fedex sample

7/27/2019 Fedex Sample

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BSM 6054 STRATEGIC MANAGEMENT

CASE ANALYSIS


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FedEx 5 Geographical Zones

United States

Asia-Pacific

CanadaEurope, Middle East and Africa

Latin America-Caribbean


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General External Environment


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Political/Legal Factors

Deregulation of airline and trucking

industry

Trade deregulation in Asia Pacific

Chinas entry into WTO

Formation of AFTA

911 terrorism, SARS


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Socio-Cultural Factors

Customers expectation are increasingly on

the rise (customer behavior)

speed and reliability

prefer services/products which are world class

quality but modified to suit the local culture and

custom

Increased urbanization


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Demographic Factors

One third of the worlds population is

centered in China & India

Due to wide income disparity within the

country itself, most investments are focused

on the super-cities like Shanghai, Beijing

etc


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Economic Factors

Fierce competition

Rising inflation and fuel prices

High growth in B2B & B2CUS market saturation

Volatility of major currencies (USD , Euro)


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Industry Analysis


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Threat of New Entrants

LOW

Economies of Scale (truck, airplane, global

network)

High capital requirement


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Intensity of Rivalry Among

CompetitorsHigh

Global competitorsUPS, TNT, DHL (with

equally strong resources)

High fixed cost and high exit barrier lead to

aggressive competition


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Threat of Substitutes

LOW

Minimal substitute products available for

physical goods

Only some documents can be sent by Internet,

Email and Fax


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Power of Suppliers

Depend on type of purchases

HIGH

Aircraft

LOW

IT products

Truck

Maintenances and repairs


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Power of Buyers

HIGH

Intense competition in express delivery industry

Low switching cost

More bargaining power for corporate customers

(e.g. Dell Computers, Cisco Systems)


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Competitive Environment Analysis


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Four leading companies in the international

courier business: DHL, FedEx, UPS and

TNT.

Besides global players, there are local

players like PosLaju who provide services

in Malaysia.


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Even though FedEx pioneered the Web-based

package-tracking system, such systems have

become the industrial norm rather than a

competitive advantage today FedEx need to keep up with latest innovations

eg.e-mail tracking, SMS etc

Technology and innovation are the key factors in

gaining competitive advantages



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Establised in 1969. Taken over by DeutschePost World Net in 2002

Euro 39 billion corporation

Under DHL global brandDHL Express,DHL Freight, DHL Danzas Air and Ocean,DHL Solutions

Four market segmentsMail (DeutchePost), express (DHL), logistics (DHL &Danzas) and finance (Postbank)

DHL


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Established in 1907, and has grown into a US$30billion corporation today

The strongest competitor for FedEx in US

Formed a strategic alliance with Open Market,Inc, to design a complete Internet commercesolution in providing integrated logistics andfulfillment

Work with IBM and Lotus to standardize formatson their websites

UPS is more focused on their core business

UPS


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TNT Logistic Approach

Procurement and Inbound Logistic

Manufacturing support

Outbound Logistic and Distribution

Aftermarket Services

TNT


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Environment Trends

&

Attractiveness of External Environment


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Environmental Trends

Globalization

Intensive use of IT and increase adoption of

e-business

Integrated supply chain management

Outsourcing by customer

Strategic alliance and Mergers andAcquisitions (M & A)

Turbulent changes in business environment


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Summary: Attractiveness of

External EnvironmentGlobalization, advancement in IT and

outsourcing trends by customers have

created boundless opportunities for a

company like FedExGlobal networking

Globalization create more needs

Outsourcing of Supply Chain Management

Strategic alliance with local partner


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Strategic Analysis


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Key Success Factors

Lies in the ability to leverage its:

the expertise of its various subsidiaries.

information and logistics (virtual and physical)

infrastructure,

strong strategic alliances with customers and

suppliers.

effective marketing (branding, pricing)capabilities

supply chain management capabilities


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To achieve above average returns by

offering

High quality of serviceaccurate, fast, reliable

Innovative, value added and extensive service

offerings and supply chain solutions.

Competitive prices

Key Success Factors


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Business Level Strategies

Supported by the core competencies of its various

subsidiaries. Mainly focused on:

B2B segment

-corporate clients

-Supply Chain Management services -integrate its

various suppliers and customers.

B2C-FedEx Home Delivery (new e-commerce

residential service)


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Corporate Level Strategies

On 19 January 2000, FedEx embarked on aworldwide reorganization

-Across 5 geographical zones

-Across 6 subsidiariesTo achieve a single branding system with a single

point of access for customers:

Standardized names of subsidiaries -leverage the

FedEx brand name. FedEx Serviceswas formed- hub for the growing

portfolio of independent FedEx services.


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Corporate Level Strategies

FedEx Services

-Combines sales, marketing and technology support for

the FedEx family

-A single sales force cross-sells a wide portfolio ofservices and pricing schemes.

- Provides customers with a convenient, single point of

access to the full range of FedEx services.

-Provides customer service, invoicing, claims andtrace functions

- common toll free number and website www.fedex.com
http://www.fedex.com/http://www.fedex.com/


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Core Competency- Tangible

Financially strong- USD21 billion turnover and operating margin of 6.4%

in FY02

Logistics infrastructure

-Airplanes (648), vehicles (60,000), warehouse(10million square ft), capacity to handle 3.3 milpackages every night and lift capacity of 26.5 milpounds daily.

State-of-the-art information infrastructure- Handles 60 million transactions a day in 1999, savingFedEx the cost of its many customer service employees.

Strong staff (200,000 employees)


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Core Competency- Intangible

FedEx brand name-reputation for speed, reliability and innovation.

Services: overnight package delivery, 10:30 a.m. next daydelivery, Saturday delivery time-definite service for freight,

money-back guaranteesBusiness concepts:express distribution, customer logisticsmanagement , supply chain management

-strong presence and acceptance worldwide.

Intellectual capital-5000 IT personnel with capacity to develop,maintain and upgrade its in-house software and ITinfrastructure.


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Core Competency- Value Chain

Won over 194 awards for operational excellence

since 1973.

First global express transportation company to

receive simultaneous system-wide certificationISO 9001 in 1994

System innovations - COSMOS, Powership Plus

Single point of access, customer service, invoicing

-provides cheaper, faster and more efficient value

added services


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Innovative and creative spirit

-First to introduce various innovative services

Flexibility and vision to shape the industry

Trendsetter -not just to prepare for change but toshape change on a global scale.

All these efforts strengthen and increase the value

of the FedEx brand name- translates to aboveaverage returns and a sustainable competitiveadvantage.

Sustainable Competitive Advantage


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Strengths Extensive use of IT and new technological devices First mover advantagesworld leader in

overnight delivery

Integrated logistic and management servicesprovider

Key partnership with big corporations

FedEx trade namewell recognized

Strong resources


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Opportunities

Globalization and trade deregulation create

new business opportunities

Deregulation of airline and trucking

industries

Outsourcing trends by customers

Continuous growth in B2B and B2C


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Threats

Fierce competition

Innovation is easily imitated by competitors

Terrorism and SARSRising inflation and fuel prices


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Vision, Mission, Objective

&

Strategy Recommendation


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Vision, Mission & Objective

Vision

To become world leader in express delivery andsupply chain industry before year 2020

MissionTo provide quick, reliable delivery of

packages/documents and integrated supplychain management services through innovative

technology, efficient operation, and well-established global network at competitive

prices


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Vision, Mission & Objective

Objective

To increase the current revenue of US$21

billion to US$45 billion and the operating

margin of 6.4% to 9.0% in year 2008


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Business Level

Integrated Cost Leadership and Differentiation Strategy

Global key account management

Key partnerships with major customers

Advance IT devices providing real-time information

Continuous innovations and first mover advantages

FedEx Online

Continuous improvement of organizational operation and cost

reduction program E.g. Spent US$1.1 billion in 2002 for purchase of fuel

Purchasing policy of 2-3 suppliers or use fuel saving vehicles


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Business Level

Market Penetration Strategy

Increase market share by aggressively targeting at

fast developing countries like China and membercountries of AFTA

Reduce its dependence on US market sales (more

than 60%)

Reduce the risk of fierce competition with UPS inUS market


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Corporate Level Restructuring Strategy

Optimize FedEx Express and FedEx Grounds operation

Consist more than 80% of total sales for FedEx

E.g. same pick-up team for customers

Improve synergy among subsidiaries

Leverage the existing resources among subsidiaries

Shared activities, exchange of competencies (knowledge, staffs,

success stories)

Regularly assess the current and new locations for office andwarehouse and take advantage of different time zone in different

countries to shorten the lead time for deliveries


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Corporate Level

Financial Strategy Sell and lease back of aircrafts: 648 aircrafts with value of

US$5.8 billion

Huge fund for business expansion, tip-top condition ofaircrafts, tax advantages, no problem with old aircrafts

Concentric Diversification Outsourcing trend of supply chain by customers is on the rise

Demand Responsive Model

Innovative technology and information system

Part of re-engineering strategy to turnaround the FedExServices into profitability


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Corporate Level

Cooperative Strategy

For minor areas, form JV, partnerships or

subcontract the delivery services to local postalcompanies or couriers to capture the business

opportunities


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