Examining the Case of Federal Express

Examining the Case of Federal Express

Examining the Case of Federal Express

Analyze Federal Express’s value creation frontier, and determine which of the four building  blocks of competitive advantage the company needs in order to continue to maintain above-average profitability. Provide a rationale to support the response.  

After analyzing Federal Express’s value creation frontier, it can be determined that Fedex effectively exploited the amount of time it takes a package to be received by the customer.  In 1977 Congress relaxed several regulations that controlled the air cargo industry.  This was allowed Federal Express to be able purchase and control its own fleet of cargo planes.  Thus, in 1981 Federal Express expanded its business into the overnight delivery market (Hill, 2013).  Despite other competitors such as:  UPS, USPS and Air

Cargo Inc., Federal Express efficiently maintained market share of over 30%.  Fedex accomplished this by offering superior customer service, superior efficiency and innovation of new services.  An example of how Fedex has been an innovator in the industry is, the implementation of “The Time Delivery Guarantee”.  This service guaranteed that a package accepted at Federal Express at 5pm would reach its destination by noon the next day.  Smith (2014) states that:  “its clear innovation is in our DNA”

Pricing was also a major component in maintaining market, although the pricing schematics of UPS were far more reasonable, the service offered by Federal Express was far more superior.  In order to maintain its competitive advantage Fedex needs to capitalize on superior innovation.  It has been a strong suit of Fedex in past pursuits, even though offering a 1030am delivery in 1983.  The venture that would cost the Fedex 18 million dollars in profit loss.   Superior innovation consists of offering new and superior products that would satisfy the customer’s needs.  All while maintaining low cost variables and product differentiation.  This is suggested because There’s always something that Fedex can approve upon.  With increasing shipping costs and scattered delivery times, Fedex needs something to help them stand out in the digital age, as well as rough economic times.  

Determine the main aspect of product differentiation and capacity control that Federal Express could use in order to maintain an edge over its rivals. Justify the response.

  The main aspect of capacity control and product differentiation that Fedex must adhere to in order to maintain its competitive edge is: maintain and develop relationships with corporate clients.  Amazon is one of Fedex’s most profitable corporate clients.  With many packages being handled by Fedex for Amazon, it’s no wonder that Fedex is increasingly growing its brand worldwide.  

Outsourcing shipping is perhaps the smartest move Fedex has made to date.  Being an integral part of the firms supply chain expands Fedex’s capacity control and product differentiation, being that it provides a service that no one else is offering.  The development of strategic alliances is also pertinent to the success of Federal Express.  

Federal Express has successfully maintained strategic alliances with USPS, Amazon, Laura Ashley and the NBA.  According to Export Today’s Global Business (2001), In 2001 Fedex strategically aligned with NEXTLINX.  The CEO NextLinx Rajiv Uppal (2001), stated that:  "allows customers to access NextLinx's best-of-class trade technology through FedEx's vast global networks."