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Introduction
Federal Express achieved a great deal of success in the 170's with a pioneering approach to overnight delivery of letters and packages in the U.S.A. After several booming years of catering to customers needs, FedEx's growth in the United States slowed considerably. This was due to direct competition from United Parcel Service, and the increased popularity of the fax machine. At this time FedEx founder, Fredrick Smith began to look elsewhere for opportunities for new growth.
Problems
FedEx made more than 0 international acquisitions, including courier services and trucking operations. But strong overseas rivals, DHL Worldwide Express and TNT were becoming deep-rooted in Europe. In addition, government regulations posed a problem, resulting in a million dollar a month loss for an entire year. In 188, FedEx acquired Tiger International, the worlds biggest air heavy-cargo company, which included the Flying Tiger Line. However this acquisition brought a number of challenges
· The move more then doubled FedEx's debt
· Tiger's system was designed for slow-moving, heavy freight a sharp contrast to FedEx's high speed network
· European rivals were likely to also make global acquisitions
· FedEx stood to lose customers that had traditionally used Flying Tiger
It was clear that the European Market was much harder to crack then FedEx thought. They had a strong push from their competitors, but most importantly they overestimated the size of the market and failed to do market research on the what and how the European market would be utilizing their services.
Current Situation
S.W.O.T Analysis
Strengths
· Accomplished great success in the 170's, pioneering the service of distributing packages and letters in the United States.
· Successfully served customers for many years (170's-18, when rivals approached the market).
· The founder, Frederick Smith was very motivated and has a great desire to be the best; he has a goal to be, "the largest and best transportation company in the world" (5).
He also stated in 188 "We consider our international business to be as important as our domestic business" (5). This statement is showing his determination to be the best he can be in both markets.
· Strategically designated Flying Tiger to ship to international countries where no airport-landing restrictions existed.
· Managed to gain ability to operate in all 1 countries of the European Community, with this FedEx took advantage of reduced restrictions on surface transportation companies.
· Barge company painted FedEx's colours orange and purple on the barges
· FedEx was the first of three (DHL, UPS) to have a homepage accessible to its customers for gathering information and ordering pickups online.
Weaknesses
· FedEx found difficulty in dealing with rival competitors.
· They lacked research concerning obstacles in foreign countries and markets
a) Regulations for shipment time/weight
b) Protection of local carrier companies
c) Understated the complexity of expanding into European market
· Losses in four years totaled $1. billion which lead to firing 6600 employees and the closing of operations in 100 European cities.
· Overestimated size of market expected daily shipments to move toward US's level of million, unfortunately only reach 100,000 units per day.
Opportunities
· FedEx could research the market in other parts of the world where there is a demand for their service.
· With a competitive advantage, they could capture more market share in the existing market. They have an opportunity to stand distinct from their direct competitors.
· FedEx could obtain more overseas growth more effectively rather than develop the foreign business opportunities on its own, especially moving into Asia.
· They had to alter some parts of their operations according to the new markets needs.
Threats
· A major threat is their direct competitors DHL, TNT, and UPS as they went global as well.
· Technology became a threat in the early eighties when fax machines became a popular tool.
· Foreign government regulations
a) Japan was protected by local express carrier companies
b) Packages over 70 pounds were prohibited, even if en route to other destination
c) In result to these obstacles in Tokyo, a loss of $1 million dollars was taken
· Extreme debts of $880 million- Tiger International added to their debt and soon after increased the debt to $.1 billion.
· Tiger was designed for slow and heavy freight, opposite to the need of FedEx- fast, small packages.
· Overnight deliveries are not as popular in Europe as they are the US.
· Rivals picked up their business that they couldn't handle due to the cut back of operations in European cities.
P.E.S.T Analysis
Political
· Foreign governments in Europe and Japan had regulations concerning the weight of the packages. Packages must be less than 70 pounds to enter Japan even if en route to a destination.
Economical
· FedEx operations took over the US carrier businesses.
· Europe took a downward jump, eliminating 6600 jobs and 100 FedEx operations throughout Europe.
Social
· European cities were not as big on overnight deliveries. Their operations didn't have as great of demand as the US.
Technological
· Fax machines, email and cell phones may show to have an affect on FedEx.
With their website interaction, customers can reach them anytime, anywhere to retrieve information and make orders. Their website has many advantages such as 4 hour service and assistance as well as tracking their parcel's whereabouts.
Company Objectives
· To become the largest and best transportation company in the world.
· Consider international business to be as important as domestic business.
· Reassure Flying Tiger customers to do business with them after the acquisition.
· Seek additional growth over seas.
· Change some parts of its formula to meet the needs of its new market.
· Focus on the more lucrative small package overnight business.
Alternative Course of Action
1. Buy out all major competitors
pros
-could monopolize the industry
-could utilize the strengths that other companies have to offer
-could take over the UPS and TNT names and divide each name into a market group and offer different rates and guarantees
cons
-will be very costly
-will involve a lot of time and extensive paperwork
. Create a team of researchers to travel around the world and conduct surveys and use other methods of primary research to find out customer needs and wants
pros
-will be able to learn about cultural differences
-create awareness of the company
-learn about country laws
-learn about consumer demand and importance of freight in the communities
cons
-time consuming
-could be very costly
-results may not be essential enough for company success and will greatly increase debt
. Continue downsizing and reduce the amount of global transportation of packages to lower operational costs
pros
-less employees to pay as well as compensate for
-can compete at the same price levels as competitors to obtain greater market share
-may increase demand for global shipping and could re-enter the global market when the time is right
-concentrate more on return business
cons
-loss of a lot of consumers who rely on Fed Ex help keep their business running
-will be responsible for the unemployment of many people
-could be responsible for the bankruptcy of a foreign small business
-Fed Ex wants to be the largest and best shipping company
4. Create an edge that that no competitor can top, develop a promotional offer possibly a cross promotion with a new product that no consumer could resist
pros
-will gain market share
-won't be too expensive
-will possibly help a new product enter the market
-could help develop a larger database of one time users based on promotion
cons
-may actually deter consumers
-promotion may get beaten by competitor
-may not be a new product to promote
-may not work due to consumers brand loyalty for the competition
Recommendations
We feel that Fed Ex should consider buying out all major competitors and monopolize the industry. By doing this Fed Ex can set industry prices best suit the needs of the customers as well as their own. The competitors such as UPS, DHL and TNT all have individual strengths that no one else knows about whether it be primary research, customer data bases or large accounts. Fed Ex could utilize this information and create a corporation that is flawless and fast. They could offer royalties to the former company owners and develop a service that will reach individual markets based on individual company names. By doing this it will increase shipping productivity and possibly help the economy by providing more business transactions than ever seen before. Although time consuming and high costs of extensive paperwork, becoming one is like becoming an all-star team. All number one assets working together to be the best.
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