IT Investment Strategies and Focus of FedEx

(1) How do the IT investment strategies and focus of FedEx and its main competitor UPS differ? Which company has the better strategy? Why?

FedEx just focuses less on operational technology and more on revenue-generating, customer satisfaction, and strategic advantage technology. UPS is a much larger company that focuses on operations and the bottom line. UPS is constantly mimicking FedEx by following their strategic advantage technology to stay in competition. FedEx has the best strategy of long term success. By investing in customer satisfaction and strategic advantage technology the company is building long term goals and relationships. FedEx early learned the importance of information system and invest larger amounts of money in it. So FedEx believes it has the competitive advantage on information system. It is true that FedEx make a big success in information system. However, UPS did not realize the importance of the information system in the early 90s.But it does take a long period time, UPS invests significantly in it and ultimately achieves. FedEx has the better IT investment strategy than UPS. The reasons can be listed as followed:

Firstly, FedEx realizes the importance of IT technology, so the CEO offered a $1 billion annual budget to develop it from long time ago. However, its competitor UPS realizes this after than FedEx, although it make up for this gap for a while. Secondly, keep innovating is the best advantage competition, because FedEx can always stay ahead, while what its competitor can do is copying and follow it. Through the application of new technology, FedEx can offer better services and products to meet the customers’ needs. The “Insight” is just a good example.

Thirdly, FedEx focuses on developing not only operational technology, but also others technologies such as revenue-generating, customer-satisfaction generating and strategic advantage technology. Through applying these technologies, FedEx can achieve diverse development.

(2) Is FedEx’s IT strategy a good one for its competitive battle with UPS? Why or why not? Is it a good model of competitive IT strategy for other types of companies? Defend your position.

Yes, FedEx’s IT strategy a good one for its competitive battle with UPS. A good IT strategy has to tackle five competitive forces that form the structure of competition in its line of business. The organization that effectively overcomes:

 Rivalry of Competitors

 Treat of New Entrants

 Threat of Substitutes

 Bargaining Power of Customers

 Bargaining Power of Suppliers

An organization seeking to gain a competitive advantage on its rivals has to formulate a strategy that tackles all the above mentioned forces and implement five basic strategies.

 Cost Leadership

 Differentiation

 Innovation

 Growth

 Alliance

FedEx’s strategy “move, communicate, shoot” is basically a differentiation and innovation strategy. Where in its line of business is working very well in terms of revenue and customer satisfaction. FedEx’ IT strategy is focused on customer based technology and less on operational support technology. Where there is the most revenues come from to cover its $ 1 billion a year budget for information technology. The big challenge in this approach is that it’s a restless process there is no time for rest. Once a new innovative and different service or product has been launched, all competitors will soon follow. So the company has to shoot it service and move on to the next one as FedEx’s strategy say “move, communicate, and shoot” and then the cycle goes on.

This strategy might have worked very well with FedEx in its industry. On the other hand, it would not necessarily work for other lines of work. This is due to several reasons. This strategy does not deal with Cost Leadership, Growth, or Alliance strategy. There are other risks that are needed to be put under observation and control. If a business has different & innovative products but demand high prices due to cost issues, there product might not see the light.

(3) Use the Internet to discover more about how FedEx is involved in fighting the war on terror, beyond what is reported in this case. For example, FedEx has made some controversial disclosures of customer information to intelligence agencies. Discuss FedEx’s corporate responsibility to assist in the war on terror while protecting the privacy of its customers, as well as any other issues uncovered in your research.

Information sharing from the private sector to the federal government has the potential to become problematic where a company’s sharing is not required by regulation or where it does not meet a company’s direct self-interest in protecting its own assets against criminal or terrorist’s attacks. FedEx’s information sharing with federal authorities also raises privacy and legal issues. According to a former CIA official, “the new cooperation between business and the government takes place in a legal ‘gray zone’ that has never been tested in court. [These] relationships could undermine existing privacy laws. Faced with legal risk and ambiguity, many companies – including FedEx say that, as a matter of policy, they do not disclose customer information to federal authorities without a subpoena, warrant, or court order. Companies will be more likely to share corporate information when doing so can help them better protect their own assets, prevent misuse of their systems, and detect and reduce costs associated with crime or fraud. International freight shipper FedEx provides homeland security officials access to the international portion of its databases. Information provided includes credit card details, shipper name and address, and the package’s origin and final destination. Cooperation with FedEx provides the ability to see if credit cards have been used in other suspicious transactions and map the activities of and links between persons or organizations of interest. It has created a police force recognized by the state of Tennessee that works alongside the Federal Bureau of Investigation. The company has rolled out radiation detectors at overseas facilities to detect dirty bombs and donated an airplane to federal researchers looking for a defense against shoulder-fired missiles. Moreover, the company is encouraging its 250,000 employees to be spotters of would-be terrorists. It is setting up a system designed to send reports of suspicious activities directly to the Department of Homeland Security via a special computer link. FedEx’s newfound enthusiasm for a frontline role in the war on terror shows how the relationship between business and government has changed in the past few years. In some cases, these changes are blurring the division between private commerce and public law enforcement.