Strategic Management - USA Truck

Strategic Management - USA Truck Case Study

Mission/Vision/External Analysis

The company has specializes in commodity transportation in the U.S., as well as in small areas of Canada and Mexico. With its main headquarters in Van Buren, Arkansas, the company has also developed additional maintenance facilities throughout the U.S. According to the company's website, the main objectives for the company have been revenue growth and increasing the company's operating margins. These, in turn, are bound to increase the added-value for the company's shareholders.

There are several important external factors that need to be looked into.

In terms of economic factors, the company is dependant on the general evolution of the U.S. economy. The reason for this is that the more the economy produces, the more products will need to be moved around, so a large part of the U.S.A. Trucks demand is determined by the evolution of other companies in the market.

On the other hand, governmental factors are also important, because they virtually regulate the market that the company is operating in. As such, for example measure that will stimulate businesses, such as decrease in interest rates, allowing for higher credits to be acquiring, will positively impact the company. Further more, corroborated with international and regional factors, the governmental factor is important for the actual border regulation with Mexico and Canada, where part of the company's business is targeted. If governmentally signed treaties ensure an easy passage through the borders, then this will positively impact the company.

The technological remains one of the very important competitive advantages at USA Trucks. One of the reasons for this is the Data Center that the company owns and that is used in payrolls, billing, accounting, as well as maintenance and operational areas. All the programs for this were developed by in-house programmers. The computers are monitored 24 hours a day for 100% functionality.

II. Industrial Analysis:

The company is currently operating in the trucking industry by providing transportation services throughout 48 U.S. states, as well as parts of Canada and Mexico. According to different analysts, the industry is currently characterized by an expectancy as to when the rest of the economy will be picking up. As such, competition is high on the market. Some of the most important competitors for the company remain JB Hunt Transport Services and Landstar System. Both have larger market capitalization than USA Truck, but also higher revenues. JB Hunt can also boast a higher operational margin, with this standing at 11.08%.

III. Internal Analysis (non-financial):

Management

The management has proposed for itself six long-term business objectives, aimed at maximizing company performance. These are to earn the cost of capital, to improve our earnings consistency, to expand the operational margins and the operating ratio, to increase long-term revenue growth, to improve managerial efficiency by increasing the management equity stake and to have a more effective communication policy with the investing public.

A proper and efficient managerial activity also ensures that the company's employees are efficient and that any problems they might have do not destabilize the activity of the company. As such, USA Trucks has set in place several motivational programs to encourage drivers.

The most important of these is the Presidents Million Mile Club, rewarding and acknowledging the drivers that have completed more than 1,000,000 miles. The program is systematized on four different levels: platinum, gold, silver and bronze, to recognize each additional million miles that the driver has completed.

Further more, as another motivational policy, the company encourages drivers themselves to provide feedback on the Internet as to how the company can develop to better help their interests and their jobs.

Marketing

The company is keen to constantly advertise the competitive advantages it has over its competitors, including the fact that it has a large fleet of 53 dry vans, entirely corporate owned (which obviously makes it easier to track). The company has also adapted the slogan "Running with Pride," which, in part, emphasis the company's commitment to fulfilling the customers' requests, notably delivering the products in the right time. The company also provides a free toll phone number where the customers can call, as well as an online tracking capacity.

Operations

The operations are coordinated so as to ensure the company's strategic objectives. The capacity to track the routes online, notably where the products are at a certain point, is a great operational advantage. On the other hand, the company has also entered the truck sales market, offering tractors maintained in good condition to interested third parties.

IV. Financial Analysis:

While the company's base revenue has remained at similar figure in 2006 as in 2005 (around $400 million), the company's net income has dropped from just under $16 million to a bit above $12 million. The growth itself was affected by the decrease in demand, due to the general decreasing trend in the U.S. economy throughout 2006. Further more, the company has not yet managed to fully control costs, which is why this is one of the company's projected objectives for the future, along with margin expansion.

The operating ration decreased from a high of 96.5% in 2002 to 91.1% in 2005, only to rebound in 2006 to 93.1%. Cash flows from operations also increased with up to 34.8% in 2006 (see Appendix 1 for more relevant financial and operating information).

V. Assumptions/challenges/objectives

The challenges for the company are likely to come both from general economic and business factors, as well as from those deriving from the highly competitive and fragmented market in which the company is operating. In terms of the general economic and business factors, things that can raise overall operation costs, such as the increase in fuel price, for example, is something to be taken into consideration. On the other hand, the high competition on the market will ensure the survival only of companies able to provide the best quality services at the lowest prices.