Business Environment: Fed Ex and Corus - Essay Example

Order 149946 Topic: Introduction to business Introduction: This paper seeks to analyze the business environments of two corporations and the effects of this environment on the management of each organization using e-case studies and other sources. In this paper we will also conduct our own research into organizations, and using the underpinning theories and models, we will critically analyze each company’s strategies in relation to given theories and model and finally we will compare and contrast different strategies of each company. We will start first with the case of Fed Ex and will be followed by the case of Corus. Analysis and Discussion 2.A.1 Analysis of case using PESTLE, Porter’s Five Forces and SWOT, PESTLE PESTLE stands for political, economic, socio-cultural, technological, environmental and legal environments surrounding the business of Fed Ex Political – The status of air cargo regulation affects the supply demand of company’s products. This is confirmed by case facts say: “Federal Express took a leading role in lobbying for air cargo deregulation that finally came in 1977. These changes allowed Federal Express to use larger aircraft (such as Boeing 727s and McDonnell-Douglas DC-10s) and spurred the company’s rapid growth. By the mid-2000s Federal Express had the world’s largest all-cargo air fleet, including McDonnell-Douglas MD-11s and Airbus A-300s and A-310s. The planes have a total daily lift capacity of more than 12,000 tonnes. In a 24-hour period, the fleet travels nearly 500,000 miles while its couriers log 2.5 million miles a day, the equivalent of 100 trips around the earth. Economic Deregulation is also economic policy that is implemented through political action. Deregulations lessen in effect government control in how business conducts their business. In the case of the cargo industry, the government has allowed industry player to acquire bigger aircraft that could move goods better for the player in the industry. Socio-Cultural The changing need and wants if customer because of changing technology. People need to communicate and thereby documents these events. The proliferation of the Internet has made it accessible to almost everybody who has computer and even cell phones and hence what originally caused Fed Ex to generate revenues by delivering mails has stopped because customer could now communicate via electronic means and store and transfer documents in a similar manner. Legal Companies in the industry are affected by any legal requirements of countries where the do business specially air regulations. Environmental The business of Fed Ex requires the used of aircrafts which must take into consideration the reality of changing weather conditions to run the business. At one of the company’s source of major operation, the weather is favourable to Fed Ex. Case facts say, “the Memphis weather was excellent and rarely caused closures at Memphis International Airport and that the airport was also willing to make the necessary Improvements for the operation and had additional hangar space readily available. Porter’s Five Forces (Porter, 1980) Power of Buyer There is low bargaining power of buyers because the of the presence of integrated services as done by Fed Ex. Case facts say, “The key factors of success for FedEx were low cost, ease of use, free setup and service and trouble-free ordering, payments and delivery.” The company has indeed delivering the goods to customers by integrating its services within the supply chain of its customers and this has also the effect of raising customer switching costs and has created competitor barriers to entry. (Case facts, paraphrasing made) Power of Sellers Low bargaining power of seller due to alliances formed with various companies thereby lessening the power of industry sellers. Case facts confirmed this, “FedEx forged strong relationships and developed innovative technology solutions based on customer needs. Being a technology leader, FedEx had a wide array of partnerships in technology. It partnered with Orbit Commerce to provide internet commerce services on a rental basis for small businesses and established an internet-based supply chain partnership with for all network supplies for running the end-to-end internet-based network. In addition, AT&T had a deal with FedEx to create a wireless internet site for package tracking and delivery. FedEx also signed exclusive delivery agreements with a number of e-tailers like eToys, Pro-Flowers, Value America and LL Bean. An order on one of these sites automatically triggered a FedEx dispatch request.” (Scholes Kevan, 2004) (Paraphrasing made). Rivalries among existing firms Weak rivalry among existing competitors is encouraging to the industry. There are only few firms in the industry; hence this is favourable to the Company Availability of Substitutes Substitutes are available especially with the proliferation of e-mail done through the Internet. Before the company earned from transmitting documents, however, the recent development in e-mails has effectively reduced business opportunities for firms in the industry. Difficulty of Entry There is difficulty of entry because of economies of scale caused by the integrated services. The company is noted to have low cost, ease of use, free setup and service and trouble-free ordering, payments and delivery which has resulted into integration. This therefore discourages new comers to come in to the cargo transport industry via a worldwide network as reached by Federal Express. Said integrating services within the linkages among its suppliers and its customers will discourage present customers to switch to competitors too . (Scholes Kevan, 2004) (Paraphrasing made) SWOT - SWOT stands for company strengths and, weakness and industry opportunities and threats. Strengths and weaknesses are internal to the company to derive these characteristics one must know what helps the company in delivering value to customers. It does it is a company strength, but if it restricts or prevents the company from attaining the same , then it is a weakness. On the other hand, opportunities and threats are external to the company. An opportunity will afford higher chances for profitability for the industry players while a threat does the opposite. The following are the results of SWOT for Fed Ex: Strengths – The Company has a world wide network of services that serves its customers. Weakness - The changing needs of customer to use electronic mails. Opportunities – Based on PESTEL and Porter’s Five Forces, Fed Ex enjoys the following industry opportunities: cargo deregulation, the changing technology affording faster ways to serve customers, low bargaining power of sellers and buyers, barriers to entry created by integrated services Threats – Availability of substitutes because of proliferation of electronic mails and documents. 2. A.2 What are its present strategies of Fed Ex and how do we evaluate the same? FedEx website (2006) provides strategies to attain its mission which it stated as follows: “FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards.” To attain the said mission, the company claims the do the following strategy: “The unique FedEx operating strategy works seamlessly - and simultaneously - on three levels. 1. Operate independently by focusing on our independent networks to meet distinct customer needs 2. Compete collectively by standing as one brand worldwide and speaking with one voice. 3. Manage collaboratively by working together to sustain loyal relationships with our workforce, customers and investors (FedEx, 2006). To evaluate Fed Ex strategy (Newman, et. al., 1994), the framework is whether strategy adopted takes advantage of opportunities and protects itself from threat and weather it uses its strengths and improves on or avoids its weakness. By operating independently by focusing on our independent networks to meet distinct customer needs, the company may be taking advantage of the cargo deregulation since deregulation could from country to country. Hence the strategy is acceptable. By competing collectively by standing as one brand worldwide and speaking with one voice, the company is a maximizing its strength of having a world wide network. This will also lessen advertising cost, hence higher profitability for the company. In managing collaboratively by working together to sustain loyal relationships with its workforce, customers and investors the company is also making use it worldwide network to services to build competitive advantage thereby further making it difficult for new entrants to come in. It’s therefore a way of taking advantage of an opportunity. 2.B.1 Analysis of case using PESTLE and Porter’s Five Forces and SWOT. PESTLE Political Tariffs are ways to discourage exports from other countries. Corus being a British company stands to benefit from this development. Case facts confirmed the lifting by saying: “US President Bush announced the lifting of the US tariffs imposed on foreign steel imports to the USA in March 2002. This followed a ruling by the World Trade Organization that the tariffs were illegal.” Corus being a steel manufacturer hopes to increases export sale as a result of this development Economic The opening up of ones economy has its own advantage and disadvantage. The steel industry where Corus belong is being confronted by competition all over the world including Asia. Case facts confirmed that there were imports into Europe of very competitive steels from Asia and Eastern Europe that indeed Lakshmi Mittal, the Indian head of the world’s second largest steel company (LNM), was warning that the real threat to Europe was China which had expanded its capacity by more than 30 per cent in 2003 and may well be looking for export opportunities if the forecasts of continuing rapid growth in domestic demand were inaccurate (Scholes Kevan, 2004) (Paraphrasing made). Excess world production capacity is always a possibility as what happened in the case facts with demand by more than one third. However, recently price were becoming to look better as case facts provided that steel prices were likely to continue to rise – partly as a result of the buoyant Chinese economy’s effect on world price. (Scholes Kevan, 2004) (Paraphrasing made). In 2003 there was a global recovery in steel prices, which together with significant progress in the company’s manufacturing performance and continuing benefits from its ongoing cost and efficiency programme, more than offset higher raw materials and energy costs (Scholes Kevan, 2004) (Paraphrasing made). Socio-cultural Player in the industry must respond to the changing needs and want of customers. Some companies for synergy and hence lower cost resort to merger and acquisition. This event actually happened in the case of Corus where it chose merger as strategy which was intended to benefit its customers, its employees and its shareholders. One ground invoked by the company was that its customers are looking for a wider range of products tailored to their needs and they want more service, often with suppliers’ teams working alongside them; they want the latest technology. In addition, these customers also want more international coverage and they also want different metals for different purposes sometimes in combination with each other (Scholes Kevan, 2004) (Paraphrasing made). Technological As indicated in socio-cultural environment, customer wants their need to be attuned with technology; hence technology influences company’s strategy. Legal Companies in the industry are affected by any legal requirements as to the quality of steel products for different purposes. Environmental Manufacturers may have to content with the disposal of their waste materials in the manufacture of steel and their other products. Porter’s Five Forces (Porter, 1980) Power of Buyers Strong buying power of buyers is due to lifting of tariff. Liberalization could only bring greater competition. Power of Sellers A sellers group becomes stronger as they increase in number. Increasing number of steel producers all over the world, including expansions made by China in Asia is evidence to high bargaining power of sellers. Rivalry among competitors Strong rival could be a result of deregulation since suppliers of products increased accordingly. Availability of Substitutes Steel which are used by car manufacturer may allow the car manufacturers to use materials other than steel hence affecting the demand for steel products. Ease of Entry Ease of entry is encouraged due to lack of differentiation in many steel products. SWOT Strengths Recently increasing share prices of Corus. Case facts say that the share price of the company had recovered from its low of 3.75p to over 40p (outperforming the FTSE250 index by more than 20 per cent in the early months of 2004) (Scholes Kevan, 2004) (Paraphrasing made). The company is also noted to have the financial strength as per case facts despite the big losses after the merger. Weaknesses Something is wrong with the company organizationally. Case facts say that the appointment of joint Chief Executives did not help and that the company’s command structure was cumbersome and decision-making slow. It was further noted that unlike Anglo-Saxon companies, where chief executives take decisions and boards have an advisory role, in continental European boards, directors tend to have a greater influence on the day-to-day running of the company (Scholes Kevan, 2004) (Paraphrasing made). Opportunities Increasing global prices of steel may allow the company recovery. Threats Strong bargaining power of buyers and sellers, easer of entry and strong rivalry of firms in the industry may make is not encouraging to stay in business. 2.B.2 Evaluation of strategies as against the models Case facts provide the following strategies in attaining British Steel’s globalization vision: - To use a range of different approaches to global development, such as joint ventures (Western Europe and USA); overseas transplants (USA, Eastern Europe and possibly Asia and South America); and continued exports of high added value products. - To continue to achieve efficiency gains and remain one of the most cost-efficient producers globally. - To target capital investment carefully and to keep a strong balance sheet (good cash management and low gearing) to ride out the fierce cycles in demand (Scholes Kevan, 2004). In the evaluation of company’s strategies using the models as analysed it could be said that company may not be responding effectively to its environment as a result of our SWOT analysis. The company’s aims to form joint ventures although the merger in the past has resulted in its huge losses. The company by refusing to see the signs clearly may indicate poor long-term vision. This is confirmed by case facts which said, “Where Corus has also suffered is a lack of long term vision. While Arbed and Usinor have organized global alliances that have given them strong positions in developing markets such as Brazil, Corus’ operations outside Europe are mainly concentrated on small steel ventures in the US, whose success has been patchy.” (Scholes Kevan, 2004) 2. C. Compare and Contrast the Strategies of the two corporations Comparing the strategies of Fed Ex and Corus revealed that one is being responsive with its environment and uses its strategy appear to believe in the use of the model. That was Fed Ex which has shown a better performance than Corus. On the other hand, Corus appeared to have decided to stick it out with the steel industry and planned to merge or acquire more companies although analysis using the models may not confirm or agree anymore. Although both of them are making their strategies, they do not necessarily read signs and respond to these signs similarly. References: FedEx (2006) Company Web site, {www document} URL http://www.fedex.com/us/about/today/mission.html, Accessed January 16, 2007 Newman, et. al. (1994), Strategy, South-Western Publishing Co, Cincinati, Ohio, USA Pearsoned (2005), e-case studies {www document} URL http://wps.pearsoned.co.uk/ema_uk_he_johnson_excorpstrat_7/0,9855,1709610-,00.html, Accessed January 17,2007 Porter (1980) Competitive Strategy, Techniques for Analyzing Industries and Competitors, Free Press, USA Scholes Kevan (2004) FedEx, Case Study, {www document} URL http://wps.pearsoned.co.uk/wps/media/objects/1669/1709610/extra_cases/0273687395_case_fedex.pdf ,Accessed January 16, 2007 Scholes, Kevan (2004) Corus, Case Study, {www document} URL http://wps.pearsoned.co.uk/wps/media/objects/1669/1709610/extra_cases/0273687395_case_corus.pdf, Accessed January 16, 2007 Read More