Between 1969 and 1971, Fred Smith secured $90 million in financing to launch Federal Express, a service that initially provided overnight and second-day delivery to 22 major cities in the United States. “FedEx” began deliv-ery in 1973, and the company enjoyed immediate success. FedEx was the first major air transport firm to implement a hub-and-spoke system, with all packages flown to a cen-tral location (Memphis) each night and redistributed by air to final destinations in the predawn hours. The airline shift from parcels to passengers and the strike at UPS in 1974 all contributed to the firm’s early market-share gains. FedEx went public in 1978. By the late 1980s, FedEx had begun to move interna-tionally, purchasing Tiger International (also known as Flying Tigers) and carriers in Japan and Italy. In 1989, FedEx doubled its international volume. In 1995, FedEx cre-ated Latin American and Caribbean divisions and became the first US express carrier to offer direct flights to China. In 1996, FedEx introduced the first

delivery company, with more than 60,000 drop-off loca-tions, 650 aircraft, and about 85,000 vehicles and opera-tions in 220 countries. FedEx has even partnered with the US Postal Service to provide air transportation for postal express shipments, an arrangement that allows FedEx to utilize post offices as critical package drop-off locations. FedEx ships more than 6 million packages per day. In 2019, FedEx opted not to renew its contract with Amazon that helped the online retailer bridge the “last mile” be-tween warehouses and consumers. Founder Fred Smith remains the CEO and owns approx-imately 6% of FedEx shares. Smith is known as a popular and savvy leader, both inside and outside the company.

Internet-based

shipping management system, known as interNetShip. A UPS strike in 1997 sent 850,000 packages a day to FedEx, creating more opportunities for the firm. In 1998, FedEx averted a pilot strike of its own, prompting the company to outsource more of its flights. In 2000, Federal Express adopted its nickname,

“FedEx,” as its official company name. FedEx acquired Kinko’s in early 2004 to serve a broader array of shipping and office-related needs, particularly those of small busi-ness owners; stores were renamed FedEx Office in 2008. In 2007, FedEx acquired its Chinese partner, DTW Group, and launched the first one-day guaranteed service in China later in the year. FedEx expanded its presence in Mexico in 2011 with its acquisition of Servicios Nacionales Mupa S. de CV. Today, FedEx provides transportation, e-commerce, and supply-chain management operations, including worldwide express delivery, ground small-parcel delivery, small-quantity freight delivery, and supply-chain manage-ment services. FedEx remains the world’s leading express

220 Chapter 8 Functional Strategies

Case Challenges 1. Do FedEx and UPS offer the same delivery services, or has each chosen to focus on different forms of delivery and/or customer needs? Explain.

2. The Internet has alleviated the need for overnight delivery of many documents. How has FedEx survived and even prospered amid this key technological change?

3. Should FedEx be partnering with a key competitor and protected government entity, the US Postal Service? Why or why not?

1. FedEx and UPS both offer delivery services, but they have chosen to focus on different forms of delivery and customer needs. While both companies provide overnight and second-day delivery services, FedEx distinguished itself by pioneering the hub-and-spoke system, which allowed for more efficient distribution of packages. Additionally, FedEx has expanded its international presence more aggressively than UPS, acquiring international carriers and establishing direct flights to key global destinations. UPS, on the other hand, has focused on building a strong ground delivery network and investing in technology to optimize package tracking and delivery efficiency. Ultimately, while there may be overlap in the services offered by FedEx and UPS, each company has carved out its own niche and tailored its offerings to meet specific customer needs.

2. Despite the internet alleviating the need for overnight delivery of many documents, FedEx has survived and prospered by adapting to changing market dynamics and diversifying its services. Instead of relying solely on document delivery, FedEx expanded its offerings to include small-parcel delivery, freight services, supply-chain management, and e-commerce solutions. This diversification enabled FedEx to capitalize on the growing demand for package delivery driven by online shopping and global trade. Additionally, FedEx invested in technology and infrastructure to enhance its efficiency and reliability, ensuring that it remained a trusted provider of express delivery services in an evolving marketplace.

3. Partnering with a key competitor and protected government entity like the US Postal Service can be a strategic move for FedEx, depending on the specific circumstances and objectives. Collaborating with the USPS allows FedEx to leverage the postal service's extensive network of post offices and delivery routes, expanding its reach and improving its last-mile delivery capabilities. Additionally, partnering with the USPS can help FedEx reduce costs and increase efficiency by utilizing shared resources and infrastructure. However, there are potential risks and challenges associated with such a partnership, including competition concerns, operational complexities, and regulatory considerations. Ultimately, the decision to partner with the USPS should be evaluated based on its potential benefits, risks, and alignment with FedEx's overall business strategy and objectives.