Product Differentiation And Capacity Control Essay Sample
The small package express delivery industry is competitive and complex industry and in order to be successful require careful strategic planning. Federal Express was found in 1973and transformed itself from local state delivery company to supply chain management and logistics organization at global level. Company is constantly running its operation more than three decades and has invested a huge amount in information technology that contributed to enhanced efficiency of operations. FedEx is an organization that built its reputation as a carrier that makes deliveries overnight. FedEx just not recognized for its lower pricing services but its global reach, service offerings, and technology. Organization is specialized in making next day deliveries and recognized for its speed of delivery and reliability. Organization’s introduction of services helped organization in lowering down the cost and for this reason, prices of services. The major revenues of Federal Express come from discounts.
The aim of this paper is to make an analysis on the strategies of Federal Express that organization is utilizing to make ahead in the competition and analyze the significance of the current model and suggesting a new one.
Value Creation Frontier of Federal Express and Building Blocks for Competitive Advantage
The value creation of Federal Express is based on the core competencies of the company such as reliability and speed of delivery, and global presence. Due to globalization speed requirement has got higher and global reach has immense importance for companies like FedEx. Federal express’s ability to make delivery in more than 200 countries. Federal Express has its local ground presence in United States and can deliver in reliable and speedy manners at lower price. These are the competencies that create value for the organization. Value creation is an important factor for the survival of the organizations either in the service sector or in manufacturing (Cameron, 2006) in such competitive business environment to deal with stiff competition. Federal Express made value creation possible through the adoption of advanced technology (Mukherjee, 2007).
The major competence of the organization is to keep itself up with the changing business environment. It has been determined that correct and timely information plays a crucial role in creating value. In the case of Federal Express, timely delivery at correct place within correct time frame have been possible only with the correct information. Companies are constantly taking in-depth analysis of Federal Express competencies and are trying to copy the organization’s model. As a result of this, at present different companies have started serving customers with lower price and speedy deliveries through the improvement of their supply chain strategies. However, in order to be competitive Federal Express has to be creative and innovative and for this purpose, the company must focus on modern technologies. In addition, the organization should provide customers access to their packages through the development or deployment of digital technology. With increased globalization, presence of business at international level demands services at broader level for this reason Federal Express must expand its operations in more countries. Organization must focus on its core competencies and continue to focus on reducing the lead time to enhance the distribution efficiencies.
Product differentiation is a strategy through which organizations differentiate their products or services from competitors in order to gain competitive advantage by attracting them (Magin, 2007). Company through reducing the lead time could reduce the cost of logistics that could serve the organization with cost leadership advantage over competitors (Boyaci, & Ray, 2003). Through the management of inventory by applying latest technologies, company could enhance the integration between ground and air shipping. The demand for container storage and shipping is growing (Brautlecht, 2013). Company could enhance the container storage and shipping that could serve the company with differentiation. Moreover, the company’s local competitors are not much competitive in term of services and, therefore, the company can follow different strategies such as:
Enhance the range of service
Expand international market
Manage the shipments through several options such as airfreight services, land, and sea services.
Company can also enhance the efficiency of its operations that could help the organization in standing separate from competitors through helping in reducing the cost. Company can also improve the commercial clients’ market edge, could improve the supply chain and make innovations in tracking technologies. If organizations have enhanced its logistics services, then customers would not have to worry about, and they could better concentrate on their core competencies. All of these features along with the current strengths of the organization can make the Federal Express services differentiate from competitors and could serve the organization in gaining competitive advantage.
Efficiency of current business model:
The business model of FedEx is unique, and the concept behind the business model is to operate a business on an independent basis. However, the concept is also to compete on the collective basis and due to this concept organization is acquiring five subsidiaries. These subsidiaries include FedEx trade network, FedEx Logistics, FedEx Ground, FedEx Express, and FedEx Custom Critical. Organization has freedom to operate independently in each sector such as in logistics, transportation and distribution. Each segment has its culture, business model, structure, and transportation system. Every segment has its separate and independent operation activities but when come up with the competition then all these segments together give tough competition to competitors.
The company is currently providing services to its customers at lower cost as compared to its competitors. However, to remain competitive company on a long-term basis can pursue the strategy of differentiation and cost leadership that will serve the organization with immense benefits. The reason is that these strategies together will enable the organization to beat the competitors and organization through these capabilities will be able to have a competitive advantage over its rivals. Organization for controlling the cost of operations and adding value to the transaction process of customer’s organization can gain competitive edge. Organization must focus on its online presence due to increased utilization of the internet. With cost cutting and value addition strategy combination with an online presence, organization will be able to enhance the sales and for this reason profitability of the organization (Daft, 2015).
Impact of global competition on suggested business strategy:
The suggested business strategy includes cost cutting, value addition through the improvement of quality and enhancement of online presence, but global competitive environment can make an impact on this strategy in multiple ways; for example. Due to international operations, currency and other factors will vary that will make a significant impact on profits, for this reason; cutting the cost in all countries may, not an easy task. If the world of logistics is considered then multiple companies are getting support from government. This support can make significant negative impact on the new strategy of the organization and despite cutting the operational cost, Federal Express may not able to gain competitive advantage over rivals.
Different countries have different laws and regulations that make an impact on the operations of the organization (Hill, & Jones, 2013) and may be in some countries Federal Express is not able to cut cost due to enhanced tax liabilities. Due to increase utilization of internet security threats and privacy issues have increased as well for this reason this is the threat to the organization. In order to remain competitive and enhance the quality and capability of services at global level company can make acquisition and mergers. As it has been observed that container storage and shipping trend is increasing. For this reason, the organization can focus on the container storage and shipping as well. This strategy will leverage the expansion of services and enhance the profitability of the organization.
Ti has been realized that small package express delivery industry is full, of multiple service organizations and making entrance is not easy for new organizations; even existing organizations are struggling for making significant profits. FedEx has several strengths as compared to its competitors. These strengths include the network of the organization is present in more than 200 countries. In addition, FedEx has more than 290000 employees. It is the best in terms of utilization of technology as compared to its competitors and has experience of more than three decades in transportation and logistics. Despite all these strengths company in order to be competitive and successful must focus on value addition and innovation. Company is currently dependent upon United States for profitability. For this reason, it has been recommended that the company must focus on expanding its operations in more countries and should enhance the value of its services through focusing on efficiencies of operations. It is essential that constant innovation and value addition be taken into consideration and company must enhance its online presence to attract a wider audience that will serve the organization with enhanced profitability.
Boyaci, T., & Ray, S. (2003). Product differentiation and capacity cost interaction in time and price sensitive markets. Manufacturing & Service operations management, 5(1), 18-36.
Brautlecht, N. (2013). Container Ship Demand to Grow in Line With GDP, Maersk Line Says. Bloomberg Business, Retrieved February 1, 2015 from http://www.bloomberg.com/news/articles/2013-06-05/container-ship-demand-to-grow-in-line-with-gdp-maersk-line-says
Cameron, S. K. (2006). Competing Values Leadership: Creating Value in Organizations. Great Britain: Edward Elgar Publishing.
Daft, L. R. (2015). Management, 10th E.D. USA: Cengage Learning.
Hill, C. W. L., & Jones, G. R. (2013). Strategic Management: An Integrated Approach (10th Ed). South Western: Cengage Learning.
Magin, V. (2007). Competition in Marketing: Two Essays on the Impact of Information on Managerial Decisions and on Spatial Product Differentiation. Germany: Springer Science & Business Media.
Mukerjee, K. (2007).Customer Relationship Management: A Strategic Approach To Marketing. USA: PHI Learning Pvt. Ltd
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