Organizational Theory and Behavior

CHAPTER 13 Organizational Structure and Culture

KNOWLEDGE OBJECTIVES After reading this chapter, you should be able to:

1. Define key elements of organizational structure, including both structural and structuring dimensions.

2. Explain how corporate and business strategies relate to structure.

3. Explain how environment, technology, and size relate to structure.

4. Define organizational culture and discuss the competing values cultural framework.

5. Discuss socialization.

6. Describe cultural audits and subcultures.

7. Explain the importance of a fit between individual values and organizational culture.

Exploring Behavior in Action

Growth and Structure Provide an Integrated Portfolio of Services at FedEx

Many companies have goals designed to achieve growth and diversification of the markets they serve, both product and geographical. These long-term goals are often maintained even during economic recessions such as that experienced at the end of the first decade of the twenty-first century. Growth can be achieved by developing new products and services internally or by acquiring other organizations. Growth by external acquisition has been popular, because it is often a faster and less risky means of achieving the desired growth. FedEx’s corporate strategy involved both of these approaches.

In 1971, Federal Express Corporation was founded in Little Rock, Arkansas. Early in its history, FedEx used internal development to achieve rapid growth. By 1983, Federal Express had achieved $1 billion in revenue. It made its first acquisition, Gelco Express International, in 1984, launching its operations in the Asia Pacific region. Five years later, Federal Express purchased Flying Tigers to expand its international presence. That same year, Roberts Express (now FedEx Custom Critical) began providing services to Europe. In 1995, FedEx acquired air routes from Evergreen International with authority to serve China, and opened an Asia Pacific Hub in Subic Bay, Philippines, launching the FedEx AsiaOne Network. By 1996, FedEx Ground achieved 100 percent coverage in North America.

In 1998, FedEx acquired Caliber Systems Inc. and created FDX Corporation. This series of acquisitions made FedEx a $16 billion transportation powerhouse. But the acquisitions and growth continued. In 1999, Federal Express Corporation acquired Caribbean Transportation Services. In January 2000, FDX Corporation was renamed FedEx Corporation. Also in 2000, FedEx Trade Networks was created with the acquisitions of Tower Group International and World Tariff.

In 2001, FedEx acquired American Freightways; in 2004, it acquired Kinko’s for $2.4 billion as well as Parcel Direct; and in 2007, it completed its acquisitions with its purchase of Chinese shipping partner DTW Group to obtain more control over and access to services in secondary Chinese cities.

As suggested by the large list of acquisitions, FedEx’s strategy to achieve growth was realized. It also diversified the company’s portfolio of services. For example, it acquired Kinko’s to expand the company’s retail services through the 1,200-plus Kinko’s stores, and by acquiring Parcel Direct, it was able to expand services for customers in the e-tail and catalog segments. All the companies acquired by FedEx Corporation were carefully selected to ensure a corporate culture with a positive service-oriented spirit, thereby providing a good fit with FedEx.

FedEx has been listed 12 times among Fortune’s 100 Best Companies to Work For, and in the top 10 of Fortune’s World’s Most Admired Companies. FedEx was named to both prestigious lists most recently in 2017.

The growth in the size and scope of the company led FedEx to delegate significant authority to the divisions. Together, the various divisions are FedEx, but independently, each division offers flexible, specialized services that represent an array of logistics, supply chain, transportation, and business and related information services. Operating independently, each FedEx company manages its own specialized network of services. The FedEx Corporation acts as the hub, allowing its decentralized divisions to work together worldwide. FedEx coordinates the activities of operating divisions in ways that integrate them to provide customers a unique and powerful portfolio services globally.

Along with its competitive array of services, FedEx remains innovative and sensitive to its environment. For example, one demand always facing FedEx is customer demand for trusted and convenient pickup locations. In 2017, FedEx entered into a long-term alliance with Walgreens pharmacies. Various Walgreens now serve as FedEx pickup locations. “Walgreens, with its strong focus on customer care, is the perfect retailer to help us continue to meet the growing demand for convenient, secure drop-off and pickup options, and our research has shown that customers rank pharmacies as a preferred location for accessing their e-commerce shipments,” said FedEx Executive Vice President Raj Subramaniam. In addition, FedEx also has initiatives to promote a sustainable environment. For example, one goal is to reduce aircraft emission intensity 30 percent from a 2005 baseline by 2020 by modernizing their air fleet with FedEx Fuel Sense operational improvements. The company estimated that in 2016, it experienced cost reductions of $233 million and avoided 1.47 million metric tons of Co2 emissions.

In 2016, FedEx achieved $58 billion in annual revenues. Analysts predict a bright future with FedEx’s focus on serving the e-commerce market and improved technology.