Laura Ashley and Federal Express Strategic Alliance
Laura Ashley is a global clothing and furnishings retailer based in the United Kingdom. They have grown at a very fast rate from operating 231 retail stores in 1986 to 481 stores in 1990. Unfortunately, its profits were not increasing as expected due to the inefficiency of its logistics management. There was an over dependence on in-house manufacturing, SBUs operated as stand-alone businesses with independent inventory and systems which means duplicated systems that are not integrated, and dysfunctional distribution operations such as outdated inventory ordering methods and inefficient movement of goods along the supply chain. Based on these problems, Jim Maxmin decided to form an alliance with Federal Express BLS, to let them handle the logistics of LA's business since that is what BLS does best, while at the same time also benefiting Federal Express.
The contract between LA and BSI for the strategic alliance was not your typical contract with specific rules, price, penalties, etc. The alliance was a "win-win business partnership," with no defined end point and lasting at least for 10 years. The contract had a very relatively loose structure, and it was based on trust and focuses on areas of mutual interest. There were no specifics on defining issues since it may conflict with the mutual interest that this alliance is based on. Both sides have agreed to be transparent and share information with each other, and have mechanisms built in to deal with matters that could not be agreed upon.
When it comes to forming a strategic alliance, this kind of contract is good because it is based on a high level of trust and the focus of mutual interests, to help each other gain competitive advantage in the market. Trust is very important in every relationship, even in business. Also, having a loose structure makes more sense in a fast changing environment because specifics changes over time. In other words, the...
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