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Fedex and Cochlear Property Ltd Case Study Analysis

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Case 1: Cochlear Property Ltd

Why has this Company Succeeded or Failed so far?

             To a large extent, Cochlear Property is a successful enterprise. It has so far evolved from a mere research idea limited to the labs of Australian universities to a global commercial success due to a number of things.

            The first thing that has made Cochlear Property successful is the fact that it is an entity that controls a unique technology. Porter (2012) states that technology embodies value in an entity and this leads to competitive advantage in business. The technology of the company is distinct and it provides hearing aids and abilities to people from different parts of the world. It makes life comfortable for a lot of people but the strength of Cochlear Property is that it is a unique technology which cannot be easily replicated due to the fact that the company has a patent right to the technology.

            The second factor responsible for the success of Cochlear Property is the Australian government’s policy of encouraging pharmaceutical and medical research entities. This provided the much needed capital which was used to get the company to move to a high pedestal in its operations and attain a sustained level of productivity.

            The third fact is that the company sought financing when they needed it and this helped to expand the entity and make it more opened to people from different parts of the world.

            The fourth element of the success of Cochlear Property is the fact that the company has been able to penetrate specific markets. This is because it is a specialised product that is suitable for deaf people in different parts of the world. The ability to get the products to consumers makes the company solvent and keeps it going.

Fedex and Cochlear Property Ltd Case Study Analysis

What are the Risks, Reward and Trade-Offs of a Globally Growth Oriented Business?

            Risk-reward trade off refers to balancing entrepreneurial risk for rewards in the form of profits or revenues (Mankiw, 2012). Cochlear has a technology that is unique, distinct and very much in demand amongst a particular niche of the markets around the world. However, the risks relate to the challenge of financing. Hence, financing risk was the main and central risk that faced Cochlear Property.

            The main risks involve the internationalisation of the company through the acquisition of funds. The low capital and the the need for internationalisation came with the challenge of raising funds and this had the inherent risk of destabilising the company and its capital structures as well as its going concern status.

            Acquiring funds from sources that proved to be extremely expensive meant the company would pay too much money to finance their debts. This will mean too much interest to be paid at different points in time and this could cut down profitability and lead to the collapse of the company.

            On the other hand, equity financing meant the risk of opening the door for external investors, particularly Americans who could use their power and influence to dislodge the company’s original founders and pursue a profitability strategy that could destroy the original vision of Cochlear. Hence, they had to balance the risk of financing.

            There was also the risk of failure in international markets. This is because the sale in international markets could face serious challenges and issues that could make the venture not worthwhile.

            Additionally, there was the risk of the entry of other competitors and other service providers. This could cause a major competition for the market share in the hearing aid implant market. This could have put Cochlear out of business.

            However, Cochlear managed to grow organically and gradually with Australian government grants and the help of other business angels. With time they took money from an American venture capitalist in exchange for modest equity shares. After that, they invited Australian institution investors and the company remained in safe hands. Meanwhile, the sales overseas was successful so the company became a sustainable entity.

Explain the Prime Strategy for Financing the Start-Up

            Financing strategy refers to the long-term plan and system of asset financing and capital mobilisation and could be done through debit or equity financing or both (Quiry, 2012). Cochlear had a major issue and a major challenge in raising funds. This is because it was a research entity and only people who believed in the success of the research sought to support and assist its expansion to a major business.

            Thus, in the beginning, the approach was to acquire funds through business angels and personal contributions. They took donations from telethons and other means of raising funds from members of the Australian public. This led to the build-up of sufficient funds to under take further research and remain solvent as a business.

            The Australian government also provided grants of about $4.4million between 1978 and 1983. This phase seem to describe the organic financing strategy which involves spending only money that was generated and relying on business angels and grants. It is after this period that the country sought to expand into a global entity that it needed an expanded and enhanced capital base.

            The strategy of expanding the capital base was done through venture capital financing and raising money from the Australian public. In the process, Cochlear Property took money from venture capitalists in the United States in return for a significant but minority interest in the company of below 30% of the shares in return for an investment of $3 million. After that Cochlear Property moved on to sell its shares to the Australian public targeting institutional investors. This capital base led to the internationalisation and international sale of Cochlear’s product in different parts of the world.

Critically Analyse the Business Plan or Strategy of the Company

            Business plan is about the operations and marketing strategy of a company for the production and sale of goods and services (Pinson, 2012). Business plan involves the identification of a business strategy and an action plan (Bernus et al, 2012).

            “Strategy is defined as the determination of basic long-term goals and objectives of an enterprise” (Slolt, 2012, p1). Strategy is a long -term plan formulated by top level management for the entire organisation (Karami, 2012). Strategy is responsible for formulating dynamic decisions about critical elements of a business (Langabeer and Hapiewocki, 2010).

 The business model of Cochlear Property seem to have three basis:

  1. Specialised research into hearing technology;
  2. Business model to commercialise the technology;
  3. Internationalisation of the business.

            Cochlear has the competency in research into hearing technology. They specialised in the research and found ways of studying and evaluating this and improving it. From this, the company built the technological infrastructure to their hearing aid. And since then, Cochlear Property has sought to continuously improve their technology and systems.

            The company has also developed a technology for the sale and commercialisation of the hearing aids. This was done through the sale to Australian hospitals and other entities that provided hearing aids to people in Australia. This helped the company to build a sustained service that could keep the business solvent.

            The third component of the strategy involved the international sale to particular markets around the world where people needed the technology. This expanded the market and provided high levels of revenue to Cochlear Property. This globalised the company and made it an international entity with very lucrative ventures of earnings.

Explain the Companies Primary Innovation

            “Innovation consists of the generation of a new idea and its implementation into new products, process or service, leading to dynamic growth of the business (Urabe et al, 2008, p3). Shavinina (2009) stated that innovation relates to new ideas that are commercialised and made accessible to people in different parts of the world.

            Cochlear’s core strategy involved the creation of implantable hearing devices. This is a technology the company spent years to develop in the 1970s. This technology is implanted in the human ear and enables people to hear. This is done through a surgical process.

            The commercialisation of the innovation is based on the fact that the company owns the patent to the technology. And this gives it a unique right to a source of competitive advantage and unique authority in the area of hearing abilities and hearing devices. The technology provides hearing aids and hearing opportunities to people who are destined to live as deaf people.

            The technology’s success is in the fact that it provides a solution to a small niche. However, the people in this small niche of society really need the device as it adds up significantly to their lives and makes major changes to people’s social and cultural lives.

Case 2: Federal Express

            Federal Express is a major global entity that provides major services including cargo services in the United States of America. The firm started and led the market of commercial cargo and freight matters in the United States. As it became successful, it was moved to different parts of the world, with a particular focus on the Chinese markets.

Why has this Company Succeeded or Failed so Far?

            Federal Express and its airfreight and cargo branch was successful from its earliest years and it has remained successful to-date even in the face of major competition and numerous new entrants. Fedex’s success is about the country’s leadership role in the industry. And due to this, it has become a major player in the airfreight and cargo industry.

            The company’s success is centred on its role and position as a market leader in the United States, China and different parts of the world. A market leader is a firm with the largest market share or sales revenue in a given industry (Lindgreen, 2012). Market leadership makes an entity the controller of the industry since they dictate the pace for other entities (Mueller, 2010).

            Fedex is a market leader and this is because it entered the industry long before other people entered it. It pioneered the idea of moving freight within domestic routes through aircrafts. This was not the case in the 1960s. This is because in that era, humanity had been used to using ships to transfer things across continents and also use railways to transport cargo and other logistics. In that period the aeroplane was used only for passenger conveyance and for military purposes. However, the founder of Fedex dreamt of the idea of moving goods and services within the United States and beyond through aeroplanes.

            Thus, they entered the market in the 1970s and hired planes to convey goods that needed to be transferred in less than 24 hours. Thus, they hired planes and conveyed people’s cargo at a cost plus profit. This gave Fedex a leadership posture and when things got liberal, they purchased their own aircraft fleet and conveyed things for passengers. This made them pioneers and market leaders. They have held to that leadership by pioneering in foreign markets around the world.

What do you Consider to be the Key Reasons for this Company’s Success?

            The key reason for Federal Express’ success as an international or global entrepreneurial venture is that it is a pioneering entity in an industry that no one had entered in the past. The industry was opened and there was so much opportunity in the industry. So pioneering in the industry made Fedex a leader.

            Fedex started in the United States, a country with a natural market for freight services and logistical support. This is because the geographical layout and the administrative division of the United States to separate federal units and states. The vast division of the United States and the freedom of movement of goods and services between the states made it inevitable for goods to be moved from one point to the other. This therefore created a fertile ground for the growth of an entity like Fedex.

            When Fedex started, it was a very modest entity. This is because the airline industry of the United States was highly regulated. This means the company had to only hire aircraft in order to distribute their orders. However, when the US government deregulated their airline industry, they could acquire planes of their own. And it became apparent that with America’s global leadership, other nations would move onto the path of deregulation.

            Fedex moved into Europe and then to China in 1984. In Europe, Fedex was able to become a market leader since it was a pioneering entity in Europe too. In China, they had to work by hiring Chinese aircraft and other things that was in sync with the Communist government’s needs and expectations.

            Although China delayed in deregulating its airline industry until 1994, Fedex was already in the Chinese market and they were able to consolidate their hold and build a major freight and cargo entity in the mid to late 1990s. The strength of Fedex in China lies in the fact that Fedex led the logistical service when European Union and American entities entered the Chinese market. This is because the leading freight services in China were local. And hence, they were not able to meet the expectations of the American and Europeans who entered China to trade.

            Fedex took the Chinese market by offering services that the European and American entities were used to. Fedex was able to provide reliable and more flexible services for the international entities and hence, became the most important freight service provider in China. Different niches were opened in Africa, Asia, Latin America to convey cargo from the United States.

Were the Skills and Resources of the Company Sufficient?

            Yes, the skills and resources of the company was sufficient for each stage of the expansion of Federal Express. The company built competencies in the United States of America. And it was only when things were alright that they exported their services to different parts of the world.

            The capital base of Fedex was formulated through venture capitalists and this led to the building of a strong capital base that was grown gradually. With competency in the United States, Fedex moved to Europe and then to China.

            By the time Fedex got to China, it had a team of very experienced staff members with strong skills and competencies. As it operated, it brought in a few American managers who helped their Chinese counterparts. With the expansion into China, other European and other managers were brought in to assist in the growth and expansion of the company into the Chinese grassroots. This made the company a successful entity. The essential staff and capital base of Fedex was always sufficient to deal with the expansion needs and expectations of the company.

Discuss the Entrepreneurial Steps in this Company’s Path to a Successful Venture

            The entrepreneurial steps used by Fedex was somewhat straightforward. First of all, they began in familiar territories and terrains in the United States. The founder sought to build the entity in the local American market of the north-east. However, when it grew and became a credible business, different markets and hubs were identified deep into the United States. In the next few years, Fedex got markets in all states in the United States.

            After Fedex’s success, it moved to Europe where it sought to provide services to parts of the European continent with history of US army presence. They used the old routes to establish trading hubs throughout the most important European nations and this led to the capture of a major market in the Western world. This led to entry into the Pacific region of Australia and Japan.

            As the experiment proved worthwhile, the Chinese market was secured alongside other markets in the developing world. When China proved to be lucrative, they lived on albeit with a modest outlook. After deregulation in China, Fedex sought to expand its scope by provide specialised services to American and European entities seeking to enter the vast Chinese market. This led to the growth of Fedex in China which is now an important market. Describe the main entrepreneurs attribute and behaviours.

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