Using the following outline,write a 4 page paper on FedEx Express (a global comp

ID: 452097 • Letter: U

Question

Using the following outline,write a 4 page paper on FedEx Express (a global company research paper). REFERENCES::: >> AT BOTTOM :)

Introduction

1.FedEx Business Solutions

a) History and future endeavors

b) Acquisitions and mergers for growth

c) Services and supplies offered

2. Posed Challenges

a) Challenges faced

b) Strategies used to overcome challenges

Conclusion

Berman, J. (2016, January). FedEx acquisition of TNT receives unconditional approval from European Commission. Logistics Management. Online Newsletter. Retrieved from http://www.logisticsmgmt.com/article/fedex_acquisition_of_tnt_receives_unconditional_approval_from_european_comm

DePillis, L. (2014, October). How Fedex is trying to save the business model that saved it millions. The Washington Post. Retrieved from https://www.washingtonpost.com/news/storyline/wp/2014/10/23/how-fedex-is-trying-to-save-the-business-model-that-saved-it-millions/

FedEx (1995-2016). Database Source. Retrieved from http://careers.van.fedex.com/companies/

FedEx (1995-2016). Database Source. Retrieved from http://www.fedex.com/us/fedex/shippingservices/express.html

FedEx (1995-2016). Database Source. Retrieved from http://investors.fedex.com/company-overview/overview-of-company/default.aspx

Explanation / Answer

1.FedEx Business Solutions

History

FedEx Express, formerly Federal Express, is a cargo airline based in Memphis, Tennessee, United States. It is the world's largest airline in terms of freight tons flown and the world's fourth largest in terms of fleet size. It is a subsidiary of FedEx Corporation, delivering packages and freight to more than 375 destinations in nearly every country each day.

Its headquarters are in Memphis with its global "SuperHub" located at Memphis International Airport. In the United States, FedEx Express has a national hub at Indianapolis International Airport. Regional hubs are located at Ted Stevens Anchorage International Airport, Oakland International Airport, Newark Liberty International Airport, Fort Worth Alliance Airport and Miami International Airport. International regional hubs are located at Paris-Charles de Gaulle Airport, Guangzhou Baiyun International Airport, Kansai International Airport, Toronto Pearson International Airport and Cologne Bonn Airport. There are a total of 12 air hubs in the company's worldwide network.

The concept for what became Federal Express came to Fred Smith while he was studying at Yale University. For a class there, he submitted a paper which argued that in modern technological society time meant money more than ever before and with the advent of miniaturized electronic circuitry, very small components had become extremely valuable. He argued that the consumer society was becoming increasingly hungry for mass-produced electronic items, but the decentralizing effect induced by these very devices gave manufacturers tremendous logistic problems in delivering the items. Smith felt that the necessary delivery speed could only be achieved by using air transport. But he believed that the U.S. air cargo system was so inflexible and bound by regulations at that time that it was completely incapable of making sufficiently fast deliveries. Plus, the U.S. air cargo industry was highly unsuited to the role. Its system depended on cooperation between companies, as interlining was often necessary to get a consignment from point A to point B, and the industry relied heavily on cargo forwarders to fill hold space and perform doorstep deliveries.In his paper, Smith proposed a new concept—have one carrier be responsible for a piece of cargo from local pick-up right through to ultimate delivery, operating its own aircraft, depots, posting stations and delivery vans. To ensure accurate sorting and dispatching of every item of freight, the carrier would fly it from all of its pickup stations to a central clearinghouse, from where the entire operation would be controlled. He submitted the paper to the professor teaching the course, who supposedly gave the paper the grade of "C". The actual grade has been debated. Despite the professor's opinion, Smith held on to the idea. Smith founded the Federal Express Corporation in 1971. It was originally founded in Little Rock, Arkansas in 1971, as Smith was operating Little Rock Airmotive there. After a lack of support from the Little Rock National Airport, Smith moved the company to Memphis, Tennessee and the Memphis International Airport in 1973.

First FedEx Express aircraft, aDassault Falcon 20 named Wendy, on display at Steven F. Udvar-Hazy Center.

The company started overnight operations on April 17, 1973, with fourteen Dassault Falcon 20s that connected twenty-five cities in the United States. Fred Smith's childhood friend, John Fry of Ardent Studios, sent Ardent partner Terry Manning to the Federal Express home office on Democrat Road near the Memphis Airport with the first package to be put into the system. That night, 186 packages were carried. Services included both overnight and two-day package and envelope delivery services, as well as Courier Pak. Federal Express began to market itself as "the freight service company with 550-mile-per-hour delivery trucks". However, the company began to experience financial difficulties, losing up to a million USD a month. While waiting for a flight home to Memphis from Chicago after being turned down for capital by General Dynamics, Smith impulsively hopped a flight to Las Vegas, where he won $27,000 playing blackjack. The winnings enabled the cash-strapped company to meet payroll the following Monday. "The $27,000 wasn’t decisive, but it was an omen that things would get better," Smith says.In the end, he raised somewhere between $50 and $70 million, from twenty of the USA's leading risk venture speculators, including such companies as the First National City Bank of New York and the Bank of America in California. At the time, Federal Express was the most highly financed new company in U.S. history, in terms of venture capital. Federal Express installed its first drop box in 1975 which allowed customers to drop off packages without going to a company local branch. In 1976, the company became profitable with an average volume of 19,000 parcels per day.

A 1977 legislative change (Public Law 95-163) removed restrictions on the routes operated by all-cargo airlines, and enabled Federal Express to purchase its first large aircraft: seven Boeing 727-100s. In 1978, the company went public and was listed on The New York Stock Exchange.The following year it became the first shipping company to use a computer to manage packages when it launched "COSMOS" (Customers, Operations and Services Master Online System), a centralized computer system to manage people, packages, vehicles and weather scenarios in real time. In 1980 the company implemented "DADS" (Digitally Assisted Dispatch System) to coordinate on-call pickups for customers; this system allows customers to schedule pickups for the same day.

In 1980, Federal Express began service to a further 90 cities in the United States. The following year the company introduced its overnight letter to compete with the U.S. Postal Service's Express Mail, and allowed document shipping for the first time. Later in 1981 it started international operations with service to Canada, and officially opened its "SuperHub" at the Memphis International Airport. Federal Express' sales topped $1 billion for the first time in 1983. In the same year the company introduced ZapMail, a fax service that guaranteed the delivery of up to five pages in less than two hours for $35. ZapMail would later become a huge failure for the company, costing it hundreds of millions of dollars. In 1986, the company introduced the "SuperTracker", a hand-held bar code scanner which brought parcel tracking to the shipping industry for the first time. Federal Express continued its rapid expansion in the late 1980s, and opened its hub at Newark Liberty International Airport in 1986 and at Indianapolis International Airport and Oakland International Airport in 1988. In 1989, the company acquired Flying Tiger Line to expand its international service, and subsequently opened a hub at Ted Stevens Anchorage International Airport to accommodate this new, expanded service.As the volume of international shipments increased, Federal Express created Clear Electronic Customs Clearance System to expedite regulatory clearance while cargo is en route. In 1994, Federal Express adopted the "FedEx" name, formalizing the abbreviation that until then was unofficial. Also that year, FedEx launched Fedex.com as the first transportation web site to offer online package tracking, which allowed customers to conduct business via the internet. In 1995, the company acquired air routes from Evergreen International to start services to China, and opened an Asia and Pacific hub in Subic Bay International Airport in the Philippines. In 1997 FedEx opened its hub at Fort Worth Alliance Airport and in 1999 opened a European hub at Charles de Gaulle Airport in France. In 2000, the company officially dropped the "Federal Express" name and became "FedEx Express" to distinguish its express shipping service from others offered by its parent company FedEx Corporation. In 2001, FedEx Express signed a 7-year contract to transport Express Mail and Priority Mail for the United States Postal Service. This contract allowed FedEx to place drop boxes at every USPS post office. In 2007, the contract was extended until September 2013. The USPS continues to be the largest customer of FedEx Express.

In December 2006, FedEx Express acquired the British courier company ANC Holdings Limited for £120 million. The acquisition added 35 sort facilities to the FedEx network and the company introduced Newark, Memphis, and Indianapolis routes directly to UK airports instead of stopping at FedEx's European hub at Charles de Gaulle Airport. In September 2007, ANC was rebranded as FedEx UK. FedEx Express also acquired Flying-Cargo Hungary Kft to expand service in Eastern Europe. The late-2000s recession hit parent company FedEx Corporation and its express division hard. Many companies looking for ways to save money stopped shipping or moved to cheaper alternatives, such as surface shipping. FedEx Corporation announced large network capacity reductions at FedEx Express, including retiring some of its oldest and least efficient aircraft such as the McDonnell Douglas DC-10 and the Airbus A310. FedEx also announced layoffs and work hour reductions at some of its hubs.

In December 2008, FedEx postponed delivery of the new Boeing 777 Freighter; four were delivered in 2010 as previously agreed, but in 2011, FedEx only took delivery of four, rather than the ten originally planned. The remaining aircraft were delivered in 2012 and 2013.

FedEx Express closed a hub for the first time in its history, when operations at its Asian-Pacific hub at Subic Bay International Airport in thePhilippines ceased on February 6, 2009. The operations were transferred to Guangzhou Baiyun International Airport in southern China. FedEx Express had planned to open the new Chinese hub in December 2008 but in November 2008, the company delayed the opening until early 2009 citing the need to fully test the new hub.On June 2, 2009, FedEx opened the new hub building at Piedmont Triad InternationalAirport in Greensboro, North Carolina. FedEx announced in December 2008, that it still intended to open the building on time, despite the bad economy. The hub's operations would be scaled back from 1,500 employees to only 160, the size of the previous operations at the much smaller sorting facility.FedEx gave no time line as to when the hub would be operating at expected hub levels.The hub had been delayed many years since FedEx first picked the airport to be its Mid-Atlantic U.S. hub back in 1998. FedEx had to fight many complaints from nearby homeowners about the anticipated noise generated by its aircraft, because most of its flights take place at night. A third runway was built to accommodate the hub operation and the extra aircraft.

On October 27, 2010, FedEx opened its Central and Eastern European hub at Cologne Bonn Airport. The hub features a fully automated sorting system that can process up to 18,000 packages per hour. The roof of the hub features FedEx's largest solar power installation, producing 800,000 kilowatt hours per year.

Mission & Goals

FedEx Corporation will produce superior financial returns for its shareowners by providing high value-added logistics, transportation and related business services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards.

Financial Goals

FedEx Corporation provides strategic leadership and consolidated financial reporting for the FedEx family of companies, managing a broad portfolio of transportation, e-commerce and business services. FedEx Corporation has clearly outlined goals and strategies for the future.

FedEx Long Term Goals

Growth Strategies

FedEx plans to focus on these five strategies to grow as a business.

Certain statements herein are considered forward-looking statements, such as statements relating to management's views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements.

future endeavors

announced its goal to increase earnings per share by 10 to 15 percent yearly over the long-term and achieve 10 percent plus operating margins at this week’s annual stockholders meeting.

Fred Smith, chairman, president and CEO, provided an overview of fiscal 2010 that ended May 31, and discussed the company’s strategies going forward for its 280,000 team members.

“Thomas Jefferson one time said, ‘I like the dreams of the future better than the history of the past.’ I’m solidly with Jefferson,” Smith said. “FedEx has a great history and we’re all proud of it, but we’re focused on a history still being made.”

One area where the future is uncertain is FedEx Freight. The company earlier this month announced plans to combine FedEx Freight and FedEx National LTL (less-than-truckload) operations into one company on Jan. 30. That means 100 facilities will close and 1,700 of its 34,000 workers will be cut to offset losses. FedEx Freight, founded in 2001, lost $153 million during the 2010 fiscal year.

The new FedEx Freight will operate a pick-up and delivery network that provides customers with two options: priority and economy service.

“We believe this integration will strengthen our leadership position and the less-than-truckload sector, broaden the FedEx portfolio and provide future growth opportunities,” Smith said.

And while this year wasn’t a profitable one for FedEx Freight, it was “absolutely disastrous” for some of its competitors, Smith noted.

“We think that the value proposition we’re offering our customers, which we verify with a tremendous amount of independent research and our sales forces out now selling, is going to be extremely popular,” he said.

Many industry analysts praised FedEx’s international growth and efforts to resize its struggling U.S. trucking operations.

Kevin Sterling, senior vice president for BB&T Capital Markets, said the transition is a good strategy because FedEx has grown its freight division through acquisitions, and now it is essentially all operating under one roof.

“They were running duplicate operations,” Sterling said. “It makes absolute sense to consolidate the terminals and lay off some redundancies.”

He also agreed with the corporation’s targeted 10-15 percent annual increase.

“If you look at FedEx’s history, they have demonstrated that,” Sterling said. “Particularly in their Express segment, and I see tremendous opportunity for growth through earnings per share and then the marginal expansion will come as they put more freight through their network.”

It came as no surprise, however, that FedEx Freight workers are apprehensive about their job security. Two employees attended the meeting and questioned the company’s efforts to look after its employees.

“Unfortunately, try as we might, we cannot pay people when we have no work for them to do,” Smith said in response.

FedEx is estimating a cost of $150 million to $200 million related to the move for things such as employee severance costs and lease terminations.

Bill Logue, CEO of FedEx Freight, said a strong, healthy company is the right future for all its employees long-term.

“We’ve worked very hard to make sure we’ve done the right thing for our employees on the front side,” Logue said. “Our goal is to reduce the 1,700 losses because our objective is to impact as few employees as possible.”

Also at the meeting, FedEx Corp. stockholders voted against the International Brotherhood of Teamsters General Fund proposal for the board’s chairman to be an independent director who has not previously served as an executive officer of FedEx.

Stockholders also denied Massachusetts Laborers’ Pension Fund’s request that the board of directors revise the company’s Corporate Governance Guidelines to adopt and disclose a written and detailed succession planning policy and more openness in planning for Smith’s eventual departure.

A staggering 192,862,505 sharers voted against the amendment, while only 60,096,419 sharers voted in favor.

Smith, 66, was first elected as a director in 1971. He is the company’s founder and has been chairman, president and CEO of FedEx since January 1998 and chairman of FedEx Express since 1975.

The board agreed that one of its most important duties is to ensure that FedEx is prepared for the planned or unplanned departure of its CEO, but deemed the proposal unnecessary, stating that it already and always has had an effective succession planning process.

Other proposals that passed include the adoption of FedEx’s 2010 Omnibus Stock incentive plan and the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the company for fiscal year 2011.

The stockholder proposal regarding shareholder action by written consent was adopted, although the margin was extremely close, with 130,547,711 sharers voting in favor and 122,072,809 sharers voting against.

“Although not binding on the company, the board of directors will take the recommendation of our stockholders into account as we evaluate our government structure,” Smith said.

The board of directors also announced the retirement of director Judith Estrin, CEO of JLABS LLC, with more than 20 years of service on the board. James Barksdale, another long-timer on the board and member of the information technology oversight committee, will now become its chair.

For fiscal 2016, FedEx (FDX) has set a mixed bag of guidance. The company has projected adjusted earnings to be $10.60–$11.10 per share before any year-end mark-to-market pension accounting adjustments. The company expects to see better base pricing, volume growth, and benefits from its profit improvement program. This will offset any unfavorable change in fuel prices and anticipated increases in salary and benefits for the year. FedEx expects to see a higher capex of about $4.6 billion due to higher investment in the continued expansion of the FedEx Ground networks. The effective tax rate for 2016 should be 36%–37% before any year-end pension adjustments and excluding any impact from the TNT acquisition.

Acquisitions and mergers for growth

Acquisition

Year

Acquisition

Overview

1984

GelcoExpress International

FedEx dramatically expands its presence outside of the U.S. with the acquisition of Gelco Express, a worldwide courier with service to 84 countries.

1989

TigerInternational Inc.

With the integration of the Flying Tiger Line, FedEx becomes the world's largest full-service, all-cargo airline. The acquisition includes routes to 21 countries, a fleet of cargo aircraft including Boeing 747s, facilities throughout the world and Flying Tigers' expertise in international airfreight.

1998

Caliber System Inc.

FedEx creates FDX Corporation (later renamed FedEx Corporation) and grows its portfolio of services with the addition of ground small-package carrier RPS (now FedEx Ground), Western U.S. less-than-truckload carrier Viking Freight (now part of FedEx Freight), Caliber Logistics (now FedEx SupplyChain Systems), Caliber Technology (now part of FedEx Services) and Roberts Express (now FedEx Custom Critical).

2000

Tower Group International Inc.
WorldTariff Ltd.

FedEx Corp. creates FedEx Trade Networks. Today, FedEx Trade Networks is one of the largest-volume customs entry filers in North America and provides FedEx customers with end-to-end transportation and customs clearance solutions around the world.

2001

American Freightways Corp.

FedEx Corp. acquires this less-than-truckload carrier serving the Central and Eastern U.S. to complement Viking Freight. Rebranded as FedEx Freight in 2002, these companies combine to make FedEx Freight a leader in the regional less-than-truckload shipping industry.

2004

Kinko's Inc.

FedEx Corp. expands its retail access to all of the 1,200 Kinko's stores. With the backing of a FORTUNE 100 corporation, Kinko's gains the resources and expertise needed to continue expansion of its corporate document outsourcing business and international operations.

2004

Parcel Direct

FedEx Corp. broadens its residential delivery portfolio with the acquisition of Parcel Direct, a leading parcel consolidator. Parcel Direct becomes a subsidiary of FedEx Ground and is renamed FedEx SmartPost. The company offers a proven solution to customers in the fast-growing e-tail and catalog industries seeking a cost-effective means of shipping low-weight, less time-sensitive goods to residential customers.

2006

ANC Holdings Limited

FedEx Corp. acquires ANC Holdings Limited, a United Kingdom domestic express transportation company for £120 million. This transaction will allows FedEx Express to directly serve the entire UK domestic market.

2006

Watkins Motor Lines

FedEx Corp. acquires Watkins Motor Lines, a leading provider of long-haul LTL services, for $780 million.

2007

Flying Cargo Hungary Kft

FedEx Express acquires its Hungarian global service participant, Flying Cargo Hungary Kft, giving FedEx a wholly-owned operation in one of the region's dynamic markets.

2007

Tianjin Datian W. Group Co., Ltd.

FedEx Corp. acquires Tianjin Datian W. Group Co., Ltd.'s ("DTW Group") 50 percent share of the FedEx-DTW International Priority express joint venture and DTW Group's domestic express network in China for approximately US$400 million in cash.

2007

Prakash Air Freight Pvt. Ltd.

FedEx Express acquires its primary Indian service provider, Prakash Air Freight Pvt. Ltd. (PAFEX), for approximately $33 million.

2011

AFL Pvt. Ltd./Unifreight India Pvt. Ltd.

FedEx Express acquires the logistics, distribution and express businesses of AFL Pvt. Ltd. and its affiliate, Unifreight India Pvt. Ltd. This acquisition provides FedEx more robust domestic transportation and added capabilities in India.

2011

Servicios Nacionales Mupa, S.A. de C.V. (MultiPack)

FedEx Express acquires the operations of MultiPack in Mexico. MultiPack's existing operations include its pick-up and delivery network, warehousing and logistics services, 48 distribution centers, 13 warehouses and more than 500 retail outlets, all of which will be consolidated into the FedEx business.

2012

Opek Sp.z o.o.

FedEx Corp. acquires the Polish courier company Opek Sp.z o.o. (Opek) for $54 million. This acquisition gives its FedEx Express business unit access to a nationwide domestic ground network with an estimated $70 million in annual revenue and 12.5 million shipments annually.

2012

TATEX

FedEx Corp. acquires TATEX, a leading French business-to-business express transportation company, for $55 million. This acquisition gives its FedEx Express business unit access to a nationwide domestic ground network which carries 19 million shipments and produces approximately €150 million in revenues annually.

2012

Rapidão Cometa

FedEx Corp. acquires Rapidão Cometa, one of the largest transportation and logistics companies in Brazil. This acquisition brings more than $500 million of annual revenue, and is the latest step in the company’s strategy for profitable growth in FedEx Express's Latin American and Caribbean (LAC) region.

2014

Supaswift

FedEx acquires the Supaswift businesses in South Africa and six other countries (Botswana, Malawi, Mozambique, Namibia, Swaziland and Zambia). The Supaswift acquisitions represent the latest step in the company’s strategy to grow its African network and service offering.

2014

Bongo International

FedEx Corp. acquires Bongo International, a leader in cross border enablement technologies and solutions. Bongo International’s technology and processes provide a comprehensive and integrated end-to-end solution that helps retailers and e-tailers grow by reaching international consumers. Bongo International’s capabilities complement and expand the FedEx portfolio of offerings important to the rapidly growing global e-commerce marketplace.

2015

GENCO

FedEx Corp. acquires GENCO, one of the largest third-party logistics providers in North America. GENCO is a pioneer and market leader in reverse logistics, test and repair, remarketing and product liquidation solutions. GENCO’s complete range of product lifecycle services include inbound logistics; warehousing & distribution; fulfillment; contract packaging; managed transportation; systems integration; returns processing & disposition; test, repair, refurbishment; product liquidation; and recycling. With a comprehensive portfolio of supply chain services, GENCO’s expertise will expand existing FedEx service offerings in the evolving retail and e-commerce markets.

The rapid pace of mergers and acquisitions in transportation and logistics should continue in the near term as companies try to make up for slow growth by buying new business, FedEx Corp. Chairman and Chief Executive Fred Smith said Wednesday.

“I think you will see a significant amount of M&A driven by low growth,” Mr. Smith said at the Journal of Commerce Inland Distribution Conference. “The reality is that a lot of people get put under a lot of pressure when growth slows down. Growth hides a lot of sins and covers up a lot of inefficiencies.”

FedEx is in the process of acquiring Dutch parcel firm TNT Express NV after buying third-party logistics firm GENCO earlier this year. United Parcel Service Inc. this summer acquired freight broker Coyote Logistics, whileXPO Logistics Inc. has undertaken a string of recent acquisitions, most recently Con-way Inc.

Much of the transportation industry has experienced lower or flat growth in freight demand this year as industrial production has slipped. Mr. Smith attributed the pullback to reduced spending on both oil and natural gas production, as well as an “echo” of the slowdown at West Coast ports and harsh winter weather earlier this year. He said many shippers ordered too much to prevent disruption, and that inventory levels remain high. He thinks some of this should “bleed off” in the near term.

One sector not slowing down is FedEx’s bread-and-butter package business.

Mr. Smith said e-commerce is booming, driving growth in parcel shipments and leading to the expectation of another record peak holiday season. But he said carriers face new logistical challenges from online sales because they push larger packages into delivery systems and bring more residential deliveries that are more costly to handle than business-to-business deliveries.

If you go into a FedEx Ground facility these days, you will be amazed by the kayaks and tires and all sorts of things that don’t go through the automated sorting systems,” Mr. Smith said.

Same-day delivery will remain a niche business area because of the costs involved, he said.

While same-day delivery has worked in areas like New York City in the past, that is due to a very low labor cost. “If you can get filet mignon for $5 versus $30, you’re going to eat a lot more filet,” Mr. Smith said.

Mr. Smith said he expects more technological advances to come to the transportation industry, including autopilot for trucks and other safety features that should make operations safer.

rones will also be used at some point, but he said there are significant safety concerns that must be addressed first.

“I think it’s a great idea to use drones, and I think they will be used,” Mr. Smith said. But he cautioned that the devices are potentially lethal. “The worst thing about things that fly…is that they hit the ground in an uncontrolled manner.”

FedEx’s bid of $4.8 billion is relatively cheap compared to UPS’ $6.8 billion, given that TNT’s stock has declined only 5% since UPS first showed interest in TNT. We believe that there are two reasons behind this. Firstly, UPS’ bid would have included a premium for the possible cost synergies due to the acquisition. However, FedEx would not be able to generate such synergies due to its small presence in Europe. Secondly, TNT has been suffering for the past two years due to its restructuring efforts, which have pressured its bottom line and brought down the company’s value. In the fourth quarter of 2014, TNT reported a €137 million loss.

The FedEx-TNT deal is appealing not only because of the cheaper price tag, but also because of the massive increase in market share that FedEx will witness in Europe. According to 2013 data, FedEx is one of the smallest logistics integrators in Europe with a market share of 5%. DHL leads with 19%, followed by UPS at 16% and TNT at 12%. Once the deal closes by the first half of 2016, subject to regulatory approval, FedEx would become the second largest logistics player in Europe. The acquisition also serves the company’s goal of improving profits. FedEx has been trying to increase its presence in Europe for quite some time, since it plays an important role in lowering costs, which should contribute to the CEO’s plan to boost Express profits by $1.6 billion by the end of FY 2016. To this end, FedEx has also opened 100 stations across 11 European countries since 2011.

Services and supplies offered

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2. Posed Challenges

Legacy delivery companies like FedEx Corp. and United Parcel Service Inc. played a huge role in the decline of the U.S. Postal Service, but it’s time for them to pay the piper--technology has brought them face-to-face with their own competitive threat: Amazon.com Inc., Uber and other startups.

Mobility, brought upon by the proliferation of smartphones, apps and connected devices, has created a climate of instant gratification and given way to a fast-growing market for on-demand delivery services, such as Postmates.

The millennial generation is much less loyal to legacy brands than generations past. Data shows consumers are hungrier for better, faster and more transparent services--from shipping to cable--and don’t much care who provides it.

In a study of 2,000 U.S. consumers released this week by Acquity Group, 64% said they would pay a premium for faster delivery. Roughly 75% said they would be open to receiving deliveries from third parties, but just 12% reported using pop-up next-generation services, such as Postmates, so far.

Acquity said that gap presents significant opportunities for tech and crowdsourcing companies, assuming they can maintain their competitive advantage.

It seems everyone wants to get involved in the delivery business these days, with the costs of entry declining thanks the affordability provided by crowdsourcing--which in this case is the idea of using localized fleets and regular people to deliver household goods faster and more efficiently.

Postmates, founded in 2011, has been expanding rapidly across the U.S., delivering anything from prepared foods to Starbucks Corp. SBUX, -0.34% coffee and lingerie for Valentine’s Day.

Third-party delivery companies that don’t focus on shipments at their core, such as ride-sharing company Uber, are also trying to hop on board.

Uber has been testing a service to deliver items through its fleet of 200,000 active drivers, while Amazon.com Inc. AMZN, +9.57% already testing delivery drones, is said to be testing an Uber-like app that would, in some cases, pay regular people to deliver packages en route to their own destinations, according to The Wall Street Journal.

These pop-up delivery services haven’t put much of a dent in FedEx FDX, -0.33% and UPS’s UPS, +0.15% delivery monopoly just yet, but FedEx on Wednesday called fiscal 2015 a “transformative year” after reporting a 4% decline in third-quarter express-delivery revenue and a 27% year-over-year increase in operating expenses, which outpaced overall revenue growth of 2%.

“It’s a changing of the guards,” said Roger Kay, a technology analyst and founder of consulting company Endpoint Technologies Associates “If the old guards can’t provide a comparable experience and comparable price, in some sense they aren’t going to be competitive anymore.”

UPS has fared a bit better that FedEx. Its revenue rose 1.4% to $14 billion in its most recent quarter, while total operating expenses stayed flat at around $12.3 billion. However, its revenue growth has decelerated on a sequential basis in each of the last three quarters.

Of course high costs aren’t just a problem for the legacy companies: Amazon’s shipping costs rose 30% last fiscal year, and the regulations governing crowdsourcing companies, like Uber, are still being tested in the U.S. court system.

On Wednesday, the California Labor Commission ruled that an Uber driver who filed a compliant there was an employee of the company and not an independent contractor as Uber claims. While the ruling is being appealed and may be overturned, if it is upheld and applied to all Uber drivers, it would weigh heavily on the company financially. Rob Enderle, a tech consultant and founder of the consulting company Enderle Group, said challenges like these make it more difficult to knock legacy delivery giants off their pedestals.

“If Uber drivers become employees, you’d expect FedEx and UPS to strengthen until we figure out the drone thing or get self-driving delivery cars on the roads,” said Enderle. “Although, you can expect FedEx and UPS to be investing in those as well.”

However, Kay said the very real threat of the newcomer in today’s competitive marketplace at the very least should push legacy companies to evolve.

“Companies that pretended the cyber thing wasn’t an issue ended up going belly up,” he said. “They can’t just let it go.”

Shares of FedEx closed down 3% to $176.73 on Wednesday, but are still up 19% from 12 months ago. UPS shares are down 2.3% over the last year, while Amazon’s are up 28% from last June, though Amazon has a number of revenue streams beyond just e-commerce.

With the slowdown of world trade, economic problems in Europe and Asia, and the U.S. low economic growth, FedEx's bottom line continued to be threatened, according to Richard Smith, managing director of the FedEx Express.

On top of that, the cost increase of energy posed another challenge, he added.

"Energy has dramatically changed the economy of moving goods," Smith told Xinhua.

In its latest quarter report released in March, FedEx's profit was down by 31 percent, though its revenue was up by 11 percent.

Smith said it indicated that businesses were more cost conscious and many had shifted from express mail services, which are more profitable for the company, to slower and economical deliveries.

FedEx had taken initiatives to improve overall fuel efficiency, including increasing the size of its alternative vehicle fleet, transforming from diesel to natural gas-fueled trucks, and pursuing other advanced technology, he said.FedEx developed from a regional company to a world leading corporationafter it moved from LittleRock, Arkansas, to Memphis, Tennessee, in April 1973.

FedEx used the method of 'Classical Management' theory to cut costs when competition put pressure on pricing, increase productivity by applying new technologies, re-examine organizational efficiency and effectiveness.

Through the 'Evolutionary Perspective' weaker members of the population are in danger of perishing when conditions become more difficult. FedEx is largely at the mercy of its wider environment, and its priority must be to scan its surroundings for threats and opportunities. The company should be vigilant and have a clear idea of its own market characteristics. This will help protect the organisation from dangers and ensure survival within a population or niche. FedEx learned to adapt marketing strategies applied by product innovators to become adept at delivering game-changing services in light of the unique characteristics of service innovation.

FedEx has created an innovative culture and has been recognized for this with national and international awards. But more important than the accolades is the value delivered to customers.

When FedEx asked its customers what they wanted, they said they want FedEx to help them grow, to collaborate with them, and to expand their markets. FedEx innovations help customers grow their businesses. This is true customer-driven innovation. When your customers grow, you grow. That is the bottom line and FedEx knows this to be true.

FedEx can be said to be an innovative entrepreneur and also an exploiter of change in the Evolutionary Perspective. To maintain market superiority and continued growth and profitability, one of FedEx's top strategic priorities is improving customer experience. The company struggle for the best performance allowing them to survive and progress.

In my point of view, an Evolutionary approach allows an organisation to develop better tools to deal with evaluating threats and opportunities as well as balancing exploration and exploitation in changing environments. This approach is based on the natural selection principle which means on the market the strongest survives. In this context the manager's individual strategic decisions are not considered important and his role is limited to maintain the costs low. With this approach the environment is the one that leaves a mark on the strategy's structure. Only through constant improvement of operational effectiveness, enterprises can reach and maintain profitability. For Weick (1979) the evolutionary model is essential for understanding how individuals and groups make sense of their world and how they organise processes. Here, sense-making is the main mechanism for individuals to understand the environment that surrounds them (Weick, 1995).

Contrary to the competitive approaches of the classical perspective it could be argued that if organisations need to find and fit into a competitive niche in order to survive then their strategies are not deliberate, but emergent.

Meanwhile, major brick-and-mortar retailers such as Wal-Mart Stores Inc, Best Buy Co Inc and Gap Inc are shipping more online orders from stores close to shoppers, rather than from warehouses hundreds of miles away.

“UPS and FedEx are not only watching this, they are likely concerned about it,” said Lou Tapper, an executive at third-party logistics company Longistics, who worked at FedEx for 18 years. “Big companies like Amazon and Wal-Mart will dictate which direction this goes. Those are the companies that FedEx and UPS need to fill their planes and trucks.”

United Parcel Service Inc, the world’s largest package delivery company, on Friday cut its earnings forecasts, blaming overcapacity in the global air freight market, customers trading down to slower but cheaper shipping services, and a slowing U.S. industrial economy.

The move came after FedEx Corp said in June that it was raising shipping rates and cutting jobs and costs, as excess capacity in the air freight market had more than offset increased shipments.

Both package delivery companies set their fees according to zones that correspond to the distance a package has to travel.

For instance, FedEx’s Zone 2 is zero-to-150 miles from origin to destination, while Zone 4 is 301-to-600 miles. Shipping a 10-pound package in two days through Zone 4 costs $25.80, while the same package in Zone 2 costs 32 percent less at $17.50, according to FedEx’s latest rate card for consumers.

UPS uses similar zones for its domestic ground delivery service, which takes four to five days. Zone 4 costs $9.20, while Zone 2 costs $7.94 for a 10-pound package.

Retail companies get discounts for shipping big volumes of goods, but the percentage differences between the zones are similar, according to Joel Anderson, president of walmart.com.

Wal-Mart, the world’s largest retailer, has been shipping online orders from its stores for several years. This year, it is expanding the program to 50 locations from 25.

“We are at least two zones closer by utilizing the stores,” Anderson said. “The closer we can inject the order into our network, the more this saves the customer time and reduces what it will cost us to get it to the customer.”

He declined to say how much Wal-Mart is saving from this.

To be sure, ship-from-store retail initiatives can also benefit package delivery companies if they accelerate the growth of online shopping - even if delivery distances are shorter.

UPS spokesperson Susan Rosenberg said the company is benefiting from the spread of e-commerce distribution centers built by Amazon and other companies. UPS also helps retailers ship online orders from stores, she added.

FedEx did not respond to requests for comment on Friday.

“If I buy a shirt from Gap online, the shipping route length may be shorter, but then more people are buying online too,” said analyst Joshua Herrity of Telsey Advisory Group.

Still, the risks that these retail strategies pose to package delivery companies are beginning to be discussed on Wall Street. The topic came up during a UPS conference call with analysts in April.

“Some of the questions I get asked...are whether these same retailers are going to try to build a network that doesn’t incorporate the current parcel carriers in ways that they could actually end up being a competitor,” Morgan Stanley analyst Bill Greene said during the call.

Ship from store may be a problem for UPS and FedEx in five to 10 years, but it will take some time for lots of retailers to figure how to make the strategy work well at high volumes, according to Fiona Dias, chief strategy officer at ShopRunner.

A more immediate threat is Amazon, Dias and others said.

Amazon has a growing fleet of delivery trucks, which are already a common sight in its home town of Seattle, where it has been operating an online grocery delivery service for years.

In 2011, Amazon changed its fulfillment strategy and began building new distribution warehouses closer to large, heavily populated areas such as Los Angeles and San Francisco.

In the first quarter of 2013, Amazon’s shipping costs were 4.7 percent of revenue, down from 5.1 percent a year earlier.

“For a company the size of Amazon, that’s a pretty big deal,” said R.J. Hottovy, an equity analyst at Morningstar.

"UPS and FedEx are not only watching this, they are likely concerned about it," said Lou Tapper, an executive at third-party logistics company Longistics, who worked at FedEx for 18 years. "Big companies like Amazon and Walmart will dictate which direction this goes. Those are the companies that FedEx and UPS need to fill their planes and trucks." United Parcel Service (UPS), the world's largest package delivery company, on Friday cut its earnings forecasts, blaming overcapacity in the global air freight market, customers trading down to slower butcheaper shipping services, and a slowing U.S. industrial economy.The move came after FedEx (FDX) said in June that it was raising shipping rates and cutting jobs andcosts, as excess capacity in the air freight market had more than offset increased shipments.
Both package delivery companies set their fees according to zones that correspond to the distance package has to travel.For instance, FedEx's Zone 2 is zero-to-150 miles from origin to destination, while Zone 4 is 301-to-600 miles. Shipping a 10-pound package in two days through Zone 4 costs $25.80, while the same package in Zone 2 costs 32 percent less at $17.50, according to FedEx's latest rate card for consumers.UPS uses similar zones for its domestic ground delivery service, which takes four to five days.Zone 4 costs $9.20, while Zone 2 costs $7.94 for a 10-pound package.Retail companies get discounts for shipping big volumes of goods, but the percentage differencesbetween the zones are similar, according to Joel Anderson, president of walmart.com.Reducing Shipping Distances
Walmart, the world's largest retailer, has been shipping online orders from its stores for several years.This year, it is expanding the program to 50 locations from 25."We are at least two zones closer by utilizing the stores," Anderson said. "The closer we can inject the order into our network, the more thissaves the customer time and reduces what it will cost us to get it to the customer."He declined to say how much Walmart is saving from this.To be sure, ship-from-store retail initiatives can also benefit package delivery companies if they accelerate the growth of online shopping -- even if delivery distances are shorter.UPS spokesperson Susan Rosenberg said the company is benefiting from the spread of e-commerce distribution centers built by Amazon and other companies. UPS also helps retailers shionline orders from stores, she added.FedEx didn't respond to requests for comment Friday.
"If I buy a shirt from Gap online, the shipping route length may be shorter, but then more peoplearebuying online, too," said analyst Joshua Herrity of Telsey Advisory Group.
Still, the risks that these retail strategies pose to package delivery companies are beginning to be discussed on Wall Street. The topic came up during a UPS conference call with analysts in April.
"Some of the questions I get asked ... are whether these same retailers are going to try to build a network that doesn't incorporate the current parcel carriers in ways that they could actually end up being a competitor," Morgan Stanley (MS) analyst Bill Greene said during the call.Ship from store may be a problem for UPS and FedEx in five to 10 years, but it will take some time for lots of retailers to figure how to make the strategy work well at high volumes, according to Fiona Dias, chief strategyofficer at ShopRunner.A more immediate threat is Amazon, Dias and others said.
has a growing fleet of delivery trucks, which are already a common sight in its home town of Seattle, where it has been operating an online grocery delivery service for years.

In 2011, Amazon changed its fulfillment strategy and began building new distribution warehouses closer to large, heavily populated areas such as Los Angeles and San Francisco. In the first quarter of 2013, Amazon's shipping costs were 4.7 percent of revenue, down from 5.1 percent a year earlier.

"For a company the size of Amazon, that's a pretty big deal," said R.J. Hottovy, an equity analyst at Morningstar. "That could be potentially very disruptive to UPS and FedEx."

Year

Acquisition

Overview

1984

GelcoExpress International

FedEx dramatically expands its presence outside of the U.S. with the acquisition of Gelco Express, a worldwide courier with service to 84 countries.

1989

TigerInternational Inc.

1998

Caliber System Inc.

2000

Tower Group International Inc.
WorldTariff Ltd.

2001

American Freightways Corp.

2004

Kinko's Inc.

2004

Parcel Direct

2006

ANC Holdings Limited

2006

Watkins Motor Lines

FedEx Corp. acquires Watkins Motor Lines, a leading provider of long-haul LTL services, for $780 million.

2007

Flying Cargo Hungary Kft

FedEx Express acquires its Hungarian global service participant, Flying Cargo Hungary Kft, giving FedEx a wholly-owned operation in one of the region's dynamic markets.

2007

Tianjin Datian W. Group Co., Ltd.

2007

Prakash Air Freight Pvt. Ltd.

FedEx Express acquires its primary Indian service provider, Prakash Air Freight Pvt. Ltd. (PAFEX), for approximately $33 million.

2011

AFL Pvt. Ltd./Unifreight India Pvt. Ltd.

2011

Servicios Nacionales Mupa, S.A. de C.V. (MultiPack)

2012

Opek Sp.z o.o.

2012

TATEX

2012

Rapidão Cometa

2014

Supaswift

2014

Bongo International

2015

GENCO

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