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Case 1
SEPTEMBER 5, 2016
ANDREW WILKERSON
CIS410-01
Burlington Northern Andrew Wilkerson
Burlington Northern Railroad is a railroad transport company that is trying to decide the
best route for the company to take in order to maintain long-term success. Upper management
have been trying to decide whether to invest in and implement a new automated railroad control
system, named ARES (Advanced Railroad Electronics System). The benefits this system would
provide include increased performance of daily operations, a more reliable scheduling system to
help with delivery times, and better control over Burlington Northern’s assets. However, the
price tag that comes along with this system is not cheap (around $350 million) and the company
already has a decent amount of debt. This is a very risky decision for the company to make. This
case analysis will include a Five Forces Analysis, an Industry Competitive Analysis and a
recommendation of what the company should do with the readily available information.
The company’s primary mission is to provide safe and profitable rail operations. This
mission allows Burlington Northern to increase profits, thus allowing them to compete with
Union Pacific, their biggest competitor in the market. This business is driven by the high demand
need to transport large quantities of items over long distances. This includes coal, agricultural
commodities, industrial products, intermodal, forest products, food and consumer products, and
automotive products. Coal represents about one-third of the Burlington Northern’s revenue,
therefore making it the largest source of revenue for the company. (Cash, 1994). The ARES
system would definitely help Burlington Northern stay ahead of the curve and increase
efficiencies in areas that they need to improve, such as scheduling and asset utilization.
Burlington Northern is based on a Cost Leadership generic strategy. This describes a way
to establish competitive advantage over the marketplace, by attempting to have the lowest cost of
Burlington Northern Andrew Wilkerson
operation in the industry. This can normally be achieved by efficiency, size, scale, scope, and
cumulative experience. Firms that normally have the most success in cost leadership often have
This strategy fits because Burlington Northern is looking to increase efficiency and has the
The main problems that plague Burlington Northern are organizational. They include:
Human errors
The organization has a basic set of stakeholders. They include Burlington Northern’s
Competition:
Burlington Northern Railroad faces competition from two separate entities: similar
railroad companies such as Union Pacific, and the transport trucking industry. Trucking
companies tend to be more convenient due to roadways being more accessible than railways. The
Burlington Northern Andrew Wilkerson
trucks work more as a Just-In-Time production system, and can travel the same amount of
distance in just a matter of days. While other railroad companies have attempted to utilize new
technology such as double tracks and fuel-efficient engines, conclusive evidence of competitive
benefit is still lacking. Coal and grain remain the biggest revenue generators, and thus Union
Pacific and other railroad companies remain the biggest competitors, but trucking is providing a
viable alternative.
Substitutes:
The primary substitutes for trains and railroad companies would be cargo trucks, semi-
trucks, and air transport. All these substitutes can be more efficient and productive if utilized
correctly. Roadways and airspace are much easier to share and maneuver multiple deliveries
upon. However, the amount each train is able to transport with each delivery still outmatches
Suppliers:
Burlington Northern’s primary suppliers come from the amount of resources that they
ship. This is due to the exclusiveness of how coal and other products are transported. Most
companies that mine coal and other minerals have long-term contracts with these railroad
companies to ship their product, so this section of the market is pretty closed off to other types of
invaders. The company also changed the marketing of grain transportation through their
Customers:
Burlington Northern Andrew Wilkerson
The main customers Burlington Northern has include the coal companies (residing in the
Powder River Basin), agricultural providers/farmers in the Midwest and Great Plains, industrial
producers, lumber, and consumer goods. If Burlington Northern was to implement ARES, they
could gain leverage by offering a higher quality of service due to their increased sustainability
and efficiency.
New Entrants:
Burlington Northern Railroad was a merger of four different railroads in the 1970’s, and
remains one of the few competitors in the market. Because massive railroad systems cost an
unbelievable amount to construct and maintain, along with the difficulty of sanctioning land to
utilize, new entrants to the market are not likely. Trucking is more lucrative to enter and has a
substantially lower initial cost of entrance, so more potential entrants decide to go into the
Courses of Action
There are a couple of different courses of action that Burlington Northern could take.
They include:
correctly, including improving service to their customers and cutting costs in staffing.
Employees and managers could potentially lose their jobs with the new and improved
scheduling system, but the remaining employees may benefit from having a less
stressful job. The Burlington Northern customers would receive greater quality of
2. Merge with another company. The partner choice would have to be planned out
carefully, but maybe branching into the trucking industry would provide extra
benefits to the long-term success of the company. Sharing the costs for the new
system with a new partner would be less money out of pocket, but Burlington
Northern would still see the same benefits from the better system. A reduction in staff
would be imminent. Customers would still see the increased reliability and
3. Do nothing. This approach would maintain the company’s status and operations.
They would not see any increase in revenues, and the employees would likely
My normative recommendation would be to do nothing. The reason why I chose this course of
action is that the proposed benefits do not outweigh the costs, nor are the benefits guaranteed in
any way. Implementation of this system is a critical, if not the most difficult, stage of this
proposal. The perceived benefits from this system are based on the assumption that the
implementation of the system went flawlessly, and every employee was able to utilize it to its
fullest extent in order to see the greatest return on investment. This is just not likely to happen,
especially when trying to implement new technology into an “old faithful” type of organization.
It’s obvious that there is room for improvement at Burlington Northern, but going with
the shiniest and newest technology may not be the best solution. Five steps that Gareth Morgan
outlined in Images of Organization that may help include: shifting all responsibility for the
organization of work from the workers to the manager; using scientific methods; selecting the
best person for the job; training the worker to do the work efficiently; and monitoring work
Burlington Northern Andrew Wilkerson
performance. They need to utilize what they have first, before they move on to something
different.
Burlington Northern Andrew Wilkerson
Works Cited
Cash, et. al. Building the Information-age Organization: Structure, Control, and
Goldratt, Eliyahu M., and Jeff Cox. The Goal: a Process of Ongoing Improvement. Great
Morgan, Gareth. Images of Organization. Beverly Hills: Sage Publications, 1986. Print.