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FedEx is a multinational CEP firm that provides the service to customers around the
world in the mode of transportation from one point to another point by cargo, flights, and
ground vehicles. The entire coursework is about how the FedEx implemented different
kind of strategies to gain the competitive advantage in the market as compare to other
familiar freights like UPS, DHL, TNT and AWS. The worldwide operations of FedEx firm
and strategic view of FedEx market that consist internal as well as external environment
conditions, the organization that faces the difficulty between the customers and
competitors. The view explains the capabilities of FedEx PESTLE analysis and the
organization structure of the firm that elaborates the threats and rivalries facing by the
organization. The differentiation strategy followed by the FedEx that shows a strong
customer base by offering value added solutions that competitors dont have. FedEx
achieved differentiation through high customer service, quality, rapid product innovation
and usage of high technologies. FedEx acquired Supaswift to gain the South African
market. FedEx may continue organic development in its existing infrastructure to capture
further market. FedEx may focus on alliances with giant retail and online sectors for
ensuring the business in future.
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Word Count
Number of Pages:
Number of Words: 3181
Cover Page
Declaration of Originality
Executive Summary
Conclusion
Gantt Chart
Content Page
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Table of Contents
1: INTRODUCTION..........................................................................................................4
2: EXTERNAL ENVIRONMENTAL ANALYSIS.............................................................4
2.1: Macro-Environment...............................................................................................4
2.2: Porters Five Forces Model..................................................................................6
2.3: Market Segmentation............................................................................................8
3: INTERNAL ENVIRONMENT.......................................................................................9
3.1: Resources and Competencies................................................................................9
3.1.1: Physical- IT Infrastructure.................................................................................9
3.1.2: Financial- Revenues........................................................................................10
3.1.3: Human Capital- FedEx Diversity Workforce................................................11
4: BUSINESS & CORPORATE LEVEL STRATEGY.................................................11
4.1: Differentiation Strategy.......................................................................................11
4.2: Vertical Integration..............................................................................................13
4.2.1: Backward Integration...............................................................................13
4.3: Merger and Acquisition.......................................................................................14
5: RECOMMENDATION OF STRATEGIC OPTIONS...............................................14
6: Conclusion...................................................................................................................16
7: References..................................................................................................................17
List of Figures & Tables
FIGURE 2.1: FEDEXS FUEL EFFICIENCY IMPROVEMENT YEAR BY YEAR (NPR NEWS 2012)......................5
FIGURE 2.2 PORTERS FIVE FORCES MODEL FOR FEDEX (HARVARD BUSINESS REVIEW 2008)...............7
FIGURE 3.1: RESOURCES AND COMPETENCIES (FEDEX 2013).................................................................10
TABLE 3.1: PERCENTAGE INCREASE IN REVENUE (FEDEX ANNUAL REPORT 2012)................................10
FIGURE 3.2: FEDEX REVENUE FY 2011 V/S 2012 (FEDEX ANNUAL REPORT 2012)...............................11
FIGURE 4.1 VERTICAL AND HORIZONTAL INTEGRATION (FEDEX 2013).....................................................13
FIGURE 5.1: CEP INDUSTRY GROWTH RATE IN EUROPE (A. T. KEARNEY ANALYSIS 2013)....................15
FIGURE 5.2: UPS V/S FEDEX SALES REVENUE (DIFFEN 2013)................................................................16
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1: INTRODUCTION
FedEx Corporation is a logistics service corporation and operated since 1973 (FedEx
2013). Under the company FedEx, there are different Business Units according to the
market demand; FedEx Express, FedEx Ground, FedEx Freight, FedEx services and so
on. All of these services are operating under the brand name of FedEx, but they are not
very much related with one product line and another (Vector Strategy Group 2010).
FedEx was mentioned in the best 100 of Fortune 500 Companies and 10 most admired
companies (CNN Money 2013). This factor proves that FedEx is performing the best in
logistic industry, therefore, can also be assumed as the market leader of the whole
logistic market and there would be analysis on the performance of FedEx in marketing
management and how the company is strategically operating in the industry.
In this assignment, there will be 4 parts of analysis on the company FedExs strategic
management. Part 1 is about the critical analysis on external environment which is
including macro environment, industry, and market segment, part 2 is about the internal
environmental conditions, part 3 is the discussion of FedExs vertical integration,
backward integration and merger & acquisitions and part 4 is recommendations for the
company FedExs current performances based on the organisations strategic capability.
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In United States, because of the terrorist attack at 11 September 2001, the government
is highly concerned like that similar events may happen again (Knee n.d.). Therefore, the
government enacted the Aviation and Transportation Security Act signed by previous
President Bush in November 19, 2001 (Knee n.d.) As subsequence, local noise
regulations of United States controlled in FedEx aircraft operations in some domestic
areas. This might be affected on the revenue of the FedEx.
ECONOMICAL analysis: means the impacts of the countrys inflation, GDP, GNP,
unemployment rate, exchange rate, economic crisis, interest rates and banking systems
(Johnson, Wittington & Scholes 2011). FedExs CEO, Fred Smith, trying to get oil
efficiency while oil prices are continuously rising (NPR news 2012). FedEx is operating
with about 700 planes and so many numbers of trucks and vans and ships delivering
around the world, so oil is kind of essential in processing. Because of the high oil price,
FedEx needs to use other alternatives to operate machines instead of using petroleumbased fuels which cause expensive for organizations and non-eco-green (NPR news
2012). FedEx is also considering of using electric vehicles to get fuel efficiency
improvement. This is how economically effect upon FedEx and how the organisation
managed the problem to survive. Heres the diagram that shows improvement.
Figure 2.1: FedExs fuel efficiency improvement year by year (NPR news 2012)
SOCIO-CULTURAL analysis: the living standard of people, perceptions, traditional
issues, intellectual rights, populations, lifestyle changes, cultural changes and attitude
changes effect on FedEx (Johnson, Wittington & Scholes 2011). For example, lifestyle
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Bargaining Power
Bargaining Power
of Suppliers
Competitors
of Buyers
LOW TO
HIGH
HIGH
MODERATE
Threat of Substitute
Products or Services
MODERATE
Figure 2.2 Porters five forces model for FedEx (Harvard Business Review 2008)
LOW
The threat of entry is very low because the barriers to entry are high in logistic industry
- Shipping
- commodity
(Vector Strategy Group 2010).
The amount
of financials need in the industry is very high
and the access of the distributed channel is hard to build (Vector Strategy 2010). And for
the new entrants, there are also costs for the experience curve because new entrants
dont have enough experience in the industry (Johnson, Whittington & Scholes 2011). So
there will be unnecessary costs for the new companies due to the lack of experience and
they cannot apply the economies of scale.
The threat of substitutes of the industry is in the moderate level (Vector Strategy
Group 2010). Means there are not many chances of the alternatives of the product for
the customers. Because of the emergence of fax machine, e-mail systems and new ecommerce strategies, they are threatening the logistic companies (Reuters 2013). Even
though, there are substitutes, some important documents still need to use FedExs
service from one place to another (Vector Strategy Group 2010). There are not only
threats but also opportunities exist in the industry, so, the level is moderate.
The bargaining power of buyers means the price may probably be controlled by
customers if they are powerful (Johnson, Whittington & Scholes 2011). In case of FedEx,
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bargaining power of buyers is relatively high accordingly when they are large in number
and corporate customers, concentrated and purchase products/service in volume
quantity (Henry Fund Research 2012). According to Henry Fund Research, FedEx is
expecting to increase 9% in all retailers in 2016 (Henry Fund Research 2012). Online
shops like Amazon.com, Buy.com, ebay.com and etc are main customers of delivery
industry, so, since their industry is growing then logistic industry might also be growing in
next 5 year as an annual growth rate of 10% (Henry Fund Research 2012). So in this
case bargaining power may be higher as there is a growth in retail & e-retail sectors.
The bargaining power of suppliers relates to the influence of Suppliers upon industry
(Johnson, Whittington & Scholes 2011). Even though the suppliers for packaging
equipments and small vehicles are low in bargaining power of suppliers, the unstable
price of oil is effecting in the level of moderate to logistic industry (El-Khamy and
Golubov 2005). Now, FedEx is trying to reduce the power of suppliers to their company
by using alternative energy and electric vehicles for transportation (Reuters 2013).
Therefore the suppliers bargain power may vary from low to moderate for FedEx.
The extent of rivalry between competitors means another business groups in the
same industry and same customers of FedEx (Johnson, Whittington & Scholes 2011).
For example, TNT and UPS are the main competitors for FedEx and there are also some
other players like DHL, OHL, AWS and DB Schenker (Hoovers Inc. n.d.). Even though,
there are only 3 main competitors including FedEx, they are competing considerably
concentrated (Vector Strategy Group 2010). Even in acquisitions, when FedEx has
Kinkos, UPS also has Mailboxes Etc. (Vector Strategy Group 2010).
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normal package returns (FedEx 2013). There are heavy package about over 150 pounds
deliveries in FedEx Express Freight and there are four different types in FedEx Express
which all services are all reliable and time-definite deliveries (FedEx 2013).
3: INTERNAL ENVIRONMENT
FedEx operates its business units, enabling them to compete collectively. FedEx
corporate environment has the characteristics of organic organization; constantly
changing environment and the uncertainties generally emits a much higher level of
fluidity and flexibility. Preparation and decision-making are as close as possible to the
point concerned possible. Employees can respond to changes characterized by a
decentralized power structure.
Type
Physical
FedEx Competences:
What FedEx do well
Easy accounting and
record keeping
Software
Financial Highlights
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Financial
tracking
Exceptional performance
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Revenue generated
$42.6B in FY 2012
Net Income $2.0B in FY
2012
FedEx Workforce Diversity
Human
Diverse workforce,
FedEx is made up of
members
FedEx Ship Manager is proprietary software of FedEx hence it is RARE and Inimitable
by competitors (FedEx 2007), it makes shipping easy because it tacks the status
instantly and confirm delivery quickly. It also manages the return easily (FedEx 2013).
Year
Revenue
2011
39,304
2012
42,680
% Increase
8.58
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Figure 3.2: FedEx Revenue FY 2011 v/s 2012 (FedEx Annual Report 2012)
From the above graph it clearly indicates that the revenue increased by 8.58% from the
year 2011 to 2012.
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Depending upon the customers requirement FedEx divided into different Business
Units: FedEx Express, FedEx Custom Critical, FedEx Ground, FedEx Freight, FedEx
Supply Chain Services and FedEx Trade Networks (FedEx 2013). Each Business Unit
intended to towards a specific segment according to customers requirement. Customers
might have different requirements at the same time i.e. document express need to
deliver overnight, and then freight in the next day. FedEx understand the customers
need and have segmented the business to gain the competitive advantage.
FedEx is much more distinguished from its competitors on global supply chain solutions
i.e. distribution and order handling services for critical, time-sensitive and medical
instrument devices through FedEx Critical Logistics (FedEx 2013). FedEx offers the
money back guarantee and pick up facility from the customers door step (FedEx 2013).
Worldwide, FedEx is much more visibly differentiated from its competitors due to
infrastructure. FedEx serving more than 220 countries and territories, 90000 ground
vehicles, 660 aircraft in operation, in service and more than 10 million daily average
package shipment (Proctor 2013). It is very difficult for other companies to establish
such a huge infrastructure because no one else has the infrastructure that FedEx has
and people think of FedEx for global delivery.
FedEx make promises but its rivals cannot because of their limited infrastructure and
resources. With the expected globalization of large scale business in the future, it is
likely that competitors may work to overcome this differentiation by establishing their
own infrastructure and resources.
But for now, FedEx is market leader as far as global express delivery is concerned
(FedEx 2013). The infrastructure ensures the quality of the FedEx service.
FedEx was built upon innovation, and it continues to be an m part of the FedEx culture
and business strategy (FedEx 2013). One of the FedEx innovation solution is
SenseAware provided by FedEx a ground breaking sensor-based logistics service that
combines a multiple sensor devices with a web base shipment monitoring application. It
enables customers to monitor their consignments in real time basis with information like
temperature, location and exposure to light and share this important information
continuously with their supply chain partners (FedEx 2013). FedEx Institute of
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Technology at the University of Memphis is there for hi-tech research, think tank
sessions, corporate training programs and conferences (FedEx 2013).
Vertical Integration describes entering activities where the company is its own supplier or
customer (Johnson, Whittington, and Scholes 2011: 240). Vertical integration states that
firm has integrated all the prospects of the supply chain management including
supplying raw materials, manufacturing, managing warehouse, distribution and retailing
or forwards to the customers (Environmental Leader 2010).
Generally there are two types of vertical integration i.e. forward and backward
integration. (Hubbard and Beamish 2010: 254)
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above service FedEx Office provides self services to its customers. The computers are
available on rental basis where each computer is connected to the printer for printing the
documents (FedEx 2013). The FedEx Office retail solution also offers a selection of
office supplies and business books for retail purchase.
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Figure 5.1: CEP Industry Growth Rate in Europe (A. T. Kearney Analysis 2013)
So we recommend FedEx should continue in organic growth i.e. investing in planes,
vehicles (need to expand more in ground vehicles) and infrastructure, especially in Asia
(India and China and Europe), but also need to focus on penetrating into foreign markets
by partnering with local supply chain industries.
FedEx has used its four business segments to grow from a 3.7% in 1991 to a forecasted
17.7% industry share by 2015 (FedEx Annual Report 2012). FedEx is dedicated in
reinvesting earnings for expanding business operations both globally and locally that
keep it aggressive year after year (FedEx Annual Report 2012). With the development of
large urban centres around the globe that are able to improve efficiency and reduce
delivery time, FedEx should do research and change the routes of supply to meet
demand.
FedEx has net income of $2 billion out of revenue of $42 billion where as UPS has net
income of $3 billion out of revenue of $53 billion (Diffen 2013). Amazon uses FedEx
much more frequently (Diffen 2013). So FedEx should focus on alliances with giant
retail and online sectors like Walmart, Flipkart, e-bay etc for generating more revenue
and ensuring the business for forth coming years.
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6: Conclusion
To finalize datas that mentioned above, in logistics industry, FedEx is performing well
from the point of strategic management even though the organization has some
weaknesses to fix. Since it is the oldest logistic company in industry and it has been
mentioned by fortune 500 companies, the company FedEx maybe assumed as the
market leader of logistic industry line. If the organization prepare for the weaknesses,
learn from mistakes, pass the experience curve, and also adopt the new trends in the
industry, then FedEx probably become the best logistic company around the world.
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7: References
Bloomberg Business week (2008) FedEx Ditches Kinko's [Online] available from
<http://www.businessweek.com/stories/2008-06-09/fedex-ditcheskinkosbusinessweek- business-news-stock-market-and-financial-advice >
[25 June 2013-08-20]
Chen, C., Duong, L., Yang, H., Susanty, M., Vellandi, M., Betro, A. (2004) FedEx
Corporation Strategic Audit [Online] available from
<http://www.melodiesinmarketing.com/work/FedEx_Final_Paper.pdf>
[22August
2013]
CNN Money (2013) Is FedEx a good company or what? [online] available from
<http://money.cnn.com/magazines/fortune/fortune500/2011/snapshots/2067.html
> [21 July 2013]
ComputerWeekly (2011) CIO interview: Michael Foster, European vice-president of IT,
FedEx Express [Online] available from <
http://www.computerweekly.com/news/2240105218/CIO-interview-MichaelFoster-European-vice-president-of-IT-FedEx-Express > [01 August 2011]
El-Khamy, M. and Golubov, Y. (2005) FedEx in the Global Market [Online] available from
<http://www.mcafee.cc/Classes/BEM106/Papers/2005/FedEx.pdf> [23 July 2013]
Environmental Leader (2010) Supply Chain Management Market to Hit $8.5 Billion by
2015 [Online] available from
<http://www.environmentalleader.com/2010/10/05/supply-chainmanagement- market-to-hit-8-5-billion-by-2015/> [14 July 2013]
FedEx (2013) Charitable Contribution Guidelines [online] available from
<http://about.van.fedex.com/charitable-contribution-guidelines>
[25 July 2013]
FedEx (2013) FedEx Innovation [Online] available from
< http://about.van.fedex.com/fedex-innovation> [18 August 2013]
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Henry Fund Research (2012) FedEx Corporation (FDX) [Online] available from
< http://tippie.uiowa.edu/henry/reports12/fdx_sp12.pdf> [28 July 2013]
Hoover's Inc. (n.d.) FedEx Corporation Competition [online] available from
<http://www.hoovers.com/companyinformation/cs/competition.FedEx_Corporation.e6bc953d777db293.html>
[27 August 2013]
Hubbard, G., Beamish, P., (2010) Corporate Multi-Business Strategy. Australia: Pearson
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Reuters (2013) Analysis: New e-commerce strategies threaten UPS, FedEx [online]
available from <http://www.reuters.com/article/2013/07/14/net-us-upsfedex- ecommerce-analysis-idUSBRE96D04R20130714> [22 August 2013]
Staff, B. (2010) FedEx Launches Three-Point Green Plan [online] available
from
<http://www.greenbiz.com/news/2010/04/20/fedex-launches-three-point-
Vector Strategy Group (2010) Strategic Report For FedEx Corporation [online] available
from <http://economics
files.pomona.edu/jlikens/SeniorSeminars/vector2010/pdf/fdx.pdf>
[28 July 2013]
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