MORG4038 Management and Organization - FedEx’s Successful Internationa
FedEx’s Successful Internationalization
Companies desiring to compete in global markets need to be flexible in how, where, and what they provide customers. As early as 1979, FedEx founder Fred Smith acknowledged that customer needs were constantly changing, and to be successful FedEx would need to implement strategies to help it become mobile and flexible and at the same time ensure strong customer satisfaction. Through a series of buyouts, FedEx implemented successful strategies in Asia. Simultaneously, the firm implemented innovative technologies, creating a seamless experience for international customers using its services.
It was no accident that FedEx became the premier carrier servicing Asia. As early as the 1980s, Smith recognized the growing market in China and knew that Asia would become an economic powerhouse. So, in 1984, FedEx launched operations in China and began the first direct express flight to the mainland in 1996. In 1989, FedEx paid $895 million to buy Tiger International Inc., a struggling hauler with rights to fly into most Asian airports and a management team familiar with the Pacific Rim. Wall Street did not like this decision because of Asia’s unpredictability, but FedEx saw the potential in this region. The decision turned out to be highly profitable. FedEx’s business in Asian countries has soared, with a dramatic increase in the volume of goods shipped over FedEx’s international network and much of the growth coming from Asia. In January 2006, FedEx spent $400 million to buy out its partner in China, Tanjin Datian W Group, giving FedEx full control over Datian’s trucking fleet and 89 distribution hubs. It also gave FedEx more control over services in secondary Chinese cities that are becoming more linked to the global economy as manufacturers shift factories further inland as they flee increasing labour costs in coastal regions. FedEx closed its Asian hub in the Philippines in 2008 and built a new $150 million super hub in the heart of Guangzhou, one of China’s fastest-growing manufacturing districts. To provide seamless services, FedEx recognized the need to provide all types of services that identify communication needs and in 2004 rebranded all of its companies to make customers aware of the breadth of its services.
Implementing the proper IT system to assist FedEx with the challenges of growing internationally was equally important. FedEx managers realized that an IT system must take into account the idiosyncrasies of different countries, custom authorities, and individual needs. FedEx knew that, to provide detailed and accurate information to customs about customer shipments, it had to automate and electronically track all shipment documentation. So, FedEx installed the technology for customs authorities to review the documentation, in turn, simplifying the customs process and giving them the ability to identify and examine the inbound manifest of shipments quickly and accurately.
The IT system also gives customers seamless clearance through customs, plus visibility of their shipments and customs procedures through to a receipt. A customer can go online from anywhere to conduct a transaction or track a shipment. FedEx also administers its own IT operations and develops much of its own technology. In order to achieve this, it has a large team of developers and IT personnel.
These initiatives have helped make FedEx successful, especially in the Asian market. FedEx continues to expand its operations in Asia, opening a freight forwarding office in India in early 2010. In fact, during 2008–2010, it opened 22 freight forwarding offices in international locations such as London, Brussels and Mexico City. Additionally, in 2010, FedEx announced the start of a new international supply chain service called International Direct Distribution. The intent is to provide a single rapid, flexible solution that increases the speed to market and reduces cost. It consolidates multiple packages, bypasses distribution centres, and streamlines customs clearance, thus delivering goods quickly to their final destination. The company’s managers realized that in order to be successful, they needed to respond quickly to the changes and new challenges of the “flatter” world. FedEx has been one package ahead of its competitors as a first mover in areas throughout the world.
Questions for FedEx’s Successful Internationalization
2. Can competitors imitate FedEx’s approach in international markets and take market share away from the company? Critically evaluate?
3. Is the FedEx move to close its hub in the Philippines and build a new one in China a good decision for its Asian operations? Critically discuss.
Answer
Management and Organizations
1. According to Altbach and De Wit (2017), the changes that have taken place in demands of consumers have been understood effectively by FedEx and has further formulated strategies which are able to play a major role in fulfil the needs. The company has developed its reputation by the proper implementation of successful approaches and strategies in Asia. The company has been able to become a major carrier based service provider in Asia. The potential which has is developed by the Asian region was thereby identified effectively by the company. The organization further took a decision to acquire the company named Tiger International Inc. so that it is able to develop its operations in Asian market. This decision had proved to be successful and acted as a major turning point for the company.
As discussed by Bouncken, Schuessler and Kraus (2015), the success which was gained by FedEx in the industry was mainly based on the control which the company had developed over the Asian market. The company thereby started expanding its operations by purchasing its partner company named Tanjin Datian W Group in China. The organization has thereby gained total control on its operations in Asia. FedEx was successful in offering its services and reaching the consumers in various smaller cities of the country. Another major step which was taken by the company was based on the movement of Asian Hub from Philippines to China. This step proved to be useful for the development of its operations.
As discussed by Cannavale (2017), FedEx had aimed at providing seamless levels of services to the Asian customers by moving the Asian hub to the country. FedEx had further rebranded its business operations in 2004 with the aim of increasing the reach of consumers and the presence of the business in the industry. The effective implementation of various IT systems has been able to play a key role in providing fierce levels of competition to different companies which operate in the same industry. The IT based systems which have been implemented by the company have been able to provide opportunities to FedEx so that the management is able to communicate with consumers and ensure success as well.
2. As discussed by Cavusgil and Knight (2015), the proper understanding of the potential of Asian market is considered to be an important approach that was implemented by FedEx. The organization has thereby been able to develop its Asian operations with the knowledge based on the market. The company has aimed at offering the best services to customers with the help of movement of the hub closer to areas where services will be provided. FedEx has developed a wide variety of service which can be offered to the consumers including, business solutions, e-commerce and transportation. The different services which are offered to consumers are related to different business operations of the company which include, FedEx Freight, FedEx Services, FedEx Express, FedEx Ground. The different business services that are offered by the company to fulfil various needs of consumers cannot be imitated easily by the competitors.
According to Chiva, Ghauri and Alegre (2014), the key factor which lies behind the absence of effective competition levels available for FedEx is related to resources and capabilities gained by them. The organization has thereby developed its position in the industry before the competitors had been able to start their operations. The operations of various new organizations within the market has not been able to affect the profitability and revenue based levels of FedEx. The package and freight sector of Asia is competitive FedEx has recently starting facing competition from the companies United Parcel Service and Amazon.
As discussed by Dutot, Bergeron and Raymond (2014), the competitive advantage that has been gained by the company is based on the entire duration of the operations in comparison to other companies. The advantage which has been gained by the company over its competitors has proved to be effective for FedEx so that the revenues and levels of profitability can be maintained. The solutions which are offered by the company to the consumers have been expanded so that it is able to maintain the profitable position in the industry. The approaches and strategies cannot be imitated by the competitors in an effective manner in order to compete with FedEx. The process which has been implemented by FedEx in order to form an effective customer base in various areas of its operations has provided strength to the company. The strength that has been developed by the industry is based on understanding of the changing needs of consumers. The organization has been quite successful in the proper development of its position in the industry with the help of its customer management skills (Hånell and Ghauri 2016).
3. According to Hong, Wang and Kafouros (2015), the decision related to the closure of the Asian hub of FedEx in Philippines and further moving the operations to China was based on proper development of Asian operations. The company has thereby been successful in proper development of operations with assistance provided by the resources possessed by FedEx. The analysis of consumer demands is considered to be an important part of effective part of the operations. FedEx also decided to increase its fleet in order to reach more number of consumers within less amount of time. The formation of the hub closer to the operating areas is considered to be an important part of the steps taken by the company in order to develop the customer base.
As discussed by Khojastehpour and Johns (2015), FedEx has the aim of creating a huge customer base and providing them with desired products within lower amounts of time. The supply and distribution based activities of the organization have affected the revenues and levels of profitability as well. The development of the Asian hub of the company in China has played a major role in the reduction of costs. The organization has also been successful in increasing levels of revenues and profitability. The reduction of the cost levels has been helpful for the company to provide effective services to the consumers. The organization has been successful in detecting the growth based opportunities in Asia and further has used the opportunities in order to develop its position. The different decisions which have taken by the company based on the expansion of operations in Asia has been helpful in ensuring the success of FedEx (Knight 2015).
4. According to Suseno and Pinnington (2017), the management of different functions of the organization is considered to be a major part of social process which is conducted by them. The process is thereby based on responsibility which has to be fulfilled by an organization in order plan the operations in an economic and effective manner. The various functions that are considered to be basic or fundamental for the organization mainly include, organizing, planning, controlling and actuating. A new model has also been developed with respect to different managerial functions of organizations which is based on different steps including, organizing, planning, staffing and directing.
As discussed by Williams et al. (2014), FedEx has been analysed in the case study which is related to the ways by which the company has been able to implement the different managerial functions in an effective manner. The analysis of the managerial functions which have been fulfilled by the company include, planning, controlling and organizing. The process of planning has played a major role in the ways by which the company has implemented different strategies in order to develop its operations in Asia. Organizing is considered to be an important function which is based on the development of different aspects of the company in an effective manner. The aspects of the organization which are managed with the help of this function are the physical aspects, human resource aspects and financial aspects.
According to Khojastehpour and Johns (2015), the managerial function based on organizing is thereby helpful in developing different parts including, identification of various activities, assigning duties, classification related to grouping of the activities, coordination based on authority and delegation of authority. Controlling is considered to be a major part of the managerial functions which are based on the development of standards related to performance depicted by the employees in order to achieve standards or goals. The case study based on FedEx is also able to depict different managerial functions that are fulfilled by the company. The management of the company has gained immense levels of success in understanding the different growth related opportunities that are offered in Asian market.
According to Hong, Wang and Kafouros (2015), the process of planning is also based on the different strategies which have been developed and implemented by the company on a periodic basis. Acquisition of the various organizations has proved to be an important part of the entire planning process which is conducted by FedEx. The proper development of IT systems is also considered to be an important part of the planning process.
The managerial function related to organizing has also been depicted in an effective manner in the case study based on FedEx. International growth of the organization is thereby facilitated by implementation of appropriate technologies in various organizational functions. The managers of FedEx have been able to play a major role in the ways by which the company has organized various functions. The function related to controlling is based on the proper maintenance of the profitable operations of FedEx (Knight 2015).
References
Altbach, P.G. and De Wit, H., 2017. Global: Internationalization and Global Tension: Lessons From History. In Understanding Higher Education Internationalization (pp. 21-24). SensePublishers, Rotterdam.
Bouncken, R.B., Schuessler, F. and Kraus, S., 2015. The theoretical embedding of born globals: Challenging existing internationalization theories. The International Business & Economics Research Journal (Online), 14(1), p.39.
Cannavale, C., 2017. Post-Bureaucratic Firms' Internationalization: A Cross-Cultural Perspective. In Evolution of the post-bureaucratic organization (pp. 126-151). IGI Global.
Cavusgil, S.T. and Knight, G., 2015. The born global firm: An entrepreneurial and capabilities perspective on early and rapid internationalization. Journal of International Business Studies, 46(1), pp.3-16.
Chiva, R., Ghauri, P. and Alegre, J., 2014. Organizational learning, innovation and internationalization: A complex system model. British Journal of Management, 25(4), pp.687-705.
Dutot, V., Bergeron, F. and Raymond, L., 2014. Information management for the internationalization of SMEs: An exploratory study based on a strategic alignment perspective. International Journal of Information Management, 34(5), pp.672-681.
Hånell, S.M. and Ghauri, P.N., 2016. Internationalization of smaller firms: Opportunity development through networks. Thunderbird International Business Review, 58(5), pp.465-477.
Hong, J., Wang, C. and Kafouros, M., 2015. The role of the state in explaining the internationalization of emerging market enterprises. British Journal of Management, 26(1), pp.45-62.
Khojastehpour, M. and Johns, R., 2015. From pre-internationalization to post-internationalization: Relationship marketing perspective. Journal of Strategic Marketing, 23(2), pp.157-174.
Knight, J., 2015. Internationalization brings important benefits as well as risks. International Higher Education, (46).
Suseno, Y. and Pinnington, A.H., 2017. Building social capital and human capital for internationalization: The role of network ties and knowledge resources. Asia Pacific Journal of Management, pp.1-26.
Williams, N.L., Ridgman, T., Shi, Y. and Ferdinand, N., 2014. Internationalization as interaction: A process perspective on internationalization from a small developing country. Thunderbird International Business Review, 56(2), pp.127-144.
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