TEACHING NOTE 1: FEDEX CORPORATION: STRUCTURAL
TRANSFORMATION THROUGH E-BUSINESS
Case by Ali F. Farhoomand and Pauline Ng
Teaching Note by Casper van der Veen
Case Synopsis
This case describes the development of FedEx from an express delivery company in 1973 to a
global logistics and supply chain management company in 2000. First, a detailed description
is given of the leading industry role FedEx has played during the first decades of its existence.
Then the case goes into the importance of IT throughout the company history and its impact
on the firm’s infrastructure. The second part of the case involves the present. FedEx is about
to go through a major reorganization and is at the same time struggling with various strategy
issues. The FedEx case is an interesting, broad and challenging case that will meet a variety of
teaching objectives.
Teaching Objectives
If used in conjunction with chapter 1, this case can be employed to meet the following
teaching objectives:
Introduction of strategy process, content and context topics. The FedEx case has a very
broad scope, touching on almost all of the major strategy topics in the book. This allows
for a broad discussion on the major themes of strategic management (link to
introduction).
Understanding the concepts of strategy. The case questions are aimed at testing the
students ability to distinct, define and work with strategy issues, paradoxes, conflicting
demands, as well as strategy perspectives (link to introduction and reading 1.3 Poole and
Van de Ven).
Understanding of organized complexity and wicked problems. FedEx is faced with a
complex set of issues that is not tame and cannot be dealt with by employing simple
problem solving tools. Issues are interrelated: dealing with one means dealing with related
issues, too (link to introduction and reading 1.2 Mason and Mitroff).
Ability to recognize strategy issues. As in real life strategy matters, some issues could be
more present than others. Despite the wickedness of these issues, students are asked to
distill and categorize the most important issues from the case (link to introduction and
reading 1.2 Mason and Mitroff).
Understanding the nature of strategy paradoxes. This case can be used to illustrate that
there are no straightforward ‘right’ solutions to strategy issues, but that strategists must
deal with tensions between opposite demands. As such this case can be used to illustrate
the approach taken in the rest of the book (link to introduction).
Teaching Guideline
As the chapter coverage table indicates, the FedEx case touches on a wide variety of strategy
issues. Due to this richness, the FedEx case can be difficult to teach. If the teacher wishes to
focus on one issue, it might prove difficult to avoid class discussion going off on a variety of
tangents. However, if an integral coverage of all aspects of the case is intended, then the
complexity of drawing together a variety of elements within a short period of time might
prove quite daunting. Whatever the objective, usage of this case requires strong directing by
the teacher and disciplined discussion by the students. The case breadth can be exploited in
three ways:
, CASE 1: FEDEX CORPORATION
Introductory case. The case can be used at the beginning of a course (as we suggest using
it directly in conjunction with chapter 1), to give students an overview of issues to come.
The central issue of almost each chapter is dealt with in the FedEx case, which makes it
possible for the professor to illustrate the topics that will be dealt with throughout the
course.
Wrap-up case. The FedEx case can be used as a final wrap up case for the course, because
it challenges the student to integrate almost all of the issues discussed during the course.
Exam or assignment case. Again because almost all issues are touched on in this case, an
assignment or exam based upon this case will ensure that the most important elements of
the course can be covered.
A vital part of chapter 1 is the distinction in strategy between process, content and context.
This is central in handling this case in the first three questions. The last two questions will
provide the students with the opportunity to dive more into the content of the book,
introducing strategy issues, underlying tensions and strategy perspectives. In case 2 on
Honda, the students will focus further on the concept of tensions, paradoxes and ways to
resolve them. The last two questions also provide the teacher with the handholds to add a bit
of polarization to encourage debate, especially by asking the students about their own strategy
perspective. Sometimes we even ask the students to physically split between the two
perspectives that are handled: have each group sitting on one side of the classroom. This will
add even more polarization, debate and a lot of fun for the students, too.
While the following cases in this teaching guide generally focus on one particular issue, this
case will serve to test students on their skills to recognize the important strategic issues
themselves. Be aware of the fact that the exhibits in this case can be linked directly to the case
questions, adding great depth to the case analysis. Furthermore, even though the focus of the
case is on e-business, we advise you to expand the focus towards showing that the entire
strategy context has been (and still is) very important for FedEx from the start. The first
question therefore provides an ideal way to start the case discussion.
Case Questions
1. Describe the context of FedEx’s strategy between 1973 and 2000. What were the
circumstances that FedEx encountered?
2. Describe FedEx’s strategy content between 1973 and 2000. What were the main
characteristics?
3. Describe FedEx’s strategy process between 1973 and 2000. How did FedEx’s strategy
come about?
4. What are the 5 main strategy issues for FedEx in 2000? Why?
5. Which strategy perspective does FedEx have on each of these issues? Did it change over
time? What is your perspective on each issue?
Case Analysis
1. Describe the context of FedEx’s strategy between 1973 and 2000. What were the
circumstances that FedEx encountered?
Pioneer in express transportation and logistics industry. FedEx is widely regarded as the
inventor of the express logistics and transportation industry. In 1973, it was the first to
deliver packages overnight, enabling customers to shorten their order cycle in a reliable
fashion. Throughout the next decades, FedEx continued to bring innovations to the
industry: it was the first package courier to use it’s own air fleet, invented customer
logistics management and multi-client warehousing, was the first to build a virtual
infrastructure and the first to issue handheld scanners to its drivers (exhibit 1: FedEx‘s
record of system innovation).
,CASE 1: FEDEX CORPORATION
Deregulation. FedEx quickly capitalized on various national and international deregulation
measures. Government airline industry deregulation permitted the landing of larger freight
planes, deregulation of the U.S. trucking industry allowed the company to establish a
regional trucking system and trade deregulation in Asia Pacific opened up a whole new
market for FedEx.
Changing industry rules due to new technology applications. The rise of information
technology gave huge possibilities to add a whole new sort of infrastructure to the physical
infrastructure that FedEx had already established. This virtual infrastructure had a new
function in the express transportation industry: the management and utilization of
information about the physical logistics. The industry was now also concerned with
customer material flow management, within as well as outside companies.
Globalization of businesses. While customers expanded their global scope, the movement
of goods across national boundaries created new demands for the transportation and
logistics industry. Clients asked for global presence, global delivery possibilities and thus
for global industrial knowledge. In 2000, FedEx served 210 countries that made up for
90% of global GDP.
Increasing competition. While FedEx was the first in the industry in 1973, throughout the
next decades a growing number of others discovered the possibilities of express transport
and logistics management. Global companies such as DHL, UPS and TNT, as well as
small local couriers, capitalized on IT developments. In 2000, competition was fierce,
lessening the importance of FedEx in the industry more and more.
2. Describe FedEx’s strategy content between 1973 and 2000. What were the main
characteristics?
Responding to market demand for value-added services. Businesses did not only ask for
simple on-time delivery of a package, they started to ask for more services increasingly.
Logistics for them came to include value-added activities such as order processing,
distribution center operations, inventory control, purchasing, production and customer or
sales services. Providing these services became a key part of FedEx’s strategy.
Creating consumer lock-in. One source of FedEx’s competitive advantage, the ability to
deliver goods quickly, pulled in customers by shortening their order cycle and thus reduce
their costs. Moreover, the best customers were pulled in further by giving them PC’s with
FedEx software designed to link them to FedEx’s systems and offering these customers the
PowerShip program with additional services. In 2000, PowerShip had 850.000 on-line
customers worldwide. As stated in the case, by integrating its services with the customers,
and thus generating more customer loyalty and increasing switching costs, FedEx raised
market entry barriers successfully.
Supreme infrastructure. The heart of FedEx’s success has been its distinct activity system.
Components of the company’s unique value chain include the COSMOS centralized
computer system that was established as early as 1979 and keeps track of all packages
through bar codes, as well as multiple-client warehouses, the Route Planner that maps
pickup and delivery for the customer, in-vehicle data systems and the website fedex.com,
allowing customers to keep track of the route of their package online.
Vertical integration. In the 1980s, FedEx’s activities expanded backwards to the
businesses that bought its services. In the industry activity chain of express transport, the
company started to provide services to its customers tracking back to the processes
involved before the packages left them. Doing so, FedEx identified points along the supply
chain where they could provide management services, from the supplier, to purchasing, to
manufacturing, to order management, to transport with the ‘FedEx Integrated Logistics
Solution’ (exhibit 3 and 4). Sometimes customers even totally outsourced their supply-
chain management functions to FedEx. Along the way, FedEx also moved into other
transport activities within its industry through horizontal integration (exhibit 5).
Changing organization of subsidiaries. A web of subsidiaries backed up FedEx’s vertical
integration. The corporation established mutual business units concerning activities such
, CASE 1: FEDEX CORPORATION
as logistic management, express transport, air freight, supply chain management, internal
database management and so on. For instance, in 2000 FedEx operated data centers in
Memphis, Colorado Springs, Orlando, Dallas, Miami, Singapore and Brussels.
Establishing partnership arrangements. FedEx’s role in providing integrated logistics
systems formed the basis of many partnership arrangements. Dell and Cisco are examples
of companies that team up with FedEx as their preferred supplier for their distribution
activities (exhibit 2). Another important partner is Netscape, with whom FedEx signed an
agreement to adopt Netscape software for its internet and intranet sites in 1999, giving
FedEx leverage over 13 million Netscape users. Other partners include L.L. Bean and
Hewlett-Packard on-line, merchants using FedEx distribution and therefore mentioned on
fedex.com.
3. Describe FedEx’s strategy process between 1973 and 2000. How did FedEx’s strategy
come about?
Visionary belief in future direction. Fred Smith, President and CEO of FedEx, was the
creative engine in the company’s strategy. As stated in the case: Smith was the visionary
who forced his company and other companies to think outside the proverbial. The
continuous innovation in FedEx’s strategy reflect a strategic mind focused on leveraging
opportunities, for instance with Smith insisting on the acquisition of an own air fleet,
contrary to competitors’ logic. Yet he also brings some rationality to the equation by
tempering too much creative enthusiasm, saying “our biggest challenge is to correctly
manage everything what is on our plate”.
Long-term foresight. The statement of VP William Conley is key, here: “If we’re all
operating in a day-to-day environment, we’re thinking one to two years out. Fred’s
thinking five, ten, fifteen years out.” Strategy both evolved in the short term from the
operational level, as well as from long-term planning. An example of the latter is that very
early on, Smith foresaw that Internet was going to spur some major changes in the industry
and planned his company’s future accordingly.
Organizational transformation. Before FedEx announced its major internal reorganization
in 2000, it has gone through several transformations in the former decades. FedEx has
changed the way it does business overtime through vertical integration and expansion. The
company has also changed the way its organization is configured through the continuous
incorporation of IT and other system innovations.
4. What are the 5 main strategy issues for FedEx in 2000? Why?
I. The issue of industry development. How should FedEx relate to its environment? In 2000,
FedEx has to deal with various situational changes, such as fierce competition, economic
decline and the rise of e-tailing and electronic commerce. Somehow, FedEx should
comply with the demands these changes pertain. However, its competitors will probably
adapt to the new industry rules, too. Instead, maybe FedEx could also try to set the ‘rules
of the game’ themselves, as it has done so many times before. In other words, FedEx has
to deal with the paradox of compliance and choice.
II. The issue of international configuration. How should FedEx organize its activities across
borders? In 2000, FedEx served 210 countries around the world with various regional IT
offices in Brussels, Leiden and Singapore, as well as a web of local offices. On one hand,
FedEx can compose and manage these subsidiaries to leverage as much cross-border
business relatedness as possible, answering the demand for global synergy through
standardization, coordination and/or centralization. On the other hand, FedEx
should stay attuned to the specific demands of each national market, answering to the
demand for local responsiveness. Thus, FedEx is confronted with the paradox of
globalization and localization.
TRANSFORMATION THROUGH E-BUSINESS
Case by Ali F. Farhoomand and Pauline Ng
Teaching Note by Casper van der Veen
Case Synopsis
This case describes the development of FedEx from an express delivery company in 1973 to a
global logistics and supply chain management company in 2000. First, a detailed description
is given of the leading industry role FedEx has played during the first decades of its existence.
Then the case goes into the importance of IT throughout the company history and its impact
on the firm’s infrastructure. The second part of the case involves the present. FedEx is about
to go through a major reorganization and is at the same time struggling with various strategy
issues. The FedEx case is an interesting, broad and challenging case that will meet a variety of
teaching objectives.
Teaching Objectives
If used in conjunction with chapter 1, this case can be employed to meet the following
teaching objectives:
Introduction of strategy process, content and context topics. The FedEx case has a very
broad scope, touching on almost all of the major strategy topics in the book. This allows
for a broad discussion on the major themes of strategic management (link to
introduction).
Understanding the concepts of strategy. The case questions are aimed at testing the
students ability to distinct, define and work with strategy issues, paradoxes, conflicting
demands, as well as strategy perspectives (link to introduction and reading 1.3 Poole and
Van de Ven).
Understanding of organized complexity and wicked problems. FedEx is faced with a
complex set of issues that is not tame and cannot be dealt with by employing simple
problem solving tools. Issues are interrelated: dealing with one means dealing with related
issues, too (link to introduction and reading 1.2 Mason and Mitroff).
Ability to recognize strategy issues. As in real life strategy matters, some issues could be
more present than others. Despite the wickedness of these issues, students are asked to
distill and categorize the most important issues from the case (link to introduction and
reading 1.2 Mason and Mitroff).
Understanding the nature of strategy paradoxes. This case can be used to illustrate that
there are no straightforward ‘right’ solutions to strategy issues, but that strategists must
deal with tensions between opposite demands. As such this case can be used to illustrate
the approach taken in the rest of the book (link to introduction).
Teaching Guideline
As the chapter coverage table indicates, the FedEx case touches on a wide variety of strategy
issues. Due to this richness, the FedEx case can be difficult to teach. If the teacher wishes to
focus on one issue, it might prove difficult to avoid class discussion going off on a variety of
tangents. However, if an integral coverage of all aspects of the case is intended, then the
complexity of drawing together a variety of elements within a short period of time might
prove quite daunting. Whatever the objective, usage of this case requires strong directing by
the teacher and disciplined discussion by the students. The case breadth can be exploited in
three ways:
, CASE 1: FEDEX CORPORATION
Introductory case. The case can be used at the beginning of a course (as we suggest using
it directly in conjunction with chapter 1), to give students an overview of issues to come.
The central issue of almost each chapter is dealt with in the FedEx case, which makes it
possible for the professor to illustrate the topics that will be dealt with throughout the
course.
Wrap-up case. The FedEx case can be used as a final wrap up case for the course, because
it challenges the student to integrate almost all of the issues discussed during the course.
Exam or assignment case. Again because almost all issues are touched on in this case, an
assignment or exam based upon this case will ensure that the most important elements of
the course can be covered.
A vital part of chapter 1 is the distinction in strategy between process, content and context.
This is central in handling this case in the first three questions. The last two questions will
provide the students with the opportunity to dive more into the content of the book,
introducing strategy issues, underlying tensions and strategy perspectives. In case 2 on
Honda, the students will focus further on the concept of tensions, paradoxes and ways to
resolve them. The last two questions also provide the teacher with the handholds to add a bit
of polarization to encourage debate, especially by asking the students about their own strategy
perspective. Sometimes we even ask the students to physically split between the two
perspectives that are handled: have each group sitting on one side of the classroom. This will
add even more polarization, debate and a lot of fun for the students, too.
While the following cases in this teaching guide generally focus on one particular issue, this
case will serve to test students on their skills to recognize the important strategic issues
themselves. Be aware of the fact that the exhibits in this case can be linked directly to the case
questions, adding great depth to the case analysis. Furthermore, even though the focus of the
case is on e-business, we advise you to expand the focus towards showing that the entire
strategy context has been (and still is) very important for FedEx from the start. The first
question therefore provides an ideal way to start the case discussion.
Case Questions
1. Describe the context of FedEx’s strategy between 1973 and 2000. What were the
circumstances that FedEx encountered?
2. Describe FedEx’s strategy content between 1973 and 2000. What were the main
characteristics?
3. Describe FedEx’s strategy process between 1973 and 2000. How did FedEx’s strategy
come about?
4. What are the 5 main strategy issues for FedEx in 2000? Why?
5. Which strategy perspective does FedEx have on each of these issues? Did it change over
time? What is your perspective on each issue?
Case Analysis
1. Describe the context of FedEx’s strategy between 1973 and 2000. What were the
circumstances that FedEx encountered?
Pioneer in express transportation and logistics industry. FedEx is widely regarded as the
inventor of the express logistics and transportation industry. In 1973, it was the first to
deliver packages overnight, enabling customers to shorten their order cycle in a reliable
fashion. Throughout the next decades, FedEx continued to bring innovations to the
industry: it was the first package courier to use it’s own air fleet, invented customer
logistics management and multi-client warehousing, was the first to build a virtual
infrastructure and the first to issue handheld scanners to its drivers (exhibit 1: FedEx‘s
record of system innovation).
,CASE 1: FEDEX CORPORATION
Deregulation. FedEx quickly capitalized on various national and international deregulation
measures. Government airline industry deregulation permitted the landing of larger freight
planes, deregulation of the U.S. trucking industry allowed the company to establish a
regional trucking system and trade deregulation in Asia Pacific opened up a whole new
market for FedEx.
Changing industry rules due to new technology applications. The rise of information
technology gave huge possibilities to add a whole new sort of infrastructure to the physical
infrastructure that FedEx had already established. This virtual infrastructure had a new
function in the express transportation industry: the management and utilization of
information about the physical logistics. The industry was now also concerned with
customer material flow management, within as well as outside companies.
Globalization of businesses. While customers expanded their global scope, the movement
of goods across national boundaries created new demands for the transportation and
logistics industry. Clients asked for global presence, global delivery possibilities and thus
for global industrial knowledge. In 2000, FedEx served 210 countries that made up for
90% of global GDP.
Increasing competition. While FedEx was the first in the industry in 1973, throughout the
next decades a growing number of others discovered the possibilities of express transport
and logistics management. Global companies such as DHL, UPS and TNT, as well as
small local couriers, capitalized on IT developments. In 2000, competition was fierce,
lessening the importance of FedEx in the industry more and more.
2. Describe FedEx’s strategy content between 1973 and 2000. What were the main
characteristics?
Responding to market demand for value-added services. Businesses did not only ask for
simple on-time delivery of a package, they started to ask for more services increasingly.
Logistics for them came to include value-added activities such as order processing,
distribution center operations, inventory control, purchasing, production and customer or
sales services. Providing these services became a key part of FedEx’s strategy.
Creating consumer lock-in. One source of FedEx’s competitive advantage, the ability to
deliver goods quickly, pulled in customers by shortening their order cycle and thus reduce
their costs. Moreover, the best customers were pulled in further by giving them PC’s with
FedEx software designed to link them to FedEx’s systems and offering these customers the
PowerShip program with additional services. In 2000, PowerShip had 850.000 on-line
customers worldwide. As stated in the case, by integrating its services with the customers,
and thus generating more customer loyalty and increasing switching costs, FedEx raised
market entry barriers successfully.
Supreme infrastructure. The heart of FedEx’s success has been its distinct activity system.
Components of the company’s unique value chain include the COSMOS centralized
computer system that was established as early as 1979 and keeps track of all packages
through bar codes, as well as multiple-client warehouses, the Route Planner that maps
pickup and delivery for the customer, in-vehicle data systems and the website fedex.com,
allowing customers to keep track of the route of their package online.
Vertical integration. In the 1980s, FedEx’s activities expanded backwards to the
businesses that bought its services. In the industry activity chain of express transport, the
company started to provide services to its customers tracking back to the processes
involved before the packages left them. Doing so, FedEx identified points along the supply
chain where they could provide management services, from the supplier, to purchasing, to
manufacturing, to order management, to transport with the ‘FedEx Integrated Logistics
Solution’ (exhibit 3 and 4). Sometimes customers even totally outsourced their supply-
chain management functions to FedEx. Along the way, FedEx also moved into other
transport activities within its industry through horizontal integration (exhibit 5).
Changing organization of subsidiaries. A web of subsidiaries backed up FedEx’s vertical
integration. The corporation established mutual business units concerning activities such
, CASE 1: FEDEX CORPORATION
as logistic management, express transport, air freight, supply chain management, internal
database management and so on. For instance, in 2000 FedEx operated data centers in
Memphis, Colorado Springs, Orlando, Dallas, Miami, Singapore and Brussels.
Establishing partnership arrangements. FedEx’s role in providing integrated logistics
systems formed the basis of many partnership arrangements. Dell and Cisco are examples
of companies that team up with FedEx as their preferred supplier for their distribution
activities (exhibit 2). Another important partner is Netscape, with whom FedEx signed an
agreement to adopt Netscape software for its internet and intranet sites in 1999, giving
FedEx leverage over 13 million Netscape users. Other partners include L.L. Bean and
Hewlett-Packard on-line, merchants using FedEx distribution and therefore mentioned on
fedex.com.
3. Describe FedEx’s strategy process between 1973 and 2000. How did FedEx’s strategy
come about?
Visionary belief in future direction. Fred Smith, President and CEO of FedEx, was the
creative engine in the company’s strategy. As stated in the case: Smith was the visionary
who forced his company and other companies to think outside the proverbial. The
continuous innovation in FedEx’s strategy reflect a strategic mind focused on leveraging
opportunities, for instance with Smith insisting on the acquisition of an own air fleet,
contrary to competitors’ logic. Yet he also brings some rationality to the equation by
tempering too much creative enthusiasm, saying “our biggest challenge is to correctly
manage everything what is on our plate”.
Long-term foresight. The statement of VP William Conley is key, here: “If we’re all
operating in a day-to-day environment, we’re thinking one to two years out. Fred’s
thinking five, ten, fifteen years out.” Strategy both evolved in the short term from the
operational level, as well as from long-term planning. An example of the latter is that very
early on, Smith foresaw that Internet was going to spur some major changes in the industry
and planned his company’s future accordingly.
Organizational transformation. Before FedEx announced its major internal reorganization
in 2000, it has gone through several transformations in the former decades. FedEx has
changed the way it does business overtime through vertical integration and expansion. The
company has also changed the way its organization is configured through the continuous
incorporation of IT and other system innovations.
4. What are the 5 main strategy issues for FedEx in 2000? Why?
I. The issue of industry development. How should FedEx relate to its environment? In 2000,
FedEx has to deal with various situational changes, such as fierce competition, economic
decline and the rise of e-tailing and electronic commerce. Somehow, FedEx should
comply with the demands these changes pertain. However, its competitors will probably
adapt to the new industry rules, too. Instead, maybe FedEx could also try to set the ‘rules
of the game’ themselves, as it has done so many times before. In other words, FedEx has
to deal with the paradox of compliance and choice.
II. The issue of international configuration. How should FedEx organize its activities across
borders? In 2000, FedEx served 210 countries around the world with various regional IT
offices in Brussels, Leiden and Singapore, as well as a web of local offices. On one hand,
FedEx can compose and manage these subsidiaries to leverage as much cross-border
business relatedness as possible, answering the demand for global synergy through
standardization, coordination and/or centralization. On the other hand, FedEx
should stay attuned to the specific demands of each national market, answering to the
demand for local responsiveness. Thus, FedEx is confronted with the paradox of
globalization and localization.
