The Management of Global Trade Distribution - Assignment Example

THE EVOLUTION OF THE GLOBAL TRADE DISTRIBUTION PROCESSES OF FEDEX OVER THE NEXT FEW YEARS FedEx is abbreviated for Federal Express. FedEx offers a range of services with respect to transportation, business services and e-commerce. The management of a broad portfolio is conducted under related brand names segregated on the functional basis (Diffen, n.d.). The industry has a value of $208 billion with an annual growth rate of 3.3% in the last five years (IBIS, 2014). The industry is dominated by four players. FedEx and UPS are American based companies and enjoy duopoly in America, while other couriers like DHL and TNT Express have leading positions in European market. DHL has a considerable market share of around 40% of the Asian market (The Economist, 2012). FedEx accounts for the market share of around of 49% in USA as compared to around 50% by the competitor UPS. FedEx has developed the fleet and service base that has built a strong reputation of the company. For example, GPS tracking, Online Solution (FedEx, 2012a), SenseAware (Business Wire, 2014) are some of the leading services from FedEx. The industry in which FedEx operates is highly competitive and it has low switching cost for buyers and suppliers. Also, the industry is affected by high oil prices. FedEx, with its service to the global market, has focused on building competitive edge with technological innovation and is ranked at the 91st position on the Forbes Most Valuable brands (Forbes, 2013). Competitive information technology orientation has taken the place of absolute advantage for FedEx. Change in the global trade agreements and patterns have a direct impact on the FedEx. FedEx supports FTA for the removal of barriers from Panama, Columbia, and South Korea. Furthermore, FedEx has capitalised the growth in global demand for the Korean products where Korea in all has generated $3.8 billion in the year 2011 (FedEx, 2012b). FedEx has planned to establish logistic hub in Pudong considering the global trade patterns between China to Europe where Shanghai Pudong International Airport is to take the position of hub (FedEx, 2012b). Hence, FedEx is keenly developing the comparative advantage from the changing global trade patterns. Furthermore, the company is also directly impacted by the varying regulations from country to country. For example, FedEx launched SenseAware in different market upon receiving security clearance from the respective countries’ and related organisations (Leung, 2011). Most recently it has expanded to 14 European countries and Canada. Such strong connectivity with the movement of sensitive products has developed strong position of FedEx among individual and business customers (Business Wire, 2014). With the impact of globalisation, resilient economic conditions, changing trade patterns and business models across the broad, FedEx has received considerable threats (Brown, 2013). For example, leading clients like Amazon, Wal-Mart, and eBay are developing changing their business models and shipping online orders from closed by shops to customers than moving large distances from warehouse. For instance, Wal-Mart in the year 2013 has doubled the expansion of stores for online stores delivery from 25 to 50. Similarly, Amazon has developed its now fleet of trucks. This drive to new business by FedEx’s business clients is aimed at saving considerable shipping cost. However, it will impact the role and bill of FedEx as the fees charged is based on distance travelled (Barr, 2014). Another, challenge to market leaders of the courier industry including FedEx in the home is the rise of regional packaging and courier services providers. For example, LaserShip Inc. and Eastern Connection Operating Inc. have regional business with low operating cost; hence, are offering low rate for the services. Also being regional centres, these service providers have offered the businesses like Amazon an attractive alternative which is speedy and flexible (Stevens, 2013). The new dimension of online business has changed the distribution business dynamics. Business to customer delivery packages system is expected to rise with online trends. FedEx and other companies are eying this growth for sustaining and growing their market share. However, Prohibitions or regulations also pose direct impact on the business of FedEx. For instance, Russia, in order to safeguard the local e-commerce trade services, has recently regulated couriers to prove the parcel does not contain anything over 150 euros (or USD 200). Such issues not only affect the revenue of courier companies but these issues would also impact the service quality. Also, other countries have such issues like Norilsk, which is the major city of Siberia lacks online year round rail or road connections which require reaching the customer by airways (Kramer, 2014). These impose cost pressures on the business. Hence, the future of global trade and distribution business will transform over the period of few years. At one end, the courier companies like FedEx are establishing their hubs to cater the future growth of trade distribution form the emerging countries and the evolving trading patterns. On the other hand, the leading clients of FedEx are closing the gap with their client which is reducing the role of couriers. Further with the availability of alternative sources of distribution service FedEx is under the pressure of cutting cost. With the evolution of the dynamics of global trade and distribution business, the FedEx has made a strategic shift for cost cutting and modernising the information technology which is competitive edge of FedEx. In order to sustain the cost pressures, FedEx has involved cost cutting by laying off-employees. Also, due to the excessive air capacity, FedEx plans to retire older aircrafts that will induce efficiency in the business (Murphy, 2013). Another strategic measures taken by the FedEx to deal with the competitive pressure of the evolving business landscape is related to outsourcing of the IT service. FedEx has offered voluntary buyout of IT. The company reported that IT service providers after buyout will be offering almost 25 to 30 percent of the requirement of the FedEx in contrast to less than 10 percent services in the current organisational structure (Murphy, 2013). FedEx is renowned with its competitive edge as well as experience in the courier service. The current global standing of FedEx has resulted from the expertise learned with effective integration of the information technology. Hence, the risk from the retailers to become a potential threat would require some time. Retailers to establish their own delivery system would require investing in learning the effective, efficient, technologically abreast, speed and accurate information service to the customers (Barr, 2014). In addition to the strategic imperative of cost cutting, FedEx is also requires adapting its service to changing customer demand. It is important for FedEx to alter its services accordingly. Most important and effective source of sustaining its competitive edge is the well devised strategy in order to effectively and competently capitalised on its expertise and the brand name. The success of the SenseAware implies that the market has high sensitivity to the high level of monitoring and tracking services. With the expertise developed with this and other such related technological innovations, FedEx can cater highly sophisticated markets. Capitalising on its brand name as effective service provider that provides speedy and accurate information to customers, FedEx shall developed customised services suiting to specific industry requirement. For instance, logistic hub in Pudong complimented with the packaged business service of logistics and business solution will strengthen its position the market (FedEx, 2012b). FedEx shall develop a collaborative service with the local business in emerging markets. Similarly, a division of FedEx can facilitate the considerable chain of transportation to industry across countries. For example the transportation under ASEAN Free Trade Area - Common Effective Preferential Tariff (AFTA-CEPT) automobile parts from Philippines to Indonesia and similarly to other countries. Furthermore, the cost savings from the employee layoff and retirement of less efficient carriers can be passed on to its valuable corporate customers. Furthermore, barriers in countries such as Russia would drive the majority of the courier service provider out of the market. It will sustain the presence of the FedEx in the market where regulatory barriers are dominant, and as the barriers are erased, FedEx will have a notable presence in the market. Importantly, in each of these services the role of technology will be prominent. For instance, FedEx has recently supported the drive for the robotic engineers. Integration of such technology will allow FedEx to facilitate the overnight delivery. This will strengthen the ability of FedEx to overcome the weakness that was being exploited by Amazon and Wal-Mart by their own service fleets. Also, this will allow FedEx to outpace the regional competitors in cost effective and technologically adaptive manner. Hence, with accurate information, FedEx shall attempt to win the preference of final customers of online businesses. The future of business is all about technologically adaptive services; therefore, it FedEx is required to facilities the business with a solution following its valued principles of STEM (science, technology, engineering and math) (Farrell, 2014). Hence, in the evolving business and trade patterns, FedEx shall capitalise on its strength of global expertise and awareness of the global systems. List of References Barr, A. (2014). Analysis: New e-commerce strategies threaten UPS, FedEx. Available from http://www.reuters.com/article/2013/07/14/net-us-ups-fedex-ecommerce-analysis-idUSBRE96D04R20130714 [Accessed 3 April 2014] Brown, A. (2013). FedEx Delivers A Warning About The Global Economy. Available from http://www.forbes.com/sites/abrambrown/2013/09/18/fedex-delivers-a-warning-about-the-global-economy/ [Accessed 3 April 2014] Business Wire. (2014). FedEx Expands SenseAware Availability in Europe. Available from http://www.marketwatch.com/story/fedex-expands-senseaware-availability-in-europe-2014-02-11 [Accessed 3 April 2014] Diffen. (n.d.). FedEx vs UPS. Available from http://www.diffen.com/difference/FedEx_vs_UPS [Accessed 3 April 2014] Farrell, S. (2014). Engineered for the Future: FedEx and FIRST Robotics. Available from http://blog.van.fedex.com/fedex-and-first-robotics [Accessed 3 April 2014] FedEx. (2012a). FedEx Launches New Small Business Grant Competition. Available from http://news.van.fedex.com/fedex-launches-new-small-business-grant-competition [Accessed 3 April 2014] FedEX. (2012b). Economics and access. Available from http://about.van.fedex.com/assets/_pdf/2012_FedEx_Economics_Access.pdf [Accessed 3 April 2014] Forbes. (2013). FedEx. Available from http://www.forbes.com/companies/fedex/ [Accessed 3 April 2014] IBIS. (2014). Global Courier & Delivery Services: Market Research Report. Available from http://www.ibisworld.com/industry/global/global-courier-delivery-services.html [Accessed 3 April 2014] Kramer, A. (2014). In Russia, Couriers Halt Parcel Delivery. Available from http://www.nytimes.com/2014/01/25/business/in-russia-several-couriers-halt-delivery-of-packages-to-individuals.html?_r=0 [Accessed 3 April 2014] Leung, T. (2011). FedEx debuts real-time, dynamic tracking for corporate clients. Available from http://enterpriseinnovation.net/article/fedex-debuts-real-time-dynamic-tracking-corporate-clients-2086459575 [Accessed 3 April 2014] Murphy, C. (2013). FedEx Makes Strategic Shift. Available from http://www.informationweek.com/it-leadership/fedex-makes-strategic-shift/d/d-id/1109834 [Accessed 3 April 2014] Stevens, L. (2013). A New Threat to UPS and FedEx. http://online.wsj.com/news/articles/SB10001424052702304773104579266682206635994 [Accessed 3 April 2014] The Economist. (2012). And then there were three. Available from http://www.economist.com/node/21561894 [Accessed 3 April 2014] Read More