Case Study | How FedEx Pioneered Internet Business in the Global Logistics Industry

FedEx Corporation created its own website form in 1994, it is the first step and basis for the company to develop its e-commerce.  FedEx.com is the first transportation website that could accept the one-line order for package tracking and allow the customers to transact the business by the Internet. We bring you an interesting Fedex case study about how it happened.

Both shippers and recipients could access shipping information and print documentation via the Internet. As the pioneer in the industry, FedEx should continually improve its system and service its competitor also created Internet service and Internet software.

For instance, the DHL launched the website in 1995, UPS spent billions on IT and electronic commerce. The express transportation associated with e-tailing would reach $7 billion in the year 2000, but FedEx only handled 10 percent of purchase online goods. All of these brought heavy pressure to FedEx. In 1998, the company paid more than $2 billion to acquire the Caliber System, Inc. to increase the abilities and power of Internet service and e-tailing.

Because of the large potential market and lower cost, the Internet and e-tailing market was continually enlarging in the Global Transportation and Logistics Industry. To evaluate the performance of FedEx in the Internet and e-tailing market should be from the view of five performance objectives.

Firstly, from the view of cost, FedEx was the first one for Internet and e-tailing in the Global Transportation and Logistics Industry, it focused on long-term investment in IT and led the company to have the specific position in the area. For the intense competition, the company paid more than $2 million to purchase the Caliber System. It could effectively increase its market share in the business-to-consumer delivery service. Hence, the investment partly made up the weakness against UPS.

Secondly, flexibility, the Internet service, and e-tailing provide convenience for the customers, increase an easy and quick channel for the transportation and e-tailing business. For instance, in the year 1999, FedEx Marketplace created a link to online shopping, the online shopper could click to the top online stores and with FedEx delivery.

Also Read: FedEx – The Creation Of Logistics Empire

Thirdly, dependability, the establishing of the website enhanced the dependability between the organization and its customers. The computer system supported the customers to know the conditions of their goods during the whole delivery process. For example, the company created software called FedEx Virtual Order in 1999 which provide Internet order and also provide the customers’ catalogs for them on the website. Moreover, the IT system also enhanced the internal management of FedEx Corporation. For the enormous organization, the dependable information system should be the basis for the busy operation process.

Fourthly, speed, for the transportation and logistics industry, speed is one of the crucial elements for the customers choosing a transportation company. The online order and the unique information system in FedEx deal with the order and storage, goods, and shipping process, every process could reduce the time than before. For example, the FedEx Marketplace provided easy access to online merchants to offer fast FedEx shipping.

Last but not least, quality, all of the strategies and performances about Internet and e-tailing could be linked to improving the quality providing for the customers and partners. For instance, FedEx created an e-business Tool in the year 1997 which could support an easier connection with FedEx shipping applications. And the EuroOne network established also provides a powerful transportation routing system that linking more than 30 cities. All of this would enhance the service quality of FedEx’s Internet and e-tailing.

Consequently, FedEx had an explicit objective in the Internet and e-tailing market, for both financial and non-financial performance of an organization in this area was the focus on achieving their objective. For the customers and partners, FedEx tries to provide more flexible, convenient, fast service by the Internet and e-tailing channel, created dependable and loyal relationships with them, and build a perfect reputation in the market. For the own organization, it insisted on long-term investment in the Internet and e-tailing area, it would lead to earning a long-term benefit.

Besides, the organization continually emphasized the infrastructure building and technology improvement, to create a dependable operating system and transportation team which could support the smooth operation of the Internet and e-tailing market. All of these performances lead to the development of FedEx. It could not satisfy only by the pioneer of Internet business in the Global Transportation and Logistics Industry but try to be the long-term leadership in this market.

Evaluation of FedEx Acquisition of Caliber System.

To evaluate the success or failure of FedEx Corporation acquired Caliber Systems in 1998 should also form different points of view. On the positive side, the company use $88 million acquired the Caliber System, Inc., it could provide the company with powerful technical support on Internet commercial at that time. In the period, the e-commercial was on the development stage in the Global Transportation and Logistics Industry, the long-term investment, and acquisition of Caliber System made the FedEx Corporation own the abilities and opportunities to be the pioneer and leader in this area.

According to the summary of benefits for M&A, The strategy helped FedEx Corporation enter a new market, broaden the business range, develop the new product, and also gain new information technology. From the result, after the acquisition, in the following year, the company had an excellent performance, the net income increased 30 percent, and posting record earning risen 73 percent.

However, as the passage of time, the competition in the market became more intense, despite the e-tailing and electric commerce supporting, the report showed that both the volume and the income have a negative trend. From the view of the financial report, the result had an obvious falling. This condition was the cause of several factors.

• Firstly, the fuel pricing jumping was unexpected, it will increase the cost for the company.
• Secondly, it also meant the Caliber System did not blend into the organization completely.

The organization was enormous, the operation was complicated, hence, just acquisition strategy without good association could not make the new party perform perfectly. For solving the problems, the FedEx Corporation announced reorganization on 19, Jan 2000.

Consequently, it is hard to simply judge whether success or failure for the acquisition of Caliber System. The acquisition brought benefits, opportunities, and also a new operation methods for FedEx Corporation. The negative result in the following years was also caused by multiple factors, i.e. the competition in the industry, the fuel price rapid rising and etc.

Source: ILearnLot