Executing Strategies in a Global Environment

Executing Strategies in a Global Environment

FedEx Cooperation is an American global courier delivery service company with headquarters situated at Memphis, Tennessee. It is generally an import/ export company which was established in January 1998 when the then Federal express Shipment company (founded in 1971), acquired Caliber System Inc. The sole purpose of the acquisition of Caliber System Inc by Federal Express cooperation was to enable it to diversify its services into other services that are different but related and to avoid overreliance on their core service, which was shipping. Today FedEx cooperation provides Strategic direction and consolidated financial reporting, for all operating companies that compete collectively under the FedEx name worldwide. These companies include: FedEx Express, FedEx Ground, FedEx Freight, FedEx Office, FedEx Custom Critical, FedEx Trade Networks, FedEx Supply Chain Solutions and FedEx Services.

An analysis of FedEx value creation frontier shows that the company has effectively incorporated three of the building blocks of competitive advantage. Clearly, the cooperation appreciates the importance of innovation as a means of acquiring and sustaining a competitive edge as a business enterprise. One of the initiatives the company has taken to ensure continuous innovation in the firm is FedEx innovation. FedEx Innovation is a team of proficient scholars, whose main object is to identify customer needs and adequate technology to solve business problems through innovative solutions. The product quality is another building block that FedEx cooperation has taken very seriously. This has been achieved through the use of high value-added logistics, transportation and related business services via focused operating companies. Customer responsiveness is another important building block that the company has embraced. This is evident in their prompt and high quality service delivery, a reputation they have held for years. FedEx has another advantage of thorough market coverage and consumer demand satisfaction. Despite the great attributes accorded to FedEx Express, notably, the emphasis on efficiency as a building block to competitive advantage has been quite moderate. Increased efficiency of a firm ensures optimal utilization of resources and therefore guarantees maximum output or returns. These results in low production cost, hence, a guaranteed low- cost competitive advantage for the firm. This strategy ensures that a firm maintains above average profitability. Incorporation of efficiency as a building block by FedEx will go a long way in minimizing wastage of resources and maximizing returns. Employee productivity is one source of efficiency.

Successful product differentiation is one effective measure that can enable a firm to have a competitive edge over its rivals, because, it enables the consumer to distinguish clearly between the attributes of product produced by one specific firm, from another similar product produced by another independent firm. Through product differentiations, a firm is capable of maintaining customer loyalty once it has earned it. This main aspect of product differentiation could be conveniently employed by FedEx to lock out competition since it already has a good track record of high quality and unique services. FedEx has great potential of improving its services through research and development with the input from its innovation centre, FedEx Innovation. Vertical product differentiation will be most appropriate for FedEx, because, this mode of product differentiation appeals to customers with a deep appreciation for quality.

Capacity controls serve the main function of managing revenue through risk mitigation. These controls are put in place to minimize on losses that may be incurred during the day to day running of a firm. Effective implementation of capacity controls minimizes chance of customer dissatisfaction due to occurrences such product damages, late product delivery, wrong package delivery and many others. Consistency in competency of the firm builts its reputation and it is a very effective marketing tool that strengthens the firm’s competitive advantage in the global market. With the aid of innovation, FedEx can develop a very efficient logistics function that is able to manage its firm’s supply chain at the lowest possible cost and in a way that best serves customers needs. This will lower the cost of value creation, and help the firm establish a competitive advantage through superior customer service.

The current business model that FedEx runs by is built on the foundation of diversification of product (services). This has worked for the firm in that; it has ensured its survival over the years thus enabling it to rapidly grow. Moreover, diversification has aided in regulating cash flows throughout the year regardless of the seasonal businesses that are a characteristic of FedEx.

This model can be enhanced further if a new business level strategy is incorporated. One of the business level strategies that come highly recommended is Cost Leadership. The law of demand asserts that a rational consumer will demand more of a good or service if the price of that commodity goes down. Basing on this fact, a producer can sell as much as they desire provided they sell the commodity at the price the consumers are willing to pay. However, the producer is not at liberty to reduce prices as he deems fit, because, such an irrational action will result to the failure of his business. Therefore, the producer has to devise a method of production that minimizes his cost of production while still ensuring that the quality of his output is good. Having achieved this, the producer can then sell his output at a favorable price to the consumers without incurring losses. Efficiency in all aspects of the firm’s activities is the key component that ensures Cost leadership, which guarantees a firm a competitive advantage over its competitors.

Efficiency is fostered primarily by innovations that support cost minimization and optimal use of inputs during production. FedEx has an added advantage over its competitors as far as innovation goes.

Cost leadership business level strategy, will only remain effective as a competitive advantage in the global market for a firm, if the firm is efficient enough such that it charges the lowest price while still maintaining a high quality of goods. This however can prove to be a very challenging endeavor especially in the global market, which is flooded with misleading advertisement and a lot of counterfeit commodities to the extent that the consumers are in the dilemma of discerning between authentic commodities and counterfeits.

One major effect of globalization is that, it has done away with geographical boundaries and in the process reduced the entire world into a global village. As a result, customers around the world are no longer compelled to access services from one supplier because they have been exposed to unlimited alternatives. The vast global market has therefore contributed to immense decrease in customer loyalty. Since customer loyalty is somewhat influenced by an individual’s taste and preferences, the cost leadership business level strategy may be limited in the global scene. Moreover, a” low price” in the global market tends to be a relative term, in the sense that, what one consumer in one location sees as a low price another consumer in a different location might view it as a very high price due to variations in currency used across borders among other economic factors.

Additionally, the differences in political, social and economic setups in the different countries of the world might make it such that, production of a specific commodity in one country is more profitable than production of the same commodity in another country regardless of the fact that production in both countries is done efficiently. This can be explained in the sense that, some countries have laws that make the cost of production quite rigid, such that, very little can be done to reduce it. Consider a hypothetical country A which has enacted very strict laws on minimum wages, safety precautions and pollution.

Though the producers in country A will strive to produce effectively, their cost of production is bound to be quite high. Consider another hypothetical country B, which deals in the same commodities produced by country A, assume that the labor and pollution laws are not as strict as they are in country A. If the producers in country B produce efficiently, they are bound to have a more competitive advantage with regard to cost leadership than their counterpart in country A. Evidently, exposure of the firm in Hypothetical country A to the global market undermines the effectiveness of its cost leadership Business strategy.

One significant way by which FedEx might confront its global competition is, by optimally using its innovation centre to come up with unique ways of provision of the highest quality of services that surpass any other company that conducts the same kind of Business.

Production of unique products, assures a firm a competitive advantage over its competitor globally, as it gives the firm monopoly such that the firm is in a position to change high prices for the good, without affecting demand. Even in the event that other firms dealing in the same good may crop up eventually, they will have to compete with the fact that the mother firm has already established its credibility among its customers.

The implementation of this strategy by FedEx Cooperation will ensure the global courier delivery Service Company, repeat business for the longest time.

References

David Held & Antony MaGrew. Globalization/ Anti-Globalization.Newyork: Polity Press, 2007.

John Beath & Yannis Katsoulascos.The Economic Theory of Product Differenciation: Newyork: Press Syndicate of the University of Cambridge, 1991.

Joan Magretta:Havard Business Review on Business Model Innovation: Boston, Massachusetts:Havard Business School Publishing,2009

David Campbell, George Stonehouse and Bill Houston, Butterworth Heinemann :Business Strategy: an Introduction. Newyork: McGraw Hill: 2003.