FedEx Is Whole.. Well, Wholly Owned

Thursday, March 1, 2007 1:15
Comments Off on FedEx Is Whole.. Well, Wholly Owned

Earlier today, FedEx Announced that they had completed the buyout of their partner Datian.

FedEx China

In the end (according to FedEx announcement), it took 400 Million USD to buy out their partner, and much like the recent Wal-Mart purchase showed everyone, buying into China is expensive.

For many transportation companies, buying in is viewed as the preferred model as the costs and difficulties related to building ones own network are high. Therefore, these arrangements are common in China as western logistics companies like TNT, DHL, UPS, and FedEx have all unwound JV arrangements and begun to setup their own networks.
As you can see from the map (12 months old), the FedEx/ Datian network is “China-wide” in that they do have offices in the all of China’s major economic areas, and at least one office in each province (typically provincial capitals).

However, as we have spoken about in a number of posts (here, here, and here), there are a number of areas that will determine the overall success of their operations:

  1. Price vs. quality of service
  2. Ability to fully integrate FedEx and Datian Network
  3. Ability to sell China platform within China, and to existing external base
  4. Size of network and ability to integration within global network
  5. Ability to build upon existing network and fill planes/ trucks

Of course, there are hundreds of other issues, but that is top 5 in my book. It will also be interesting to see how the new Postal Law will fall. If international providers are locked out of anything under 300g, the damage will be much greater than if 150g… and with FedEx being known more for letters and lightweight vs. parcels, a 150g difference in the law could have large ramifications on their service capabilities.

Stay tuned for more.

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