FedEx: Building a Global Distribution Powerhouse- Kamran Chaudhry Nov 23, 2010 76-505
Problem: Given that FedEx is doing remarkable in delivering certainty by connecting the global economy .The question is: is it the most cost effective, and where does it lead them with the recession and FedEx being in a kind of Maturation stage. Can they sustain the growth?
Facts and Analysis: FedEx formed in 1971, came into being from an idea Smith had when he bought interests in Arkansas Aviation sales. The company has had remarkable success. From growth to diversification, local to international. Freight to Customs, the company does exceptionally well. There are few areas where the company is not ranking number one. FedEx has made some very smart business decisions, including the deals with the Local Mail system within US and placing the FedEx boxes at every postal office within the country. The Advantage the company has is its diversification within its own sector. Buying of Caliber systems was one of the most beneficial acquisitions. RPS fleet of delivery trucks and its customer’s base helped FedEx grow and compete more effectively with UPS in the nonexpress, ground-delivery business. Advantages were that the company had same sector subsidiaries which could help it achieve economies of scale. DISADVANTAGES: On The flip side it has Huge Operational Costs. FedEx today employees 275000 people, Just the labor costs come up to 37% of revenues. One of the main issues with a company as big as FedEx is rising operational costs and fuel for its massive fleet. Just Fuel has gone up by 30% in the last few years. One major issue that is going to arise in the near future if the Bill is passed is local unionization of employees. This will mean that the Employees can demand better wages and strike at any time just like the great 1997 UPS strike. This could lead to a huge loss in market share and not to forget the union demands will increase every time the new contract is...
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