There is a constant change in the competitive landscape in most industries owing to the technological advancements (Porter, 2008). FedEx which is a global courier delivery services company has intensified its game in the e-commerce through the launching of FedFx Fulfillment networks. Similarly, Amazon which a competitor in the industry has revolutionized its e-commerce approaches through building large logistics operations among other efforts. The rising threat from Amazon delivery is a noticeable challenge that FedEx leadership must address to maintain its position as the industry leaders (Rocco, 2017). Based on these facts, this write-up examines the leadership challenge that FedEx will face as a result of the e-commerce delivery services by Amazon. Moreover, the paper will also look at the organizational information, the existing challenge, leadership approach strategies as well as the relevant recommendations to help in addressing the existing threat to the company. The primary purpose of examining the challenge of leadership in FedEx Company is to develop appropriate strategy approaches that will help FedEx maintain its position in the delivery industry.
FedEx is a courier delivery service company which undertakes time-sensitive shipment of a wide range of commodities including electronics, computer parts and currently helping businesses build strong supply chains among other services (Smith, 2016). The company’s primary stakeholders including the employee’s team under the leadership of Frederick W. Smith, shareowners and customers share the vision of growth and quality services to all stakeholders. Moreover, the mission statement emphasizes financial returns to shareholders through its operations, meeting customer and employee needs as well as safety and ethical standards in all its dealings. In order to accomplish its mission, the company has a code of ethics which is based on the environmental efficiency, safety measures, and community support. As a result, the company has progressively expanded its corporate margins which promote the growth of capital flow and enhances its capabilities to maximize customer satisfaction.
FedEx Courier Services Company offers supply and logistic services to its customers whereby the company has several facilities to support transport, storage, and delivery of packages between two addresses. The company’s logistic networks enable retailers to access services that help their businesses grow. On the other hand, Amazon.com, Inc. provides e-commerce whereby consumers, sellers as well as companies are its primary customer. As a result, Amazon has always relied on the traditional courier especially FedEx to reach the customers. In this sense, Amazon has provided a marketplace for FedEx services due to its role in connecting the company with its clients through the online platform. Therefore, Amazon is a long-standing customer to FedEx which undertakes the delivery of its packages (Rocco, 2017). Moreover, Amazon has also participated in shipping of some of the products when customers purchase and sometimes the company has also engaged in selling highly demanded products itself besides reliance on the third-party.
However, the recent development in Amazon that is building a large logistics operations in the year 2016 is seen a new entry into the industry (Rocco, 2017). Some of the developments include the building of an air cargo hub in Kentucky, purchase of 4,000 semi-trucks as well as 16 cargo planes among other developments (Rocco, 2017). It implies that Amazon will make a significant cut on its packages delivered by FedEx thus reducing its reliance on the company’s delivery services. When Amazon finally strengthens its transportation network, a move that is ongoing, there will be a significant reduction in the FedEx customer base. On the other hand, a new entry into the industry will adjust the competitive landscape which will result in significant decrease in the total market share since both companies operate globally. In as much as Amazon does not contribute to a greater percentage of FedEx’s total revenue, the recent development prospects toward logistic operations pose an obvious threat of competition to the organization. It is the role of the leadership in FedEx Company to develop ways of dealing with the rising threat from Amazon to avoid undesirable outcomes in its future operations.
The increasing threat from Amazon delivery is a significant challenge to FedEx leadership. Firstly, it will result in a reduction in customer base. In this case, Amazon will likely withdraw its reliance on FedEx for shipping and package delivery services. It will also compete with the firm for the market share since it has a more efficient e-commerce that has offered a marketplace to other courier service companies and retail businesses among other primary customers. It implies that the level of competition will increase which will translate into a high cost of operation. Following the challenge, the leadership will not adequately pursue the company’s vision and mission which aims at delivering value to shareowners, customers and all other employees (Smith, 2016). It is because the likely reduction in market share will translate into reduced cash flow and capital margins that will negatively influence the overall operation of FedEx.
Leadership Response to the Rising Threat
FedEx has not been oblivious to the increasing threat due to the recent development actions by Amazon which will intensify competition. Consequently, the organization has put in place certain measures including the launching of FedEx Fulfillment and the acquisition of the Dutch delivery company, TNT Express. The official acquisition of this firm is critical in addressing the costs of operations and expanding intercontinental presence to enhance the business’s level of competitiveness. It helps in creating audience which will gradually diminish as the Amazon services become more focused on its services and brands. TNT Express combined with FedEx Express services will be a formidable force in engulfing surface transportation networks in Europe at reasonable costs due to the reduction in duties, taxes and other international costs (Smith, 2016). Therefore, the leadership views increased physical presence as addressing the likely market place reduction that is slowly resulting from Amazon's recent involvement in delivery services.
Launching FedEx Fulfillment is also another bold step that FedEx leadership took to address the concerns of competition emanating from Amazon entrance into the industry. Previously, Amazon offered a significant marketplace for FedEx through its online services and warehouses. It acted as the link between FedEx and most of its customers, especially through the robust e-commerce. As Amazon is entrenching in the service delivery, it is apparent to the leadership that they had to address the likely loss of customers. Therefore, FedEx advanced its e-commerce by launching a logistic network for clients, especially small and medium-sized businesses. Through the initiative, FedEx will offer warehousing services to the participating firms that are it will package and ship products without using its logo (Rocco, 2017). In as much as the initiative will not adequately match the vast experience of Amazon in e-commerce, the leadership is optimistic that it limits the effects of shrinking market that will occur when Amazon finally embarks on active delivery operations.
Ways in Which Leadership Could Handle the Challenge More Effectively
The efforts by the administration to address the rising threat due to the entry of Amazon in the industry are valuable. However, there are necessary adjustments the company should make to enhance the level of success in their attempts to address the rising challenge. Notably, rising threat from Amazon delivery poses an external challenge to the leadership at FedEx. In as much as the company took steps to heighten the competition, the leadership has not jointly acknowledged the recent developments in Amazon as posing a threat to the enterprise. According to Rocco, (2017), FedEx CEO, Fred Smith openly denied the obvious threat of competition that Amazon is likely to create in the industry. His denial represents the official company position pointing to two concerns. First, when the leadership fails to accept the existing threat, the strategies employed to address the challenge such as FedEx Fulfillment will not receive the right push to bring forth the desirable outcome. Second, it prevents the development of other relevant solutions that can amicably solve the rising crisis because the whole FedEx team will now view Amazon’s move as insignificant. These notions will result into complacency while competition intensifies and when the impacts finally reflect in the growth indicators, it will be late to repair the damages. Therefore, besides the efforts the company is making to leverage its strengths in the market, let the leadership and the whole team acknowledge that Amazon entry into delivery services is a threat and invite ideas on the best approaches to address the situation.
Additionally, FedEx acquisition of TNT Express majorly strengthens its presence in the international market especially Europe (Smith, 2016). Meanwhile, the United States of America is the largest market that FedEx has served for an extended period. On the other hand, FedEx has a strong foundation of the delivery network due to the use of trucks, Airplanes, and proficient team members. As a result, e-commerce which is the greatest strength of its competitor, Amazon only accounts for 15% of its total business. It implies that in response to the rising threat FedEx has relatively missed three important aspects that are their primary source of the market, its strength as well as the focus on e-commerce.
In order to supplement the already established measures, FedEx should consider collaboration or acquisition of relevant companies within the United States with a view to secure its major market. Moreover, the company should capitalize on its strength through investment in the delivery network to enhance customer loyalty and increase value to its clients. As a result, the impact of Amazon entry into the industry will be minimal especially in reducing the company’s total market share. Finally, e-commerce is one of the promising opportunities that are underutilized by the FedEx leadership. The focus of FedEx Fulfillment is narrow that is small and medium sized businesses (Rocco, 2017). E-commerce should be advanced to concentrate on all the primary customers through increased automation of its hubs to reduce handling and minimize the cost of operations.
Amazon’s decision to build a massive logistics operation is an indication of future changes in the competitive landscape in the delivery industry (Williamson, 2008). It is not apparent what Amazon or other investors may do next to heighten the level of competition in courier services’ industry. Porter’s five forces analysis reveals new entrants as a noticeable threat to the existing players in the industry. They can also present the chance of market expansion and motivation in the industry. Notably, Amazon and FedEx previously relied on each other in undertaking their operations. As a result, they both possess reliable information concerning the existing market and the available opportunities (Banutu-Gomez & Banutu-Gomez, 2007). The resulting competition can be stiffer when Amazon finally launches active logistic operation and withdraws its reliance on FedEx for delivery of packages. It is, therefore, important that the leadership develop robust strategies to address similar occurrences in the future.
Before launching future approaches, FedEx leadership should analyze the existing competitors (Gunasekaran, Lai, & Cheng, 2008). The analysis reveals the strengths, weaknesses, and possible future strategies of each of its competitor. Major competitors in the courier service industry comprise of U.S. Postal Service, UPS, and now Amazon. The entry of Amazon comes as a surprise to FedEx possibly due to lack of proper analysis of the likely sources of competition since both companies have jointly operated in the market. Therefore, with reduced reliance on traditional couriers such as FedEx, Amazon will likely not provide the initial marketplace through e-commerce. The company will still need an audience to reach the bulk of its customers. With the current change of events, FedEx leadership can accurately analyze its competitors, predict their future strategies, and develop effective responses that will enable the company to thrive in the face of any eventuality.
After proper analysis of the competitors, FedEx should embark on cost leadership as the positioning strategy and outsourcing to enjoy the cost advantages in facing the existing competition (Williamson, 2008). Cost leadership is based on four major tenets including innovation, infrastructural development, customer based, and the economies of scale. It implies that in the company’s strategic planning, there is a need for technological advancements especially in the automation of its hubs to reduce handling and cost of operation. The longer periods of interaction with Amazon should also be helpful in the development of e-commerce which will expand the shipment capacity of FedEx. Additionally, infrastructural development involves extending the boundaries of delivery networks as a means of increasing the company’s market share. When FedEx positions itself as the leader in the industry, it will also ensure that the plans include strategies for meeting the shifting trends in customer demand. In that case, the services should be tailored to provide high value to its customers (Gunasekaran, Lai, & Cheng, 2008). Finally, the company should plan for further acquisition of relevant courier service firms both locally and internationally to increase its operational boundaries and efficiently provide services at reasonable costs.
Outsourcing strategies should also be part of the future strategic plans in FedEx Company (Williamson, 2008). As a competitive cost strategy will allow the company to benefit from the cheap cost of labor available to the developing economies. The current acquisition of TNT Express will expand the operating boundaries of FedEx. There are significant variations in the cost of labor and other inputs that FedEx require to develop its infrastructure. Therefore, including the outsourcing as part of the future strategy will benefit the company in several ways. First, it will allow the firm to acquire individual components of the chain from other countries at cheaper costs. Secondly, it will enable FedEx to access cheap labor. As a result of these benefits, the company will operate at low costs allowing it to compete with Amazon and the rest of competing firms in the industry efficiently. Besides, the factor costs, when the strategic planning involves outsourcing, it is possible that the company will discover other business opportunities in other developing countries which will enlarge their global market (Williamson, 2008). Successful outsourcing strategies will help the leadership in pursuing the company’s mission and vision.
Evidently, FedEx is a leading Courier Service Company in the United States with a vast delivery network. However, it is facing a rising threat of Amazon delivery following the building of large logistics operation in Kentucky. Leadership experiences a challenge on how to respond to the likely threat of competition of new entry into the industry. In response to the rising threat, the administration undertook two significant steps that are the acquisition of TNT Express and the launching of FedEx Fulfillment e-commerce platform. The approaches that FedEx leadership used in addressing the challenge should be enhanced through increased focus on the local market and exploiting the available e-commerce opportunities through automation of its hubs. Meanwhile, the company should involve positioning strategy and outsourcing in its future strategic plans to leverage its competitiveness in the industry. Therefore, the stated approaches are relevant policies that will ensure FedEx maintains its position as a leader in the delivery industry.