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Business As Networks: A Case Study of Fedex

Technical Report · February 2013

DOI: 10.13140/2.1.1189.5049

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Business as Networks: A
Case study of FedEx
 Karlstad Business School
Handelshögskolan vid Karlstads Universitet

Industrial Marketing

Title: Business as Networks: A ‎Case study of FedEx

Date of Submission: 2013-02-25

Author: Hafez Shurrab

 TABLE OF CONTENTS
TABLE OF CONTENTS ............................................................................................................ I

1. INTRODUCTION ..........................................................................................................- 1 -

2. BACKGROUND ............................................................................................................- 1 -

3. THEORY ........................................................................................................................- 2 -

4. ANALYSIS .....................................................................................................................- 3 -

4.1. FedEx and Network Perspective..............................................................................- 3 -

4.2. FedEx Customer Relationship Management Strategy .............................................- 4 -

5. CONCLUSIONS.............................................................................................................- 6 -

6. REFERENCES ...............................................................................................................- 8 -

I
1. INTRODUCTION
Even though business marketing and consumer-goods marketing have in common
the ‎same principles and theories, they are in reality different in the way of their
functionality ‎due to different target markets. Business marketing is an action to promote
the sale of ‎all sorts of services or products to other businesses, government, institutions
… etc. The ‎later could use the products for its operations, consumption, or reselling
them to a third-‎party. Business marketing is also known as B2B marketing, as an
abbreviation, or business-to-‎business (Hutt & Speh, 2001).‎
By comparing both business and consumer markets, it can be clearly realized
that ‎business market dominates the market volume of transaction shares, and serves the
largest markets of all. That is because of the number of B2B transactions dedicated
to ‎form every single business to consumer transaction (Hutt & Speh, 2001). Actually,
there are ‎different types of B2B companies involved. Some companies focus mainly on
B2B as ‎major activities, while others focus on consumer market without ignoring B2B
activities, ‎but as a second priority. To highlight and analyze some features of business-
to-business transactions from network perspective‎, FedEx Corporation is considered as
case study. FedEx is among the most powerful B2B companies ii the world of today.
Such huge business could be helpful to review both general and detailed reflections
concerning with the theories and perspectives of business as networks perspective.‎

2. BACKGROUND
Federal Express, also known as FedEx, was founded by Frederick Wallace Smith in
early ‎seventies. The headquarters of FedEx is located in Memphis, Tennessee, United
states. In its ‎early days, the company started courier delivery services between some
American cities, by ‎combining together and land transportation means into one system,
which was the first time for courier delivery industry to take place that time. Today,
FedEx has become the largest company ‎iidustry‎crurier‎deeivery‎iiworldwide.‎
The company mission is based on ensuring high investment return for its
shareholders, ‎satisfyiig‎aee‎custrmers’‎ieeds,‎aid‎the‎critiiuity‎wrrkiig‎ri‎deveerpiig‎
solid ‎relationships with suppliers, partners, and employees. In order to achieve their
mission, ‎FedEx follows a strategy that enables working in different levels

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simultaneously, whilst avoiding any ‎contradiction could arises between them. The
strategy is made up of three levels, compete collectively ‎being a strong brand in the
market, operating independently using own network, and manage ‎collaboratively
between leadership, partners and the work force of the company. Since each ‎company
has its own values, FedEx has built up its values with its operations frames.
These ‎values include people, service, innovation, loyalty, and responsibility (FedEx
2013). ‎
Because of the rapid growth of courier delivery service industry, and in order to
fulfill all ‎custrmers’ needs whichever the categories they are placed in, FedEx operates
several companies in a collaborative way to under FedEx brand umbrella.
These ‎companies include FedEx Express, FedEx Ground, FedEx Freight, and FedEx
Services. Each ‎one of the companies provides its customers with different kind of
services depending on ‎their requirements (FedEx 2013).‎

3. THEORY
It is difficult, or even impossible for all kind of organizations to survive alone in
a ‎competitive market relying just on their own resources. Globally, the majority of
organizations incorporate the ‎use of resources provided by other actors in the market
network. Resources could include raw materials, goods, ‎knowledge, or services (IMP
1982 and deBurca 1995). In the world of today, the relation between ‎other actors is
very important for the success of any company, where interactions and strong ‎networks
is the backbone of any effective relation. Building up a network relation
between ‎several actors, could be seen as long term investment (Turnbull & Wilson,
1989).
Going through analyzing a network and according to Håkanssson, it can be said that
a ‎network is a combination of actors, resources and activities. Actors have a dominant
role ‎because of their activities and their control over resources that is used when they
perform ‎activities. As mentioned earlier, a network model combines three important
elements. Actors ‎could be seen as individuals or groups of companies at different levels
where their main role is ‎controlling the network. The second element is resources,
whether they are human or physical ‎resources. The last element is activities including
transaction, transformation acts, and also ‎activity cycles (Håkansson, 1987).‎

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 For business markets, any marketing relationship management strategy should be
based ‎on establishing, developing, and maintaining a successful exchange with
customers. ‎Basically, there are three different types of relationships including
transactional exchanges, value-added ‎exchanges, and collaborative exchanges.
Transactional exchange is the simplest type ‎of exchange because it covers basic product
and it is more like a seller buyer ‎transaction. On the other hand, collaborative exchange
appears mainly in dynamic markets, ‎when transactions are more complex and prices are
higher. This kind of relationship could ‎be built when both actors trust each other, share
information and link their operations. ‎When it comes to value-added exchange, it is
located between transactional and collaborative ‎exchange. In another words, value-
added exchanges are those that companies target to go ‎beyond attracting new customers.
Value-added exchange focuses on how to keep customers loyal by offering
additional ‎services and promotional offers. This strategy has many positive impacts,
starting by ‎reducing serving costs, and ending with encouraging customers to buy more.
That is because loyal ‎customers provide 80% of sales, even though they represent only
20% of the total customers‎(Hutt & Speh, 2001).‎
Customer relationship management strategy is a model for achieving permanent
good ‎transactions with customers, offering customized services, and marketing
effectiveness. ‎That cannot be done without setting some priorities. Such priorities
should include ‎attracting the right customers, establishing effective working processes,
motivating employees, ‎and establishing the ability for a continuous learning
organization (Hutt & Speh, ‎2001).‎

4. ANALYSIS
4.1. FedEx and Network Perspective
In 2008,‎ FedEx‎ eauiched‎ a‎ campaigi‎ caeeed‎ “FedEx‎ deeivers‎ tr‎ a‎ chaigiig the
wrred”,‎ which‎ was‎ directed‎ tr‎ busiiess‎ tr‎ busiiess‎ market‎ (FedEx 2013). That
campaigi‎is‎regarded‎as‎reiitrrductiri‎rf‎FedEx’s‎busiiess‎ietwrrk‎sr‎that‎tr‎deae‎with‎
the complexity of the global community demand. There are five key themes that FedEx
is keen to root in partners including expansion, breadth of service, expertise and
innovation, sustainability, and education (FedEx 2013).The campaign defines the target
customers as those deciders within the procurement process for the array of

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rrgaiizatiris‎whr‎partier‎ with‎ FedEx.‎The‎partiers‎iivreved‎ii‎ FedEx’s‎ B2B‎ market
are generally organizations, institutions and governments. They are located generally in
many different countries including the UK, China, Taiwan, Germany and Japan. The
industrial network model proposes three fundamental elements including actors,
activities and resources (Håkansson, 1987). In FedEx case, the actors are represented by
the partners involved in the business at different levels, whether they belong to the
corporate level within FedEx, B2B marketing as organizations, institutions and
governments, or the group of final customer (recipient). The resources maybe
represented by the dedicated transportation means through air, sea and land, human
resources, information systems, embedded technologies, offices and headquarters,
handlers‎aid‎rther‎ergistic‎equipmeit‎…‎etc.‎The activities in FedEx’s‎busiiess‎ietwrrk
may include the courier delivery services, the adopted protocols and agreement forms
between different actors within the network, and other activity cycles. That could be
general representations reflected from the case FedEx. But, the campaign may involve
specific details in which contribute to its ultimate goal. Such details are discussed later
ii‎FedEx’s‎CRM‎strategy.

4.2. FedEx Customer Relationship Management Strategy

That campaign represented a declaration of new business to business marketing
strategy. Since relationship marketing centers on three major steps including
establishing, developing, and maintaining (Hutt & Speh, ‎2001), this campaign could be
regarded as a trigger of establishing an access to new market of B2B with FedEx. The
main goal of this strategy is to meet the variety of demand of target groups and the
countries that FedEx delivers to. FedEx dedicates such efforts to enhance the
understanding of different sets of values and demands that each country has. The
information to be provided is the key of this‎ campaigi.‎ FedEx‎ thrrugh‎a‎ “3D‎ Gerbe”‎
facieitates‎iiirvative‎aid‎effective‎crmmuiicatiri‎frr‎FedEx’s‎custrmers.‎It‎is‎regarded‎
as a major point of difference compared to competitors. Besides, the advertising
mediums are produced in many different languages to more than twenty countries,
which reflects the interest of FedEx interaction to reach globally. Generally, there are
three main types of relationships (Hutt & Speh, 2001); the campaign addressed
collaborative exchanges with‎ FedEx’s‎ custrmers. That required increasing the

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transparency in communication and mutual trust. We think that this type of relationship
is relevant to that type of business due to many reasons. Courier delivery services are
very dynamic, complex, and costly. FedEx as a high class brand could not take it for
granted that their partners deliver the values as intended. Thus, the quality of
performance and outcomes are very crucial to the business.
The main concerns that collaborative exchange costs trust and loss of
confidentiality, and the relevant switching costs are highly significant. However, these
concerns are not catastrophic generally in courier delivery services and particularly in
case of FedEx. The continual repositioning and adjustments techniques have been
followed to escalate the communication level of the brand. Furthermore, working
globally requires dealing with political unrest. FedEx adopted the strategy of hiring
local managers that understand the culture of local areas in order to avoid disturbing
inherent values and practices. This strategy proved its worthiness, as the exports jumped
300 percent since 2003 ‎(Hutt & Speh, 2001)‎.
The evolution of technology makes it difficult to be stuck to certain solutions,
especially for courier delivery services, where the technological innovation played
crucial roles in adding competitive advantages to its adopters. FedEx is also one of
those that use technology as a value proposition. The FedEx Institute of Technology at
the University of Memphis is assigned to develop and support the dependency on
technology innovation through 150 researchers. The mailrooms are designed so that the
operations such as tracking are sophistically automated. Moreover, the dedicated
ceieit/server‎ietwrrk‎is‎rie‎rf‎the‎wrred’s‎eargest‎ones (FedEx, 2013). Over the period
of the previous campaign, the most recently “3D‎wizardry”‎aid‎Wi-Fi networks systems
were incorporated as fundamental elements of the overall structure. In the current
campaign, FedEx exceeded the technological limits that others are stuck to. The
company introduced a 3D globe with use of a webcam that could analyse data and
produce statistics on the business world and update information on current economic
situations, in the all countries FedEx are located. The number of website visitors
recorded then successive significant increases. Moreover, for integrating easy social
connectivity to smaller businesses, FedEx uses social media to allow companies to track
their packages.

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 For getting out from the crowd, FedEx introduced progressive and advance services
to improve customer loyalty and attract new customers. However, a killing obstacle has
shown up to limit this advantage. Several competitors duplicated what FedEx had
introduced as a value proposition. UPS is a clear example of that. UPS has a market cap
of $65.85B with 23.69% Gross Margin, while FedEx has 24.83% (Yahoo Finance,
2010). The slight difference indicates that FedEx could not deliver very different value
to the customers. On the other hand, the current campaign is based on brand, loyalty,
aid‎partiership‎thrrugh‎FedEx’s‎technology leadership.
The customer perspective dedicated in the current campaign emphasises multiple
attributes. The price is one of them, where all partners should comply with specific
ranges across different countries. Additionally, the quality has also specific tolerance
that should not be exceeded. But most importantly, the selection of resources and
availability records should be accurate as much as possible, since they are market
qualifiers and losing them means losing the entire business.

5. CONCLUSIONS
The‎case‎FedEx‎reviews‎srme‎sides‎rf‎B2B‎market‎usiig‎the‎perspective‎“busiiess‎
as‎ietwrrks”.‎As‎crurier‎deeivery‎service‎prrvider,‎FedEx‎sets distinctive strategies to
increase current customer loyalty globally in the first place, and expand the network. To
be responsive with innovation and technological updates, FedEx refreshes context of
relationships with partners by introducing periodic campaigns. Each campaign
integrates appropriate strategies fit the potentials and dedicated resources. The current
campaign adopts the collaborative exchange as a basic relationship. The strategy is set
to be flexible so that many specific adjustments and repositioning are considered to
meet differentiated demands and values across different countries. The global market
effects such as complexity and the dynamic nature of courier delivery service as
industry are significant factors in nominating the collaborative style. Furthermore, the
continuous improvement of relevant technology facilitated the adoption of collaborative
exchange through 3D globe and sophisticated tracking systems. On the other hand, there
could be serious threats from collaborative partnership including the loss of high
confidential information and high switching costs. The main point is that the
collaborative partnership is expensive, since there are critical quality standards, price

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ranges, consistent selections of resources, and availability records to comply with.
However, the collaborative exchange made easier for FedEx to promote its main five
themes including partners including expansion, breadth of service, expertise and
innovation, sustainability, and education.

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 6. REFERENCES
Literature Sources:

deBurca, S. (1995). Service management in the business-to-business sector: From

networks to relationship marketing. In Glynn, W. B., and Barnes, J. G. (ed.), 1995,
Understanding service management—Integrating marketing, organizational behavior,
operations and human resource management. Chichester: John Wiley & Sons.

Hutt, M.D. and Speh, T.W. (2001). “Business Marketing Management: A Strategic View
of Industrial and Organizational Markets”, 7th edition, Fort Worth TX: Dryden.

Håkansson, H. (1982) “An Interaction Approach, in International Marketing and

Purchasing of Industrial Goods”, Wiley, Chichester, pp. 10-27

IMP (1982). An interaction approach. In Håkansson, H. (Ed). 1982. International

marketing and purchasing of Industrial goods—An interaction approach. London: John
Wiley.

Turnbull, P. and Wilson, D. (1989). Developing and protecting profitable customer

relationships. Industrial Marketing Management.

Electronic Sources:
FedEx (2013). FedEx Strategy, mission, and values. Available:
http://about.van.fedex.com/mission-strategy-values [2013-02-23].

FedEx (2013). Overview and facts. Available: http://about.van.fedex.com/fedex-

overview [2013-02-23].

Yahoo Finance (2010). Available http://tinyurl.com/bhy8a57 [2010-02-28].

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