Fed Ex Case Study

Situational Analysis

Nature of Demand

At its start Federal Express Inc. was classified as an air-taxi operator. Being classified as this set the company into the aircraft transportation industry. The air-taxi segment in the aircraft transportation industry was around for some time prior to Federal Expresses entry into the industry. As of 1973, when Federal Express first started up, there was close to 1,000 different airfreight forwarder salespeople in the country. With close to 1,000 different options for airfreight forwarding services there was still very few well known names in the industry. According to a random polling the only companies that people where able to recall where the ones that heavily advertised in all media fashions. Of these 1,000 different options all where still able to be divided into three main competitive sections.

Delivery Service – Delivering packages door-to-door usually in a certain mile radius.

Messenger Service – Usually handling small parcels no larger then 2-5 pounds.

Air Cargo Service – Routing air cargo across different states.

The three sections above where able to still be furthered classified into four smaller sections. Three of the four smaller sections relate to air freight.

Emergency – service with maximum speed and the highest priced.

Rush – Generally next-day delivery and somewhat price sensitive

Routine air – the largest airfreight category and very price conscientious

Routine – the largest of the four freight categories and the most price sensitive.

Of the four categories listed above the routine category is the only one that handled mostly surface freight transportation

In exhibit 1 shown below the three airfreight categories are compared using shipment numbers, average dollar per shipment, and total dollar volume as variables. These numbers are based off of 1974 data.

Estimated size of three air markets - 1974

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Even with these numbers all three markets where seen to be growing rapidly and on...