 or less. But, based on Table-D details, short-run digital printer happens to be economical beyond run lengths of 350 or more assuming that reductions in cost are uniformly distributed between run lengths of 100 and 500 (See Appendix - III for sweet point for run lengths).

The second option involves entering the book production business. But, its potential is unlimited. Here we are dealing with huge market consisting significant figures of 50,000 new titles and 1,500,000 repeat titles a year. Moreover, the market for on demand and short run books is extended beyond the life cycle of normal book. This makes market interesting in terms of extent it can expand to.

The main advantage with the option of entering into book production is size of the existing and potentially expanding traditional book market. On the other hand, major disadvantage in such an option is the fact that the competitors have already gained significant operating experience and a strong position on the market. Given the fact that first 12 publishes account for 85% share of US book publishing market, Xerox would find it difficult find the best niche into which to fit entire publishing activity. Interestingly, Xerox should also consider the channel implications for its customers.

Based on analysis and providing due considerations towards possible impact on customers as part of channel implications, the best action plan for Xerox at the given time is two pronged approach, a combined version of two options it has in hand. On one hand it can sell the equipment to the interested buyers from the value chain which they are good at. On the other hand find the entrance into publishing market. This involves dealing with channel implications for some customers by revising support costs and encouraging the competition by being fair (At least by not taking advantage of owning the technology). This option break evens at 3 machines ( See Appendix - II)

With the given approach, Xerox should consider a joint venture forward integrating into or acquisition of a publishing company. This way, it will be able to create positive synergy by bringing together company's equipment and solutions and the know-how