Write an essay of a minimum of 1200 words, addressing the questions and prompts below. Your essay should demonstrate a clear understanding of the key terms and concepts from the READ and ATTEND assignments for this unit.
ASSIGNMENT QUESTION
Write an essay of a minimum of 1200 words, addressing the questions and prompts below. Your essay should demonstrate a clear understanding of the key terms and concepts from the READ and ATTEND assignments for this unit. You must organize your work using headings formatted in APA style. The research requirement is at least two scholarly journal articles, and the course textbook. Indicate your research through in-text citations and a list of references.
- Conduct an online search, and write a brief summary of two to three issues of strategic significance that FedEx has encountered within the past 12 months. Sources used to respond to this prompt should be credible, but not necessarily scholarly.
- Which one of Porter’s generic competitive strategies best describes FedEx’s competitive strategies? Which strategy in the Miles and Snow framework best describes FedEx’s competitive strategies? Support your responses with reasons and evidence.
- Evaluate how effectively FedEx’s service strategy supports and reinforces its competitive strategy. Provide examples to support your answer.
- Discuss three issues in the strategy formulation process that FedEx should consider before changing any of its current strategies.
SAMPLE STUDENT ANSWER
Issues of Strategic Significance
Two days ago, a woman was killed in a forklift accident in one of FedEx facilities in Memphis Tennessee (Yahoo! News, 2022). This is an issue of strategic significance given the implication of worker safety from a legal and to some extent political perspective. The issue is also significant since it could affect the risk profile of the company. On February 8th, FedEx announced its intention to increase its fleet of Freight planes in a bid to match the growth in e-commerce orders (U.S.News, 2022). According to the news outlet, the distribution giant has paused its decision to purchase as it is still engaging in labor talks with the pilots. The issue is of strategic significance given the likely impact on the operational capacity of the company.
Competitive Strategies
Michael Porter’s generic typology has four major competitive strategies namely; low-cost strategy with focus, low-cost strategy without focus, differentiation strategy with focus, and differentiation strategy without focus (Parnell, 2021). However, more options were added later by others in a bid to enhance the model to fit the complex market dynamics. Using the four initial strategies proposed by Porter, the one that best describes FedEx’s competitive strategy is differentiation strategy without focus. According to Parnell (2021), differentiation strategies without focus is a strategy where the organization markets to the entire industry services that can easily be distinguished from its competitors. FedEx can easily be distinguished as a leader in logistics and e-commerce organization, known to provide fast and reliable delivery of packages to single consumers and corporate clientele. The company has a variety of packages that makes it distinguishable from its competitors such as FedEx International First, FedEx International Priority, FedEx International Priority Express, and FedEx International Economy. The differentiation of its packages makes it appealing to different sets of clients depending on convenience and cost. Given the cost aspect being involved in the structure of its packages, we can also say that FedEx also applies a low-cost without focus strategy. As such, one of the hybrid strategies proposed by others using the Porters model (low-cost/differentiation strategy without focus) best describes the strategy used by FedEx.
Other than Porter’s four-level strategy, another model that can be used to identify FedEx’s strategy is the Miles and Snow framework which proposes four typologies, defenders, reactors, prospectors, and analyzers (Parnell, 2021). From the analysis of FedEx, they belong to the prospector’s category. Prospectors are companies that are technologically innovative and seek out new markets to explore (DeSarbo et al., 2005). FedEx has prospered in its industry based on its ability to innovate, which is one of its core values, and exploration of different markets across the globe. In terms of innovation, FedEx has managed to effectively incorporate Internet-of-Things in a bid to enhance its efficiency in supply chain and logistics (Koul, 2018). The organization currently delivers to all continents with ranging timelines of delivery that are below three days depending on the destination.
Service Strategy and Competitive Strategy
There are various strategies that one can employ to gain a competitive advantage. FedEx banks on its services to have a competitive edge over its rivals. The first service strategy used by FedEx to support and reinforce its competitive strategy is the use of automation to improve customer experience and efficiency in supply chain management. FedEx applies technology-backed solutions to support its operations giving it an edge when it comes to efficiency and customer experience. For example, the organization uses SuperTracker to track each shipment until it reaches the intended destination. This prevents any instances of loses of delayed delivery due to wrong delivery destinations. Likewise, the system gives its customers the ability to kep track of their shipments in real-time, knowing where the shipment is and when it is bound to be delivered, which goes towards enhancing their experience. With improved logistics efficiency, FedEx has managed to create a level of consistency that its clients can rely on; thus gaining a competitive advantage. FedEx also has an online shipping portal with a user-friendly interface that helps its clients to easily make their shipments, collect feedback from them, and provide alerts when updates are made.
Another service strategy that FedEx has used to reinforce its competitive strategy is to create different packages for different users. These packages of shipments range in terms of the type of goods being shipped, the delivery timeline, and the cost. In the previous section, some packages offered were listed. Having a variety of packages gives its clients the flexibility that its competitors may not enjoy. Service innovation provides an organization with the capacity to meet the needs of different clients, increasing the pool of customers and creating loyalty among existing customers (Gebauer et al., 2011).
Strategy Formulation
One of the issues that could arise with strategy formulation that FedEx should consider before changing any of its strategies is the response of the competitors to the change. The industry in which FedEx competes can be considered to have an oligopolistic market structure, therefore the competition is stiff, with a significant shift in strategy bringing about an equally significant change in market position (Kolmar, 2017). In the same industry, companies like Amazon and DHL supplies have significant sway over their market base and would be more than happy to capitalize on a strategic misstep by FedEx. Therefore, FedEx needs to give significant attention to how such rivals could react to a change in strategy.
Another issue is the effect of the strategy on organizational resources (Parnell, 2021). Strategy implementation requires a significant amount of resources. The ideal approach when formulating strategies is to use measurement tools such as cost-benefit analysis to ascertain the strategy’s return on investment. For example, one of the identified issues of strategic significance for FedEx is the purchase of a new freight fleet. Such a venture requires a significant amount of resources that have significantly high levels of risks just as much as the expected returns.
The third issue in the strategy formulation process is social responsibility and ethics (Parnell, 2021). This is a significant issue especially due to the fact that the organization has operations in over 200 countries across the globe. Social responsibility starting from selection and management of employees to its operation should be considered for example when the company wants to change its pricing strategy. CSR dictates how the organization will be viewed in the public sphere and by extension impacts the formulation of business strategy.
Conclusion
This week’s analysis was focused on FedEx, an e-commerce and logistics company with over 200 branches around the globe. The magnitude of the company’s operations highlights the significance of sound strategies to drive the company to a position of competitive advantage. In this analysis, we have focused on the type(s) of strategies used by FedEx, where it is noted that the company uses a low-cost/differentiation without focus strategy. In this case, the company uses a mixture of service differentiation and pricing strategies to attract clients from different market niches. In the analysis, a description has been made on how the company uses its service strategies to reinforce its competitive strategies. However, before changing its strategies, there are some issues that FedEx should consider which will determine how useful the new strategies will be in helping the organization.
References
DeSarbo, W., Di Benedetto, A., Song, M., & Sinha, I. J. (2005). Extending the Miles and Snow strategic framework: Strategic types, capabilities, environmental uncertainty, and firm performance. Strategic Management Journal, 26(1), 47-74.
Gebauer, H., Gustafsson, A., & Witell, L. (2011). Competitive advantage through service differentiation by manufacturing companies. Journal of business research, 64(12), 1270-1280.
Kolmar, M. (2017). Firm Behavior in Oligopolistic Markets. In Principles of Microeconomics (pp. 281-300). Springer, Cham.
Koul, S. (2018). Analysis of the impact of logistics technology innovation in Supply Chain Management. Journal of Research in International Business and Management, 05(01). https://doi.org/10.14303/jribm.2018.024
Parnell, J.A. (2021). Strategic Management: Theory and practice (6th ed). Academic Media Solutions
U.S.News. (2022, February 8). FedEx eyes freighter order as e-commerce soars -sources … U.S.News. https://www.usnews.com/news/technology/articles/2022-02-08/fedex-eyes-freighter-order-as-e-commerce-soars-sources
Yahoo! News. (2022, February 18). FedEx worker dies in forklift accident at Memphis Hub, police say. Yahoo! News. https://www.yahoo.com/news/fedex-worker-dies-forklift-accident-141914594.html
SAMPLE STUDENT ANSWER 2
Strategic Issues
FedEx in 2021 experienced some problems of strategic significance. The first problem concerned labor shortages. The business has been experiencing labor shortages, which contribute to issues such as higher wage rates, overtime, and increased spending on third-party transportation, among other problems. According to Baertlein (2021), the problem contributing to the growing demand is the rapidly recovering economy. Further, the resurgence of the delta variance (COVID-19 virus) has triggered increases in e-commerce delivery demand. Growth in the number of orders has continued placing pressure on FedEx. The labor issue contributed to a 7% drop in quarterly profits of the business (Baertlein, 2021). The labor shortage was an issue of strategic significance to the business.
The business also experienced supply chain problems. The causal factor of the problem was congestion in ports. Like the rest of the shipping companies, FedEx reduced its operations because of low demand by other businesses. The latter halted their productions because of the onset of the pandemic. However, the management of FedEx did not envision the economy would bounce back quickly. The resultant effect was overstretched ports and difficulties in delivering products on time to designated customers. The challenge is a subject of strategic significance to FedEx.
Competitive Strategy of FedEx
FedEx is keen on establishing a competitive advantage over rivals. The firm has been coming up with diverse approaches to meet this goal. Porter’s generic competitive strategies and the Miles and Snow framework would be instrumental in identifying these competitive techniques of FedEx.
The most significant Porter’s generic competitive strategy used by FedEx is the differentiation strategy. The approach is one of the popular competitive techniques by businesses that target a large market base (Parnell, 2021). The practice entails the desire of a company to be unique in the market. A company using this method will include dimensions valued by consumers. Organizations pick one or two attributes customers consider valuable in the market before focusing their energies on meeting these needs. Typically, these companies reward themselves for their hard work by charging premium prices.
FedEx’s differentiation is through the provision of high quality, which competitors cannot match. FedEx notices that its competitors focus on faster deliveries; thus, they have created a massive customer base. Consequently, the management came up with the tactic of providing high-quality services, which other companies in the sector fail to match. Some of these quality practices include offering tracking systems, picking deliveries from customers’ homes, and providing customer support. The move has been instrumental in making FedEx stand out among its peers. This approach by the business contributes to the decision to charge consumers premium prices.
The other model used by the business to highlight its competitive nature is Miles and Snow framework. Specifically, FedEx is renowned for being a prospector. Prospectors are companies that are innovative and aggressive in the industry (Ilič & Mesner, 2021). These firms intend to be leaders in their respective industries compared to being followers. They are always willing to experiment with new products and services. FedEx has been registering some successes and failures. However, successes have been outweighing losses.
FedEx identifies some techniques that define its innovation and goals. Firstly, deliver9y times have been shortened extensively. The organization noted that a competitive approach is attained through working with logistic businesses, which can reliably meet consumers’ expectations for speedy deliveries. The firm also offers flexible delivery options. The company understands different customers prefer diverse delivery alternatives. Accordingly, the business provides this service to its customers. Further, FedEx is competitive by keeping expenses as low as possible. The company concluded that customers are willing to purchase products if pricing is reasonable. As such, it has been keen to adjust pricing to increase demands.
How Service Strategy Reinforces Competitive Strategy
The company’s services have been helpful in the attainment of competitive advantage. The first service strategy that reinforces competitive advantage is residential e-commerce service. This method engrosses home delivery services, where the firm collects and drops packages at doorsteps. This service might appear to be simple, but it has been boosting the competitive advantage of FedEx (Gibbins, 2018). Customers appreciate this service since it meets their need for convenient disbursement and receipt of packages. Some customers cannot visit the nearest FedEx offices because of issues such as work commitments and illnesses. Besides, the broad portfolio of services helps FedEx attain customers’ goals. Customers can achieve all services from one provider instead of utilizing diverse companies. FedEx is aware of the need of customers, and it ensures it incorporates them as part of its portfolio; this will boost its competitive advantage compared to its peers. The substantial market share of the business is also helpful in promoting competitive strategy. Market share can be effectively increased by providing consistent quality of products (Parnell, 2021). Consumers are aware of the quality of services provided by FedEx. Therefore, their support is what boosts the business’s competitive advantage. In continuation, operating activities such as consolidated sales, marketing, and innovation are some of the firm’s practices that have been contributing to the company’s competitive advantage. Therefore, the operations of the firm help propel the company ahead of its competitors.
FedEx is famous because of the services offered to customers. This can be seen from the above discussion, where it is evident that the practices of the organization contribute to its competitive advantage. The company does not deal with the manufacturing and resale of merchandise. The good services offered by the firm helps in the establishment of competitive advantage.
Strategic Formulation Process
Understanding the organization’s internal and external factors is crucial in developing effective strategies (Parnell, 2021). FedEx must address some internal issues during the strategy formulation process since they determine the output. The first issue, which they must consider, is the process committee. These individuals play a central role in formulating strategies, which the organization will use all through before completing the process. This assertion is because committees determine the progress and positive outcome of a project. There should be proper consideration to determine the need to change this critical stakeholder of the change process. Majorly, the change process of committees should follow laid procedures to prevent instances of project failure and workers’ resistance.
The other issue, which the company should consider before changing the current strategy, is allocated resources. FedEx could be tempted to alter its budget before the rise of problems in the company. Any method depends on the resources provided. For instance, any changes must incorporate resources to increase the chances of success. Resources include human resources and the capital required to propel the business to greater heights. There must be a focus on resources needed to guarantee a positive outcome of the process. Strategic implementation involves developing organizational culture, budgeting, and motivational systems. The sensitivity of these processes means any alteration must affect extensive calculations and decision-making (Maritan, & Lee, 2017).
FedEx should also focus on crucial techniques to facilitate strategic evaluation and control. The company should consider areas that demand changes without affecting strategic formulation’s continuous nature. FedEx should consider diverse analyses before the introduction of any changes. The management must be aware of the practice that requires changes and their effects on operations. Considerations will be placed on areas such as performance of environmental analysis, the establishment of organizational direction, implementation of corporate strategy and evaluation, and controlling strategy (Parnell, 2021). FedEx must focus on these areas before initiating strategy formulation.
References
Baertlein, L. (2021, September 22). FedEx Labor Shortfall Hits Quartely Profits Earnings. https://www.reuters.com/business/retail-consumer/fedex-quarterly-profit-falls-labor-costs-2021-09-21/.
Gibbins, P. (2018). Extending employee protections to gig-economy workers through the entrepreneurial opportunity test of Fedex home delivery. Wash. UJL & Pol’y, 57, 183.
Ilič, B., & Mesner Andolšek, D. (2021). Firm Strategy and Innovation Dynamics: A Conceptual Model of Innovation Competition. Teorija in Praksa, 58(1).
Maritan, C. A., & Lee, G. K. (2017). Resource allocation and strategy. Journal of Management, 43(8), 2411-2420..
Parnell, J.A. (2021). Strategic management: Theory and practice (6th ed). Academic Media Solutions
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