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Federal Express Tiger International Acquisition

Questions
1. Describe the growth strategy of FedEx, how has this strategy differed from those of its competitors? 2. What risks are involved in the acquisition of Tiger International? 3. In addition to the question of merging FedEx and Flying Tiger pilots, what other problems could be anticipated in accomplishing this acquisition? 4. Suggest a plan of action that Fred Smith could have used to address the potential acquisition problems given in your answer to Q number 3.

Growth strategy can be seen as a strategy to manage companys human resource, technology and financial capital in order to let its assets to achieve value-added in the future.(Nollet, 1991) For FedEx, there are two ways to achieve this aim: 1. Increase the efficiency of the assets (provide more and better services) FedEx began its global expansion in 1984. In order to perfect its delivery service, it purchased other companies and setup branch company around the world. Furthermore, FedEx also built COSMOS data base and Powership to improve its customer service and attract more customers. He also lobby the Government to have privileges for some airlines, in this way, they can keep competitive advantages to its competitors. 2. Increase the impact and capability of company through purchasing Tiger International, FedEx can resolve the problems on its decreasing international business and international bottlenecks. The growth strategy of FedEx is very clear, In order to expend its international business, increase revenue, FedEx provides more delivery lines, better customer service and through merge action to increase its impact and capability around the world.

There are several risks that involved in this merge.


1. It made more than doubled FedExs long-term debt, to approximately $2 billion. In 1988, it had revenues of $3.9 billion and a net income of $188 million. A $2 billion debt brought a big pressure to FedEx. 2. FedEx was a newcomer to the heavy cargo market and did not have enough experience. Much of the cargo was not sent overnight, which represented a significant departure from FedExs traditional market niche. Otherwise, the pressure from its competitors could not be ignored. 3. The involvement of labour union would be a risk for FedEx to keep its high performance and corporate culture.

There are several problems could be anticipated in this merge.


1. The management of airline for many governments in Asia is very strict. How to let FedExs business enter Asian market is a problem. 2. After this merge, how to reduce the pressure from labour union and keep its high performance is still a problem. 3. How to reduce long-term debt and increase its net income should be considered.

For the problem of how to enter Asian market, FedEx can try to cooperate with some companies which is powerful in Asian market, the company should have the right on the usage of airline in Asia and also do business in logistics area. For example, Sinotrans(a big logistics company in China) would be a good selection. For the debt problem, FedEx can try to cooperate with prime Flying Tigers customers; they are also the major competitors now, to reduce high competitive pressure in this market. FedEx is a new comer and does not have enough market shares to cover its long-term debt, reduce numbers of competitors and pressure, increase market share and revenue are the most important things for the manager to consider. Furthermore, shifting away from document service and focus on the higher-margin box business will be a good choice. Finally, for the employee problem, FedEx promised to find position for all employees, so how to integrate union and non-union workforce is the biggest problem. Manager can build a plan for human resource management such as arrange some training programs in order to improve employees working skill. It can give them confidence and also can help to improve work efficiency. Otherwise, encourage from manager also can reduce the gap between employee and employer. In this way, it can help to reduce the pressure from labor union and still can keep a high performance on their work.

Thank You!
Presented by: Group 4