Federal Express

Federal Express is based in Memphis, Tennessee. The company also has its main hub for the air fleet in Memphis with an additional mini-hub is Pittsburgh, PA. Frederick W. Smith incorporated Federal Express in 1971. His idea was to have a package air delivery company that flew mainly at night to cater to business needs. Most existing companies used passenger planes for package delivery, but Smith had a vision of a company that was not bound by the schedules of passenger carriers. He started the company with a fleet of smaller mini-freighters using French made Falcon jets. Federal Express (FedEx) was set up to pickup packages in the late afternoon and guarantee delivery by the next day anywhere in the United States that FedEx operated.

The early years of FedEx was plagued by heavy debt and very slow growth. Many other new companies entered the market but were out of business in a short time, and customers were very weary of new delivery operations. This caused some of the early problems FedEx experienced in establishing themselves in the industry. Finally, in the summer of 1975 the company passed the break-even point. The fiscal year that ended May 1976 also saw a profit of $3.5 million for the fledgling company. FedEx served about 31,000 customers in 130 U.S. cities. At this time the average daily volume rose to approximately 19,000 packages. Also Smith and FedEx employed over 2000 and owned 32 Falcon jets and leased 500 delivery vans for their growing company.

Federal Express offered three ways to send packages: Priority One, Courier Pak and Standard Air. Priority One provided overnight service with guaranteed delivery by noon the next day. Special handling services were also available for extra charges for shipping hazardous materials or for "Signature Security." Courier Pak offered overnight delivery by 5 PM the next day. Special 12" by 15 ½" envelops were used for all items up to 2 pounds. The envelopes were impervious to water and were also tear proof. Most packages sent by Courier Pak were only one pound. A company official noted that the Courier Pak had much untapped potential. The Standard Air Service offered second day delivery for packages that are less rushed. Early on FedEx discontinued a third-day service called Economy Air because it was found to be unprofitable.

Because Courier Pak has a great amount of untapped growth opportunity Federal Express should put special emphasis on it in marketing advertisements. Market research showed that the routine air package market was at 122.3 million compared to emergency and rush packaged only 18 million combined. The Courier Pak is in the routine air market and has tremendous growth potential. Major competitors in the routine market were Emery Air Freight, United Parcel Service (UPS) and the U.S. Postal Service (USPS). The latter two were mainly ground delivery companies.

It is important for FedEx to put an emphasis on the Courier Pak because it has one price for all packages two pounds or less and they are delivered anywhere in FedEx's operational territory. A study was shown that most packages sent by Courier Pak weigh only one pound. This gives a net gain of one pound and additional money for FedEx without addition weight on FedEx's aircraft. (The Falcon jets have a maximum weight limit.) The other two shipping methods that FedEx offers, Priority One and Standard Air, are priced according to their exact weight and travel distance.

FedEx should plan a comprehensive national advertising campaign. The campaign should include television, radio, magazine, and trade periodicals.