Porter’s five forces come out of the realization that firms could still attain different levels of profitability if they were kept in the same environment, under the same conditions. A model of an economy with pure competition however requires that the rates of returns obtained from adjusted risks to be constant. Porter therefore segregated the industry into five forces. The model can be used by industries that are seeking to gain an edge over other firms (Harvard Business School Press 2006). The process of gaining a competitive advantage is also best described in the product values chain analysis which will be beneficial in outlining the process of building the competitive advantage. This study will therefore outline the ways Fed Ex Corporation can use to position itself strategically in its market.
Porter’s value chain
These strategies should be supported by all departments as they work in harmony to ensure smooth operation of the activities. Adherence to the value chain would ensure customers experience value satisfaction that would surpass the level of costs the activities have consumed; thereby ensuring profitability. Normally, Fed Ex would have to incorporate the Human resource department, Company infrastructure, I.T department and the procurement department to carry out the value chain procedures (Hill, 2009). They include:
This will involve receiving purchases into the storage department after purchase as the supplies await distribution to respective departments. This would ensure proper procurement procedures and effective storage of goods. According to the Fed Ex report of incorporating ICT and turning the company into an e business, Fed Ex should make its storage operations including purchases and disbursements electronic. The company could use stores management software to undertake this project.
This is the point to which Fed Ex would be utilizing its supplies for service production. Considering Fed Ex’s definition as a corporation that bears attention to detail, the company would utilize its supplies to ensure the products are specific to the customer’s requirements. This process would ensure products are made to customer satisfaction.
After the products come from production, they are hereby warehoused, awaiting dispatch. Considering FedEx customers wanted to deal with one company, the outbound and inbound logistics should be merged; such that the departments are handled as one.
Marketing and Sales
It is the duty of the sales department here to precisely identify the customer needs and distribute the company’s products in fulfillment of the needs. Fed Ex’s rebranding strategy to merge its five branches under the name “Fed Ex Corporation” should be embraced by all departments and not only the marketing department. This would ensure the effectiveness of management and sales strategies.
These are after sale services which are offered to the customers after the sale is done. It could be done free of charge or at a fee. Fed ex’s policy of unconditional timely delivery of products and absolute satisfaction of the customer should be reinforced to ensure customer satisfaction and loyalty.
Porter’s five Forces
In a more classical sense, competition would make firms realize no profits but Porter identifies that competition is not always perfect. Firms today align themselves to compete favorably against others. It is therefore important that Fed Ex ensures the strategic merger of its five departments to work as one company (Fed Ex Corporation). This will ensure it is a more formidable force to prevent detrimental rivalry forces (Gall, 2006).
Threat of Substitutes
The threat of substitutes would majorly affect the demand of fed Ex’s services. This threat can usually come from other industries which would affect the profitability of the company. It is therefore inevitable that if there are too many substitute services in the market, consumers would have a wide variety of alternatives. It is also imperative that this trend will lead to price wars between competing firms in the industry (Harvard Business School Press 2006).
It is therefore important that Fed Ex positions itself as the best alternative through aggressive market campaigns or engaging in smear campaigns as a tactic to beat the competition. This should be done in tandem with superior service delivery above other companies. Smear campaign tactics to wade off companies that offer poor quality alternative subsidies would stem from the company’s mission statement of “doing whatever it takes to ensure customers are satisfied”
The buyer power of an industry would basically dictate the ability of customers to source the services of the company. As a result, if the buyer power is low, the profitability levels of the company would be low as well. It would therefore force the company to lower its prices to adapt to a lower buyer power. Fed Ex should therefore carry out a research to position itself in markets that have high buyer power. Fed Ex should also strategically use the internet and e business strategy to penetrate through such markets with high potential buyer power (Gall, 2006).
Fed Ex cannot carry out its business in isolation; it would need raw materials and supplies from external organizations. It would be quite expensive for the company if the market had a stronger supplier power because they would command a higher price for their supplies thereby eating into the profitability of the company. Fed Ex should seek to establish itself in a market with a lower supplier power. The best strategy Fed Ex’s management could use in reducing supplier power would be channeling all supplier related issues to its parent company, Fed Ex logistics and Caribbean transportation which will provide proper logistics and increase the company’s bargaining power when dealing with suppliers (Harris, 2006).
Barriers to entry
Barriers to entry would ultimately affect the competition of the business. Certain markets have a stronger barrier to entry; either because of high capital involvement or other bureaucratic procedures. Fed ex should establish itself in a market with higher barriers to entry. This would ensure it takes advantage of the monopoly it would enjoy to increase its profitability. However, the company should increase its efforts of transforming the business into an e business. This strategy would be a global strategy that will avoid a lot of logistical barriers to industry penetration. This analysis ill be important in expanding Fed Ex’s operations to new markets in future (Hax, 2001).
Porter’s analysis positions an organization to effectively take advantage of factors that would affect its profitability levels. It would therefore be beneficial for Fed Ex to analyze the market in relation to the five forces in order to effectively take advantage of the opportunities present in the market (Hill, 2009).