3.

0 Analysis of Brand Capabilities of FedEx Corporation

This section will analyse FedExs strategic capabilities. A Value Chain has been constructed
for FedEx in order to identify these strategic capabilities before they are analysed using the
VRIN framework.

3.1: Value Chain

A Value Chain analysis identifies parts of a firms operations that add value (Volberda
2011).It consists of primary activities; the process of making, selling and providing the
product or service, and support activities; the activities that support the primary activities and
provide the resources for them to take place (Porter, 2008).

Figure 1: Porters Generic Value Chain

The Generic Value Chain is shown in figure 1. In order to assess what adds value to
FedExs operation, a value chain has been constructed for FedEx (figure 2).

Figure 2: Value Chain for FedEx

3.1.1 Primary Activities

Marketing
FedEx is well known for its effective marketing communications and it is one way it procures
new customers (Margaritis, 2000). However, FedEx also uses relationship marketing,
especially within B2B relationships, in order to keep previous customers (Iyer, 2006). This
adds value by strengthening the brand and ensuring its existing customer base is serviced.

Packages Picked Up

This is an inbound logistics activity as the organisation receives its inputs (Johnson, 2011)
Value is added by making pick-ups as easy as possible by providing drop off points, courier
pickups and more (FedEx, 2013). This makes the process of using FedEx far easier for the
consumer. The packages are then transported to a local consolidation centre.

Packages Shipped to Regional Hub.

At the consolidation centre, all FedEx packages are combined together and transported to
one of FedExs six regional hubs within the USA, or 16 worldwide depending on what region
the local consolidation centre it was sent from is in (Smerti, 2007). This is again, a largely
inbound logistics activity. Value is added by the process of combining packages and sending
them to the regional hub together rather than micromanaging individual delivery routes, thus
making the process more efficient for FedEx and ultimately the customer (Bowen, 2012).

Packages Processed, Sorted and Packaged

At the hub packages are processed, sorted and packaged depending on the nature of their
contents and their next location. Value is added by FedExs ability to sort all packages into
one shipment depending on their destination, increasing efficiency. Those packages with
special requirements can be packaged appropriately, increasing reliability. Finally, the
location of the hub itself is central to all local consolidation centres, therefore it minimises
journey time.

Packages Sent to Destination Centre.

International packages may then be sent off to another regional hub, however once a
package reaches the region it is destined for, it will be sent to a local centre (Smerti, 2007).
By ensuring all a destinations parcels are delivered together before a certain time, FedEx
can add value by meeting the requirement to arrive according to the time specified.

Delivery to Consumer
At the local centre, a package will be picked up by a local driver who will deliver the package
to its final intended destination. Value is added as the driver reaches the destination on time,
with the package in good condition, meeting or exceeding the consumers expectation.

After Sales Service

FedEx provides after sales service which will deal with any issues, for example lost
packages, or wrong deliveries. This adds value by collecting consumer data throughout the
process in order to help consumers efficiently if any problems emerge (Wilcocks 2001).

3.1.2 Support Activities

Firm Infrastructure
FedExs large network and infrastructure ensures that its efficiency is maximised. FedEx
operates a hub and spoke system in order to achieve this (Bowen, 2012) with the regional
hub itself at a central location, where all processing and packaging will take place.
The infrastructure of FedEx also includes a number of different SBUs allowing FedEx to
service different market segments and industries.

Human Resources
HR ensures that there are always suitable staff on hand to carry out all activities. Much of
FedExs staff is part time, hired for the busy night shift (CNBC, 2012). FedEx has extensive
staff training in place which aims to maximise their efficiency and effectiveness in order to
contribute to the primary activities success.

Procurement
FedEx procures assets such as vehicles to ensure that operations have the appropriate
resources to run efficiently. FedEx always adds to its fleet, allowing it to have 5 empty planes
in the air in case of emergencies (Leonhart, 2005). FedEx acquires new businesses such as
photocopying firm, Kinkos, which it purchased for $2.4 billion dollars (Deutsch, 2003). This
increases the services FedEx is able to offer, keeping as much of its operation in house as
possible, increasing efficiency.

Technology
FedEx uses cutting edge technology to provide additional services for the customer and to
increase speed and reliability of the whole process (Bitner, 2000). All primary activities are
supported by technology including customer service, where the customer can track their

parcel during its journey, to the scanning machines which enable FedEx to handle the
maximum number of packages at maximum logistical efficiency (CNBC, 2012).

3.2 VRIN Framework

The Value Chain has allowed the author to identify a number of strategic capabilities which
could create competitive advantage for FedEx. The most valuable capabilities will be
discussed within this chapter. They are:

Innovative Technology

Large network and infrastructure

Strong Brand Reputation

Each capability has been analysed using the VRIN framework in order to assess its potential
as a source of competitive advantage for FedEx (figure 3):

Innovative
Technology

Large Network
and
Infrastructure
Strong Brand
Reputation

Figure 3: VRIN analysis of FedEx Capabilities

3.2.1 Innovative Technology

The innovative culture at FedEx is valuable and one reason that FedEx are able to operate
as efficiently as they do. Using innovative technology allows FedEx to offer extra services to
customers and operate at maximum capacity without error (Berry, 2006).
Much of the technology that they have is very rare. For example, their scanner machine
which scans packages 13 times is quicker than competitors (CNBC, 2012), or their package
tracking system, which tracks not only the package, but its contents condition too (Burks,
2006). This represents a huge investment by FedEx over the years, which many companies
cant match.
The fact that the technology used by FedEx is expensive makes it hard to obtain for other
companies; therefore it could be regarded as inimitable (Barney, 1991). Furthermore, the
value comes from complex links between technology and other FedEx capabilities, and
casual ambiguousness could be high, as competitors wont always know the exact
technology FedEx is using (Barney, 1991)
However, this capability can be substituted. Whilst competitors may not be able to imitate the
exact technology of FedEx, they can use different types of technology in order to operate
similar services and at similar capacity and efficiency. Therefore, this capability offers
sustainable competitive advantage, but only to a point, as in the future a competitor will
undoubtedly find substitutes for technology in order to complete tasks or offer services
(Barney, 1991).

3.2.2 Large Network and Infrastructure

FedExs large network of SBUs and other businesses means they are able to work across a
number of industry segments and offer many extra services such as supply chain solutions
and administration solutions. Therefore, this large network and infrastructure is a valuable
capability.
Whilst both UPS and DHL can offer some of the services that FedEx offers, it cannot offer all
of them, and such a large infrastructure and network is still a very rare capability.

However, it is not inimitable. FedEx has invested a huge amount of money in its
infrastructure and network and with similar investment; UPS could have a similar network.
Furthermore, whilst FedEx has built this network up over a number of years, competitors are
now gaining ground (Bloomberg, 2008). Therefore, the capability only offers temporary
competitive advantage, and FedEx may not be able to differentiate themselves by services
offered for much longer.

3.2.3 Strong Brand Reputation

The FedEx brand is well known throughout the world as is its reputation for high speed and
reliability with many people using FedEx due to these qualities that the brand represents
(Lussier, 2009). Therefore, the brand itself is of huge value to the company.
It could be argued that such a brand within the shipping market is rare. Indeed, only DHL
and UPS have the same global reputation as FedEx. Furthermore, FedEx is so well known
in popular culture that it even became a verb in the English language (Cambridge Dictionary,
2014) and it could be argued that no company in the industry enjoys as much fame as
FedEx does.
It is impossible for a competitor to imitate the brand of FedEx as first of all, the brand is
under copyright protection. However, competitors can create a similar or even larger
reputation than the FedEx brand; indeed UPS is such a company, even surpassing FedEx in
some respects.
Therefore, the Fed Ex brand and reputation represents sustainable competitive advantage,
but again, only up to a certain point.