Structural Transformation through E-business - Essay Example

Structural Transformation through E-business Section A: 1. A prescriptive approach to strategy includes the design, planning and positioning approaches and generally views the environment as a constant factor in strategy making, evaluation and exploitation (Weigl, 2008:29). A descriptive approach to strategy on the other hand, does take the environment into consideration and is more valuable because organizational strategy that fails to take environmental turbulence into account is too rigid. In the case of FEDEX, it must be noted that the structural changes that were made by the Company notably, through the introduction of IT operations to improve e-commerce, were in response to changes in the environment and thus reflect a descriptive rather than a prescriptive approach to strategy. 2. Fred Smith of FEDEX Corp built up his business by identifying a need – the need of Companies for timely delivery of important documents. He invested large amounts of capital in building up an expensive transportation network, because of his belief that a strong market existed among businesses for overnight delivery of time sensitive documents. A centralized computer system existed which kept track of all packages delivered and this was known as COSMOS (Customer Operation, Service Master Online System). A bar code was placed on every package at the pick up point and scanned at every stage of the delivery process. Fred Smith realized early on that the Internet would play a significant part in revolutionizing the logistics of the transportation industry. The centralized database system was improved by introducing various pioneering features, such as handing out PCs with FEDEX software for tracking of packages, hand held signature devices that delivery agents could use to record signatures and a website that contained information on package delivery status. Using EDI and the Internet, FEDEX also worked backwards along the supply chain and provided management services at several points along it, where different services could be provided; for example, transportation, inventory control, purchasing, etc. 3. In the achievement of its goals, FEDEX has capitalized the vision of its founder, Smith who believed the success of the Company lay in IT(Lappin, 1996) and has implemented IT systems that are geared towards strengthening its e-commerce operations. The realization that information systems could play a vital role in ensuring the success of business has enabled the Company to survive and gain a head start in package delivery (www.garyclarke.com). The Company has made large investments in technology, using tracking software in order to ensure that the current delivery status of a package is always available, through the use of its proprietary network called Cosmos. The Company also sets up computer terminals at its customers’ offices and allows them access to the tracking software as well, so that they are able to generate their own pick-ups and deliveries (www.brainmass.com). Customer tracking of packages is facilitated through the use of the Powership software and terminals (www.informationweek.com). The Company has been using wireless applications for a long time, but the efficiency of its current operations has been achieved by integrating SAP into its tracking system in managing its supply chain. The significant aspect of its technology development is the use of SAP R/3 systems to integrate its tracking systems with its supply chain logistics. FEDEX has already been offering its customers the use of computer terminals where they can track their packages and also arrange pick-ups and deliveries; however with the integration of tracking software with RP-3 software in the supply chain, the Company is also offering its customers the option to manage their supply chain and transportation services. FEDEX’s IT policies have been very useful in providing it a competitive edge, as compared to other courier companies like UPS. FEDEX has a Virtual order System, whereby certain companies can link directly to FEDEX so that on-line ordering, authentication, payment and shipping can be integrated. UPS however has integrated with third party companies in providing customers with e-commerce solutions. Therefore, in comparison, IT integration at FEDEX is more advanced, especially since UPS was also later than FEDEX in incorporating IT solutions. This has enhanced FEDEX’s competitive advantage. Section B: International Trade: The unique challenge of doing business in an emerging market is to overcome the operational inefficiencies and the high levels of bureaucracy arising out of Government control, which cause strategic ineffectiveness. The extent to which a transition is successful will be determined by how well the Government is able to how well the government can disband its bureaucratic systems and introduce deregulation. There are also advantages associated with doing business in an emerging market. Free market entry and exit, as well as determination of prices on the basis of supply and demand are some of the advantages, together with reduced levels of bureaucracy and control; all of which improve the potential for businesses to be successful. Macdonalds, for example, was successful in Russia, largely because of its persistence in dealing with the bureaucratic leadership that was still in the transition process to a democracy. A large part of its success lay in its advertising so that consumers could become aware of the products it sold, which are globally popular; hence it offered them in a standardized format that is common to all Macdonalds products across the world, yet made them suit the local economy by varying its food to suit the local tastes. It has succeeded in many Asian cultures, including Russia, due to its ability to adapt to Asia’s diverse cultures, tastes and temperaments (Kishaloy and Chaudhry, 2006). It also projected the impression of its products being synonymous with the freedoms of a capitalistic economy, which attracted Russians, hitherto suppressed under Communist rule, to its products. Free trade is advocated on the grounds that it helps in reducing prices through imports and maximizing returns by providing scope for acquisition of goods at lower prices. The other side of the coin however, is trade restrictions. The major reason for promoting trade restrictions is the contention that trade does not improve the lot of the common people; rather since goods are sold at lower prices, it only makes the farmers poorer. 2. Whittington’s schools of thought relate to business strategy. The classical school of thought relates to economic self interest, wherein formal plans are drawn up on the basis of rational analysis (Galliers and Baker, 1995). The major thrust of this school of thought is to maximize profits while functioning within a competitive atmosphere; and little importance is given to other environmental factors such as cultural and other contextual issues. Business process redesigning conforms to the classical school, because the focus of such redesign is to maximize profits and deal effectively with the competition faced by an organization. The evolutionary approach also focuses upon maximizing profits within a competitive atmosphere; however this approach views the organization as a dynamic entity, taking the environment into account as well. According to this approach, organizational strategy cannot be redesigned if it fails to take into account, contextual factors within the environment that also impact upon the move to enhance profits. 3. Whittington’s schools of thought may be applied in the case of Mcdonalds, which is a multicultural organization. This business functions along the grounds of a capitalistic enterprise, with the ultimate objective of maximizing its profits. It is therefore founded on the principles of the classical school of thought, handling the competition it faces from other fast food franchises in the different countries where it operates. It may be noted however, that McDonalds does take the environmental factors into account, i.e, for instance, cultural elements and local tastes. For example, in Asian countries, Mcdonalds offers spicier version of its products; it has succeeded in Russia despite the difficult market largely due to its ability to tailor its basic, distinctive food products to the local tastes. The evolutionary school of thought appears to provide a better alternative, because it takes environmental factors into account in designing a business strategy. Since there are several factors in the environment that could impact upon organizational strategy, such as political elements, cultural aspects and local tastes, government regulations as well as a turbulent economy, taking environmental factors into account would make an organization more successful. The classical school focuses only on profit maximization while attempting to decimate the competition; however this could be a static form of response which may not really be effective in the long run. References: “About FEDEX”, Retrieved October 26, 2009 from: http://www.garyclarke.com/documents/CLARKE873-3.html Farhoomand, Ali F and Ng, Pauline, 2000. “Fedex corporation: Structural transformation through business”, Case Study. Galliers, R.D. and Baker, S.D.H., 1995. “An approach to business process engineering: the contribution of socio technical and soft OR concepts”, INFOR, November 1995; retrieved January 10, 2009 from: http://findarticles.com/p/articles/mi_qa3661/is_199511/ai_n8711356/ Kishaloy and Chaudhri, Sumit Kumar, 2006. “Mcdonald’s localisation strategy: brand unification, menu diversification?”IBS Case Development Centre, Retrieved November 2, 2009 from: http://www.ibscdc.org/Case_Studies/Strategy/Corporate%20Strategy/COS0043.htm Lappin, Todd. "The Airline of the Internet." Wired Magazine. December 1996, Retrieved October 26, 2009 from: http://www.wired.com/wired/archive/4.12/ffedex_pr.html “Marketing cases (FEDEX)”, Retrieved October 20, 2009 from: http://www.brainmass.com/homework-help/business/marketing/95855 Weigl, Tobias, 2008. “Strategy, structure and performance in a transition economy: An institutional Read More