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Overview
FedEx has enjoyed regional dominance in parcel and cargo deliver in Southern China for a couple of years. When it entered Chinese market in 1995, FedEx enjoyed a brief monopoly of international deliveries in Southern China. It also had a stake in Hong Kong and other Cities in mainland China.
With at least 11 weekly flights to and from Hong Kong, Beijing, Shanghai, Guangzhou and Shenzhen, FedEx had a considerable Market Share in U.S.-China delivery.
While entering Chinese market in 1995, FedEx opted for frontal-assault marketing strategy which was used in Europe in 1980s. The strategy was successful despite the Asian devaluation currency in 1997. However, the company recorded its first international quarterly loss in 2008.
The 2008 loss and poor deliveries to China ware expected to be compensated by increased Chinese export to western countries especially the United States. The company had nearly locked out competitors from southern China market of Guangzhou and Shenzhen which represented the largest manufacturing base in China. FedEx controlled over 13% of international deliveries in the region by 2001.
It faced stiff competition from UPS, DHL, TNT and China post EMS international delivery express. It is now necessary for it to protect its market from competitors and venture into new ones.
However, domestic express deliveries have been limited by bureaucracy and biased regulations from Chinese Communist Party government with the aim of shielding local investors and China Post from international competition. Competitors like DHL and UPS entered joint ventures with Chinese firms like Sinotrans and China Post.
China joined World Trade Organization and agreed to remove some regulations by 2005. This would allow fair competition between local and international delivery companies. Competitors have entered agreements and bought local Chinese firms with hope of capitalizing on the situation.
Recommendation 1
FedEx should venture into un-tapped market in remote Parts of China though increased investment.
Justification
The Chinese economy accounts for slightly over 1% of world economy but its growth rate is one of the highest with an average of over 10% in the last few years. Several cities in China rely on local companies to deliver parcels and cargo to international destinations. However, the parcels and cargo take several days to reach their destinations.
Furthermore, Southen Chinese cities are increasing their manufacturing capacities which increase their exports too. Therefore, most business establishments require fast delivery services for mails and cargo. Although competitors like UPS and DHL have been expanding their markets recently, there are enough opportunities for expansion.
The investment should be based on the agreement between China and WTO to full deregulate domestic markets and lift foreign ownership restriction on local businesses by the year 2005. International companies can buy local firms or establish joint investments with Chinese citizens. FedEx can capitalize on this situation to expand its market to other Chinese cities which require international deliveries on daily basis.
Implementation
Before the final day of full deregulation of domestic markets and lifting of ownership restriction on local businesses, FedEx should keenly follow Chinese government steps towards achieving the WTO target. During every deregulation step, FedEx should invest to ensure that it is ahead of its main competitors.
Meanwhile, it should continue offering quality services to its current customers and expand in its traditional market of southern China. Continued quality services will earn FedEx recommendation to new companies and those experiencing delayed or poor delivery services offered by other companies.
Recommendation 2
FedEx should enter into joint ventures with existing companies which have reliable networks within China.
Justification
Transport and communication infrastructure is not fully developed in China. This means that there are several cities, towns and villages which are hard to gain access to yet they require delivery services. However, State owned China Post and some private companies have been operating in these areas for several years despite the poor accessibility.
FedEx can make use of these organisations to reach customers who have not gained access to reliable international delivery services. United Postal Services has gained access to the southern China through Yangtze River Express Airlines. DHL has acquired some percentage of Sinotrans to make it competitive in the region.
FedEx can counter ths competition by enhancing relationship with its existing partners and enter into agreements with new ones. Since TNT was expected to end its engagement with Sinotrans by 2003. FedEx can capitalize on that and enter into business agreements with Sinotrants to fill the gap left by TNT.
Although TNT is entering into joint venture with a subsidiary of China Post, customers who relied on its venture with Sinotrants will be left without reliable delivery service. This is a good opportunity for FedEx to explore.
Implementation
FedEx must establish weather partners are reliable or not before it enter into joint ventures with them. This will ensure that their reliable and quality services are not jeopardized. Back ground check should be carried out before an agreement is reached to keep off companies with poor public approval in their areas of operation.
Alternately, FedEx can identify local courier and delivery companies which can be trusted by customers in their respective areas and then enter into joint ventures with them. Finally, when the company has established enough links with customers, it can improve its services while it introduces other competitive services to their new customers.
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