Executive Summary
FedEx caters to domestic growth and expansion strategies which they utilize upon acquisition of Tiger International. Focused service – as limited to single site because of talented employees, achieve an award winning performances. Thus, one identifiable upper hand regarding FedEx focused service (Chapter 14, p. 340) strategy through site element, it can’t be easily be duplicated elsewhere as focused process applies according to business standards and commitment to operation. Federal Express's acquisition of Tiger International in 1989 made the company the world's largest full-service all-cargo airline; six years later it bought Evergreen International Airlines, giving Federal Express aviation rights in China. The company has been so successful in its twenty-five years of existence that the name "FedEx" has become synonymous with the overnight delivery of packages and mail, representing level of corporate identity shared by a mere handful of major American companies. The acquisition of Tiger International, Inc. occurred in February 1989. With the integration of the Flying Tigers network on August 7, 1989, the company became the world's largest full-service, all-cargo airline. Included in the acquisition were routes to 21 countries, a fleet of Boeing 747 and 727 aircraft, facilities throughout the world and Tigers' expertise in international airfreight.
Assumptions
Smith wanted to build reliable overnight delivery system; few others thought it was possible. Smith had hoped to attract the business of the Federal Reserve System, but when that business failed to develop, the bankers and their advisers did not see how the company could ever work or make a profit Smith began to develop other markets in commerce, medical supplies, computer parts, and electronics, sell delivery service to potential customers.
Focused Service:
- Single Service
- Multi service
Service Delivery System
Operating Strategy
Service Concept
Target Market Segments
Year
The Acquisition
Overview
1984
Gelco Express International
FedEx dramatically expands its presence outside of the U.S. with the acquisition of Gelco Express, a worldwide courier with service to 84 countries
1989
Tiger International Inc.
With the integration of the Flying Tiger Line, FedEx becomes the world's largest full-service, all-cargo airline. The acquisition includes routes to 21 countries, a fleet of cargo aircraft including Boeing 747s, facilities throughout the world and Flying Tigers' expertise in international airfreight
The Report
1) Describe the growth strategy of Federal Express. How has this strategy differed from those of its competitors?
The value and application of business innovation recognizes FedEx on top of their corporate goals and tactics for a solid business environment. FedEx growth strategy is about focused service which begins in a single location with initial service concept as FedEx is focused towards delivering innovative and unique service for instance, noting Fred Smith’s vision of business and that has been use of single nub and spoke network to guarantee overnight delivery of packages in which FedEx is good at doing at, giving more value and satisfaction to customers (Chapter 14, p. 340).
The focused service strategy utilized by FedEx differed from those of competitors as others apply to diversified service networks that can be difficult to manage along with such complex tasking such as for example, being adopted by American Express, one rival of FedEx business. In addition, also in terms of attracting competition need to build customers in the local market area, FedEx uses and executes multi site and multi service growth, expansion strategies as focused network allows management to maintain control ensuring service consistency in locations of business. FedEx services required existence of network will be a part in order to enable FedEx service to function, and not be easy to replicate by rivals (Chapter 14, p. 341). Meanwhile, FedEx growth strategy is not the same with clustered service like used by United Services Automobile Association, which have risks towards service diversification of potential loss of focus and neglect of focal business (Chapter 14, p. 342) Further, several competitors of FedEx embrace the process and law pointing to franchising as such service the incorporation of quality in the service concept has been hallmark of agreement in a franchising base (Chapter 14, p. 343)
What risks are involved in the acquisition of Tiger Int'l?
“In December 1988, FedEx announced its intent to purchase Flying Tigers and in 1989 more than 40 years of air cargo experience were merged with FedEx, giving FedEx entry into additional twenty one nations and turned FedEx as the largest full service, all cargo airline” (Chapter 14, p. 360). Thus, FedEx lost money but revenues have surpassed in fiscal year of 1989 due to Tiger International Acquisition and thus, began global expansion when purchased Celco International during the year 1984 (Chapter 14, p. 358). There can be risks that are associated with single service location and be involved in the acquisition of Tiger International such as being captive to the economic growth and its future, being vulnerable to competition that move in as well as capture shares of FedEx into the market. Aside, risks found in management and control of the enterprise have to be put in consideration as it have simple ways than those of other strategies. Aside, there can possible risks of focused service applied by FedEx such as managing service network locations require ample and effective management skills and involves challenges of integrating communication base and control and that service ideas must be rationalized and communicated to unit managers and staff that does the execution of service on a daily basis. However, planning must precede multi site expansion like training preparations, launching market based efforts and so on and so forth. Thus, single growth using multi service strategy acquired by FedEx will allow Tiger acquisition to have attractive ground as there will be ability to reach the mass market as quick as possible. Presence of over expansion risks can also be possible and that FedEx will have loss of control that outcome in such business operation and management oriented failures (Chapter 14, p. 341).
3) In addition to the question of merging FedEx and Flying Tiger pilots, what other problems could be anticipated in accomplishing this acquisition? (4 problems)
Globalization of Service issues as FedEx was unprepared for government regulations and bureaucratic red tape as for instance, FedEx business took three years to get permission from Japan to make direct flights from the Memphis hub service to Tokyo and it can be that, FedEx obsession with tight central control also contributed to government based regulations and bureaucratic red tape (Chapter 14, p. 345).
Global and or international Expansion problem as did not result in an immediate global based success as in Asia planes were flying half their capacity due to some restrictions imposed on treaties and lack of back up planes in South American operations ad that many managers of the companies had quit as they were being acquired in Europe (Chapter 14, p. 359).
Leveraged acquisition more than doubled FedEx debt to approximately S2 billion as one of the largest dilemma faced by FedEx following Tiger merger was how to integrate the two workforces (Chapter 14, p. 359).
The largest overnight carrier and FedEx lost about million on its international business since the year 1985 but the acquisition in 1989 gave FedEx strong entry position into heavy cargo and access to 21 other countries (Chapter 14, p. 359). Price wars occurred with UPS’s entry into the overnight business that have reduced FedEx revenues as well as the company’s 0 million loss on Zapmail in 1986, FedEx revenue per package have declined to about 30.3 percent in 1983 and 1988 and that price cutting strategy of FedEx had run its course(Chapter 14, p. 359).
The continued overcapacity, low switching costs and high exit barriers (Chapter 14, p. 359). For instance, passenger airlines are re-entering the air cargo market with increased vigor, presence of technology advancement as facsimile machines for example have carved a large niche’ from the overnight document segment as well as improved databases enable companies to provide clients with valuable service and that is, improved tracking information on status of imperative shipments. The ability to purchase older planes and large unskilled labor pool helps to keep hub labor costs down, lack of available airport facilities as well as acquisition of government controlled access to crowded international hubs thus, presenting in of formidable challenge (Chapter 14, p. 359).
4) Suggest a plan of action that Fred Smith could have used to address the potential acquisition problems given in your answer to the previous question (4 action plans)
The need to adopt and execute world wide distribution channels, utilization of just in time (JIT) system as it argues for elimination of traditional inventory stockpiles as common to manufacturing (Chapter 14, p. 359). FedEx and its competitors have succeeded in contracting with manufacturers to supply the needed logistical enterprise to support the JIT system (Chapter 14, p. 360).
Powership Execution by means of simplifying daily shipping process, automated program tracks shipments, provides pricing information and prints invoices. At FedEx, customer automation is expected to play an increasing significant role, tying up technology based innovations with reliable on time delivery, FedEx is achieving the goal of getting closer to their customers (Chapter 14, p. 360).
Strengthen Corporate Culture by putting effective heights to unionization attempts as such in 1976 the International Association of Mechanics and Aerospace who have rejected the offer and so FedEx pilots rejected an offer by the Airline Pilots Association during the same period (Chapter 14, p. 360). Upon having FedEx service mix boosting its traditional express package, delivery business. Merger fit in nearly with company’s plans to focus on higher margin box business while shifting away from document service (Chapter 14, p. 360). Merger and capital intensiveness of heavy cargo business made FedEx more vulnerable to economic swings and downturns as well. Although merger meshed into FedEx plans, the company is still new comer to heavy cargo market (Chapter 14, p. 360). Premerger Flying Tigers customers were competitors that used Tigers to reach markets as like FedEx had no service and or could not establish service. FedEx had to integrate the 6,500 unionized Tiger workers into a union free company (Chapter 14, p. 360).
Execute service standardization and customization, when internationalizing services relatively more services must need to be adapted to the host country environment. However, it may be more difficult for FedEx to standardize services to the extent that goods can be standardized and marketed globally (Samiee, 1999; McLaughlin and Fitzsimmons, 1996; Lovelock and Yip, 1996). Whether, marketing domestically and internationally, the need to realize that attaining quality superiority can lead to important strategic benefits including greater customer loyalty, greater productivity and responsiveness to demand, market share improvements and building competitive advantage (Lovelock and Yip, 1996). Businesses are increasingly recognizing the importance of identifying service quality dimensions in enhancing their competitive abilities and providing a strategic advantage in their industries in international markets. Furthermore, customization can be done simply because it attracts higher price and higher profit, in relationship closer to spot market and organizations may become involved in customized or specialized products as way of forcing themselves to develop new capabilities making one of customer automation services in lieu to the standards of specific export market territories (Kotha, 1995 p. 38) wherein customization is used as an entry barrier, the relationship with and sales potential of each customer and the cumulative effect on the operation of all such customers’ needs must be carefully monitored, so that either conscious change to operations can be made to support it. Then, customization can be the vehicle for learning requires care in ensuring that lessons learned are valuable and truly transferable and that the people involved are those best placed to affect the transfer (Lampel and Mintzberg, 1996 p. 26).
Customization must also be considered from architectural and nonfunctional perspectives such as factory pattern supports mapping objects and data to interoperate with legacy data and applications, for example. The development of customizable systems requires specification of growth expansion for FedEx based integrated applications in enterprise with specifications for the common components used to build these applications and configuration rules for developing applications and solutions the center of development and deployment of customizable systems is the notion of commonality and variability analysis put in a customization life cycle of FedEx mix service domain.
FedEx need to centralize sales, marketing, customer service and information technology support for FedEx Express and FedEx Ground, new subsidiary named FedEx Corporate Services formed and began operations in June 2000. FedEx Corporation is the premier provider of shipping and information services worldwide, and its companies function under the motto of ‘operate independently, compete collectively and manage collaboratively’, as operating independently, each company can focus exclusively on delivering the best service for its specific market. Competing collectively under the trusted FedEx banner ensures that all of the companies benefit from one of the world's most recognized brands.
FedEx can produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information 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 relationships with its employees, partners and suppliers as FedEx corporate based activities will be conducted to the highest ethical and professional standards as noting in specific options as below.
- Create network operations center and digitally connected network
- Utilize technology as competitive weapon, customer-facing systems
- Segment and tailor its services to corporate, mobile professional and retail customers.
- Establish world class, professional sales force targeting the lucrative commercial print market
- Implement hub and spoke stores in local markets to better utilize equipment and capacity.
- Broaden product and service offerings to meet the growing needs of its customer base.
References
Kotha S (1995) Mass customization: implementing the emerging paradigm for competitive advantage", Strategic Management Journal, Vol. 16 pp.21-42
Lampel J and Mintzberg H (1996) Customizing-customization, Sloan Management Review, pp.21-30
Lovelock CH and Yip GS (1996) Developing global strategies for services businesses, California Management Review, Vol. 38 No.2, pp.64-86
McLaughlin C and Fitzsimmons J (1996) Strategies for globalization service operations, International Journal of Service Industry Management, Vol. 7 No.4, pp.43-57
Samiee S (1999) The internationalization of services: trends, obstacles, and issues, Journal of Services Marketing, Vol. 13 No.4/5, pp.319-28
FedEx Website example URL: http://about.fedex.designcdt.com/our_company/company_information/mission_statement
Chapter 14. Growth and Globalization of services pp. 340-360
Interesting NewsCredit:ivythesis.typepad.com
0 comments:
Post a Comment