Aybey Boran: Mar 27, 2007

FedEx In Brazil

Index

1. Introduction of Federal Express Corporation

2. Overview of Firms Corporate, Business and International Strategies

3. External Environment Analysis

4. Internal Analysis

5. Country Analysis

6. Country–Specific International Strategy Formulation

7. Country Specific International Strategy Implementation

Introduction of Federal Express Corporation

History

Fred Smith Jr. was the brainchild of Federal Express. At age 27 he incorporated the company in 1971.Smith outlined his concept for the transportation of small packages in his Yale college honors thesis (which earned him a C). Smith was a US Marine combat pilot, and spent 2 years buying and selling used aircraft. He also pursued his idea for a fleet of aircraft, dedicated to exclusively to cargo, flying primarily at night. At the time, most airfreight flew on commercial passenger planes. Smith had a consulting study that validated his concept and detailed major differences between passengers and packages. Package shipping shippers preferred nighttime service to accommodate late afternoon pickups. Most people flew round trip while a given package flew in one direction. 60% of US passenger flights occurred between the 25 largest cities.

By contrast over 80% of small urgent shipments originated or terminated outside the 25 top markets. Due to the optimistic growth projections for airfreight, Smith raised over 90 million in financing by venture capitalists. Smith put in 4 million of his inheritance money, 8 million form relatives, 40 million in equity 6 corporate investors (including General Dynamics, which supplied Fed Express with planes), and 40 million in bank loans. In 1973, Federal Express flew small jets, similar to a spoke of a wheel. The hub of this system was a sophisticated sorting system in Memphis, Tenn.

Memphis was relatively close to the “center of gravity”, and package movements within the United States had excellent weather. Federal express Aircraft left their home cities every weeknight was a load of packages and flew into Memphis, often making one or two stops in route. When the packages arrived in Memphis, they were unloaded, sorted by destination, and reloaded onto to different planes. The aircraft then returned to their home cities early in the morning. Packages were picked up and delivered within a 25 mile radius of the airport by Federal Express Corporation currier vans. From door to door, the package was always in the hands of Federal Express. To facilitate handling, Federal Express limited packages to 70 pounds with a maximum of length-plus girth of 108 inches. In using a hub system and limiting package sizes, Federal Express borrowed from the experience of UPS a successful surface package handler. Many of the new firms Operations Managers were recruited from UPS.

Upon it’s launched on April 17^th, 1973, Federal Express served 22 cities with 10 aircraft, 150 employees and carried 15 packages. By October 1973, Federal Express had 19 planes, served 42 cities, and carried 2500 packages. Volume increased steadily as new cities were added but the company continued to lose money. At one point, Federal Express was technically bankrupt. While top management renegotiated loans, couriers deposited their watches when obtaining gas for their vans and base personnel hid aircraft to keep sheriffs from serving attachment papers.

In mid 1975, Federal Express passed the break-even point. May 31st, 1976, it had a net profit of 3.7 million on 75 million. At that time, Federal Express served 130 US cities, using 41 aircraft, 500 vans leased from Hertz. The company had over 2,000 employees, and an average daily volume of 19,000 packages. Due to volume growth, the company established a second minimum hub in Pittsburgh PA. This hub operated a shuttle service between Boston, NY and Washington. Federal Express had 31, 000 customers half of whom used the service in any given month. Although airfreight was costly, they were several advantages beyond speed. Air shipment required less packaging, so damage loss rates were lower. Airfreight allowed manufacturers and distributors to reduce their inventories. Given these advantages, typically airfreight users were producers of time sensitive high priced finished goods shipped to widespread locations. These were small, 90% weighted less than 70 pounds. In the 80’s competition was trying to catch up, Such as UPS. The growth rate of Federal Express was 40% annually. In 1983 Revenues were 1 billion. This was the first company to reach a financial hallmark without any mergers or acquisitions.

In 1989, Federal Express acquired Tiger International and became the world’s largest full service carrier included in the acquisition routes to 21 countries, fleet of Boeing 727 and 747’s and the Tigers expertise in international airfreight. Although Fed Ex was a leader in the industry, there were still some problems and issues concerning speed, reliability, tracing, customs, poor security practices related in numerous airline transfers that often meant damage, confusion, confusion, voids in the system and poor service.

Overview of Firms Corporate, Business and International Strategies

Mission

Federal Express will produce superior financial returns for shareholders by providing high value-added supply chain, transportation, business and related information, services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with it’s employees, partners, and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards.

Vision

Our vision is to satisfy worldwide demand for fast, time definite, reliable distribution. Federal Express will continue to build and refine a uniquely integrated all cargo express network. The network relies equally on transportation infrastructure, information technology, and dedicated Federal Express people for it’s seamless global operation.

Strategy

The unique Federal Express operating strategy works seamlessly-and simultaneously-On three levels:

Operate independently by focusing on our independent networks to meet distinct

Customer needs.

Compete collectively by standing as one brand worldwide and speaking with one voice.
Manage collaboratively by working together to sustain loyal relationships with our workforce.

Acquisitions and Alliances

Federal Express Corporation was formed in 1998 with the acquisition of Caliber Systems Inc. Fed Ex sought to build on the express delivery service and create a more distinctive that included a portfolio of related businesses. Caliber has provided integrated logistics and technology. In January 2000 Federal Express unleashed the power of its global brand. Fed Ex acquired Tower Group in February which contributed which was a foundation of a new Fed Ex Corporation subsidiary Trade Networks.

External Environment Analysis

To accurately assess the potential of successfully operating Fed Ex in Brazil, it is important to perform an External Environmental analysis. This consists of obtaining an understanding of key factors that would help to understand the market in which the business would be operating. These factors include a General Environmental Analysis which consists of a comprehension of the Demographic, Economic, Political/Legal, Sociocultural, Technological, and Global Dimensions. The next is the Industry and Competitor Analysis. Threat of New Entrants, Bargaining Power of Suppliers and Buyers, Threat of Substitute Products, Intensity of Rivalry, and External Opportunities and Threats are all considered throughout this analysis. The result is an overall understanding of the environment in which Fed Ex would be functioning and expanding.

Brazilian Politics functions in a framework of a federal presidential representative democratic republic and multiparty system. In this multiparty system, numerous parties share the vote and no single party has a chance of gaining power alone. The parties instead work together to form coalition governments. The president of Brazil, currently Luiz Inacio Lula da Silva, is both head of state and head of government. Executive power is held by the government whereas Legislative power is vested in both the government and the two chambers of the National Congress. The Judiciary is independent of either. Brazil is divided into 26 states and a federal district.

Brazil’s 1988 constitution grants powers to the federal government which is made up of the executive, legislative, and judicial branches. The president takes office for four years with possibility for re-election for an additional four years. Brazil’s president appoints his own cabinet. The current president, Lula da Silva, is a member of the Workers Party, and his Vice President, Gomes da Silva is a member of the Brazilian Republican Party. He however was elected by the Liberal Party. Both have held their positions since January 1, 2003.

The National Congress of Brazil, or Congresso Nacional, is bicameral and consists of the Federal Senate and the Chamber of Deputies. The Federal Senate holds seats for three members from each state or federal district elected according to principle of majority to serve and eight year term. One third is elected after a four year period and the next two-thirds are elected after the next four years. The Chamber of Deputies holds 513 seats. Deputies are elected by proportional representation for four year terms. The seats are granted proportionally to each state’s population, but each state is eligible for a minimum of eight seats and a maximum of seventy weighted in favor of the smaller states. Overall, fifteen parties are represented in Congress in which it is common for representatives to switch parties. The party in majority, therefore, changes regularly.

Brazilian culture is a diverse Latin American culture. Due to early ties with the Portuguese Empire Portuguese is its primary influence. Other important influences include parts of Europe, native South American People, Africa and Asia. While most diverse countries see themselves as different cultures coexisting, Brazilians consider themselves one mixed unity.

Catholicism is the religion of majority in Brazil, specifically Roman Catholicism. Over time, however, many other belief systems have began to emerge in Brazil. These include Spiritism, Hinduism, Buddhism, Ayahuasca, and Judaism. Others such as Candomblei, Umbanda, and Macumba mix Catholicism with African Tribal Religions. Other Christian denominations such as Pentecostalism, Methodism, and Baptist have also emerged. The bulk of the population, however, consider themselves agnostic.

The rapid development in recent years of microelectronics, optic technology, and software development has lead to a telecommunication and data processing revolution. This inherently caused many changes in business and daily lives. Such new technologies are based on storage, processing, and transmission of information through different media such as telephone lines, coaxial cables, optic fiber cables, microwaves, satellites, magnetic tapes, and optic disks.

This “Age of Information” as it came known, would completely shift the way people work, socialize, study, research, and find entertainment. This, in turn, motivates significant change in the economy, particularly in the service sector. Now, lower income populations have access to resources that bring them to a market once only accessible to higher income individuals. Since companies such as Fed Ex and other postal carriers are relying on efficient exchange of physical goods on a global level, riding this wave of information technology and taking advantage of the opportunities it presents it vital to their success.

Postal services were generally carried out all over the world by state organizations under a monopoly. Until about the 1960’s this lack of competition lead to inadequate addressing of their customers needs. Manual processes also lead to irregularity and inefficiency. It wasn’t until the entrance of private companies that all this began to change. State owned postal services began operating within a competitive framework which leads to more emphasis on customer needs.

This competition in the Parcel Industry is the main component influencing an entrant’s success. There are currently two major global operations with similar function and services as Fed Ex. They are UPS and DHL. Both currently deliver globally and possess the same capabilities as Fed Ex for expansion into Brazil. UPS is currently the world’s largest package delivery company delivering more than 14million packages a day to more than 200 countries around the world. They have recently expanded their operations to include logistics and other transportation related services. DHL provides shipping of documents and freight as well as contract logistics. They function in over 220 countries or territories with 120,000 destinations with more than1.5 billion shipments per year. A third competitor to consider is ECT, or “Empresa Brasileira de Correiose Telegratos”. In English, this translates to “The Brazilian Postal and Telegraph Enterprise”. This organization provides parcel delivery services and telecommunication services locally throughout Brazil.

Any new entrant must be aware of the bargaining power available to consumers when operating within a framework of competition. The bargaining power of suppliers of the previously mentioned technologies in combination with the power held by consumers forces entrants such as Fed Ex to investigate and offer services not only superior to current local providers but to any organizations with capacity to do the same. Without this competitive edge, Globalization is impossible for an organization in a world with so many providers capable of offering similar services.

Internal Analysis

The discussion below focuses on information across FedEx’s operating companies, in the following areas; Functional Activities, Leadership, Organizational Structure and Culture. In addition, this section includes discussions on FedEx’s financial analysis, as well as the company’s internal strengths and weaknesses.

Leadership & Organizational Structure

Corporate governance at FedEx Corporation is guided by a fifteen-member board, comprising of four committees, namely: Audit, Compensation, Information Technology Oversight and Nominating & Governance. The board is very independent, with FedEx Chairman & CEO, Fred Smith being the only insider on the board, and he does not chair any of the committees. The board members include the following, among other notable industry leaders: August A. Busch IV (President - Anheuser-Busch); Shirley A. Jackson (President - Rensselaer Polytechnic Institute); Steven R. Loranger (Chairman, President & CEO - ITT Corporation) and Paul S. Walsh (CEO - Diageo plc).

The Executive officers and senior management at FedEx Corporation include the following:

Frederick W. Smith - Chairman, President and Chief Executive Officer
Alan B. Graf, Jr. - Executive Vice President and Chief Financial Officer
Robert B. Carter - Executive Vice President and Chief Information Officer
Christine P. Richards - Executive Vice President, General Counsel and Secretary
T. Michael Glenn – EVP, Market Development and Corporate Communications

FedEx Corporation (“FedEx”) provides a broad portfolio of transportation, e-commerce and business services through companies operating independently, competing collectively and managed collaboratively, under the globally-recognized brand - FedEx. The holding Company, FedEx Corporation, provides strategic leadership and consolidated financial reporting for the independent companies that make up today's FedEx, namely: FedEx Express, FedEx Ground, FedEx Freight, FedEx Kinko's Office and Print Services, FedEx Custom Critical, FedEx Trade Networks, FedEx Supply Chain Services and FedEx Services. Each entity operates independently and across markets worldwide, with activities coordinated by separate management teams, headed by a distinct President/Chief Executive officer.

Functional Activities

Activities at the FedEx Corporation holding-company level are guided by the following company maxim: "Operate independently, compete collectively and manage collaboratively." This translates to management’s view of FedEx as “just a flexible network of companies designed to provide unprecedented access to a global marketplace.” Consolidated Financial Reporting at the holding company level allows for a view of the sum of the separate parts of the independent operating. The advantage is that each entity benefits from the synergistic view of a global Fortune 500 enterprise with over $32 Billion in revenues, as well as BBB investment-grade profile that facilitates broad access to capital markets.

FedEx’s global network is divided into five international regions, covering contiguous country markets as follows

United States – Headquartered in Memphis, TN
Canada – Headquartered in Toronto, ON
APAC (Asia-Pacific) – Headquartered in Hong Kong
EMEA (Europe, Middle East and Africa) – Headquartered in Brussels, Belgium
LAC (Latin America-Caribbean) – Headquartered in Miami Florida, USA.

(Brazil, our focus country, is part of LAC.)

Efforts at the regional level are collaborative and complementary to business and tactical management at each independent company operations in the respective regions. There is a president for each region who serves to coordinate group-wide strategic initiatives.

Along functional lines, FedEx consists of independent operating companies whose activities are summarized below.

· FedEx Express is recognized as the world’s largest express transportation company, offering time-certain delivery within one to three business days worldwide. FedEx express is the flagship operation, and still accounts for over $20 billion or nearly 70% of consolidated revenues. David Bronczek is President and CEO and oversees over 140,000 employees, operating from the world headquarters in Memphis, TN.

· FedEx Ground is a leading provider of small-package ground delivery service, principally serving the U.S. market. Headquartered in Pittsburgh, PA, and managed by David Rebholz, President & CEO, FedEx Ground employs more than 60,000 and accounts for roughly $5 billion in annual revenues.

· FedEx Freight provides regional next-day and second-day and interregional less-than-truckload (“LTL”) freight services. This company employs over 38,000 worldwide, accounts for nearly $4 billion in revenues, and is headquartered in Memphis, TN, with Douglas G. Duncan as President & CEO.

· FedEx Kinko’s: FedEx Kinko's Office and Print Services provides document solutions through a global network of more than 1,500 digitally-connected locations in 11 countries. The company is headquartered in Dallas, TX, generates over $2 billion in revenues, employs over 20,000 worldwide, and is run by Kenneth A. May, President & CEO.

The following are the other FedEx operating companies that are independently managed by different management teams, with operations mainly in the U.S., but also servicing global markets.

· FedEx Custom Critical provides the fastest, door-to- door same-day and next-day delivery of urgent freight, valuable items and hazardous.

· FedEx Trade Networks provides international trade services, specializing in customs brokerage and global cargo distribution.

· FedEx Services coordinates sales, marketing and technology support for the global FedEx brand, providing customers with a single point of access to.

· FedEx Supply Chain Services offers customers an outsourced modular and scalable supply chain management services.

· FedEx Customer Information Services serves to align customer contact centers, worldwide revenue operations, claims, trace and package engineering.

Organizational Culture

The culture at FedEx is evident in the company’s mission statement and corporate philosophy as explained below. Central to for-profit organizations, the mission statement’s first mentions the company’s focus on profitability and superior financial returns to shareholders. It further indicates focus on specific business portfolios, and mentions delivering through operating companies as discussed above.

Mission Statement: FedEx Corporation will produce superior financial returns for its shareowners by providing high value-added logistics, transportation and related business services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners, and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards.

The overriding culture at FedEx is centered in a corporate P-S-P philosophy or People-Service-Profit. According the FedEx, this translates to “taking care of our people; they in turn, will deliver the impeccable service demanded by our customers, who will reward us with the profitability necessary to secure our future.” FedEx’s view is that the P-S-P philosophy is like an unbroken circle or chain. Each link upholds the others and is in turn supported by them. The People link is supported by Profit, which is supported by Service, which is supported by People. This culture has translated to attracting and retaining top talent for FedEx, as can be deduced from the tenor and resume of management. The success can also be inferred from the company’s strong and improving financial performance, as well as admirable customer service reputation.

Financial Analysis

As illustrated in the above chart, FedEx boasts an impressive financial profile, posting year-over-year revenue growth and bottom line profitability both in dollar and percentage terms, often in double digits. Except for FedEx Kinko’s flat operating results, all business segments and regions have posted solid growth over the past few years. The U.S still accounts for about 75% of revenues and earnings, suggesting the International markets, including Brazil, represent solid growth potential for FedEx.

The company’s balance sheet exhibits sound liquidity and solid capitalization. With a current market capitalization of $34.6 billion as of 3/23/07, The company’s shares (ticker: FDX) trade actively on the NYSE and has shown very strong performance over the last several years, outperforming indices like the S&P, Nasdaq, Dow Jones Industrial Average, as well as a major public competitor – UPS. Following are some of FedEx’s long term financial goals - Grow revenue by 10% per year; Achieve 10%+ operating margin; Increase EPS by 10%-15% per year, which the company is believed to be on track to achieve in the near term due to its solid competitive position. The company’s stock is actively followed by star Investment Banking Analysts at Merrill Lynch, AG Edwards, and so forth, with very favorable analysts reports and recommendations given by most.

FedEx Strengths:

Strong Brand Image: Well received household brand renowned for fast and exceptional service relative to the competition, particularly in the U.S.

Global Operations: FedEx operates globally, sharing this strength with only a handful of competitors.

Innovation: Federal Express took airplanes and trucks and used them differently than any other company before them. This is innovation. They have first-mover advantage in name recognition because of this innovation. This has helped them to maintain industry leadership since 1973. FedEx has had first-mover advantage in several areas. (1) Being a global express transportation company. (2) Advanced technology and communication throughout the company’s operations. (3) Incorporating smaller companies with similar operations under its belt to synergies and control more of the market.

Strategic and Visionary Leadership: Exemplified in Fred Smith, and inculcated in the company’s culture, FedEx has impacted the shape and direction of its industry.

FedEx Internal Weaknesses:

Rising Prices: FedEx has typically being a market leader with respect to price increases for services, often above their competitors’. This can be a weakness if their customers do not perceive a difference between FedEx and its competitors’ services.

Labor Disputes: Federal Express pilots have formed an association, to better negotiate terms and benefits. This is a weakness that is common to the industry, and in fact is a perennial sore point for UPS which has to deal with Union Teamsters to negotiate contracts every so often.

Successful Integration of Acquired Businesses: FedEx has grown in recent years via acquisitions to expand FedEx Ground, FedEx Freight, FedEx Kinko’s, and generally in international markets. Integrating culture at the acquired businesses into FedEx’s P-S-P philosophy could be a challenge, and perhaps may partially explain flat results at FedEx Kinko’s thus far.

Country Analysis

History

Before the first Portuguese explorers arrived in 1500, Brazil is thought to have been inhabited by semi-nomadic populations for at least 10,000 years.　On 7 September 1822 Prince regent Dom Pedro I (later Pedro IV of Portugal) declared independence, establishing the independent Empire of Brazil.

The Brazilian Empire was formally a democracy in the British style, although in practice, the emperor-premier-parliament balance of power more closely resembled the autocratic Austrian Empire. Slavery was abolished in 1888, through the "Golden Law", created by Princess Isabel, and intensive European immigration created the basis for industrialization.

In the late nineteenth and early twentieth centuries, Brazil attracted over 5 million European, Arab and Japanese immigrants. During this time Brazil became industrialised, further colonised, and its interior further explored and developed. Brazilian democracy was replaced by dictatorships three times — 1930–1934 and 1937–1945 under Getúlio Vargas, and 1964–1985, under a succession of generals appointed by the military. Since 1985, Brazil has been regarded as a presidential democracy, a status affirmed by a plebiscite in 1993 which asked voters to indicate a preference for a presidential or parliamentary system. Voters also decided not to restore the country's constitutional monarchy.

Geography

Brazil is characterized by the extensive low-lying Amazon Rainforest in the north and a more open terrain of hills and low mountains to the south. Along the Atlantic seacoast are also found several mountain ranges, reaching roughly 2,900 metres (9,500 ft) high.　The highest peak is the 3,014 metre (9,735 ft) Pico da Neblina (Myst's Peak) in Guiana's highlands. Major rivers include the Amazon, the largest river in the world in flowing water volume, and the second-longest in the world.

Located mainly within the tropics, Brazil's climate has little seasonal variation. In southern most Brazil, however, there is subtropical temperate weather, occasionally experiencing frost and snow in the higher regions. Precipitation is abundant in the humid Amazon Basin, but more arid landscapes are found as well, particularly in the northeast. A number of islands in the Atlantic Ocean are part of Brazil.

Geographically, mainland Brazil is commonly divided into five regions: North, Northeast, Central-West, Southeast and South.

The North constitutes 45.27% of the surface of Brazil and it is the region with the lowest number of inhabitants.

The Northeast has one third of Brazil's population. The region is culturally diverse, with roots from the Portuguese colonial period, Afro-Brazilian culture and some Brazilian Indian influence. It is also the poorest region of Brazil, and has long periods of dry climate.

The Central-West has a low demographic density compared to the other regions. However, much of the region is covered by Cerrado, the largest savanna in the world. It is also the most important area for agriculture in the country.

The Southeast is the richest and most densely populated region. It has more inhabitants than any other South American country, and hosts one of the largest megalopolis of the world, whereof the main cities are the country's two biggest ones; São Paulo and Rio de Janeiro.

The South is the wealthiest region by GDP per capita and has the best standard of living in the country. It is also the coldest region of Brazil, with occasional occurrences of frosts and snow in some of the higher altitude regions.

Society

The biggest problem for Brazilian society is the poverty. The rate of poverty is 18.57% of the population - a 19.8% reduction during the previous 4 years. The rate of poverty is in part attributed to the country's economic inequality. Brazil ranks among the world's highest nations in the index of inequality assessment.

Poverty suffers with economic underdevelopment and below-par standards of living. There are great differences in wealth and welfare between regions. While the Northeast region has the worst economic indicators nationwide due to low coverage and quality of public services and widespread corruption, many cities in the South and Southeast enjoy First World socioeconomic standards.

A recent attempt to mitigate these problems is the "Fome Zero" hunger-eradication program. Part of which is Bolsa Família, a major anti-poverty program that gives money directly to empoverished families.

Culture

The core culture of Brazil is rooted in the culture of Portugal. The Portuguese colonista and immigrants brought the Roman Catholic faith, the Portuguese language and many traditions and customs that still influence the modern-day Brazilian culture.

Demography

Brazil's population is very diverse, comprising many races and ethnic groups. In general, Brazilians are descended from four sources of migration: Amerindians, Brazil's indigenous population, descended from human groups that migrated from Siberia across the Bering Strait around 9000 BC, Portuguese colonists and settlers, arriving from 1500 onward, African slaves brought to the country from 1530 until the end of the slave trade in 1850, and diverse groups of immigrants from Europe, Asia and the Middle East arriving in Brazil during the late nineteenth and early twentieth centuries.

Government and political system

Brazil is a federal republic with 26 states and a federal district. The president holds office for four years, with the right to re-election for an additional four-year term, and appoints his own cabinet. There are 81 senators, three for each state and the Federal District, and 513 deputies. Senate terms are eight years, staggered so that two-thirds of the upper house is up for election at one time and one-third four years later. Chamber terms are four years, with elections based on a complex system of proportional representation by states. Each state is eligible for a minimum of eight seats; the largest state delegation (Sao Paulo's) is capped at 70 seats. This system is weighted in favor of geographically large but sparsely populated states.

Economy

Brazil has one of the world's largest economies, with well-developed agricultural, mining, manufacturing, and service sectors. Roughly one third of the workforce is involved in agriculture. The major commercial crops are coffee (Brazil is the world's largest producer and exporter), citrus fruit (especially juice oranges, of which Brazil also is the world's largest producer), soybeans, sugarcane, rice, corn, cocoa, cotton, tobacco, and bananas. Cattle, pigs, and sheep are the most numerous livestock. Timber is also important, although much of it is illegally harvested.

Brazil has vast mineral wealth, including iron ore (it is the world's largest producer), quartz, chrome ore, manganese, industrial diamonds, gem stones, gold, nickel, tin, bauxite, uranium, and platinum. The leading manufacturing industries produce textiles, chemicals, shoes, food products, steel, motor vehicles, ships, and machinery. Most of Brazil's electricity comes from water power and it possesses extensive untapped hydroelectric potential.

In addition to coffee, Brazil's exports include iron and steel, concentrated orange juice, soybeans, footwear, coffee, beef, tropical hardwoods, and motor vehicles. Machinery, electrical and transportation equipment, and chemical products head the imports. Most trade is with the European Union nations, the United States, Argentina, and Japan. Brazil is a member of Mercosur.

Macroeconomic Indicator

GDP: $1.616 trillion (2006 est.)

Agriculture (8% of GDP), Industry (38% of GDP), Services (54% of GDP)

Exports: $137.5 billion (2006 est.)

Imports: $91.4 billion (2006 est.)

FDI Inflows: 15.066 billion (2005)

FDI Outflows: 2.517 billion (2005)

Opportunities and Threats

For Brazil to return to the kind of economic growth, a number of changes must occur. First, the public-sector deficit must be reduced substantially. The complex system of tax and credit subsidies that was developed in preceding decades offers many opportunities for efficiency-improving reform.

Second, Brazil's recent moves toward becoming a more open economy offer the prospect of increasing economic efficiency and ensuring that new resources flow into activities in which Brazil has a strong international competitive position. Decades of protectionism in a number of key sectors have imposed high costs on Brazilian consumers. Greater openness to world markets will make a noticeable contribution to Brazilian economic welfare.

Finally, Brazil could become an economically prosperous country if it can seriously address the enormous inequities in income distribution. Without substantial efforts to address the income distribution problem, the strains on the political system that have their economic counterpart in fiscal disequilibrium may make the country much harder to govern and may reduce the prospects for a successful and sustainable price stabilization.

Country–Specific International Strategy Formulation

International Corporate-Level Strategy

The global transportation system provides reliable time definite delivery of documents, packages, and freight shipment worldwide, a state of the art information technology system, with more than 2 million customers to be connected electronically with Federal Express through web or the customer automation system.

Federal Express Trade Networks- which in turn acquired World Tariff which is a customs and duty tax information company.

Federal Express Trade Networks facilitates global transportation and logistic by providing full service customs and brokerage trade consulting information technology, and e-clearance solutions. Federal Express Trade Networks also helps customers with all sizes of packages solve intricacies of shipping goods globally. The company provides customers with full service which includes entry filing, and release services, assessing and advancing customs, duties, and fees, and filing declarations for items shipped via express air and ground. Other services are fully integrated regulatory compliance for imports/exports, document preparation, and archiving which prevents shipment to be held up in customs.

Internationally, Fed Ex allows freedom to operate the transportation, distribution, and logistics systems independently, each focusing on the segment of the market it serves best. Each subsidiary has a transportation system, a cost structure, and a unique culture suited to its particular market segment. CEO Fred Smith feels that attempts to combine operations would dilute the quality of service each company provided. While companies under Federal Express have the freedom to operate independently, the strength of the corporate business is the sum of the capabilities each company brings to the corporation. Federal Express leverages company capabilities and their myriad of services.

International Business-Level Strategy

Federal Express Ground-(formerly RPS) North American ground package delivery; expanding from business to business to consumer.

Federal Express Custom Critical (formerly Roberts Express) time –specific, critical shipment within North America and Europe.

Federal Express Logistics (formerly FDX Logistics) a transportation management company plus two regional freight carriers.

These specialize in transportation management-integrated logistics and consulting services that are keeping with the hallmarks of the Federal Express brand-global time-definite information intensive. Brazil has been looking to increase economic growth. Customs clearance of express air shipments has been lax. Value and weight limitations have been eliminated in helping shipments clear customs in hours.

• 1999 Fed EX commits to servicing Brazil.

• 50 million investment at Miami Int’l airport

• Builds a 189,000 square ft shipment facility to service Latin America

• Fed Ex Trade Networks- provider of international trade service.

This system specializes in customs, brokerage and global cargo distribution. Its value added products include:

– Entry filing

– Release services

– Assessing advanced customs and duties and fees

– Filing declarations for items shipped

– Regulatory compliance for imports/exports

– Archiving which prevents shipments from being held up in customs

– Provide international trade services through its world tariff subsidiary

Clearance Process

• State of the art Technical Express Clear System-electronically expedites packages through customs

• Database has regular shipments, broker destination-importers phone numbers, corporate contact names.

• Process starts at hub –linked to computers operated by brokers and customs officials in Brazil. Customs can begin examining shipping manifests, querying air way bill data if more details assessing duties and taxes, selecting shipment shipments they wish to examine.

• Plane arrives at destination- many packages are already cleared

• Planes unload-Express Clear System identifies packages to be examined and ones cleared are labeled.

• Cleared packages transferred to Fed Ex vans for immediate delivery

Country Specific International Strategy Implementation

Organizational culture

FedEx service is very highly consistent or correlated with business sales activity, because they are covering mainly, in the case of Brazil, intercontinental or international trade. For domestic shipping in Brazil, they use local partners, which is normal practice in a global market.

Why is Brazil important to their overall strategy?

It's because in Brazil, 70% of their domestic vehicles run on ethanol. If FedEx breaks the barrier on fuel costs and gets their first with all the pillars of the strategy being implemented, then by 2020, they become a dominate force to compete with.

FedEx has expanded its FedEx PyMEx Membership Program to help small- and medium-size businesses in Brazil. Join the region’s growing export market and become more competitive players in the global marketplace. Mexico, the first country to launch the FedEx PyMEx Membership Program last year, now has more than 3,000　participating. The program was also successfully launched in Brazil.

Leadership

They are continuing to strengthen their presence in Latin America because of an expectation that its role in global supply chain is strengthening, which is consistent with the general trend in global commerce. Brazil is such an important location, almost an anchor point for the Latin American economy to some extent. They have been increasing our presence by offering additional service stations and increasing employment in anticipation of capturing more business. The current size of our operation for 50 or so countries and territories in all of Latin America is about 3,000 employees, with 500 of them stationed in Brazil, which gives you a measure of Brazil’s overall significance.

FedEx Service enhancements continued in 2000 with the launch of FedEx International First Service in Mexico, Brazil, Argentina, Chile, Panama, Uruguay, Bermuda and the Caribbean for 8 a.m. delivery to the U. S. and Europe. Leveraging the FedEx technology leadership, the region also introduced Web Application Program (WebAPI), a web interface solution, and FedEx EC-Shop, an online store for large businesses.

In Latin America, FedEx was rated among the top 100 best companies to work for. In Mexico, FedEx ranked as the No. 1 place to work, and in Brazil FedEx was No. 4

FedEx Express is playing an increasingly important role in the Brazilian textile industry. For several years, FedEx has designed custom solutions for Brazilian label Rosa Cha and designer Fause Haten.

Organizational structure

FedEx has expanded express service in the Latin America and Caribbean region for nearly two decades. The acquisition of Island Courier in 1987 was expanded service routes throughout the Caribbean to 37 islands. In 1989, FedEx acquired Flying Tigers and its routes throughout South America, becoming South America's largest air express transportation company with service to five countries.

The FedEx Latin America and Caribbean Division established its headquarters in Miami in 1996 to oversee operations in 50 countries, and service enhancements quickly followed.

FedEx Express uses the Xybernaut Atigo(R) Platform and Mobile Assistant(R) V to integrate vast amounts of data and information into a computer small enough to be totally portable. The technology helps FedEx Express packages going in or out of Brazil or other areas of Latin America be received expeditiously

In 1999, FedEx began to establish a network of retail outlets throughout Latin America with its FedEx Authorized ShipCenters. In the same year, a new Latin America and Caribbean hub opened in Miami with package sort capabilities for up to 12,000 pieces per hour.

FedEx recently installed in Chile, Mexico, and Brazil an internally developed processing system that cut by 55% the time needed for inbound packages to clear customs. FedEx's CIO for Latin America and the Caribbean was saying that Brazil wouldn't quantify the system's return on investment. But he emphasizes that FedEx's ability to gets its customers' packages through the customs maze is a great big stick that they can beat the competition with.