FedEx in China: The Competitive Strategies



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Code : COM0115

Year :
2006

Industry : Transportation

Region : China

Teaching Note: Available

Structured Assignment : Available

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Introduction:As China orchestrated the transition from a controlled economy to a market-oriented one, it became the driver of global economic growth. The demand created by the Chinese population of 1.3 billion gave rise to opportunities for companies fromacross the globe. Supported by the Chinese Government, the country emerged as the primary manufacturing base for several industries. To facilitate the burgeoning economy, a new industry, namely express delivery, emerged in China.

Prior to 2001, the express delivery and logistics industry was primarily under state control. State Postal Bureau and Sinotrans, the two state-owned companies dominated the domestic market. Despite the strongly regulated economy, foreign courier service giants like FedEx, UPS, DHL and TNT entered China by the 1980s. As the economic growth of China accelerated during the 1990s, it stimulated the growth of the express delivery industry and provided significant opportunities to foreign players. When China liberalized its economy after 2001, the foreign courier service companies executed plans to capture a dominant portion of the Chinese express deliverymarket. FedEx was the leading player in the high margin air express delivery business in China. Through a series of strategic alliances with domestic companies, investment in transportation infrastructure, and development of a strong network of flightroutes, FedEx planned to outmanoeuvre its competitors and become the largest player in the Chinese courier service market.

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