Laura Ashley & FedEX: Strategic Alliance

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Transcript of Laura Ashley & FedEX: Strategic Alliance

  • 1. Laura Ashley and Federal Express Strategic Alliance PRESENTED BY: GROUP 7

2. Overview Laura Ashley Founded in 1953 by Bernard and Laura AshleySpecialty retailer of upscale womens fashions, fabrics & home furnishing productsMarket Segmentation- on the basis of customer lifestyleHigh scale in-store services important to maintain the image of the brandProblems faced by the brand: Although sales were up but profits were flat in 1980sOverdependence on in-house manufacturingExcessive short term debtRapid cash outflow 3. Problems in distribution system of LA: Availability at 80%(stock out 20%)18 months of warehouse inventoryOutdated systemsExtended lead timesMultiple distribution contractorsDelivery problemsInefficient good flows 4. Product Flows 5. Overview Federal Express and Business Logistics Services Incorporated in 1971 by Frederick W. Smith Jr.By 1991 they were the premier carrier in overnight delivery businessRenowned for its logistics expertise &tracking systemBusiness Logistics Division created in 1987 to provide specialized logistics services to businesses throughout the worldBLS had three major operations: System lineParts bankSystem care 6. Contd.. BLS had three systems: TrackingInformationInventory managementDesire to develop Pan-European businessTransportation network / infrastructureEuropean warehouse space 7. Strategic Alliance Replace outdated LA systems with FedExFedEx to manage all aspects of LA distributionFedEx gains entry into Europe and clothing businessDevelop / Promote new FedEx business model 8. Areas for Concern Length of ContractFinancial ArrangementLeadershipContract Firmness 9. Length of Contract Minimum of 10 years Pros Eliminate the need for constant renegotiationStabilityPromotes trustCons Too aggressive for a new business relationship Limited optionsAlternatives 2 year trial agreement 5 year with a 5 year optionRecommendation 5 year with a 5 year option 10. Financial Arrangement Cost plus LA pays: FreightDirect costs in managing logistics Management fee (percentage of cost)Pro SimplicityCon Promotes inefficiency 11. Leadership Stability Success of alliance is heavily dependent upon leadership stability.Pros Maxmins level of determination FlexibilityCons Any change may lead to challenges 12. Contract Firmness Loose Contract Outcomes not clearly definedNo penalties for failure to performAgree to agree philosophyNo incentives for performancePros AdaptabilityEncourages win-win atmosphereFlexibilityEmpowermentCons Lack of specific directionLack of contingency planNo consistency in event of leadership change 13. Revised Product Flow 14. Conclusion Substantial and real benefits from the allianceBenefits to LA: New ways of doing businessImproved performanceAccess to new systems in compressed time frameAbility to focus resources where it could add valueBenefits to BLS: Trend settingEntry into clothing businessEntry into EuropeEstablish global nature of its business