A MORAL PROBLEM IN BUSINESS

The Manager’s Proper Decision in Business Ethics

            Values, morality and ethics are used in a variety of loosely connected context. Values are specific desires for objects or beliefs perceived as important, whereas ethics is a more general term that refers to conceptions of human welfare and the promulgation of principles to enhance human welfare. Morality, further, usually refers to traditional beliefs of proper and improper conduct that have an historical context of years or centuries. (, 1988)

             The philosopher's interest in morality and moral issues and judgments is neither descriptive nor clinical. Rather, the philosophical thinking about morality comprises contemplation about the shape and the substance of moral judgments. (, 1988)

            In business administration, such aspects are very important because the decisions in the business context involve assessments of conduct and character, the practical disciplines in such administration share the lingua franca of normative language like right, wrong, should, good and bad and the business administration, as ethics, at times relates not only to judgments regarding actions but also the motives and character traits that influence those actions. ( & , 1990)

            These are simply put as the business ethics, a philosophical thinking about issues of morality in business, including moral problems and judgments which are necessary to address the ethical issues that may arise in a competitive, economic environment. Similarly, such issues are also similar to those raised by any human activity. Moreover, as a result of fundamental changes in societal attitudes about the proper conduct of business organizations, great public interest in business ethics arises. ( & , 1990)

            The factors such as the growing inability of the market mechanism to govern many business decisions and activities because firms have become so large and powerful; the growth in government constraints and involvement in business firms' activities; the concern about certain issues such as environmental protection which are not normally regulated by the market; and the emergence of "quality of life" issues which are of high priority among society's social values have contributed to the increased public concern regarding business values and ethics. (, 1988)

            Additionally, firms have become larger and more bureaucratic which often inspires less concern about the proper conduct. This lowers the standards of employee behavior which is also fueled by the industrial restructuring where inevitable pressure tightens budgets and increase profits. (, 1988)

            Since the daily conduct of business raises personal ethical issues similar to those raised by any other human activity, business ethics, in short, is a topic worthy of the executive's or manager's special consideration. Further, business firms deal on a daily basis with the myriad subjects of ethical significance such as the employer and employee rights and duties, marketing ethics, corporate social responsiveness and improper conduct in the firm. ( & , 1990)

            This urges that the business executives and managers address the problems and dilemmas that pose conflicts among their various constituents. Among the managerial responsibilities, those defy the business as usual resolution is the most difficult because it poses distinct conflicts. Also, the manager’s economic responsibilities to his shareholders, suppliers and lenders conflict with his duties owed to society or with that manager's own values or moral beliefs. Thus, the careful evaluation of the impacts of decisions and the balance of the various constituent interests whether in the context of near-term or long-term effects is an integral part of the firm's management process. ( & , 1990)

            The process of balancing the constituents’ interests is very important in the business because managers who ignore consideration of these constituencies may ultimately inflict significant harm on their firms and themselves. Because of such reason, it is essential that the manager review all sides' viewpoints. On the other hand, there is no assurance that all constituents will be satisfied because of the mutually exclusive nature of the competing demands. Therefore, the crucial duty of the manager is to balance these various responsibilities to constituents in an ethical manner while attempting to provide a reasonable profit to the shareholders. ( & , 1990)

            In most cases, by relying on general principles of fairness, promise-keeping, loyalty, obeying the law and avoiding harm, a manager can make a proper business conduct decision. In the more difficult decisions, however, such principles may conflict or may be inappropriate in resolving the issue at hand. But, by answering the three questions such as what are the responsibilities at issue in each situation, what standards should guide the conflict's resolution and whose judgment should prevail in the situation-the manager's colleagues, the firm's or that of society may assist managers in resolving these various issues. ( & , 1990)

            Consequently, this careful analysis usually pinpoints the manager’s key responsibilities.  Thus, this will provides him the standards for decision-making. On one hand, the manager must examine his or her own assumptions about leadership in answering the third question. (, 1953)

            By doing so, he will know what kind of leader he is, a personal leader, an institutional or a political leader. A personal leader will be inclined to believe that his or her values should control. Institutional leadership relies on common values infused in the firm usually manifested by the manner past decisions have been promulgated while a political leader usually exhibits more flexibility than presumption in seeking compromises. (, 1953)

            Likewise, by creating policy instruments in codes of conduct which provide guidelines in areas such as corporate disclosure, compensation, fair pay and employment opportunity, privacy, freedom of expression, the environment, workplace safety, ethics in advertising, product quality and corporate social responsibility, managers may also respond to the need for making proper decisions and establishing values. (, 1953)

            By asking the question, what are the agendas and strengths of those groups, will give the managers an insight into the changes and the probability of having to alter policy and goals in response to the constituencies. However, answering this query requires a political analysis at two levels such as determining the group's goals and strength as a political player and examining the broader implications of the various political strategies a firm could adapt in a particular situation. ( & , 1990)

            The management response’s in this can be precise or a hybrid of the two whether it is formulated at the top or at a lower level. But, the clear decisions and the provided benchmarks assessing the future performance are evidences that the firm has seriously considered the issue. The flexible goals, also, permit managers to respond to developments as they arise and not commit the firm to a course of action that may prove regrettable. ( & , 1990)

            In general, the managers can effectively use a number of general approaches to difficult business, moral or ethical problems in order to reach proper decisions. Each of these approaches suggests a critical question that the manager can use as a test of the correctness of proposed action. ( & , 1990)

 

 

 

 

Bibliography:

 

 

 

 

 

Sustainability Audit Report of Bell Fire Equipment

 

 

 

 

 

 

Sustainability Audit:

 

Bell Fire Equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Summary

 

            Bell Fire Equipment needs to enhance its sustainability policies by adopting changes. The two areas of priority are improving collaboration between the R&D and marketing departments and the other is improving its processes of selecting and building relations with suppliers. The change strategy to develop collaboration is through team-building activities such as challenge simulations and meetings. The measure of change is by integrating financial measures, key performance indicators and benchmarking. The sustainability measure considers costs and benefits. The change strategy for improving supplier relations is taking feedback from the different departments to determine factors for consideration and top managers in charge of negotiating with suppliers developing the standards. The measure of change is key performance indicators and the measure of sustainability is corporate sustainability model.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table of Contents

 

Executive Summary. 2

Table of Contents. 3

Introduction. 4

Company Background. 4

Purpose of the Report 4

Scope of the Report 4

Sustainability Audit 5

Overview of Priority Areas. 5

Priority Area 1. 7

Priority Area 2. 9

Recommendations in Improving Sustainability. 10

Conclusion. 11

Reference List 13

Appendices. 14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Introduction Company Background

Bell Fire Equipment is a fire protection company established in Western Australia. As a small business, it employs 30 people handling the sale, installation and maintenance of fire protection equipment and provision of fire protection services. ( 2008) While the company experienced growth, there are issues or risk areas requiring prioritisation for change.

Purpose of the Report

            The report is a sustainability audit for Bell Fire Equipment that lists down the areas for change in business, the prioritisation of these areas, and the change strategy and measures for the top priorities.  

Scope of the Report

            The report focused on the priority areas in the company and specific discussion of change strategy and measures in the context of Bell Fire Equipment and supported by relevant theories

Sustainability Audit

            The process of sustainability audit offers key benefits to business firms seeking improvements in operations and long-term goal achievement. One benefit is the ability of the firm to focus on all evidence entrenched in the organisation to understand its sustainability as a company. Another is the consideration of internal and external perspectives of the organisation to support future oriented planning. Last is assessment of progress in sustainability by the company by using measures such as comparing the objectives with actual incremental outcomes. ( 2005)

Overview of Priority Areas

            The list of stakeholders of Bell Fire Equipment [See Summary in Table 1 in the Appendix] shows the stakeholders of the company, their influence on the business, sustainability issues, and the prioritisation of the issues.  The stakeholders are all the parties that affect the success or failure of the company in its strategic actions but since various stakeholders represent various interests, issues or problems are abound to arise ( 2007). These issues require consideration to determine the priority areas and identify change strategies and measures.

The stakeholders of the company include Bell Fire Equipment as the owner that provides leadership, authority, direction, and oversight of the company. Employees implement decisions or policies and provide feedback to the leaders. Customers determine the needs and objectives of the company. Investors provide capitalisation and share in risks. Customers determine the needs and objectives of the company. Regulatory and safety authorities impose standards for aspects of the firm’s operations. Suppliers provide the resource needs and affect the supply chain of the company. Government agencies offer mutually beneficial large-scale and long-term collaboration with the company. Private companies provide large-scale and long-term collaboration with the company. [j1] 

The company face a number of sustainability issues relative to the different stakeholders. These issues include: 1) collaboration between the R&D and marketing teams for efficient resource utilization and customer needs fulfilment; 2) careful selection of investor relations on mutual terms; 3) dissemination of information to the company of new regulations; 4) consistency in the quality of raw materials and components from suppliers; and 5) possible involvement of the company in political affairs by engaging in government agencies as its main client pool through bidding contracts. [j2] The priority issues are collaboration between R&D and marketing and consistency in the quality of raw materials and components from suppliers[j3] .

By applying the triple bottom line model ( 2007), the sustainability issues emerging from the operations of Bell Fire Equipment fall under environmental, economic or social concerns considered relative to resource, internal and external impact [See Summary in Table 2.in the Appendix]. Based on the TBL, most of the issues fall under the economic and social components. This means that the concerns faced by the company pertain more to the financial and resources aspects as well as building social relations with various stakeholders. Adhering to economic and social components justifies the prioritisation of collaboration between R&D and marketing. Nevertheless, the company also face an environmental issue in relation to its sourcing of raw materials. Consideration of environmental aspect justifies the prioritisation of consistency in the raw materials and components from suppliers. [j4] According to  (1991), these various issues correspond to the corporate social responsibility of the company. Corporate social responsibility finds representation in a pyramid [See Figure 1 in Appendix] with economic factors at the bottom and philanthropic activities at the top. The progress of the company determines the depth of its corporate social responsibility and sustainability. By focusing on these issues, Bell Fire Equipment considers the three aspects of corporate social responsibility, albeit in varying extents. 

Risk assessment support and manage change by facilitating prioritisation ( 2007). The application of risk assessment, which assesses sustainability issues according to the degree of risk, posed for Bell Fire Company shows that two sustainability issues receiving high prioritisation [See Summary in Table 3 in the Appendix]. One is organisational decay from failure of the R&D and marketing departments to collaborate and the other is failure to maintain quality of products and services because of inconsistencies or decline in the quality of raw materials and components. The priority areas pose immediate risk with wider and longer impact deserve attention and the change management plan organised. [j5] Business firms have limited resources and response to issues requires timely action so prioritisation according to risk is a necessity.

Priority Area 1

            The first area of priority for Bell Fire Equipment is preventing organisational decay by building collaboration between the R&D and marketing departments. The solution to this is building better working relations between the two departments by changing processes, systems and structures.

            Change Strategy

            The driver for change is management dilemma [j6] or the means of improving management to support collaborative practice. The type of change required is continuous transformation [j7] ( 2006) because relations develop over time and requires nurturing to continue. The organisational development [j8] strategy is normative re-educative [j9] ( 2000) because the activities for change create symbolic environments in starting collaborative relationships. Team building activities such as simulation challenges and formal meetings support collaboration. As such, the management approach would necessarily be collaborative[j10]  ( 1999) also with the heads of the departments facilitating the communication exchanges or information sharing between the two departments. The leadership style is coaching[j11]  ( 1994) because the managers lead collaboration by example and point out flaws and best practices in collaborative practice in the course of task completion. This also supports change through the voluntary action of individuals with managers stimulating action.

            There are also changes in the organisational structure to a more organic [j12] one to create cross-functional teams ( 2006) that support open communications and easy information sharing between the R&D and marketing departments as horizontal units. This also lowers the wall of formality between the two groups to build a friendly atmosphere. This involves the change process of horizontal communication

            There would be resistance during the change process [j13] because change is transitional so that individuals affected by the change go through the stages of security, anxiety, discovery and integration ( 1996). Resistance of Bell Fire Equipment to the change process largely occurs during the anxiety phase since it is in this phase that the employees in the two departments experience stress in re-establishing their place relative to the change. Easing resistance is through information sharing, coaching and collaborative management.

            Measures

            To determine the extent of success, the integrated measures of change include the combination of financial measures, key performance indicators, and benchmarking[j14] . The integrative approach is necessary since different measures focus on various areas and combining measures ensures that more coverage. Financial measures by looking at changes in market share, profitability, cash blow and budget targets. Key performance indicators are factors for success that have been pre-identified prior to the change and serve as comparison of outcomes. Benchmarking is the measurement of change outcomes based on best practices developed by the company and/or based on industry best practices. This considers what ought to be done relative to what was done. ( 2006) Since the change addresses sustainability issues, measures of sustainability also require consideration. The cost and benefit analysis [j15] that considers economic, social, legal and environmental costs work best by focusing on impacts in multidimensional areas ( 2008).

Priority Area 2

            The second area of priority for the company is ensuring consistency in the quality of raw materials and resources by selecting and enhancing relations with supply partners. The solution to this is identifying and selecting from firms that align with the quality standard of the company.

Change Strategy

The change driver for this priority area is consumerism[j16] , particularly the growing concern of the market for fire protection on quality that encompasses not only the functional quality but also environmental quality. Since the change process involves the shift in external boundaries or the manner of building supplier relations, the change strategy is empirical-rational strategy [j17] ( 2000), which operates based on the assumption that change occurs through information that point out areas for change. In particular, Bell Fire Equipment needs to gather information on various suppliers of raw materials and components, compare performance, identify which companies align with its quality values, and establish the link. It may also be necessary for the company to cut relations with low quality suppliers and establish new ones.

The style of change management for the second priority area is consultative[j18]  ( 1999) since the development of the process of selection and relationship building would form from consultations with the different departments particularly the R&D departments that directly handle raw materials and components. The leadership style that best fit this change is captain profile[j19]  ( 1994). Although the change management style is consultative, there is need for a central authority directing the consultative tasks. In addition, the objective is to ensure consistency in the outcome and a directive leader becomes necessary. The type of change is punctuated equilibrium [j20] ( 2007) because the establishment of a new supplier selection system comes after a long period of stability. However, after determining and establishing a new system, this would apply for a longer period of equilibrium. This fits the change since the intention is to build long-term relations corresponding with the long period of equilibrium. The nature of change is also mechanistic ( 2006) because even if there the process involves collaboration, the leadership style fits the captain profile and the decision rests on top management in charge of negotiating with suppliers. This requires high specialisation, authority, and formal processes.

            Measures

            The measures for the change process include key performance indicators [j21] ( 2006), especially on quality. However, as a sustainability issue, the quality indicators should include social, economic, legal and environmental components. Indicators for success should be identified prior to the change process based on expectations of successful supplier partnerships and then the outcomes would be compared with the expectations. The extent of different and the justifications would determine the success of the change process. Applicable sustainability measure for the second priority is the corporate sustainability model [j22] of considering the relationship of input to process to output and then outcome ( 2006). This coincides with the supply chain process.

Recommendations in Improving Sustainability

            Bell Fire Equipment can improve its sustainability by furthering the adoption of more encompassing sustainability policies. So far, the company has considered its economic and social sustainability. However, these only focused on internal impact. The company has not really made any strong connections with the community it serves through corporate social responsibility practices ( 2003) of sponsoring fire protection programs in the community as a philanthropic activity instead of just offering these services to its paying customers.

Conclusion

            Sustainability is building the value of the company to various stakeholders to ensure viability in the long-term. The sustainability audit allowed the determination of the areas for change for Bell Fire Equipment to support sustainability.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendices

 

Table 1: Summary of Stakeholders, Issues & Prioritization

 

 

Influence on Business

Sustainability Issues

Priority Level (High/Low)

Owner (Bell Fire Equipment)

Bell Fire Equipment provides leadership, authority, direction, and oversight of the company.

Inefficient management, weak leadership

              Low

     Employees

Employees implement decisions or policies and provide feedback to the leaders.

Poor collaboration between key departments (R&D and marketing)

High

     Customers

Customers determine the needs and objectives of the company.

dissatisfaction and loose loyalty

Low

    R&D Investors

Investors provide capitalisation and share in risks.

Poor or non-mutual investor relations

Low

Quality and Safety Regulatory

Authorities

Regulatory and safety authorities impose standards for aspects of the firm’s operations.  

Untimely dissemination of new regulations

Low

Raw Materials and Prefabricated Materials Suppliers

Suppliers provide the resource needs and affect the supply chain of the company.

Consistency in quality of raw materials and components

High

Government Agencies in Western Australia

Government agencies offer mutually beneficial large-scale and long-term collaboration with the company.

Breakdown of collaborative relations

Low

     Private

     Companies

Private companies provide large-scale and long-term collaboration with the company.

Breakdown of collaborative relations

Low

 

Table 2: Summary of Triple Bottom Line Analysis

 

Sustainability Issues

Triple Bottom Line Component

Resources & Respect

Internal Impact

External Impact

collaboration between the R&D and marketing teams

Economic

 

 

 

Social

Efficiency in human resource functions

 

 

Respect for employees, customers, and community

Improve performance and productivity

 

Effective human resource management

Meet needs of customers

 

 

Improved customer and community relations

careful selection of investor relations

Economic

 

 

 

 

Social

Efficient management of capital investments

 

 

Respect for investors and the community

Maximised investment returns

 

 

Accountability

Economic benefits to the community

 

 

Continuity of employment and income generation for the community

dissemination of new regulations  to the company

Social

Respect for people’s right to information

Adherence to new regulations

Benefits of compliance to the community

consistency in the quality of raw materials and components from suppliers

Economic

 

 

 

 

Environmental

Efficient sourcing

 

 

 

 

Respect for the environment by incorporating earth friendly features of raw materials and components as part of quality

Adhere, maintain or enhance quality standards

 

Assumption of environmental responsibility

Provision of quality products and services

 

 

Helping to alleviate pollution and release of greenhouse gases

 

 

Table 3: Summary of Risk Assessment

 

Risk

Impact (High/Low)

Parties Affected

Controls

Further Action

Organisational decay

High

Employees, Customers and Community

Performance measures, HRM policies

Information sharing

Negative investor relations

Low

Investors and community

Mutuality-based assessment of investors, building long-term relations

Improved selection methods and expansion of investor relations to support R&D

Non-compliance with new regulations because of lack of information

Low

Customers and community

 

 

Failure to sustain product and service quality Inconsistent or Low Quality of Raw Materials

High

Customers and Community

 

 

 

 

Figure 1: Corporate Social Responsibility Pyramid

 

 [j1]List of stakeholders and description

 [j2]List of sustainability issues

 [j3]Priority issues

 [j4]Justification for the priority areas using TBL

 [j5]Justification for priority areas using risk assessment

 [j6]Lecture 5

 [j7]Lecture 5

 [j8]Lecture 6

 [j9]Lecture 5

 [j10]Lecture 5

 [j11]Lecture 6

 [j12]Lecture 6

 [j13]Lecture 7

 [j14]Lecture 12

 [j15]Lecture 12

 [j16]Lecture 5

 [j17]Lecture 5

 [j18]Lecture 5

 [j19]Lecture 6

 [j20]Lecture 5

 [j21]Lecture 12

 [j22]Lecture 12

Environmental Analysis of Travelodge UK

Environmental Analysis of Travelodge UK

 

The Travelodge UK chain of budget hotels is the second largest in the United Kingdom,

with 380 branches in the UK, Ireland and Spain which are offering more or less 20,000

rooms. The chain employs innovative marketing strategies that have resulted in 6.5

million guests staying in their hotels in 2010 and 2.2 million people visiting their website

each month.[1]

 

 Travelodge is the lowest-priced hotel that offers more value for money spent and is

committed to a healthy environment with its 100% smoke-free policy. The hotel allows

 browsers to compare its rate with those of other establishments and to check what it

offers for the lowest price, which is basically towel, pillows and tea. It also provides

personalized directions to the location of the preferred hotel branch of customers, as

well as a mobile booking service for time-pressed customers. Travelodge prioritizes the

privacy and security of customers in their online and mobile transactions and has a

customer-friendly website. The chain’s focus on low price and the C and D market is its

competitive edge and what makes it attractive to budget-conscious travelers. This also

accounts for its 31% market share in budget hotels.[2]

 

The business strategy suitable for Travelodge UK can be analyzed using several

models or frameworks.

The Political, Economic, Social, Technological, Legal and Environmental (PESTLE)

analysis tool considers the bigger picture in which the business is operating. By

understanding the operating environment of a business independent of its

internal operations, the business can take advantage of the opportunities and minimize

 the threats both present therein. PESTLE is useful in understanding risks connected

with market growth and decline, and their relevance in the position, potential and

direction of the business.[3]

Porter’s 5 Forces modeling framework for business analysis considers the following

factors:[4]

Rivalry – refers to the striving of firms for a competitive edge over their rivals.

Threat of Substitutes – refers to the impact on product demand of price changes in

products of other industries.

Buyer Power – refers to the price determination by the buyer in a market where there

are many suppliers.

Supplier Power – refers to the impact of high-priced raw materials to the business.

Threats of New Entrants and Entry Barriers – refers to the entry of new firms in the

industry that will pose competition and the artificial lowering of prices by the business to

prevent potential market entrants.

The Boston Consulting Group (BCG) matrix tool considers the life cycle of a product in a

portfolio to determine the priorities of a business. The categories in a portfolio are the

following: [5]

Stars – refer to high growth, high market share products that use plenty of cash.

Cash Cows – refer to low growth, high market share products that need minimal

investments.

Dogs – refer to low growth, low market share products that should be minimized and

avoided by a business.

Question Marks – refer to high growth, low market share products that demand plenty

of cash and effort to increase market share.

The Ansoff growth vector matrix considers the business’s present and potential

products and markets via the following product-market combinations:[6]

Market Penetration – refers to achieving growth with existing products and markets.

Market Development – refers to achieving growth by introducing products to new

markets.

Product Development – refers to developing new products for existing markets.

Diversification --  refers to achieving growth by developing new products for new

markets.

 

After reviewing these business analysis frameworks, my choice for the most suitable

and recommendable for Travelodge UK is the PESTLE analysis tool. This well

established and patronized budget hotel business must continuously monitor economic,

social, technological and environmental developments both locally and globally in order

 to make adjustments as needed. Regular and potential customers are seeking more

 value for money spent, convenience, excellent customer service and environment

friendly settings in these times of economic uncertainty.

[1] “Strategic Analysis of Travelodge, UK”, 4 June 2011, <http://ivythesis.typepad.com/term_paper_topics/2011/06/strategic-analysis-of-travelodge-uk.html>

[accessed 8 June 2011]

[2] ibid

[3] “PEST/PESTLE Analysis Tool – History and Templates”, RapidBI, 29 January 2007,

<http://rapidbi.com/created/the-pestle-analysis-tool/>  [accessed 8 June 2011]

[4] “Porter’s Five Forces” QuickMBA, 2010, <http://www.quickmba.com/strategy/porter.shtml>

[accessed 8 June 2011]

[5] “BCG Matrix”, Value Based Management.net, 7 January 2011,

<http://www.valuebasedmanagement.net/methods_bcgmatrix.html>  [accessed 8 June 2011]

[6] “Ansoff Matrix”, VectorStudy.com, 2008, <http://vectorstudy.com/management_theories/ansoff_matrix.htm>  [accessed 8 June 2011]

Structural Transformation through e-Business: Federal Express (FedEx) Corporation Case Study

EXECUTIVE SUMMARY

The corporate culture of FedEx was based on superior customer service and displayed an attitude of "doing whatever it takes to serve customers" from the top to the bottom. The expansion of the Internet, therefore, was something FedEx could use to enhance its customer base and create a competitive service advantage. "It allowed FedEx to not only let its customers pull real time information and data into their internal systems, but also to become more involved in the internal processes of its customers." which involves the contributing factor in transforming FedEx into an e-business. Although there was no planned strategy to build an e-business, the decisions that the company made to align the organization structure with systems and processes has carved out a model for building a successful business for the 21st century", which lends support to transportation logistics efficiency as well as selling and supply chain logistics solutions management.

 FedEx is famous for and known for its absolute dependability and its attention to detail. FedEx accomplishes this by not being a mass of bodies moving in one direction but rather by being the several parts that compose it and working together. FedEx's guaranteed on-time service and complete satisfaction is unconditional. The image the company has so meticulously cultivated helps maintain and extend its market share. FedEx Logistics provides customized, integrated logistics and warehousing solutions worldwide. FedEx Logistics is the parent company of FedEx Logistics and Caribbean Transportation in February 2000 to provide customs brokerage and trade facilitation solutions. FedEx Corporate Services formed in January 2000 to bring together the sales, customer services, public relations and IT resources. "On January 19, 2000, FedEx announced a new branding strategy that involved changing the company's name to "FedEx Corporation", and extending the "FedEx" brand to four of its five subsidiary companies. Providing customers with an integrated set of business solutions was the pivotal reason for the renaming of the company as FedEx Corporation. Customers wanted to deal with one company to meet their transportation and logistics needs. The announcement created to pool together the marketing, sales, customer services, information technology and electronic commerce resources of the group and provide range of business solutions.

 Technological development has always been a major way for FedEx to add value since it can cut costs along with creating new ways of finding competitive advantages. Lastly, FedEx's improving and changing of the organizational structure over the last few years has added value. By developing different subsidiaries all operating under the FedEx brand name has organized the company along with improving the communication inside the company from one division to another. 

 

INTRODUCTION

 

The ability to keep up with e-businesses will depend on how well a company can keep up with new emerging technologies. FedEx has transformed into an e-business by improving several of its core competencies. On January 19, 2000, FedEx announced a new branding strategy that resulted in the change of the company's name to "FedEx Corporation" and extended this FedEx name to four of its five subsidiary companies. FedEx's strategy was to take advantage of its brand image, the name that customers have counted on for reliable service and cutting edge technology. The transformation created an integrated set of business solutions. Customers will only need to deal with one company for all its supply chain, logistics, and delivery needs. This provided a single point of access to customer service, billing, sales and automation systems. Each company under the FedEx umbrella operates independently but competes collectively. The new
organization is geared to help businesses of all sizes in achieving their goals.

DISCUSSIONS

 

FedEx's business and quality management culture FedEx's vision and goal is "satisfying worldwide demand for fast, time-definite, reliable distribution" (Cisco Systems, 1999). This vision inherently requires that the company operate under a customer focused approach. This is what FedEx has been doing since its founding - the company has emphasized putting customers first in their vision to become a part of the global market. FedEx couriers have one less thing to keep track of these days - their vehicle keys. The company's couriers use an automatic keyless entry and ignition system that has RFID transponders. The system is being tested in 200 FedEx delivery vehicles. FedEx is constantly looking at ways to streamline their delivery processes. The company's couriers drive millions of miles daily in the U.S. alone and each time a courier makes a delivery, he must spend time searching for keys to unlock multiple doors to their vehicle. If a courier misplaces his keys, he must wait for someone from a FedEx station to bring out a spare and the vehicle must be re-keyed at a cost of more than $200 per incident. FedEx delivery personnel are freed from the hassles of juggling their keys while carrying armloads of packages and are more productive along their routes. If a wristband is misplaced, its code can be purged from the system and a new code can be reprogrammed in a matter of seconds.

 FedEx vehicle is programmed using a master transponder, and can accept up to ten unique transponders. A single transponder can also be programmed to operate multiple trucks. In an effort to improve its global distribution system and, as a result enhance customer service in its shops around the world, as there entered into a path-breaking strategic alliance with Federal Express Business Logistics Services. Under the terms of a loosely structured partnership, Federal Express takes over the warehouse and distribution activities, the alliance is path breaking due to its informal structure based on trust and mutual benefit than on rules and measures. FedEx Express founder Frederick Smith have the initial conceptualization of FedEx Express as an air cargo firm that specialized in overnight package delivery on a door-to-door basis using its own planes. The goal was to deliver equipment and documents shipped from any location in the United States to any other location within the United States the next day. The logistics was merely the handling, warehousing and transportation of goods. By combining the functions of materials management and physical distribution, logistics took on a new and broader meaning. FedEx capitalized on this transition and aimed at managing all aspects of logistics. FedEx Express invested heavily in IT systems and with the launch of the internet in 1994, the potential for further integration of systems to provide services throughout its customers' supply chains became enormous. FedEx has now built a powerful technical architecture that had the potential to pioneer the Internet commerce.

Mission

FedEx Corporation will produce superior financial returns for its shareowners by providing high value-added logistics, transportation and related information services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx Corporation will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all
operations. Corporate activities will be conducted to the highest ethical and professional standards.

Problems:
FedEx's strategy was to capitalize on the growth of e-business and aimed at integrating its physical transportation with its virtual information infrastructures to create a large matrix of systems that meets the needs of businesses ranging from transportation services to complete supply chain management solutions. FedEx has taken a customer focused approach and all systems are centered on the customer. The process of building the systems and technology infrastructure was the first step in the transformation. Next, was the integration of business processes into these systems?

 This was not an easy task and required expertise in logistics and supply chain management. FedEx was following the technology age taking place in our country at this time and piggy backed on the growing e-business market. The final step is for FedEx to transform its business and make people aware of the innovations and advancement.

Political:
FedEx conducts its business internationally and therefore is required to follow international laws, rules and regulations. FedEx will not carry shipments, which are in violation of any U.S. export laws. As with all shipping companies, they will not assume liability for any loss or expense, including, but not limited to, fines and penalties, due to failure to comply with export laws or regulations relating to the export, import or movement goods at central hub locations, FedEx employees work jointly with U.S. Custom’s officials to prevent contraband and restricted items from entering and leaving the U.S. FedEx has initiated strict shipping guidelines and know your customer rules, in conjunction with law enforcement, to deter and prevent the movement of dangerous and deadly agents into the U.S. They screen packages for illegal currency and monetary instrument shipments in violation of the Bank Secrecy Act reporting requirements.

 Economic:
FedEx Corporation has grown from a package mover to the leading transportation provider in the world. It was the first to establish critical factors to transform a conventional business into an e-business. FedEx developed a global network which offers services beyond transportation, including full service management tools and support. FedEx led the way in the deregulation of the transportation industry, which resulted in economic competition and a decrease of transportation costs from 7.4 % of GDP in 1980 to 6% of GDP in 1999. It employed 166,000 full-time and part-time workers in the United States in 2000, with a payroll and benefits of $7.2 billion. The direct and indirect employment impact of FedEx operations is over 550,000 jobs, or around 1 in every 270 jobs in the United States. The company's revenues exceeded $18 billion in fiscal year 2000 while the combined direct and indirect output produced by FedEx activities
totaled approximately $53 billion. The number of export packages transported by FedEx has been growing steadily over 15 percent. FedEx has tripled its market share over the last seven years. The value of these exports has also increased 300 percent, an annual average of over 22% while during the same period U.S. exports only increased 50%, a 7% annual increase. The evolution and success of FedEx has had a multiplier effect on the U.S. economy. It continues to make technological and operational advances that are impacting on global markets as well. 

Socio-cultural:
FedEx has demonstrated that it cares very much about the global community. It uses its resources to help thousands of organizations throughout the world. Their aircraft and vehicles deliver tons of aid to disaster sites. Employees volunteer countless hours to make their communities better places to live, play, and work. FedEx gives financial support to help ensure children's safety and improve
education. FedEx is committed to all their employees and the communities in which they live. They show this by offering financial support and volunteer support for charities that promote educational, artistic and cultural, civic and humanitarian well being.

Technological:
The FedEx Corporation has made enormous strides in technology and is setting the industry standard for efficiency and customer service. FedEx has sought technological advances in response to customer needs, and has excelled in anticipating and projecting demands of an environment that would depend and thrive on information. The technology FedEx has developed enables customers and support personnel to have wireless access to essential information system's networks anytime and anywhere. FedEx was the first to integrate wireless technology more than two decades ago, and continues to develop and lead the industry in developing innovative wireless solutions.  

FedEx has long been in the forefront in recognizing the potential of the Internet to provide fast, easy and convenient service options for its customers. In 1994, the FedEx Web site was launched with a bold package tracking application that was no doubt one of the first true corporate Web services. FedEx became the first transportation company with a web site offering a feature that allowed customers to generate their own unique bar-coded shipping labels and contact couriers to pick up shipments. The web site today handles over 1.1 million package-tracking requests daily. More than 2.5 million customers connect with the company electronically everyday, and electronic transactions account for two-thirds of the five million shipments FedEx delivers daily. The web site is acclaimed in the business community for its speed, ease of use and customer-focused features.

Global:
The international market place is by far the company's most prominent growth opportunity. The FedEx global story began with the growth of FedEx Express, which today covers more than 210 countries with quick, reliable express transportation. FedEx has been a leader in the global economy, offering customers more choices and more places. The family of companies representing FedEx operates hubs all over the world, giving customers limitless opportunities to expand their customer base.

 FedEx Trade Networks provides global e customs clearance in the U.S. and Canada, offers freight forwarding services that connect the U.S. and Canada with Asia, Europe, Latin America and other major international regions. FedEx Supply Chain Services leverages the global transportation and information networks of the FedEx companies and their affiliates to provide international supply chain management solutions to customers in North America, South America, Europe, and Asia.

Competitive Environment

The competitive environment is made up of the life cycle stage, competitors, key success factors, and Porters 5 forces. FedEx is still in the growth stage of the life cycle. There are few competitors in the postal service and delivery industry.

Top Competitor:

UPS

The United Parcel Service was founded in 1907 within the United States. Today UPS is a $30 billion company that focuses on enabling commerce around the planet. UPS is one of the most recognized and admired brands in the world on top of express carrier and package delivery. UPS is a leading provider of specialized transportation, logistics, capital, and e-commerce services. UPS is involved in more than 200 countries worldwide.

 

UPS Internet Shipping is your fastest and most convenient shipping solution on the Web. Access the industry's widest array of shipping options right from your computer. UPS Internet Shipping provides many key benefits including:

Ø      Store up to 300 addresses in Address Book

Ø      Access shipment details and tracking data for up to 90 days

Ø      Customize preferences for fast, easy shipping

Ø      Shipping software not required - nothing to install

Strategic Analysis:

Most carrier firms emphasize the same strategic dimensions and use similar strategies and that once common strategy that is the carrier business is the high investment in research and development in order to develop better technologies. In the business, firms with the best technology tend to have a higher market share and this can be seen as a competitive advantage. 

Key Success Factors:

The key success factors for FedEx business is technology. This is what makes a company run and ultimately makes the money for the company. Another key success factor is marketing. People need to be familiar with the carrier's names and services so they have trust in the quality of the service provided. The more a
parcel carrier is globalization; the better success it will have when it comes to international deliveries. International deliveries are costly and there are only a few carriers that can provide total global delivery services and this could be a competitive advantage. Customer service is very important, carriers need to keep the customers satisfied with the service so they continue to come back and use the service.

Value Chain Analysis & Identification of Core Competence

Primary activities:

Ø      Inbound logistics- handling and storing of products to be shipped.

Ø      Operations- shipping products, logistics, value chain analysis, financial analysis, handling orders, checking orders.

Ø      Outbound logistics- delivery of the products, receiving payment.

Ø      Marketing and Sales- develop a positive image of the company making people feel comfortable and satisfied with the product.

Ø      Service- Concentrates on customer satisfaction, doing anything that satisfies the customers.

Support Activities:

Ø      Procurement- purchasing, trucks, planes, gas and other assets

Ø      Technology development- investments in systems innovation, research and development and information technology

Ø      HR management- hiring, training, developing and compensating employees from truck drivers to top-level management

Ø      Firm infrastructure- General management, planning, accounting, legal support, government regulations, required to support the value chain

Global distribution involves managing not only the movement of goods, but also the flow of information and finance that moves with the goods. A FedEx supply chain solution is a streamlined organization and that one core competency leads to another it is a continuous flow.

SWOT Analysis

Strengths:

Ø      Market Leader

Ø      Number one in the International Air Express Industry

Ø      They had a head start in the business

Ø      Can clear customs faster allowing shipments to avoid delays

Weakness

Ø      Major competitors and its operations

Ø      Growth demand

Opportunities

Ø      Expand into more countries

Ø      Buy more planes and trucks to deliver more packages faster

Ø      Start delivering more heavy weight cargo

Ø      Improve ground delivery

Ø      Upgrading distribution and logistic services

 Threats

Ø      Competitors that offer better prices, faster travel time

Ø      Customers stop buying products

Ø      Gas Prices can rise that will have an impact on the prices

 

Five Forces Model:

Threat of New Entrants:

The threat of new entrants is low in the parcel industry. It is low because it is very expensive to get involved in the industry. Starts up costs are high. It is expensive to have the services that are equal to that of FedEx and the other competitors.

Bargaining Power of Suppliers:

The bargaining power of suppliers is high. It is high because when looking at the items that the parcel industry use such as, planes, computers, and vehicles. If FedEx is not on good relations with these people, the costs can increase drastically.

Bargaining Power of Buyers:

The buyers have a very strong bargaining power. They have the ability to switch their user to one of the other members of the industry at any time. It is the job of FedEx to make sure that the customer is always happy. It comes as no extra cost to the buyer to switch their parcel delivery company. The only lose that is really suffered comes at the expense of the company for losing a client.

Product Substitutes:

It is very easy to substitute a delivery service. There are not many out there but the ones that are well established in the eyes of the customer and the industry. It would not be a complex task to switch one company for another. Since this is the case, FedEx has to maintain good customer relations with their clients.

Intensity of Rivalry:

The parcel industry is an intense industry. There are five main players in the industry competing for market share. The features that they are competing on are the speed of delivery, the efficiency of the delivery, and prices. If you can
create a successful mix of the three of those factors, you will hold
the greatest market share.

FedEx has become a major technology user. The use of IT to its business enabled FedEx to surpass the rest of the industry and acknowledge Fred Smith as "the visionary who forced his and other companies to think outside the proverbial one." He rationed that the company "should acquire its own transportation fleet while competitors were buying space on commercial airlines and sub-contracting their shipments to third parties, reliable on its overnight delivery commitments, "an image that has become fundamental to FedEx's overall success." The introduction of new technology allowed FedEx to install more than 100,000 sets of PC's with its software allowing customers to be linked and logged into their ordering and tracking system. The emergence of PC's loaded with FedEx software transformed the customer base into an electronic network. "Information enables corporate customers to tighten their order-to-delivery cycle, exercise just-in-time (JIT) inventory management and synchronize production levels to market demand." FedEx's quality of service became synonymous with the quality of the information provided to its workforce.

 FedEx has enhanced information management in terms of being able to identify the critical factors involved with success of an e-business. It has successfully transformed from a conventional business into an advanced e-business in its network economy. FedEx has succeeded in several areas including: visionary leadership in the application of new technologies, defining the information infrastructure, integrating internal processes, and aligning the organizational structure for maximum benefits. FedEx's key strategy was customer service and for its customers to adapt into its new information technology. FedEx harnessed its new technologies and extended the electronic business to all of its customers. FedEx has developed this technology and made it possible for its customers to connect with them in any way the customer chooses. The restructuring of FedEx addressed many processes but in particular the integration of logistics as well as supply chain management proved to be most successful. The enabled FedEx to cut inventory levels, reduce costs as well as shortening order-cycle time. This is a key for FedEx to improve the quality of service they provided to their customers.

FedEx has laid out a vast matrix of transportation and information networks that will provide them with a huge competitive advantage for some time. To function as e-business Company will need to become increasingly customer/solutions focused. All processes must be integrated to ensure a unified customer centered front that provides services throughout the value chain, logistics, and parcel carrier business. FedEx's new restructuring will serve their customers and apply new technologies constantly to improve their response time and the value of the information they provide. FedEx will continue to build, innovate, and exploit technologies from the successful base they have created and will be on top of the industry for a long time to come. FedEx can be classed as an innovator in its field, being the first company to introduce many of the technologies and processes that are used in the courier business today. Innovation can be seen as a context-specific process of invention, diffusion, adoption and implementation (Galliers & Swan, 1999).  FedEx management understands the strategic importance of innovation and has forged links to create the FedEx Technology Institute. .FedEx has also shown a strong trend for technological innovation. This means that the company is not always reactive to competition; rather they often force the competition to follow their lead. This gives FedEx a competitive edge, and also continues to ensure that the "FedEx" brand-name is well respected.

RECOMMENDATIONS

 

FedEx Corp. shall have as its basic function the obligation to bind the Nation together through business correspondence of the people. It shall provide prompt, reliable and efficient services to patrons in all areas and shall render good services to the community. FedEx can be a continued success in terms of: Keeping costs down to compete against competitors such as UPS, DHL and TNT. This includes using the latest technology to increase the speed of transactions. Focusing on customers is always important, as keeping the customers happy will allow for brand loyalty in not switching to other competitors. FedEx has to understand what it is going to take to be competitive, to meet the needs of the marketplace and then to try and exceed those and set tough targets. They should listen to their customers very well and try to diversify in an area where competitors are close in operations. Technology is important because it allows the companies to compete and be better than one another. It helps attract customers and helps to create the revenue for the companies. FedEx competes in this area by having at racking system and is available online for customers. Marketing also plays an impotent role in the industry. Marketing need to portray the company as one they can trust. Plus the customers need to be aware of the company name and the services they provide. To help build the brand name, FedEx offers an on time guarantee.

  

APPENDICES

Business Challenge

FedEx, the world's largest express package delivery and Freight Company, transports more than 5.3 million items to 215 countries each working day. FedEx maintains a fleet of more than 638 aircraft and 70,000 vehicles with schedules maintained and updated 24 hours a day, 7 days a week in an integrated global network. The company's continued growth and the logistics surrounding millions of packages per day, meant constant adjustments to operations and coordination among many operating groups. The existing legacy systems were adequate for individual business unit objectives, but could not coordinate the many functions of the Global Operations Center, the nerve center of the FedEx transportation system. FedEx needed a system that would efficiently provide contingency plans in the event of a problem. Any break in the flow of packages creates a backlog throughout the system. The company had to accomplish the system changeover while accessing the exist-ing IMS system as well as a relational database. To keep development and maintenance costs down, FedEx wanted a solution that enabled their project staff of mostly IMS system veterans to quickly and efficiently transfer application knowledge into the new system as well as incorporate new features.

 Solution

FedEx chose DataXtend CE for C++ to help create an infrastructure for the Service Recovery Application (SRA) and integrate the IMS system into the multi-tier component based application. The SRA provides recovery options and contingency plans when pack-ages are at risk of being delayed.

As events continuously stream in, each group that could be affected and each potential option is reevaluated. FedEx was able to implement near instantaneous response times using the DataXtend CE for C++ object caching features. With the object cache, data that would normally be retrieved from IMS or an RDBMS is already available in memory saving the system seconds for each data access operation.  

Benefits

The new object component framework, built with DataXtend CE for C++ as a foundation, enables previously unattempted projects to be built. FedEx is no longer limited when considering possible projects because DataXtend CE enables capabilities that were not available in IMS. Establishing functional relationships between aircraft, maintenance and ground stations was practically impossible before, but DataXtend CE makes these cross-functional relationships possible. Furthermore, because DataXtend CE development tools integrate seamlessly with Rational Rose modeling tools, FedEx's system developers transitioned smoothly to an object-based environment. DataXtend CE's code generation capabilities significantly sped up development time. SRA performance demands and response expectations were achieved using the DataXtend CE technology server. Without the caching and pre-calculations done by the DataXtend CE server, the time required to compute a list of recovery options would have been prohibitive, making the application unusable.

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Technology Overview:

http://www.fedex.com/us/about/overview/technology.html

FedEx Family: http://www.fedex.com/us/about/overview/fedexfamily.html

Mission Statement:

http://www.fedex.com/us/about/corporation/mission.html

Corporation Facts:

http://www.fedex.com/us/about/corporation/facts.html

International Chamber of Commerce (UK) Business to Business Directory (2002), "FedEx Corporation"