FedEx was founded in 1973 and it was the largest single venture capital start up in the history of the US with $90 million in financing of which $8 came from the founder, Frederick W Smith. He believed that his business of moving packages and airfreight was necessary for both businesses and the kind of flight pattern that he envisioned was one that worked within the concept of a hub. Aircrafts left their home based cities every weeknight and flew into the hub of Memphis, there the loads of packages were unloaded, sorted and reloaded onto the aircrafts which returned to the home cities in the early hours of the next morning. Packages were picked up and delivered door to door within a 25-mile radius of the local airports. As a startup company in 1973 FedEx served 22 cities with 10 aircrafts and 150 employees, by mid 1976 it had 41 Falcon aircrafts, 500 leased vans and 2000 employees. It was serving 75 cities and pickup and delivery was provided to 130 cities in the US. FedEx had achieved a profit of $6 million on $75 million revenues (8% on revenues). It had established a mini hub in Pittsburgh, had 31 000 customers of which 15 000 used the company services in any one month. FedEx achieved substantial growth in a market saturated with almost 1000 airfreight forwarder salespeople. The industry was lacking in marketing expertise and the basis for contacts with customers and potential customers was still the costly sales representatives and their personal selling efforts. Direct mail and brochures were used to support the sales staff. Heinz J Adam who was Director of marketing administration was concerned about improving the quality of customer service, wanted to target the market for Courier Pak: a large purple, red and white envelope that could hold anything up to 2 lbs in weight and for $12.50 FedEx would guarantee overnight delivery anywhere in the US. At that time the average overnight Courier Pak shipped was 1300 and his short-term goal was 6000 daily. Should the Courier Pak be receiving greater emphasis? Why or why not? FedEx had a dedicated airfleet, which tied up capital and according to the competition that limited FedEx flexibility to operate. The issue is express packages are forced to wait until the plane’s takeoff slot, which at major international airports frequently may nit tie in with the end of the day courier pickups. In 1976 the interest payment for having these planes was $6 million or 8% of revenues. But this was a major selling point for FedEx, it could advertise, “Take away our planes and we’d be just like everybody else”.
To link to this page, copy the following code to your site:
All Papers Are For Research And Reference Purposes Only!
You may not turn these papers in as your own! You must cite our web site as your source!
