Case Study of Starting FedEx
by Ron Kurtus (5 April 2018)
FedEx or Federal Express is a company that delivers packages world-wide. It main competition in the United States is UPS (United Parcel Service). FedEx was created by Fred Smith, who outlined the plan for the business as a paper for a college Economics class. He funded the start of the company through his inheritance money and venture capital. The company was started in 1971.
Examining this case study can teach you and perhaps inspire you in starting your own business.
Questions you may have include:
- What is the background of Fred Smith?
- How did he get the idea of FedEx?
- How was the business started?
This lesson will answer those questions.
Background of Smith
Fred Smith was the son of entrepreneur James Frederick Smith, who was the founder of the Toddle House restaurant chain and the Smith Motor Coach Company, which he later sold to the Greyhound Corporation. His father died while Fred was only 4. Thus, Fred was not able to learn any entrepreneurial lessons from his father. However, he probably inherited the personality traits necessary to be an entrepreneur.
As a teen Smith became interested in flying and became an amateur pilot. This interest would stimulate his idea of FedEx.
In 1962, Smith entered Yale University to study economics. While at Yale, he became friends with both future U.S. President George W. Bush and future senator John Kerry. Smith and Kerry shared shared an enthusiasm for aviation and were flying partners.
Fred was a member of Delta Kappa Epsilon fraternity and Skull and Bones. He had a dynamic personality and was able to befriend others who could help him in his business enterprises.
Idea and business plan
Smith wrote a paper for an economics class, outlining overnight delivery service in the computer information age. The paper became the idea of FedEx.
After he received his Bachelor's degree in economics in 1966, Smith joined in the U.S. Marine Corps, where he was able to observe the military logistics system, as well as their procurement and delivery procedures. This research helped in fine-tuning his dream and create a business plan for an overnight delivery service.
He served two tours of duty in Vietnam, receiving the Silver Star, the Bronze Star and two Purple Hearts. He was honorably discharged in 1969 with the rank of Captain.
In 1970, Smith purchased the controlling interest in an aircraft maintenance company, Ark Aviation Sales, and by 1971 turned its focus to trading used jets. This allowed him to gain access to aircraft to use in his future business.
On June 18, 1971, Smith founded Federal Express with $4 million of inheritance money. Also, through is college connections he was able to raise $91 million in venture capital.
In 1973, the company began offering service to 25 cities, and it began with small packages and documents and a fleet of 14 Falcon 20 (DA-20) jets. His focus was on developing an integrated air-ground system, which had never been done before.
Smith developed FedEx on the business idea of a shipment version of a bank clearing house where one bank clearing house was located in the middle of the representative banks and all their representatives would be sent to the central location to exchange materials.
FedEx is a company that delivers packages world-wide. It main competition in the United States is UPS (United Parcel Service).
FedEx was created by Fred Smith, who outlined the plan for the business as a paper for a college Economics class. He funded the start of the company through his inheritance money and venture capital. The company was started in 1971.
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Resources and references
FedEx - Wikipedia
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Case Study of Starting FedEx