This essay will discuss how the FedEx Corporation strategically used IS to exploit the Internet to compliment their core business, and dramatically increase company profits. Based on this case study It will explain how formulating an IS strategy can help a company achieve its business objectives, and it will also discuss the importance of strong leadership and management support for the IS strategy. Fred Smith founded FedEx Corporation formerly known as Federal Express in 1973 in Memphis, Tennessee. An Express Transport and Logistics company, Federal Express was joining a domestic market dominated by the US Postal Service and UPS (United Parcel Service). Fred Smith understood for the company to prosper, he had to embrace technology and use it strategically to improve his business. Smith understood the importance of information in his industry, his vision being: "information on a package is as important as the package itself."
FedEx instantly broke the mould by bucking the trend for courier companies to lease space on 3rd party airplanes; instead they invested in their own fleet. FedEx did not have to rely on other companies to ensure their customers received their packages on time, and it meant they built up a strong, early presence in the market. This trend continued and now FedEx have the largest fleet of vehicles of any company in the world (Fedex.com, 2006). This early outlay by Fred Smith was seen as a necessary and important investment. Smith continued to defy the trend in the 1980's with the "PowerShip" program, when FedEx gave away 100,000 computers loaded with the company's software. At a time when personal computers were relatively rare and expensive this investment was very unusual, however by linking client companies into the FedEx network and effectively "locking-in" customers it could be argued that the costs would have been quickly recuperated.
In 1994 Federal Express launched www.FedEx.com. The Website offered the ability for the customer to track the order of their package online. They were one of the first companies in the world to use the internet to support their business in this way, as described by Jim Barksdale former CIO and COO of FedEx: "It was the first outward and visible demonstration of a practical, productive use of the Internet by a real business for a real business purpose."
REPORT 2006 EM540 COMMERCIAL IN CONFIDENCE ISSUE 1 NOVEMBER 2006 Copyright © 2006 European Aeronautic Defence and Space Company Page 3 At this time, online advertising was only just beginning to appear, Internet Service Providers such as AOL were just beginning to provide public Internet access, and major online sites such as Yahoo! had not yet appeared.
The use of the Internet in this way was revolutionary. For the first time, a company had adapted it's IS strategy to take account of the Internet (Boddy, Boonstra & Kennedy, 2002). They had successfully integrated their company intranet with the internet, and complimented the physical side of their business without changing the way the actual transportation side was ran. The customer-centric nature of the website and the following supportive computer tools such as the InterNetShip application, meant that customer catchments and perhaps most importantly, customer retention, was being directly and positively affected by IT. Perhaps the most noticeable benefit from the launch of the website was the company's revenue, which rose from $8 billion in 1994 to around $21 billion in 2002 (FedEx.com).
The ability to track a package was already available within the company. FedEx was the first transportation company to use barcodes on their packages. In 1979 the couriers were the first to use SuperTracker hand-held computers. The DADS (Digitally Assisted Dispatch System) was implemented in 1980. This allowed packages to be scanned at the point of pick-up, and was the first instance of a transport company using computers in their vans. In 1981 the COSMOS (Customer...
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