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Fedex Corp - Early History

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In 1971, Frederick W. Smith raised $91 million in venture capital. After adding $4 million of inherited money to his funding, Smith purchased a used aircraft company in Little Rock, Arkansas. He began using the aircraft to provide overnight delivery services for envelopes and small packages being shipped within the United States. Smith eventually named his business-Federal Express. Operations at Memphis International Airport in Tennessee were established in 1973. By then, Federal Express owned a fleet of 14 Dassault Falcon airplanes and employed nearly 400 workers. Services included both overnight and two-day package and envelope delivery services, as well as Courier Pak. The firm began marketing itself as "a freight service company with 550-mile-per-hour delivery trucks." When Smith found himself struggling to pay expenses, including payroll, he approached venture capitalist General Dynamics for a loan. After his funding request was rejected, Smith flew to Las Vegas, Nevada, where he won $27,000 at the black jack tables.

Smith's tenacity paid off in 1976, when the firm achieved profitability for the first time. Federal express launched a direct mail advertising campaign to boost its visibility. With roughly 19,000 packages delivered every day, sales reached $3.6 million. In 1977, the firm benefited from a strike by employees of rival UPS and the bankruptcy of another competitor, REA Express. The U.S. government also loosened airline regulations, allowing Federal Express to use larger aircraft, such as Boeing 727s, and take advantage of more flexible flight schedules. Sales grew to $110 million, and earnings reached $8 million. In April of 1978, the firm conducted its initial public offering. The New York Stock Exchange began listing Federal Express shares that December. In 1979, FedEx began using a centralized computer system known as COSMOS to track packages, routes, weather, vehicles, and employees. Soon thereafter, a digitally assisted dispatch system (DADS) was put in place to allow clients to electronically request pickups.

By the 1980s, package delivery rates had reached 65,000 per day. The firm operated units in nearly 90 U.S. cities. Advertising agency Ally & Gargano developed the firm's first major television advertising campaign in 1981, with the tag line, "Federal Express: When it absolutely positively has to be there overnight." That year, the firm launched its FedEx Overnight Letter and began international service to Canada. By then, Federal Express had become the leading airfreight services provider in the United States. Sales reached $1 billion in 1983. The firm was the first in the nation to attain such high sales in less than a decade since its inception without making any mergers or acquisitions. A new facsimile delivery service, known as ZapMail, made its debut in 1984. It guaranteed delivery of five pages or less in less than two hours for $35. That year, the firm made its first acquisition, package courier Gelco Express. Other acquisitions soon followed, including businesses in Europe and the Middle East. International expansion continued in 1985 when Federal Express established a European headquarters in Brussels, Belgium. Sales grew to $2 billion.

The company's ZapMail service proved unprofitable. As a result, Federal Express discontinued it in 1986. To streamline operations and cut costs, the firm set up regional sorting facilities in New Jersey and California, which allowed for increased control of deliveries. Each region was evaluated via a new Service Quality Indicators program, which monitored overdue deliveries, lost shipments, packages sent to the wrong recipient, and other errors. Federal Express also began housing merchandise for its larger clients, making shipments upon request. Acquisitions in 1987 included Cansica and Island Courier Companies. The firm added to its international holdings in 1988, with the purchase of Italy's SAMIMA and three freight carriers based in Japan. Earnings grew to $188 million as sales neared the $4 billion mark. Federal Express also launched a new unit, called Business Logistics Services, which offered transportation and operations management to other businesses.

In its largest purchase to date, Federal Express paid roughly $885 million for Tiger International Inc. in 1989. Tiger operated an air cargo delivery service known as the Flying Tigers, which held runway rights in major metropolitan airports in Asia, Europe, and South America. The purchase allowed the firm to strengthen its airfreight services, particularly overseas, where sales nearly doubled. However, it also brought with it government safety regulation issues and additional debt. When the deal was completed, Federal Express was forced to contend with a debt load of more than $2 billion. As a result, the firm's international arm posted a loss of $194 million, despite the higher sales.

By the start of the 1990s, Federal Express held 43 percent of the express transportation market, compared to the 26-percent market share of its largest rival, UPS. The firm effectively brought a price war to its close when it upped its rates for the first time in seven years. The Malcolm Baldridge National Quality Award for service companies was bestowed up Federal Express in 1990. The following year, the company launched international cargo service EXPRESSfreighter and a new subsidiary known as FedEx Aeronautics Corp. The firm also decided to divest a 50-percent share of its operations in the United Kingdom. In May of 1992, Federal Express shuttered its domestic operations in Italy, Germany, France, and the United Kingdom, focusing instead on shipping freight to and from Europe, rather than from one destination to another within the nation. By the end of the year, sales had grown to $7.6 billion. The Business Logistics unit established a base office in Singapore and secured contracts from IBM Corp. for early morning parts deliveries, and from Laura Ashley, for inventory and transportation management.

Express packages delivered daily averaged 1.4 million in 1993. By then, Federal Express had grown into the largest overnight delivery service on the globe. During contract negotiations with Federal Express, the Airline Pilots Association began pushing for major raises, better benefits, and increased job security for Federal Express pilots. However, a tentative agreement was not reached until three years later. In 1994, Federal Express changed its name to FedEx. To compete with the same-day delivery and early morning delivery services offered by UPS, FedEx began offering similar services for both packages and letters in 1995. The firm also began making deliveries to eight countries located in the former USSR. In early 1996, a blizzard took a $20 million toll on FedEx. Targeting the rapidly growing small business and home office markets, FedEx convinced OfficeMax to let it place self-service drop boxes at OfficeMax stores nationwide. The firm also became the first U.S. cargo carrier allowed to fly in China. A 15-day strike at UPS allowed FedEx steal market share from its rival. By then, the firm's fleet had grown to 590 airplanes and 38,500 vehicles.

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about 1 month ago

Thank you for the history lesson, it was very informative!

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11 months ago

So few people seem to write in sentence case these days, I just felt it my responsibility to post a properly formatted (if not grammatically correct) sentence.

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over 1 year ago

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over 1 year ago

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over 1 year ago

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almost 3 years ago

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almost 3 years ago

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almost 3 years ago

I absolutely adore reading your blog posts, the variety of writing is smashing.

This blog as usual was educational, I have had to bookmark your site and subscribe to your feed in i feed.

Your theme looks lovely.Thanks for sharing.

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