Business as ‎Networks: A Case ‎Study of FedEx

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This document is dedicated to analyse the use of marketing network perspectives and models in B2B market using FedEx as case study.

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Business as ‎Networks: A Case ‎Study of FedEx

  1. 1. Business as Networks: A Case study of FedEx
  2. 2. Karlstad Business School Handelshögskolan vid Karlstads UniversitetCourse code: FEAD51Course name: Industrial MarketingTitle: Business as Networks: A ‎ ase study of FedEx CDate of Submission: 2013-02-25Family name Given nameShurrab HafezEl Bouassami MohammedName of the teacher: Patrik GottfridssonName of the administrator: Frania Johansson
  3. 3. TABLE OF CONTENTSTABLE OF CONTENTS ............................................................................................................ I1. INTRODUCTION ..........................................................................................................- 1 -2. BACKGROUND ............................................................................................................- 1 -3. THEORY ........................................................................................................................- 2 -4. ANALYSIS .....................................................................................................................- 3 - 4.1. FedEx and Network Perspective..............................................................................- 3 - 4.2. FedEx Customer Relationship Management Strategy .............................................- 4 -5. CONCLUSIONS.............................................................................................................- 6 -6. REFERENCES ...............................................................................................................- 8 - I
  4. 4. 1. INTRODUCTION Even though business marketing and consumer-goods marketing have in commonthe ‎ ame principles and theories, they are in reality different in the way of their sfunctionality ‎ ue to different target markets. Business marketing is an action to promote dthe sale of ‎ ll sorts of services or products to other businesses, government, institutions a… etc. The ‎ ater could use the products for its operations, consumption, or reselling lthem to a third-‎ arty. Business marketing is also known as B2B marketing, as an pabbreviation, or business-to-‎ usiness (Hutt & Speh, 2001).‎ b By comparing both business and consumer markets, it can be clearly realizedthat ‎ usiness market dominates the market volume of transaction shares, and serves the blargest markets of all. That is because of the number of B2B transactions dedicatedto ‎ orm every single business to consumer transaction (Hutt & Speh, 2001). Actually, fthere are ‎ ifferent types of B2B companies involved. Some companies focus mainly on dB2B as ‎ ajor activities, while others focus on consumer market without ignoring B2B mactivities, ‎ ut as a second priority. To highlight and analyze some features of business- bto-business transactions from network perspective‎ FedEx Corporation is considered as ,case study. FedEx is among the most powerful B2B companies ii the world of today.Such huge business could be helpful to review both general and detailed reflectionsconcerning with the theories and perspectives of business as networks perspective.‎2. BACKGROUND Federal Express, also known as FedEx, was founded by Frederick Wallace Smith inearly ‎ eventies. The headquarters of FedEx is located in Memphis, Tennessee, United sstates. In its ‎ arly days, the company started courier delivery services between some eAmerican cities, by ‎ ombining together and land transportation means into one system, cwhich was the first time for courier delivery industry to take place that time. Today,FedEx has become the largest company ‎iidustry‎crurier‎deeivery‎iiworldwide.‎ The company mission is based on ensuring high investment return for itsshareholders, ‎ atisfyiig‎aee‎custrmers’‎ieeds,‎aid‎the‎critiiuity‎wrrkiig‎ri‎deveerpiig‎ ssolid ‎ elationships with suppliers, partners, and employees. In order to achieve their rmission, ‎ edEx follows a strategy that enables working in different levels F -1-
  5. 5. simultaneously, whilst avoiding any ‎ ontradiction could arises between them. The cstrategy is made up of three levels, compete collectively ‎ eing a strong brand in the bmarket, operating independently using own network, and manage ‎ ollaboratively cbetween leadership, partners and the work force of the company. Since each ‎ ompany chas its own values, FedEx has built up its values with its operations frames.These ‎ alues include people, service, innovation, loyalty, and responsibility (FedEx v2013). ‎ Because of the rapid growth of courier delivery service industry, and in order tofulfill all ‎ ustrmers’ needs whichever the categories they are placed in, FedEx operates cseveral companies in a collaborative way to under FedEx brand umbrella.These ‎ ompanies include FedEx Express, FedEx Ground, FedEx Freight, and FedEx cServices. Each ‎ ne of the companies provides its customers with different kind of oservices depending on ‎ heir requirements (FedEx 2013).‎ t3. THEORY It is difficult, or even impossible for all kind of organizations to survive alone ina ‎ ompetitive market relying just on their own resources. Globally, the majority of corganizations incorporate the ‎ se of resources provided by other actors in the market unetwork. Resources could include raw materials, goods, ‎ nowledge, or services (IMP k1982 and deBurca 1995). In the world of today, the relation between ‎ ther actors is overy important for the success of any company, where interactions and strong ‎ etworks nis the backbone of any effective relation. Building up a network relationbetween ‎ everal actors, could be seen as long term investment (Turnbull & Wilson, s1989). Going through analyzing a network and according to Håkanssson, it can be said thata ‎ etwork is a combination of actors, resources and activities. Actors have a dominant nrole ‎ ecause of their activities and their control over resources that is used when they bperform ‎ ctivities. As mentioned earlier, a network model combines three important aelements. Actors ‎ ould be seen as individuals or groups of companies at different levels cwhere their main role is ‎ ontrolling the network. The second element is resources, cwhether they are human or physical ‎ esources. The last element is activities including rtransaction, transformation acts, and also ‎ ctivity cycles (Håkansson, 1987).‎ a -2-
  6. 6. For business markets, any marketing relationship management strategy should bebased ‎ n establishing, developing, and maintaining a successful exchange with ocustomers. ‎ asically, there are three different types of relationships including Btransactional exchanges, value-added ‎ xchanges, and collaborative exchanges. eTransactional exchange is the simplest type ‎ f exchange because it covers basic product oand it is more like a seller buyer ‎ ransaction. On the other hand, collaborative exchange tappears mainly in dynamic markets, ‎ hen transactions are more complex and prices are whigher. This kind of relationship could ‎ e built when both actors trust each other, share binformation and link their operations. ‎ hen it comes to value-added exchange, it is Wlocated between transactional and collaborative ‎ xchange. In another words, value- eadded exchanges are those that companies target to go ‎ eyond attracting new customers. bValue-added exchange focuses on how to keep customers loyal by offeringadditional ‎ ervices and promotional offers. This strategy has many positive impacts, sstarting by ‎ educing serving costs, and ending with encouraging customers to buy more. rThat is because loyal ‎ ustomers provide 80% of sales, even though they represent only c20% of the total customers‎(Hutt & Speh, 2001).‎ Customer relationship management strategy is a model for achieving permanentgood ‎ ransactions with customers, offering customized services, and marketing teffectiveness. ‎ hat cannot be done without setting some priorities. Such priorities Tshould include ‎ ttracting the right customers, establishing effective working processes, amotivating employees, ‎ nd establishing the ability for a continuous learning aorganization (Hutt & Speh, ‎ 001).‎ 24. ANALYSIS4.1. FedEx and Network Perspective In 2008,‎ FedEx‎ eauiched‎ a‎ campaigi‎ caeeed‎ “FedEx‎ deeivers‎ tr‎ a‎ chaigiig thewrred”,‎ which‎ was‎ directed‎ tr‎ busiiess‎ tr‎ busiiess‎ market‎ (FedEx 2013). Thatcampaigi‎is‎regarded‎as‎reiitrrductiri‎rf‎FedEx’s‎busiiess‎ietwrrk‎sr‎that‎tr‎deae‎with‎the complexity of the global community demand. There are five key themes that FedExis keen to root in partners including expansion, breadth of service, expertise andinnovation, sustainability, and education (FedEx 2013).The campaign defines the targetcustomers as those deciders within the procurement process for the array of -3-
  7. 7. rrgaiizatiris‎whr‎partier‎ with‎ FedEx.‎The‎partiers‎iivreved‎ii‎ FedEx’s‎ B2B‎ marketare generally organizations, institutions and governments. They are located generally inmany different countries including the UK, China, Taiwan, Germany and Japan. Theindustrial network model proposes three fundamental elements including actors,activities and resources (Håkansson, 1987). In FedEx case, the actors are represented bythe partners involved in the business at different levels, whether they belong to thecorporate level within FedEx, B2B marketing as organizations, institutions andgovernments, or the group of final customer (recipient). The resources mayberepresented by the dedicated transportation means through air, sea and land, humanresources, information systems, embedded technologies, offices and headquarters,handlers‎aid‎rther‎ergistic‎equipmeit‎…‎etc.‎The activities in FedEx’s‎busiiess‎ietwrrkmay include the courier delivery services, the adopted protocols and agreement formsbetween different actors within the network, and other activity cycles. That could begeneral representations reflected from the case FedEx. But, the campaign may involvespecific details in which contribute to its ultimate goal. Such details are discussed laterii‎FedEx’s‎CRM‎strategy.4.2. FedEx Customer Relationship Management Strategy That campaign represented a declaration of new business to business marketingstrategy. Since relationship marketing centers on three major steps includingestablishing, developing, and maintaining (Hutt & Speh, ‎ 001), this campaign could be 2regarded as a trigger of establishing an access to new market of B2B with FedEx. Themain goal of this strategy is to meet the variety of demand of target groups and thecountries that FedEx delivers to. FedEx dedicates such efforts to enhance theunderstanding of different sets of values and demands that each country has. Theinformation to be provided is the key of this‎ campaigi.‎ FedEx‎ thrrugh‎a‎ “3D‎ Gerbe”‎facieitates‎iiirvative‎aid‎effective‎crmmuiicatiri‎frr‎FedEx’s‎custrmers.‎It‎is‎regarded‎as a major point of difference compared to competitors. Besides, the advertisingmediums are produced in many different languages to more than twenty countries,which reflects the interest of FedEx interaction to reach globally. Generally, there arethree main types of relationships (Hutt & Speh, 2001); the campaign addressedcollaborative exchanges with‎ FedEx’s‎ custrmers. That required increasing the -4-
  8. 8. transparency in communication and mutual trust. We think that this type of relationshipis relevant to that type of business due to many reasons. Courier delivery services arevery dynamic, complex, and costly. FedEx as a high class brand could not take it forgranted that their partners deliver the values as intended. Thus, the quality ofperformance and outcomes are very crucial to the business. The main concerns that collaborative exchange costs trust and loss ofconfidentiality, and the relevant switching costs are highly significant. However, theseconcerns are not catastrophic generally in courier delivery services and particularly incase of FedEx. The continual repositioning and adjustments techniques have beenfollowed to escalate the communication level of the brand. Furthermore, workingglobally requires dealing with political unrest. FedEx adopted the strategy of hiringlocal managers that understand the culture of local areas in order to avoid disturbinginherent values and practices. This strategy proved its worthiness, as the exports jumped300 percent since 2003 ‎ Hutt & Speh, 2001)‎ ( . The evolution of technology makes it difficult to be stuck to certain solutions,especially for courier delivery services, where the technological innovation playedcrucial roles in adding competitive advantages to its adopters. FedEx is also one ofthose that use technology as a value proposition. The FedEx Institute of Technology atthe University of Memphis is assigned to develop and support the dependency ontechnology innovation through 150 researchers. The mailrooms are designed so that theoperations such as tracking are sophistically automated. Moreover, the dedicatedceieit/server‎ietwrrk‎is‎rie‎rf‎the‎wrred’s‎eargest‎ones (FedEx, 2013). Over the periodof the previous campaign, the most recently “3D‎wizardry”‎aid‎Wi-Fi networks systemswere incorporated as fundamental elements of the overall structure. In the currentcampaign, FedEx exceeded the technological limits that others are stuck to. Thecompany introduced a 3D globe with use of a webcam that could analyse data andproduce statistics on the business world and update information on current economicsituations, in the all countries FedEx are located. The number of website visitorsrecorded then successive significant increases. Moreover, for integrating easy socialconnectivity to smaller businesses, FedEx uses social media to allow companies to tracktheir packages. -5-
  9. 9. For getting out from the crowd, FedEx introduced progressive and advance servicesto improve customer loyalty and attract new customers. However, a killing obstacle hasshown up to limit this advantage. Several competitors duplicated what FedEx hadintroduced as a value proposition. UPS is a clear example of that. UPS has a market capof $65.85B with 23.69% Gross Margin, while FedEx has 24.83% (Yahoo Finance,2010). The slight difference indicates that FedEx could not deliver very different valueto the customers. On the other hand, the current campaign is based on brand, loyalty,aid‎partiership‎thrrugh‎FedEx’s‎technology leadership. The customer perspective dedicated in the current campaign emphasises multipleattributes. The price is one of them, where all partners should comply with specificranges across different countries. Additionally, the quality has also specific tolerancethat should not be exceeded. But most importantly, the selection of resources andavailability records should be accurate as much as possible, since they are marketqualifiers and losing them means losing the entire business.5. CONCLUSIONS The‎case‎FedEx‎reviews‎srme‎sides‎rf‎B2B‎market‎usiig‎the‎perspective‎“busiiess‎as‎ietwrrks”.‎As‎crurier‎deeivery‎service‎prrvider,‎FedEx‎sets distinctive strategies toincrease current customer loyalty globally in the first place, and expand the network. Tobe responsive with innovation and technological updates, FedEx refreshes context ofrelationships with partners by introducing periodic campaigns. Each campaignintegrates appropriate strategies fit the potentials and dedicated resources. The currentcampaign adopts the collaborative exchange as a basic relationship. The strategy is setto be flexible so that many specific adjustments and repositioning are considered tomeet differentiated demands and values across different countries. The global marketeffects such as complexity and the dynamic nature of courier delivery service asindustry are significant factors in nominating the collaborative style. Furthermore, thecontinuous improvement of relevant technology facilitated the adoption of collaborativeexchange through 3D globe and sophisticated tracking systems. On the other hand, therecould be serious threats from collaborative partnership including the loss of highconfidential information and high switching costs. The main point is that thecollaborative partnership is expensive, since there are critical quality standards, price -6-
  10. 10. ranges, consistent selections of resources, and availability records to comply with.However, the collaborative exchange made easier for FedEx to promote its main fivethemes including partners including expansion, breadth of service, expertise andinnovation, sustainability, and education. -7-
  11. 11. 6. REFERENCESLiterature Sources:deBurca, S. (1995). Service management in the business-to-business sector: Fromnetworks to relationship marketing. In Glynn, W. B., and Barnes, J. G. (ed.), 1995,Understanding service management—Integrating marketing, organizational behavior,operations and human resource management. Chichester: John Wiley & Sons.Hutt, M.D. and Speh, T.W. (2001). “Business Marketing Management: A Strategic Viewof Industrial and Organizational Markets”, 7th edition, Fort Worth TX: Dryden.Håkansson, H. (1982) “An Interaction Approach, in International Marketing andPurchasing of Industrial Goods”, Wiley, Chichester, pp. 10-27IMP (1982). An interaction approach. In Håkansson, H. (Ed). 1982. Internationalmarketing and purchasing of Industrial goods—An interaction approach. London: JohnWiley.Turnbull, P. and Wilson, D. (1989). Developing and protecting profitable customerrelationships. Industrial Marketing Management.Electronic Sources:FedEx (2013). FedEx Strategy, mission, and values. Available:http://about.van.fedex.com/mission-strategy-values [2013-02-23].FedEx (2013). Overview and facts. Available: http://about.van.fedex.com/fedex-overview [2013-02-23].Yahoo Finance (2010). Available http://tinyurl.com/bhy8a57 [2010-02-28]. -8-

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