International Strategy Fed Ex Presentation

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Here is a presentation made within the frame of my BA of International Business at the University of Huddersfield.
The presentation features the international strategy pursued by FedEx.

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International Strategy Fed Ex Presentation

  1. 1. International Strategy The Case of FedEx By Albin Pinard Msc International Business Development
  2. 2. Contents <ul><li>International Strategies:Strategic Choices Review </li></ul><ul><li>FedEx Background Information </li></ul><ul><li>Why a Global Strategy for FedEx ? </li></ul><ul><li>Conclusion </li></ul>
  3. 3. Strategic Choice Framework: Strategic Choices Review <ul><li>4 different strategic choices: </li></ul><ul><li> Multi-domestic strategy </li></ul><ul><li>High local responsiveness / low cost reduction pressures/based on </li></ul><ul><li>Decentralization/products and services tailored to local markets </li></ul><ul><li> International strategy </li></ul><ul><li>Particularly adapted to firms which enjoy a valuable core </li></ul><ul><li>competence that competitors in foreign markets don’t have </li></ul><ul><li> Transnational strategy </li></ul><ul><li>Adapted to firms which want to simultaneously achieve low cost </li></ul><ul><li>and differentiation advantages.This strategy remains hard to </li></ul><ul><li>implement because both pressures are often in conflict. </li></ul><ul><li> Global strategy (FedEx,Texas Instrument) </li></ul>
  4. 4. Global Strategy Aspects <ul><li>Standardisation (products/services) </li></ul><ul><li>Uniform Marketing (homogeneity of customer response to the marketing mix) </li></ul><ul><li>Large geographical coverage </li></ul><ul><li>Based on cost reduction strategies (scales economies/Scope economies/Location economies/Learning Curves) </li></ul><ul><li>Adapted to low responsiveness demand locations </li></ul><ul><li>Source: Yip,G.S (1989) and Viswanathan & Dickson (2007) </li></ul>
  5. 5. FedEx Background Information <ul><li> Nationality: USA </li></ul><ul><li> Since 1973 /International presence since 1984 (FedEx made the express delivery industry) </li></ul><ul><li> Activity: </li></ul><ul><li>Express delivery of packages and documents worldwide </li></ul><ul><li>Third party logistics provider (supply chain solutions) </li></ul><ul><li> Annual revenue 2007: $ 35,214 (million) </li></ul><ul><li> Presence in 220 countries and 375 airports </li></ul><ul><li> 3,3 million package shipped everyday </li></ul><ul><li> 679 aircrafts (biggest fleet in the industry), 43500 trucks and 15 international hubs </li></ul><ul><li> 260 000 employees worldwide </li></ul><ul><li> Main competitors: DHL,UPS,TNT </li></ul>
  6. 6. <ul><li> Pushing the standardisation to its maximum (very law local responsiveness in the express delivery industry) </li></ul><ul><li> Focusing on cost reduction strategies </li></ul><ul><li> Centralized control: Top management takes all the decisions </li></ul><ul><li> Extending its geographical coverage through acquisitions </li></ul><ul><li> Forcing air deregulation </li></ul>Why a global strategy is the most appropriated one for FedEx ?
  7. 7. Total standardisation <ul><li>Services and delivery methods </li></ul><ul><li>Very similar demand worldwide/low local responsiveness </li></ul><ul><li>ISO 9001 certification </li></ul><ul><li>Reinforce the standardisation of the FedEx’s Services worldwide </li></ul><ul><li>Marketing </li></ul><ul><li>Pricing : same prices worldwide </li></ul><ul><li>Advertising :global advertising campaign «  Relax It’s FedEx  » </li></ul><ul><li>Standard Technology </li></ul><ul><li>International compatibility of wireless applications </li></ul><ul><li>FedEx SuperTracker : shipping information available to employees and customers worldwide </li></ul><ul><li>FedEx e-business website (international standard technology) </li></ul>
  8. 8. Cost Reduction Through Scope Economies: The FedEx’s Hub and Spoke Network  The optimal combinaison of transport modes (aircraft + train/trucks) allows Fedex to achieve scope economies International hub
  9. 9. Cost Reduction Through the Experience Curve <ul><li>Cost reduction achieved over the time thanks to: </li></ul><ul><li> Experience of FedEx in its industry (first mover-advantage) </li></ul><ul><li> Learning effects through learning by doing </li></ul><ul><li>Better knowledge of international routes (gain of time) </li></ul><ul><li>Decrease of the number of lost packages over the time </li></ul>2008 Delivery time 1973 Time
  10. 10. Through Scale Economies  Recent acquisition of 9 Boeing A380  carry 300,000 lbs of freight (twice as much as the previous MD-11 model) <ul><li>Single marketing strategy: significant economies of scale through </li></ul><ul><li>advertising and R&D </li></ul>
  11. 11. Extension of the Geographical Coverage Through Acquisitions of Local Freight Companies <ul><li>2 recent exemples: </li></ul><ul><li> 2006: acquisition of HLC Holdings Ltd (UK)  FedEx gains the coverage of 80 UK cities + 2200 vehicules </li></ul><ul><li> 2006: acquisition of DTW (China)  allowed FedEx to touch 300 new cities in China </li></ul><ul><li>Acquisitions of freight companies allow FedEx to : </li></ul><ul><li> Increase its customer base/fleet/resources </li></ul><ul><li> Enjoy the benefice of an already existing business  quicker access to market </li></ul>
  12. 12. By Forcing Air Cargo Deregulation <ul><li> Leading role in Lobbying air deregulation </li></ul><ul><li> U.S Air Cargo Deregulation Act 1977 </li></ul><ul><li> Encouraging U.S government to include air cargo rights in its negotiations with countries in which FedEx wants to operate </li></ul><ul><li> Open Skies Agreement with China in 2005 </li></ul>
  13. 13. Matrix Structure <ul><li>Pros: </li></ul><ul><li>Speed up the decision-making </li></ul><ul><li>Reduce bureaucracy </li></ul><ul><li>More interdepartemental communication </li></ul><ul><li>Cons: </li></ul><ul><li>Generate conflicts </li></ul><ul><li>Does not allow long-term working relationships </li></ul>
  14. 14. Through Centralisation FedEx’s Worldwide Area Structure <ul><li>Tight control: </li></ul><ul><li>Facilitate coordination </li></ul><ul><li>Consistency of decisions </li></ul><ul><li>Avoids Duplication </li></ul><ul><li>Easier to make change </li></ul>Headquarters Memphis (USA) Middle East and Africa Division USA Division Latin America Division Canada Division Asia Pacific Division
  15. 15. <ul><li>Pros: </li></ul><ul><li> First-mover advantage in its international expansion (since 1984) </li></ul><ul><li> Core-compentences based at home (no outsourcing) </li></ul><ul><li>Significant E-business advance of FedEx  KEY strengh </li></ul><ul><li>as Internet reinforces standardisation </li></ul><ul><li>Cons: </li></ul><ul><li> Cross cultural problems increase with global strategy </li></ul><ul><li> management innefective </li></ul><ul><li> Global strategy increases the FedEx reliance on </li></ul><ul><li>National regulations (especially towards air regulation) </li></ul><ul><li>“ Regulations have a strong impact on the ability of a </li></ul><ul><li>company to standardize” (Visvanathan and Dickson,2007,p.55) </li></ul>Conclusion

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