High Cost Xerox Essay Example | Topics and Well Written Essays - 1750 words

High Cost Xerox - Essay ExampleAccording to Slatter, there are six major sources of cost disadvantage which can lead to a firm having to charge higher prices than its competitors.Let us analyze and apply the six factors illustrated by Slatter, to the Xerox corporation to get a better picture of the negative consequences of high over head costsDue to staggering assets and supranational ventures that this pine standing company had accumulated over the past few decades, Xeroxs cash position had become tenuous. Its liquidity had deteriorated to the point where capital markets froze Xerox out. Cash is queen regnant in an economy in recession. like in 2000,and Xerox was crippled with assets without cash flow. High overhead costs piled up due managements obsession with expensive quality control measures during a fairly weak financial position. A perfect quality index while being admirable ,costs a carry on of money. The trade-offs associated with 100% quality be to be too large ,leadi ng Xerox to increase its pricing scheme ,thus creating a negative competitive position. Some international and even local markets were not willing to pay the price for quality especially when Japanese low cost ,high quality products began invading the market. Xeroxs biggest weakness proved to be its financial situation, and specifically the heavy debt and the low profitability.The organization was too large leading to huge over head costs.Unlike its competitors who were concentrating on more progress and diversified technology, Xerox employees were living in the past inspite of Xeroxs attempts at diversification.They still were focused on being a copier company rather than a profitable documentation company or a modern information technology company. This resultant roleed in loss of direction .Like all giant companies, it was difficult for apt innovators and entrepreneurs to survive, and instead the mediocrity had taken over and threatened the company from the inside. The once th riving copier division was still too influential and vetoed other forward-looking projects .(Johan Olsson,january 1996). This made Xerox have weak credibility on the IT-business side lending it a less sophisticated image than its competition.2. Absolute cost disadvantages which result from competitors controlling strategic variable not available to the firm itself Let us take the example of the Japanese company Canon,which proved to be Xeroxs biggest and cleverest opponent. As a late entrant in the copier market, Canon was forced to concentrate on niches where Xerox was weak. One of these was the low end, which Canon attacked with a serial publication of progressively smaller machines, culminating, in 1982, with the launch of the personal copier. Copiers were notorious for breaking down, a propensity Xerox exploited by charging for service calls. Canon completed that to be successful, a personal copier would not only have to be cheap, it would also have to be virtually service fre e. Canons revolutionary dissolving agent was to include all the key components - drum, charger,