Federal Express

Federal Express

Executive Summary

FedEx provides many benefits to its customers. The shipping industry, however, is one of extreme competition. Not only are customers confronted with the choice of carrier, they are also confronted with a choice of means of shipment. It is further complex, as the pricing strategy of the sector has companies, for instance, who lead cost in one form of shipment such as ground and follow in another form of shipment such as international delivery. FedEx foresaw the importance of differentiation early on, as did most of the sector players. FedEx realized that it was in the information business. Customers are not only concerned with the product getting from point A to B, but further, are interested in the knowledge of where the cargo originated from, its present whereabouts, destination, estimated time of arrival, price and cost of shipment. All these elements are just as important to some businesses and consumers as receiving a safe delivery. To support this need, and differentiate itself from competitors, FedEx created state-of-the-art technology for customers to track and validate shipments. Shipments are virtually traceable from their origin to their destination all with the convenience of the personal computer. Additionally, FedEx has forecasted the important strategic trend of a continuously global shipping market. The differentiation of products is a continuous process in this competitive industry as innovations are often quickly imitated. FedEx strives to develop innovations and listens to customers wants and needs.

Table of Contents

Question 1:5

Question 2:7

Porters Generic Strategies8

Risk of new entry by potential competitors8

Extent of rivalry between established firms9

Bargaining power of buyers9

Bargaining power of suppliers10

Threat of substitute products10

Question 3:10

Question 4:13

Question 1:

Federal Express is the largest provider for overnight mail delivery in the United States. The company employs approximately 145,000 purple-blooded workers. With more than 600 aircraft, among them the most sophisticated models from Airbus and Boeing, Fed Ex transports more than 3 million packages every day. Under the unique hub and spoke system most of the packages are flown from various destinations to the International Airport in Memphis, where the company's main headquarters is located.

A huge team of workers sort incoming packages every night with the help of an advanced conveyer belt system. During a four-hour window, (the time span until the planes have to leave again), the mail was sorted by destination. Every night at 2:50 A.M. the first airplane leaves Memphis again and, for more than an hour every minute another plane takes off. Fed Ex with its giant hub in Memphis is a very sophisticated logistic provider(www.ups.com/content/us/en/about/facts/worldwide).

Its customers can rely on the promise that each package will be delivered by 10:30 A.M. the next morning. While the package is on its way customers can trace it almost every inch of its journey. Fred Smith, the founder of the company, demands that his workers “treat every package as if it were the last package Fed Ex will ever handle”. Customers appreciate the service and reliability of the company and pay more compared to prices of ...