FedEx - Innovation Creates Competitive Advantage

Author: (American) Marden Bora / Country:
Publisher:
Publish Date: 2006-01-01
Features: Win in competition with innovative talent Whether in the past or in the future, the great progress we have made in the transportation industry—this progress can be continuously pushed to new horizons through human activity—is just a symbol. If we can maintain this creativity and unleash our imagination, constantly pushing the horizon further, then 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 brand new industry On the night of April 17, 1973, when Federal Express began operations, a small group of people gathered around a makeshift platform, sorting 186 packages, and then 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 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, it was this investment that enabled the company to become profitable later. 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, connecting transportation systems worldwide and providing comprehensive services in transportation, information, and logistics. This transformation and growth did not happen overnight. An important factor in its success is that the company develops its service plans strictly according 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 globally. As a result, HP's laptops were shipped directly from factories in China to customers in North America within 2–3 business days. In the past five years, Federal Express's stock price has doubled. During the same period, the stock price of its main competitor, United Parcel Service (UPS), only increased by 15%, while the value of the Standard & Poor's 500 index fell by 20%. Federal Express has become one of the best 100 American companies ( by Fortune magazine, 1998–2004) and one of the most popular companies (2001–2004). P1-2