FedEx Corporation
Strategic Management Project
Prepared for:
DR. Robert Ch. Wood
BUSINESS 189 – Strategic Management
Prepared by:
SAN JOSE CONSULTING GROUP:
Billy CRANE
Brad LANDTHORN
Bob MIRI
Jeremy RELPH
Chris SANCHEZ
Andrea VERNEROVA
December 9, 2003
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TABLE OF CONTENTS
EXECUTIVE SUMMARY ……………………………………………………………… 3-5
Chapter I: HISTORY ……………………………………………………………… 6 -9
Chapter II: EXTERNAL ANALYSIS ……………………………………………….9-15
A. Industry Life Cycle
B. Industry Dynamics
C. Porter’s Five Forces
D. Global Competition
E. National Context
F. Opportunities and Threats
Chapter III: INTERNAL ANALYSIS ………………………………………………16-23
A. Competitive Advantage
B. Distinctive Competencies
C. Strategies
D. Four Building Blocks
E. Strengths
F. Weaknesses
G. Image
Chapter IV: BUSINESS-LEVEL ………………………………………………………23-28
A. Business Level Strategy
B. Issues in Differentiation
C. Targeting Customer Needs
D. Market Segmentation
E. Differentiation of Quality
F. Differentiation in World
G. Advantages of Differentiation
H. Impact of Strategy
Chapter V: VALUE CHAIN ……………………………………………………… 28-34
A. Value Chain
B. Product Technology
C. Impact of National Context of Industry
D. Response to Differences Among Nations
E. Global Dimensions of Strategy
Chapter VI: CORPORATE-LEVEL STRATEGY ………………………………………. 35-41
A. Fedex Corporation
B. Express
C. Ground
D. New Offerings
E. Horizontal Integration
F. Vertical Integration
G. Fill in the Blanks, H. White Spaces
I. Premier Plus 10, J. Mega Opportunities
REFRENCES………………………………………………………………… 42-44
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EXECUTIVE SUMMARY
During one of his two combat tours in Vietnam, Federal Express CEO Frederick Smith got
a quick lesson in survival from a crusty Marine sergeant. “Lieutenant,” the sergeant told Smith,
“there’s only three things you gotta remember: shoot, move, and communicate.”(Fortune, Nov.
1997)
Some thirty plus years later, and at the helm of one the shipping industry’s largest
competitors, Smith has utilized that same tactical advice in the business world. His maneuvering
of FedEx has incorporated an aggressive shooting strategy as the company has emerged into
numerous shipping regions around the world such as Asia, and furthermore, FedEx continuously
has been pursuing and developing a solid foundation and infrastructure for the company and its
future. One example is the addition of a new hub in the Philippines, at Subic Bay. His movement
has guided the company to innovate its products and develop with the needs of its customers.
Finally, the use of communication has emerged as one of the company’s greatest competencies,
not only with customers, but internally as well. “FedEx has always been a technology trailblazer,
and the success of fedex.com is testament to that.” The company was one of the first to harness
the power of the Internet, launching its Web site in 1994 with a bold new package tracking
application one of the first true corporate Web services. Soon after, FedEx became the first
transportation company with Web site features that allowed customers to generate their own
unique bar-coded shipping labels and request couriers to pick up shipments. FedEx Ground is
taking advantage of the wireless LAN technology by expediting the movement of shipping
information from delivery workers’ terminals to a central database.
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It is with these tactics along with FedEx strong competencies and worldwide
infrastructure, which will be discussed in further detail hereafter, that will foster the companies
success and eventual competitive advantage in years to come.
FedEx provides many benefits to its customers. The shipping industry, however, is one of
extreme competition. Not only are customers confronted with the choice of carrier, they are also
confronted with a choice of means of shipment. It is further complex, as the pricing strategy of
the sector has companies, for instance, who lead cost in one form of shipment such as ground and
follow in another form of shipment such as international delivery.
FedEx foresaw the importance of differentiation early on, as did most of the sector players.
FedEx realized that it was in the information business. Customers are not only concerned with
the product getting from point A to B, but further, are interested in the knowledge of where the
cargo originated from, its present whereabouts, destination, estimated time of arrival, price and
cost of shipment. All these elements are just as important to some businesses and consumers
as receiving a safe delivery. To support this need, and differentiate itself from competitors,
FedEx created state-of-the-art technology for customers to track and validate shipments.
Shipments are virtually traceable from their origin to their destination all with the convenience
of the personal computer. Additionally, FedEx has forecasted the important strategic trend of
a continuously global shipping market. The differentiation of products is a continuous process
in this competitive industry as innovations are often quickly imitated. FedEx strives to
develop innovations and listens to customers wants and needs.
Further meeting the needs of customers worldwide, the company has invested extensively
in global infrastructure. Fedex connects some of the most important areas of the world that make
up 90% of the world’s gross domestic product, some of the new hubs were built in the Philippines
at Subic bay and in Europe at Charles de Gaulle, in Paris. Particular emphasis has been placed on
gaining a strong presence in the spawning Asian market. Countries such as China, which had
been predominantly exporting countries, are now large importers of goods from all parts of the
World. Since 1984 they have expanded service to over 300 cities within China.(Business Source
Premier)
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It is with this keen sense of “the big picture” that FedEx finds itself without a current sustained
competitive advantage within the shipping industry. The Fedex return-on-equity percentage of
10% falls far below the industry average of nearly 20%. The company has invested heavily in
aircraft and development of strategic worldwide airline hubs. In 1997, FedEx foresaw the
opportunity of Internet commerce and its implications on the shipping industry. It is this same
intuition that we at the San Jose Consulting Firm believe FedEx is positioning themselves as
the future leader, with sustained competitive advantage, in the international market of the
shipping industry.
The extensive infrastructure and resources FedEx has compiled are quite impressive. The
company has added several optimum hubs, the Euro One Hub in Paris, the Asia One Hub at Subic
Bay, and the new Iraq hub to increase the reach and accessibility in blossoming new economies
and manufacturing locations. This infrastructure, coupled with FedEx’s continuous innovations
and fulfillment of customers needs, is what will create continued success, and eventual sector
competitive advantage in the years to come.
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Chapter I: HISTORY
Key events and dates in the history of FedEx Corporation.
(In italics: the entry of FedEx’s major competitor, UPS Corporation.)
1907 – UPS created by Jim Casey as the American Messenger Company in Seattle, Washington.
1953 – UPS resumes air operations. Blue Label Air provides two-day service to Chicago, Detroit,
and several major cities on the east and west coasts.
1957 – UPS serves areas of five states within 150-mile radius of Chicago.
1971 – Federal Express Corporation is founded in Little Rock, Arkansas.
Frederick Smith realized the tremendous need for one to two day package and air-freight delivery
that was better than the current distribution system.
1973 – Federal Express relocates operations to Memphis, Tenn.
On the first night of continuous operation, 389 Federal Express employees and 14 aircrafts deliver
186 packages overnight to 25 U.S. cities — and the modern air/ground express industry is born.
1975 – Federal Express installs the first Federal Express Drop Box.
1975 – UPS forges “Golden Link,” becomes first package delivery company to serve every address
in the 48 contiguous United States.
1977 – After two years of lobbying led by Federal Express, Congress passes Public Law 95-163
enabling FedEx and other cargo airlines to use larger aircraft with no geographic restrictions on
routes.
1977 – UPS provides air service to all 50 U.S. States
1978 – Federal Express Corporation is listed on the New York Stock Exchange; ticker symbol is
FDX.
1981 – Federal Express introduces the Overnight Letter.
Federal Express begins international delivery with service to Canada.
Federal Express opens its Super Hub adjacent to Memphis International Airport.
1981 – UPS purchased first aircraft for use in air delivery service.
1983 – Federal Express becomes the first U.S. company to reach revenues of $1 billion without
merger or acquisition.
1984 – Federal Express acquires Gelco Express International and launches operations in Asia
Pacific. The first PC-based automated shipping system, later named FedEx PowerShip®, is
introduced.
1985 – RPS Inc. (now FedEx Ground) is founded in Pittsburgh, Pa., and introduces bar code
labeling to the ground transportation industry.
1985 – UPS started international air service between U.S. and six European countries.
1986 – Federal Express introduces the SuperTracker®, a hand-held bar code scanner system that
captures detailed package information.
1989 – Federal Express purchases Flying Tigers to expand its international presence.
1990 -Federal Express becomes the first company to win the Malcolm Baldrige National Quality
Award in the service category.
1990 – UPS – first scheduled flights to Asia on UPS aircraft.
1992 – UPS – electronic tracking of all ground packages begins.
1992 – UPS is delivering to more than 200 countries and territories; delivering 11.5 million
