(Introduction) Federal Express (FedEx) under the leadership of Fred Smith has been innovative from its very beginning. The very idea of a hub-and-spokes distribution system was revolutionary. Smith saw the air freight industry in the early 70's as inefficient and unreliable. In the early stages Smith was quoted as saying, "Federal Express has the opportunity to become one of American's great corporations and the dominant force in the small package air express industry. We have found a gap in the transportation industry and we are going to fill it." .
The hub-and-spokes system addressed the inefficiencies of the industry. Smith then utilized technology to deal with the reliability issues in the industry. Through the use of technology FedEx employee and even customers can track a package through the FedEx system. .
FedEx is a proponent of e-commerce. They realize that through prosumption, having customers conduct their business online, they save the cost of additional employees and phone costs. .
(Industry Analysis) Within the industry are two types of companies. There are combination carriers, which are primarily passenger airline companies that also carry cargo. And then there are "all-cargo" companies like Federal Express which only carry cargo, have fleets of planes, usually fly at night, have ground transportation, and personnel for door-to-door pick-up and delivery. The "all cargo" companies control 90% of the domestic cargo companies. .
Competition in the "all cargo" segment of the industry includes: UPS, DHL, Airborne Express and U.S. Postal Service. The entire industry delivers roughly 5.6 million packages each day. FedEx currently has a 45 - 50 % market share and thus delivers 2.8 million packages each day. .
Customers tend to be loyal to a reliable company. For example, FedEx believes that customers will choose the more reliable of available shipping companies, even if that company is more expensive than the competition.