Xerox Case Analysis

Chace Estes,Benjamin Fieman, Greg Holt, Anthony Khors, Jasmine Olikh &

Natalie-Rosanna Rebot

Political

Transition in 2001

Both administrations placed a high priority on education and encouraged reading by increasing federal funding for libraries

Economic: GDP

Economy was strong during most of the Clinton years, but began to decline during his last year and again after 9/11. Economy was again robust during most of the Bush years, but again began to decline towards the end of his second term.

Social

• Shifting demographics led to higher enrollment in schools and colleges.

• Emphasis on education, reading

Technology

• Late 90s saw the dot com bubble inflate and burst

• Rise of the internet enabled consumers to buy anything online. Online Shopping became huge.

Value Chain of Book Industry

Printing Industry Analysis

• 323117 Books Printing• This U.S. industry comprises establishments

primarily engaged in printing or printing and binding books and pamphlets without publishing.

Printing Industry Analysis

Printing Industry Analysis

Publishing Industry Analysis

• 511130 Book Publishers • This industry comprises establishments known

as book publishers. Establishments in this industry carry out design, editing, and marketing activities necessary for producing and distributing books. These establishments may publish books in print, electronic, or audio form.

Book Publishing Industry Analysis

Size & Profit Margins

Industry Size Profit MarginAuthor N/A 10-15%

Printing $20B 6-7%

Publishing $23.1B 5%

Retailing (Specialty Retailers) $34.9B 3-5%

Book Value Chain (with Wholesaler)

Author Printer Publisher Wholesaler Retailer Customer

Price paid by customer$25

10 to 15% royalty

Opportunity cost

5% (60 cents)$23.1 Billion Sales48% to trade ($12)20% manufacturing20% author30% overhead25% costs of book returns

$20 billion industry$500-$750k capital + $5k overhead

1 to 2% Net margin$5 more thanpurchase price16% unit share

3 to 5%Net margin

$0.6

$5.75

$12

Profit

Value Added

$3

$2

$0.15

$5.65

$3.15

$0.5

$17$0.34

$4.66

$1

$7Lease costsOverhead

Book Value Chain (without Wholesaler)

Author Printer Publisher Retailer Customer

Price paid by customer$25

10 to 15% royalty

Opportunity cost

5% (60 cents)

$23.1 Billion Sales48% to trade ($12)20% manufacturing20% author30% overhead25% costs of book returns

$20 billion industry$500-$750k capital + $5k overhead

3 to 5%Net margin

$4.6

$5.75

$16

Profit

Value Added

$3

$2

$0.15

$5.65

$3.15

$0.5

$2

$7 Lease costsOverhead

Question 5• The publishing houses and printers with run lengths of 1000 and below

would be able to leverage the Xerox Book-in-Time printing platform.

• As a General Manager of Xerox BIT, I would sell this technology to those seeking to produce run lengths of 1000 and below. The pitch would reiterate the cost efficiency, flexibility, low set-up time and “on demand” benefits of the Xerox BIT.

• There would be a demand for about 25,000 such machines given current market conditions. These machines would ideally be sold to printers who wish to have “on demand” printing for low run lengths.

Amazon• Amazon eliminates the “middleman” in the value

chain and essentially takes over the job of the retailer.

• Amazon provides both economies of scale and economies of scope. This is due to the fact that such a large entity will have a great deal of bargaining power. Moreover, middleman markup charges are eliminated from the value chain and the end consumers are able to enjoy cheaper prices and better discounts.

Amazon in the Value Chain

Authors

Printers

Publishers Wholesalers

Amazon

Customers

Wholesalers

Amazon