Strategic Position
PEST Analysis in the UK
Political Factors
The United Kingdom relatively stable and fair country, where the public has a substantial influence on the inner working. The country also has a proactive government that offers abundant opportunities to the companies operating within the country. However, it is uncertain whether the UK will continue to be a member of the European Union where law and regulations are continuously updated in areas such as environmental legislation, consumer protection legislation, and Health and safety law.
Economic Factors
The United Kingdom has a substantial economic position compared to other countries. In Europe, the country is ranked position two behind German, in terms of Gross Domestic Product. The effect of European Union has facilitated the increase of free market and foreign direct investment not only in the UK but also in Europe at large.
Social Factors
The UK is densely populated with about 64.1 million people. In addition, the country is open to migration, especially on the refugee influx in Europe due to the political crisis in countries such as Syria and Iraq. As a result, this has resulted in a large and cheap labor force. The majority of the people in the country has a high standard of living. However, there is a high and growing dependency ratio.
Technological Factors
The UK and EU at large have effective laws and regulations concerning the intellectual property. In addition, there is a stiff internal competition that stimulates growth in the country. Although there are quality innovative skills, the technological development is relatively slow compared to the United States.
Porters 5 Analysis
Competitive rivalry
The Business Courier industry is dominated by few large organizations such as DHL, FedEX, UPS, and TNT. All the companies have a similar strategy of operating worldwide and providing delivery services, which have similar features. The customers in the market can easily switch to a competitor at a little cost. Therefore, the rivalry competition is high.
Bargaining Power of Buyers
Customers who can easily switch to another competitor characterize the Business Courier industry. Although the number of customers in the industry is high, the product and services offered are similar and have little differentiation, and consequently requiring the competitors to strive to meet the needs of the customers. As a result, the bargaining power of buyer in the industry is moderate.
Bargaining Power of Supplier
The supplies which offer envelops, boxes, and other raw materials sales their products in bulk. As a result, there is an economy of scale that enables the companies to the courier market to sell their products at lower prices (TNT, n.d.). The supplier power can be relatively high given that the TNT Express has large outsourcing accompanied by tight relationships with their suppliers.
Threat of substitutes
Substitutes such as emails have significantly affected the courier market. However, the technology has not yet facilitated another alternative way of sending material products (hard copies) such as parcels. Customer satisfaction in this market is enhanced through offering an affordable price, quality and reliable services, and being on time to reduce the threat of substitutes.
Threat of new entrants
The threat of new entry in the business courier market is low because of several factors. These factors include the high capital requirement, economies of scale, and high need of distribution channels. These factors discourage new entrant from entering the market.
Strategic Capabilities
VRIN Framework
Valuable: the resources of TNT are more valuable compared to the competitors because it focuses on customer satisfaction to deliver superior customer experience, and hence retain customers (TNT, n.d.).
Rare: TNT resources are rare because it has a competitive advantage over its main competitors by delivering products to the right time at the right place.
Imitable: it is hard to imitate the consumer market skills because TNT Express has a brand name that is well recognized and fairly respected across the world.
Non-substitutable: concerning distribution network, it is hard for the competitor to utilize another equivalent resource to replace TNT's advantage. However, in the aspect of consumer marketing skills, it is unclear whether competitors can utilize other equivalent resources.
Porter's Value Chain
Primary activities
Inbound Logistics: the company has maintained ongoing communication with suppliers and sourcing from multiple suppliers. This is to facilitate enhanced and integrated global network.
Operations: to enhance operational excellence the company has installed total quality management, preventive change management, health and safety management, and clear and simple health and safety performance management processes (TNT, 2016).
Outbound Logistics: the company as Smart Zero Emission supply chain solution. The supply chain has no intermediaries because their products and services are sold in their licensed stores.
Market and Sales: TNT Express focuses more on a high level of customer services, superior quality, and customer satisfaction than aggressive marketing.
Service: the company aims to enhance customer loyalty through an integrated level of customer services. Customer promise is their key strategy.
Support activities
Infrastructure: TNT Express has new hubs and modernized infrastructure. The company has automated their depots and hubs as well as standardizing and simplifying their core processes.
Human Resources management: the HR ensures a safe and healthy working environment for employees. It also facilitates continuous engagement, development, and training of employees.
Technological development: the company has remained steadfast in technological development. For instance, company's vehicles are equipped with telematics and aerodynamic devices to reduce CO2 emission (TNT, 2016).
Procurement: the company utilizes the Procurement Excellence Programme to enhance the value creation of the procurement function (TNT, 2016).
Stakeholders
The company's main stakeholders include investors, employees, subcontractors, civil society organizations, suppliers, and customers (TNT, 2016). In the United Kingdom, the company has employed over 10,000 employees.
Strategic Choice
Potential future strategic direction (Ansoff Matrix)
Market Penetration
The company aims to increase its market share and lead the industry by creating value, instilling pride in their people, and share responsibilities around the world. The company is also focused on selling more varied express products and services to the established consumers. In addition, the company's marketing strategy is based on delivering a superior experience. For instance, the company embraces sophisticated technology to allow customers trace their deliveries.
Product Development
The company aims to improve customer experienced by delivering quality products and services at the right time to the right place. The company focuses on on-time delivery. The company also seek to improve the quality of their products through operation excellence, innovation, and customer relationship management.
Market development
TNT Express is focusing on finding a new group of customers in the larger addressable market. In 2011, the company developed a strategic alliance with Adrexo Colis to expand its market position in France market. Other market expansions include in the Middle East, Africa, and Asia-Pacific region.
Related diversification
As a diversification strategy, the company is expanding its products to enter into a new but related market. For instance, the company is entering the standard parcels, which is parcel market that is not categorized as express. Other diversification includes intercontinental shipments, and business to consumers.
Unrelated diversification
The company has tried to avoid risk diversification and prefer to remain in the courier industry to grow its brand.
Potential methods by which future direction may be made to happen
Various methods are available to shape the future direction of TNT Express and achieve a substantial growth. Methods include partnerships, divestments, or acquisitions. The company has a reputable brand name and has transferable capabilities since it has operated in different countries around the world. As a result, these factors are favorable for potential acquisitions, partnerships, and divestments. For instance, the company is in the process of acquiring FedEx declares.
Potential opportunity for innovation
TNT Express need to embrace innovation to focus on the growing needs of the private customers. In this case, the company needs to develop an innovative solution that allows 24 hours pick-up services. For instance, a company can establish a national introduction of parcels and invest on the e-commerce.
Strategic analysis
Strategic position (SWOT Analysis)
Strengths
TNT Express has a reputable brand image globally and serves in more than 200 countries
The company offers wide range of diversified service
The company is recognized for its superior customer experience and innovative force in the courier industry
The company has automated their depots and hubs as well as standardizing and simplifying their core processes
Weaknesses
The competitive segmented has constrained the company's ability to achieve substantial market share
The company has limited service diversification
Opportunities
The company has the opportunity to embrace methods such as partnerships, divestments, or acquisitions to shape its future.
Diversification in services and products
Penetration and expansion in newer markets
Threats
The industry has little number of competitors with low-cost services and products
Change of consumers' consumption behavior due to the advancement of technology.
Strategic Choice (SAFe analysis)
Suitability
The customer satisfaction strategy of the company addresses the main constraints and opportunities. For instance, Porter's five forces illustrate how the company concentrates on accumulating and deriving the power of consumers by ensuring they meet their needs and hence increase the market shares. However, the company should develop an alternative strategy to address the challenges associated with the innovation and technological advancement.
Acceptability
Risk: The liquidity ratios of the company are significantly low hence indicating that company has a lower margin of safety to cover its short-term debts. For instance, the current ratio and quick ratio are 1.18 and 1.17 respectively, and they correspond to the industry ratio.
Return: the profitable ratios of the company indicates that the stakeholders are benefiting from the strategies adopted by the company. For instance, the company has a gross margin of 95.23 percent that shows profitability (Investing, n.d.).
Reaction: the stakeholders such as investors has faith on the strategy employed by the company and strives to enhance the growth of the company.
Feasibility
The company requires high-level skills to perform different functions such as sales and marketing, distribution, customer services, and finance. According to the cash flow, the company incurred a loss in 2014, hence indicating that the strategy is not feasible (TNT, 2016).
References
Investing. (n.d.). FedEx Acquisition | Welcome to TNT's corporate website, offering company news and information for investors, press, and other stakeholders. Retrieved from http://www.tnt.com/corporate/en/site/home/investors/fedex_offer.html
TNT. (2016). Annual Report 2015. Retrieved from TNT website: http://www.tnt.com/content/dam/corporate/pdfs/Archive/Quarterly%20reports/2016/AR2015/tnt-express-annual-report-2015.pdf
TNT. (2016). FedEx Acquisition | Welcome to TNT's corporate website, offering company news and information for investors, press, and other stakeholders. Retrieved from http://www.tnt.com/corporate/en/site/home/investors/fedex_offer.html
TNT. (n.d.). TNT-Case Study. Author.
