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Structural Transformation Through

E- Business

Ezgi Öztörün
Onur Okut
Agenda
A) About FedEx
1. Information About Company Establishment
2. Industry Development- FedEx Innovations (timeline)
3. Competitor Analysis

B) Structural Transformation Through E- Business


1. FedEx Problem
2. Impacts of E-Business on the Industry
3. As of January 2000 Announcement - New Implemented Structure

C) Between 2000 - 2010 FedEx


1. Evaluation of 2000 Announcements
2. Post - Implementation Strategies

D) Final Comments & Questions and Answer Session


A) About FedEx

1) Information About Company Establishment

 Began operation as a customs broker in Niagara Falls, N.Y. (1903)


 Frederick W. Smith - Federal Express in June 1971
 Officially began operations on April 17th, 1973 - the modern air/ground
express industry was born

“Since its inception in 1973, Federal Express Corporation has transformed itself
from an express company to a global logistics and supply-chain management
company.”
A) About FedEx

2) Industry Development- FedEx Innovations


a) The Express Transportation and Logistics Industry

3 main trends:

 The globalisation of businesses

 Advances in information technology and


the application of new technology to
generate process efficiencies

 The changing market demand for more


value-added services
The breakthough for
the industry!
A) About FedEx

With the advent of IT, express


transportation became an aggregation of
two main functions:

 The physical delivery of parcels


 The management and utilization of the
flow of information pertaining to the
physical delivery
A) About FedEx

2) Industry Development- FedEx Innovations


b) The FedEx Innovations (timeline)

 1979 COSMOS (Customer Oriented Services and Management Operating System)


 1984 PowerShip
 1985 Bar-code Labelling
 1994 FedEx Website
 1996 FedEx interNetShip
 1999 Partnership with NetScape
A) About FedEx

3) Competitor Analysis
To competitiveness of transportation companies depended upon 3 factors:
 Their global network of distribution centers
 Their ability to delivery wherever their customers conducted business
 Speed- in order to avoid from the effects of rising inflation and global

competition

The 4 leading companies - UPS,TNT,DHL and FedEx-


held more than %90 of the worldwide market
A) About FedEx
SWOT Analysis

Strengths:
1) global scale Weaknesses:
2) new technology 1) prices
3) strong brand 2) labor disputes
image

Threats:
Opportunities: 1) relations with
1) global expansion foreign countries
2) world economic
2) joint-ventures
and political
conditions
“Although FedEx pioneered the Web-based
package-tracking system such systems became the
industry norm rather than a competitive
advantage”
B) Structural Transformation
Through E- Business

1) FedEx Problem

 After the acquisition of Calibar Systems Inc. in 1998


 Compatibility problem between Caliber and FedEx’s logistics
 UPS’s competitive advantage
 FedEx- confused customers
 Effects of rising fuel prices in 1999
 Pressure to re-think its business strategy and its supply-chain channels
B) Structural Transformation
Through E- Business

2) Impacts of E-Business on the Industry

The effects of the internet on express transportation and logistics market was
twofold:

 Opportunities in logistics management -using the internet through engineer their


supply chain.
(Integration with customer supply chains was the key)
 The express transportation needs presented enourmous opportunities for companies
such as FedEx.
(Growth in e-tailing and business to business (B2B) e-commerce)
By integrating these e-business trends, FedEx
renovated its structure to get rid of duality problems in
supply–chain organizations
B) Structural Transformation
Through E- Business
3) As of January 2000 Announcement - New Implemented Structure

A new branding strategy-extending the FedEx brand to


four of its subsidiary companies:

 FedEx Express (formerly Federal Express)


 FedEx Ground (formerly RPS)
 FedEx Custom Critical (formerly Roberts Express)
 FedEx Logistics (formerly Caliber Logistics)
 Viking Freight (no change in 2000 however changed in
2002 and became FedEx Freight)
B) Structural Transformation
Through E- Business
FDX Corp. At the end of 1999

Federal FDX Viking Roberts


Express RPS
Logistics Freight Express

FDX Supply Caribbean


Chain Services Transportation

FedEx Corp.

FedEx
FedEx FedEx FedEx Viking FedEx Trade
Custom
Express Ground Logistics Freight Networks
Critical

FedEx Logistics
FedEx Home
Delivery
January 2000
Caribbean
Reorganization Transportation
B) Structural Transformation
Through E- Business
 Introduction of a new low-cost residential delivery service - FedEx Home Delivery
 Changes for B2B solutions
 Growth in consumer e-commerce (B2C e-tailing)

BEFORE AFTER

Multiple brands Single branding

Separate sales force Single sales force

Multiple invoices/ Single


accounts invoice/account

Streamlined
Multiple automation
automation

Separate customer Single customer


service service
Was the January restructuring going to
bring the harvest?
C) Between 2000 - 2010 FedEx

1) Evaluation of 2000 Announcements

10%
Did it provide the right
9%
ingredients to achieve
the objectives of 8%

creating value for 7%

FedEx customers while 6%

at the same time 5%


UPS
FedEx
improving profitability 4%
Linear (FedEx)
for FedEx? 3%

2%

1%

0%
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009
Return on Sales Ratio
C) Between 2000 - 2010 FedEx

1) Evaluation of 2000 Announcements


60000
Thousands$

50000 In short term, new


transformation of e-
40000 business and
January 2000
30000 UPS
FDX
announcements did
20000 not have a great
impact on the
10000
profitability.
0
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Sales Volume - Revenue


C) Between 2000 - 2010 FedEx

2) Post - Implementation Strategies


Given the speed at which technology and the marketplace were changing, would
the new organization structure be adaptable to the FedEx’s business?

 Restructuring of some of the subsidiaries such


as Viking Freight and Home Delivery Services
via B2C e-commerce modal completed in 2002

 After the restructuring process completed, the


FedEx Corp. preferred to grow with the
acquisitions.
D) Final Comments
 The primary reason for the transformation in 2000 was the result of acquisition
strategy. FedEx, however, grew after 2003 with acquisitions. We believed that this
acquisition oriented strategy can create new compatibility problems again and
affect FedEx’s performance negatively in long-run.

 The adaptation problems of FedEx can easily be solved if our expectations will
realize. FedEx implemented an integrated system(like FedEx Corp.) The acquisition
strategy should always be complemented with integration strategy.

 The problems in supply-chain of FedEx was solved with the support of internet
technology. Since 2000 transformations, FedEx renovated itself with e-commerce
applications such that B2C was a new idea for FedEx, unlike its competitor –UPS.
D) Questions and Answers
 In 2000, FedEx did not only combine its subsidiaries but also transform its supply
chain systems. What factors gave rise to the structural transformation of FedEx?
The internet forced the company to consolidate its supply chain systems and
solutions as customers demanded global solutions .
Customers were confused because of decentralized structure of FedEx.
Integration with customer supply chains was the key.
 Fill in the blanks:
______became
Speed of significance to achieve competitiveness, not only for the
transportation companies but also for their customers in
express transportation
____________________industry.

 True or False?
After the 2000 implementations, FedEx did not anticipate to meet needs of businesses
specializing in B2C e-tailing.
False