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FedEx is the world's largest express delivery and ground small-parcel delivery. Its less-than-truckload freight delivery, supply chain management, customs brokerage, trade facilitation and e-commerce Solutions Company with more than 145,000 employee's worldwide and delivering more than 3.2 million packages daily. FedEx commands a fleet of 634 aircraft and more than 42,500 vehicles. It offers various international packages and document delivery services to 214 countries. It also offers international freight services and commercial and military charter services. FedEx Group acquired Kinko's, Inc on 12-Feb-2004. Nowadays it provides document solutions and business services which including copying and printing services, signs and graphics, videoconferencing, high-speed wireless and wired Internet access and computer usage.
FedEx is very well known for its tagline of "when it absolutely, positively has to get there". FedEx was founded in April of 1973 by Fred Smith. He incorporated such management principles that have made FedEx an overnight success. These principles have made FedEx employees show unprecedented dedication not only to their work but also to their company. Federal Express Corp. distributed an approximate $20 million Special Appreciation Bonus to nearly 90,000 U.S. operations employees in recognition of their extraordinary efforts on August 20, 1997. It's no idle boast to say that they are a family.
One reason FedEx is a corporate leader is it's an organization filled with individual leaders. Indeed, the company has designed the process by which it turns rank-and- file employees into middle managers (and then senior leaders) with as much creativity and attention to detail as the process by which it sorts packages in its Memphis hub.Â
FedEx has the strength of dependable know-how in the delivery business with more than three decades of experience in providing logistics services to individuals and fellow businesses. FedEx changed the nature of delivery business by reconfiguring outbound logistics (a primary activity) and human resource management (a support activity) to originate the overnight delivery business and creating value in the process. Understood that customers would value not only overnight deliveries but also the ability to track them, FedEx developed a proprietary computerised tracking system called Customer Oriented Services and Management Operating System, or COSMOS (Hitt, Ireland & Hoskisson 2003), which introduced computer technology to the shipping industry in previously unheard-of ways and permanently altered the nature of competition within it. The company, over the years, had also invested heavily in IT systems, providing them with a powerful technical architecture that had the potential to pioneer in Internet commerce.
Rising Prices: Federal Express' prices are above their competitors'. This can be a weakness if their customers do not perceive a difference between Federal Express and its competitors' services.
Labour Disputes with Pilots:
FedEx Pilots Association has been formed by Federal Express pilots. This organization demanded changes in the pilots' salaries, retirement benefits, and the fact that Federal Express outsources some foreign flights instead of giving their own pilots the job. The pilots have a Web site where all the news are posted and feelings are discussed. The pilots threatened to strike during the busy Christmas season in 1998. Federal Express and the FedEx Pilots Association have developed a tentative agreement, which is published on the pilots' Web site. However, the pilots do not believe this agreement fully meets their expectations. This particular dispute is definitely an internal weakness for Federal Express, considering they have 3,500 pilots employed with them. Their operations would suffer if there were strikes. Federal Express took the extra 800,000 shipments a day when UPS employees went on strike in 1997. If Federal Express employees went on strike, their competitors definitely could gain an advantage.
Â Â Â Â Â Opportunities
Â The firm's main opportunity is to use cooperative strategies to create value for a customer that exceeds the cost of constructing value in other ways (Desarbo, Jedidi & Sinha 2001). Also to establish a favourable position relative to competition. Living examples are the two that FedEx already engaged in. In an alliance between the firm and the U.S. Postal Service (USPS), the company roughly transports 3.5 million pounds of USPS packages daily on its planes and is earning FedEx more than $7 billion - $6.3 billion in transportation charges and $900 million in drop box revenue in the seven-year deal with USPS (Ulfelder 2001). Another alliance was with worldwide professional services firm KPMG, which intent is to deliver total, end-to-end supply-chain solutions to large and mid-sized companies. Another opportunity seen for FedEx is the opportunity to take advantage of the recent development.
Â Their main competitor in their line of business is UPS. The two companies compete directly against each other in several product categories, and are locked in fierce battles to dominate not only package delivery but e-commerce and logistics markets as well. Although competitive actions and competitive responses take to build or defend a firm's competitive advantages and improve its market performance (Hitt, Ireland & Hoskisson 2003),
The presence of this tough competition, its sometimes detrimental to the growth of the firm. In FedEx's case, they were caught off guard by UPS when the latter use dits internally generated technology skills to offer e-tailers a multitude of shipping options and prices. Though both firms help customer better utilise information to track and ship inventory, UPS is pulling ahead of FedEx (Haddad & Ewing 2000). Federal Express' other competitors include: United Parcel Service, Airborne Express, Emery Worldwide, DHL Worldwide, BAX Global, and United States Postal Service. The market share each of these companies hold is shown in Figure 3 on Page 2 of the Appendix. Federal Express holds 46.5 percent, the largest portion, with UPS and Airborne Express as the largest competitors. As shown from the preceding information, Federal Express is clearly a large, strong, and growing express transportation company.
Rising fuel prices could also severely impact upon the company's net income
Porter's five forces analysis:
As we can see above that the company is facing a very tough time with its existing competitor ups so analyzing it from the porter's framework we can say that the company is going through a high threat of competition from the existing competition and can harm its market share covering the maximum market share.
As demonstrated by the constant battle between FedEx and UPS, established players in shipping service industry complete rigorously for a market share, the company who responses first to the constantly changing environment wins. Established companies have to strive for continuous improvement in quality, lowering price, and innovation. There is very low switching cost for consumers in this industry making rivalry even more intense. In addition, intense rivalry is also due to the fact that maintaining the infrastructure of an express delivery company presents an exit barrier due to high fixed costs.
Based on the company history, company analysis, industry analysis and performance analysis, we have the following recommendations for Federal Express. Ensure that the employees, especially pilots, are well compensated. Since Federal Express is a service company, employees are critical to its success. Place pilots' salaries at or above the industry average. They need to maintain a strong presence on the Internet, in case of a shakedown, and find ways to make their e-commerce user-friendly and profitable. They need to keep prices within 10 % of their competitor's prices, or make sure that their customers view their service as worth the price.
Â Owned by Frederick W. Smith, the company was incorporated in June 1971 and officially began operations on April 17, 1973, with the launch of 14 small aircraft from Memphis International Airport. It soon entered its maturing phase in the first half of the 1980s and grown to become the largest operating company in the FedEx family, handling about 3.2 million packages and documents every business day. During the fiscal year 2006, it netted a revenue of $21.4 billion (includes FedEx Trade Networks) and is currently employing more than 139,000 employees worldwide, serving in more than 220 countries and territories and 375 airports worldwide. David Bronczek is the current President and CEO of the well-known express transportation company. Since its inception, FedEx had transformed itself from an express delivery company to a global logistics and supply-chain management company.
From the above discussion it is very clear that the company is going through a lot of competition and problems but instead of all these the company is acquiring a good position in the market and have a lot of scope to develop.
The company needs some changes and have some limitations also but instead of it, it is in a good position and is developing, the company is facing very tough competition and is in a hyper competitive position but still it is surviving facing all the competition.
The company have a fear to lose its market share to its competitors and is in a position of cut throat competition so it should focus on its strategies properly in order to maintain its position.