FedEx has developed a package tracking system on the Internet. The Package tracking system allows the customer to quickly and easily locate the whereabouts of the package(s) sent with FedEx. The Customer supplies an air bill number, and the information system locates their package.
How does the package tracking system add value to FedEx
Reduced costs:
For each package tracking request handled by the online system rather than by phone FedEx saves 8 dollars. Without its online services, which handle 800 million of the company’s 1,2 billion customer interactions per year, FedEx would have to hire about 20.000 more customer service employees.
Effective access:
The online system allows the customers to track up to 25 packages at a time. Such tight links with customers' systems can make electronic commerce easier and faster.
Time saving:
The online package tracking system is faster and easier to navigate than a phone call, and the time spent locating a package is reduced.
Porter’s Five Forces Classification
- Buyer Power
This is a moderate force in the freight transportation industry because competition keeps prices similar among the companies. The only difference is companies, such as FedEx who have value-added services that allow a higher price. Also, the buyers of the services in this industry are reactionary. They do not know the technology before it happens and they become dependent on technology, service and speed offered by the companies in this industry and will pay for it.
One of the FedEx’s greatest strengths is undoubtedly its business concept. No matter what the economy is doing, there will always be a need for package delivery of some sort by companies and individuals involved in nearly every industry.
FedEx has been the industry leader since 1973 and has very strong brand image. On the other side, FedEx prices are above their competitor’s. This can be a weakness if their customers do not perceive a difference between FedEx and its competitors’ services.
- Supplier Power
This is a strong force if the suppliers serve industries other than Air Freight. If a supplier only has accounts, or the majority of their accounts with these companies, they will not be able to control prices and supplies. Suppliers that are involved in this industry are: vehicle manufacturers, airplane manufacturers, fuel suppliers, labor, airports, and shipping materials manufacturers. FedEx prices depend on the contracts with oil suppliers that company develop in order to cover fluctuating fuel costs and volatility of supply.
FedEx pilots have formed the FedEx Pilots Association that demanded changes in the pilots’ benefits, and the fact that FedEx outsources some foreign flights instead of giving their own pilots the job. It is very unlikely that FedEx operation would not suffer if there were strikes or dispute with outsourcing companies. But if FedEx employees went on strike, their competitors could gain an advantage.
Through FedEx’s expansions globally, they are subject to laws and regulations of all foreign countries. There are subject to the entire world’s economic and political condition in the areas of fuel prices and supply, customer purchase of their services, and relations with foreign countries.
- Rivalry Among Existing Firms
This is a strong force in this industry because the competitors use price cuts to compete, there is a low cost and ease to switching brands, and the companies in this industry diversify and acquire other companies for strategic growth and synergy. FedEx competitors include United Parcel Service, Airborne Express, Emery Worldwide, DHL Worldwide, BAX Global, and United States Postal Service. FedEx holds 46.5 percent, the largest portion, with UPS and Airborne Express as the largest competitors. FedEx is clearly a large, strong, and growing express transportation company.
- Threat of New Entrants
Entry barriers in the express delivery and freight transportation industry are high. Brand recognition serves as one entry barrier. Each company currently in the industry has strong brand images, leaving a harder job for new companies. Of course, being the originator of the express delivery concept is also a key strength. FedEx became a household name before any of its competitors ever arrived on the scene, and thus has become synonymous with the idea of express package delivery in the minds of consumers. Domination of the distribution channels will be also significant barrier to entry. In case of FedEx, they are already having large amount of preferable distribution channels and also convenient office locations.
Other barrier is the capital expenditures to start an express transportation company are large, and the companies currently are achieving economies of scale by going global. Any smaller company will not be able to achieve these right away, not allowing them to compete on prices.
Another factor threatening potential entrants is trade tariffs and international regulations. Most companies currently in the industry have already established relations with foreign countries. New companies will have to prove themselves to foreign companies, suppliers, and customers.
- Threat of Substitutes
This is a weak to moderate force in the industry. Businesses and individuals that wish to ship cargo and packages can substitute it by other modes of transportation such as trucks, trains and boats. However, the customers that use air freight transportation usually desire convenience, speed, and low cost. Traditional transportation modes do not offer all three of these. Businesses and individuals who want to ship documents can use e-mail, the Internet, and Facsimiles. However, these can take some time to scan and load, and then it is uncertain that your document will get to its destination.
Economic Attributes Framework
Marketing
Operational excellence and brand recognition with establishes distribution channels infrastructure create big demand for express delivery service. However, increasing competition engaging to improve marketing effectiveness. Companies are moving in direction from services-centric to customer-centric logistics. The goal is to address customer needs in a precise, customized way, while optimizing marketing dollars.
Additionally, competition increases demand for the introduction and optimization of additional channels to reduce costs, while increasing the quality and frequency of customer contact.
Manufacturing
Express distribution does not involve any heavy manufacturing process. However, it involved in building distribution systems, airport hubs, design and manufacture of cargo loading system, information technology systems, design and manufacture wireless devices with automate courier dispatch, pickup and delivery, development power truck and aircraft and so on.
Financing
Capital expenditures of the express transportation company are large, and the companies currently are achieving economies of scale by going global. Fuel and labor together account for the almost half of an airline’s costs. Fuel is the hardest expense for the transportation industry to forecast; supply is at the whim of a powerful International cartel, and demand changes with the weather and the economy in general. Labor costs have also risen dramatically over the last several years, with pilot salaries increases and with unions increasing benefits requirements. Also, operation in the global market with large number presented suppliers as vehicle manufacturers, airplane manufacturers, fuel suppliers, labor, airports, and shipping materials manufacturers require constant long term financing.
Key Elements and Corporate Strategy
- “Operate independently, compete collectively” as a compass for decision-making and distinguish from the competition.
- Delivering Financial Results
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Leading the Way with Unmatched Service Options. The full-service transportation company, offering the broadest array of services. FedEx Express, FedEx Ground, FedEx Freight, FedEx Custom Critical and FedEx Trade Networks create an array of shipping and supply chain services that execute delivery quickly and conveniently across the globe.
- Diversification of the business, that give customers more options, shift resources as markets dictate and keep more business within the FedEx family of companies.
- Leading the Way with Cutting-Edge Technology
FedEx are taking specific actions in order to achieve strategic goals.
The core strategy of “operate independently, compete collectively” was taking to the point that all operating companies are finely calibrated to the segments they serve. FedEx focus on perfecting the “compete collectively” side of the strategic equation by improving the customer experience at every point of contact.
FedEx have taken significant steps to reduce overhead, increase productivity and tightly focus on sales and marketing efforts. These efforts, combined with an improving economy, should position them to increase revenue, profitability and return on invested capital and to generate positive free cash flow.
FedEx Ground have huge increase in the volume of daily processing shipments, due mainly to an expanded network, improved service levels, improved sales capabilities, especially for small- and medium-sized customers, and the power of the FedEx brand. The new FedEx Home Delivery expanded to serve 90% of the U.S. residential market.
FedEx expending customer choices by offering home delivery with unmatched premium options like day-specific delivery and delivery by appointment FedEx Freight continued to make competitive gains despite a slow economy, and now offers the best service in the regional less-than truckload transportation sector.
FedEx truly diversify and global company. FedEx currently serves more than 187 countries and territories with more 7,000 employees. The company provides the most extensive trans-Pacific airlift of any major competitor.
FedEx engages in the promotion the cutting edge technologies in order to boost pickup and delivery efficiency and to give customers another convenient way to access FedEx information. They are leading in the e-business innovations as electronic commerce and supply chain management. FedEx recently launched the numerous programs that utilize wireless technology in order to give the customers unparalleled information about their FedEx shipments, whether inbound or outbound.