Fedex Brand – Performance leadership as differentiator
FedEx is an excellent example for this chapter. It was actually a very late entrant into the ar express services market As mentioned earlier, it started in 1971 Emery Air, which started n 1 946 was the air delivery giant at the time. in fact the FedEx idea almost didnt take off The founder, Fred Smith, wrote a paper on it for one of his college projects and famously got a ‘ C ‘ for his effort. But like all the best entrepreneurs he had a stubborn, reckless cowboy streak in him, He went ahead and set up Federal Express in 1 971 . His focus was, of course on performance leadershin as a differentiator, It would deliver letters and small parcels by I Dam the next day to any destination within the continental United States, provided you gave them the items by the close of the day.
How did FedEx do it? By using its renowned hub-and-spokes model. All parcels collected by FedEx from clients were sent immediately to Memphis, which acted as the hub. The parcels were then sorted according to destination and sent out via FedEx’s own fleet of planes — the spokes. Upon arrival, they were transferred to vans and distributed.
What a lot of people did not understand at the time was the logic behind the hub-and-spokes model that gave FedEx its pertormance edge. You see, if you lived in Los Angeles on 51 St Street and wanted to send a parcel to someone on 55tb Street, just a few blocks away, that parcel would be collected by FedEx and sent to Memphis, which was a few thousand kilometres away, for sorting, then sent back to Los Angeles and delivered to that someone on 55th Street. To a lot of people in the industry, that simply did not make sense. Why make a parcel destined for a location only a few blocks away travel all the way to Memphis and then back?
However the genius of Fred Smith was in the realisation that the hub- and-spokes model was the only way to coordinate deliveries with speed and accuracy. One hub, many spokes — just like a bicycle wheel. To make the system work, though, FedEx had to invest heavily in infrastructure, planes, vans, people, machines, computers and software. And it had to integrate everything properly.
That is what it takes to be the performance leader in air express. Has it differentiated FedEx? Oh yes! So successfully that today, FedEx is a multi- billion-dollar company and Emery Air is no longer around. The wonderlul thing about FedEx’s differentiation strategy is that it made people think, “If FedEx is so good with its overnight letters, it must be pretty good with its three-day service and ground service and international deliveriesas well, Maybe we should use FedEx” FedEx’s perlormance leadership in one area allowed the company to move into other categories, and that is how it became the giant that it is today.