Internal Analysis of FedEx

FedEx is known for its distinctive competencies of brand equity, strong infrastructure
and established commitment to innovation and technology. Matt Boyle stated in Fortune,
“FedEx has successfully transcended its image as simply an air express carrier…to become a
one-stop shop for any shipping need…FedEx’s stock [is] up almost 30% for the year…while
UPS’s stock is up just 19%...FedEx [has] won the hearts and the minds of the broad business
audience this year… ” (Fombrun, C.J. and Van Riel, C.B.M., 2003). The FedEx brand has
gained worldwide reputation such that whenever a company or individual wants to send a
package in a timely manner, they would say “FedEx it”. A lower percentage of customers
would choose UPS or DHL as their priority choice.

Innovation is the very fabric of FedEx throughout history and FedEx sees it as a
sustainable business strategy for the future. FedEx has a core competency of high technology
applications in all its applications. The organization embraces not only new technologies but
also innovates technologies, best tailored for the competitive advantage of the nature of the
business service. Customers have the convenience of tracking their parcel delivery process
via the internet, which saves a lot of time going through a telephone automated service.
Besides, this service gives customers a sense of security when they are assured that their
packages have been delivered and the delivery information can be easily accessible. FedEx is
dedicated to provide the best delivery service and to sustain a competitive edge by sharpening
its technology upgrades, evidenced by its partnership with the University of Memphis to set
up the FedEx technology institute, with an objective to develop the newest technologies
(http://about.fedex.designcdt.com/our_company/fedex_innovation). In addition, FedEx has
provided customer value when it extended the drop-off times to cater to customers’ needs. On
top of value-added services, FedEx guarantees money back to customers for late deliveries,
hence, building client-relationship trust.

Compared to its competitors, Fred Smith of FedEx made bold moves to acquire
extensive fleet of aircraft. One of which, is the acquisition of Flying Tigers in 1989, giving
him a clear advantage in the Asian Air Express market
(http://www.latinamericanlogistics.org/articles/ups-fedex-dhl-tnt---who-will-dominate-the-
world-of-logistics.htm). Its extensive hub and spoke network extended its global reach to
more than two hundred countries in the world. FedEx has spent over $1.5 billion in 2003
alone to create a worldwide network of hubs, airplanes and trucks. This was costly for its
competitors to imitate. Given that FedEx owns a large market share, the threat of it cutting
prices would heighten barriers of entry for new entrants.

FedEx and UPS are very close rivals and are tracking each other’s movements in the
market fanatically. Both are comparable in terms of market research and having centralized
organizations with annual business planning processes decided by their headquarters. Both
organizations leveraged on investment in organization and employee development, rooted in
strategic planning culture. However, FedEx has a unique 360 degree HR management system
which is rare to its competitors (http://www.latinamericanlogistics.org/articles/ups-fedex-dhl-
tnt---who-will-dominate-the-world-of-logistics.htm).
 (Source: http://www.themanager.org/models/valuechain.htm)

A quick analysis of the FedEx activities in the value chain:

• FedEx has world marketing talent, being run by its founder who has takes swift and
bold strategies.

• The leverage of its global IT network allows it to service corporate accounts on a

global basis.

• Its rare 360 degree management system encourages best HR management for
employees and also organizational stability, critical in the operations of the value
chain as well.

• Its active procurement optimization initiative has saved millions of dollars, right down
to the bottom line.

Alike its competitor UPS, FedEx has also been able to maintain its independence and
adopt a centralized command and control structure from the beginning. Having similarities of
a strong revenue base, long term strategic plans and several acquisitions, FedEx’s weakness
stems from the fact that it is unable to differentiate from its rival, UPS, to gain a bigger
foothold of market share and become the market leader. In fact, FedEx’s constant huge
investments in infrastructure would prevent it from lowering its prices to gain a bigger market
share.

Applying the VRIO framework proposed by Barney (2002) to FedEx, FedEx services
do provide customer value and competitive advantage, but only for a period of time. Except
for its 360 degree HR management system, its competitors do possess the similar resources,
capabilities and competencies. Its extensive fleet of aircraft is costly for its competitors to
imitate which sustains its competitive advantage in the industry. Besides, the firm is highly
organized under the command and control structure to exploit resources. Centralization is not
beneficial in itself but it facilitates strategic planning, which allows economies of scales. This
would enhance benefits to every component of the value chain
(http://www.latinamericanlogistics.org/articles/ups-fedex-dhl-tnt---who-will-dominate-the-
world-of-logistics.htm). To an extent, I would say that FedEx has a competitive advantage
above its competitors but it might not sustain as a market leader without strategic planning.

Bibliography

Fombrun, C.J. and Van Riel, C.B.M., 2003. Fame & fortune: how successful companies build
winning reputations. Financial Times Prentice Hall Publisher.

Barney, J.B., 2002. Gaining and Sustaining Competitive Advantage. 2nd Ed. Prentice Hall
Publisher.

http://about.fedex.designcdt.com/our_company/fedex_innovation

http://www.themanager.org/models/valuechain.htm

http://www.latinamericanlogistics.org/articles/ups-fedex-dhl-tnt---who-will-dominate-the-
world-of-logistics.htm