Fedex soln pdf

5,286 views

Published on

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
5,286
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
158
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Fedex soln pdf

  1. 1. Fedex http://www.bignerds.com/print/Fedex/18228 OMGT 1044 Service Management Assignment 2 Report on Service Management “Federal Express: Tiger International Acquisition” Due Date: 17/09/08 Report on Service Management Exclusive summary This paper refers to a case of Federal Express, one of American’s great success enterprises. FedEx’s major business is overnight delivery and in 1988, he purchased Tiger International, the world’s largest heavy-cargo airline. Through this merge, FedEx started to enter heavy-cargo delivery market and stand in the forefront of the International cargo market. Through this paper, we will analysis several key problems related to FedEx’s development. Firstly, environment problems, involves long-term and global environment issues. Secondly, competitive problems, which is mainly comes from intra-industry competitors. Thirdly, technology problems and finally, association problems involve how to integrate strategy operation and corporate culture. Then, we will analysis some FedEx’s competitive advantages to find why it can be the leader in delivery market. Finally, we will address the questions includes FedEx’s growth strategy, the risk it met, and will give some recommendations for company in order to help them to resolve its potential risk. The recommendations include: 1) Find a powerful partner in Asia in order to extend its Asian market. 2) Corporate with its competitors to reduce the competitive pressure in its main market. 3) Build a plan of HRM to reduce the pressure from labor union and try to keep a high performance on its business. Table of Contents 1. Introduction………………………………………………………………………………………4 2. Aim…………………………………………………………………………………………….....4 3. Analysis the case………………………………………………………………………………....4 3.1 Major issues…………………………………………………………………………………….4 3.2 FedEx’s Competitive Advantage………………………………………………………………..5 3.2.1 High efficiency and safety delivery service ……………………………………………….....5 3.2.2 Global expansion……………………………………………………………………………..6 3.2.3 Advanced system……………………………………………………………………………..6 3.2.4 Special corporate culture……………………………………………………………………...6 3.2.5 Acquisition of Tiger International…………………………………………………………….6 4.0 Address the questions…………………………………………………………………………...6 4.1 Describe the growth strategy of Federal Express. How has this strategy differed from those of its competitors………………………………………………………………………………………7 4.2 What risks are involved in the acquisition of Tiger International………………………………7 4.3 What problems could be anticipated in accomplishing this acquisition………………………..7 4.4 Suggest a plan of action for potential problems………………………………………………..7 5.0 Conclusion……………………………………………………………………………………...8 6.0 Reference……………………………………………………………………………………….9 1. Introduction: Federal Express, one of American’s great success enterprises began operations almost two decades ago in Memphis, Tennessee. At that time, no one realized that this small company was about to revolutionize the air-cargo industry. On April 17, 1973, the company delivered 18 packages, becoming the first to offer1 of 5 8/4/2011 11:12 PM
  2. 2. Fedex http://www.bignerds.com/print/Fedex/18228 nationwide overnight delivery. FedEx began global expansion in 1984, it established a European headquarters in Brussels and set Far East headquarters in Honolulu. In 1988, FedEx purchased Tiger International, the world’s largest heavy-cargo airline. The purchase price was about $880 million. The action brought both advantages and disadvantages. For the advantage aspect, it catapulted FedEx to the forefront of the international cargo market, giving it landing rights in 21 additional countries, nearly three times the size of its newly competitor. Furthermore, it also creates an opportunity for FedEx to satisfy the requirement of JIT system. For the disadvantage aspect, it brought $2 billion long-term debt and different corporate culture will affect FedEx’s performance in its business. 2. Aim: The aim of this report is to analyze the case study on Tiger International acquisition by Federal Express and recommend an action plan to solve the merger problems. 3. Analysis the case 3.1 Major issues: According to the information shown in the case, there are several key problems related to the Federal Express. These issues include environment issues, competitive issues, technology issues and association issues. For the environment issues, firstly, the air facilities present a serious problem to the industry. Lack of airport facilities, back-up plans, and landing places will be seriously jeopardize the guarantee of delivery by FedEx and this kind of problem had been affect the operations in South American. Secondly, it is a formidable challenge to acquire government-controlled access to crowded international hubs. These are long term environment problems, and all air-cargo companies will meet this problem not just FedEx. Thirdly, under the global environment, with the development of globalization and economies grow more interdependent, how to satisfy customers’ new demand is also a big problem. Just-in-time system becomes more and more popular and this system relies on having the right part at the right place at the right time and it also means large amount of number and fast delivery. So, how to play a reliable role, improve work efficiency, and supply the needed logistical expertise to support JIT framework will be a current problem need to be considered. For the competitive issues, how to face to the price wars is the main problem in this factor, especially since UPS entered into the overnight-package market in 1982. This action started a series of price wars and made FedEx’s average revenue per package declined by 30.3% between 1983 and 1988. So, how to face to new competitors, how to make competitive advantage to keep the revenue are very important for FedEx’s manager to consider. Besides, intra-industry competition and rivalry threaten to the development of the air-cargo industry. For the intra-industry competition, due to overcapacity of the airline companies, they also want to reenter the air-cargo market in order to balance their revenue. These new firms increase the competitive in the market and lead current players to consolidate their operations in hope of achieving increased economies of scale. Furthermore, continued overcapacity, low switching costs, and high exit barriers will continue to make the air-cargo industry extremely competitive. So, how to reduce overcapacity, keep cost, and decrease exit barriers risk are also important factors for company to survive in this high competitive market. For technology issues, base on the development of the technology, Zapmail was quickly made obsolete by fax machines and this made FedEx lost $350 million and had to drop its business in this area. So, how to let business to fit the development of technology is also very important. Finally, how to integrate FedEx and Tiger’s business and corporate culture will relate to the whole company’s development for the future. Firstly, this kind of huge merger action brought $2 billion debt. It will make shareholders hesitate about whether they can receive their profit in the future. Secondly, capital intensiveness of the heavy-cargo business made the company more vulnerable to economic swings. Base on the economic crises which happened in Asia in 1997 and in the U.S. these years, heavy-cargo business will be easy to be affected and this will affect FedEx for a long-term development. Thirdly, FedEx still was a newcomer to the heavy-cargo market and will meet many competitors. High pressure from competitors, price wars and other factors will make FedEx hard to extend their business in this area. Otherwise, how to integrate2 of 5 8/4/2011 11:12 PM
  3. 3. Fedex http://www.bignerds.com/print/Fedex/18228 corporate culture is also a problem. One of the competitive advantage for FedEx is it never employed organized labor. This made FedEx having a high performance. However, after merge with Tiger International, FedEx had to merge the unionized workforce with its own union-free environment. This union background of Tiger workers will dilute the corporate culture at FedEx. How to keep balance between unionized and non-unionized workforce to keep competitive advantage and high performance will be a big issue to be considered. 3.2 FedEx’s Competitive Advantage: According to this case, Federal Express, as one of America’s great success company, keeps several competitive advantages under today’s globalization and high competitive environment. It includes: 1. High efficiency and safety delivery service FedEx offers a 1-hour “on-call” pickup service, customers just need to make a call but do not need to send their packages to pickup center by themselves. This can help to save a lot of time and can been seen as a good customer service. During the delivery, FedEx provides COSMOS database information system and guarantees it can locate any package in it possession within 30 minutes. This can be seen to keep the safety for customer’s packages. For the delivery, FedEx keeps its promises for nationwide overnight delivery service and always have a high efficiency and safety performance. This type of customer service helps it to ensure continued growth. 2. Global expansion FedEx began global expansion in 1984; it established a European headquarters in Brussels, Far East headquarters in Honolulu and its business has been covered over South and North America, Europe, Asia, and other 21 countries. This strategy lets FedEx build their brand very early and easy to do its business around the world. 3. Advanced system FedEx developed Powership system to attract customer and, thus, enables it to satisfy the firm’s needs. This system can track shipments, provides pricing information, and prints invoice. Such a device helps FedEx and its customers to reduce paper work and improve work efficiency. It also helps FedEx to attract high-volume customers. 4. Special corporate culture A labor union will always negotiates with company for workers’ salary and working time. However, FedEx does not need to worry about these pressures from union because it never employed organized labor. This makes FedEx to have an admirable human resource record and high performance. Furthermore, this builds a great advantage to its major competitor, UPS. 3.2.5 Acquisition of Tiger International Acquisition of Tiger International made FedEx to stand at the forefront of the international cargo market. This successful action brought several advantages to the company. Firstly, it had landing rights in 21 additional countries. This gave FedEx more opportunities to extend its national business. Secondly, this action not only let FedEx became owner of the world’s largest full-service, all-cargo airline, but also let it had nearly three times the size of its nearest competitor. Thirdly, base on Tiger International has more than 40 years of air-cargo experience; this merge gave FedEx a strong entry position into heavy cargo business and has enough experience for future development. Furthermore, Tiger’s addition created a best opportunity for FedEx to cooperate with international manufactures. Their new heavy shipments capability can satisfy the requirement of JIT system. So we can see this merge brought an unprecedented advantage and opportunity for FedEx. 4.0 Address the questions 4.1 Describe the growth strategy of Federal Express. How has this strategy differed from those of its competitors?3 of 5 8/4/2011 11:12 PM
  4. 4. Fedex http://www.bignerds.com/print/Fedex/18228 Growth strategy can be seen as a strategy to manage company’s human resource, technology and financial capital in order to let its assets to achieve value-added in the future.(Nollet, 1991) For FedEx, there are two ways to achieve this aim, first is to increase the efficiency of the assets (provide more and better services), second is to increase the impact and capability of company. For the first way, FedEx began its global expansion in 1984. In order to perfect its delivery service, it purchased other companies and setup branch company around the world. He also lobby the Government to have privileges for some airlines, in this way, they can keep competitive advantages to its competitors. Furthermore, FedEx also built COSMOS data base and Powership to improve its customer service and attract more customers. For the second way, through purchasing Tiger International, FedEx can resolve the problems on its decreasing international business and international bottlenecks. This merge not only brings FedEx into the business of delivering heavy cargo but also creates a good opportunity for it to cooperate with international manufacture. So we can see, the growth strategy of FedEx is very clear, In order to expend its international business, increase revenue, FedEx provides more delivery lines, better customer service and through merge action to increase its impact and capability around the world. 2. What risks are involved in the acquisition of Tiger International? There are several risks that involved in this merge. Firstly, it made more than doubled FedEx’s long-term debt, to approximately $2 billion. In 1988, it had revenues of $3.9 billion and a net income of $188 million. A $2 billion debt brought a big pressure to FedEx. Secondly, FedEx was a newcomer to the heavy cargo market and did not have enough experience. Much of the cargo was not sent overnight, which represented a significant departure from FedEx’s traditional market niche. Otherwise, the pressure from its competitors could not be ignored. Finally, the involvement of labor union would be a risk for FedEx to keep its high performance and corporate culture. 3. What problems could be anticipated in accomplishing this acquisition? There are several problems could be anticipated in this merge. Firstly, as we know, the management of airline for many governments in Asia is very strict. How to let FedEx’s business enter Asian market is a problem. Secondly, after this merge, how to reduce the pressure from labor union and keep its high performance is still a problem. Thirdly, how to reduce long-term debt and increase its net income should be considered. 4. Suggest a plan of action for potential problems. For the problem of how to enter Asian market, FedEx can try to cooperate with some companies which is powerful in Asian market, the company should have the right on the usage of airline in Asia and also do business in logistics area. For example, Sinotrans(a big logistics company in China) would be a good selection. For the debt problem, FedEx can try to cooperate with prime Flying Tigers’ customers; they are also the major competitors now, to reduce high competitive pressure in this market. FedEx is a new comer and does not have enough market shares to cover its long-term debt, reduce numbers of competitors and pressure, increase market share and revenue are the most important things for the manager to consider. Furthermore, shifting away from document service and focus on the higher-margin box business will be a good choice. Finally, for the employee problem, FedEx promised to find position for all employees, so how to integrate union and non-union workforce is the biggest problem. Manager can build a plan for human resource management such as arrange some training programs in order to improve employees’ working skill. It can give them confidence and also can help to improve work efficiency. Otherwise, encourage from manager also can reduce the gap between employee and employer. In this way, it can help to reduce the pressure from labor union and still can keep a high performance on their work. 5.0 Conclusion: In conclusion, if Federal Express wants to keep its leader position in global market, how to improve customer service to attract more customers, reduce pressures from its competitors and labor unions, and how4 of 5 8/4/2011 11:12 PM
  5. 5. Fedex http://www.bignerds.com/print/Fedex/18228 to resolve a series of problems which affect it merger action are all very important and need to be considered by the manager. By following the proper strategies, the company can once again minimize job losses, maintain a skilled and cheap workforce but most importantly, receive a profit in the first quarter of operations leading to a successful acquisition. Word Count: 2366 6.0 References: Fitzsimmons, J., Fitzsimmons, M. (2008). Service Management. 6th ed. New York: McGraw-Hill. 358-360, 339-354. J.Nollet. “Growth and Strategy.” Services PLUS. Boucherville, Quebec, Canada: G.Morin Publisher Ltd., 1991, Chap.8.pp 119-365 of 5 8/4/2011 11:12 PM

×