Corporate Strategy of Fedex Corporation

Corporate Strategy of Fedex CorporationExecutive SummaryThis analysis of the corporate strategy of FedEx Corporation relates to trine specific issues in the corporate strategy case. The first issue is a detailed analysis of the initiation-wide express emigration and logistics industry. The second issue discusses around the mergers and sciences in transportation and logistics industry. The final issue is a critical critique of the consummation of FedEx in the events b let loose overing to the January 2000 re musical arrangement.In the first section, the global express transportation and logistics industry is an attractive sector rootd on the fundamentals of the sector give in the five forces analysis using Porters framework. There argon boastfully barriers to entry, there are minimal substitutes that exist, industry is relatively disciplined, and the power of buyers and suppliers are mixed. FedEx is well placed in the sector given its m completely competencies and can-d o capabilities relating to its focussing and the functional areas of marketing, human resources and information engine room and systems.In the second section, gives a brief knowledge about the benefits and limitations of merger and acquisition strategies in this industry. This also describes how in effect(p) was the 1998 drill hole System acquisition and where did it led the association do in its further years.In the final section, it is noned that FedEx performed paltryly in spite of appearance its sector and given its capabilities, the upstanding was expected to make been more proactive in moving past its pitiable action. Neverthe little, the pissed had to wait until after several quarters of poor performance and only after the competitors have taken advantage of the information in the net market did FedEx make changes to its trading. Post the changes, FedEx did well in utilising its core competencies that were identified in the first section, and leveraging these competencies to its advantage.CHAPTER-1 Analysis Of oecumenic convey Transportation And Logistics IndustryIntroduction To Transportation And Logistics Industry.Global Transportation Logistics Industry comprises a wide range of service providers, covering all in all modes of transport air, road, rail, sea as well as cogitate services such as warehousing, handling, stevedoring, and lastly measure out added services like packaging, labelling, assembling etc. In addition to these physical services, TL involves all sorts of planning, organising and managing services in the area of transportation and logistics. all over the past years, we have seen a tr block up to diversification ( ingathering strategies mergers acquisitions), which results in larger coordinated groups operating in more than sensation of the TL sub-sectors. As a result, it be lets precise unclear to understand the limits between the different TL sub-sectors.(http//www.pwc.com/gx/en/transportation-logistics /index.jhtml)About FedEx FedEx corporation offers transportation, e-commerce and job services through its network of subsidiaries, divided into iv business members. The FedEx express segment includes federal Express Corp., a jumper cable global express transportation fraternity offering time-certain tar within one or three business days and FedEx Trade Networks Inc., a provider of client brokerage, global cargo distribution and Global Trade Data and Global Trade Tools software products. The FedEx ground segment includes FedEx Ground Package System Inc., which provides small package ground delivery to nearly 100% ofU.S.residences. The FedEx freight segment includes FedEx Freight Corp., a US provider of next day, second day and interregional less than truckload (LTL) freight services FedEx Custom Critical Inc., the worlds largest provider of expedited time critical shipments and Caribbean Transportation Services Inc., a provider of airfreight forwarding services between the U S and Puerto Rico. The last segment is FedEx Kinkos, consisting of FedEx Kinkos Office and nonion services Inc., which provides copying and printing services, signs and graphics, videoconferencing, high speed wireless and wired Internet access and com moulder usage, as well as retail access to all FedEx ground and global express shipping services. (Jack W. Plunkett 2007)Porters Value Chain AnalysisThis section assesses the global express transportation and logistics industry through the value chain analysis of Porter. The review is done across the primary and support activities for the value chain with the details presented in the pursual tablePrimary ActivitiesCommentsInbound logisticsIncreased presence in various markets to expand footprint and capture market share by players (Lai et al, 2008)OperationsIncreased cost in operations due to rising dismiss prices margins of industry players hit (Wadewitz, Johnson Weinz, 2008)Outbound logisticsImportant activity as link to nodesD istribution centres being set up by the largest players in the sector in new markets such as China (Lai et al, 2008) selling and salesIncreased importance in current market with pressure on margins though players have generally kept pricing disciplineServiceService to customer could potentially change with new pressures and competitive dynamics current focus on service but business models on customer service delivery could change (Greene Longson, 2008).Support ActivitiesCommentsFirm infrastructureEntrepreneurial culture typically focusing of firms could be forced into action with potential consolidation in the sector trainn by pressures in decreased business and margins could lead to synergies and value (Fitchie, 2008)HR watchfulness serviceman resources continues to play an important role as talent influences the activities across the value chainTechnology developmentTechnological capabilities continue to be critical factoring the sector and a requirement to be a player (Greene Doshi, 2007)ProcurementImportant lever for sector given large capital letter outlay required for building or replacing fleetSome are pursuing this activity despite sector pressure as business has decreased FedEx recently reported to have bought somewhat aircraft from Rolls-Royce (Armitage, Fornaro Crispin, 2008)www.umbrellacloud.com/business-model/value-chainWe note from the analysis above and the supporting arguments in articles, the key factors impacting the value chain are the followingIntegration of the firms activities across primary and support activities Though each of the activities above have their influence on the sector and its development, the important underlying factor is the integrating of the primary and support activities in redact to drive the efficiency of the firms in the sector, and ensure the delivery of the customer service required by clients.Use of engineering to drive integration and also efficiencies across the value chain Aside from the integratio n of the activities, a key driving force as well is the call of technology to both drives the integration and also pushes the efficiencies across the value chain as this impacts the pricing of services and delivery of customer requirements.Strong management to drive actions and initiatives across the chain Finally, strong management is needed in order to identify the opportunities and be able to push for the implementation of these initiatives, bursticularly in technology and in integration. The current industry pressures from higher fuel prices are changing the dynamics of the sector.Supply Chain ManagementSupply Chain analysis involves working(a) across multiple enterprises or companies (Inter-enterprise) to shorten the preparation chain time in the delivery of goods and services to the consumer or customer. Demand uncertainty in supply chains can be addresses by faster response times. A basic product supply chain can afford longer lead times and batch manufacturing of large lot sizes to meet the demand. A supply chain that produces fashion or mass customization products must respond quickly and be more agile. Most supply chains are moving in the direction to support a more rapid changing of demand by the consumer or customer.Good transportation and logistics companies also natures in reducing total costs through supply chain management excellence. Supply chain management means managing the business process from the initial supplier to the ultimate customer focusing on speed and flexibility, resulting in the lowest total cost and highest customer satisfaction-from suppliers supplier to customers customer-with supply decisions based on total life cycle costs.In this Context, FedEx identifies five principal attributes of supply chain managementStrategy Creating an impelling supply chain management organization and supporting fact-based strategies and plans.Resources Developing and deploying human resources and information systems infallible to maximiz e performance. Nothing happens without top-notch, highly-skilled professionals using effective technical tools.Processes Creating strategic plans based upon total cost management and in sourcing/outsourcing analysis and applying a systematic approach to better utilizing the supply base.Optimization Aligning the supply base with our supply chain goals and continually seeking to improve the supply chain methods and composition.Globalization Viewing supply opportunities on a global basis.(www.fedex.com)FedEx Core Competencies And energetic CapabilitiesThe analysis above of the global express transportation and logistics industry provides an indication of the requirements needed in order to be succeederful in the sector. This sub-section presents the core competencies and dynamic capabilities of FedEx and will present the link with the sectors requirements for success.The core competencies and dynamic capabilities of FedEx are the following2. Human resources empowering employees One of the core competencies of FedEx is the authority of employees which has led to entrepreneurial behaviour among the employees (Schindehutte, Morris Kocak, 2008). This empowerment is the dry land that FedEx is able to adapt quickly to market changes and keep abreast of the development in the global express transportation and logistics sector and ahead of competition.3. Marketing delivering customer value FedEx is known for their innovativeness in delivering value to their customers. It is partly the point above on employee empowerment which drives this. However, it is also largely the strength of their marketing organisation in being able to identify the value that customers require and their ability to deliver this through convenience and minimised relational costs (metalworker Colgate, 2007).4. Information systems and technology providing true 24/7 information FedEx has invested significantly in its information and technology systems in order to provide customers with i nformation to lede the services being provided by FedEx. The firm realised early on in their business history, and well ahead of the other firms in their sector, the importance of information (e.g. package tracking, drop-off spot finder) and the power this brings to meeting customers needs (Bhattacharya, 2006).5. Management continuing learning and application to operation This core competence of FedEx is driven by their CEO and Founder Fred Smith who stated that the success of FedEx is based on continual learning and education and the discipline to apply those lessons to your operation (Sarros, Cooper Santora, 2007). FedExs actions have been based on a continual understanding of their market situation and the implementation of initiatives to meet the requirements of the evolving sector such as proficient demands and customer service level requirements.Strategic fantasy And Infrastructure Within FedEx Corporation(a) FedEx Strategic Vision And Visionary Leadership.Frederick W Smith, the Chairman, President, and CEO of FedEx Corporation was presented the Peter F. Drucker Strategic Leadership Award for the year 1997. The award, established in 1995, was in recognition of an individuals innovative and result-oriented leadership. With the help of his team he executed a vision with consistency and focus. Analysts credit Smiths leadership as the reason for the transformation of FedEx, from a once loss making company, to a global logistics industry leader with revenues of $22.5 billion. Under his leadership, FedEx management has developed rigorous processes with extremely low defect rates employees are empowered through information, technology and thorough training. Information technology has transformed the company into a cyberspace leader as well as a logistics trailblazer.Smith was one of the few business leaders who first anticipated the application of Internet in business operations, resulting into the ground of the website www.fedex.com in 1994, enabling customers to do business online.FedEx had been established as a technologically driven company. Smith stipulated three goals, which he believed would form the critical success factors of FedExs business in future speed, reliability and customer service. In order to achieve these goals, Smith invested heavily on IT. Smith strongly believed that for an express industry, it was necessary to use IT to provide customers with real-time information about the movement of their documents/packages.Visionary Leadership FedEx Supply Chain Services will be an acknowledged world leader in global integrated logistics management, supply chain solutions and time-definite delivery. Our motivated associates will forge mutually profitable partnerships with our customers using world-class technology and business practices.Smith also believed that in a service oriented organization like FedEx, it was very important to have highly committed employees, failing which it was not possible to deliver the ki nd of service that the customers expected. FedExs employees were do to believe that they were not merely performing their duties but were solving the transportation problems of the customers. It is clear from these analyses that FedEx Corporation had been very competent in technology and human resources which resulted in its great success. FedExs corporate strategic vision is based on three principlesoperating independently by focusing on independent networks to meet distinct customer needscompete collectively by standing as one brand worldwide and speaking with one voice Manage collaboratively by working together to sustain loyal relationships with their workforce, investors, and customers.http//www.icmrindia.org/casestudies/catalogue/Leadership%20and%20Entrepreneurship/LDEN023.htm(b) FedEx Transportation And Logistics InfrastructureFedEx Corporation (FedEx) provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, op erating independently and managed collaboratively, under the respected FedEx brand. These operating companies are primarily represented by Federal Express Corporation (FedEx Express), the worlds largest express transportation company FedEx Ground Package System, Inc. (FedEx Ground), a leading provider of small-package ground delivery services and FedEx Freight Corporation, a leading U.S. provider of less-than-truckload (LTL) freight services (FedEx Annual report 2007).Overall, FedEx hasover 280,000 employees worldwide,operates approximately 50,000 drop off locations and managed over 10 million square feet of warehouse space worldwide. They have 670 aircrafts, and 75,000 vehicles and trailers, handling around 6.5million daily shipments to more than 220 countries and territories. (Jack W. Plunkett 2007). FedEx Corporation introduced express delivery to the world in 1973, and re main(prenominal)s the worlds largest express transportation company and it is the worlds largest overnight p ackage carrier with about 30 per centum market share.Taking into considerations the key elements from the above analysis and FedExs core competencies it can be pass judgment out that FedEx primary activities are Marketing and Sales, checking orders, financial analysis and receiving payment, packaging, shipping products, logistics, handling and storing of products to be shipped, handling orders, delivery of the products, and finally Service to ensure customer satisfaction. But, the key elements which support these activities areProcurement (purchasing, trucks, planes, gas and other assets).Research and Development (RD) activity which include technology development, investments in systems founding, and information technology (IT) development.Human Resource Management that includes hiring, training, developing and compensating employees from the truck drivers to the top management.Firm infrastructure which includes general management, planning, accounting, legal support, government regulations, and other general requirement to support the value chain.(c) FedEx Virtual Information InfrastructureInformation Technology is the backbone of the FedEx Corporation which is immensely responsible for its success and its competitive advantage over its rivals. FedExs consistent perspiration in the development of information technology and system innovations has always been its prime concern which created the direct interconnection between its customers and services. FedExs Virtual Information System emerged as a revolution in this context which closed the gaps between the consumer and seller.In 1979, a centralised computer system Customer, Operation, Master Online System kept track of all packages handled by the company. This computer system relayed data on package movement, pickup, invoicing and delivery to a central database. In 1984, FedEx started to launch a series of technological systems. The Power-Ship program, aimed at improving efficiency and control, which pr ovided the most active customers (around 850,000) with the proprietary online services. But, the most significant development in this field came between the years 1994-99 which started giving the term to the virtual information infrastructure. They were first to offer online package status tracking through FedEx website so that customers can actually conduct business via internet. In 1995, a Windows-based shipping and tracking software allowed around 650,000 users to process and manage their shipment from their desktops. FedEx Virtual-Order Software in 1996 linked internet ordering with the delivery and online tracking. In 1997, FedEx introduced e- air tools for easier connection with shipping tracking applications. FedEx decided to overhaul its internal I.T. infrastructure under the Project GRID (Global Resources for Information Distribution). The project twisting replacing 60,000 terminals and some PCs with over 75,000 network systems. Also, in 1999 FedEx signed an agreement wi th Netscape to adopt Netscape software as the primary technology for accessing its corporate intranet sites. FedExs intranet included more than 60 Websites, created for its end users and some cases by its end users. At this point of time FedEx was the largest online client server network in the world that operated in real time. The benefits of these services were not limited to FedExs customers. Its online services, which in 1999 handled 60 million transactions per day, saved FedEx cost of 200,000 customer service employees. In turn, the Company reported spending 10 percent of its 17 billion U.S. dollars annual revenue on I.T. in 1999. Information had allowed FedEx to lower its costs such that the cost to customers of using FedEx in 1999 was lower than it was 25 years ago.FedEx Virtual Order Processhttp//www.ite.poly.edu/people/brao/fedex_case.htmCHAPTER-2 Mergers skills In Transportation And Logistics Industry.Benefits And Limitations Of Merger And Acquisition Strategy.Merger and Acquisition is basically a mechanism by which an organization grows. It is a kind of external growth strategy which involves using the businesss money to invest in other businesses, whereas the internal growth occurs by expend profits in the same business. A merger occurs when two separate companies agree, usually by mutual consent, to come together. On the other hand, acquisition is a takeover which involves purchasing a shareholding of over 50%, and then this company can control and impose its will upon this. Merger and acquisition are growth strategies are beneficial for transportation and logistics industry, as in all the other industries if two companies decide to join hands after a detailed interrogation and surveys.(bookbook.book)Benefits Of Merger And AcquisitionMergers and acquisitions usually succeed in building cost efficiency through the implementation of economies of scale. Basically, a new economically enduring firm emerges, through the union of two parent firms wi th an increased scale of operations. As a result, there are chances that the cost per unit will come down with rise in output production. In context of TL industry the company will get a outstandingger infrastructure and they whitethorn get easy access to the areas which were to difficult to reach. This in turn will increase their logistics offerings and their efficiency with reduced cost, which was not possible if they would have thought of change magnitude the branches on their own.This process also often leads to an increased value generation for the company. It is expected that the shareholder value of the newly established firm would be greater than the sum of the shareholder values of the parent companies which is applicable in TL industry as well.One of the benefits of mergers and acquisitions is increase in market share. When a financially stable company acquires a contrastingly distressed one, the newly found organization nonpluss a substantial increase in market share. The new firm is usually more cost-efficient and competitive when compared to its financially weak parent organization.Limitations Of Merger And AcquisitionI. If due to mergers and acquisitions, a company has considerably a big market share then there could be less competition complacency amongst firmscan lead to lower quality of services and less investment in new products and services.II. Due to merger or acquisition, if a company expands too much then it could also lead to diseconomy of scale. In this condition, it will lead the firm to produce products and services at increased per unit costs.III. Mergers and acquisitions can lead to loss of jobs.IV. Mergers could be a factor of de-motivation for staff, for example, managers would prefer to work for big company where they get higher salaries and more prestige.V. There could be failure to secure good will of a wide range of stakeholder groups in both companies.VI. possible conflict between individual and corporate objectives is n ot given sufficient recognition and isnt managed.VII. Reputation can also be damaged during the merger process.Acquisition Of Caliber Systems In 1998 By FedEx CorporationIn the year 1998, FedEx took a big leap in context to its diversification by acquiring Caliber System Inc. As a result of this, five subsidiary companies were formed Federal Express, RPS, Roberts Express, Viking Freight and FDX Logistics. Apart from Federal Express, all the other four were the part of Caliber System and all were managed independently. The logistics operations of both FedEx and Caliber were different as differed in customer bases and service offerings. Caliber was expertise in providing an boom logistics operation focusing mainly on high priced goods industries such as moving raw materials, managing work-in-progress, manufacturing of cars and fork-lift trucks etc. Federal Logistics and Electronic Commerce (FLEC) before the acquisition was not able to provide complete supply chain solution because th ey just focused on finished goods and reverse logistics. But, the acquisition led FLEC to put there hands into areas like warehousing and transportation apart from the basic logistics functions. Later, Caliber became apart of FDX Logistics and FLEC continued as a division under Federal Express.The burden which this acquisition brought along with it to the company was that, the company has to loose its image of just being an express delivery company. The challenge was that all the critics including the customer related the FedEx brand just with transportation. One solution to this challenge was the renaming of the company. In this context, the acquisition gave the name to the holding company as FDX Corporation but they did very less to promote the name. Therefore, the transportation subsidiary FedEx Express still lived on as a brand image and the corporate name was still under cover. distant other companies such as UPS which ran only under one name for all its services, FedEx was tr ying to promote all its subsidiary companies with completely unrelated label under FDX logo.The key agenda here was that, the two separate logistics businesses within the group with separate sales and customer service staff created confusion within customers and resources were duplicated. The big thing was despite having such confusion the branches continued to operate and offer solutions at all level of supply chain. In this scenario, the autonomy of all subsidiary companies where maintained but the challenge was to bring the companies closer to create the synergy. These companies were operating with separate accounting systems and customer service staff, so they made a vision to progress individually but compete collectively.Therefore, we can figure out that this acquisition was not a complete success as all the subsidiary companies sustained but the ultimate goal for the corporation was to provide customers with a single point of access to the whole Group. In later years, this became the main reason for the companys structural transformation through advancement in information technology within the company.CHAPTER-3 Events Leading Up To January 2000 ReorganizationThis section provides an analysis of the events leading to the January 200 reorganisation of FedEx. The first sub-section reviews the performance of FedEx and the developments in the Internet market while the second sub-section touches on the impact of the major strategic initiatives undertaken. The final sub-section provides a quick summary of the analysis.FedEx Performance And Internet Market DevelopmentsThe January 2000 reorganisation was largely driven by the poor performance of FedEx in the preceding periods. While performance remained strong and positive up to 1999 with record earnings, this proved to be the start of a downtrend in performance. The next several quarters saw FedExs performance experience considerable in income and profit. This was partly influenced by the rising fuel prices b ut the failure of the company to react and still be reasonably profitable in a backdrop of rising fuel prices led management to believe that change was needed.The performance of FedEx was sub-par and deserved poor reviews. The lower financial performance aside, FedExs performance was inadequate for the following reasonsUn-reactive and inflexible It took several quarters of poor performance for FedEx management to take action. FedEx could have been more aggressive in its actions and realised instantaneously after the first quarter of poor profit performance that the industry was changing and that FedEx needed to make a move. At the very least, FedEx could have made moves that would have impacted other players as well and severely harm the poorer capitalised firms (e.g. start a price war)Did not utilise advantages in sector partly related to the first point, FedEx did not push to make any impact on the sector. FedEx could have utilised its network, for example, and worked with its suppliers and even buyers to ensure that the firm still maintained good profitability in the period of high fuel prices.In addition to the poor performance of FedEx in the preceding several quarters, the development of the Internet market and the actions of competitors forced FedEx to review its business strategy and determine the steps necessary in order to bring the firm back to profitability and booming operations. In this respect, the actions of FedEx were unacceptable as well for a couple of reasonsFailure to realise technological changes For a firm that was known to be reliant on technology as well as at the forefront of technological advancements, the actions of FedEx were unacceptable as they showed poor pro-activity and understanding of the changes happening in the sector.Reactionary moves to technological innovation Not only did FedEx not realise technological changes that would impact the sector, FedEx had to wait for other firms to take the first move in tapping the new technology. This thusly made the situation worse as it placed FedEx in a position that was far behind other competitors in terms of the use and development of technology.Motivation for Strategic InitiativesFedEx had three strategic initiatives following the reorganisation in January 2000. For these actions, FedEx could be lauded as these addressed the concerns that FedEx faced following the several period of poor performance and the developments in the Internet market. The strategic initiatives and the rationale for pursuing each are as followA new branding strategy that involved changing the Companys name to FedEx Corporation, and extending the FedEx brand to four of its five subsidiary companies This is an excellent move for a couple of reasons (1) integrates the firm and leverages the successes of the various divisions, (2) taps the brand that clients are familiar with. This would allow FedEx to leverage its advantages in the sector as seen in the five forces analysis. Alth ough relatively belatedly, FedEx did realise the importance of integrating their businesses and maximising their position in the sector.The need for one point of access to sales, customer services, and billing and automation systems This again touches on the integration point although at a different aspect. With an integrated business across its key activities, FedEx could provide clients with easy access and reliable services, factors that are important for the FedEx clients. Also, this action gives FedEx the technological push that it needed in order to bring its technology up to par with competitors, and position the firm for possible advancements at a later time.FedEx Home Delivery, a new, economical residential delivery service- This last action by FedEx touched on several important factors related to the success of firms in the global express transportation and logistics industry (1) innovation in products and services, (2) leverage of strengths of related businesses, and (3) exp