Laura Ashley and Federal Express
Strategic Alliance
Team 1
Charlotte Chen
Jessica Crane
Dave Christensen
Emilio Fabico
Beau Herman
Shane Hunt
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Background
Laura Ashley (LA)
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18 months of warehouse inventory
Availability at 80% (Stock out 20%)
Outdated systems
Extended lead times
Multiple distribution contractors
Delivery problems
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Product Flows
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Background
FedEx
• Renowned for logistics expertise
• Systems
– Tracking
– Information
– Inventory management
• Desire to develop Pan-European business
• Transportation network / infrastructure
• European warehouse space
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Strategic Alliance??
• Replace outdated LA systems with FedEx
• FedEx to manage all aspects of LA distribution
• FedEx gains entry into Europe and clothing business
• Develop / Promote new FedEx business model
YES !!!
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Areas for Concern
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Length of Contract
Financial Arrangement
Leadership
Contract Firmness
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Length of Contract
• Minimum of 10 years
– Pros
• Stability
• Eliminate the need for constant renegotiation
• Promotes trust
– Cons
• Too aggressive for a new business relationship
• Limited options
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Length of Contract
• Alternatives
– 2 year trial agreement
– 5 year with a 5 year option
• Recommendation
– 5 year with a 5 year option
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Financial
Arrangement
• Cost plus
– LA pays:
– Direct costs in managing logistics
– Freight
– Management fee (percentage of cost)
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Financial
Arrangement
– Pro
• Simplicity
– Con
• Promotes inefficiency
– Recommendation
• Performance-based management fee
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Leadership
• Stability
– Success of alliance is heavily dependent upon
leadership stability.
– Pros
• Maxmin’s level of determination
• Flexibilty
– Cons
• Any change may lead to challenges
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Leadership
• Recommendation
– Succession plan - Implement a contract
stipulation that accounts for the possibility of a
change in leadership.
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Contract Firmness
• “Loose Contract”
– “Agree to agree” philosophy
– Outcomes not clearly defined
– No penalties for failure to perform
– No incentives for performance
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Contract Firmness
• Pros
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Flexibility
Adaptability
Encourages “win-win” atmosphere
Empowerment
• Cons
– Lack of specific direction
– Lack of contingency plan
– No consistency in event of leadership change
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Contract Firmness
• Recommendation
– Implement more structured contract
• Focus on length of contract, financial agreement,
leadership issues
• Implement written incentives and penalty programs
• Provide contingency plan
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Conclusion
• Good fit for strategic alliance
• Implement recommendations
“A partnership is a marriage. No matter how positive, cooperative,
and helpful the partners are at the start, it is essential that they see
their relationship in the cold light of the practicalities. They have to
look at it as if it doesn’t work and walk through the consequences.”
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Questions???
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