Factors Behind the Success of FedEx: An Analysis of Strategies
FedEx was so successful in Asia because its founder Fred Smith identified that they need to make changes and implement new strategies to become mobile and flexible which would help to cater to all the changing demands and requirements of the customer. He figured out that for the above to implemented and show good results they need to be present everywhere so that they are in reach of the customers. So, they started series of buyouts in that region. The next step they took was to implement innovative technologies, creating a seamless experience for international customers using its services.
Fred Smith realised in 1984 that China will is the next growing market, so he decided to open an office in China. FedEx became the first express carrier to be linked electronically with China customs in 1994. IN 1996 FedEx was first to operate a United States – China all-cargo route and in the same year they started flying their own aircraft to serve the China market and by 2007 FedEx announced domestic services in China and became a wholly foreign owned enterprise in China. (Ying, 24 July 2018).
In 1989 FedEx bought Tiger International Inc. for 895$ million which was struggling at that time. The advantage was that it had rights to fly into any Asian airport and a management team which was familiar with the Pacific rim. This decision was not appreciated by others as they thought this would be a big risk but instead it helped FedEx network to grow and soar their business in different parts of Asia. In 2006 FedEx bought Tanjin Datian W Group for 400$ million which was the partner of Tiger International Inc. and eventually giving them full control of their fleet and 89 distribution hubs. Also, it gave them access to China’s secondary cities that were being linked to global economy as the manufacturers were shifting their factories in these secondary cities to escape high labour cost.
One of the major things contributing to the FedEx success in Asia is its IT system which was so good and advanced that it could give customers seamless clearance through customs and would help them in tracking their shipments. This technology was developed by their own through its large IT team. We could say that it was Fred Smith whose strategies and right decisions helped the company to grow and become successful in the market.
FedEx is a company which basically transports goods from one location to another using different modes of transportation. Currently FedEx has a lot of competitors but only few were able to generate more revenue like UPS, DHL and USPS. These competitors have more market share than FedEx but due to some of its ways of doing business people still prefer FedEx.
If a customer wants things to reach on time they always chose FedEx and the IT system developed with FedEx is so advanced that the customer never faces any difficulty using its website and tracking their products. (Wood, 22 Feb 2017)FedEx also started giving options to their customers for the dispatch of the package like when you want to ship the goods overnight shipping option was introduced.
From the above we can say that the competitors can imitate FedEx’s approach in all points except one thing, the one thing which is difficult to imitate is its IT technology. This is the most essential part of the FedEx’s success. All its competitor can build their own IT team but it will not be easy and would involve a lot of time and fortune. So we can say that it’s difficult for the competitors to imitate FedEx’s approach.
It was the best decision in the interest of the company to move its hub from Philippines to one in Guangzhou, China. China’s market was more prosperous than that of Philippines and Guangzhou was one of the China’s fastest-growing manufacturing districts. In an interview FedEx executive mentioned that the opportunities in China, especially the Pearl River Delta region that produces a third of China's exports, is very high. That is the main reason that the Baiyun International Airport in Guangzhou was chosen as a freight-handling center. Also, it was home of China Southern Airlines, the mainland's biggest domestic air freight handler. (Buckley, 2005)
- Ying, W. (24 July 2018) FedEx: Competition good for innovation - Chinadaily.com.cn. Available at: http://www.chinadaily.com.cn/a/201807/24/WS5b568d77a31031a351e8fbe9.html (Accessed: 23 September 2018).
- Wood, M. (22 Feb 2017) Comparison of Shipping Services, business.com. Available at: https://www.business.com/articles/fedex-vs-ups-vs-usps-head-to-head-comparison-of-shipping-services/ (Accessed: 23 September 2018).
- Buckley, C. (2005) ‘FedEx to move Asia center to China’, The New York Times, 14 July. Available at: https://www.nytimes.com/2005/07/14/business/worldbusiness/fedex-to-move-asia-center-to-china.html (Accessed: 23 September 2018).