Strategic Management Analysis of FedEx Corporation, High school final essays of Strategic Management

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FedEx Corporation

A Case Analysis on Strategic Management

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CASE BACKGROUND

FedEx's history dates back to 1971 when Frederick Smith (now CEO) acquired a majority stake. I am interested in Arkansas Aviation Sales. His frustration at not being able to effectively deliver the package within two days gave rise to the idea of finding a more efficient way to handle the shipment. Blacksmith. He named his new company Federal Express in hopes of securing a federal contract. Creating a public good through the Reserve Bank and the Commonwealth term. contract offer with The Federal Reserve Board refused, but the company officially began operations in 1973, when he was 14 years old.

A light plane delivering his 186 packages from Memphis, Tennessee to his 25 cities in the United States. Federal Express did not officially change its name to FedEx until 1994. FedEx made its first profit in 1975 and helped lobby for deregulation. Air freight adopted in 1977. Deregulation has allowed FedEx to use larger aircraft, and today FedEx is the world's largest all-freight fleet. The company reached $1 billion in sales in 1983, First U.S. company to achieve this level of sales without a merger or acquisition Within 10 years of operation. After a string of international acquisitions, FedEx launched its offering Acquisition in 1995 serving Europe, Asia and China.

In 2014, about 90% of his $1.2 billion investment in FedEx was for capacity expansion or infrastructure. As Christmas approached, the company hired about 50,000 more seasonal workers. from 40,000 in the previous year. This investment is designed to accommodate rapid consumer growth Products ordered online. Peak volume, which marks the busiest day of the year, has increased dramatically for FedEx in recent years, with over 26 million packages in a single day just before Christmas. His busiest day at his competitor UPS recently increased by 40% to his 31 million packages. Last minute offers for free online shipping before and after the holiday season have become very common in recent years.

2. ENVIRONMENTAL ANALYSIS

A. GENERAL ENVIRONMENT

A.1 OPPORTUNITIES

A.1.2 TECHNOLOGICAL FORCES

The GENCO acquisition is expected to further FedEx’s commitment to its customers by improving logistics offering.

A.1.3 ECONOMIC FORCES

International markets continue to be important for future growth in the airfreight industry. In 2014, international markets accounted for over 50 percent of the air freight ton-miles and have been increasing steadily since then. Domestic volumes are growing around 4 percent a year, whereas volumes in Asia are growing nearly 20 percent a year. Both FedEx and UPS have capitalized on these trends, especially in China, but also in Germany, to help facilitate a growing European market

B1.4 INDUSTRY GROWTH

Approximately 55 percent of the $90 billion is derived from ground delivery services, whereas 29 and 8 percent, respectively, are derived from domestic and international air delivery services. Delivery services outside the United States currently are a $200 billion industry with 3 to 4 percent annual growth expected through 2020, taking the overall projected industry revenues to over $ billion by 2020.

B1.8 CREDITOR’S ACTION

Domestic volumes are growing around 4 percent a year, whereas volumes in Asia are growing nearly 20 percent a year. Both FedEx and UPS have capitalized on these trends, especially in China, but also in Germany, to help facilitate a growing European market as well. International rates tend to offer a higher margin as well, since many customers internationally disproportionally use next day service, which carries a significant price premium.

B.2 THREATS

B.2.2. POTENTIAL ENTRANTS

With e-commerce growing, new delivery competitors such as Google, eBay, and Amazon are offering delivery services. As of now, many of these delivery services are same day and only in large cities such as Manhattan, Los Angeles, and San Francisco. It is unclear whether Amazon and Alibaba can also become package delivery giants; however, they have eroded into margins of the big transport firms such as UPS and FedEx. With Amazon’s size and package volume, the firm can negotiate attractive shipping prices for its customers. Exhibit 6 reveals market share data for rival firms in the package delivery industry.

B.2.4. BARGAINING POWER OF SUPPLIERS

UPS and FedEx have questions regarding how the USPS can offer discounts to customers, when both UPS and FedEx are being forced to raise prices. With respect to USPS’ lower prices, UPS’s management recently stated that it should “raise a red flag,” especially since the organization is currently operating at a loss. UPS management went further, accusing USPS of charging higher rates on first-class letters, where customers have little choice or bargaining power on who to do business with. In addition, both UPS and FedEx have accused USPS of offering subsidies to customers to ship with them and even charging less for package delivery than revenues derived.

C. INTERNAL ENVIRONMENT

C.1 STRENGTHS

C.1.1. MARKETING

Strong brand image and reputation in the market, Successful advertising and promotional campaigns, Established distribution channels, Good customer relations and loyalty. The company has a strong brand identity and a loyal customer base. Their focus on sustainability and ethical production practices also helps to differentiate them in the market.

C.1.2. PRODUCTION/OPERATIONS

Efficient manufacturing processes, Consistent quality control, Use of advanced technology and equipment, Strategic location of the production facility. The company has efficient production processes and a strong supply chain, which enables them to maintain high-quality products while keeping costs low.

C.1.3. FINANCE

Strong financial performance, Consistent revenue growth, adequate cash reserves, Good credit rating. The company has a healthy financial position with a strong cash flow and consistent profitability. They also have a good relationship with their investors, which provide stability and access to funding.

C.1.4. ORGANIZATION & MANAGEMENT

Experienced and competent management team, Effective organizational structure, clear strategic direction, Good communication and coordination among departments. The company has a flat organizational structure, which promotes communication and collaboration among employees.

They also have a strong leadership team that prioritizes transparency and employee satisfaction.

C.1.5. HUMAN RESOURCES

Skilled and motivated workforce, Competitive compensation and benefits, Good employee relations and low turnover rate, Adequate training and development programs. The company values employee development and provides a positive work environment with competitive compensation and benefits. This helps to attract and retain top talent.

C.1.6. RESEARCH & DEVELOPMENT

Continuous product innovation and improvement, Investment in R&D activities, strong focus on customer needs and preferences, collaborative partnerships with research institutions. The

D. EXTERNAL FACTOR EVALUATION MATRIX

EXTERNAL FACTOR EVALUATION (EFE) MATRIX

KEY EXTERNAL FACTORS WEIGHT RATING WEIGHTED

SCORE

RATING

VALUES

Opportunities:

1. There is intense competition in the shipping and logistics industry which offers similar services.

0.15 4 0.60 (4)^ –

superior response

(3) – above average response (2) – average response

2.The LTL typical haul consists of 1,000 to 1,500 pounds and is normally used by business-to-business or retail-to-consumer segments, such as Amazon sending shipments to customers.

3. The company uses recycled paper in most of their shipping packaging, and also has recycling programs in place for a variety of items, including batteries, printer ink cartridges, lights, paper, oil, tires, plastics, and many other products.

0.12 3 0.36 (1) – poor response

4. International markets continue to be important for future growth in the airfreight industry. Amen

Threats:

1. E-commerce growth has led to new competitors in delivery services such as Amazon, eBay, and Google.

Overall Rating:

2.5 – high response

2. UPS and FedEx accuse USPS of offering discounts and subsidies to customers, causing concerns about unfair competition.

3. USPS is a massive employer and delivers a significant portion of the world's mail volume.

medium response

<2.5 – low response

4. High jet fuel prices historically were to blame for many customers switching to trucking and slower means of transportation, favoring lower cost over more timely arrival of products.

TOTAL WEIGHTED SCORE 1.00 2.

E. INTERNAL FACTOR EVALUATION MATRIX

INTERNAL FACTOR EVALUATION (IFE) MATRIX

KEY INTERNAL FACTORS WEIGHT RATING WEIGHT

ED

SCORE

RATING

VALUES

Strengths:

1. The company has a strong brand image and reputation in the market with a focus on sustainability and ethical production practices.

0.11 2 0.22 (^) (4) – superior response (3) – above ave. response (2) – ave.

2. Efficient manufacturing processes with consistent quality control and advanced technology and equipment.

0.13 3 0.39 response (1) – poor response

3. Strong financial performance with consistent revenue growth, adequate cash reserves, and a good credit rating.

4. Continuous product innovation and improvement with investment in R&D activities, strong focus on customer needs and preferences, and collaborative partnerships with research institutions.

Weakness:

F. Competitive Profile Matrix

Global Expansion

Market Share 0.11 3 0.33 3 0.33 2 0.

FedEx UPS DHL

Key Factors Weight Ratings Score Ratings Score Ratings Score

Advertising 0.12 3 0.36 3 0.36 2 0.

Service Quality 0.15 3 0.45 3 0.45 3 0.

Price Competitiveness

Management 0.1 4 0.4 2 0.2 3 0.

Financial Position

Customer loyalty

Total

G. ASSUMPTIONS

G.1. GENERAL ENVIRONMENT STABILITY

Based on the Economic forces and Environmental forces are stable. FedEx has been improving its logistics offering. The domestic market and the global markets have been increasing steadily as well. FedEx also uses recycled paper in most of its packaging. They provide different programs such as recycling programs wherein customers could also drop off their used recyclables.

G.2. INDUSTRY GROWTH PROSPECTS

Albeit FedEx has competitors such as Google, eBay, and Amazon. FedEx continuously provides top-notch services for its customers. The company keeps up with e-commerce and expanded its business by providing services to online retailers.

G.3. COMPANY’S COMPETITIVE POSITION

FedEx has a strong brand image and reputation in the market. Albeit the company has worldwide competition such as DHL, UPS, and Amazon, FedEx has maintained its quality control, equipment, location, and much more making a strong brand identity and having a loyal customer base. FedEx has a skilled workforce, the company values its employees' development and provides them with a positive work environment. FedEx also uses advanced information systems to make their company go on smoothly. With good security measures, sensitive information such as its customers' information would be secured. Besides that, advanced information systems also help the company to keep track of its inventory, analyze sales data, and manage the company’s supply chain.

3. PROBLEM STATEMENT

The major problem of FedEx is how to achieve its sustainability in the global market as evidence by the following

UPS, DHL, and Amazon may compete with FedEx, putting pressure on its price and profitability. In 2015, the company raised shipping charges to protect margins against this competition, but it's unclear how customers will react. Case-based restricted international expansion. FedEx is expanding in the US, Canada, and Mexico, but to stay competitive in the global market, it may need to emphasize foreign expansion. FedEx may need to invest more in its global network and better market its services as international shipping and logistics demand rises. Its high prices may deter certain customers and require more targeted and efficient

4. ALTERNATIVE COURSES OF ACTION

A. TOWS MATRIX

C. GRAND STRATEGY MATRIX

D. SUMMARY OF STRATEGIES

STRATEGY OPTIONS TOWS IEM GSM TOTAL

A. INTEGRATION STRATEGIES

1. Forward Integration 1 1 2
2. Backward Integration 1 1 2
3. Horizontal Integration 1 1 2

B. INTENSIVE STRATEGIES

1. Market Penetration 1 1 1 3
2. Market Development 1 1 1 3
3. Product Development 1 1 1 3

C. DIVERSIFICATION STRATEGIES

1. Concentric Diversification 1 1
2. Conglomerate Diversification 0

3. Horizontal Diversification 0 D. DEFENSIVE STRATEGIES
4. Retrenchment 0
5. Divestiture 0
6. Liquidation 0 Joint Venture 0 5. RECOMMENDED ALTERNATIVE AND ACTION PLAN

A. QUANTITATIVE STRATEGIC PLANNING MATRIX

KEY STRATEGIC FACTORS WE

IGH

T

Market Penetra tion

Market Develop ment

Product Development

R

at in g

Wei ghte d Sco re

Ra tin g

Wei ghte d Scor e

Ratin g

Weigh ted Score

OPPORTUNITIES:

1. .Being from Memphis Tennessee FedEx is the top express delivery service in the world, sending roughly 3.5 million parcels each day from around 2,000 FedEx Office locations to more than 220 nations and territories.

1. FedEx owns and operates a fleet of about 600

aircrafts and more than 50,000 motor vehicles and

trailers. This will result in more carbon emissions.

Some competitors might use this as an advantage to compete with FedEx by using a more eco-friendly

method.

2. FedEx completed the takeover of a polish courier company. Opek.zo.o., and french B2B express

transportation company. TATEX, both in mid 2012. Then FedEx acquired Rapidào Cometa, a Brazilian

Transportation and logistics company. This will

increase the operating cost and more difficulties in operating.

3. Ebay

Although it is one of the most well-known and

successful online marketplaces, eBay does not

actually stock any of the products that it offers for

sale. Instead, it gives users the ability to advertise

objects for sale, which can subsequently be auctioned off and competed for by other users. Ebay

has, as of late, provided the opportunity to buy

products for face value or to submit price offers for

them, both of which were previously available

4. Amazon

A huge variety of goods are sold on Amazon.com.

With the exception of its product selection, the direct

Amazon-to-buyer sales strategy is almost identical

to what occurs at the majority of other sizable online

shops. You may discover practically anything you might want to buy, including bedding, apparel,

jewelry, gourmet cuisine, sporting equipment,

computers, furniture, toys, and garden supplies, as

well as books, CDs, DVDs, and clothing. The

nuances are what make Amazon a massive company.

In addition to its enormous selection of products,

Amazon does everything in its power to personalize the shopping experience.

SUB-TOTAL 1 1.37 1.07 1.

STRENGTHS:

1.Strong brand image and reputation in the market,

Successful advertising and promotional campaigns,

Established distribution channels, Good customer

relations and loyalty. The company has a strong

brand identity and a loyal customer base. Their

focus on sustainability and ethical production

practices also helps to differentiate them in the market.

2. Efficient manufacturing processes, Consistent

quality control, Use of advanced technology and

equipment, Strategic location of the production

facility. The company has efficient production

processes and a strong supply chain, which enables them to maintain high-quality products while

keeping costs low.