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 The Bartlett

School of Construction and Project Management

MSc Project and Enterprise Management

Critical Reflections on the Strategic Management of FedEx Corporation

by

Saif Eddin Sayed Ahmed

January 2020

The Bartlett – School of Construction and Project Management

UCL Faculty of the Built Environment
2nd Floor 1-19 Torrington Place
London – WC1E 7HB
Declaration of originality

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plagiarism and that I may be penalised for submitting work that has been plagiarised.

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If I have been asked to submit hard copy, I understand that the work cannot be assessed unless both hard
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I declare that all material presented in the accompanying work is entirely my own work except where explicitly

and individually indicated and that all sources used in its preparation and all quotations are clearly cited.

Date: 5th of January, 2020 Signature: Saif Eddin Sayed Ahmed

Word count: 2998

The Bartlett – School of Construction and Project Management

UCL Faculty of the Built Environment
2nd Floor 1-19 Torrington Place
London – WC1E 7HB
1. Overview of Firm’s Current Strategy

FedEx Corporation (FedEx), a leader in the logistics industry specialising in courier services since 1973,
operates by offering comprehensive high value-added logistics, transportation and information services via
its group of companies (FedEx, 2019a). Headquartered in Memphis, USA, FedEx has a global reach to 220
countries; connecting 99% of world’s gross domestic product (FedEx, 2019d) and a global market share in
the courier and delivery services of 30% (Appel, 2019). This global presence, in conjunction with its robust
operational network, competitively positions FedEx at the top between its rivals (Marketline, 2018). The
corporation categorises its business operations into four business segments: FedEx Express (world’s largest
international express transportation company), FedEx Ground (North American day-definite low-cost
shipping), FedEx Freight (less-than-truckload freight shipping) and FedEx Services (FedEx, 2019d).

As a large multi-divisional corporation cutting through different business areas, FedEx follows a
combination growth strategy using diversification and portfolio extension through mergers and acquisitions
(M&A) while rapidly expanding areas of the businesses affected by e-commerce (FedEx, 2019d). This
enables them to attain a global footprint, establish new business relationships, enhance their capabilities
and increase their customer base (David and David, 2017). The FedEx family of businesses, despite 96.8%
of their revenues being from customers using two or more of the sister businesses, follow a decentralization
strategy of competing collectively and operating independently with varying business-level strategies
(FedEx, 2019b; Bhardwaj and Momaya, 2006) (see Appendix A). This, in return, allows them to be fine-
tuned to deliver the best service and value for the market segment served (FedEx, 2019d).

Nonetheless, the foundation of FedEx’s success starts with empowering its people (FedEx, 2018b). FedEx
has recognized that taking care of its people leads to better service quality to customers, which in turn leads
to more sales and associated profits that are reinvested in people and the growth of the corporation (FedEx,
2016; Maini, 2008). Therefore, FedEx’s leadership is committed to creating a high-performance culture by
nurturing its employees through their People-Service-Profit (PSP) strategy, which, according to FedEx
(2018b), is the key to FedEx’s future.

Following these strategies, FedEx has continually landed a position in the top four largest courier and
delivery companies in the world (see Table 1 and Figure 1). Nevertheless, globalization of trade, growth of
e-commerce and rapid technological advances have been restructuring the industry in which FedEx thrives
(FedEx, 2019d), especially after shifting from express business-to-business (B2B) market, which historically
represented the majority of FedEx overall revenues (FedEx, 2019c), to the less time sensitive business-to-
consumer (B2C) e-commerce market (FedEx, 2019f).

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This paper shall critically analyze FedEx’s strategies by reflecting them on the traditional strategy concepts
of industry, competitor and sustained competitive advantage, and then contrasting the strategies with
factors leading to greater strategic agility. Finally, the factors affecting the attainment of strategic agility
will be discussed.

2
2. Critical Assessment of the Firm’s Strategy and Recommended Changes

2.1 Reflections on Traditional Strategy Concepts Applied to the Firm

Strategy development for organisations can be confusing due to the wide variety of approaches that can
be adopted (Burnes, 2009). Nevertheless, Teece et al. (1997) outline three main traditional models of
strategy adopted by organisations in practice: (1) Competitive Forces model (focusing on industry), (2)
Strategic Conflict model (focusing on competitors), and (3) the Resource-Based model (focusing on
sustaining competitive advantages). In theory, using these models should place the organisation in a
sustained competitive position in a well-defined industry, exploiting valuable inimitable resources and
competencies to tackle the five forces in ‘Figure 2’, while constantly manipulating and out-maneuvering
competitors (Burnes, 2009).

Associated with Porter’s (1980, 1985) five competitive forces model, the first model encourages the
‘industry’ mindset, by which five competitive forces (see Figure 2) shape the industry within which the
organisation competes, influencing the strategy development (Johnson et al., 2008).

Despite being one of the most known models in practice, it is arguable if the forces are still relevant, as it
has been heavily criticized in recent years with industry boundaries becoming more fluid and in other cases
collapsing (Grundy, 2006; Dulčić et al., 2012). This has been reflected through a research by PwC (2016c);
“56% of CEOs across all sectors predict a large existing player from another industry to move into their
industry” (p.8), and the logistics industry is no exception. Unprotected by entry barriers (Pearlson, 2019),
this industry has been witnessing penetration from all directions by start-ups as well as giants from other
industries such as Google (David and David, 2017), Amazon (Malighetti et al., 2019) and Uber (PwC, 2016b).

3
On the other hand, another viewpoint of the five forces shaping the logistics industry regards them
becoming highly interdependent (Grundy, 2006). Due to the surge in e-commerce, the increasing
bargaining power of buyers reduces entry barriers (Denning, 2017). This encourages new entrants using
asset-light technology to either enter the industry, for example ‘crowd-sharing’, or come up with
substitutes to the market, such as drones and 3D printing (PwC, 2016b). Moreover, suppliers as well as
customers of the logistics industry, such as Amazon, are also turning into significant competitors (Malighetti
et al., 2019; PwC, 2016b).

Thus, being also viewed as inflexible and static (Miller, 1992; Thurlby, 1998), the industry approach would
leave FedEx at risk of the rapidly changing market place (Burnes, 2009), struggling to match the high-speed
advances in industry disruptions (PwC, 2016b).

Nevertheless, viewing the current courier service industry at a global level, three companies are mainly
driving it (Malighetti et al., 2019): FedEx, UPS and DHL, constituting 91% of the global market (Figure 1).
This oligopoly in competition results in strategic interdependence between competitors (Onghena et al.,
2014), encouraging the use of the second model; Strategic Conflict model (Teece et al., 1997).

Competition in this model is portrayed as war, where strategies are dynamic and implemented to out-
manoeuvre rivals and manipulate the market environment (Burnes, 2009). This competitor outlook fuels
FedEx’s predatory inorganic growth strategy through mergers and acquisitions of related companies;
penetrating rival territories to increase its global market share, for example: $4.4 Billion acquisition of
previous competitor ‘TNT’ increased FedEx’s global market share from 24% to 30% (MarketLine, 2019)(see
Figure 1).

Nonetheless, as discussed earlier, the competitive dynamics of the industry are changing (Malighetti et al.,
2019) with an increasing difficulty in telling who’s competing with whom (Moore, 1996). PwC (2016b)
promotes companies alliancing by sharing fleets and networks to enhance efficiency; a key-method to
FedEx’s penetration strategy of the Latin American and Chinese markets (DeOliveira et al., 2012). However,
Kim and Mauborgne (2016) advocate another approach: Blue Ocean Strategy, with a goal of not beating
competition, but instead making it irrelevant. Using this approach, FedEx can grow in untouched waters,
instead of fiercely competing in ‘red oceans’ trying to gain more share in existing demand (Pearlson, 2019).

4
However, orchestrating a strategy for sustained performance requires a third approach; ‘Resource-Based
Model’ (Fahy, 2000) (see Figure 3). This involves deploying superior unique resources and competencies
that provide the firm with a sustainable competitive advantage over competitors (Ensign, 2001; Grant,
1991), and then nurturing them, as Schmidt (2014) pictures, by “closing the fortress and defending them
with boiling oil and flaming arrows” (p.86).

In the logistics industry, three competencies, according to Sandberg and Abrahamsson (2011), are difficult
to obtain, making them sources of sustainable competitive advantage:

• Company culture
• Managerial experience
• Technical knowledge

Through the “People-Service-Profit” strategy, FedEx’s people have been their greatest differentiator from
competitors (Maini, 2008), with one of the core competencies of FedEx being the deeply embedded
entrepreneurial culture among its employees (Bhardwaj and Momaya, 2006). Conjoined with that is
the long history of experience in leading the logistics industry by the collective thinking of a leadership with
at least 19 years of experience of working at FedEx (FedEx, 2018c) (see Appendix B). Ranking in the ‘Fortune
Top 10 Most Admired Companies’ for 15 years in a row, organisational culture and leadership have been a
sustainable competitive advantage for FedEx (FedEx, 2019e). On the technical side, FedEx depends on its
technical knowhow and innovations, primarily obtained through acquisitions of other logistics companies
such as TNT Express, P2P Mailing Limited, GENCO, and Bongo International (See Appendix C), to run the
most automated network in the industry (FedEx, 2018c) that is “not easily replicated”, says Frederick
Smith, founder and Chief Executive Officer of FedEx (FedEx, 2018a, p.92).

5
Nonetheless, a well-established network could become a hindrance instead of an advantage (PwC, 2016b).
The urban logistics associated with the explosive growth of e-commerce leaves FedEx’s backbone express
(air) network less efficient compared to other more economical less time-sensitive alternatives on the
ground (see Figure 4) (FedEx, 2019d). This demonstrates that in the hypercompetitive environment of
modern logistics (Esper et al., 2007), sustaining a specific competitive advantage could be a fatal distraction
because advantages are rapidly created and eroded (Pearlson, 2019). Therefore, winning requires creating
and recreating transient advantages in wave after wave (Leavy, 2014) and then surfing through those waves
of short-lived opportunities (Mcgrath, 2013); winning requires strategic agility (Denning, 2018).

6
2.2 Strategic Agility in FedEx

Competitive advantages in logistics are transient, demanding not only speed and flexibility in grasping the
short-lived opportunities, (DeOliveira, 2012) but also customer centered innovation focused on making new
markets, hence requiring strategic agility (Denning, 2017).

To achieve strategic agility, organisations should have creative cultures which reduce resistance to change,
and an organisational structure that eases attention to emerging opportunities and implementation of the
change (Bock et al., 2012). Therefore, FedEx’s first steps in strategic agility have been taken through their
People-Service-Profit (PSP) strategy and their decentralized organizational structure, as discussed below.

The ‘People-Service-Profit’ strategy begins with ‘people’, as they are, according to Frederick Smith, their
‘greatest asset’ (FedEx, 2019d, p.6). This culture of nurturing employees is a principal factor for strategically
agile organisaitons (Doz and Kosonen, 2008); it has led to an entrepreneurial behavior within FedEx’s
employees at all levels, thus, creating the culture of creativity (FedEx, 2019d; Schindehutte and Kocak,
2008). This, along with the open and supportive culture of FedEx that embraces inputs, even when
inconsistent with held beliefs (Bhardwaj and Momaya, 2006), has been promoting employees to
continuously take risks in developing innovative ideas (Daft, 2018). Nurturing people at FedEx also includes
a commitment to the advancement of team-members (FedEx, 2019d), especially by enhancing their agile
skills and mindsets through the Agile Academy, developed at FedEx, to assist their agile transformation (The
University of Memphis, 2019).

This PSP strategy also promotes diversity in FedEx’s culture (FedEx, 2019f), naming FedEx one of world’s
“50 Best Companies for Diversity” in 2019 (FedEx, 2019d, p.6), hence, sparking creativity even more through
the generation of independent and different alternative ideas (PwC, 2012; Doz and Kosonen, 2010). In
return, this creative culture, united under a collective direction through FedEx’s one voice (Ferrel and
Hartline, 2014), would support fast organisational adaptation in the ambiguous and turbulent environments
(Bock et al., 2012; Doz and Kosonen, 2010).

The adaptive capacity of FedEx is further magnified through its decentralized organisational structure;
reducing decision-making levels through delegation (Sadeghi et al., 2012; FedEx, 2019d; Bhardwaj and
Momaya, 2006), thus responding to changes in the marketplace rapidly and efficiently (FedEx, 2019f; FedEx,
2019d). Moreover, by fine-tuning each company independently to its market segment, the decentralization
strategy equips FedEx with the speed and flexibility to swiftly react to industry intruders by transforming
FedEx from one large aircraft carrier to a fleet of small fast ships (Doz and Kosonen, 2010, p.379). Together,
the creative culture along with the decentralized management, induced a higher localized innovation and
customer responsiveness for FedEx (Pearlson, 2019).

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FedEx’s merger and acquisition (M&A) growth strategy, however, not only extends its corporate portfolio
into new markets and products, but this activity of grafting new business models into existing operations
also acts as seeds of change to reconfigure current operating models (Doz and Kosonen, 2008), aiding in
the adaptation to market changes (Doz and Kosonen, 2010). Nonetheless, the reconfiguration process in
M&As, as described by Bock et al. (2012), affects strategic agility negatively in the short-run, primarily due
to difficulties within the integration process (Brueller et al., 2014).

Consequently, at a time where industry disruptors, especially those operating in the last-mile (PwC, 2016b),
keep logistics companies struggling to keep up with their rapid advances (Miller, 2018), the reconfiguration
time associated with M&A would slow down FedEx in grasping new opportunities to grow (Brueller et al.,
2014). This can be seen in FedEx’s acquisition of ‘TNT’ in 2016 which has been taking more time to integrate
than expected (FedEx, 2019d). Thus, another more flexible approach for growth in e-commerce would be
adopting the platform thinking; centering FedEx’s core attention to the evolving competitive environment
(Gulati and Kletter, 2005) while expanding their periphery by delegating responsibility through sub-
contracting and shared services (Pekkarinen and Ulkuniemi, 2008; Bock et al., 2012).

Crowd-sharing, also known as ‘Uber Model’ (PwC, 2016b), is one example of shared services that can be
used by FedEx. Asset-light and tech-heavy, it increases resource fluidity and responsiveness in the last-mile
towards the ever-changing needs of customers, while providing scale flexibility to unexpected surges in
demand without increasing capital investments (Castillo et al., 2018; Pekkarinen and Ulkuniemi, 2008).
Furthermore, it decreases service complexity through the concept of modularization in transport (Bock et
al., 2012), hence, facilitating the reconfiguration processes discussed earlier (Pekkarinen and Ulkuniemi,
2008; Doz and Kosonen, 2010).

In a nutshell, the creative organisational culture, through the PSP strategy, and the adaptive organisational
structure, through decentralisation, enhanced FedEx’s strategic agility. However, adopting platform
approaches for growth would allow FedEx to acquire greater strategic agility in e-commerce.

8
2.3 Factors Affecting the Attainment of Strategic Agility

The unprecedented dynamics in today’s competition, as has been discussed, urges the need for strategic
agility (Denning, 2018). Nevertheless, organisations struggle to develop the three enabling capacities of
strategic agility (Brueller et al., 2014; Doz and Kosonen, 2010): making sense quickly, leadership unity and
redeploying resources rapidly (see Figure 5).

Making sense quickly requires strategic and diligent gathering of bits of information to predict new market
occurrences before competitors, finding potential customers and quickly responding to their needs
(Pearlson, 2019; Doz and Kosonen, 2008; Brueller et al., 2014). However, while the collection of structured
data, the easily recognisable and manageable data (PwC, 2019), has been the pillar of market and customer
research, it has been estimated that 80% of data is unstructured, for instance, in search engines,
smartphone applications, and social media (PwC, 2016). This huge pool of data, called ‘Big Data’, yields rich
information of customer preferences, needs and behaviour (PwC, 2016). Nevertheless, collecting and
analysing this data in a robust strategic process, and the effective use of it in a forward-looking view, is a
challenge that can only be unlocked with emerging technologies that offer real-time acquisition,
aggregation and analysis of these heterogenous volumes of information (Ernst & Young, 2014).
Technologies, such as artificial intelligence (AI), have been helping FedEx with reacting in lighting speed to
emerging opportunities in various corporate decisions, such as next market to penetrate or next new
product to introduce (Smith, 2017).

Accordingly, the awareness and responsiveness that artificial intelligence (AI) provides to organisations is
huge (Bughin et al., 2011), but even so, the impact of technology on facilitating strategic agility extends
further than that. When organisations are facing rapid changes to their business models, strategically agile
organisations are those better prepared to rapidly reallocate resources (Brueller et al., 2014), which is
challenging in geographically diverse network industries such as logistics (Hausmann et al., 2015). With
common barriers to resource allocation being the lack of intent, right skills and mindsets (Hausmann et al.,
2015), using robots; combining both AI and Big Data, would enhance the speed and flexibility of resource
allocation (Smith, 2017). Furthermore, for an organisation to change quickly, communication plays a vital
role in the implementation process (Cornelissen, 2017; Elving, 2005), as described by Argenti (2017), “you
cannot execute a strategy if you cannot communicate it” (p.84). To swiftly broadcast information such as
corporate decisions and developments, organisations use IT systems such as CICS (Corporate Information
and Communication System) in order to keep employees across the organisation informed of corporate
matters in real-time (Cornelissen, 2017).

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This effective communication has been an integrative part of organisations, as it increases the readiness
levels for change by employees, thus reducing their resistance to change (Elving, 2005). This is essential,
since organisational change depends on the actions of its members; only happening when member’s
mindset changes (Goodman and Dean, 1982), and in the end, agile, as described by Denning (2015), “is a
mindset” (p.11). In addition, communication creates an integrated community within the organization
fueled by commitment and trust (Elving, 2005), not only between employees, but also towards and
between leadership teams, acting as an emotional lever to effectively motivate the workforce in enacting
strategies (Doz and Kosonen, 2010). Communication also means choice of words and actions, which is a
crucial tool, as changing mindsets can be extremely difficult (Denning, 2015). In fact, leadership teams have
a central role in inspiring and encouraging organisational collaboration to achieve strategic agility by
reflecting agile values in their actions, encouraging others to do similarly (Denning, 2018; Doz and Kosonen,
2010). Thus, more importantly, this transition to agility would be especially difficult when leadership teams
themselves have not yet embraced the agile mindset (Denning, 2017). In other words, leadership teams
need to be united, and be able to collectively produce bold nimble decisions once a strategic situation is
realized and its resulting opportunities or risks have been understood (Doz and Kosonen, 2008). Otherwise,
actions will be slowed down by reluctance for venturing new business models in an unfamiliar territory, and
private disagreements due to dominant mindsets (Doz and Kosonen, 2010).

Therefore, leaders should not be ‘passive creatures’; merely adapting organisations to the unpredictable
environment, but must reinvent the situation by inducing change to the industry, customers or even
competitors (Burnes, 2009). Their leadership should be transformational; creating new visions and
challenging existing conditions, which can only be effective through sensitivity, unity and fluidity (Doz and
Kosonen, 2008).

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Appendix A:

FedEx Corporation follows the decentralisation strategy of competing collectively and operating independently
to successfully manage the diversified portfolio of businesses in Figure A1. Figure A2 portrays the decentralised
organizational structure used by FedEx. This strategy provides FedEx with a competitive advantage of meeting
the needs of a wide range of customers while maintaining focus to the operating companies (Bhardwaj and
Momaya, 2006; Fedex, 2019a).

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Appendix B:
List of current FedEx Corporation executive officers, showing their long years of experience with FedEx (FedEx,
2019d, p.26).

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Appendix C:
FedEx has pursued a series of acquisitions for its growth and corporate development. Below is a full list of the
companies acquired by FedEx starting with its first acquisition in 1984 and ending with its most recent
acquisition in 2019. FedEx has acquired 25 organisations so far in total (FedEx, 2019b).

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