Thursday, February 1, 2007

International Markets Are Growing for FedEx Express

STANFORD GRADUATE SCHOOL OF BUSINESS -- Don’t look for global package delivery service FedEx Express to go the way of the Pony Express, which abruptly met its demise once the telegraph made it possible to relay information more quickly than a fleet of riders on horseback.

FedEx Express is keeping up with technological changes in the industry as it continues to expand abroad, said Michael Ducker, president of International FedEx Express. Ducker, who oversees business operations for the company’s international operations, U.S. Export business, and Express Freight Services, spoke to Business School students February 26 as part of the Global Speaker Series.

The Tennessee native began his Federal Express career modestly in 1975 when he took a part-time, $2.81-an-hour job at the company’s Memphis office. Eighteen months later he was promoted to manager. “Many others started their career precisely in the same way, unloading aircraft, washing trucks, as accounting clerks, whatever it takes. It’s a testament to what the company’s become,” he said, “being able to rise up through the ranks and run the company.”

It all started with an idea to use small planes instead of ponies to deliver packages.

“Who had ever thought about using little airplanes to take packages overnight, connect them up with trucks, and scan them all so you knew where all of them were?” Ducker said. The Tennessee-based firm’s growth abroad really took off after 1978, the year U.S. regulators agreed to the company’s request to use larger 727 airplanes. Today the FedEx Express subsidiary services 220 countries and territories, handling 3.5 million packages a day with a fleet of 672 aircraft.

Asia is one area central to the company’s growth. Next year FedEx Express will open an Asia Pacific hub at Guangzhou Baiyun International Airport, located in the Chinese province of Guangdong; it will be the company’s largest hub outside the United States and is intended to take advantage of package transportation growth in the Asia Pacific region. Over the next 20 years, Ducker said, that hub “will have over $60 billion of impact on the Chinese economy.” Expanding abroad has also had its challenges, but those issues have never been about culture or language, he said. “The challenges I faced have been much more systemic. They’ve been about protectionism, unwieldy regulations, and outdated customs regulations. One of the things we do as part of our regulatory work is fight against any of those kinds of regulations that hinder free trade and global commerce.”

Keeping in mind how new competitors can disrupt existing companies, Ducker said FedEx Express touts its broad geographic reach and expertise. In China, for example, a local operator can likely truck goods more cheaply than FedEx Express. But, he said, as that customer grows and needs goods delivered across the region, they’ll need a global carrier like FedEx.

But, like the Pony Express, some of FedEx Express’s initiatives have been upended as technology has evolved. For example, there was ZapMail, a service launched by parent firm Federal Express in 1984 when fax machines were new and expensive. Customers could fax documents from one FedEx office to another, for a fee. “What happened is we didn’t calculate that everybody would soon have a fax machine sitting on their desk, that never occurred to us,” said Ducker. The venture closed in 1989, costing the company about $300 million.

“You have to change on a dime in this business,” and should follow customers’ demands, Ducker said.

While FedEx Express has also experienced challenges as it expands abroad, Ducker said the company, which employs 290,000 worldwide, benefits from having diverse workforces in its local markets.

“For us that has been a key differentiator,” he said. “We have a very diverse workforce. We make it a point of hiring people locally to ensure we stay in touch with our customers in those markets. From couriers to country managers to senior executives, they represent a global culture.” He said the company recently landed on Fortune’s “most admired companies” list. Even in Korea, where Ducker said FedEx experienced “labor strife a couple of years ago, FedEx has been voted one of the greatest places to work. Taking care of our people is clearly a top priority for that.”

Prior to assuming his current position, Ducker served as president of the company’s Asia Pacific Region. He has held various senior management positions with FedEx Express including vice president for the Southern European Region. Ducker earned his master’s degree from the Kellogg School of Management at Northwestern University and Hong Kong University of Science and Technology. In January 2003, he was appointed by President Bush as one of three business people to represent the United States on the Asia Business Advisory Council, an adjunct to the Asia Pacific Economic Cooperation.