Asia Pacific: Developing Fedex S Presence in the World S Largest Air Freight Market

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Asia Pacific: Developing FedEx’s Presence in the World’s Largest Air Freight Market

Table of Contents

About the Team______4

ExecutiveSummary______6

About FedEx Corporation______7

History______7

Mission Statement______7

Leadership______8

Strategic Leadership______9

Organizational Culture______10

Social Responsibility______10

Supply Chain and Logistics______10

Competetive Advantage______11

Analysis______12

Internal Factor Analysis Summary______12

External Factor Analysis Summary______12

Strategy Formulation______13

TOWS: Possible Strategies______13

Asia-Pacific Strategy______14

Implementation______14

Evaluation______17

Pre-Launch______17

Post-Launch (Immediate)______19

Post-Launch (36 Months)______21

Controls______22

Success/Failure______23

What We Learned______25

References______26

Appendix______28

Table 1.1______28

Table 1.2______29

Table 1.3______30

About the Team

Jackson Willingham

Born and raised in Eastern Washington, Jackson Willingham is a Business Administration Major. Jackson is a former lifeguard and swim teacher who is CPR and First Aid certified. He has also recently earned his Emergency Medical Technician license. His passion is helping others and his dream career is in Medical Administration. When he is not studying for college, you can usually find him walking his Australian Cattle dogs, Bentley and Lexus, or reading World War II history.

Jack Reiswig

Jack is a native of Coeur d’Alene and this is his second time around attending college. He is married to his high school sweetheart and they have two wonderful children ages 11 and 9. Jack will graduate this Spring with a degree in General Business. With over 17 years in banking, getting his degree will hopefully increase the ceiling forpromotion and advancement. Jack hopes to advance his career with Wells Fargo and continue to learn and grow with the bank.

Andrew O’Dell

Andrew was born in Seattle and moved to North Idaho when he was six. After he graduated from High School, Andrew started working for a local home improvement store. Since then, he has been in retail management for over 15 years. Andrew will procure his bachelor’s degree in Business Administration with an emphasis in Marketing in the Spring of 2018. When Andrew is not busy with work or school; he enjoys playing sports, boating and fishing, and spending time with his wife and two children (ages 14 and 9). After Andrew acquires his degree, he hopes to get into real estate appraisal or another aspect of real estate.

Morgan Bueser:

Morgan is originally from the Seattle area, moving to the Coeur d’Alene area with her family in 2005. After taking a few years off from college, she decided to finish up her accounting degree at LCSC, beginning in the Fall of 2016. She plans on graduating in the Spring of 2019 with enough credits to sit for the CPA exams. She is currently interning at a small accounting office, working on tax preparation and bookkeeping for clients. In her spare time, she like to go on hikes and float the local rivers in the summertime with her fiancé, who she plans on marrying in late July of this year.

Executive Summary

Today’s marketplace is one without borders. To stay competitive, firms must find new ways to compete on a global level. In order to capitalize on opportunities in foreign markets, FedEx must expand its global operations and succeed in providing its customers with the most valuable services.

FedEx, a corporation that focuses the majority of its operations within the United States, has many opportunities to expand its global presence. The domestic US market accounts for approximately 75% of FedEx’s total revenues, while the Asia-Pacific market accounts for almost half of the total global air-freight market activity. It is imperative for FedEx to find ways to compete with firms outside of the United States and capitalize on opportunities abroad. FedEx has already made outstanding progress to achieve this objective. In the past five years, FedEx has acquired TNT Express, a vast European delivery service provider headquartered in the Netherlands. By coordinating its efforts within each of its functional departments, FedEx can successfully expand in the Chinese market.

The Asia-Pacific strategy, as developed by North Idaho Consultants, provides a comprehensive framework for FedEx’s expansion into China and is based on its unique strategic position in the delivery market. The team conducted a SWOT analysis to determine how FedEx can capitalize on its strengths and weaknesses while simultaneously responding to external threats and opportunities. This information was then used to arrive at four strategic options. From these options, a final strategy was chosen. Next, plans for its implementation, progress evaluations, and controls were drafted.

FedEx has a responsibility to its stakeholders to make decisions that are financially sound. This must be done while continuing to discover new ways to create value for its customers. The firm must also be mindful of how its operations impact each of its functional areas of business, which include accounting and finance, human resources, and customer service. The Asia-Pacific Strategy reflects each of these goals and provides a detailed plan for FedEx’s expansion in China.

About FedEx Corporation

History

FedEx was founded in 1971 in Little Rock, Arkansas by Frederick W. Smith. While in college, Frederick realized that it was not economically sound to rely on passenger routes to deliver packages that required faster delivery, which prompted him to purchase a small aviation company that would allow him to fly his own routes for deliveries. Federal Express officially began on April 17, 1973 with 389 team member and 14 aircraft. The company did not show a profit until July of 1975, but by 1983 they were reporting $1 billion in revenue.

Federal Express began immersing themselves into international operations in 1984, with limited service in Europe and Asia. In 1989, Federal Express acquired Tiger International, making FedEx the largest full-service, all-cargo airline in the world. This acquisition added 21 new countries to its already expanding footprint. In 1994, the company adopted the name “FedEx” as its official brand. The following year, through the acquisition of Evergreen International Airlines, they gained access to start delivering to China. In 2007, FedEx acquired Tianjin Datian W. Group as a joint venture with DTW International Priority Express, which launched a domestic express in the Chinese market.

FedEx continued with its plan of growth through acquisition by purchasing companies such as Caliber System, which included multiple subsidiaries. In the year 2000, FedEx changed the names of its different lines of business to what we now know today as FedEx Express, FedEx Ground, FedEx Custom Critical, FedEx Freight, FedEx Global Logistics, and the new FedEx Corporate Services. FedEx purchased Kinko’s in 2004, which expanded its retail access to all 1,200 Kinko’s locations.

In addition to the above-mentioned acquisitions, FedEx has also acquired ANC Holdings in the U.K. In 2016, FedEx purchased TNT Express, one of the world’s largest express delivery companies, causing FedEx’s presence in Europe, Asia, Africa, and the Americas to be exponentially expanded. FedEx purchased a total of 13 companies between 2006 and 2016, which has expanded them to over 220 countries served and over $60 billion in revenue.

Mission Statement

FedEx’s mission statement, according to the company website, is as follows:

“FedEx Corporation will produce superior financial returns for its shareowners by providing high-value-added logistics, transportation, and related business services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationship with its team members, partners, and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards.”

Leadership

Chairman and CEO

Frederick W. Smith is chairman and CEO of FedEx Corp., a $64 billion global transportation, business services, and logistics company. Smith is responsible for providing strategic direction for all FedEx Corp. and its operating companies, including FedEx Services, FedEx Express, FedEx Ground, and FedEx Freight. Since founding FedEx in 1971, he has been an active proponent of regulatory reform, free trade, and “open skies agreements” for aviation around the world. Most recently, he has advocated for vehicle energy-efficiency standards and a national energy policy.

President and COO

FedEx Services Leadership: Co-President and Co-CEO

David J. Bronczek is president and chief operating officer of FedEx Corp. Bronczek is responsible for marketing, sales, and all FedEx operating companies. He is a member of the five-person Executive Committee, which plans and executes the corporation’s strategic business activities. Bronczek is also co-president and co-CEO of FedEx Services, which provides sales, marketing, information technology, communications, customer service, technical support, billing, and collections services for U.S. customers of major FedEx business units and certain back-office functions that support other FedEx companies. Previously, Bronczek was president and CEO of Memphis-based FedEx Express, the world’s largest express transportation company.

Executive Vice President and CFO

Alan B. Graf Jr. is responsible for all aspects of the corporation’s global financial functions, including financial planning, treasury, tax, accounting and controls, internal audit, investor relations, and corporate development. He is also a member of the five-person Executive Committee, which plans and executes the corporation’s strategic business activities.

He served as executive vice president and CFO of FedEx Express. In addition to his involvement at FedEx, Graf also serves on the boards of directors for Nike Inc., Mid-America Apartment Communities, Inc., and Methodist Le Bonheur Healthcare.

Executive Vice President, FedEx Information Services, and CIO

FedEx Services Leadership: Co-President and Co-CEO

Robert B. (Rob) Carter is executive vice president of FedEx Information Services and chief information officer of FedEx Corp. He is a member of the five-person Executive Committee, which plans and executes the corporation’s strategic business activities. Carter is also co-president and co-CEO of FedEx Services, which provides sales, marketing, information technology, communications, customer service, technical support, billing, and collections services for U.S. customers of major FedEx business units and certain back-office functions that support other FedEx companies. Carter joined FedEx in 1993 and has over 35 years of systems development and implementation experience. Carter is responsible for setting the technology direction of the FedEx applications, networks, and data centers that provide around-the-clock and around-the-globe support for FedEx product offerings.

Strategic Leadership

The founder of the company, Frederick W. Smith, is the Chairman and CEO of the company. He is responsible for providing the strategic direction for all FedEx Corp. and its operating companies, including FedEx Services, Express, Ground, and Freight. He is currently advocating for vehicle energy-efficiency standards and a national energy policy.

Organizational Culture

FedEx has a culture which is best explained by P-S-P, or People-Service-Profit. This was started by the founder, Frederick Smith and still continues today. The philosophy means that if you invest in your people, they will provide superior service which will in turn generate profits. FedEx’s website describes this as a circular nature, the more invest in your people, the better service they will provide, thereby increasing profits that will allow you to continue to invest in your people.

Social Responsibility

Social Responsibility is important to FedEx, as evidenced by visiting its website. They have a Code of Business Conduct and Ethics which sets the bar at a high standard for conduct in the workplace, health, safety and environment, human rights, harassment and discrimination, conflicts of interest, and gifts and entertainment. They also have an environmental policy focusing on the long-term health of the company and planet. Earthsmart solutions helps integrate sustainable practices into its business to keep the focus on the customer while being environmentally conscious. When it comes to slavery and human trafficking, FedEx has a zero-tolerance policy that includes its customers, suppliers and contractors. In addition, FedEx has a Data Security and Privacy policy, as well as a Public Engagement Policy that encourages transparency regarding political campaigns.

Supply Chain and Logistics

FedEx is the supply chain for thousands of business throughout the world. With its stores, warehouses, ports, aircrafts, and other various transportation vehicles, FedEx strives to deliver the world in a time effective way.

Competitive Advantage

When a local FedEx manager, Brian Bippes, came to speak to our class in March, he explained the reasoning why FedEx Ground employees are independent contractors. This is to keep FedEx regulated as an airline rather than a transportation company, which is how UPS is classified. Pertaining to cost effectiveness, by having FedEx Ground workers as contractors instead of employees, it provides a competitive advantage for them since they do not need to offer benefits to these employees. Benefits are a huge expense to any company; however, when you have over 95,000 team members, as FedEx Ground does, those savings make a substantial difference to FedEx.

Analysis

The first step needed to develop an effective strategy for FedEx was to first analyze the internal and external factors that FedEx faces. Upon determining what these were, our team developed a detailed IFAS/EFAS table (See Table 1.1 in the Appendix) with each factor’s weight, rating, and total weighted score, which we briefly overview in the next few paragraphs.

Internal Factor Analysis Summary

Strengths: An internal analysis of FedEx revealed that the company has many strengths. Most notably, FedEx has the largest air fleet in the industry with over 650 aircraft. FedEx also has a strong brand image that is recognizable on a global scale. Additionally, FedEx uses innovative ways to serve its customers through its on-site locations and a mobile app that allows for the management of deliveries. Through its SenseAware technology, the firm has provided companies a highly secure and reliable means of shipping.

Weaknesses: In order to remain competitive in the delivery market, FedEx must also be aware of its weaknesses. FedEx has work to do to improve its market share in ground deliveries in the US market. UPS has a superior market share in the industry of 54.8% compared to FedEx’s value of 23.2%. The firm’s on-site locations are also in need of improvement. FedEx’s recent partnership with Walgreens has created a need for training and development among Walgreens employees. FedEx is also extremely reliant on the United States market, which accounts for 75.6% of its global revenues. This reliance on the domestic market has also caused the firm to miss out on opportunities in international markets. The Asia-Pacific air freight market, the largest in the world, represents an opportunity for FedEx that it has yet to capitalize on.

External Factor Analysis Summary

Opportunities: There are several opportunities for FedEx both at home and abroad. In the midst of an expanding e-commerce market, FedEx can find new and improved delivery methods to decrease operating costs. The firm has recently begun an initiative to improve its on-site locations that serve as a cost-effective method for customers to send and receive packages. On a global scale, FedEx must improve its presence and market share. Specifically, the Asia-Pacific market represents a prime opportunity for FedEx. On a domestic scale, FedEx can improve its Less-Than-Truckload fleet to more effectively compete with UPS. Finally, e-commerce represents a market with extreme profit potential for the firm. This is especially true with the presence of online retail giants such as Amazon, whose customers account for a high volume of deliveries.

Threats: FedEx has threats within the delivery market that it must respond to in today’s environment. Amazon, a firm that began by selling books, is now a vast organization involved in multiple industries. Following an announcement from the firm will begin offering delivery services, FedEx’s stock price decreased by 5%. FedEx is also competing with several other firms within the delivery market, including DHL and UPS. Although FedEx ranks number one in the United States air transportation market, it must be proactive in its response to these competitive forces. Increasing fuel costs are also a threat to FedEx. Potential fluctuations in crude oil prices can lower FedEx’s profit margins in the future. Finally, the threat of information security means FedEx must strengthen its technological capabilities. This represents a highly important issue that is crucial in maintaining customer trust and loyalty.

Strategy Formulation

TOWS: Possible Strategies for FedEx

By utilizing the information developed in the IFAS and EFAS, we were able to develop a TOWS chart (See Table 1.2 in the Appendix) to assist us in creating an innovative strategy for FedEx.

Strength-Opportunity Strategy: FedEx will need to continue to increase global operations and presence. After the acquisition with TNT, FedEx had the blueprint on how to have a successful acquisition, and it can reproduce that into other fruitful markets.

Strength-Threat Strategy: FedEx must find more cost-effective, innovative methods to compete with competition. With over 650 aircraft, FedEx has the largest fleet in the delivery industry. In addition, it has a highly established ground fleet in the United States. By leveraging these assets and improving shipping methods, FedEx can reduce both costs for its customers and the threat of competing firms such as UPS and Amazon.