Business Strategy in Global Environment - Assignment Example

?Executive Summary: Fastway is New Zealand’s primer courier and parcel delivery company. This company came into existence 1983, and since then it hasgone on to become world’s largest franchise courier services company. The company holds 50 percent of the market comprising of both New Zealand and Australia. It is currently operating in a tough economic climate that is putting pressure on its current operational procedures. To complicate the situation further, the company is carrying too much debt on its balance sheet. In addition to this, the company is finding its current market potential as fully maximised. The competitors in this market are holding their ground; they are trying very hard to slice of some customers from Fastway’s customer base, but so far, no competitor has been successful in accomplishing this objective. Even though the current operations of the company are redundant, but still the company has been very successful in meeting its customers’ expectations with significant ease. Nevertheless, the company cannot keep operating like this for too long and it will have to take initiatives to improve its current processes. Moreover, the company needs to decide whether it would use its strong capital base to expand into new market or if it will continue to serve in its current market. In this regards a decisive action is needs from the company’s management. Introduction: Tough economic climate has made it imperative upon companies to improve their operation methods, restructure their cost structure and identify new market segments, which the company can serve profitably. In this regards, if a company wants to ensure its survival, it should start its operations in the global arena. A company by initiating its operations in the international arena can expand its customer base and take advantage of the opportunities presented by globalization. To reap the benefits of globalization, the company needs to adopt a global strategy. This global strategy heavily depends on the company’s competitive position in its national market. In this case, Fastway is strongly entrenched in its local market and has no reason to stop itself from going abroad. However, if Fastway wants to succeed in this action, it needs to implement the requirements that come with the generic strategic management strategies like: Market Development, Product Development, and Differentiation and etc. Part 1: Strategic Choices and Options for the Company Strengths, Weakness, Opportunities and Threats (SWOT) Matrix: Strength: The company was formed in 1983 in New Zealand, and is now the world’s largest franchise courier service company. The company’s management is renowned for coming up with exceptional company policies. Company’s internal structure, comprising of policies, procedures and staff is perfectly tailored to fit the requirements and expectations of local market. The company has a very strong organisational culture in place, which is perfect for handling any unprecedented circumstances in the company’s external and internal environment. The company is offering a product mix that is highly suitable to meet the needs of the local market. The company has strong brand equity in its local market. The company has strong infrastructure and is highly technology oriented; the company firmly supports innovation in its existing company processes. The company has a strong positioning statement to differentiate it from competitors operating in the market. The company has operational processes which enables it to deliver a package in a very quick time. This further leads to its name being synonymous to quick and timely delivery. The company has a strong capital base which allows it to maintain a large fleet in the marketplace. The company has a strong network of hubs, airplanes and trucks which allow it to offer fast track services. The company holds 50% of the market share of the parcels in the shipping industry. The company is firmly customer oriented and this fact is professed by means of its customer service. Fastwasy’s website is a vital means of interacting with customers. The company’s website receives large number of hits and is one of the reasons for its popularity in the shipping industry. The company possesses a state of the art electronic package tracking system and a sophisticated distributions system. The company is Australia’s fast growing courier franchise. The company has systems in place which allows it to offer customers reliable pickup and delivery service complemented by simple and flexible pricing. A hard to replicate hub and spoke system is possessed by the company. Weakness: The scale of operations the company is running currently has now conferred upon it economies of scale. This means that the company is running a costly operation. The company’s financial statements reveal that the company is heavily leveraged. This fact can be very problematic for the company. The company’s standing in the global arena is very weak due to its lack of international exposure. The company is not reaping the advantageous of its strong brand equity in the marketplace. Opportunities: The company can expand its operations in the international market. The company can attract new customers by offering them low cost services. The company can expand the horizon of its services by means of its website. The company is currently working with small and medium enterprises and online retailers. In this engagement the company has integrated its services with the shopping carts of the client. Threats: The company is currently engulfed in tough economic climate, putting the company in a new operational paradigm. The company’s competitors are making a stronghold in international markets, whereas the company is passive about expansion. Large companies which formed the company’s main customer base are undertaking cost cutting initiatives. TOWS/SWOT Matrix: SWOT / TOWS Matrix STRENGHTS WEAKNESSES 1. World’s largest franchise courier service company. Company is running a costly operation, no economies. 2. Exceptional company policies. Company’s financial statements reveal that the company is heavily leveraged. 3. Policies, procedures and staff are tailored to fit the requirements and expectations of local market Lack of international exposure. 4. Strong organisational culture Not reaping the advantageous of its strong brand equity. 5. A product mix that is highly suitable. 6. Strong brand equity 7. Strong infrastructure and is highly technology oriented 8. Operational processes enabling very quick and timely delivery services. 9. Strong capital base 10. Strong network of hubs, airplanes and trucks 11. Holds 50% of the market share of the parcels in the shipping industry 12. Company possesses a state of the art electronic package tracking system and a sophisticated distributions system 13. Reliable pick up and delivery service complemented by simple and flexible pricing 14. Hard to replicate hub and spoke system OPPORTUNITIES S-O Strategies W-O Strategies Expand its operations in the international market Use the strong network of hubs, airplanes and trucks to expand into international markets. (S10, O1) Use strong IT infrastructure to work closely with this new customer segment. (S7, O4) Tailor operational processes to provide low cost services to customers. (S8, O2) The company should move into international markets, to utilise the full capacity of its operations. (O1,W1 &3) The company can target new customers through its strong brand equity. For this the company should advertise more.(W4, O2) Attract new customers by offering them low cost services Expand the horizon of its services by means of its website Currently working with small and medium enterprises and online retailers THREATS S-T Strategies W-T Strategies Currently engulfed in tough economic climate The company should use its strong culture to fight out the tough economic climate (S4, T1) The company should utilise its capital resources to expand abroad. (S9, T2) Use technology to grab new customer segment (S7, T3) The company should reduce its debt as it can be a problem in the times of recession. (W2, T1) The company should expand abroad to utilise all its resources. (W1, T2) The company should expand its operations abroad and make use of its strong brand equity. (W4, T2) Company’s competitors are making a stronghold in international markets Company’s main customer base are undertaking cost cutting initiatives Market Development: The aim of broadly classifying these above mentioned strategies is that the reader can specifically know which generic strategy the company can employ to influence upcoming event in its environment. The implementation of this strategy would entail the company to expand into international market where it has virtually no presence at all. The company can look for potential regions and countries where it can start its operations. In this case, it would be recommended that the company start its operations in the Emirate of Dubai. The company can open its operations is the Dubai Logistics City, this would give it a geographic advantage, since Dubai is centrally located. By opening its operations in this city, the company will gain access in to the Arab world, Asia, and Europe. These are three big markets to which company can offer its services too. However, there is a dichotomy in the opportunity; the company will be up against a culture which is a totally different from the culture in which the company is currently operating in. in order to be successful in this culture the company will have to tailor its product offerings according to the cultural values and norm of these regions. The most encouraging point in the implementation of this strategy is that the company is currently underutilising its operational capacity; it has too many resources which are not finding their true utility. Thus, by expanding into international markets the company will make use of these resources and will not have to undertake exceptionally large capital investment. Moreover, the company is well renowned to adjust its product mix to the needs and wants of the target market. Moreover, the company has a strong brand equity that it could leverage to introduce its services in these markets. Customer Orientation: The company is renowned to be customer centred. It offers a product mix that is a very close reflection of the needs and wants of the customers. The company ensures that it offers its customers reliability of service when it comes to picking up or delivering a parcel. This reliability is augment by the simple and flexible pricing method that the company employs to price its services. This method of pricing is so simple that its dynamics can be easily understood by the customers. To provide comfort to customers with regards to their package destination, the company has integrated a state of the art order tracking system on its website. This allows the customers to check the status of their parcel. Moreover, the company’s website allows customers to get close to the company and book their orders through this website. The company’s sale staff and representatives are extremely customer centred and are trained to satisfy the needs of their customers’. This attitude of the company can play a vital role in creating brand loyalty and not only that it can help to maximise customers’ life time value. This kind of customer facilitation and customer orientation can be a major competitive advantage for companies operating in this industry. However, the company needs to take additional measures to make their supple chain more flexible and responsive to the volatile needs of the customers. Operational Excellence: Since the company is currently engaged in operations which are proving to be very cumbersome from the aspect of cost, therefore it is necessary that the company take initiatives which help the company to shirk these arising costs. The fundamental reason behind this inefficiency is that the company has been adamant when it comes to adding new resource in to the current setup without creating the proper utility for these resources. As a result of this the company is currently carrying an underutilised capacity, which is preventing the company from achieving economies in its operations. Even thought the size of the company’s operations is considerably large, but in order to resolve the problem created by the underutilised capacity, the company should start finding utility for its acquired resources. Market Penetration: The company needs to start find new customers in order to increase its revenues. On the contrary the company can utilise its strong brand equity in its current markets and it strong capital base to fund a marketing program that penetrate this market further. Since the market the company is currently serving is still present numerous opportunities for sales therefore this strategy presents a favourable picture for its implementation. However, the company needs to assess the true potential of this opportunity that can be estimated by means of finding out the expected number of audiences that can be attracted towards the company through this marketing program. This strategy also needs to be assessed from the aspect of finance. The capital outlay that would be needed to make this strategy work can be enormous and can drain the company from vital capital resources. Moreover, if this marketing program fails to generate enough response than all this capital expenditure made by the company will have to be written off from its books. Low-cost leadership: This strategy has to do with providing customers with low cost services. This can be a vital competitive advantage for the company, but in order to implement this strategy the company will have to take tedious efforts to re-engineer its operational design and cost structure, because otherwise it would be very hard for the company to deliver low cost services. And if the company blindly or with giving due attention to its operational costs declare to customers’ its intention of providing low cost strategy, and then later backs away from it since it could not sustain such damages to its profit margins, than this could serious harm its brand equity in the marketplace. If the company manages to successfully tailor its operations and underlying cost structure, than it can gain a remarkable competitive advantage that will be very hard to imitate by its competitors. Moreover, the profit margins the company can extract after the successful implementation of this strategy will be extremely high. These increased profit margins can play a vital role in removing the negative effects of debt on the books of the company. Moreover, the company will add new capital into its equity that will play a major role in enhancing its market capitalisation. One best strategy: It would be recommended to the company that it should go for the first strategy that is “Market Development”. This strategy requires a company to enter a new market, however, the nature and attributes of the product offerings of the company would be same. As mention earlier, the company should opt to start its operations from the Emirate of Dubai in order to tap into the markets in Europe, Middle East and Asia Pacific. Moreover this initiative will allow the company to utilise its underutilised resources. By initiating operations in this region, the company will put to use the large number of airplanes in its fleet and many other similar costly resources. Also since the company has excess amount of capital available with it, therefore it can use it to design an exclusive marketing program for each of the countries it decides to start its operations in. Also this strategy helps the company to avoid the uncertainty that is prevalent in the market penetration strategy. The uncertainty that is being talked about over here is that of demand stimulation of the company’s service offerings. If the company is going to invest this amount on its current market, than the probability that it will bring in additional revenue is very low. On the contrary if the company spends this amount on new markets coupled with its current low cost services and flexible pricing, than the probability of stimulating demand and achieving set out profit targets would be higher. Another thing the company has on its side is the strong network of hub and spoke that will allow it to connect parcels arriving from one part and leaving to a destination in other part of the world. This will play a major role in making the services more quick and efficient. Part 2: Implementation Issues Implementation of the Chosen Strategy: As the final recommended strategy for the company is to move into the international arena, therefore the company will have to adjust its working in accordance with this strategy. There are numerous changes related to the current structure of the company that needs to be undertaken in order to implement this strategy. Following are the changes that the company shall have to take in order to successfully implement this strategy. Some of the success factors for this strategy are a function or subset of the order strategies discussed above. However, since this strategy is such a complex one to undertake for the company, therefore it would be better for the company to take complementary strategic measures in order to ensure the success of the main strategy. Following are the changes: Seek Operational Excellence and complementary efforts: The company will have to undertake serious efforts to reduce the heavy cost of debt that it is carrying on its books. This is eroding the profits that the company is making through its current operations. Moreover, the company has to find the utility for its existing resources, since the company is currently underutilising its capacity. As a result of that the company again is incurring a huge capital outlay on its fixed cost. If the company wants to achieve operational excellence, than it will have to achieve economies of scale in its operations, for this the company will have to expand the scope of its current operations and make use of its resources. Otherwise the company will not be able to successfully implement its international strategy, and there are possible chances that this shift in focus may cost the company in its current stronghold markets, as competitors may utilise this opportunity to break away a major chunk of the company’s customer base. Therefore, the company will have to keep a vigilant eye on the competitors of its current markets, while it tries to initiate its internal operations. The company can be successful in implementing its international strategy only if manages to design low cost operations, comprising of an organic, effective and efficient supply chain. The company will have to form a special task team that will have complete autonomy over the process of re-engineering the company’s current operations. This task force will cut across organisational functions and bureaucratic setup and will be completely autonomous with regards to the actions it wants to take to re-engineer the business processes of the company, so that it is in the right operational structure to support its international operations. This task team should have experts from each functional. This would ensure that each department of the company will have their say in designing the future operational mode of the company and taking the company into international arena. The team members of this task force would be given assignments related to their functional expertise. Since the job of going international is a cumbersome one, so it deserves a 360-degree feedback from all the experts in this task force. Although each member will design a framework for his functional area in the new setup, but these individual frameworks would be available for critique from other fellow team members. However, it the organisation wants to ensure that the team remains objective throughout the duration of the project, so for this it would have to setup effective protocols to handle developments in the team. Moreover, the company can also hire an external consultant to coordinate the activities of the project. This consultant will also facilitate the brainstorming sessions and the session where an aspect of the strategy is going to be designed. The fundamental role of this consultant would be to keep the team objective and free from interpersonal conflicts. Moreover, he will also be responsible to play the role of a devil’s advocate. This role insures that the team member does not conform under peer pressure and also that the group does not ignore a vital aspect of the situation. This consultant should be incorporated in the team from the start. He should work with the team members to setup effective protocols for internal communications, handling external developments and most importantly in the setting up of quarterly goals. This would ensure that the entire team is on the same page when it comes to defining the tactical objectives of the company. Another important thing that this team has to establish right from that start is the assessment procedure and timing of this assessment. Obviously, since the strategy that is being undertaken is a complex one, therefore it is certain that any policy measure that is implemented would take some time before professing itself in the environment. In such circumstances the team will have to keep a close watch on the developments and establish a time period that will be suitable for assessing the impact of the strategy. In this entire process, the headquarters should not at all stay aloof to the working of this team but rather it should closely monitor the developments that are taking place. The group should be called frequently to the headquarters to give presentation regarding their progress and likely actions that it would take in the future. In this way the team would be under strict vigilance, its every action will be checked and logic of it would be questioned. Thus the team would be under pressure to take the right steps and most importantly it would have to take those steps which are consistent with the corporate philosophy. Geert Hofstede Analysis: Companies which plan to go abroad have to face a challenging environment. National, cultural and regional differences are the most prominent amongst those. Since the environment in which the company enters is totally alien: to its personnel and the dynamics of this environment are totally unknown to it, therefore it needs to take special care when it comes to setting up its operations in this environment. The culture of European countries is totally different from its Asian and Eastern counterparts. Thus US companies have to tailor its operations according to the requirements of these markets otherwise there are considerable chances that it will alienate its customers and suffer a negative impact on its equity. In order to understand the difference between the current culture and the new culture, the company needs to assess the underlying variables on the following dimension. Power Distance: The power distance is the relationship between wealth and citizen’s power. In Asian and Arabian societies, this relationship is towards the lower end of the spectrum, whereas in the western societies this is totally opposite. In the western society since everyone is concerned about wealth therefore this dimension is towards the higher side of the spectrum. In such circumstance the company should adopt practices marked by egalitarianism. This will be a source of motivation for employees working for the company in this region and also for customers who would receive consistent services without any demarcation. Individualism vs. collectivism: The society of US is centered on individualism. Customers are totally independent when it comes to expressing their needs. This is totally opposite for the Asian and Arabian societies which are characterised by stanch collectivism. Thus a company which decides to operate in this part of the world should form teams for every challenging situation as workers prefer working in teams. Masculinity: This dimension has to do with the tendency of the men of this region to emphasise their masculinity. As a result of this, the society gives more opportunity to males as compared to females. Men prefer working with men rather than female, thus any company operating in this environment will have to let go of its equal opportunity claim. Uncertainty Avoidance: People of this region like to know what they are up against in advance. Their tolerance for uncertainty in extremely low and they take all those measures to prevent the arising of those situations in which they are unclear as to their roles. In this regards a company needs to clarify the job requirements of the employees recruited from this region. Long-term orientation: Well on this dimension the Arab resembles people from US, whereas Asians are totally different from both of these groups. Both Arab and US people are long term oriented, whereas Asians are short term in orientation. In this regards a company entering these markets will have to decide the nature of its relationship with the customer of these regions. Implications: The company will have to incorporate these considerations, found through the above analysis, in its company structure and other supplementary activities. The company in order to better understand the dynamics of the environment should hire management that is well aware of the culture, mood of operations, and most importantly the tacit legal and working norms of the region. This will enable the company to adjust its product mix according to the needs and wants of the regional market and also to run its operations in a manner that are culturally feasible. Moreover, the company also needs to keep in mind its global strategy while working in this region. The message it communicates to customers through its various customer contact points should be consistent with the message that the company communicates in order regions of the world. In this case the company should embark upon an integrated marketing communication program, so that it can have a consistent image for its product offerings and corporate style of doing things. In this regards the headquarters of the company should take an initiative to keep a close coordination with its regional teams and use their inputs to design a global business strategy for the company and its product offerings. How and Why Strategic Management Tools are Important Strategic management tools are of high importance as they help the managers and business owners to identify different points or loopholes that can be improved. By using different tools such as TOWS matrix, organisations are able to come up with strategies in a way that they could maximise the opportunities that are prevailing in the market using their strengths or organisations can minimise the threats they are facing by capitalising on the strengths they have. This allows organisations to come up with strategies that could help them in making the most of the situations. Similarly there are several other tools that could help the organisation to not only identify different opportunities and threats, but it allows the organisation to improve the current situation so that it helps in improving the profitability of the firm. How Leadership and Strategic Change Will Be Required Leadership has an important role in managing the overall process of change. Good leadership qualities can help in implementing the change appropriately. In addition to this, good leaders can help not only in implementing the change but in making the change successful by encouraging every member of the organisation. In order to manage and make the change successful, it is important to have a proper change strategy. Such strategies would allow implementation appropriately and if proper strategies and implementation of change is not appropriate, then it could have a negative impact on the organisational performance. Conclusion: From the above analysis, it is clear that the company has matured in its current market. it is currently well established in this market which is justified by the fact that it holds 50% of the market share. Thus, this fact alone presents a viable opportunity for the company to take its operations international and utilise its current resources to its maximum capacity and last but not the least gain economies of scale in its operations. This strategy of going international seems like a logical step for the company to take under these circumstances. References: Charles W. L. Hill and Gareth R. Jones, Strategic Management Theory, Sixth Edition, Houghton Mifflin Company, Boston, 2004. Appendix 1: EFE Matrix EFE Matrix Key External Factors Weight Rating Weighted Score Opportunities 1. Expand online services 0.07 2 0.14 2. Offer larger variety of shipping services 0.09 4 0.36 3. Increase technical services for hardware and software 0.09 2 0.18 4. Increase number of Domestic Hub’s 0.13 4 0.52 5. Market with other on line companies 0.12 2 0.24 6. Innovation 0.06 2 0.12 Threats 7. Fuel prices 0.10 4 0.40 8. External competition 0.07 2 0.14 9. Economic slowdown 0.11 4 0.44 10. Lower cost competitors or imports 0.05 3 0.15 11. External changes (Government politics) 0.06 3 0.18 12. Price wars 0.02 2 0.06 13. Product substitution 0.03 2 0.06 Total 1.00 2.99 Appendix 2: IFE Matrix IFE Matrix Internal Factor Evaluation Weight Rating Weighted Score Strengths 1. Cost advantage 0.10 3 0.30 2. Asset leverage 0.05 2 0.10 3. Effective communication 0.03 2 0.06 4. Innovation 0.04 1 0.04 5. Online growth 0.06 3 0.18 6. Loyal customers 0.08 3 0.24 7. Supply chain 0.11 4 0.44 8. Pricing 0.12 4 0.48 Weaknesses 9. Diseconomies to scale 0.07 3 0.21 10. Over leveraged financial position 0.08 1 0.08 11. Low market share 0.07 2 0.14 12. Not innovative 0.08 1 0.08 13. Not diversified 0.06 2 0.12 14. Poor supply chain 0.05 1 0.05 Total 1.00 2.52 Appendix 3: CPM Matrix Fastway Express DHL CPM Matrix Weight Rating Weighted Score Rating Weighted Score Rating Weighted Score Competitive Profile Matrix Product Quality 0.08 4 0.32 4 0.32 4 0.32 Price competitiveness 0.19 4 0.76 4 0.76 4 0.76 Management 0.13 3 0.39 4 0.52 4 0.52 Financial Position 0.12 3 0.26 4 0.48 4 0.48 Customer Loyalty 0.1 3 0.30 3 0.30 3 0.30 Global Expansion 0.09 1 0.09 2 0.18 4 0.36 Market Share 0.14 3 0.42 4 0.56 2 0.28 Production Capacity 0.15 1 0.15 2 0.30 3 0.45 Total 1.00 2.69 3.42 3.47 Appendix 4: SWOT Matrix SWOT Strengths Weaknesses Cost advantage Diseconomies to scale Asset leverage Over leveraged financial position Effective communication Low market share Innovation Not innovative Online growth Not diversified Loyal customers Poor supply chain Supply chain Pricing SO STRATEGIES WO STRATEGIES Opportunities Expand online services Ability to adopt product mix to meet market demand - industrial storage distribution developments/CBD Office Markets Diversify internationally to take advantage of international opportunities Offer larger variety of shipping services Adjust the development pipeline to focus on delivery stock which is attractive to the rental market Increase technical services for hardware and software Large loyal database - this can be turned into a very valuable long term assets with the aging populations Increase number of Domestic Hub’s Market the company as leaders in sustainability Market with other on line companies Innovation Threats Fuel prices Use large loyal database to remain strong through harsh economic conditions Merge, acquire or expand internationally to avoid New Zealand economic climate. External competition Stop recruitment to reduce company overheads through tough economic climate Economic slowdown Lower cost competitors or imports External changes (Government politics) Price wars Product substitution Read More