Entrepreneur Frederick Smith

8/3/2019 Entrepreneur Frederick Smith

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FedEx Corporation, originally known as FDX Corporation, is

a logistics services company, based in the United States with

headquarters in Memphis, Tennessee. The name "FedEx" is a syllabic

abbreviation of the name of the company's original air

division, Federal Express, which was used from 1973 until 2000.

FedEx Express is the world's largest express transportation company,

providing fast and reliable delivery to every U.S. address and to more

than 220 countries and territories. FedEx Express uses a global air-and-ground network to speed delivery of time-sensitive shipments,

usually in one to two business days with the delivery time

guaranteed.


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List of CompetitorsList of Competitors

y UPS

y DHL (World Market Leader)

y TNTyAramex

y BAX Global

y Choice Logistics

y Purolator Courier


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Introduction

Frederick Wallace Smithy Chairman, President. CEO ofFedEx Corporationy Won Peter F Drucker Strategic Leadership Award for the

year 1997

y Born in August 1944, in Marks, Mississippi, U.Sy Smith studied in prestigious Memphis University Schooly Keen observer and avid readery Determined to be an entrepreneury At the age of 1959, started first business Ardent Record

Companyy Graduated in Economics and Political Science at Yale

University in mid 1960s


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U.S MARINE CORPSy Served as a Marine (Captain) for nearly four and a half

years in the Vietnam war

yAs a group leader, he led people from diversebackground

y Gained experience in leading people from lowersections of society which helped in understanding

their needs and psychology.yAfter Vietnam war, he served in Arkansas Aviation

Sales, Little Rock, U.S.


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FactsFactsy During 1960s IBM and Xerox provided automation

services but failed in providing reliable after sales

servicey Quick shipment of the spare parts was not possible

due to poor logistics services. Most of the airfreight inthe US was shipped through the passenger aircraft.

yNeed for exclusive airline for freight delivery

yAt USMC, he felt need for an integrated air grounddelivery system


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InceptionInceptiony Joined Arkansas Aviation Sales after Vietnam War.

y The company was in business of selling and repairing

aircraft and was running at a lossy Smith noticed that the company was facing the same

problem that he had witnessed at USMC. (delivery ofcritical spare parts)

y Need for IAGD system led him to incorporate FederalExpress Corporation onJune 18, 1971 in Little Rock, U.S


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ChallengesChallenges

y Task of building a nationwide network of mail delivery

y Developing organizational framework to deliver

express maily Finance

y Unexplored and alien nature of industry


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HUB AND SPOKE SYSTEM

Packagesfrom

Chicago

Packagesfrom

New York

Packagesfrom LosAngeles

ToFlorida

ToTexas

HUB(Central

Location)


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HUB AND SPOKE SYSTEM


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y Study conducted by two marketing firmsindependently A.T Kearney & Aerospace AdvancePlanning Group in 1972

Studies revealed:

y 90% commercial airline companies did not operateafter 10pm

y Market for delivering critical, time sensitive shipmentswithin two days was estimated to be around 700 mn

growing @ 20%y Overnight delivery could be fulfilled in 100 big city

airports

y Company would break-even when volumes reaches 1.6

mn packages a year


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Daily Volume DataDaily Volume Data


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Financial picture

1974 1975 1976 1983

$17.79

$43.49 $75 $1,000

$8.85

$4.12$9.85

$88.93

Revenues in mn Pre tax loss in mn Income


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0

200

400

600

800

1000

1200

1400

1600

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Column1

Operating Income

Net Income


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Role ofI.TRole ofI.Ty Need for Real Time Information about the movement of

packagesy Evolution of first technological innovation at FedEx the

COSMOS (Customer Oriented Services and ManagementOperating System)

y FedEx launched Global Operations Control Centre (GOCC) tokeep track of weather patterns and keep track on movements ofplanes and trucks

It helped in:y Improve Hub and Spoke system efficiencyy Guiding aircrafts and trucks which minimized unfavourable

incidentsy Making customers packages more safe thereby making FedEx

more reliable


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y In 1994, Smith launched FedEx Ship, Internet basedsoftware, which enabled customers to dial COSMOSand place order, track shipment, etc

y In the same year, FedEx launched its own websitewww.fedex .com which offered all services.

y Use of IT helped FedEx to reduce overhead costs for

FedEx in terms of establishing customer supportcentres, toll free numbers


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FedEx and PeopleFedEx and Peopley Smith believed that in a service oriented organization

like FedEx, it was very important to have highlycommitted employees to deliver the kind of service

that customers expected.y At FedEx, Smith preached the People Service Profit

(PSP) philosophy. When company earned higherprofits, employees would get share of profit.

y

Smith lured experienced people by offering stockoptions and an adventurous and exciting careerprospects at FedEx


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y Several innovative training programs were devised forFedEx employees to qualify for higher positions atFedEx.

Smith :Promoted informal work culture

Devised complaint management system

Employed open door policy

Initiated guaranteed fair treatment policy

Initiated several awards programs


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GlobalizationGlobalization

Smith strongly advocated globalization

Smith:

y Commenced international operations in 1984

yAcquired Tiger International and transformed intoworlds largest in 1989

y Obtained aviation rights in China in 1996

In 1998, FedEx made one of the biggest acquisitions inthe express cargo industry by acquiring CaliberSystems for $2.7bn

By 2003, FedEx had expanded its global presence in 210

countries in the world


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y Smith transformed FedEx from a loss making companyduring its early years to a $1bn revenue company in1983. (Efficient and Effective)

yWhile establishing FedEx in early 1970s he risked$4mn that he had inherited from his family trust. Thisrisk was based solely upon his confidence. (Risk taker)

y Smith was a determined person who never succumbed

to failure. In 1974 FedEx was on the verge ofbankruptcy, still smith did not lose courage andbelieved in his business plan. (Determined)


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y Smith was acknowledged for his quick decisionmaking qualityand for the confidence he displayed

even when the odds were against FedExy Smith devised a unique compensation system, which

encouraged hired truck operators to deliver largequantities of shipments without forgoing the

timeliness and customer service


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CriticismCriticismyAnalysts accused Smith of resorting to unethical

means to arrange money for FedEx during the initial

years of its operations.yAnalysts felt that Smith committed a few strategic

blunders. Ex- his decision to start operations in Europeby establishing Hub in Germany without analyzing

market potential forFedEx (failed miserably)

yAnalysts accused Smith of patronizing politicians andresorting to intense lobbying to win favours for FedEx.


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y Industry analysts also felt that Smith had focusedmainly on the air bound express delivery market and,in process, badly lost market share to competitors like

UPS in the ground shipment market.y Many ofFedExs employees felt that Smiths too much

inclination on providing its customers with innovativeuntested services on a regular basis resulted in the

company losing money on a few occasions


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PresentlyPresentlyy Revenue US$ 34.734 billion

y Operating income US$ 1.998 billion

y Net income US$ 1.184 billiony Total assets US$ 24.902 billion

y Total equity US$ 13.811 billion

y Employees290,000 (May 2010)

y Subsidiaries FedEx Office, FedEx Express, FedExGround, FedEx Freight, FedEx Custom Critical, FedExSupply Chain, FedEx Trade Networks, FedEx Services


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SWOT analysis


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Futurey The environment ofFedEx is changing fast due to

financial crisis, increasing no. of competitors and due

to globalizationy The future is too volatile and unpredictable to plan for

heavy investments

y FedEx must maximize its chance to strengthen it

position. This can be done by:Meeting better expectations of the customer

Paying attention on changing needs of customer

Launching more innovative services


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Thank You

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Entrepreneur Frederick Smith