Powell Logistics Inc Case Solution

2. Problem Statement

After a thorough analysis of the case, the problem statement for Powell Logistics Inc. has been identified as follows: “The intense competition and rising costs in the trucking industry of the United States and Canada are causing a serious dent in the performance of Powell Logistics. This is also depicted in the financial statements of the company for the year 2007 when compared with the previous year. Hence, John Powell, president and founder is worried about the future of the company and needs to make a strategic decision which would impact the company in the long-run.”  

For this purpose, a few strategic alternatives are available to John Powell, which are discussed and critically evaluated below. The trucking industry had been an important part of the U.S. economy, especially since way back in 1965 when the index calculation of the trucking industry was made part of the overall U.S. business index calculation (Long, 1968).

3. Strategic Alternative 1

One of the strategic alternatives that John Powell is considering is to expand the company and retain his and his family’s control of the company. Expansion seems a reasonable option to the president as currently the company is heading to a stale position and needs to be revamped. However, expansion plans would burden the company with a heavy investment at a time when the company’s profits and earnings have declined compared to the previous year.

At the same time, the benefits that expansion would bring must be taken into account. With a required estimated investment of $10 million for land and construction of the facilities, Powell Logistics would be able to gain hefty annual savings in administrative salaries, and labor and transportation costs. Moreover, having one central facility would help the senior management and employees stay focused and save time for the important work. A lot of small costs would also be cut down, for example, paying overtime to the drivers.  

This alternative is, however, dependent on economic conditions prevailing in the U.S. and Canada. Research shows that there has been increasing uncertainty in U.S. economic policy and unpredictability. This also affects the Canadian economy’s stock market performance (Sum, 2012).

4. Strategic Alternative 2

A second alternative that was available to John Powell is to sell the company as per an offer made to him recently. Perhaps John had not thought about selling his family business before this offer. Now, even if John does not decide to sell the company to the current bidder, he can explore other investors to get a better deal. Selling completely is not the only option that John Powell should consider; he should look to form mergers with competing firms as mergers are a useful option for many organizations and provide benefits to the existing workforce, as well (McNeil, 2010). Since Powell Logistics Inc. has a long history of a good reputation and useful trade links, a successful merger with a key competitor is likely, such as with Travelers Transportation Services or Yellow Transportation. This would help to retain some control of the business by the Powell family as opposed to selling the company.

5. Strategic Alternative 3

Another alternative that the president and founder is considering is to step down and hand over the business completely to his family. However, this alternative itself has two further options: John Powell should get into the succession plan in the current state of the company; that is, without any expansion plans; on the other hand, Powell could serve the company directly in the capacity of the president for two more years while heading the expansion plans, as well. Once the necessary expansion has been made in a period of two years, and he believes the company has been put on a somewhat right path again, he can then step down as the president of the company.

However, continuing to run the company with only his family members in top positions would not fare too well with other staff in the company. The company has been there since fifty years and other staff members must have also contributed to the success of the company. If John Powell plans to handover the charge of the company to his family without any further succession planning for other staff members, the implications of such a strategy would not be healthy. The employees will feel discriminated against and stay de-motivated. However, research shows that family-run businesses have produced good sales and profits for some companies in the past (Brannon, Wiklund, & Haynie, 2013).

Another question arises that if John Powell decides to go with this succession route, which of his children would be the most suitable choice to head the company? The second son, Ryan Powell, who has been with the company since 1984, seems the most logical and unbiased choice. Ryan has had the oldest association with the company amongst family members. He currently holds a very important position of national sales manager and has led the company into fruitful price negotiations and strong customer relationships. He has contributed to the company by building a solid network of customers and deserves to lead the company as the new president.

6. Recommendation

After considering the three strategic alternatives above and presenting their analysis, it can be concluded that the most logical and reasonable alternative is the expansion plan of the company, that is, Strategic Alternative 1, along with Strategic Alternative 3- passing the ownership to the children. There are reasons to support this claim. Firstly, Powell Logistics Inc. is a family affair and the business is in the roots of the Powell family. They have been the custodians and well-wishers of the company throughout its fifty years of being in business. Hence, the association, attachment, and sincerity which the Powell family would have towards the company as the owners would be unmatched by other employees. For the long-run growth of the company, it would be useful if the ownership stays in the hands of the Powell family who have so far run the company with quite a lot of success. However, as discussed under ‘Strategic Alternative 3’, John Powell should stay firmly with the day-to-day running of the company for two more years and see through the expansion plans before stepping down for his second son Ryan Powell.