International Marketing - FedEx Corporation - Essay Example

? “International Marketing” FedEx Overview of the Company FedEx Corporation which was known primarily as FDX Corporation was started in America as a global courier service with its headquarters in Memphis, Tennessee. FedEx is an abbreviation of ‘Federal Express’ which was used till 2000 till it came to be known as FedEx. It started business in 1998 after FDX Corporation acquired Caliber System Inc. They started off with services such as express shipping, a ground service, a truckload freight carrier airfreight services in some regions and even technology and logistics services. In 2000, FedEx came about and a proper functional team was made, even of its subsidiaries. In 2004, FedEx also acquired Kinko’s Inc in order to expand itself in the general public. (Pride, et al., 2011) A few of the services FedEx offers are as follows: FedEx Ground FedEx Express FedEx SmartPost FedEx Freight FedEx Custom Critical FedEx Trade Networks FedEx Corporate Services FedEx Supply Chain Services FedEx Tech Connect FedEx Office All these services aren’t offered in all areas however the majority are. FedEx competitors include ARAMEX, BAX Global, DHL Express, United Parcel Service and many others. (Gilbert, 2012) FedEx China and globalization impact on the industry Over 400 cities in China are reached by FedEx in the present day. FedEx provides businesses and customers both a chance to explore their portfolio of services such as e-commerce, business services and transportation. They offer integrated applications for businesses as well with the help of operating companies. They also have the mark of a good company with honest and admirable employees and it has been focused on safety, ethics and the professional standards that need to be met to cater to the community and its customers. A Chinese retailer was finding it difficult to provide the customers with a fitting room experience in case they shopped online. And since online is the next big thing in the world today, this had to be figured out. FedEx Courier was the answer to the problem of the fitting room. FedEx delivers the order and they wait at the door while the customer tries on the clothes in the comfort of his home and if they wish to return it back, they simply have to hand it back to the courier service. And this was an opportunity that FedEx honed into since China has a huge population, furthermore around 1 million of that population has more that 1 million dollars of wealth and in this way, they have attracted the elite by providing them the best customer service there is to offer. So one of the questions comes to mind as to why has FedEx expanded to China and does major business operations there? China has been growing at a rapid rate over the years, probably one of the fastest in the world. It expands at a rate of around 9% per years and 20% of the world lives there. (Birla, 2005) China also has a purchasing power parity that is second highest in the world after US, which only makes more sense that FedEx expanded into China after it tapped into the US market. Globalization has reduced barriers and lead to a more interconnected world and so people demand goods and services from the influences of the outside world, more so than they did before. Their demands and their needs have changed over the years. China also hosts a US Embassy in Beijing and has four consulates over the country which helps businesses out by recommended trade professionals. US have also marked 14 cities in China which are the American Trading Centers. They import from USS and form 54% of the total imports which are growing at a rapid rate. Therefore US can also take advantage of this expansion. Globalization has helped to overcome barriers but has made protecting rights and tracking the developments in different markets a more difficult task. (Wetherbe, 1996) China also started creating economic zones and these encourage foreign direct investment and leads to flexible trading policies and incentives. China also offers financial incentives to ten of its industries especially those that focus on high technology and environmentally friendly practices. China has also been invested in its infrastructural developments and especially transportation which especially aids the courier business. They focus on improved automation and minimal loss of goods during transportation. FedEx Guangzhou Hub started in 2009 to further aid shipping in the entire region of the Asia Pacific. The major drivers of globalization worldwide are: lower costs of transportation and communication, the formation of international bodies such as World Trade Organization and Regional Trade Agreements, and liberalization of trading policies such as deregulation of FDI. (Gosnell, 2005) However, there are separate drivers in the courier service industry that need to be mentioned. Logistics companies over the world have benefitted from the globalization exposures in the world especially with regards to communication and transport. The time that it would take these companies to deliver has gone down massively and especially if this is an intra state delivery. Therefore safety measures can also be taken since time isn’t a focus now. This helps services become more reliable like the courier service. Courier services can also offer same day or a short time period of delivery services. This especially helps in the case of urgent parcels or when one has to meet a deadline. Courier services are also well reputed with regards to delivering in a proper condition. Also as the boundaries in the world are decreasing, there is increasing trade and commerce as well as information flow and a need to communicate. Courier services help business in carrying on their business operations better and also at a lower cost and a faster delivery rate. Therefore they help in increasing productivity and allow companies to be more efficient in their structure and their production. This helps to reduce idle times and shut downs of the production facilities that have been seen over the years. (Bilgin, et al., 2004) Courier services like FedEx have also providing logistic and support functions and this helps organizations develop their unique competencies and grow more competitive. ‘Good are never produced until they reach the end users’ and the courier service is thus of growing importance and has a great deal of competition since there are a great deal of innovations in this area to improve efficient such as introducing services like overnight deliveries, internal mail management etc. (Corporation., n.d.) There are also a growing number of courier companies and they are all approved to do business. Many people are involved directly or indirectly in this business. Liberalization and global support have lead to revenues being earned by courier companies which makes them appealing to enter so their number is growing, and competition is becoming fiercer as they lower their regulations and increase their services and their innovation to attract customers and break the cut throat competition that exists today. (Anon., n.d.) Market entry strategy China has been a potential for growth for many industries as discussed above. Entry strategies are different in different countries depending on their culture, economy, geography and many other reasons and therefore many strategies are considered. Studies show that entry strategies that would involve a higher control of the company such as by subsidiaries are better than licensing strategies that give low amount of control. This shows why FedEx which is a fully owned subsidiary in China functions better and is more successful than UPS in China which is a joint venture. Smaller firms also seem to be better off than the larger ones and the opening of the market place to competitors isn’t as successful in China as all over the world. The earlier the entry also, as well as the smaller the distance between the host and the home nation in terms of economic or cultural differences, the greater the success rate. (Barney & Hesterly, 2006) Therefore FedEx’s mode of entry into China is through a wholly owned subsidiary which is the complete ownership f FedEx in China by the original firm as well as their manufacturing services and selling and organization etc. Therefore they are able to control the factors of production as well as key decisions that have led to their success. Flexibility increases and there is lesser chance of leakage of information which can lead to losing out on a competitive advantage. (Jain, 2011) Transaction costs however will increase with this high amount of control but the benefits outweigh the costs. Early entry strategy used by FedEx has also led them to have many advantages such as getting access to local suppliers and distribution channels. They also had the chance to shape consumer’s perceptions and become their preference. They are also able use the incentives that the government offered to encourage their entry into the market. FedEx was also able to use the ‘strategic window’ opportunity and time their entry by observing the market and the culture for a longer duration of time. Firm size also makes a difference. Since FedEx has expanded and is a large firm, it could enter the global market and expand into China because it had the resources, both management and finance to grow and expand into China. A strategy that has helped FedEx enter into China and for many other global expansions is the CAGE Distance Framework which stands for the cultural, administrative, geographic and economic difference between nations which is important information for companies when they make their strategies. (Perloff, et al., 1994) It helps understand a great deal about the home nation that companies are about to expand in such as the trade, people, capital and information available in the market. (Jain, 2011) Since China is moving fast in terms of technology and overall economy, the distance between the host and home country was lesser which one of the determinants of success is since FedEx could understand the market better when expanding better. The CAGE strategy allows for the difference to become apparent for FedEx and it shows the weaknesses of the company as compared to what the local competitors might have to offer. It also helped FedEx see the differences in the different countries sitting in US and this allowed it to strengthen and cater its entry and positioning. Geographic distances and economic ones are particularly important in this case and then cultural differences because they determine the demand of goods or services and the consumer’s overall preference. The segmenting was more or less similar to US and the infrastructural developments in China made it easier for US to enter. The skills that they had learnt in US could be adapted to China as well and there was little room for adjustment. Thus a positive correlation has been seen between less distance between home and host nation and the possibility of success. In this case, the CAGE analysis for bilateral or country pairs was used to see the difference between US and China. Even though the culture and traditional practices seem to be more prominent in China and US, and geographically they are different however they are economically similar with their investment in technology and infrastructure and their rapid growth rate. (Deresky, 2006) China and US both use a huge amount of electricity; have high life expectancy however openness is greater in US than China because China manufactures everything and is less prone to imports and also because its culture is a melting pot due to the many migrations over the years which has led to one culture which is a mixture of different cultures and is tolerant to their practice as well. They are both also not land locked and thus have the freedom of movement that is needed for a courier service. They are both also low in Country risk, which measures the three dimensions of an economy; financial, economic and political. They have a relatively stable economy and thus can do well in each other’s nations and they haven’t had any trade imbalance or any such hyper inflation that would deter the economies from trading. (Haig, 2011) China and U.S also have similarity in their involvement in their legal associations and trading partners. However, the distance between the two countries is large and may deter the management functions since it is a subsidiary and not a joint venture or a franchise. FedEx also has distinct features which allow it to be a competent brand and builds brand equity. Internal analysis shows that it has a strong infrastructure and is innovative and advanced in technology. It has gone beyond the image of simply being an air express carrier and it has become a one stop solution for any shipped goods. Its stock price is higher than its competitors such as UPS. This is because the employees have worked with their minds and heart to cater to the broad audience. The core competencies of FedEx include the VRIO framework which is part of the major strategy of the firm. The starting point is the vision statement and this is reflected in the objectives and then the analysis of the firm as well its implementation of its policies. VRIO is part of the internal framework and it looks at the capability and the resources of the firm. (Kam, n.d.) VRIO stands for the four questions that the firm asks itself to build its strategic framework to determine what its potential is in the marketplace. V is the question of value which is the ability of a firm to take advantage of an opportunity and take care of their firm against threat. R is the question a firm asks about rarity which is the presence of other similar resources and services in the market. It is I better if the service of product is relatively rare and the capability belongs to none or few of the competitors. I is the question of imitation which is the possibility of the service or product to be imitated. The more difficult a product or service is to imitate, the greater the chance to success. FedEx is primarily a transportation service however it has an integrated value supply chain which is difficult to imitate and thus competitors will lose out. They have also expanded too many areas due to their resources and offer all types of services so they have a broad portfolio. The last question of VRIO is how organized the firm is, or how able and ready and how many resources they have. Thus the capability of FedEx will help the internal function of the organization. Customers have the ease of keeping a track of their delivery processes online and this allows them to save time via this automated service. The customers will also feel secure when they feel that the delivery information is transparent and they are in control as well. Thus FedEx keeps upgrading its innovation and edge. FedEx also provides customers with the time that they will receive their goods and services and the opportunity to give back money in case FedEx is late in its deliveries and thus they give respect to their customers and build a relationship with them. (Pierer & Britain), 1998) Above its competitors, FedEx also possesses a huge aircraft fleet. It has a hub and spokes network and this is difficult to imitate. It has already increased the barriers to entry with competitive prices, and it can continue to do so further. FedEx also covers a 360 degree HR system which its competitors haven’t realized. The courier industry will focus on high value, and this is also a time sensitive business especially since the goods move over long distances. The falling costs for FedEx have allowed it to increase volume. Carriers known as integrators integrate the entire process on ground and off ground and they manage the network of FedEx in a logistical manner. One of the problems that FedEx will place is that the lines between air and ground freight is now very thin and almost merging and this will make it difficult for FedEx to differentiate from its competitors and lose out with those firms which specialize. (Heinemann, n.d.) However Chinese economy is recently showing a low growth rate especially due to its import/export scenario and this is one of the fears that FedEx will face both on ground and off ground. FedEx’s shareholder value has also been slipping due to the fact that it has many things in its portfolio but cannot differentiate or make clear its differences. The last theory or strategy that FedEx employs is the Integration Responsiveness strategy or framework which talks about two main needs for a strategy that should be implemented. They should integrate their entire value chain which FedEx does globally since they expand and they also have an integrated supply chain and also to create products and services that respond to the needs of the local market. (Ghemawat, 2007) China supports infrastructure and it has a good connectivity all over the country and hence FedEx responded to this need by expanding their business to China in as a subsidiary. (Anon., 2003) Integration globally means that FedEx has coordinated its value chain across many markets intra state and across the world and it takes its advantages and synergy throughout the world in other similar countries. The countries are similar as aforementioned because of the distance between them being low. This was determined in the CAGE analysis and therefore the Integration responsiveness method can be implemented from US to China. (Venaik, et al., 2000) Conclusion FedEx in China is aimed at achieving excellence and at the same time keeping costs low. They have integrated their inventory and their IT as well as their order bookers and keepers to increase accuracy. They allow consumers to plan ahead knowing the products and services that will be available to them at a particular time. (Fan, et al., 2009) FedEx is also reliable and fills in for emergencies as well even beyond their usual hours because they have options such as next flight delivery options. And critical orders always arrive on time due to FedEx’s tracking function as well and this is present around the clock. Therefore FedEx is able to meet its meet its customer’s needs at all times and even in different time zones because it is well networked and reliable however it should be wary of the challenged that the modern world brings. It has a wide range of services that handle critical aspects of a business or customers and they claim to have the finance to increase customer base and manage their cost of distribution. (Jacques & Kepos, 2010) References Anon., 2003. 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