Value Chain And Supply Chain Analysis Commerce Essay

Value Chain And Supply Chain Analysis Commerce Essay The definition of value chain analysis includes evaluation of business activities which impacts the companys competitive strength. Delivering a product on time is the result of multiple business processes working perfectly to create a Value Chain that leads a firm greater profit over costs (Dess, Lumpkin, Eisner, 2007). There are two main value chain activities in the organizations. The first one is primary activities which could directly add value for the final products, for instance, marketing and sales, operations, service and etc. The second one is support activities which could support the effective of primary activities, for example, the infrastructure, Human Resources Management, technology and etc. (Campbell, 2002) All these departments work together to produce the companys profit. In the race for global domination, the components of this value chain have to be optimized   on a worldwide scale, at all levels of the corporation Global Headquarters, Regional Headquarters, a nd country level, as well as within the critical product portfolios, regions, and countries that the companies operate in. (Johnson, 2008) 2.1.1 The Value-Chain activities for the industry and FedEx Corporation Transportation is one of the largest industries in the world, and its sector range is very wide which include taxis, truck, train, ships, barges, airplanes, pipelines, warehouse and logistics service. For the industry, the three main trends were globalization of business, information technology development and new technology to support process efficient, and the market demand for more value-added. Hence, the companies in transportation and logistics industry depend on the global network of distribution centres to gain quick payment cycle and cheaper resources. In FedEx Corporation, as a leader firm in the industry, its centralized structures have always required, and facilitated billion dollar investments in IT and established the website from 1994. It provided a successful technology for the FedEx Corporation as a pioneer in the whole industry for e-business. This strategy became an advantage that they used to undermine their competitors strengths and localized customer service. Wit h a globally connected IT network, FedEx was able to leverage their IT advantage to service their corporate accounts on a global basis, rather than on a country by country basis. With the best HR system in the business, FedEx also has had an active strategic procurement optimization initiative that has been adopted by the rest of the industry, producing savings in excess of millions of dollars, straight to the bottom line. The most important part of the value chain is found in the senior management of these companies. FedEx has had stable, strong teams running the critical components of the value chain and the associated departments. (Latinamericanlogistics.org, 2009) For further support activities of infrastructure, in the early years, most companies developed on buying space on commercial airlines or contracting their shipment to the third parties. However, FedEx emphasize on creating its own fleet, the strategy could effectively reduce the cost of business process, increase the dependability and speed of delivery and improve the length of order cycle. Furthermore, for solving the transportation volume growth slow down, the FedEx Corporation reorganized in the year of 2000, its five subsidiary companies could operate independently but compete collectively in the industry. 2.1.2 The core activities for the industry and FedEx Corporation Global Transportation and Logistics Industry as the service industry, its core activity of value chain should be the service. The companies should compete on customer segmentation, pricing and quality of service. In the industry, USP was the largest company for transportation. Most companies should emphasize on reducing the cost, well-managed logistics operation could effective reduce the length of order cycle and relieve the stress of cash flow. FedEx Corporation was introduced as federal Express to the early marketplace. At that time, the company fought to a new logistics method, which was overnight delivery. It succeeded and well done enough for their competitors in the market and bring more interesting to the logistics market. The most interesting thing is that FedEx provides fast delivery services which has been named as FedEx Ground. This service provides the delivery day in 2-3 days and within a less expensive cost to every shipper. On the other side, FedExs value chain is embedding into Ground, Cargo and other divisions. At first time when company talking about FedEx ground, the companys president and CEO (Frederick, 2008) indicated that the decision to split Ground apart was to Broaden and deepen FedExs product line, in order to take advantage of customer focus, and the scale of the market. In the package business of FedEx Ground, it includes low value products which dont need to be at final destination because of the short package time of FedEx Express. Smith (2006) announced the model is taken from 3M Company, which has 250 separate operating companies, each of which is focused on a specific market segment. According the figure 1, FedEx had specific objectives and strategies in every Value-chain activities. Figure 2 FedEx value chain activities (Source: http://www.fedex.com/us/about/today/mission) 2.2 Supply Chain Management Analysis Supply Chain Management is the monitor and management of materials, information, and finances, as those elements move in a process from supplier to manufacturer to wholesaler to retailer to consumer (SearchManufacturing.com, 2007). For running the full range of products and services, companies rely on SCM expedient procedures and techniques to move goods. I.e. FedEx promise the fast delivery within the less expensive cost. FedEx is in the business of providing businesses the ability to manage their supply chains. In the Global Transportation and Logistics Industry, the stage of supply-chain should be from supplier, inbound, manufacturing, order management to the outbound. For the whole process, the companies should have effective management on inventory management, warehouse management, the purchasing process, the product distribution, transportation and the customer service. (Lynch, 2006) In FedEx Corporation, it has advanced management system in each process. The figure 2 shows that the different management system utilization in FedExs supply chain management. For instance, the Customer Oriented Service and Management Operating System is one of unique system in FedEx Corporation which could integrate the information of goods shipping and the information about the mode of transportation. Besides, the Global Resources for Information Distribution which launched in 1998 could improve the quality and quantity of their delivery. Furthermore, its Global Inventory Visibility System, Inventory Mana gement System, Transportation Management System Enterprise Resources Planning, Customer Clearance System are all forceful supporting for every steps in the supply-chain management. Figure 2, FedEx solution in the supply chain process. (Source: Case study of FedEx) In one word, FedEx Corporation could always catch the demand and changing needs quickly and effectively in the industry, their leader strategies in value-chain activities and supply-chain management could perfectly support the company to achieve its core value and take the leadership position in the Global Transportation and Logistics Industry. 3. Mergers and Acquisitions in Global Transportation and Logistics Industry and FedEx Corporation Mergers and Acquisitions (MA) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity. (Lynch, 2006) A merger make the shareholders of the organizations come together to share the resources for enlarging the organization and the all the old shareholders in the merger will become the shareholders in the new organization. (Campbell, 2002) But the acquisition is one organization buying and subsuming the unequal partners. The shares in the smaller company will be bought by the large one. (Ansoff, 1988) With the development of human society, economic globalization is increasingly clear that MA between companies has become a common thing, but a deal is not as simple as writing the word and its connotation of far beyond the superficial meaning, and thus a correct understan ding of mergers and acquisitions are particularly important. 3.1 The MA in the industry and evaluation Apparently, it has both benefits and limitations for MA in the Global Transportation and Logistics Industry. From the view of advantages, firstly, the MA could increase the market share in the whole industry. I.e. the DHL acquired Airborne Express to increase its market share in ground delivery market. (Lyne, 2003) Secondly, it could reduce the competition in the market. Thirdly, it could gain preferential access for the distribution channels. For instance, FedEx acquired the UK express company called ANC for improve the distribution channels in the UK. (Business Wire, 2006) Moreover, MA may help the company develop the new products or exploit product ranges for searching more opportunities in the market of Global Transportation and Logistics Industry, this method will be much quicker than the organization to launch it from the beginning step. Besides, the MA could help the company to gain new production and information technology for reducing the cost, improve the quality and differ entiation of their products. For example, FedEx acquired Caliber Systems in 1998. Moreover, the company could entre in a new market by MA. For instances, Amazon.com purchase the joyo.com in China for the Chinese distribution market. (uk.reuters.com, 2004) Additionally, the MA in the Global Transportation and Logistics Industry may enhance the awareness and reputation in the market, especially for the company may under the alleged misdemeanour. Last but not least, the MA could support the companies in Global Transportation and Logistics Industry to achieve asset strip which means break up an acquired company and recovering more than the price paid by selling the parts separately. (Campbell, 2002) On the other side, the MA in the Global Transportation and Logistics Industry also have limitations and potential problems. The main factors of integrations failure could be summarize in the following six elements. The first one is lack of research for the conditions of the target company. Hence, it could not achieve the expectation after the integration. The second factor is the cultural inappropriate between the two parties. The third issue is the two parties lacking of communications before of after the integration. Another failure factor is that loss of key personnel in the target company after the MA performance. Furthermore, a potential problem is the over paying for the acquired company lead the acquiring company to get into the financial risk. The last issue for MA in the Global Transportation and Logistics Industry is assuming that the growth in the market is uncertain which include the market trend, economic trend and etc. 3.2 Evaluation of FedEx acquisition of Caliber System To evaluate the success or failure for FedEx Corporation acquired Caliber Systems in 1998 should also form the different points of view. From the positive side, the company use $88 million acquired the Caliber System, Inc., it could provide the company a powerful technical support on Internet commercial at that time. In the period, the e-commercial was on the development stage in the Global Transportation and Logistics Industry, the long-term investment and acquisition of Caliber System made the FedEx Corporation own the abilities and opportunities to be the pioneer and leader in this area. According to summary of benefits for MA, The strategy helped FedEx Corporation entre a new market, broaden the business range, develop the new product and also gain new information technology. From the result, after the acquisition, in the following year, the company had an excellent performance, the net income increased 30 per cent and posting record earning risen 73 per cent. (Gelis, 1999) However, as the passage of time, the competition in the market became more intense, despite of the e-tailing and electric commerce supporting, the report shown that both the volume and the income have a negative trend. From the view of financial report, the result had an obvious falling. This condition was cause of several factors. Firstly, the fuel pricing jumping was unexpected, it will increase the cost for the company. Secondly, it also meant the Caliber System did not blend in the organization completely. The organization was enormous, the operation was complicated, hence, just acquisition strategy without well association could not make the new party perform perfectly. For solving the problems, the FedEx Corporation announced reorganization on 19, Jan, 2000. Consequently, it is hard to simply judge whether success or failure for the acquisition of Caliber System. The acquisition brought benefits, opportunities and also new operation method for FedEx Corporation. The negative result in the following years was also cause of multiple factors, i.e. the competition in the industry, the fuel price rapid rising and etc. 4. FedExs financial and non-financial performance in the Internet and e-tailing market The popular using of Internet has changed most business in the world. The utilization of Internet improved the structure of organization, the collection, saving and dealing with data and information management. Furthermore, it also provided the opportunity for companies increase the awareness and sale channels in the market. FedEx Corporation created its own website form 1994, it is the first step and basis for the company to develop its e-commerce. FedEx.com is the first transportation website which could accept the one line order for package tracking and allow the customers to transact the business by Internet. Both shippers and recipients could access shipping information and print documentation via Internet. As the pioneer in the industry, FedEx should continually improve their system and service due to its competitor also created the Internet service and Internet software. For instance, the DHL launched the website in 1995(Exelby, 2000), UPS spent billions on IT and electronic commerce (Blackmon, 1999). The express transportation associated with e-tailing would reach $7 billion in the year of 2000, but FedEx only handled with 10 percent of purchase on-line goods. All of these brought heavy pressure to FedEx. In 1998, the company paid more than $2 billions to acquire the Caliber System, Inc. to incre ase the abilities and power on Internet service and e-tailing. (Payne, 1997) Because of the large potential market and lower cost, the Internet and e-tailing market was continually enlarging in the Global Transportation and Logistics Industry. To evaluate the performance of FedEx in Internet and e-tailing market should be from the view of five performance objectives. (Slack, 2007) Firstly, from the view of cost, FedEx as the first one for Internet and e-tailing in the Global Transportation and Logistics Industry, it focused on long-term investment on IT and led the company to have the specific position in the area. For the intense competition, the company paid more than $2 millions to purchase Caliber System. It could effectively increase their market share in business-to-consumer delivery service. Hence, the investment partly made up the weakness against with UPS. Secondly, flexibility, the Internet service and e-tailing provide the convenience for the customers, increase a easy and quick channel for the transportation and e-tailing business. For instance, i n the year of 1999, FedEx Marketplace created a link to the on-line shopping, the on-line shopper could click to the top on-line stores and with FedEx delivery. Thirdly, dependability, the establishing of the website enhanced the dependability between the organization and customers. The computer system supported the customers to know their goods conditions in the whole delivery process. For example, the company created software called FedEx Virtual Order in 1999 which provide Internet order and also provide the customers catalogues for them on the website. Moreover, the IT system also enhanced the internal management of FedEx Corporation. For the enormous organization, the dependable information system should be the basis for the busy operation process. (I.e. in 1995, FedEx launched AsiaOne Network, it is a transportation routing system) Fourthly, speed, for the transportation and logistics industry, speed is one of the crucial elements for the customers choosing a transportation co mpany. The online order and the unique information system in FedEx deal with the order and storage, goods and shipping process, every process could reduce the time than before. For example, the FedEx Marketplace provided easy access to on-line merchants to offer fast FedEx shipping. Last but not least, quality, all of the strategies and performances about Internet and e-tailing could be linked to improve the quality providing for the customers and partners. For instance, the FedEx created e-business Tool in the year of 1997 which could support an easier connection with FedEx shipping applications. And the EuroOne network established also provide a powerful transportation routing system which linking more than 30 cities. All of this would enhance the service quality of FedExs Internet and e-tailing. Consequently, the FedEx had an explicit objective in the Internet and e-tailing market, for both financial and non-financial performance of organization in this area was focus on achieving their objective. For the customers and partners, FedEx try to provide more flexible, convenient, fast service by the Internet and e-tailing channel, created dependable and loyal relationships with them and build a perfect reputation in the market. For the own organization, it insisted on long-term investment on Internet and e-tailing area, it would lead to earn a long-term benefits. Besides, the organization continually emphasized on the infrastructure building and technology improvement, to create a dependable operation system and transportation team which could support the smooth operation in Internet and e-tailing market. All of these performances lead the development of FedEx. It could not satisfy only by the pioneer of Internet business in the Global Transportation and Logistics Industry but t ry to be the long-term leadership in this market. 5. Conclusion As has been discussed and evaluated, the Global Transportation and Logistics Industry as a significant industry in the world, the competition is intense and its changes is large and rapid. For the main organization in the industry, such as FedEx Corporation, should have clear objectives in its long-term operation and management. It includes the right decisions in the value-chain activities the specific process in the supply-chain management. Furthermore, the company should have a penetrating judgment for the marketing trend in the following years and according the judgment and other factors provide a right decision for Merger and Acquisition strategies. Additionally, the organizations should also focus on the infrastructure building, enhance the performance in their operation and management process. Internet market should still play a significant role in the Global Transportation and Logistics Industry and its potential benefit is enormous. Hence, to gain the leadership position in t he Internet and E-commerce area may lead the organization to take the leadership in the Global Transportation and Logistics Industry.