FedEx - Innovation Creates Competitive Advantage

Author: (USA) Marden Bower
Country of Origin:
Publisher:
Publish Date: 2006-07-01
Features: Win in Competition with Innovation
Whether in the past or the future, the great progress we have made in the transportation industry—this progress that can be continuously pushed to new horizons through human activity—is merely a symbol. If we can maintain this creativity and unleash our imagination, constantly pushing the horizon further, who knows when the new horizon before us will reach its destination? And this destination is where everyone can enjoy a better life. —Alfred P. Sloan Jr.
Creating a New Industry
On the night of April 17, 1973, a small group of people gathered around a makeshift table, sorting 186 packages, and loading them into 14 small planes. These planes could take off at any time to 25 cities in the United States. From that night on, Federal Express became a transportation company specializing in overnight package delivery. Thirty-two years later, it had reached a daily processing capacity of over 5 million packages and served 215 countries worldwide. The company's revenue grew from $6 million in 1973 to $24 billion in 2004. In its first decade, the company did not make a profit, but by 1983, it had become a $1 billion revenue company. From 1973 to 1975, the company lost over $20 million due to the need to build infrastructure and networks. However, this investment enabled the company to become profitable afterward. From 2002 to 2004, the company's net income exceeded $2.3 billion. The company continuously innovates to meet customer needs. Today, Federal Express consists of four subsidiaries that connect transportation systems worldwide, providing comprehensive services in transportation, information, and logistics. This transformation and growth did not happen overnight. A key factor in its success is the company's strict adherence to tailoring its services to customer needs. The relationship between Federal Express and HP is a typical example. In the rapidly changing computer industry, new models appear every month. HP recognized that computers stored in warehouses could quickly become obsolete. Federal Express and HP partnered to develop a supply chain service solution, reducing HP's inventory of its top-selling laptops worldwide. As a result, HP's laptops were shipped directly from factories in China to customers in North America within just 2–3 business days. In the past five years, Federal Express's stock price has doubled. During the same period, its main competitor, United Parcel Service (UPS), saw its stock price increase by only 15%, while the Standard & Poor's 500 index's market value fell by 20%. Federal Express has become one of the best 100 companies in the United States（《Fortune》magazine's ranking, 1998–2004）and one of the most popular companies（2001–2004）. P1-2