FedEx Corporation - Structural Transformation through E-Business - Case Study Example

Case Study – FedEx Corporation “Structural transformation through E-Business” Table of Content Porter’s Five Forces model 3 Relevance of Porter’s Five Forces model with Strategic Planning of FedEx Corporation 4 Porter’s Value Chain 5 Relevance of Porter’s Value Chain technique with FedEx Corporation 6 Core competencies at FedEx responsible for its transformation 8 Advantages of international trade to FedEx 9 Disadvantages of international trade to FedEx 10 Question Two: 10 Whittington’s “Classical” School of Thought 10 Applying Whittington’s ‘Classical’ School of Thought to FedEx 11 Whittington’s ‘Evolutionary’ School of Thought 11 Applying Whittington’s ‘Evolutionary’ School of Thought to FedEx 12 Reason for selecting ‘Evolutionary’ School of thought 12 Question Three: 13 Processual School of Thought 13 Critical evaluation of the implications for strategic management 14 Reference 16 Question One: Porter’s Five Forces model Porter’s five forces model is a widely accepted technique for competitive analysis and strategy formulation. Every industry possesses certain level of competition which is variable with the industry type. The Porter’s five forces analysis helps organizations in identification and categorization of competitive forces which are acting upon them and supports them in strategy formulation for resisting the forces. The model is comprised of five different parts each of which specifies various forms of competitive forces. Five different parts of the model are, Rivalry among existing firms – Many organizations belonging to the same industry treat their competitors as rivals. This is so because organizations in the same industry competes each other for various factors which includes resources, customer base, and other associated factors which supports their business operation to gain competitive advantage. Potential entry of new competitors – Most of the industry faces this force due to entry of new competitors in the industry which indicates certain rise in competition level for resource acquisition. Bargaining power of suppliers – during high level of competition suppliers have numerous options for their customers which empowers them with capability to negotiate with their customer organizations on the cost of resources. Bargaining power of consumers – due to increase in number of companies offering same product the consumers gain power to negotiate the price of the product since they have numerous options of companies offering the same product at different prices. Potential development of substitute products – when a new product is launched in the market as a substitute of available products the competition level raises for the latter case (David, 2006, p.92). Figure 1- Porter’s five forces model (Source- David, 2006, p.93) Relevance of Porter’s Five Forces model with Strategic Planning of FedEx Corporation FedEx Corporation is involved with the logistic services and serves a vast area across the globe with strong logistics capabilities. In the context of the company Porter’s five forces model has several relevant points which the company has considered to meet the challenges of high competitive force posed by its competitors. The company since its inception has significantly performed strategic analysis to remain ahead of its competitors by identifying different crucial aspects of the business and industry requirements. Since the company is fully involved in transferring of goods from one place to another, the threat of new product as its substitute is low. To reduce the threat of high competition from its rival organizations FedEx has continually strengthened its core business requirement, i.e. logistics system to gain customers’ trust. The company faced the threat from the Postal Department in U.S. when people started availing their services. To minimize the threat and protect its business the company opened new collection centres at potential locations making its services easily accessible by the customers. In the context of expansion of its business FedEx acquired firms which offered logistics services at domestic level in China and entered the new market area. This act of FedEx reduced the threat of competitors because the company acquired its small competitors removing the threat of competition from them. In reducing the bargaining power of customers FedEx offered them with attractive discounts with reliable services which helped them in wining customers’ confidence and created a reputation in the industry. To remove the dependencies on airlines for faster delivery of goods the company developed its own airlines which specifically served as cargos for transferring of goods from one location to another. This reduced the risk of bargaining power of suppliers where the private airline companies served as a type of suppliers offered cargo services to FedEx (Gehani, 1998, p.193-97). Porter’s Value Chain The value chain technique supports organizations in carrying out their strategic analysis and Porter described that organizations can gain competitive advantage by managing their value chain better than their competitors. Porter’s value chain technique views an organization as a system comprising of ‘primary’ and ‘secondary’ activities which assesses the competitive advantage of the company. The primary activities consist of input activities, processes for transformation, and output activities. These primary activities are categorized as inbound logistics, operations, outbound logistics, marketing and sales, and services. The secondary activities are classified as the supporter of primary activities which involve infrastructure, human resource management, procurement, and technology and development (Basu, 2004, p.286-87). Figure 2- Porter’s Value Chain model (Source- Basu, 2004, p.286) Relevance of Porter’s Value Chain technique with FedEx Corporation In context of relevancy of FedEx Corporation’s strategy with Porter’s value chain technique the primary and secondary activities of FedEx can be classified with each set of activities stating the capabilities of FedEx for creating value among its customers. In case of primary activities FedEx performed following efforts to gain the competitive advantage: Inbound logistics – to improve its inbound logistics the company stressed on opening more number of dropping centres at potential locations which are easily accessible by the customers. Outbound logistics - the company possessed strong transportation capabilities with which it achieved on time deliveries irrespective of the distances. By focusing on its delivery times irrespective of the distances the company achieved high customer satisfaction. Marketing and sales - FedEx offered its customers with lucrative discounts on every order. The idea of offering discounts to customers helped FedEx in gaining more number of customers. The company also performed effective ad campaigns for promotion of its services. For example, the ad campaign named as “Batting the Bird” initiated by FedEx targeted its internal as well as external customers (Gehani, 1998, p.196). Services – the company insisted on providing on-time, doorstep delivery which helped the organization in creating value among its customers. Apart from delivering of goods the company also serve as one stop destination for freight forwarding. Additionally the company also provides with trade technology and advisory services to its customers (Slatter-A, 2007, p.162). Considering the secondary activities which support the organization in performing its primary activities are as follows: Infrastructure – the company possesses a strong infrastructure to support all of the aspects of its business operations. Wide network of collection centres across the world with strong transportation and handling capabilities has helped the organization in empowering its infrastructure to meet the business requirements. Human resource management – the human resource management at FedEx is very effective as the company regularly provides its employees with education regarding their services in comparison to its competitors. The company adopted the philosophy of “People-Service-Profit” priority which stressed on considering the employees, customers, and stakeholders needs. Technological developments – the company possesses technological capabilities such as COSMOS, Command and Control satellite system, and APEC Tariff database which helped in meeting the delivery deadlines through shortest and safest routes in all weather conditions. Separate fully operative call centres possessed by the company helped them in improving their customer service (FedEx-A, n.d.). Procurement – as discussed earlier the company adopted effective approaches to improve its procurement of orders through large number of collection centres and also online assistances for placing orders. Core competencies at FedEx responsible for its transformation Following are the core competencies of FedEx which supported its transformation between 1973 and 2000: Enhanced approaches for tapping more number of orders: Numerous collection centres provided the customers with certain amount of discounts which helped them in tapping more number of customers. Also the collection vans possessed by the company helped them in acquiring more customers. Technological innovation at FedEx: to remain ahead of its competitors the company performed extensive research activities and formed separate labs and institution for technological innovation. Reduced dependencies of customers on buses and airlines for transferring goods by offering overnight delivery at all locations. The company owned its own aircrafts which supported them in performing their long distance operations and capture overseas market base (Fiore, 2005, p.64). Adopting technological innovations enhanced the productivity of the organization by reducing the constraints such as weather conditions and identification of shortest and safest routes (FedEx-B, n.d.). Providing logistics services on 24/7 basis supported the organization in creating its identity in the global market. Advantages of international trade to FedEx In terms of international trade FedEx become the largest express transportation company around the world and has its presence in 214 countries. This provides them with larger customer base in international market. The company become second largest in North America in serving ground transportation of small package including the business to residential services through home delivery services. Became the part of China’s economic development by facilitating them with air transportation infrastructure through which China got access to potential market places across the globe. FedEx performed several overseas acquisitions and mergers which expanded its overseas operations with greater number of subsidiary companies. The company accounted for 90 % of world’s GDP with its 24 or 48 hours of service which it achieved through heavy investments on international infrastructure developments (Slatter-B, 2007, p.163). Disadvantages of international trade to FedEx In the international trade since 1985 FedEx accounted a loss for approximately $74 million. The company lost to its competitors like UPS during 1984 causing a loss of 15 percent on each package while Zapmail caused a potential loss of $350 million to FedEx which was one of the services offered by FedEx dropped in 1986 as it become obsolete. The company faced a high level of price war in international market due to a series of mergers and acquisitions. The revenue of FedEx declined by 30.3 percent during the period of 1983 and 1988 when UPS emerged as a threat for FedEx. Due to excessive price war the air cargo industry faced high level of rivalry and competition among themselves (Fitzsimmons, 2006, p.575). Question Two: Whittington’s “Classical” School of Thought Whittington’s “classical” school of thought suggests a type of approach which views the factor of profitability as the primary goal for a business organization. The approach has been introduced by Richard Whittington in this text named “What is Strategy and Does it matter?” (1993). The Classical approach shares its common view with other approaches on strategists which says that strategists can provide the organizations with choices for different situations which can influence the outcomes (Segal-Horn-A, 1998, p.414). The classical approach advocates for rational planning through which the primary goal of business can be achieved. The classical approach is inclined towards the economics of Scotland which were practiced during the eighteenth century. And regarding the implementation of the strategy the classic approach has resemblance with the military ideologies of Ancient Greece (Mazzucato & Open University, 2002, p.2). Applying Whittington’s ‘Classical’ School of Thought to FedEx The classical approach suggested by Whittington emphasizes the profitability as the primary objective can be applied to the business operations of FedEx Corporation. Since the company belongs to logistics industry and airline cargo transportation is one of its major business activities which face very aggressive price competition. In this situation of high competition level profit making can be considered as the core purpose of the business organization. FedEx Corporation has faced high level of price competition from its competitors UPS in the past so it should be more focused towards profit making. The classical strategic approach can provide FedEx with profit making alternatives by strictly adhering to the strategies. The company can renovate its business operations to enhance their profit making and utilizes the resources as per the adopted strategies. Whittington’s ‘Evolutionary’ School of Thought The “Evolutionary” school of thought describes that business environment and market places are highly uncertain where conditions keep on changing. In this regards it becomes essential for organizations to believe that strategies cannot be considered as permanent and they should born and die with the business conditions. This approach advocates that the forces observed by the organizations are not decided by the managers of the organizations rather it is the market which keeps on changing and influences the effectiveness of the strategies adopted by the organizations (Segal-Horn-B, 1998, p.11). This approach shares a common view with the classical thinking of strategies in regards to profit making ability of the organization and considers profit making as the core purpose for businesses (Analoui & Karami, 2003, p.52). Applying Whittington’s ‘Evolutionary’ School of Thought to FedEx The “evolutionary” approach suggests that organizations should renovate their strategic approach as per the environment of the business and consider profit making as the core purpose for the organizations. Present day business environment is highly uncertain which require business organizations to get prepared to face the challenging business conditions. FedEx Corporation has started observing high level of uncertainty in the market due to increased level of price competition among the competitors of the industry. In this context evolutionary approaches for strategic planning can be of potential use for the organization. Another major advantage of evolutionary approach for strategic planning is its emphasis on the matter of survival of the organization in the highly uncertain business environment which keeps on creating turbulence for the businesses. Considering the changes and essentiality of adopting business organizations as per the changes, FedEx Corporation should develop strategies to ensure their survival in the provided business environment. Along with that emphasizing the profit making activities for the interest of the organization can bring more stability in the organization on global perspective. Reason for selecting ‘Evolutionary’ School of thought The “evolutionary” approach for strategies can be more effective for FedEx Corporation due to several reasons which the company faces in present day business environment. The strategic approach according to the evolutionary thinking considers profit making as well as survival as the priority for every business organization which is applicable to FedEx also since through this approach the company can ensure its survival as well as profit maximization for further development. Getting resistant to the uncertainty of the business environment has also favoured the evolutionary approach for strategic planning over the classical approach for FedEx Corporation in present day business environment. The change factors should remain a major concern for present day business organizations and strategies should be developed and modified as per the changes. The evolutionary approach favours the criteria by possessing the thought that strategies should not be fixed rather they should be developed as per the environmental turbulence and resisting it. Question Three: Processual School of Thought The processual school of thinking advocates for strategic planning as per the views of the evolutionary approaches and considers long-term planning as irrelevant to the interest of the organization. But the processual approach does not consider that organizations can always obtain profit as their outcome and does not consider the profit maximization as the core purpose for the businesses. The approach considers that organizations and the market environment are very close to each other and remains in immediate contact which creates confusions in strategic moves making its implementation slow. The approach also favours the evolutionary approach in their sceptic views on rational thinking. The views possessed by the processual approach considers that the world and the knowledge base possessed by organizations are imperfect and they should keep this in their thinking while performing strategic planning. The processual approach for strategic planning is completely against the views possessed by the classical approach for strategic planning and considers the strategies as to be created as per the situation rather than developing it on a long-term basis. The major reason for the processual approach going against the long term planning is that it completely disagrees to the fact of rational thinking for long –term goals Critical evaluation of the implications for strategic management “Stacey’s (1996) integrated model of decision-making and control comprises of four loops: the rational; the overt politics; the covert politics; and the culture and cognition.” (Stacey, 1996, p.156) The four loops emphasized by the model of Stacey (1996) developed for decision making consist of the rational, the overt politics, the covert politics, the culture, and the cognition. Viewing the model through the processual thinking for strategic approaches the above mentioned four loops can be interpreted as follows: The rational – the processual thinking possesses a low interest level in rational thinking as it considers that long-term thinking is not relevant to the organizations long-term survival in the highly uncertain environment. One needs to have a rational thinking for future planning in a long run which is, according to the processual thinking should not be considered and asking for more emphasis n the present business environment and develop strategies to counter those challenges which are posed by the environment. The overt and covert politics – the processual approach for strategic planning and its views over the political activities within and out of the businesses can be categorized into two phases, i.e. pre-processual and processual approaches for thinking. The overt nature of politics as per the processual thinking describes its separation from the ideologies, superstitions, emotional factors, and subjectivity. Rather the overt political nature viewed through the processual approach for strategic planning brings objectivity in the organizational planning which considers the data and the facts of the situation present in front of them. The covert nature of political activities are not supported by the processual vies of strategic planning as it increases the level of subjectivity, ideologies, and increases the involvement of emotional factors in the strategic planning of the organization. Culture and cognition – in the views of processual approaches for strategic planning culture is considered as an important part as it considers the social system as an adaptive mode developed by human beings. In this regards, the approach is more concerned with the cross-cultural generation of patterns and behaviour which are, as per the views of processual approach, the most prominent feature of a social system (Hodder, 1997, p.70). In the context of cognition, the processual approach for strategic planning has supportive views and encourages the act of cooperation through which business organizations can resolve the issues which have risen among them due to the environmental turbulences. The processual view considers the environment as turbulent and requires a cooperative nature from all the members of the business environment to resolve the issue and ensure survival in the present day business environment. Reference Analoui, F. & Karami, A. 2003. Strategic management in small and medium enterprises. Cengage Learning EMEA Basu, R. 2004. Implementing quality: a practical guide to tools and techniques: enabling the power of operational excellence. Cengage Learning EMEA. David, F. 2006. Strategic management: concepts and cases. 10th ed. Pearson Education Asia Ltd. FedEx-A. No date. FedEx- About FedEx- Technological Innovation at FedEx. [Online] Available at: http://fedex.com/ma/about/overview/innovation.html [Accessed on April 2, 2010]. FedEx-B. No date. FedEx- About FedEx- Technological Innovation at FedEx. [Online] Available at: http://fedex.com/ma/about/overview/innovation.html [Accessed on April 2, 2010]. Fiore, F. 2005. Write a Business Plan in No Time. Que Publishing. Fitzsimmons. 2006. Service Management. 5th ed. Tata McGraw-Hill. Gehani, R. 1998. Management of technology and operations. John Wiley and Sons. Hodder, I. 1997. Interpreting archaeology: finding meaning in the past. Routledge. Slatter, J. 2007-A. The 100 Best Stocks You Can Buy 2008. Adams Media. Slatter, J. 2007-B. The 100 Best Stocks You Can Buy 2008. Adams Media. Segal-Horn, S. 1998. The strategy reader. Wiley-Blackwell. Stacey, R. D. 1996. Strategic Management and Organisational Dynamics. 2nd ed. Pitman, London. Read More