WHAT ARE THE MAJOR CHALLENGES THAT PANALPINA WILL HAVE TO OVERCOME AND THE CAPABILITIES THAT WILL HAVE TO DEVELOP TO MAINTAIN ITS LEADING POSITION AND THE RAPID PACE OF GROWTH
Background
Globalization and the unprecedented pace of internationalization of the businesses have had the tremendous effect on the activities of the modern corporations. Some of the major challenges which the companies face in the contemporary business environment include innovation and technology advancements.
This document focuses on the analysis of the specific company, Panalpina, one of the biggest logistics companies, which proud itself in excellent supply chain solutions for the global customers. Logistics industry, and international players,like Panalpina, are highly dependent on technological advancements and innovation in building on their competitive advantage and lead the market (Sadler, 2003). These two elements were outlined as major challenges and issues for the organizations in 2015-2-2016.
The research topic of this particular study is centered around the following: “In view of aggressive market penetration strategy and organic growth ambitions, Panalpina will further demand to focus on significant financial and Human Resource (HR) investments to align its long-term strategy with the external trends and forces (Moncka et al., 2014). What are the major challenges that Panalpina will have to overcome and the capabilities that it will have to develop to maintain its leading position and the rapid pace of growth?"
Research Aim
AN analysis of the situation and the challenges, specific to the logistical and supply chain management industry globally, outline that technological advancements and the external pressure on company's ability to implement innovation culture are the key challenges and areas of focus for the middle and the long-term future. It was identified and formulated in the research topic of this proposal that overcoming these challenges with forward-thinking and ambitious strategies the goal of the companies. But this has to be done along with appropriate and comprehensive cost-optimization and risk management approach, which ensures financial stability. The aim of this research, therefore, is to explore the challenges in technology and innovation and identify the ways to build on effective long-term strategy for Panalpina, which is grounded on 4 pillars: cost-effectiveness; exclusive and differentiated offer; advanced innovation culture; and unique internal capabilities built to address with external pressures.
Research Objectives
Based on the outlined research aim and preliminary study of the business environment that surrounds the organization, it is evident that highly investment-heavy strategy and reasonably short life-cycle of its supply chain solutions place a number of pressures on the long-term profits and sustainable competitive advantage. Big companies in the contemporary environment are struggling with innovation and the attempt to build better innovation process. At the same time, the technological background, available for the companies in logistics sector is developing at exponential way. To remain competitive, these companies should become early adopters of the latest technology, which is a calling for Panalpina´ bottom line due to high costs of this technology (Little, 2007). Many companies choose to wait for the next generation technology at the expense of the outdated systems, as the lifecycle of the technological solutions is very low and at times waiting allows significant savings. But this makes the organizations run the risk of being left behind the competition (PWC, 2012; Tecee, 2010). The insight into the market and the internal analysis of the company allows narrowing down this research to the following objectives:
How can Panalpina become more flexible in its innovation process and create more innovative culture, while remaining in control over the organization and the alignment of strategy with operational and tactical levels?
How can Panalpina develop a long-term technology strategy on a global level and remain flexible enough to adopt the newest technology effectively and cost-consciously?
Literature Review
An insight into the past decade of the operations of Panalpina and understanding of the strategies that underlie the growth of the organization, it was possible to identify the two major dimensions that affect the organization from financial as well as operational perspective. These dimensions are innovation and technology. Th multifaceted approach to dealing with this dimension is the key to sustainable growth and profitability of the organization. Based on the annual report, presented by the company by the end of the financial year 2015, the focus of the company in a medium and the long-term will continue to be centered around the emerging markets. The strategy is very investment centered, where innovation investments, where the company utilized not only direct financial inflow in R&D but actively involved in Merger and Acquisition (M&A) through a purchase of Apollo Perth and Grieg Logistics. The project on advanced controlled temperatures alone received over USD 5 million in direct internal financing (Panalpina, 2013). Such a multifaceted approach to international expansion and market penetration in emerging economies makes Panalpina a leader in the innovation process and allows it to gain the strong competitive advantage in a medium term, based on the scale and scope of operations and acquired expertise (Monzcka et al., 2014). Peirchy and Fang-L (2016), however, outline that while M&A strategy in emerging economies is a good way to gain fast access to innovation and the needed knowledge and expertise, it, at the same time, places the company at risk of internal issues, related to the differences in organizational culture and challenges related to dealing with people, who come from different organizational background. As a result, the company can suffer significant losses in a long-term due to the reduction in productivity, quality, and motivation of employees. The point that is made by many authors, exploring innovation and innovative cultures is that organizations should be increasingly aware of the fact that innovation should be built from within the core of the company to respond to the external challenges. Acquisition of the companies with needed innovation is an option that always comes at an indirect cost of training, motivational strategies, and organizational re-alignment, which often, are ignored by the companies at the time of acquisition (Koller and Horn, 2003). Furthermore, innovation is, often, a result of delegating the authority and decentralizing the functions within the organization. This empowers groups and individuals to think out-of-the-box. Panalpina's case studies on Toshiba cargo consolidation system and logistics capacity, Boeing 747-8 upgrade for the latest technology and many other projects serve as examples of the decentralized innovation process and the cell organizational structure (Panalpina, 2015; Panalpina, 2011). Teece (2010) suggests, organizational structure and the governance are subjects to a variety of external influences. Innovation is essential for the organization and flexibility with regards to it is an important competitive tool. Many companies, operating in cell organizational structures, however, loose the control over the operations and culture and find themselves trapped in between strategies, where they fail to build the innovation culture, and only partially implement innovation process. Panalpina proved to be effective in most of the largest projects that they have conducted over the past decade. The risk, that the company is running at the moment is to lose control over its integrity and organizational culture, while striving for innovation on project level.
Another important element of this discussion is the level of acceptance and risk, which the company is ready to take on when it comes to adoption of new technology. Little (2007) argue that logistics and supply chain industry is one of the sectors, which highly relies on technology and innovation of systems and processes. The complexity of this business model is also associated with the expectations of the clients, which outreach to Panalpina and its competitors for the latest technology and innovation, which they cannot achieve internally due to the lack of skills, experience or financial resources to invest in internal development. This expectation and "desire" of the companies in Business-to-Business (B2B) segment places a lot of pressure on the decisions with regards to the adoption of new technology by Panalpina. The challenge is to find an optimal balance between technology pioneering and the cost-effectiveness. Moncska et al (2014) suggest that companies should be able to prioritize their customer segments and align investment levels into technology based on the Return on Investment (ROI) and the lifecycle of technology. Competition analysis and high market trend awareness is the key to the successful operations of the company. With that, Panalpina should see the solution to the challenge of achieving technological competitiveness at effective cost through in-depth market research and strategic partnerships with its major customers, which can guarantee the continuity of the projects (Wang, 2009).
PWC (2012) report explores the ways to leverage emerging technology for sustainable growth, outlining the three major areas, incremental innovation, breakthrough innovation and radical innovation. In order to be able to leverage the costs, organizations like Panalpina should look at breakthrough innovation as the core of its innovation culture., while avoiding large capital investments in incremental innovation. Supply chain management operates with high infrastructure and fixed costs, which means that the risk management strategy should be relatively conservative. With that in mind, radical innovation is considered a high-risk strategy. Due to the increased competition and external complexity of the business, such innovation process within information technology can bring significant financial advantages. To be able to reduce the risks and optimize the cost and technology adoption processes, Panalpina should look at strategic partnerships, which will share the costs and reduce the risks due to the stronger bond with the B2B clients (Devenport, 2013).
Theoretical Framework and Research Design
Theoretical Framework
The research will be mostly guided by the interpretive perspective of Alvesson (1996), who suggests that individual analysis and research should utilize single theory, linked and explained by the personal view on business, political and economic situation. This means that the research will aim to use the theories, which the author is intellectually familiar in order to build on the in-depth knowledge of a limited number of approaches, rather than the shallow understanding of multiple theories. This approach is appropriate for the study as it offers an opportunity to highlight individual organizational authenticity. Given the fact that the scope of the research is limited to a single company, Panalpina, and limited to the timeline of several weeks, Alvesson's approach to theory serves as the good framework to achieve the research aim and answer the questions in research objectives.The theoretical approach places focus on interpreting the meanings and perspectives of the company, individuals, and external stakeholders, as well as outlined the ways in which these meanings are negotiated. The research will explore the meanings of Panalpina's management has for the strategy and the long-term direction of the company, its relationships with internal and external stakeholders. The situational approach to this study directs the author towards two specific elements, which outline the challenges of the company: innovation and technology.
It is important to outline that while the Alvesson's approach utilizes not only theory research but observation and interviews, the timeline limitations and resources will make this research be based purely on the analysis of the secondary literature and studies, conducted in the period of 1990-2016. The range of works includes business studies and official Panalpina statistics, as well as academic literature, exploring business models, supply chain management frameworks and other relevant aspects of the industry and the environment, in which Panalpina operates.
Research Design
The study of Panalpina with the focus on the current and the future challenges related o adoption of new technology and the company's approach to innovation are grounded upon the experience of many organizations as well as specific case studies that the company has conducted and participated in over the decades of its existence. While the insight into the success of the operations and the impact of the above forces can be, to some degree, measured with quantitative indicators, this measure is an internal tool, which outlines the nature of relationships of the company with its external environment. The purpose of this research, however, is not o identify or evaluate the appropriateness of the quantitative variables, which Panalpina have developed to assess its strategic fit, but rather to understand the theoretical framework, real-life cases, and outcomes and assess the power of the external forces with regards to financial and operational effectiveness of Panalpina in logistics and supply chain industry. To be able to achieve the research aim, therefore, qualitative research methods will be utilized. The focus on this specific method will ensure that the research is adequately built to be concluded with quality and within the given timeline.
Research Methodology
As the study is focused on the specific issues and challenges that surround the Panalpina company, this study will be focused on the analysis of various information sources, including some raw statistical data and an in-depth study of the theories and frameworks, presented in the works of business and academic authors over the period of 1990 – 2016. The author aims to apply three major qualitative methods of analysis:
Document analysis;
Grounded Theory;
Document analysis will include both, print media and the online sources, such as company website, blog and digital reports, available for general public and those, targeting more specific stakeholders. The objective of this method of research is to go through a significant data to be able to draw upon specific observations, relevant to the subject and explain the importance of the innovation and technology for the industry as well as Panalpina in general.
Grounded Theory will allow narrowing down this research.The key element of this methodology is to make emergent conclusions and gather the information that will be further defining the research question, determine its relevance and the feasibility of this study. More specifically, the research will focus on the analysis of the effects of technology and innovation on the operational and commercial aspects of Panalpina and its competitors.
Finally, the case study method will be utilized to analyze the specific events, relationships and developments, which surround Panalpina and define its strategic approach to the business in the past, present and the future. This method will allow elaborating the study with specific perceptions and the understanding of the intended outcomes as they relate to the actual events within the company. Additionally, the research aims to develop several quantitative and qualitative variables, which could build on more comprehensive conclusions with regards to the future strategy and the change management of Panalpina.
Ethical and Accessibility Issues
The common ethical dilemmas in business research among standard research misconduct, conflict of interest and authorship, include some specific considerations with regards to invasion of privacy, deception and data management. Th research will be conducted in accordance with the AoM Code of Ethical Conduct in order to ensure that it cannot harm the participants.There is little concern with regards to the possible breach of confidentiality as no documents or interviews will be conducted to expose the personal or organizational data, not available to general public (Flynn and Goldsmith, 2013). Based on the widely available documentation in online as well as print media, this research will only involve non-sensitive data. Deception occurs, once the researcher presents the study as something different from what it actually is, misleading the reader. Another important aspect of academic research on a business topic is plagiarism, where the works presented as unique, while it uses and borrows the ideas from other studies, previously conducted. To avoid deception as well as plagiarism issues in this study, the author will accurately cite and reference all the information sources, directly and indirectly, used to complete this analysis (Miller et al, 2012).
There are several accessibility considerations to this study that should be taken into consideration (Richards, 2014). First of all, the study is an academic project will allow only limited access to official statistical data, based on the fact that Panalpina is a publicly traded company. Secondly, in order to ensure the quality of the qualitative research methods, it was decided not to include observation and interview methods in the analysis as it would demand significantly higher time and resource investments. Finally, the research will be grounded on subjective observations and conclusions of the author, driven from the raw data and document analysis. The research does not aim to provide any specific and measurable empirical evidence to the conclusions.
Timeline
The timeline for this research was limited to a maximum of 10 weeks, which gives the author sufficient time to identify the resources, formulate the research aim and objectives, build on the research project milestones and conduct the research, presenting findings and conclusions. To prepare for the research, the timeline was divided into 5 stages, which outline the point of research at each week.
The above timeline is a comprehensive guide for the authors for collection, evaluation and analysis of the data. It will provide a basic framework for the follow up on the progress and the intended outcomes.
References
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