Fedex's Successful Internationalization

FedEx’s Successful Internationalization

1. FedEx has found immense success in Asian market because, it identified the constant change in customer needs and to meet such needs the organization itself had to be dynamic in their approach and in formulating and deploying strategies. FedEx owner Fred Smith acknowledged the growing market in China as early as 1979 and made a sound decision to expand to Asian continent.

Based on the identification of opportunities in the global market, FedEx launched operations in China in 1984. Its success in Asia predominantly owns to the implementation of smart strategies such as buying out a struggling hauler, Tiger International Inc., which had rights to fly into most Asian airports and having a management team accustomed to the Pacific Rim. Another vital decision was taken in January 2006 to acquire its partner in China, Tanjin Datian W Group, which resulted in having complete control over all trucking fleet and distribution hubs. It gave the organisation more control over its internal task environment.

FedEx has always been a customer responsive organisation, so customer satisfaction has always been paramount to it. In order to achieve this, it implemented proper technology and put an apt IT system in place. The company invested $1.4 billion in business technology in the 2004 fiscal year, a respectable 6% of revenue (Foley, John 2004). It shows the organisations awareness about the external environment of ever evolving technological advancements blended with the need to keep customers need and satisfaction in check. The investment in innovative technology made customers more aware of the services it offer, helped them track the waiting time of their shipping and the ability to check shipments status online. As the IT system electronically tracks all shipments online, it simplifies the custom process which is an operational barrier, admitted by Eddie Chan, Head of China and senior vice-president of FedEx Express. Chan said "When the customs are slow and inefficient, they serve as barriers to us and our customers" (Zheng 2015). Having invested in proper technology helps the organisation get rid of such barriers and results in smooth conduct of everyday operations.

Hence, having apt strategies in action and smart investments along with critical decisions helped FedEx emerge as a premiere courier delivery service provider in Asia.  

2.   Yes, there is always the possibility of other organisations trying to imitate a successful global organisations approach such as FedEx to get a hold in international market, but I would doubt such imitation of approach resulting in snatching away the already set market share of the company.

FedEx acted swiftly after identifying the growing market internationally and was one of the first cargo companies operating intercontinental between Asia and Europe. FedEx dramatically enhanced its services between China and Europe to meet increased customer demand, as China has become Europe's fastest-growing export market and second largest trading partner, and China's exports to the EU hit $4 trillion in 2013, according to the Chinese General Administration of Customs (Zheng 2015).Competitors require to identify such key opportunities and act dynamically in this changing economic environment instead of mere imitation.

FedEx also excels at implementation of Total Quality Management which is maintaining true quality at every stage of operational process and trying to make each process more efficient and effective which would benefit customers as well as the organisation. Also success of an organisation mainly pertains to its ability to effectively manage human resources and FedEx prioritise it highly as VP, HR at FedEx express, Mr. John Allison put it  "We aim for 100% customer satisfaction and all FedEx employees must have an 'above and beyond' attitude when doing their jobs. The attitude of doing whatever it takes to serve the customers is reflected from top to bottom in the organization's structure; this kind of spirit is integral to the FedEx work culture. This spirit fosters an environment or culture where an employee's performance speaks for himself or herself," (Morte,JP 2003).

FedEx provides excellent one stop service which is also technically sound along with setting a benchmark and standard within the organisation, which would be hard to achieve and maintain for the competitors. For a competitor to take away market share, it will have to offer something new in addition to what FedEx has to offer, in order to persuade FedEx’s already built strong customer base.

3.  FedEx built a new $150 million super-hub in the centre of Guangzhou which is China’s fastest growing manufacturing districts. This can be termed as a good decision because the managerial committee must have identified China as a more promising market than the Philippines for its Asian operations along with many other factors.

The decision was primarily based on the rising customer needs and to accommodate the services provided to ever growing customer base. Samuel David, country manager at FedEx Philippines said "The Internet is responsible for the dramatic increase of our shipment volume in Asia. Business-to-business (B2B) and business-to- consumer (B2C) transactions across the region created a big demand for our delivery services," (Computerworld Philippines 2001). The company had to be more cost efficient in laying out its operations for a growing business and thus decided to shift base in 2008.

Reason to move to China was because of the low manufacturing costs and the reputation of being one of the top manufacturer’s in the world. Many companies benefit from setting up factories in China because of the low labour costs. Low labour costs massively help in operational cost cutting and the capital saved can be further invested in other key facets such as improving and developing IT.

Setting up its Asian hub in Guangzhou seems a well analysed strategic decision based on multiple key factors. Guangzhou is the only development district in China that has four kinds of state-level development zones under a single administrative committee. It was among the first state-level economic and technological development zones approved by the State Council in 1984. It is one of the most advanced development zones in China with a close proximity to big cities like Hong Kong and Macau. Plus it has an advanced transportation system (China Industrial Property Report 2014). So considering all these factors, the decision to close its hub in the Philippines and build a new one in China looks like a significantly good decision for its Asian operations.