1. How has Fedex managed to maintain technical superiority (i.e., reliability, service, package tracking, etc.) in its industry? Can Fedex continue to do so in the future? Why or why not?
FedEx innovativeness has been one of their most prominent competitive advantages. They were the first to introduce overnight business delivery, the service they remain market leaders in even today. FedEx was also the first to recognize the need for customers to track packages, by creating Customer Oriented Services and Management Operating System (COSMOS), which provided information about the status of the delivery. Today SenseAwareSM solution gives an opportunity to monitor shipments in almost real-time , including their temperature location etc. FedEx is extensively using internet technology by providing the opportunity to send shipments through their websites, prepare required documentation and check the cost structure online. Their supply chain is based on the latest technology, with the use of automated sorting, label identification and storage. It allows lowering shipping costs and reducing the impact of human errors.
Although advance technology and low operating costs are often the determinants of success, they cannot be the cornerstone of competitive strategy. With the delivery of documentation decreasing, FedEx is losing the market segment, where it always had competitive advantage. Moreover, the ownership of fixed assets (planes, trucks etc.) may reduce the cost in the short-run, however it hinders company flexibility in adjusting to the changing market environment. Furthermore, technology today is developing very fast, can be easily copied by competitors and goes obsolete in very little time. Therefore, FedEx should concentrate more effort on promoting the brand, developing closer customer relationships and redesigning their product offering, in order to stay competitive even with the loss of documents delivery business. Although technological superiority is necessary for future success, it is rather a “hygiene” factor, than a source for competitive advantage in the future market.
2. Give examples of two prominent crises FedEx could face in the future. What steps should the company take to prepare for these crises?
One of the crises, which would affect FedEx is the increase in fuel prices. As transportation is largely based on the fuel consumption, sharp increase in prices would force the company to raise prices for their delivery services. Consumers are likely to decrease consumption under these circumstances. In order to prepare for this crisis, FedEx should invest in more sustainable technology and optimize their supply chain. Reducing operation cost through process optimization will allow maintaining a stable price, without the need to squeeze company’s margins.
Another crisis for FedEx can be the substitution of their services. Their core competence is the overnight delivery of small packages, mainly documentation. However, with the development of electronic documents and email communication, mailing documents is becoming obsolete in the modern world. Therefore, in order to remain competitive in the market, FedEx should emphasize other services in its portfolio. Thus, the delivery of small packages, mainly for online retailers, is currently dominated by UPS in the market. However, this segment is one of the most promising, considering the rapid development of online shopping. FedEx should consider this current market trend and create strategic plans for product diversification and developing competitive advantage in other areas.
3. Suppose you are the CEO of a start-up firm in the package delivery industry. You have plenty of capital to work with, but little infrastructure and no management team in place. What strategy would you pursue and why?
In order to determine the strategy to pursue for a small package delivery firm, it is necessary to identify its strengths and weakness, as well as to evaluate the external opportunities and threats of the market environment. The major strength of the company is capital abundance, thus it is able to purchase delivery vehicles, hire sufficient number of employees etc. Secondly, we can make an assumption that the small firm intends to operate locally, where it has significant competitive advantage in better market knowledge, compared to the big global delivery services. On the other hand, the current situation of the firm implies a number of weaknesses. The company does not have a recognizable brand and a customer base, therefore in the short-run it will be hard to convince people to use their service. The absence of management team makes it impossible to create a sound competitive strategy and to aim at full-scale competition with the firms, which have already established package delivery services. The absence of sufficient infrastructure also hinders independent development of the company. As it takes long time to set up infrastructure systems, it is impossible for this company to establish itself in the market in the short-run. External environment also possess a number of threats. Thus, strong competition from bigger and well-known companies can become a significant market entry barrier. However, fast development of online shopping and the need of fast deliveries is the opportunity, which may contribute to the company success. Based on these findings, the most reasonable strategy for the company is to cooperate with a bigger service provider or a freight forwarder. In this case, it will reap the benefits of the common infrastructure use and get the necessary volumes due to the established reputation of the partner company. Moreover, this cooperation may assist in selecting strategic and operational plans, thus mitigating the negative impact of the absence of management. In return it will provide delivery services in the local area, thus employing the advantage of the local area knowledge and employ the available capital.
References
Birla, M. (2005). Fedex delivers: how the world's leading shipping company keeps
innovating and outperforming the competition. Hoboken, United States of America:
John Wiley& Sons, Inc.
El-Khamy, M., & Golubov, E. (2005). Fedex in the global market. Informally published
manuscript, California Institute of Technology, Pasadena, California. Retrieved from
http://www.scribd.com/doc/19630069/Fed-Ex
FedEx, Initials. (2011). Fedex innovation. Retrieved from
http://about.fedex.designcdt.com/our_company/fedex_innovation
Frock, R. (2006). Changing how the world does business: fedex's incredible journey to
success-the inside story . San Francisco, Unites States of America: Berrett-Koehler
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