FedEx is a worldwide delivery service specializing in the transportation of parcels and packages, and is the largest express transportation company with about 30 per cent of the market share. Since its founding in 1973, FedEx has done business with an eye to technological improvement. When it became one of the first companies to do business using the Internet in 1994, it was considered one of the only companies to whom the nature of the Internet as a medium for interaction was relevant. The reason for this was obvious: the development of the Internet as a medium for the sale of goods necessitated world-wide package delivery. FedEx had been one of the first companies to develop a computer network that was used to track its products. The case study addresses how FedEx transformed itself into an e-business by integrating physical and virtual infrastructures across information systems, business processes and organizational bounds. In 1998, FedEx acquired Caliber Logistics of Hudson, Ohio and in 2000 announced plans to restructure the entire company with a mind to Enterprise Resource Planning in order to capitalize on its new strengths. The study includes a comprehensive analysis of transportation logistics and FedEx's internal integrated logistics applications.

Problem.

The case seeks to determine whether a company should focus on core competencies or seek vertical and forward integration to provide integrated services. In addition, the case reviews some of the obstacles that companies face when they wish to introduce an e-business model to replace their traditional methodologies. The case study addresses the shift from "physical" to "information and value-added services" in an e-commerce environment.

Identification of Environmental Opportunities and Threats and Firm

When the study was published in 2000, FedEx had rode the wave of profitability expectations fueled by the hyper-active imaginations of the investment finance community. The study notes that The National Research Federation estimated that the residential market for FedEx Home Delivery would grow by 119% by 2003, and that much of the growth will be attributable to the Internet. In many respects the exercise...

However, it was discovered when such Internet companies failed to generate returns on investment that it was a combination of two problems that precluded the generation of revenues. One was that transference of consumer demand from traditional patterns of retail consumption to Internet-based ones never took place. Another problem was that revenue-generating companies had logistical problems; 20% a year revenue growth was unsustainable. Part of the reason for this was that enterprises were not planned or sourced effectively.
This provides a unique opportunity for FedEx; although Internet companies were to fail in part due to poor logistics, all companies are reliant on internal and external information systems in order to grow and maintain their businesses effectively. In many respects, it is this ability that makes FedEx superior in its abilities to UPS, Airborne Express, or DHL: it is a facilitator with nearly a decade of experience in information-based process management and e-commerce. When any retail-intensive firm moves its products, some form of just-in-time system of inventory management is fortuitous, whether the company be located on the Internet or in a local mall. Companies with high inventory-turnover, such as toy stores at Christmas and luxury goods stores that handle the procurement of specialty items continue to use FedEx. Many of these items are manufactured outside the U.S., and Internet-based retailing would only be the last stage in a production process in which shipment is necessary at intermediary levels. So far, the market has recognized this: FedEx'es stock hovered at 40 dollars in 2000 and has since approached the 80-dollar mark.

In many ways, the decision to partner with SAP was fortuitous; SAP R/3 is widely recognized in Europe as being integral to inventory management. Revenues from the company's European operations have increased although this is largely result of the climbing value of the Euro. FedEx ground is only in the United States, leaving Europe open to be dominated by its competitors in the market for ground…