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Please read the attached two cases (Ricoh, and Cheateu) and Threadless website (https://www.threadless.com/) and answer the questions below:The assignment requires applying the course concepts from the class session. Please see the attached powerpoint slides from each session and and apply core concepts while answering each question.Individual Assignment QuestionsQuestion 1A (Recommend about 2 pages) 20 MarksCompare and contrast the outside-in readiness of Ricoh Canada and Chateau Margaux at the time that each respective case was written. After comparing each company, provide your assessment of which organization, Ricoh or Chateaux Margaux, is in the best position to deliver value to their customers.Question 1B (Recommend about 1 page) 10 MarksFor the company that you felt is the least outside-in driven (Ricoh or Chateau Margaux), what do you believe is the single most important thing that organization should do to move to become more outside-in driven. Justify why you believe that this is the single most important move. Question 2A (Recommend about 1 page) 10 MarksFor an entrepreneurial initiative, Threadless has seen significant success over the years. There are many reasons for this, but from a customer value perspective, what has been their innovation?Question 2B (Recommend about 2-3 pages) 30 MarksRefer back to the company you identified in Question 1(B) (as being the least outside-in driven). Provide a complete customer value profile and assessment of value priority of one segment that you feel is core to that organization’s (Ricoh or Chateau Margaux) future success. (If you are analyzing Chateau Margaux, stay focused only on the third wine option.) Be sure to justify your customer value analysis by drawing information from the case study as well as drawing on as many course concepts as is relevant in order to provide a rich understanding of the customer value and priority. Question 3 (Recommend about 3 pages) 30 MarksFor the company that you discussed in questions 1(B) and 2(B), describe the Business Model that you believe that company (Ricoh or Chateau Margaux) will have to put in place in order to deliver value to the customer you profiled in Question 2B.Total 100 Marks All answers are to be written in 12-point font, double spaced, 1 inch margins.Notes:Grading is based on how well you apply the course concepts in order to provide insight into the corresponding questions being asked about that case. An expectation in this individual assignment is that you are able to draw on the appropriate course concepts in order to address the questions at hand. If you draw on too many (unrelated) concepts (i.e. the “everything but the kitchen sink” approach), this will detract from the clarity of your analysis. On the other hand, not drawing on all relevant concepts for that question will lead to an incomplete analysis. Session 6 and Session 2 have several key concepts. I prefer using 3 or 4 major ones from these sessions
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A09-15-0006
Prescott C. Ensign
Jonathan Fast
Ricoh Canada Inc.
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In January 2013, Glenn Laverty, President and CEO of Ricoh Canada Inc., was going to meet with his executive management team to develop the company’s strategy for the next three years (see Exhibit 1). Ricoh Canada
Inc. (RCI), a wholly owned subsidiary of Ricoh Americas Corporation, had its head office in Toronto, Ontario,
and employed over 2,100 people in Canada. Its parent, Ricoh Company Ltd., headquartered in Japan, was an
international leader in the digital imaging and document management industry. It operated in more than 200
countries and regions, and employed over 109,000 people worldwide. Ricoh Company Ltd. had worldwide
sales of US$23 billion in FY2012.
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RCI was facing saturation in the market segment that was its primary source of revenue—delivery and
maintenance of printing/copying devices to customers. Canon and Xerox were both strong competitors in this
segment, and Laverty was concerned: “We will see an increasingly rapid shrinkage in our traditional market
during the next five years.” Areas of opportunity included document management systems and IT services. RCI
defined services as a combination of onsite and offsite resources that supported business operations infrastructure.
These resources included cloud computing, remote monitoring, and other innovations. RCI could have used this
technology to make customer information more secure, mobile, and personal.
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Background
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Laverty openly admitted his dilemma with services by saying, “What services to develop further and how
aggressively to market them is still an unknown.” He knew providing more services would require additional
investment, but the questions of how much and to what area were the real issues. Given RCI’s current financial
position, how realistic was it for RCI to transition to a services company?
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Ricoh Canada Inc. adopted its current name in 1997, but had been operating in Canada under various names
since 1924. RCI was a sales organization that used a lease and service model with its office imaging equipment.
All the equipment was manufactured in Ricoh’s high quality and efficient facilities in Japan. A transfer pricing system was used when product was shipped from the parent corporation to its subsidiaries. To summarize,
RCI’s focus was on using its direct channel and dealer network to sell and service the inventory coming from
Japan. RCI moved into digital printing in the 1990s and became a dominant player in the Canadian market. It
accounted for 25 percent of Canadian market sales in the high-end multifunction product segment in FY2012.
In August 2008, the parent company, Ricoh Company Ltd., acquired IKON Office Solutions (IKON)
for US$1.6 billion. IKON was the world’s largest independent provider of document management systems
and services. It used copiers, printers, and multifunction printer technologies from leading manufacturers, and
document management software and systems from companies like Captaris Inc., Kofax Ltd., and Electronics for
Imaging Inc. The acquisition strengthened Ricoh’s North American direct sales network and gave it control of the
dealer network on which its largest competitor, Canon Inc., relied heavily. Following the acquisition, workforce
integration did not take place as rapidly as Ricoh Company Ltd. management had anticipated.
State of the Market
In 2012, Laverty had asked his management team to look at the state of the services market. The way he saw it,
three trends were pushing RCI toward services: shifts in technology, user behavior, and corporate behavior. The
advent of digital storage and document management technologies meant that customers were printing fewer
Copyright © 2015 Thunderbird School of Global Management, a unit of the Arizona State University Knowledge Enterprise. This
case was written by Professor Prescott C. Ensign and Jonathan Fast, both of the Lazaridis School of Business and Economics, Wilfrid
Laurier University, Waterloo, Ontario, Canada, for the sole purpose of providing material for class discussion. It is not intended to
illustrate either effective or ineffective handling of a managerial situation. Any reproduction, in any form, of the material in this
case is prohibited unless permission is obtained from the copyright holder.
documents. Using digital documents allowed for faster and more effective workflows as well as greater accessibility. Digital documents were available to anyone over the Internet. Laverty mentioned, “Modern businesses were
striving to become paperless offices, which is a very scary thing for anyone at Ricoh to say out loud.”
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The team found that the Canadian services market was worth US$24 billion in 2012. By comparison, the
size of the hardware/break and fix market—RCI’s primary revenue source—was US$4.5-5 billion with growth
in 2012 of two percent. It was clear that technological advancements in tablet and mobile device networks were
disrupting RCI’s legacy business. By 2016, the printer/copier market was estimated to shrink by three percent
annually, and this downward trend would accelerate after that point. Glenn pointed out, “It has never been easier
not to print something, and that means trouble for everyone in the industry. We have to adapt or face extinction.”
Early signs of this were already present; mergers and acquisitions activity had been rampant in the traditional
market as big competitors sought to protect profits by buying competitors. As Laverty told his management team:
If we stay only in the printer business, RCI will be squeezed at both ends. We will see a decline in
sales and a decline in the subsequent stream of income from maintenance. Where the market will
stabilize once it begins to contract is unknown. So we have to move beyond this segment. Planning
for negative growth is not acceptable.
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When the services market was broken down further, it became clear that big changes were taking place
with medium-sized businesses. It could be seen that 42 percent of services spending was going to be made by
medium-sized businesses in 2013. This represented a 7.4 percent spending increase year over year. The cost of
services had come down to an inclusive price point where medium-sized businesses could take advantage of what
was offered and, consequently, usage was increasing. After seeing this, VP of Services Mike Fast commented,
“What we are seeing here is the good kind of deflation which is produced by increases in efficiency allowing
better products to be sold cheaper and to a wider market.” RCI had a two percent market share in the services
market for medium-sized businesses, or, in RCI terms, firms that fit into RCI’s geographic/key named accounts
classifications. Another major trend was small to medium-sized businesses shifting towards cloud services where
IT infrastructure was handled for them. As volume on the cloud increased, cloud services were able to achieve
economies of scale and flexibility. From a consumer perspective, using the cloud was much more cost effective than upgrading an in-house server network and corresponding support resources. Finally, companies were
demanding software to better share information across an organization whether it be document management,
process management, or communication management.
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Consumer studies of the services market indicated that consumers considered a long list of factors when
assessing a provider. These included: cost effectiveness; environmental sustainability; information security and
compliance; business process streamlining; change management; worker productivity; information optimization; and strategic infrastructure. VP of Marketing Eric Fletcher advised Glenn that all of his team’s research
had been pointing to one factor: “The primary interest of consumers was a provider who could unify services in
the company at a reasonable cost.”
Competition in Ricoh Canada Inc.’s Market
The segments that RCI traditionally competed in were extremely competitive (see Exhibits 2 and 3). Competitors could be broken down into two groups: Tier 1 and Tier 2. The following describes RCI’s competitors’ recent
strategic moves.
Tier 1—Canon, Xerox, and HP
Canon Canada Inc. had relied heavily on IKON for both unit sales and service infrastructure, so it was focusing
on rebuilding this channel after IKON was acquired by Ricoh. In March of 2010, Canon Inc. acquired Océ
N.V. (based in the Netherlands) to increase its market share in the digital space as well as to expand its research
and development. Canon Inc. was positioned as a leader in managed print and content services according to
Gartner Inc.’s proprietary research.
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Xerox Corporation entered the services market in February 2010 with the acquisition of Affiliated Computer
Services Inc. (ACS), an IT services firm based in Dallas, Texas. In Canada, Xerox was maintaining traditional
core unit sales while encouraging its sales force to sell services. Its cash flow from the traditional product lines
was expected to fund the expansion into services. Xerox Canada had performed well with its major accounts in
healthcare and government. Recently, Xerox had launched cloud services.
Hewlett-Packard Company (HP), in Canada and worldwide, had a very strong brand and customer network for its IT hardware. It was using this reputation to move into services. HP acquired EDS (Electronic Data
Systems) on August 28, 2008, to give it the ability to combine hardware and services to create holistic offerings
to customers. The integration of services with hardware was ongoing.
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Tier 2—Konica Minolta and Others
Konica Minolta Business Solutions Canada Ltd. was strong in the A3 (standard European format) printer segment. Its pricing on a cost per page basis was low, almost to the point of disrupting the market. Also, it was
introducing a new A3 color lineup, making it hard for others to compete within the A3 colour segment. Konica
Minolta products had good image quality and performance.
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Lexmark had left the inkjet printing business and turned its attention to improving its A4 (standard North
American format) laser printer lineup. Lexmark was on an acquisition spree, year after year gobbling up software
companies to support its growth objectives. Samsung Electronics Canada Inc. was expanding its A3 product
lineup. Other competitors were also retooling print offerings but were not moving into services as aggressively
as those in Tier 1.
Other
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Within the services landscape, there were several large competitors—specifically, Google, IBM, and Amazon
with highly developed cloud services.
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Ricoh Canada Inc.’s Customer Base
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RCI had sold business-to-business (B2B) with 89 percent of sales made directly to business customers, and the
remaining 11 percent of sales made by independent dealers. RCI did not have a business-to-consumer (B2C)
line, although most of RCI’s primary competitors (Canon, Xerox, and HP) did. Laverty did not see the B2C
market providing long-term growth because it was so competitive. However, he was open to anything should
sufficient evidence be presented.
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Part of RCI’s strategic dilemma was that the profile of its customers was morphing rapidly; customers were
changing what they wanted. They were also discriminating more when making purchase decisions. Laverty said,
“Studies show that 57 percent of customers are well informed.” Given the deterioration of information asymmetry
in the industry, RCI was trying to build on experience and relationships with customers. RCI top management
believed that a positive customer experience would still resonate more than any other factor. Laverty felt this
should continue to be a priority based on an assessment of the NPS (net promoter score) metric.
RCI’s customers could be broken down into four classes based on the size of the client. These were: geographic accounts, key named accounts, major accounts, and strategic accounts.
Geographic accounts were RCI’s smallest customers and typically had only one location. New customers in
this segment were generally targeted through cold calling by RCI’s sales force. The way this worked was that a
salesperson was given a postal code and then pitched products to all small businesses within it. The estimated
success rate of cold calling was one in ten. Most new business based on client count was generated in this manner.
These customers offered the highest margins because the transactions were usually isolated, rather than drawn
out business deals where RCI would be fighting on price.
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Key named accounts were small to medium-sized enterprises that had five or six locations. Like geographic
accounts, these entities were also targeted through cold calling. The sales representatives attached to these accounts had more tenure, giving them a higher probability of developing and nurturing a relationship. Existing
accounts in this segment were prime targets for off-cycle selling. That is, once under contract, they were asked
to buy more from RCI. According to VP of Sales Peter Ronan, “Marketing services would fit very well between
hardware cycles because it would allow us to increase our share of a customer’s wallet through a business relationship that is already established.”
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Major accounts included large customers like hospitals and colleges/universities. The complexity of these
clients required more customization in product and services offerings. Together with strategic accounts, this
defined the key GEM market (government, education, and medical market). Transactions with these entities
required more internal resources, often requiring up to six months or more to close a deal that would involve
a salesperson as well as upper management. RCI was aggressively targeting healthcare accounts because they
could leverage their government relationships with these clients. Some of RCI’s large customers in this area were
Canada’s largest board of education as well as a large healthcare company in eastern Canada.
Current Service Offerings
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Strategic accounts were RCI’s largest customers and included banks and substantial government units. They
were also the hardest deals to close. These customers generally sent a request for proposal (RFP) to major competitors in the industry and based their decisions on bids, causing the formality of this segment to be considerably
higher than the others. These clients required a lot of attention, and it generally took six months or more before a
deal was finalized. RCI had not yet determined if the RFP process was an advantage or disadvantage. RCI’s track
record in this realm was mixed, but it had managed to win contracts with a large life insurance company, two
of Canada’s big five banks, and Canada’s largest food retailer. Government units were an area where RCI would
have liked to focus more resources because they offered exposure into the broader public sector. For example,
hospitals could buy products using the same prices set in government contracts without having to send out a
separate tender.1 See Exhibit 4 for a review of projected growth in spending for major and strategic accounts.
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RCI’s services could be broken into three segments: Technical Services (traditional break and fix); Professional
Services; and Managed Services. Technical Services was the largest in terms of revenue, producing US$193
million, or 39 percent of the revenue in 2012, but the growth potential was limited (see Exhibit 5). RCI’s total
revenue from Professional Services and Managed Services was US$52 million in 2012. With regard to Professional Services and Managed Services, Laverty stated, “Currently, we don’t have a lot of volume in these areas,
but we have some cool technology. We are just not completely sure how to use all of it. Also, given our relative
inexperience in the services market, we need to figure out where RCI should operate relative to competitors.”
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Technical Services was based on the legacy business and involved servicing machines in the field. From the
standpoint of a service level agreement, customers had become more demanding, and RCI had been able to
grow its market share by meeting or exceeding customer expectations. The field technical team was the backbone
of the service agreements. RCI had a very strong ERP system (Baan) and 550 well-trained personnel. VP of
Services Mike Fast said, “These guys aren’t your traditional copier technicians; they are highly trained, and have
competencies, like networking skills, that extend beyond the machine.”
Professional Services helped customers streamline and better integrate their workflow processes. The solutions currently offered included: Managed Document Services (MDS), IT hardware, and remote monitoring and
deployment services. MDS was designed to increase the efficiency of information transfer within an organization.
For example, the software could read scanned images and automatically route documents to those who approved
and/or used them. This concept could extend point-to-point across an organization using programmed rules
that fit the business’s structure. MDS helped a small or large company increase its workflow efficiency, manage
its network, enhance its security, and troubleshoot when problems arose. Revenue for MDS was reported under
Managed Services due to corporate restructuring, but was controlled as a part of Professional Services.
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Healthcare was publically run in Canada.
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Professional Services helped a prospective company build its IT components, including both hardware and
software, necessary to run company workflows. Although not yet released, IT services included cloud services and
disaster recovery support. RCI’s cloud services were intended to be a gateway to critical information. Corporate
planning was under way in Japan and margins for this segment of the business were expected to be 56 percent at
launch in the first quarter of 2013. The profile of Professional Services as RCI described it is found in Exhibit 6.
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Managed Services encompassed three areas: (1) imaging print and fulfillment (Ricoh Document Management or RDM); (2) onsite managed services (Ricoh Management Services or RMS); and (3) litigation support
services (Legal Document Services or LDS). Image print and fulfillment was just as the name suggests. RCI had
two centers: one located in Aurora, Ontario, and the other in Vancouver, British Columbia. The items (e.g.,
books or posters) were printed for customers and then held in inventory. Onsite managed services were customerspecific services such as conference management, internal print room management, and reception services. Legal
Document Services was a niche service to support law firms during litigation through a process called electronic
document discovery. RCI scanned legal documents and recorded them digitally so that law firms could search
and retrieve them.
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Services support teams (consultants and solution engineers) operated as an overlay structure to the sales
channel, with sales owning the customer relationship. Support teams educated the sales channel and identified
opportunities within the market. The sales team engaged the support team as subject matter experts when pursuing
opportunities with potential customers. Furthermore, support teams also engaged in more traditional consulting
activities focused on enterprise software and hardware needs. Teams from this group went into businesses, studied
operations, and then made recommendations. This gave RCI the ability to design the most efficient workflow for
the business, providing comprehensive solutions. In general, the consulting service was free for customers who
subsequently bought RCI products. Independent dealers were able to use these support teams to supplement
operat …
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