International Strategy Fed Ex Presentation

International StrategyInternational Strategy

The Case of FedExThe Case of FedEx

By Albin Pinard By Albin Pinard

Msc International Business Msc International Business DevelopmentDevelopment

ContentsContents

International Strategies:Strategic Choices International Strategies:Strategic Choices ReviewReview

FedEx Background InformationFedEx Background Information Why a Global Strategy for FedEx ?Why a Global Strategy for FedEx ? ConclusionConclusion

Strategic Choice Framework: Strategic Choice Framework: Strategic Choices ReviewStrategic Choices Review

4 different strategic choices:4 different strategic choices:

Multi-domestic strategyMulti-domestic strategyHigh local responsiveness / low cost reduction pressures/based onHigh local responsiveness / low cost reduction pressures/based onDecentralization/products and services tailored to local marketsDecentralization/products and services tailored to local markets International strategyInternational strategyParticularly adapted to firms which enjoy a valuable coreParticularly adapted to firms which enjoy a valuable corecompetence that competitors in foreign markets don’t havecompetence that competitors in foreign markets don’t have Transnational strategyTransnational strategy

Adapted to firms which want to Adapted to firms which want to simultaneously simultaneously achieve low costachieve low costand differentiation advantages.This and differentiation advantages.This strategy remains hard tostrategy remains hard toimplement because both pressures are often in conflict.implement because both pressures are often in conflict. Global strategyGlobal strategy (FedEx,Texas Instrument) (FedEx,Texas Instrument)

Global Strategy AspectsGlobal Strategy Aspects

Standardisation (products/services)Standardisation (products/services) Uniform Marketing (homogeneity of customer Uniform Marketing (homogeneity of customer

response to the marketing mix)response to the marketing mix) Large geographical coverageLarge geographical coverage Based on cost reduction strategies (scales Based on cost reduction strategies (scales

economies/Scope economies/Location economies/Scope economies/Location economies/Learning Curves)economies/Learning Curves)

Adapted to low responsiveness demand locationsAdapted to low responsiveness demand locations

Source: Yip,G.S (1989) and Source: Yip,G.S (1989) and Viswanathan & Dickson Viswanathan & Dickson (2007)(2007)

FedEx Background InformationFedEx Background Information

Nationality: USANationality: USA Since 1973 /International presence since 1984 (FedEx Since 1973 /International presence since 1984 (FedEx

made the express delivery industry)made the express delivery industry) Activity: Activity: Express delivery of packages and documents worldwideExpress delivery of packages and documents worldwideThird party logistics provider (supply chain solutions)Third party logistics provider (supply chain solutions) Annual revenue 2007: $ 35,214 (million)Annual revenue 2007: $ 35,214 (million) Presence in 220 countries and 375 airportsPresence in 220 countries and 375 airports 3,3 million package shipped everyday3,3 million package shipped everyday 679 aircrafts (biggest fleet in the industry), 43500 679 aircrafts (biggest fleet in the industry), 43500

trucks and 15 international hubstrucks and 15 international hubs 260 000 employees worldwide260 000 employees worldwide Main competitors: DHL,UPS,TNTMain competitors: DHL,UPS,TNT

Pushing the standardisation to its Pushing the standardisation to its maximum (very law local responsiveness maximum (very law local responsiveness in the express delivery industry)in the express delivery industry)

Focusing on cost reduction strategiesFocusing on cost reduction strategies

Centralized control: Top management Centralized control: Top management takes all the decisions takes all the decisions

Extending its geographical coverage Extending its geographical coverage through acquisitionsthrough acquisitions

Forcing air deregulationForcing air deregulation

Why a global strategy is the most Why a global strategy is the most appropriated one for FedEx ?appropriated one for FedEx ?

Total standardisationTotal standardisationServices and delivery methodsServices and delivery methods Very similar demand worldwide/low local responsivenessVery similar demand worldwide/low local responsiveness

ISO 9001 certificationISO 9001 certification Reinforce the standardisation of the FedEx’s Services worldwideReinforce the standardisation of the FedEx’s Services worldwide

Marketing Marketing PricingPricing: same prices worldwide: same prices worldwide AdvertisingAdvertising:global advertising campaign « :global advertising campaign « Relax It’s FedExRelax It’s FedEx » »

Standard TechnologyStandard TechnologyInternational compatibility of wireless applications International compatibility of wireless applications FedEx SuperTracker : shipping information available to FedEx SuperTracker : shipping information available to

employees and customers worldwideemployees and customers worldwide FedEx e-business website (international standard technology)FedEx e-business website (international standard technology)

Cost Reduction Through Scope Economies:Cost Reduction Through Scope Economies:The FedEx’s The FedEx’s Hub and Spoke NetworkHub and Spoke Network

The optimal combinaison of transport modes (aircraft + train/trucks) The optimal combinaison of transport modes (aircraft + train/trucks) allows Fedex to achieve scope economiesallows Fedex to achieve scope economies

International hub

Cost Reduction Through the Experience CurveCost Reduction Through the Experience Curve

Cost reduction achieved over the time thanks to:Cost reduction achieved over the time thanks to:

Experience of FedEx in its industry (first mover-Experience of FedEx in its industry (first mover-advantage)advantage)

Learning effects through learning by doingLearning effects through learning by doing- Better knowledge of international routes (gain of time) Better knowledge of international routes (gain of time) - Decrease of the number of lost packages over the timeDecrease of the number of lost packages over the time

2008

Delivery time

1973 Time

Through Scale EconomiesThrough Scale Economies

Recent acquisition of 9 Boeing A380 carry 300,000 lbs of freight (twice as much as the previous MD-11 model)

Single marketing strategy: significant economies of scale through advertising and R&D

Extension of the Geographical Coverage Through Extension of the Geographical Coverage Through Acquisitions of Local Freight CompaniesAcquisitions of Local Freight Companies

2 recent exemples:2 recent exemples: 2006: acquisition of HLC Holdings Ltd (UK) 2006: acquisition of HLC Holdings Ltd (UK) FedEx FedEx

gains the coverage of 80 UK cities + 2200 vehiculesgains the coverage of 80 UK cities + 2200 vehicules 2006: acquisition of DTW (China) 2006: acquisition of DTW (China) allowed FedEx to allowed FedEx to

touch 300 new cities in Chinatouch 300 new cities in China

Acquisitions of freight companies allow FedEx to :Acquisitions of freight companies allow FedEx to : Increase its customer base/fleet/resourcesIncrease its customer base/fleet/resources Enjoy the benefice of an already existing businessEnjoy the benefice of an already existing business

quicker access to marketquicker access to market

By Forcing Air Cargo DeregulationBy Forcing Air Cargo Deregulation

Leading role in Lobbying air deregulation Leading role in Lobbying air deregulation

U.S Air Cargo Deregulation Act 1977U.S Air Cargo Deregulation Act 1977

Encouraging U.S government to include Encouraging U.S government to include air cargo rights in its negotiations with air cargo rights in its negotiations with countries in which FedEx wants to countries in which FedEx wants to operate operate

Open Skies Agreement with China in Open Skies Agreement with China in 20052005

Matrix StructureMatrix StructurePros:

- Speed up the decision-making- Reduce bureaucracy- More interdepartemental communication

Cons:- Generate conflicts- Does not allow long-term working relationships

Through CentralisationThrough CentralisationFedEx’s Worldwide Area StructureFedEx’s Worldwide Area Structure

HeadquartersMemphis (USA)

Middle East and AfricaDivision

USADivision

Latin AmericaDivision

CanadaDivision

Asia PacificDivision

Tight control:

- Facilitate coordination- Consistency of decisions- Avoids Duplication- Easier to make change

Pros:Pros: First-mover advantage in its international expansion First-mover advantage in its international expansion

(since 1984)(since 1984) Core-compentences based at home (no outsourcing)Core-compentences based at home (no outsourcing)Significant E-business advance of FedEx Significant E-business advance of FedEx KEY strengh KEY strenghas Internet reinforces standardisationas Internet reinforces standardisationCons:Cons: Cross cultural problems increase with global strategyCross cultural problems increase with global strategy management innefectivemanagement innefective Global strategy increases the FedEx reliance onGlobal strategy increases the FedEx reliance onNational regulations (especially towards air regulation)National regulations (especially towards air regulation)

““Regulations have a strong impact on the ability of aRegulations have a strong impact on the ability of acompany to standardize” (Visvanathan and company to standardize” (Visvanathan and

Dickson,2007,p.55)Dickson,2007,p.55)

ConclusionConclusion