The Business External Assessment – Fred Smith and FedEx
Federal Express began as an idea in the mind of CEO Fred Smith while working on his business degree. He wrote it up as a paper, and believe it or not got a “D” on it because his professor found the idea so ludicrous.
A Look At The External Market
Fred was looking at critical business mail and comparing the turnaround time and delivery reliability as offered by the biggest American provider, the United States Post Office. His assessment showed him it was pretty poor, and he thought that he would have a marketable service if he could find a way to deliver important mail overnight and guarantee that it would be there by a specific time the next morning.
It’s important to keep in mind that the cost of a special delivery letter at the time Fed Ex started was one dollar, and he was proposing to charge in the neighborhood of $7 for his service. But he bet on the fact that the need was real and he would win if he could make it work. His potential customers were not getting important mail delivered quickly and reliably, and would pay if they knew it could be done.
When It Absolutely, Positively Has To Be There Overnight
In 1973, when Federal Express began continuous operations, a business’s alternatives for overnight delivery were few and very expensive, usually involving specialized courier service (unless you wanted to drive it there yourself!). Post Office Special Delivery delivered after hours and on weekends, but the issue there was the in-between offices, where it could be held up for days until sorting was completed.
Fred’s idea involved a central facility to which all packages would come, and where sorting and re-embarking would be completed in two hours. Sounds kind of crazy, huh? Obviously, Fred’s original professor figured it sounded that way! Fred located the main facility in Memphis, Tennessee, and in 1973 the air express industry was born. That first night 389 employees and 14 Dassault Falcon jets delivered 186 packages to 25 U.S. cities.
Assessing Fred’s Assessment
What were the key points that Fred identified in his original external analysis? Let’s take a look:
- The need to deliver critical documents was as great as ever.
- Delivery methods were still slow and unreliable. Remember that the Pony Express met this very same business need across the frontier, and was only replaced when the telegraph began to meet the need reliably.
- Approaches to meeting this need, the courier services, were fairly small and fragmented, and very expensive.
- American companies had shown a willingness in the past to pay a premium price for reliable, fast delivery. The Pony Express charged about $5 per letter – at a time when the average cowboy earned $1 a day! Couriers were similarly pricey.
- No company had succeeded in finding a way to gather, sort, and the redistribute large volumes of letters and packages overnight, and the Post Office was not doing anything to address the need.
An External Analysis That Delivers
Was Fred Smith’s external assessment and resulting plan effective? Consider whether the markets like what his company offers. In 2008, 35 years after the start of continuous operations, FedEx had total revenues of $37.9 billion, with an operating margin of 5.5% and a net income of $1.1 billion.
More importantly, although its operating margin has narrowed due to the recession, its revenues over the past five years have continued to grow at the rate of $3 billion a year. Obviously then, companies like Fred’s plan, and they use Federal Express. What kind of difference would it make for YOUR company if you sat down right now and took two hours for a careful analysis of the external factors affecting your business? Why not schedule it for this week?
The Risks And Costs Of International Parcel Delivery
Whether we run a business or we need to send a package, at some point we will need to use international parcel delivery. Depending on which country your item is going to will depend on the requirements and price, and with so many rules and regulations, not to mention tax and customs, sending a package abroad can become a pain in the backside. Following a few simple rules can make this process a lot easier though.
All international parcel delivery items must be securely packed whatever the item is. If you are using one of the well-known couriers and you are sending a letter or paperwork, then they have special packaging for it to be enclosed in, this saves you worrying about how it needs to be packed.
Fragile items can be difficult as it depends on the size of the item. If it is something like a small to medium statue or vase for instance then wrap the item in bubble wrap, and place it in a box, then pad another box about an inch bigger with newspaper and place the smaller box inside, that adds double protection to the item. For larger items use a mixture of bubble wrap, newspaper, and polystyrene peanuts to protect it.
For large and misshaped items, each courier has specific instructions on how to pack them correctly so please refer to the appropriate web site.
Depending on the weight, size and where it is going will decide on the total price, with the bigger named companies being expensive, so it depends on what you are sending.
If you are sending very important documents then you should never use the normal postal service, always use one of the well-known couriers who specialize in shipping them. It may cost more but these companies very rarely lose them, unlike some postal services.
For fragile items using international parcel delivery you should also use one of the big named companies, unless the item has little value.
If you have an item that is worth less than $100, apart from those mentioned above, then you can really use any service you like, just make sure you add insurance cover if you think it is worth something.
When using a courier, in most cases your item will arrive at its destination fine, they do not lose items that often, but items can become damaged, this is usually due to people in transit countries or the destination not really caring. The bigger the courier then the least likely it is to be damaged as some have their own jets, whereas the cheaper ones use normal airline holds.
If you are thinking about using your own country’s postal service then remember that postage to countries like the Philippines, India, and a number of others tend to have a high number go missing due to corruption. So remember that you get what you pay for when using international shipping, if you really want your package to arrive safely then use a more expensive courier.