Federal Express B

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Federal Express main products are delivering packages to widespread locations within a short time. In this case study, we would focus our discussion on its most profitable services, i.e. Priority One, Standard Air Service, and Courier Pak (Table 1).

Federal Express Product
FedEx specializes in guaranteed overnight delivery of high-priority packages, documents, and heavy freight.

How does Courier Pak fit in Federal Express?
For services users
Courier Pak is a guarantee overnight delivery service, and is expected to be delivered to anywhere within the FedEx system for the cost of $12.5 with the weight up to 2 pounds regardless the distance of the destination. Courier Pak's waterproof, tearproof envelope offered a unique physical shipping method to the customers, and provided protection for the documents & accommodates their security need.

For Federal Express
As mentioned in the case, there is a significant market potential (almost 870000 pieces per day) for documents and small package mailing. An analysis shows that in FEC stations, the volume for Courier Pak is 30% more than Priority One. That means Courier Pak market has a growing potential. In addition, it is found that the variable cost of it is the lowest among all other overnight delivery services provided by Federal Express (Table. 2). That means Courier Pak may be a more profitable product.

Our analysis
Current situation
Typical users of airfreight were producers of time-sensitive, high priced, finished goods such as valuable architecture and confidential documents. But in 1976, a spring survey shows that only 24% customers used both Courier Pak and Priority One services while less than 1% of them used only Courier Pak. Moreover, the capacity of the aircraft was 6200 pounds and the average weight of the package for Priority One and Standard Air Service was 14 pounds while it was 1 pound for Courier Pak; which Courier Pak could provide larger revenue per aircraft. On the...
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