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Business Strategy Analysis

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Business Strategy Analysis Paper

Grand Canyon University LDR – 620
November 19th 2012

Business Strategy Analysis Paper

C.H. Robinson Worldwide is an international third party logistics provider, specializing in over the road, railroad, and ocean freight. Currently they utilize over 53,000 transportation companies and currently have over 37,000 customers. With over 200 offices in North American, they also have offices that operate in such places as Asia, Europe, and Australia. With over 8,000 employees they dedicate themselves on service and integrity. In 2011 CHRW had gross revenues of $10.3 billion and handled over 8 million shipments. The mission of the organization is their people, processes, and technology improve the world's transportation and supply chains, delivering exceptional value to our customers and suppliers. Founded in 1905, one of the biggest strengths that Ch. Robinson Worldwide has is the access to available trucking companies, intermodal containers and ocean containers. CHRW has built their company on solid relationships and customer service. Having over 230 offices worldwide the company can reach and service a larger population of the globe. With handling over 8 million shipments last year and having over 37,000 trucking companies on contract CHRW can offer their customers prices extremely competitive prices and still provide excellent customer service. The major weakness of the organization is actually one of their strengths. Although the company can offer its customers excellent prices on shipments, it’s the truck companies that sometimes refuse to do business with them. Although a trucking company may be on contract with CHRW, this does not mean that they are obligated to haul loads for them. In the past the logistics industry was very unethical. Brokers were able to take advantage of trucking companies because of their access to freight, often promising a backhaul without any intention to find them one. Ethics has become a big part of the industry, in the past business was often done in very unethical ways and at times those events still happen. Employees often lie to trucking companies because they are making commission on each and every transaction. These types of situations can ruin a company’s image extremely quickly. CHRW has workforce with tenure that has an average of 10 years. Newer employees still want to cut the corners in order to make extra money.
This is one of the factors that they lose business and the services of their trucking company. CHRW has a lot of opportunities, not only to make a greater profit but also to grow. They currently have less than 3% of the business in the United States. While in the past their focus was on large companies, smaller companies make up the highest percentage of businesses in the United States. They need to maintain their focus on these companies and offer the same services to them. These are the businesses that do not necessarily have the highest freight volume but do often have a stronger budget than those of the big companies. It’s here where CHRW can make a greater profit as well as gain more business. Currently C.H Robinson Worldwide has around 176 offices in the United States. But only has about 59 offices internationally. This is the area with the highest potential of growth in the marketplace. As the company grows, they will continue to expand into international markets and increase the services that they offer as the opportunities presents themselves. The major threats for C.H. Robinson are, for one, the economy. If businesses are not selling their product then the need for a logistics company is not necessary. Also if the economy is in a recession then there customers are more likely to get more competitive quotes instead of staying loyal with their existing logistics company. A recession can also cause a decrease amount of volume and cut profit. Service failures by trucking companies are another major threat to C.H. Robinson. CHRW’s business revolves around the trucking companies that they have on contract. Service failures do not just hurt the customer service aspect of the business but they also cost the company money for late shipments.
One of the strategic objectives C.H. Robinson has is when they open any new branch, they make sure the branch hits the ground running and there is no lag time. For example when open offices internationally; they make sure they have in place the technology and the resources available for the branch to succeed. This includes the right employees, the access to the right equipment and the necessary technology to help them succeed.
Another strategic objective that C.H. Robinson Worldwide has is to gain a larger stake in the domestic market. One of the ways they plan on doing this is to continue to open offices where they see the market increasing. Whether the offices are in the United States or international, CHRW sees that opening offices in an increasing market will give them a local presence to those customers.
Some of the specific plans they have in place is to continue to make acquisitions to help them secure more of the market. Last year they bought a wide range of companies that saw as benefit to their organization. Whether it be a company that can offer them an advantage in a certain sector of their business or a company that is stronger in one of the services that both provide.
C.H. Robinson Worldwide has a couple of contingency plans risks against a branch or the entire company. One of the plans they have in place is to have minimum insurance requirements for all of their trucking companies. Throughout any shipment a product may shift or break. Making sure a trucking company has the adequate insurance for the shipment ensures that the company cannot be liable for any damages. Another plan they have place is to protect themselves from any lawsuits from customers or carriers is an internal fee they charge per shipment. This fee differs from shipment to ship depending on the overall charge to the customer. The fee is 3% of the charge to the customer and goes into a fund that is held solely for this purpose. I think that C.H. Robinson’s business strategy is extremely strong. Although they may only have less than 4% of the market, they still have the largest in the domestic market for any non-asset based logistics company. They are not afraid to invest in resources, whether it be technology, services, offices, or even personal. They maintain their competitive advantage by the volume of shipments they handle, the acquisitions they make, and the services they provide to their customers. I think that one area that they should concentrate on is the over the road shipments that are not dry freight. While normal dry freight is definitely the majority of their shipments, I think if they started developing more dedicated offices that strictly focused on flatbed shipments it could definitely open more possibilities for freight and getting more flatbed carriers on contract.

References

C.H. Robinson Worldwide, Inc. (2011.) Annual Report: The Power of Performance. Eden Prairie, MN; Retrieved from: http://investor.chrobinson.com

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