Case Analysis : Federal Express

1936 Words Oct 2nd, 2014 8 Pages
Chris Pawlikowski
10/1/14
MGT 610
Federal Express Paper
Background
While attending Yale University in 1962 Frederick Smith wrote a term paper containing his idea for Federal Express. During Smith’s studies he realized the need for an express delivery system based on logistics. He saw a huge potential for growth in air cargo industry because the infrastructure for airlines was centered on passenger transportation and not cargo transportation (Bloomberg, 2004). After graduating from Yale in 1966 Fredrick Smith was commissioned in the US Marines and served in Vietnam. During this time he was able to learn from the United States military logistical system (Smith, 2014).
Start up Federal Express was founded in Little Rock, Arkansas by Frederick Smith in 1971. The name Federal Express comes from the Federal Reserve Bank. Frederick Smith saw how the Federal Reserve Bank operated with a central bank and many satellite locations and used it for Federal Express’s business model. For the airline industry this is called the Hub-and-spoke System. The air freight business is an extremely capital intensive business. Frederick Smith came from a well off family and was able to put $8.5 million of his inheritance towards the startup of Federal Express. Smith was able to raise $80 million in venture capital to get the company started (Linden, 1988). Federal Express moved to Memphis, Tennessee two years after beginning operation. The move took Federal Express’s headquarters from a Little…

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