LO1: PROCESS OF STRATEGIC PLANNING
Q 1.1 Define the terms and state the mission, vision,objectives,goals and core competencies of your chosen organisation.
A mission statement must be specific enough to pin down a company's real business arena. The company's business activities, technologies and competencies, or how the enterprise goes about creating and delivering value to customers and satisfying their needs (Pearce, 1997).
A strategic vision concerns a firm's future business path as to the kind of company it is trying to become and what customer needs are to be satisfied in the future.
Objectives and Goals broadly outline the targets that the company wants to achieve by aligning itself to its strategic vision. Core Competencies necessarily mean the core strengths of the organization in the domain it operates in.
FedEx mission statement is:
"To provide organizations and individuals the best value in "integrated logistics" through a global network, innovative use of technology and caring people".
The Vision is to offer customers tailor-made solutions to their logistics and express delivery needs, combining leading-edge technology with the traditional "can-do" attitude of the 170,000 employees worldwide has defined the firm's future business path.
In an business environment as dynamic as the express delivery industry, the goals and objectives are usually short term but all aligned to the mission and vision of the company. Immediate goals and objectives would be to develop a market entry strategy with respect to the penetration in a developing economy or an emerging market.
The core competency for Fedex is in providing express delivery of packages and materials throughout the world. With global proficiency in solutions, express, air freight and overland transport, Fedex unites worldwide coverage with a profound understanding of local markets.
Q.1.2 For your chosen organisation, describe the key issues encountered in strategic planning.
Strategic Planning or Management refers to the organization's process of defining its strategy, or direction, and decision making by allocating the resources to pursue the defined strategy.
The five tasks of strategic planning and management are listed as under:
- Forming a strategic vision of where the organization is headed.
- Setting objectives.
- Crafting a strategy to achieve desired outcomes (Hitt, 2012).
- Implementing and executing the chosen strategy efficiently and effectively.
- Evaluating performance and initiating corrective adjustments in vision, long-term direction,
- objectives, strategy, or execution in light of actual experience, changing conditions, new ideas,
- and new opportunities.
FedEx also has an internship program with AIESEC trainees to help them learn FedEx's global business. The FedEx CEO believes, "FedEx is growing fast and we're looking for global minded, multicultural, innovative young leaders with a drive to be good corporate citizens and with a proven `can-do` spirit." Recognizing the potential of the logistics market very early, the Chairman and CEO of FedEx has been pursuing a growth strategy focusing on capacity building. Through significant investments in infrastructure, technology and network, FedEx ensures that they are well placed to fulfill future customer demand. The construction and operation of the new Central Asia Hub in Hong Kong is an extension of this strategy.As a key facet of FedEx's strategy they recognizes the high importance of serving specialist global industry sectors. The FedEx CEO said "No matter where in the world, FedEx industry teams are there, servicing the market and building best practice solutions. Our industry specialists will refine our services to fit your logistics mission, inclusive of complete project management and trade compliance implementation. FedEx's growth strategy revolves around investing in infrastructure, service offerings and people."
Q.1.3 Compare and contrast two differentplanningtechniques which you could apply to your chosen organisation.
The BCG Growth-Share Matrix, is a marketing planning technique coined by the Boston Consulting Group. It is based on two dimensional variables: relative market share and market growth. They often are pointers to wellness of a business. In other words, products with greater market share or within a fast growing market are expected to yield relatively greater profit margins. For FedEx the BCG matrix is shown below.
FedEx services is currently a cash cow. It has a high market share but the growth has slowed down due to the saturation of the industry. The key strategy at this stage of the business is to invest minimum and hold them to fund future businesses. The market share can remain in place by just a little investment (Ketchen, 2004). Whatever profit arise for FedEx business can be used to develop other businesses of FedEx which require greater investment.
Stakeholder mapping or analysis refers to the action of analyzing the attitudes of stakeholders towards an activity or business. This technique is frequently used during the preparation phase of a project to evaluate the attitudes of the different stakeholders regarding the possible changes. Stakeholder analysis can be done on a regular basis to track changes in stakeholder attitudes over a period of time.
For FedEx the stakeholder mapping matrix is shown below.
For FedEx the stakeholder mapping matrix is skewed towards the Latents due to the express delivery and quick services offered by them. The market share of FedEx is also close to 30 % in the market and are slated to surpass DHL soon (Hambrick, 1982). This quadrant is a high power and low interest quadrant as people know it exists and the services are standard. The growth for FedEx has also slowed down due to the same thing.
LO2: BE ABLE TO FORMULATE A NEW STRATEGY
Q 2.1 Conduct an organisational audit on your chosen organisation by carrying out a SWOT analysis.
NAME OF COMPANY –FedEx Corporation
SWOT analysis for FedEx is as follows:
The biggest strength of FEDEX is that it is the largest transportation carrier company in the world. Its fleet of carriers is more than of any of its competitors in the whole world. The custom agents of FEDEX are spread to around 140 countries around the globe and thus it has a huge network. The services offered by the company are of international level and the brand name adds on to the competitive advantage that the company has against its competitors.
The concept of outsourcing much of its operations from outside has helped a great deal in cutting down costs of the company. It has relationships with Polar Air and Lufthansa Airlines. The main strength would be its presence all over the world and the Lean organization practiced by the company (Walker, 2008).
The integration of the EGAP system (new internal processing application) has posed problems for the operations in its inception stages. Furthermore, few cases of unethical employees have caused trouble in the organization. The contractor model at some stations is not as per the company standards. Lack of flexibility is a huge problem that has been observed in USA. Lastly, FEDEX’s relationship with USPS for rural deliveries has severely hampered the responsiveness, which causes a delay of around 2 to 3 days in transit.
FEDEX currently owns only 5% of the US market share. Thus there is loads to be done in this part of the world. By improving upon its flexibility issues it can acquire a decent market share in US. Growth in the world GDP ensures new opportunities in the developed as well as the developing countries. With the world becoming flatter, need to communicate and deliver objects through such companies is increasing.
Worsening of the economic environment in US has posed a threat to FEDEX’s business there. Furthermore, terrorist attacks in the United States have caused FEDEX to cut down many of its airlines. Then there are strong competitors in the form of FedEx and UPS which have already clinched a large part of the target group of FEDEX. Competition is bound to become stronger with more players coming in. Currency fluctuation is another threat which affects the prices of transfer of goods between countries.
Q 2.2 Evaluate the business environment for your chosen organisationby doing a PESTEL analysis.
PESTEL ANALYSIS FORFedEx Corporation The PESTL analysis for FedEx is given below: - Political / Legal Factors: As FEDEX operates in 228 countries worldwide, each country has its own political and legal barriers. Some countries are quite open to foreign investments while other countries like US prohibits more than 25-percent foreign ownership of a U.S.-registered air carrier The two air express giants UPS &DHL had complained to the U.S. Department of Transportation (DOT) that FedEx was hiding behind its complicated ownership stake in FEDEX Airways so it can illegally finance its expansion into the American market with the profits of its monopoly mail operation (Berger, 2011). FEDEX was able to upgrade its hubs in Hong Kong and Bahrain it was unable to expand in Brussels. The governments of Belgium objected to increasing night flights over Brussels owing to aircraft noise and claims that the relentless noise at night would balloon medical spending by 250 million euros (US$304 million) annually had FEDEX expanded. FEDEX will move its intercontinental hub in 2008 either to Leipzig, Germany, orVatry, France, leaving Brussels only as a regional hub. In the airfreight industry there is too much Government interference.
The globalization of production, firms, and markets has created an increasing demand by firms for seamless global infrastructure services, thus creating pressures for the globalization of many infrastructur services. The global firms of today increasingly demand network operators that can tie together the globally distributed facilities of the firm through integrated network services. The demand for new global operators of network services has had the most dramatic impact in parcel post and express mail delivery, and more recently in the provision of inter modal transportation services.
Social Factors There have been a lot of societal changes in the last few decades. There is a trend of more people around the world celebrating Valentine’s Day, Mothers’ Day and also sending gifts during the Christmas and Muslim holy month of Ramadan. FEDEX's has responded to this particular trend by offering substantial discount during these festive occasions and encouraging people to send gifts to their relatives.
Technological Factors Technology considerations such as information exchange, in-transit visibility, automation, and security are key to sustaining competitive advantage. In the information age, most companies rely on information technology (IT) to share information internally and with their key suppliers and customers In an industry like air express which is driven by technology more than anything else, certainly technological factors play a vital role in deciding the company's fate at present and in the future. In 2000, FEDEX launched FEDEX WAP Track, the industry's first tracking service designed especially for use with WAP-enabled mobile phones and devices. FEDEX launched the world's first global SMS tracking service to allow customers to track FEDEX shipments via text messages (Foreman, 2005).
Q2.3 Define and explain the significance of stakeholder analysis.
A stakeholder is any person or organization, who can be positively or negatively impacted by the actions of the company. They can in turn also cause an impact on the actions of a company, government, or organization. The Types of stakeholders are:
- Primary stakeholders: are the ones who are ultimately affected, either positively or negatively by an organization's actions.
- Secondary stakeholders: are the ‘intermediaries’, persons or organizations who are indirectly affected by an organization's actions (Newcombe, 2003).
Stakeholder mapping or analysis refers to the action of analyzing the attitudes of stakeholders towards an activity or business. This technique is frequently used during the preparation phase of a project to evaluate the attitudes of the different stakeholders regarding the possible changes. Stakeholder analysis can be done on a regular basis to track changes in stakeholder attitudes over a period of time. The key benefits of stakeholder analysis are in identifying the following and acting accordingly: -
- Stakeholders' interests
- Key people to be informed about the project during the execution phase
- Negative stakeholders as well as their adverse effects on the project
- Ways to influence other stakeholders
- Potential risks
Once the above points are identified, accordingly strategies can be devised to implement the same.
LO3:UNDERSATND APPROACHES TO STRATEGY, EVALUATION & SELECTION
Q 3.1 Define fourstrategic options available and explain how they may be implemented within your chosen organisation.
A company can achieve a competitive edge by various means, e.g., by manufacturing products more cheaply than competitors, by offering unique products or services, or by concentrating on small market niches. Logistics supports each of these business strategies in its own way. Such logistics concepts as “mass customization” or “postponement” even allow cost leadership and differentiation strategies to be achieved simultaneously (Berger, 2011).
Logistics in various business strategies
Business strategy determine the products with which and the markets in which a company intends to achieve competitive advantages. Porter has identified three promising types of generic competitive strategies that enable companies to outperform their sector competitors.
- Comprehensive cost leadership
- Sector-wide differentiation and
- Concentration on focal areas such as market niches.
The third strategy can also be interpreted as an application of the first two strategies with a focus on one particular market segment.
Comprehensive cost leadership:
The strategy of comprehensive cost leadership in a sector requires the rigorous exploitation of the experience curve effect to reduce unit costs. This requires an aggressive build-up of capacities and strict cost control. The job of logistics systems is to handle large volumes of goods in geographically spread-out markets at the lowest possible cost. A company that pursues a strategy of cost leadership must rely on logistics process capacities that allow for simple and far-sighted logistics systems (Hitt, 2012). This includes technological capacities for implementing flows of material, the capacity to simplify procedures and the capacity to anticipate necessary processes. In this strategy, profits are earned by selling large quantities of items at low prices. The lower unit costs mean that these margins can still be achieved when competitors are no longer profitable due to lower experience curve effects.
The differentiation strategy strives to lend a special status to a product from the customer’s perspective, enabling it to be perceived as unique throughout the sector. The differentiation can result from a special brand image, the product’s quality or special product-related services. This also includes a high-level delivery service. Customer-oriented capacities such as rigorous market segmentation, accessibility and a high level of flexibility have a positive impact on a company’s success. Differentiation shields the company from its competitors and creates a customer relationship with the product. Since, customers are prepared to pay higher prices for the image, the quality and/or the additional services, profits generated by this strategy result from higher margins, not high sales volume.
Concentration on focal areas:
The strategy of concentrating on focal areas such as market niches requires the company’s focus to be placed on a particular customer group, a regional market or a small range of products within a sector. The competitive edge results from the adjustment to the specific requirements of a market segment as well as from cost advantages in this market segment. The differentiation takes place largely on the individual customer level as the company constantly offers new services and responds as flexibly as possible to specific customer needs. In contrast to the cost leadership strategy, the cost advantages are not based on the experience curve effect - which is related to large sales volumes
Rather, certain costs are never incurred at all - e.g., warehousing costs for delivery warehouses when a regional market is supplied directly from the plant. The concentration on market niches can result in simpler logistics systems as well. But it can also require special adjustments in the logistics systems to meet the service requirements of a specific market segment.
In case the company is planning to protect its interests regarding employee turnover issues it can go for employee rotation policy to safeguard the interests for the employees and also employ more strategies for employee satisfaction with respect to job design and rewards etc.
Q3.2 Using your analysis from Q3, recommend an appropriate future strategy for your chosen organisation
An appropriate future strategy that can be employed by FedEx with respect to improving its business control and market share would be a hybrid strategy so that two fold focus can be pursued. The hybrid strategy that can be implemented is of Cost Leadership plus differentiation so that other competitors cannot replicate the same.
Cost leadership plus differentiation
In logistics, it is also possible to pursue hybrid strategies - that is, strategies that aim for cost leadership and differentiation at the same time. One case in point is the mass-customization concept. Here, large unit numbers of standardized product components or modules are initially produced. End production, which churns out a multitude of product versions, follows only at the end of the value-creation process. Here is an example: Large numbers of white T-shirts can be pre-produced in China and then should be imported to Europe. However the T-shirts shall not be dyed until they reach their final destination. This postponement concept, in which product customization is put off, generates economies of scale and synergy effects in production of standardized modules. This can result in both a high level of added value for the customer thanks to variety or differentiation and in cost leadership.
The advantages of this type of business strategy are that it can lead to economies of scale and greater revenues. Greater market share and long term profitability are the other notable advantages.
LO4: UNDERSTAND HOW TO IMPLEMENT A CHOSEN STRATEG
Q 4.1 Focusing on your recommendation in Q3.2,compare the roles and responsibilities needed to implement the suggested future strategic plan.
The future strategic plan that is required to be executed is of Cost leadership plus differentiation. This strategy is being implemented to be able to provide the clients with a more customized solution offering.Once the customer will place an order for delivery the standardized product can be procured from the supplier and then accordingly modified in the warehouse in that particular location. This would ensure reduction in costs and also timely delivery. The roles and responsibilities of the departments that would be in charge of implementing this strategy would be: -
- Procurement and transportation of Finished Goods
- Procurement and transportation of Raw Materials
- Customer Delivery and Packaging
- Billing rates to Customers
- Payments to Suppliers
- Credit Policy Review with respect to grade of suppliers (Williford, 1999).
Other roles and Responsibilities required would be
- Ensure Planned Implementation of the same by Process Manager
- Ensure Transition of employees towards the implementation of the new Strategy
- Ensure Pickup of express deliveries by using GPS tracking
Q4.2 Identifyand evaluate resourcerequirements you will need toimplementanew strategy within your chosen organisation.
The different resources that are needed to be Identified to Implement the Cost Leadership and Differentiation plan are: -
- Distributors of Raw Materials and Finished Goods
- Order Sourcing Workforce
- Order Delivery Workforce
- Order Processing Workforce
- Personnel Department to manage contractual employees
- Payment Collection Workforce from Client
- Supplier payment for goods sourcing and Personnel to manage employee salaries and wages.
Time and Material Sources
Once the strategy is planned to be implemented, a separate marketing team and research and development team can be allocated to plan for the receptivity of the new idea of customization of products for delivery. They can conduct focused group surveys to gauge the same. Once the Data is available the R&D team can provide the analysis to the product team to come up with an interface to integrate with their ERP so as to manage it online. The order tracking can be done from the central server to avoid any redundant workforce. Once the order is scheduled, other activities and checks can be conducted to respond to the same. The marketing team can plan to market this unique strategy by use of social networking sites or even media advertisements.
Q4.3 From your responses in Q4.1 & Q4.2, create a Gantt Chart that shows the activities required and timescalesfor the implementation of your recommended strategy. Discuss the activities and targets to monitor your strategy.
The time line for the implementation of the activities described previously can be seen below (Barney, 1997): -
MERIT 1, 2 & 3 CRITERIA.The Go-Live stage signifies the timeline when the process change would be well integrated with the long term strategy of Cost leadership plus differentiation. The strategy has been incorporated from the best practices selected in the logistics industry.
This question relates to Q2.2 and Q2.3
Using PESTEL, • Analyse the impact of Government regulations, interest rates, inflation and demographics (external factors) on your chosen organisation over the past three years. • In addition, apply tools such Porters Five Forces to explain how your chosen organisation might respond to these factors. • Present your answer in a report format. Over the past few years the government regulations with respect to the airline and cargo industry as well as changing policies have affected the transportation business. The focus for every company in this industry hasOver the past few years the government regulations with respect to the airline and cargo industry as well as Become cost reduction. Due to the rise of inflationary conditions the customer is also willing to spend just a little to fulfill his need.
The rest of the analysis will be covered in Porter’s 5 forces model.
- Rivalry amongst Competitors (Strong):
In the international market, the level of rivalry among existing firms vary from country to country. For most of the developed countries, such as Australia, USA or United Kingdom, the rivalry can be intense. This is because the growth of the airfreight industry in such countries has reached its maturity.
The battle for market share in the highly desirable North American air-express market is attracting more and more potential competitors. Both Britain's Royal Mail and Air France had expressed interest in entering the U.S. market. TNT Post Group of Amsterdam, the leading air-express carrier in Europe had entered the US market through a subsidiary, TNT International Express USA .TNT's express business distributes about 3.6 million time-sensitive documents, parcels, and freight shipments each week through its network of 800 hubs and depots.
United Parcel Service is the world's largest package-delivery company and surprisingly handles six percent of the US daily gross domestic product. It has been rated the "World's Most Admired" company in its industry in 2003 FORTUNE magazine survey. In the U.S. 80% of the world's "overnight" deliveries--many of them still documents--take place. But international shipments--1.3 million a day--are growing twice as fast, 18% annually. FedEx is dominant only in American air express.
- Bargaining Power of Customers (Moderate ) :
Buyers are an important component of the five competitive forces because of their potential to affect profitability in the following ways. Large volume buyers or concentrated buyer groups who demand for discounts and concessions from cargo forwarders. Lack of buyer switching cost can result in more demanding buyers as the threat of switching forwarders is a source of power for multinational companies. Threats of backward integration by buyers are sources of power to buyers. Information on the profit potential of buyers and buyer groups for forwarders to engage in buyer selection to improve profitability
Buyer power is moderate in the market. Although, there are many low prices on offer for consumers to choose their preferred price and service level many of these low price providers have more delivery time and the services are unreliable as Companies engage third party contractors. Therefore the level of competition that is sustained will determine the level of future buyer power in this industry.
- Bargaining power of Supplier (Strong)
Suppliers are an important part of the five competitive forces because of their effects on firms' sources of raw material, machinery, capital and labor. The following conditions were identified by Porter as leading to supplier power :
- Concentration of supplier groupings like TWA- a group of carriers plying between Asia-North America routes to reduce rivalry between carriers and protect prices.
- Lack of dependence on individual forwarders for substantial fraction of carriers' sales except for a handful of big and powerful forwarders by the sheer volume they handle.
- Switching cost and transit time delay faced by FedEx when switching between carriers
The bargaining power of airfreight suppliers is strong. Airfreight industry is dependent on two kinds of supplies that is supply of aircrafts, vehicles, networks and supply of packaging materials & sect; Vehicles:. Airbus & Boeing dominate the distribution of airlines for carriers worldwide. As the major supplier of the industry, they almost have a total control over the price of the planes that are critical in air transportation business. However, the expensive cost of aircraft supplied is balanced with long time investment of the planes as planes can be used at least for 5-10 years.
Cargo capacity: The local airlines also play critical role in airfreight industry. In this industry, availability of space in cargo planes are the most vital part to run the business. Each of them often load tons of cargo each year, and offloading of shipments due to lack of space means delay in transit time.
- Competitive Force of Substitute Products (Weak)
The importance of substitution lies in its potential to limit potential profitability by the existence of cost-effective substitutes for products and services.
Substitute products are not really applicable in the airfreight industry. In today's world, there is no substitute for fast and reliable delivery other than the air-express industry.
For years, there have been dire predictions that technological developments in the communications field - such as e-mail, and electronic document and funds transfers would lead to the death of the post. These technological developments represent substantial threats to the letter .Mail volumes continue to grow even in high-technology environments like Hong Kong, Singapore and South Korea. The post can remain vital, competitive and useful in this new era of communications and all depends on air express companies strategic initiatives. Therefore, this force is very weak in the industry.
- Threat of New Entrants (Weak)
The major defense against new entrants is entry barriers which are any structural component of an industry that retards or excludes new entrants. The international air freight industry can erect such barriers to entry by the wide geographical coverage of their service as it is difficult for new entrants to have such a wide coverage at the outset.
Secondly, cargo forwarders can use their buying volume with carriers to attain a cost advantage which new entrants are unlikely to get until they are able to attain scale of production. The threat of entry into the airfreight industry is generally low. This is due to the fact that the entry is based around heavy initial investment and severe risks involved, that creates several barriers of entry into the industry.
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