Strategic Transformations At The Fedex Corporation Commerce Essay

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In 1973, FedEx corporation was started, (Standard & Poor,2003)using 8 small planes to provide air express service and initiating the United States arrived the next day door to door air express service, timely, accurately, and the reliably.

In the late 1980s, the manufacturing industry transferred form developed countries to the developing countries, Federal Express, as the first company to recognize this trend, embarked on a massive global expansion.( A. Thompson & Alonzo J. Strickland,2003) To respond to increasingly intense international competition and Challenge, Asia-Pacific branch has emerged.

In the 1990's, M & A(Mergers and Acquisitions) , capital market and other ways to played a great role in the logistics industry, and brought about the birth of the top ten logistics groups. In the face of competition, FedEx Corporation, on the one hand, kept on mergers and acquisitions to expand their strength and scale; On the other hand, reinvent itself with information technology and network technology.

Global Information Infrastructure (GII), although still in its early stage of development, it has had a profound worldwide impact. (Christine L. Borgman, 2003)Expected in the next decade, GII's development will affect every facet of daily life - education, health, work, entertainment. The barriers of time and space will be the past, human beings, as an integral part of the world, will be realized from this profound change. In order to keep its competition, FedEx Corporation combined its business with advanced information technology, improving its own management system according to their business. Meanwhile, FedEx Corporation carried out its e-business platform to contact global users, other e-business specialist suppliers. Federal Express adjusts the information system structure in order to improve its business processes, companies from the traditional terminal/host structure changes to the distributed computing model. At present, FedEx will provide proactive network management, solve the failure before the end-user reports an error. This system has improves the Express ground line and a large number of customers increased to handle more capacity shipped express mail. So the company owns the ability to provide more a wide range of Internet Commerce. FedEx effectively distributed in more than 200 countries, more than 30,000 offices with 11 thousand employees closely linked with the information.

3 Analyzes: Internal, External Environment

3.1 The External Competitive Environment: Based on Five-Force Model

3.1 .1 Porter's Five Forces:

Five Forces was proposed by Model .E.Michael Porter in the early 80s which made a global implication in business strategy far-reaching. (Gregory G. Dess & G. T. Lumpkin, 2003)Used this model can effectively analyze customer's competitive environment and provide the analysis of competitive strategy,(1) Competition among Firms (2) Power of Buyers (3) Power of Suppliers (4) New Entrants (5) Substitutes.Five forces of different combinations will ultimate impact the potential changes of industry profits.

3.1.2 Five Forces: Analysis of The Competitive Statues of FedEx

Substitutes. With increased trade and popularity of e-business, express industry has become an integral part of the national economy and will suffer little threat form substitute products.

New Entrants. Because of the information technology, Express industry doesn't have high barriers, a great number of new entrants entry this field. However, large companies such as FedEx, own great advantages, including advertising, express delivery business development and sales networks. More importantly, the brand personality and consumer loyalty gave potential entrants to set up invisible barriers.

Power of Buyers. Internet has greatly promoted the development of E-business, increasingly number of customers use E-commerce platform. Although there are large number of buyers in the world, but in some areas, such as China, courier services is not a standardized product, demand is of large-scale differences. Because of many express companies and the service is not in place, express market buyers have more bargaining power.

Power of Suppliers. Suppliers affect the development of the industry by means of increasing prices of products or services and decrease the quality of the products or services, as a result, the downstream industry profit goes to decline. Power of suppliers of Express industry come form: the government; the labor force; the technology providers. FedEx may suffer threats from government and technology provider. With internet development, many companies and inter users are concerned about whether the government will impose some additional requirements to the internet. The potential problem areas include: taxes, liability, restrictions on the type of information transmission, standardization of controls, licensing requirements and the level of service provider requirements. Meanwhile, technology provider provides equipment and transportation, information network construction to express industry.

Competition among Firms. FedEx, United parcel service, DHL, Thomas Nationwide Transport is the world's four major express delivery industry giants, meanwhile, other courier companies prosper, peer competition is increasing.(Robert Malcolm Campbell,2002)

3.2 The Internal Environment: Based on Porter's Value Chain Techniques

3.2.1 Porter's Value Chain techniques:

Porter's Value Chain techniques was proposed by the famous Harvard Business School strategic scientist Michael .E. Porter.( John L. Fortenberry & Jr.John L. Fortenberry,2009)In this technique, external and internal value added activities are divided into basic activities and support activities. Basic activities and support activities constitute value chain basic activities; Basic activities are related to production, sales, feeding logistics, shipping logistics, and after-sales service. Support activities related to personnel, finance, planning, research and development, procurement, As enterprises to participate in activities, not every element of activities create value, in fact, only the certain activities truly create value, the real value of the business activities of the value chain is the "strategic sectors". To maintain competitive advantage, in fact, enterprises should to keep certain advantages of the value chain.

3.2.2 Value Chain techniques: Analysis of the internal environment of FedEx:

First of all, services. Because it's easy for competitors to cut prices to compete, FedEx recons that improve service level is the key to long-term maintenance of customer relationships. In 1994, FedEx set up his Web site, including the "customer service line operating system" to provide customers with convenient, fast and efficient service.

Secondly, logistics. Federal Express has a highly efficient logistics. FedEx provides customers with an advanced, integrated logistics management system to build agile enterprise supply chain system. Taking United States ground running system for example, Federal Express delivered about 2.5 million packages daily in the United States, 600 courier collection and delivery of these sites express parcels. Express station operation and management staff run the digital dispatch system and deliver the latest express route schedule.

Thirdly, technology development. Federal Express has a huge technical development team to support enterprises be a huge competitive edge. FedEx launched the "whole is greater than the parts" of the collaboration, (Charles J. Fombrun, C. B. M. van Riel, 2004) intelligent cargo solutions, utilized the Internet break through the industry-wide, physical form and geographic differences. With this connection, a business can take advantage of the resulting strategic resource to attract the other enterprises.

3.3 The Core Competencies and Capabilities:

Value chain analysis is to determine the core competencies; it inquires the companies pay close attention to the state organization's resources, special attention and training business in key value chain to gain important core competencies. Based on Porter's Value Chain techniques, it is necessary to identify the core competencies and capabilities which brought about strategic transformation at FedEx Corporation between 1973 and 2000.

Firstly, long-term maintenance of customer relationships. Fred. Smith, the founder of Federal Express had a famous saying, "want to dominate the market, the customer must first follow your heart away, then let the customer's purse to go with you." (Michael D. Basch, 2002)Because it's easy for competitors to cut prices to compete, FedEx recons that improve service level is the key to long-term maintenance of customer relationships. Over the years, for its reliable service, Federal Express won a good reputation from customers. Federal Express also attaches great importance to customer relationship management. As a service business, customer service management is one of the most important areas for Federal Express.

Secondly, technology innovation. Each value activity includes techniques. Technology supports the entire value chain. In recent years, to build core competence, Federal Express put a lot of investment in technology integration, through the integration of advanced technology to maintain technology leadership. For example, in 1973, Federal Express applied the "axis wheel - axle" mode n its logistics management. In 1984, Federal Express developed the first PC-based automation transport decency. In 1996, FedEx introduced FexdEx Internetship, allowing customers to network processing package. In 2000, FedEx launched a new client technology revolution and developed the Federal Express building e-commerce platforms. These innovations have brought the FexdEx Company a huge competitive advantage.

Thirdly, Multicultural. Federal Express has its own culture, but also contains a variety of local cultures. In the super-center stations, local culture show one kind of culture as concept of time; in software development laboratory and logistics services, local culture show one kind of culture as innovation and creativity; in line, local culture show one kind of culture as emphasized customer satisfaction. FedEx's culture is effective because it is closely linked with business objectives, namely to provide high quality to serve the customer.

3.4 The Main Advantages and Disadvantages of International Trade to FedEx Corporation

3.4.1 Advantages:

First of all, perfect international routes' system. Federal Express owns a wide coverage, time to reach international line system. So it is able to provide many independent transportation services while other major competitors are hard to reach. International routes of FedEx Corporation can reach the most remote state, so that Federal Express has a very favorable competitive advantage.

Secondly, international networking. compared with the United States other air transport companies, FedEx has a license to serve in many countries, and can provide diverse transport routes that a lot of competitors can not.

In the end, international operations. Union, especially overseas business alliance, is an extension of services and effective way to use the network. With the La Poste Group and Frans Maas GroepN.V.'s Union who provide shipping services to Europe, Federal Express has long-term effective, flexible business expenses partner.

3.4.2 Disadvantages:

International diversification is always accompanied by risks.(D.M.Reeb, C.C.Y.Kwork,&H.Y.Baek,1998)

First of all, seasonal demand. International trade, particularly in Asia and the U.S. market, will reach its peak October and November .This dependence on the peak demand period is a major weakness of the company, if a sales decline, will affect the company's overall profit.

Secondly, government instability and foreign wars could affect FedEx's international trade. Differences exchange rate and fluctuations are likely to affect FedEx's international trade. For U.S. companies, in terms of the dollar against other currencies determines their international value of the assets and income. Such as the U.S. dollar rising in value will reduce the value of assets and income of U.S. multinationals in another country. Federal Express is no exception.

In summary, the main reasons that brought about strategic transformation at FedEx Corporation between 1973 and 2000 contain the external and internal environment. In the context of globalization and information technology, Federal Express has the personnel, services, technology and other core competencies, but still has some threats. Global Strategy should consider the exchange rate, other national policies. Because of the development of information technology, Federal Express promotes changes form logistics of their traditional way to e-commerce.

4 Several Schools of Strategic Thoughts and their Appliances

4.1 Whittington's 'Classical' schools of thought and its appliance

Emphasis on rational analysis. Whittington's 'Classical' schools of thought hold the idea that strategy making need a carefully planning and rational analysis to maximize long-term competitive advantage. (Richard Whittington, 2001) Each strategy formulation of Whether global strategy, acquisition strategy, or the transformation of e-commerce strategy, Federal Express all adopted rational analysis, and most achieved good results. For example, its activity about acquainting Flying Tiger achieved great success.

In 1989, in order to expand its influence and competitiveness, Federal express decided to acquire Flying Tiger Airlines Company. However, Federal express company would confront with many problems, such as an increase of 1.4 billion in debt, enormous challenges of human resource management and how to corporate culture conflicts. By rational analysis of pros and cons of the acquisition and the key issues to be solved, Federal Express bought Flying Tiger. After the acquisition of Tiger Airways Company, Federal express received the right route of 21 countries in Asia who have high speed economic growth in the global economy. This acquisition made FedEx far-reaching its goals.

4.2Whittington's 'Evolutionary' Schools of Thought and its Appliance

To adapt to globalization, information technology trends, transfer to global strategy and e-commerce strategy.

Whittington's 'Evolutionary' schools of thought hold the idea that the environment is too completed; unpredictable, therefore strategic planers can not make valid predictions. (Richard Whittington, 2001)The only activity they can do is to ensure that their work match the environment recently as efficiently as possible.

In the background Globalization, information technology, Federal Express effectively started global strategy, and carried out strategic restructuring, transferring to E-business strategy. In 1995, FedEx purchased the route between China and the United States to begin to use its special Federal Express cargo plane pilots to take charge of the express transportation service between the two countries. In the March of 1996, FedEx becomes the only American Express company who owns the direct flights to enjoy the rights of Chinese transportation.

Internet is sweeping through the economy and impacting business through a variety of ways of operation. In the information age, how to make full use of the internet resources which is available to every business becomes a necessary consideration external environmental factor when every business decides to develop strategies. FedEx web site shows that: In the current information age, a company's advanced systems, mode of operation and handling of information far beyond its value in the company's internal use. In the marketing idea "whole is greater than the parts", the FedEx utilizes the internet to start its e-business platform to contact global users, other e-commerce specialist supplier.

4.3 'Evolutionary' Schools of Thought and its Appliance

Innovation of strategies. 'Processual' schools of thought hold the idea that strategies are more likely to learn from a practical process of compromise emerge, not from a rational decision-making. (Richard Whittington, 2001)

Stacey (1996) integrates "organizational context" and "the effects of individual psychology" with the "processes of decision-making and control". The model identifies four loops: Rational, Overt Politics, Cultural and cognitive and Covert Politics. (Stacey, R. D. (1996)

Evaluation of the implications for strategic management of each of the four loops:

Rational.The process includes the discovery of the problem, the choice of the strategy and implementation of strategy. It shows that strategic planers need to maximize profits as the principle, via calculation, carefully research, and then select the best plan. But the premise is, managers are rational economic man, but, in the face of complex environmental changes, managers, after all, is limited. So it may lead to errors in strategic decision-making. If the cooperation adheres to the wrong long-term strategic decision, a number of problems will appear.

Overt Politics. Overt Politics behavior is an observable behavior. In order to obtain the resources, enterprises need negotiations. And via overt politics enterprises will increase their influence.

Culture and Cognition. Culture is very important that it can play a significant roll on the evolution of the organization and activities. (Gregory G. Dess & G. T. Lumpkin 2003) An effective corporate culture can guide staff awareness and customers to understand the enterprise better. Culture is able to maintain a unified shared for organization of enterprise mental model. However, culture is not formed in a day, but rather need gradually brought up.

Covert Politics. Covert politics behavior is not visible, but the enterprise can make full use of the cover politics behavior by corporate with other companies or organizations to form alliances. Those alliances will facilitate business behavior or increase their power.

Stacey's model shows that the creation of a strategic direction involves far more than the "rational loop" of the classical view and survival requires constant learning.

Federal Express makes full use of the theory in its strategy decision making.

FedEx's core business is logistics. (Ali Farhoomand & Peter Lovelock, 2001)A key factor in its success is that it is always the providers and users of technology solutions. In his practice, FedEx continued reform the logistics model. Such as COSMOS model, it is the one of logistics model that FedEx launched on the integrated logistics technology and produced huge benefits and broad prospects. In 1980, the Federal Express used a digital assist up system (DADS) to guide the courier to collect a single location under. In 1994, the Federal Express Web site was set up to provide practical, on-line tracking information and other services. Currently, the U.S. Federal Express is pressing ahead with its e-commerce platform .These innovations are learning in the practice.

Meanwhile, FedEx has an effective corporate culture, people-oriented, including staff and customers. For Federal Express employees, they have fair treatment of the regulations. FedEx put much emphasis on the development of its own staff and customer's service. This outstanding corporate culture enhances cohesion of the enterprise and establishes a good corporate image.

5 Strategic Recommendations:

Under the background of globalization and information technology, Federal Express has the personnel, services, technology and other core competencies, but still has some threats which comes form external environment. So I tend to use theory of evolution school of thought to make strategic recommendations for Federal Express.

5.1 Maintain the Competitiveness Existing, Continue to Implement the Global Strategy.

Porter believes that success in global markets business in competition need the domestic market success. Undoubtedly, the Federal Express in the domestic market has been successful, but how to gain competitive advantage on global markets, I believe that the Federal Express can use their own successful experience, make the best trade-off between efficiency and localization study to carry out globalization strategy.

5.2 Make Full Use of the Internet, Achieve E-business Transformation.

Currently, FedEx is utilizing e-commerce platform, has developed cargo tracking, the online checking service systems, logistics management information systems, enterprise logistics agent system to achieve a seamless connection with the user. This is what FedEx make a positive response to the external environment. Based on Porter's five forces model, we can see a lot of Internet technology reduces the barriers, the threat of new entrants may increase; non-intermediate lead the power of some suppliers increased and the number of customers increased; bargaining capacity still exists, the competition between peers is growing. Internet technology reduces the cost of express delivery of companies, the unique advantages of differentiation comes from the internet can be easily imitated, so the cost strategy is more important than differentiation Strategy. As e-commerce induce a large number of companies entering the market with low-cost, therefore, Federal Express need to pay more emphasis on focus strategy.


Under the background of globalization and information technology, Federal Express has the personnel, services, technology and other core competencies, but still has some threats which comes form external environment. What Federal Express need to do is: Maintain the competitiveness existing, continue to implement the global strategy; make full use of the Internet, achieve e-business transformation.