Pioneer of Internet Business in the Global Transportation and Logistics Industry Case
Study of FedEx
Transportation is one of the largest industries in the world, and its sector range is very
wide which include taxis, truck, train, ships, barges, airplanes, pipelines, warehouse and
logistics service. For the industry, the three main trends were globalization of business,
information technology development and new technology to support process efficient, and the
market demand for more value-added. Hence, the companies in transportation and logistics
industry depend on the global network of distribution centres to gain quick payment cycle and
cheaper resources. In FedEx Corporation, as a leader firm in the industry, its centralized
structures have always required, and facilitated billion dollar investments in IT and established
the website from 1994. It provided a successful technology for the FedEx Corporation as a
pioneer in the whole industry for e-business. This strategy became an advantage that they used
to undermine their competitors’ strengths and localized customer service. With a globally
connected IT network, FedEx was able to leverage their IT advantage to service their corporate
accounts on a global basis, rather than on a country by country basis.
Pioneer of Internet Business in the Global Transportation and Logistics Industry
FedEx Corporation created its own website form 1994, it is the first step and basis for the
company to develop its e-commerce. FedEx.com is the first transportation website which could
accept the one line order for package tracking and allow the customers to transact the business
by Internet. Both shippers and recipients could access shipping information and print
documentation via Internet.
As the pioneer in the industry, FedEx should continually improve their system and service
due to its competitor also created the Internet service and Internet software. For instance, the
DHL launched the website in 1995, UPS spent billions on IT and electronic commerce. The
express transportation associated with e-tailing would reach $7 billion in the year of 2000, but
FedEx only handled with 10 percent of purchase on-line goods. All of these brought heavy
pressure to FedEx. In 1998, the company paid more than $2 billions to acquire the Caliber
System, Inc. to increase the abilities and power on Internet service and e-tailing.
Because of the large potential market and lower cost, the Internet and e-tailing market was
continually enlarging in the Global Transportation and Logistics Industry. To evaluate the
performance of FedEx in Internet and e-tailing market should be from the view of five
performance objectives. Firstly, from the view of cost, FedEx as the first one for Internet and e-
tailing in the Global Transportation and Logistics Industry, it focused on long-term investment
on IT and led the company to have the specific position in the area.
For the intense competition, the company paid more than $2 millions to purchase Caliber
System. It could effectively increase their market share in business-to-consumer delivery
service. Hence, the investment partly made up the weakness against with UPS. Secondly,
flexibility, the Internet service and e-tailing provide the convenience for the customers, increase
a easy and quick channel for the transportation and e-tailing business. For instance, in the year
of 1999, FedEx Marketplace created a link to the on-line shopping, the on-line shopper could
click to the top on-line stores and with FedEx delivery. Thirdly, dependability, the establishing of
the website enhanced the dependability between the organization and customers. The
computer system supported the customers to know their goods conditions in the whole
delivery process. For example, the company created software called FedEx Virtual Order in
1999 which provide Internet order and also provide the customers’ catalogues for them on the
website.
Moreover, the IT system also enhanced the internal management of FedEx Corporation.
For the enormous organization, the dependable information system should be the basis for the
busy operation process. (I.e. in 1995, FedEx launched AsiaOne Network, it is a transportation
routing system) Fourthly, speed, for the transportation and logistics industry, speed is one of
the crucial elements for the customers choosing a transportation company. The online order
and the unique information system in FedEx deal with the order and storage, goods and
shipping process, every process could reduce the time than before.
For example, the FedEx Marketplace provided easy access to on-line merchants to offer
fast FedEx shipping. Last but not least, quality, all of the strategies and performances about
Internet and e-tailing could be linked to improve the quality providing for the customers and
partners. For instance, the FedEx created e-business Tool in the year of 1997 which could
support an easier connection with FedEx shipping applications. And the EuroOne network
established also provide a powerful transportation routing system which linking more than 30
cities. All of this would enhance the service quality of FedEx’s Internet and e-tailing.
Consequently, the FedEx had an explicit objective in the Internet and e-tailing market, for
both financial and non-financial performance of organization in this area was focus on achieving
their objective. For the customers and partners, FedEx try to provide more flexible, convenient,
fast service by the Internet and e-tailing channel, created dependable and loyal relationships
with them and build a perfect reputation in the market.
For the own organization, it insisted on long-term investment on Internet and e-tailing
area, it would lead to earn a long-term benefits. Besides, the organization continually
emphasized on the infrastructure building and technology improvement, to create a
dependable operation system and transportation team which could support the smooth
operation in Internet and e-tailing market. All of these performances lead the development of
FedEx. It could not satisfy only by the pioneer of Internet business in the Global Transportation
and Logistics Industry but try to be the long-term leadership in this market.
Evaluation of FedEx Acquisition of Caliber System
To evaluate the success or failure for FedEx Corporation acquired Caliber Systems in 1998
should also form the different points of view. From the positive side, the company use $88
million acquired the Caliber System, Inc., it could provide the company a powerful technical
support on Internet commercial at that time. In the period, the e-commercial was on the
development stage in the Global Transportation and Logistics Industry, the long-term
investment and acquisition of Caliber System made the FedEx Corporation own the abilities and
opportunities to be the pioneer and leader in this area. According to summary of benefits for
M&A, The strategy helped FedEx Corporation entre a new market, broaden the business range,
develop the new product and also gain new information technology. From the result, after the
acquisition, in the following year, the company had an excellent performance, the net income
increased 30 per cent and posting record earning risen 73 per cent.
However, as the passage of time, the competition in the market became more intense,
despite of the e-tailing and electric commerce supporting, the report shown that both the
volume and the income have a negative trend. From the view of financial report, the result had
an obvious falling. This condition was cause of several factors. Firstly, the fuel pricing jumping
was unexpected, it will increase the cost for the company. Secondly, it also meant the Caliber
System did not blend in the organization completely. The organization was enormous, the
operation was complicated, hence, just acquisition strategy without well association could not
make the new party perform perfectly. For solving the problems, the FedEx Corporation
announced reorganization on 19, Jan, 2000.
Consequently, it is hard to simply judge whether success or failure for the acquisition of
Caliber System. The acquisition brought benefits, opportunities and also new operation method
for FedEx Corporation. The negative result in the following years was also cause of multiple
factors, i.e. the competition in the industry, the fuel price rapid rising and etc.
