The Competitive Advantage of Fedex Commerce Essay

2/19/2018 The Competitive Advantage Of Fedex Commerce Essay
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The Competitive Advantage Of Fedex Commerce Essay

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Published: 23rd March, 2015
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Government rules and regulations are the primary political factors a ecting an organization. FedEx being
an international company needs to interact with di erent nations that don't implement tough trading
rules and regulations, allowing them to make use of better international services. Business standards,
political stability and industrial limitations are few other political factors that can a ect the business.
FedEx is successful in the international market because it rmly and strictly adheres to all relevant laws.
Economical
The economic factors which can distress the customers and can have e ect on the business are interest
rates, rise in fuel prices, in ation and exchange rates. The nancial assets of the company are a ected by
recession in the market. FedEx is a ected by the economic situation around the world; as a result it has
to respond to the varying economic factors. FedEx need to be exible with its charges depending on the
economic condition of that country. Saturation of the US market has also a ected FedEx negatively. Also
the instability in the US dollar and EURO has a ected the business which in turn has negative e ect on
the organizations like FedEx.
Social
Population and the education status of the country are the social factors that can a ect an organization.
These two a ect the decisions that an organization makes in order to meet the demands of the
customers. Increased urbanization goes in the favour of FedEx as there are more educated people to use
their services. Also customers' expectations are increasing with time, so FedEx has to provide fast and
reliable services which are world class quality but modi ed to suit the local culture and custom.
Technological Factors
FedEx is successful like many other companies due to advancement in technology. The company used
the Internet to its full bene t by providing anywhere in the world the electronic services. Consumers can
check the status of their package from the comfort of their house. E-Commerce another great innovation
which allows FedEx to connect with the world for the business transactions.
Chapter III: INTERNAL ANALYSIS
Internal Service Quality
5C Frame work
A. Competitive Advantage
The competitive advantage of FedEx as compared to its competitor, the UPS is low in the shipping
industry as their return on investment is below the industry average.
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A Model of Competitive advantage
Source: http://www.quickmba.com/strategy/competitive-advantage/
B. Distinctive Competencies
FedEx mainly possess existing rather than distinctive competencies. The pro ciencies which facilitated
FedEx to become the leading express organization globally are its ferocious assurance to innovation,
technology, brand equity and strong infrastructure.
With the express package delivery FedEx is the name that comes rst to the customers mind. A quote
from allaboutbranding.com says it all, "FedEx is a great brand. Great brands provide a source of
identi cation. These brands di erentiate great brands and cement their leadership credentials assurance
of quality".
FedEx infrastructure is its next prevailing competency. FedEx has spent a hugh capital to build globally
network of hubs, trucks and airplanes. So FedEx is in a position to harm any new entrant by just cutting
down its prices.
The third competency for FedEx is its devotion to innovation and implementation of latest technologies.
This obligation of better serving the customers keeps FedEx Express as the leading giant worldwide. This
dedication is not a new thing as Frederick Smith of FedEx said in 1979 "The information about a package
is just as important as the package itself."
FedEx's vision guides its strategies. The motivation to be the world leaders has leaded them to their core
existing competencies. UPS were world leaders in the shipping industry before 1980's but changes in the
Motor carrier Act and Staggers Rail Act in early 1980's paved the way for FedEx to compete with UPS in
many elds.
C. Strategies
FedEx current strategies are the fruit of its distinctive competencies which were built over a period of
three decades. During this period FedEx has expanded its global network by o ering fastest delivery
time, like by starting the next day delivery to and from Taiwan on 2nd September 2003.Similar FedEx
entered the Iraq market by o ering door-to-door pick-up and delivery service. This characteristic aptitude
of o ering services where no one else has gone makes it di cult for its competitors to move into this
shipping market
Other strategy aspect of FedEx is its involvement in the latest technology which they achieved by
establishing the FedEx Technology Institute at the University of Memphis in 2003. FedEx is the only rm
that o ers its customers automated and package tracking option.
D. Four Building Blocks
The evaluation of FedEx against the four building blocks i.e. quality, e ciency, innovation and customer
satisfaction does not give it a competitive gain against its competitors like UPS. The reason being that
FedEx has invested such a hugh capital that their ROIC is not as decent as UPS.
E. Image
To big organizations like FedEx and UPS the element of image is very essential for their survival. In well-
developed industries image becomes the key di erentiator for the purchase decision.
According to Forbes magazine (Jan 02), "Being most admired is all about delivering what you promise to
multiple audience, and that's something FedEx has down pat...FedEx has successfully transcended its
image as simply an air express carrier for business to become a one-stop shop for any shipping need."
Positive market campaign through advertisements reinforces the image of FedEx Corporation in the
competitive industry. While image is further build by extending hands into the community projects. FedEx
further improved their image by introducing steps to reduce their carbon emission and energy
consumption.
Chapter IV: BUSINESS-LEVEL
A. FedEx's Business Level Strategy
A distinctive business strategy is setup by FedEx on the basis of its strength in logistics and technological
innovation. FedEx sets a standard which is di cult to be followed by its competitors. Being labelled as
Innovators FedEx has to convey this message to its customers that they provide only high quality of
services. FedEx like its rivals is capable of fast delivery but they are more customers friendly. FedEx home
delivery (new e-commerce residential service) is one of the other business strategies which separate it
from its rivals.
B. Issues in Di erentiation
To di erentiate from rivals in shipping industry is very di cult as customers are very price conscious.
They usually are not brand loyal as they might like to use the services of cheaper courier. Their aim is just
to deliver their parcels on low cost, fast and e ciently on time. They are not bother about how advance
the company is in technology and innovation. A ordability is the main concern of these customers. So to
be the leader FedEx needs to di erentiate itself from their rivals in every aspect of the business so that
the customers recognize them as reliable industry.
C. Targeting Customer Needs
To meet the need of the customers FedEx have six di erent divisions in its corporation. As di erent
customers have speci c need each amenity covers a particular sector of the market. By targeting
di erent market sections FedEx tries to satisfy the psychological needs of the customers who need
guaranteed delivery within time speci ed period. Di erent services may be required by the customers at
di erent times so FedEx will always be there to serve them.
Case Pro le - FedEx
http://image.slidesharecdn.com/fedex
D. Market Segmentation
FedEx is formed of di erent business units which work collectively as a whole unit under the banner of
FedEx Corporation. These units concentrate on single market and operate independently rather than
focusing on the whole market. This gives FedEx a competitive edge over its competitors.
FedEx Express is the industry's global leader which provides rapid, steadfast and time-de nite delivery.
FedEx Ground supplies small package, less time-sensitive service to business. FedEx Home Delivery is
dedicated to residential services and operates from FedEx Ground. The third unit FedEx Freight is
responsible for delivery of heavy packages across whole length of haul. Under it also works the FedEx
Custom Critical unit which specializes in time-speci c customer critical shipment. To meet the demand of
the international customers FedEx Trade Networks works to provide support to the international market
and hence international trading. Lastly FedEx Supply Chain Services operates to provide customer
satisfaction by co-ordinating the movement of good.
FedEx Express and Ground are the pro table segments of the company and responsible for the major
part of the FedEx business. FedEx conceits itself mainly on FedEx Express which gives a good successful
picture of the company.
It becomes clear that FedEx markets itself according to the demands of the customers and not by
demographic areas.
E. Di erentiation of Quality
To meet the demands of its customers FedEx invested hugh capital in building its infrastructure. The
transportation system and logistics play an important role in running the business and are the main
functional units. There is good coordination among di erent functional units of the company which
results in smooth running of the business and hence this forms the basis of good quality service to the
customers.
F. Di erentiation in the World
In US FedEx is often compared with UPS, while FedEx has made every e ort to di erentiate itself from its
competitors. The market value of the UPS in US is more because of its pricing while FedEx is recognised
globally for its services. FedEx resources allow them to run their business on much higher grounds than
its rival, but with future globalization of the big businesses its competitors will try to overcome this
di erentiation. FedEx has 600 aircrafts in its eet and has hubs all over the world, the quality which will
be very di cult to overcome.
FedEx strategies keep them apart and di erent from their competitors. This helped them to make large
customer base. Being labelled as innovators it is easy for FedEx to set up new hubs and package tracking
systems.
G. The Impact of their Strategy
The same strategic dimensions are used by most of the businesses and the one common strategy is the
investment of hugh capitol in research and development to develop better technologies. The rms using
the latest and better technology tend to have better market share nationally and internationally and this
gives a competitive advantage to the company.
The major competitor of FedEx, UPS took some years to build an infrastructure to take control of the
domestic ground market in US of which now it holds major share. While at the same time FedEx started
looking for ways to expand themselves internationally and build an infrastructure for competency in that
market. The installation of the international hubs puts FedEx one step ahead of their competitors and
thus gives them a competitive advantage.
For any company the prominent growth opportunity is the international market place. FedEx entered the
global market with the introduction of FedEx Express which is known for its fast and reliable
transportation service. FedEx is a recognised leader in the global economy and o ers its customers more
options and limitless places. The second thing which goes in the favour of FedEx is the E-commerce.
Customers can purchase any product from the internet and it can be shipped anywhere in the world.
Fig: Acer and FedEx: Stream lines returns [2]
(Source: http://www.fedex.com/us/solutions/downloads/acer.pdf)
Assessed on 4th Dec 2012
Chapter V: VALUE CHAIN, TECHNOLOGIES, GLOBAL STRATEGY
A. Value Chain
Value Chain has primary and support activities.
Primary Activities:
Inbound Logistics: the products that need to be shipped are handling and stored.
Operations: Value chain analysis, nancial analysis, logistics, shipping of products, handling and checking
orders.
Outbound Logistics: receiving payments and transporting products.
Marketing and Sales: Making people feel satis ed and comfortable with the product by developing a
positive image of the product.
Services: Customer satisfaction the main objective.
Support Activities:
Procurement: Purchasing assets, trucks, aeroplanes.
Technology development: Financing in innovation, research and development, IT and e-commerce.
HR Management: Hiring, training and development of employees
Firm Infrastructure: Management, planning, legal support, law and government regulations which are
necessary for the support of value chain
B. Product Technology
Product technology dominant all businesses in transportation in which FedEx operates. Internet is the
prominent technology that is used by FedEx in handling its operations.
"FedEx has always been a technology trailblazer, and the success of fedex.com is testament to that."
FedEx was the rst to develop its Web site in 1994.Daily around 2.3 million customers connect to its web
site which is known for its speed and customer focused features.
The Web Marketing Association praised fedex.com as the "Best Transportation Web Site" and e-Week
saluted it as a top e-business innovator."
FedEx Solution is an example of another latest technology used by FedEx which is a selection of various
electronic tools.
C. Impact of national context on the industry
Shipping industry and in particular FedEx depends to a greater extent on the national context. The
market value of FedEx is improving as it is expanding its horizon without any limitations. The economic
downturn in America has led it; to bring changes in its foreign policies. These changes will help FedEx and
the other shipping industries to turn to the foreign markets.
D. Response to Di erences among Nations
The opportunity of growth with globalization will help FedEx to reach its goal of brand building and
standardizing its products in the new and diverse market.
To overcome the barriers of governmental rules and regulations in di erent countries FedEx designed an
online business planning tool FedEx Global Trade Manager to help the international customers to obtain
the necessary information about the fees and charges for overseas shipping.
E. Global Dimensions of Strategy
Global strategy shadows every dimension of FedEx. Therefore FedEx is divided into:
FedEx 5 Geographical Zones:
United States
Asia-Paci c
Canada
Europe, Middle East and Africa
Latin America-Caribbean
Global Factors:
Globalization - leading to more integrated markets
Borderless business transaction

The basic concern of any customer in any part of the world is timely delivery of their product whether
individual or business. This consistency does need FedEx to tailor their services. This helps FedEx to
establish there successful pricing strategy instead of raising the cost of their services. In this way they can
use their resources to upgrade their technology and to focus on time-sensitive ability to deliver.
Another part of global strategy is having only few locations as the main centre for managing the
operations, like Hong Kong for Asia-Paci c Network and Miami and two cities in Mexico for Latin America-
Caribbean Network
In short, low cost, standardized service and few key locations internationally to serve 210 countries show
the FedEx global strategy is on the right track.
Chapter VI: CORPORATE-LEVEL STRATEGY
A. FedEx Corporation
FedEx Corporation o ers the main strategic leadership as well as the main nancial liability for all the
company. FedEx is currently divided into di erent units which run independently but mould the entire
services to meet the customers need. The main motto of the company is "Operate independently,
compete collectively." The decision making ranking at FedEx Corporation is as follows:
FedEx Express EMEA abridged organization chart.
http://www.palgrave-journals.com
FedEx reorganized world-wide on 19th January 2000 with 5 geographical zones and with 6 subdivisions.
For customers to have a single access point a single brand system was created.
Standardized names of subsidiaries -leverage the FedEx brand name.
Establishment of FedEx Services-hub for the growing portfolio of independent FedEx services.
FedEx Services
Further support for the FedEx family was provided by combining marketing, sales and technology.
An extensive range of services and pricing schemes was set up by single sale force.
Customers were provided with single point of access to all range of FedEx services
Helps customers in invoicing, tracing of packages and also claims.
Website www.fedex.com and common toll free number for all the services.
B. Horizontal Integration
Horizontal integration is merger of similar companies and procurement sought out by the industry
leaders. It is a way of trying to increase the industry value of the company by lowering the price,
increasing the product value and bargaining power of the company and managing industry rivalry's.
FedEx from as early as 1980's has been involved in this.
The purchase of Flying Tiger air eet and American Freight are the example of this.
C. Vertical Integration
The strategy of vertical integration of FedEx is very aggressive. Having a very strong infrastructure gives
FedEx a competitive edge in the shipping market. As they control most of the distribution channels they
still purchase from independent suppliers. Most of these suppliers give maintenance services and some
provide them with packaging services.
D. Fill in the Blanks
FedEx need to consider some ll in the blanks strategies which depend on existing competence's like:
â€¢ Increasing their ground service abilities.
â€¢ Paying attention to recyclable material for packaging which will reduce their material cost and will
show the public that they are concerned about the environment.
Conclusion
The unit describes the Strategic Management of an organization and how its helps in setting up the
standards to achieve its goals and objectives.
FedEx a name, a leader in the Shipping industry whose basic function is to bind the nation through
business. Its aim to provide a fast, reliable and e cient service to its customers in all areas of shipping
industry. FedEx known for its innovation, keeping its cost down, using latest technology to speed up the
transactions of goods.
Focusing on the customers is always a key to the success of business and keeping them happy allows
developing brand loyalty.
To beat its rival FedEx has to understand that meeting the demands of the market place is essential. This
can be achieved by setting tough targets for the future and then trying to achieve them. FedEx have
shown how strategy helps in decision making and brings better results for the company.
Over the past 30 years FedEx has been a company which has changed the way we view express
transportation and delivery services. FedEx has shown that a company is not only about technology,
managers and pro t making. It places their employees on pole position, as they are the ones that keep
the company going and serve the customers.
Strategy Recommendation
Business Level
ƒ˜ Integrated Cost Leadership and Di erentiation Strategy
Global key account management
Key partnerships with major customers
Advance IT devices providing real-time information
Continuous innovations and rst mover advantages
FedEx Online
Continuous improvement of organizational operation and cost reduction program
o E.g. Spent US$1.1 billion in 2002 for purchase of fuel
o Purchasing policy of 2-3 suppliers or use fuel saving vehicles
ƒ˜ Market Penetration Strategy
Increase market share by aggressively targeting at fast developing countries like China and member
countries of AFTA
Reduce its dependence on US market sales (more than 60%)
Reduce the risk of erce competition with UPS in US market
Corporate Level
ƒ˜ Restructuring Strategy
Optimize FedEx Express and FedEx Ground's operation
o Consist more than 80% of total sales for FedEx

o E.g. same pick-up team for customers
Improve synergy among subsidiaries
o Leverage the existing resources among subsidiaries
o Shared activities, exchange of competencies (knowledge, sta s, success stories)
o Regularly assess the current and new locations for o ce and warehouse and take advantage of
di erent time zone in di erent countries to shorten the lead time for deliveries
ƒ˜ 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 of aircrafts, tax advantages, no problem with old
aircrafts
ƒ˜ Concentric Diversi cation
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 FedEx Services into pro tability
ƒ˜ Cooperative Strategy
For minor areas, form JV, partnerships or subcontract the delivery services to local postal companies or
couriers to capture the business opportunities
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2/19/2018 The Competitive Advantage Of Fedex Commerce Essay

The Competitive Advantage Of Fedex Commerce Essay

Published: 23rd March, 2015

Chapter III: INTERNAL ANALYSIS

Internal Service Quality

A Model of Competitive advantage

D. Four Building Blocks

Chapter IV: BUSINESS-LEVEL

A. FedEx's Business Level Strategy

C. Targeting Customer Needs

Case Pro le - FedEx

F. Di erentiation in the World

G. The Impact of their Strategy

Fig: Acer and FedEx: Stream lines returns [2]

Assessed on 4th Dec 2012

Chapter V: VALUE CHAIN, TECHNOLOGIES, GLOBAL STRATEGY

Value Chain has primary and support activities.

Outbound Logistics: receiving payments and transporting products.

Services: Customer satisfaction the main objective.

Procurement: Purchasing assets, trucks, aeroplanes.

Technology development: Financing in innovation, research and development, IT and e-commerce.

HR Management: Hiring, training and development of employees

C. Impact of national context on the industry

D. Response to Di erences among Nations

E. Global Dimensions of Strategy

FedEx 5 Geographical Zones:

Europe, Middle East and Africa

Globalization - leading to more integrated markets

Borderless business transaction

Chapter VI: CORPORATE-LEVEL STRATEGY

FedEx Express EMEA abridged organization chart.

Standardized names of subsidiaries -leverage the FedEx brand name.

Helps customers in invoicing, tracing of packages and also claims.

D. Fill in the Blanks

â€¢ Increasing their ground service abilities.

ƒ˜ Integrated Cost Leadership and Di erentiation Strategy

Global key account management

Key partnerships with major customers

Advance IT devices providing real-time information

Continuous innovations and rst mover advantages

Continuous improvement of organizational operation and cost reduction program

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

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

ƒ˜ Market Penetration Strategy

Reduce its dependence on US market sales (more than 60%)

Reduce the risk of erce competition with UPS in US market

Optimize FedEx Express and FedEx Ground's operation

o Consist more than 80% of total sales for FedEx

o E.g. same pick-up team for customers

Improve synergy among subsidiaries

o Leverage the existing resources among subsidiaries

o Shared activities, exchange of competencies (knowledge, sta s, success stories)

ƒ˜ Concentric Diversi cation

Outsourcing trend of supply chain by customers is on the rise

Demand Responsive Model

Innovative technology and information system

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