Fedex - Company Analysis - Academic Assignment - Top Grade Papers - Academic Assignment

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    Research Proposal

    A Research Proposal Examining the Company Known as Federal Express Corporation (FedEx)

    and Their Industry Analysis and Competition

    By:

    Layla Lewis

    Brandon Cherry

    Matt Hanson

    Jonathan McDonald

    Steven Snapka

    Frank Townsend

    Texas A&M University

    Strategic ManagementSummer I 2010, MGT 527-02W

    Professor: Dr. Sewell

    July 02, 2010

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    Introduction

    Title

    A Research Proposal Examining the Company Known as Federal Express Corporation

    (FedEx) and Their Industry Analysis and Competition

    Background

    History & Company Purpose of IBM

    Federal Express is an express transportation company, founded in 1971, by

    Frederick W. Smith. Federal Express more commonly known as FedEx specializes in overnight

    delivery of packages, documents, and heavy freight. FedEx operates in four categories which are

    FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services. FedEx employs over

    210,000 worldwide. Federal Express invented the express package industry in 1973 (Senn,

    1998). FedEx Express provides fast and reliable delivery to every U.S. address and to more than

    220 countries and territories.

    FedEx's mission statement is to produce superior financial returns for its

    shareowners by providing high value-added logistics, transportation and related information

    services through focused operating companies (Quillinan, 2000). Safety will be the first

    consideration in all operations. Corporate activities will be conducted to the highest ethical and

    professional standards (www.fedex.com).

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    Identification of the Industry

    FedEx is in the air delivery and freight services industry, but is starting to corner

    the logistics services industry as well (FedEx Services, 2006). FedEx has two main competitors

    domestically, United Parcel Service and United States Postal Service. In addition to competition

    in the United States FedEx competes globally with Canada Post, FCML Couriers, TNT N.V.,

    Deutsche Post (DHL), Royal Mail, LDH Express, Japan Post, India Post, and other regional

    carriers (Senn, 1998).

    UPS

    FedEX

    USPS

    Industry Analysis

    Intensity of Rivalry

    Despite the presence of only a few competitors (FedEx, UPS, and USPS), air freight and

    express logistics remain competitive industries (Senn, 1998). The market for FedExs services

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    remains competitive due to price-conscious consumers, a lack of differentiation between

    companies, and a low penalty for changing logistics providers (Logistics Industry, 2008).

    Threat of New Entrants

    The threat of new competitors within the industry is low due to the high cost of entry.

    For example, capital equipment, such as aircraft, cost in the tens or hundreds of millions apiece,

    not to mention the logistics hubs and information infrastructure necessary to provide the levels of

    service and reliability expected of FedEx and its competitors (Airfreight, 2009). The difficulty

    for even an established company to penetrate the US market is evidenced by DHLs failed bid to

    compete in the domestic market.

    Threatof Substitutes

    The threat for substitutes is low to moderate due to limited alternatives to shipping

    products such as air freight. Shipping services involving air freight must be handled with speed

    and accuracy (Airfreight, 2009). Few companies have the ability to offer delivery solutions

    compared to FedEx or UPS. While many types of documents, music and software can be

    distributed electronically, many consumer and B2B products must still be physically delivered.

    Bargaining Power of Suppliers

    In this area, bargaining power is low. Companies that provide products to these high-end

    logistic companies usually provide their products in bulk and at a price reduction. If a supplier

    chooses to gouge prices, the logistic companies can seek alternative suppliers. The majority of

    purchased products are accessible from other vendors which quickly eliminates bargaining

    power (Parnell, 2009).

    Bargaining Power of Buyers

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    The bargaining power of buyers in this industry is low to medium. Individual consumers

    have the opportunity to change service providers at their discretion depending on their needs at

    the time. Although, an individual does not have the opportunity to negotiate pricing on services,

    he or she does have a choice in which logistics provider they use (FedEx Services, 2006). A

    larger buyer such as a company may be able to receive special pricing through exclusive

    arrangements.

    Porters five forces model FedEx Corporation

    Industry Profitability

    Porters five forces model is an excellent tool for analyzing FedExs profitability, which

    encompasses the forces that drive an industrys profitability (Parnell, 2009). These competitive

    Suppliers PowerLOW

    - Products suppliedto the industry

    Threat of EntryLOW

    -High start up costs

    Threat of SubstitutesLOW

    Limited services for large

    freight and air freight

    Buyers PowerLOW - MEDIUM-

    Shipping choices- Large Buyers

    Existing RivalsHIGH

    - FedEx, UPS, USPS, DHL

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    forces include: intensity of rivalry, threat of new entrants, threat of substitutes, bargaining Power

    of suppliers and bargaining of buyers. As stated previously, FedEx is a corporation that provides

    many different products and services, so applying Porters five forces model to the industry can

    be quite complicated. To ensure understanding, we will rate each force as they affect FedEx.

    Who Has Succeeded and What Are the Critical Success Factors?

    Companies who have experienced success in the logistics services industry include

    FedEx, UPS, and DHL. Companies who have lagged in this industry include USPS, and other

    national or regional logistics service providers, who have not adapted to economic, social, and

    technological changes. Factors critical to success in this industry include a global presence and

    ability to incorporate new technology into their business infrastructure. Firms in this industry

    must have a global outreach in order to meet the ever growing demand for domestic and

    international shipping (Devan, 2010). This is especially important in Asia-Pacific market where

    industry growth is expected to increase immensely over the next few years. (Global logistics,

    2008).

    The internet has radically accelerated global e-commerce and international trade, further

    fueling the demand for international shipping. Changes in technology include, laser and camera-

    based label scanners, automated handling equipment, hand-held computer devices used by

    delivery personnel, and GPS (Industry Overview, n.d.). Businesses must adapt to technological

    changes in order to adhere to customers demand for speed, flexibility, and reliability, while also

    giving them the ability to cut costs.

    Macro-environmental Properties

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    What Political / Legal Forces Affect the Industry?

    While the legal and regulatory environment does not affect the logistics industry in the

    same way as others, such as telecommunications or oil drilling, certain factors still bear

    discussion here. The most pronounced issue facing FedEx appears to be labor laws, with lesser

    issues in areas such as anti-trust. For example, when DHL chose to close its operations in the

    US, it opted to contract UPS for the domestic portion of its international business. This move

    was challenged as potentially leading to a drop in competition, and therefore a rise in prices

    (Page, 2008).

    Of greater note is a recent showdown with the IRS over FedExs labor practices. One

    contentious practice used by FedEx is to hire workers, such as deliverers, as independent

    contractors rather than regular employees. This allows the company to save up to 30% on

    personnel expenses by skirting a variety of responsibilities, such as health and unemployment

    insurance, FICA, Medicare, and more (Griffing, 2010). The IRS filed a $319M injunction

    against FedEx in 2009, claiming that the company exerted too much control over its contractors

    (Orey, 2009). For example, even though these contractors own their own vehicles, they are

    painted with FedEx logos, and wear FedEx uniforms. They drive routes specified by the

    company, and most importantly, are prevented from providing delivery services to any other

    company (Griffing). It would not be a stretch to refer to them as contractors in name only.

    In a related issue, rival UPS has lobbied congress to end a loophole that makes it

    extremely difficult to unionize the company. FedEx employees are regulated by the Railway

    Labor Act because the company was originally founded as an airline. FedEx uses this status to

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    block unionization of every employee, such as truck drivers, even though their duties are

    completely unrelated to the air transport segment of the business (Helm & Herbst, 2009). FedEx

    has countered with an ad campaign against the brown bailout, adding additional pressure on

    congress by threatening to cancel a large order of Boeing 777s.

    Economic Forces

    As a huge corporation, FedEx must consider economic forces as they affect industry and

    customer behavior. One of the strongest to encounter is Gross Domestic Product. Naturally,

    FedEx embarks on global competition and is affected by the changes in GDP. In our struggling

    economy and that of others, GDP has fallen and FedEx has felt the pressure (The Associated

    Press, 2009).

    Other forces that affect the company are inflation, interest and exchange rates. All of

    these impact the companys bottom line. High inflation rates are very detrimental as they raise

    the cost of doing business (Parnell, 2009). In the case of interest rates, companies like FedEx

    watch as interest rates fall as this could increase business due to an increase of customer

    spending (Dade, 2008). The same can be said for exchange rates. In order for a company to

    profit while doing business in the global market, the exchange rates must remain low. When an

    increase occurs, the cost of doing business rises (Mester, 2005). Ultimately, a rise in either of

    these rates decreases consumers purchasing power which negatively influences the bottom line.

    Social Forces

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    Federal Express has many social forces that it faces and the industry itself has many

    more. The freight market is enormous and happens minute by minute on a global scale.

    Operations and logistics are occurring 24 hours a day to and from every corner of the globe.

    Each of these locations have different social forces that shape their culture and business

    activities. No executive in the freight & logistics industry would send a female executive to

    negotiate a deal with a Middle East country due to their lack of acceptance of women in the work

    place. While those same corporations understand they need to send someone who will embrace

    and grow a relationship with the local Middle East industry because they require knowledge and

    trust with the people they perform business with.

    Societal traditions have big impacts on business endeavors as certain geographic

    locations may only use one company as a matter of loyalty and respect or may be paying them a

    fee to use them as is customary in certain societies. Some traditions dictate that to even do

    business in that region you need to visit the religious leader to receive a blessing and good

    fortune and if you don't you won't be permitted to do business in that particular region. You

    might even have to fight the stigma that your work is cursed by the locals if you don't go through

    the proper channels. Other countries do not have such traditions and simply require the right

    price for the right service. Consumers psychology can be greatly affected by those behaviors

    performed by a certain cultural learning process as research suggests where a child's buying and

    loyalty habits are shaped by the environment and influences they grow up with (Foxman,

    Tanshuhaj, & Ekstrom, 1989). Thus, creating a perpetual wheel of teach, grow and change that

    the industry leaders must anticipate and adapt to.

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    China will not allow most companies to operate in its borders without hiring a local

    workforce. These requirements of businesses in the workplace require different strategy levels

    for different circumstances. Japan has certain well known characteristics such as they don't mix

    personal family life with business, unlike in Europe where you might do business at the home of

    the CEO (Williams, 1988). Fed Ex will still be able to use its core competencies to produce a

    logistical solution and ship the freight where it needs to go, but will need to approach and operate

    differently in each societal location. This has forced some area's to not grow and expand as you

    see in the Middle East and North Africa where the development has been stifled by societal

    forces such as rebels, dictators, tribes, or lack of functioning government or authority.

    What Technical Forces Affect the Industry?

    FedEx first became engaged in e-commerce in the 1970s, and was one of the first

    shipping companies to harness the Internet for customer ordering, package tracking and process

    monitoring. The company has always been considered a technological innovator in the shipping

    industry. Because of their e-commerce business model, FedEx has been able to leverage its

    information infrastructure to allow the company to extend beyond pure transportation and

    address other service needs for the customer, allowing FedEx to become deeply integrated in its

    customers internal processes (Epstein, 2004).

    The first major system application breakthrough for FedEx was the introduction of COSMOS in

    1979, which reported real-time status and location of a shipment, and was accessible to

    customers through an 800 number. Other innovations include FedEx PowerShip, a PC-based

    workstation given to business customers to manage their shipping needs on-site in 1987...

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    Finally, wwwfedex.com was launched in 1994, which offered information about the company,

    shipping rates, tracking, and the ability to allow users to complete and print shipping labels over

    the Internet (Hargrove, 2001).

    Micro-environmental Properties

    Current Firm-Level Strategy?

    FedEx provides transportation, e-commerce and business services. The corporate profile

    is made up of six companies that operate independently, compete collectively and manage

    collaboratively under the FedEx brand in four business segments: FedEx Express, FedEx

    Ground, FedEx Freight and FedEx Services. The six companies are FedEx Home Delivery,

    FedEx Office, FedEx National LTL, FedEx Custom Critical, FedEx Trade Networks, and FedEx

    Supply Chain. The firms profile indicates that it operates in multiple related industries

    (Hoovers.com).

    The current strategic alternative for the company is to increase size and sales using the

    internal growth and strategic alliances models (Parnell, 2009). FedEx has focus on five core

    strategies to grow as a company: grow core package business, grow internationally, grow supply

    chain capabilities, grow using e-commerce and technology, and grow new services and alliances

    (FedEx.com).

    The core package business has been a significant contributor to revenue and earnings

    historically and is a critical business in the overall growth strategy. Because international global

    air freight shipping is growing and profitable in the transportation industry, worldwide expansion

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    has to be a continued part of the growth strategy. The supply chain business has to expand its

    capabilities to offer more modular and scalable solutions to remain competitive and attract more

    customers (Upshaw & Taylor, 2000). E-commerce is a 329 billion dollar a year business. To

    grow market share, FedEx has to continue incorporating new technologies to provide efficiencies

    and reliability for its customers. FedEx will need new service offerings going forward to

    maintain continued growth in all areas of the business. Alliances will be beneficial to keep up

    with technological advances, fend off competitors, and help in gaining market share.

    Current Business-Level Strategy

    Looking at Porters generic strategy topologies, FedEx as a company is best matched

    with the differentiation strategy (no focus) from a large business perspective. FedEx is proficient

    from a technical innovation standpoint and has used this ability to develop services and

    technologies that are marketable to the entire shipping and logistics industry (Parnell, 2009). The

    companys most notable strength is in the level of service it provides for its customers. By

    differentiating the level and quality of service from their competitors, customers are willing to

    pay more for FedExs service offerings.

    The Miles and Snow prospector strategy framework aligns with the current business-level

    strategy of FedEx. The prospector characteristics of being first movers, entrepreneurship, and

    creating new business ventures within their existing firm (intrepreneurship) are ever present in

    FedExs business level strategy (Parnell, 2009). FedEx is credited with innovation and redesign

    of the shipping and logistics industry as we know it today.

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    What makes the organization unique in relation to its competitors is its differentiation in

    meeting the customers needs. FedEx divided its business into six different segments of FedEx

    Home Delivery, FedEx Office, FedEx National LTL, FedEx Custom Critical, FedEx Trade

    Networks, and FedEx Supply Chain to address the specific needs of its customers. Another

    notable differentiation that FedEx has over its competitors is the ability to provide global

    services due to its large infrastructure and fleet of 663 aircraft (Hedley, 2002). When customers

    think of global delivery services they think of FedEx.

    Competitors Business-Level Strategies Being Employed

    FedEx must be aware of the business-level strategies of its two main competitors, USPS

    and UPS. The USPS focuses its efforts on their central business unit, which is U.S. domestic

    package shipping. They look to provide customers with the greatest value in domestic shipping

    by keeping costs low for the customer as well as themselves through operational efficiency,

    standardization, process control, and technology. As part of their strategic plan the USPS plans

    to, Reduce the cost of meeting universal service obligations by focusing on major cost drivers,

    especially delivery operations (Strategic, 2007). This puts them in the low-cost strategic

    approach of Porters Generic Strategies (Parnell, 2009).

    UPS, FedExs closest competitor, has three core business units: (1) U.S. domestic

    package, (2) international package, and (3) non-package. Their business-level strategies for each

    of these units have to do with expanding operations and staying on the cutting edge of

    technology to meet customers need and expectations (UPS Charter, n.d.). UPS attempts to use

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    the differentiation strategy approach of Porters Generic Strategies, by offering customers

    products and services that their competitors dont (Parnell, 2009).

    Current Functional Strategies

    Marketing Strategy

    FedExs universal marketing objective is to produce a trustworthy, brand imaging and

    propose across all end user relations (Savage, 2004). Their marketing strategy revolves around a

    marketing mix that is tailored to fit a specific target customer: businesses and individuals

    globally. By proceeding with maximum globalization and extending their services into

    uncharted markets, FedEx is able to homogenize its product (Maddox, 2007). FedEx understands

    that diverse customers have special logistic needs. FedEx uses to its advantage the fact that it is

    broken into individual business units to satisfy specific segments of the market. This allows to

    better service the needs of all consumers while allowing each to operate independently of one

    another yet still compete collectively (Creamer, 2005). By doing so, FedEx has created the

    opportunity for each unit to allow for a more attentive approach to their own market. An

    approach such as this frees up the business units from worrying what each other is doing and

    provides an advantage over competitors (Creamer).

    FedExs brand priorities are to better communicate its full bundle of shipping and

    communications services to business and individual audiences and use fully integrated marketing

    to tell its story (Maddox, 2007). An example of this is the 2009, strategic advertisement

    campaign of We Understand. that consists of TV spots, online, radio, print and direct-to-

    consumer advertisement vying to show FedExs continual effort to provide for customers needs

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    (Tucker, 2009). FedEx changed their advertisement slogan because FedEx felt that their previous

    slogan, Relax, its FedEx was not appropriate for their customers anymore. Their new

    campaign message reflects empathy toward its customers, and has breadth-showing all the things

    FedEx can do for customers, including providing easy and economical shipping and services

    (Tucker).

    Financial Strategy & Position of the Firm

    FedEx has had three straight years of declining net income which may not come to any

    surprise because of the weak economy. FedEx has substantially lowered its total liabilities the

    past three years which would help if they need to raise money in a debt offering. FedEx

    continues to pay a dividend to reward their shareholders and to focus on the main goal of an

    organization which is to maximize shareholder wealth. FedEx began paying a dividend in July

    2002 which was five cents (Brooks, 2002). FedEx has accomplished an outstanding feat by

    having better leverage ratios than the industry and its largest competitor UPS. The return on

    equity is quite alarming for FedEx, while UPS has a huge edge on them. Below you will find

    financial ratios for FedEx, UPS, and the industry average.

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    Summary of Firm and Industry Ratios for [2010]

    Industry: Air Delivery & Freight Services

    Brooks, R. (2002). FedEx Corp. plans to pay dividend, first in its history. Wall Street Journal,239(107), 82-84.

    Production and Purchasing strategies

    As a service company, FedExs purchasing concerns are not as far-reaching as those in

    production industries. Just the same, FedEx does have a large amount of capital equipment, such

    as trucks and aircraft that are expensive to maintain and service, in addition to a few key

    consumables such as cardboard and other paper products. According to Birkland (2008), FedEx

    Ratios FedEx Industry Avg UPS Notes

    Current Ratio 1.6 1.6 1.4 2-1 ratio is desirable

    Quick Ratio 1.5 1.5 1.4 # represents how fast a businesscan come up with cash on shortnotice.

    Asset Turnover 1.4 1.8 1.4 Measures efficiency ofcompany's total assets on sales

    Inventory Turnover 68.6 15.8 N/A Indicates how many timesinventory of finished goods issold per year

    Leverage Ratios 1.8 3.2 4.3 Used to understand acompany's ability to meet itslong term financial obligations

    Debt/Equity .14 .8 1.32 Indicates the % of fundsprovided by creditors ascompared with owners

    Gross Margin 25.3 24.0 23.8 Company's efficiency duringthe production process

    Return on Assets 4.8 7.8 6.9 Return on total assets employed

    Return on Equity 8.6 24.8 31.9 Measures a firm's profitabilityin comparison to the total

    amount of shareholder equityReturn on Capital 5.9 10.9 9.1 Measure of how effectively a

    company used the moneyborrowed or owned invested inoperations

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    Group 7, Dr. SewellMGT 527-02W Summer I 2010Strategic Management Group ProjectFEDERAL EXPRESS CORPORATION (FedEx) CASE ANALYSIS

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    employs nearly 1700 technicians in 673 shops to service its fleet vehicles; one technique to

    ensure quality parts are used is to try out a new suppliers components on limited number of

    vehicles for a year before committing to wider implementation. Another way that FedEx

    mitigates vehicle expenses is by relying on contract drivers who own their own vehicles

    (Griffing, 2010).

    Some costs, such as fuel, are simply passed directly on to consumers rather than being

    mitigated directly: www.FedEx.com lists a table of fuel surcharges which can be quite

    substantial-up to 19% on FedEx Express when fuel prices are above $3.28 a gallon. Besides

    cost, FedEx considers other factors, such as diversity, in choosing its suppliers: According to

    Mary McDaniel, VP for materiel and corporate sourcing, FedEx tries to exceed its goal of 5% of

    purchases through diverse vendors. FedEx uses third party certification to control admittance to

    a list of preferred diverse suppliers, and all suppliers are graded on timeliness, quality and cost

    (Avery 2005).

    Human Resource & Information Systems Strategy

    FedEx has multiple current strategies in its various functional areas of business due to its

    multiple entities operating in different theaters. However, the information system that FedEx

    uses has been specifically designed to integrate each business level activity so that FedEx can

    create a business level strategy for each company. FedEx has the motto of operate

    independently, compete collectively (Alghalith, 2007). This belief allows each business entity

    to operate itself independently while incorporating the same goals shaped by FedEx Corporate,

    creating a greater competitive advantage in each market (Alghalith). FedEx with the slowdown

    of the economy has slowed its IT expansion to test new systems.

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    The Human Resources department has two main responsibilities. The current system that

    needs to be managed, through ensuring that FedEx retains the correct people and to continue its

    successful smooth operations that people have grown to trust. FedEx with the downturn of the

    economy in 2008, instituted a pay increase freeze that was recently lifted to make sure they can

    still maintain the competitive edge when it comes to human capital, but more importantly to

    ensure that the knowledge management that can't be easily replaced and has made them the

    leader in the industry isn't lost to competitor's (Levitz, 2009). Secondly, there are many new

    area's globally that FedEx is looking to start operating in and H/R needs to focus on obtaining

    local support and expertise to make the right strategic planning decisions and subsequent

    expansion's.

    SWOT Analysis

    Strengths

    Innovative: FedEx has been able to grow and stay competitive because they have always

    been able to stay on the cutting edge. They have made innovation part of the

    organizations culture, which has not only allowed them to incorporate new technologies

    to deliver new products and services (Knudson, n.d.). FedEx has even established FedEx

    Labs, where teams of eight to twenty-five people work on creating new technologies and

    products (Innovators, n.d.).

    Global: FedEx is truly an international organization, this allows them to not only better

    serve existing customers, but to reach out to new customers and increase their market

    share (FedEx Express, n.d.). This includes countries such as China, India, and Brazil,

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    which are expected to see higher growth than the U.S. and European markets (Lennard,

    2009).

    Strong Brand Name: FedEx is able to rely heavily on their strong brand name to generate

    business. This not only allows them to generate revenue, but also means that they can

    save costs in marketing and promotions. FedEx ranked thirteenth on Fortunes 2010,

    Worlds Most Admired Companies list (Worlds, n.d.). Having a strong brand name

    gives FedEx an advantage when attempting to penetrate new markets or in further

    international expansion.

    Weaknesses

    Energy Reliant: FedExs package delivery infrastructure relies too heavily on fossil

    fuels, even as they transition to greener technology (Fuel, n.d.). This can have a large

    effect on the organizations bottom line, even though FedEx passes on some fuel costs to

    their customers. For the June 7, 2010July 4, 2010 time period, FedEx has a fuel

    surcharge of 17%, for FedEx Express, if fuel is priced at $3.04 per gallon (FedEx

    Guide, n.d.). This will impact customers and affect their decision on whether or not to

    do business with FedEx.

    Decreasing Profits and ROA: FedEx has experienced decreased profits and return on

    assets, robbing the company of funds necessary for its expansion plans. The companys

    net income has decreased from over $2 billion in 2007 to $1,184 million in 2010, and

    their return on profit has also decreased over the same period from 8.4 in 2007 to 4.8 in

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    2010 (FedEx Corp, n.d.). These statistics show how efficiently an organization is

    operating, and FedEx is going backwards.

    Heavily Reliant on U.S.: FedEx relies too heavily on the United States for revenue.

    Despite global expansion, FedEx is still too reliant on the U.S. for much of their business.

    In 2008, the U.S. provided 71.9% of FedExs total revenue (Global Road, 2009). Over

    reliance on a single country leaves FedEx vulnerable in the event that economic, social,

    or political difficulties disrupt business.

    Opportunities

    International expansion: Express logistics is well established in the U.S. and Europe, but

    lags in other parts of the world such as India and Asia. For example, the air express

    market in China is expected to grow at 34%, compared to the global average of 11%,

    through 2020 (Datamonitor, FedEx Corporation, 2009).

    Expansion in online shopping: Online shopping, which depends on companies like

    FedEx for delivery, is projected to grow at a compound annual growth rate of 13.9%

    through 2012 (Datamonitor, FedEx Corporation, 2009).

    Threats

    Technological effects: Changing technology and falling prices for professional-grade

    printing equipment allows individuals and small companies to accomplish publishing

    tasks in-house rather than at businesses like FedEx Office (Palmeri, 2008). Palmeri also

    notes that cut-rate prices on basic copy and print services at office supply stores have

    commoditized this segment of the business. Technological substitutes such as fax email

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    and online forums will likely continue to cut into mail volumes (Datamonitor, FedEx

    Corporation, 2009).

    Fuel Prices: The express logistics industry is already price competitive. FedEx must

    accept low profits when fuel prices rise, or pass on the cost to customers via a fuel

    surcharge, which could drive away customers and reduce revenue (Datamonitor,

    Company profile, 2009).

    Sensitivity to health of the economy: While there are some promising signs of economic

    recovery, fears remain about a double-dip recession or a cascade effect of economic

    troubles emanating from Europe (Periman, 2010). As FedEx is a supporter of consumer

    spending and other businesses, any effect on the economy as a whole will be immediately

    felt at FedEx (Datamonitor, Company profile, 2009).

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    SW/OT Matrix

    Opportunities

    #1 International expansion

    #2 Expand online presence

    Threats

    #1 Technological effects

    #2 Fuel prices

    #3 Sensitivity to health ofeconomy

    Strengths

    #1 Innovative

    #2 Global

    #3 Strong brand name

    Alternative #1: Expand global presence.

    Alternative #2: Using innovative ideas to offset increasingfuel prices.

    Weaknesses

    #1 Energy inefficient

    #2 Decreasing profits/ROA

    #3 Relies Heavily on US forrevenue

    Alternative explanation with Pros and Cons

    Alternative #1 - Expand FedEx global business endeavors (S2, W2). FedEx relies heavily on its

    domestic business for revenue. The company should continue expanding globally in order to

    increase market share and mitigate the risk of economic downturn in any one region. .

    Pros -

    Use of in-region offices strategy strengthens presence in the region and provides

    customers with enhanced freight forwarding services.

    Allows for direct access to local personnel with industry experience and cultural

    expertise to meet customer needs.

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    Increased access to the FedEx global network and seamless support across other FedEx

    operating companies in markets.

    Cons -

    International political pressures

    Government drivers: trade policies, technical standards, regulations

    Cost drivers: location of strategic resources, differences in country operating costs.

    Alternative #2 - Use of hybrid trucks to overcome fuel expenses (S1, T2). With rising fuel

    prices and public relations benefit of Going Green, hybrid fuel trucks are an alternative to

    offsetting high fuel costs while demonstrating FedExs commitment to the green initiative.

    Pros -

    Fuel savings will eventually make up for the premium paid for initial up front capital

    costs.

    Fuel savings will help FedEx remain competitive in the economic downturn that started

    in late 2008.

    Unlike the diesel from petroleum that is currently used in most commercial vehicles, bio-

    diesel and others are a renewable resource. This use of fossil fuels supports the

    companys green initiative, and contributes to the overall health of the environment.

    Cons -

    Initial cost of vehicles is higher than the traditional delivery truck.

    Even with the savings realized of using a hybrid truck, the average ROI is 8 years.

    Bio-diesel fuel is not readily available in all 50 states or international markets.

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    Analysis and recommendation of the Alternatives

    FedEx going green could lead to a multitude of success. FedEx hybrid trucks are getting

    40% better gas mileage and emit 95% less pollution than the rest of the fleet (Warner, 2008).

    Going green is sometimes a difference-maker in a customer's choice on which they use for their

    service (Gunther, 2009). Government subsidies may provide additional help for FedEx to convert

    solely into hybrid trucks. The volatility of oil prices could cause a huge concern for FedEx if

    they do not convert to hybrid trucks (Dries, 2009). FedEx must realize that going green is going

    to be costly upfront, but will pay dividends in the long term (Seymour, 2007). Government

    regulations could be enacted on businesses to that create pollution harmful to the environment; at

    that point FedEx would be forced to spend the money to convert all their trucks anyway, and

    possibly pay a fine or damages.

    A more proactive approach is to make the conversion on their own terms and avoid

    higher conversion costs as demand for such trucks would certainly rise steeply if spurred by

    government regulation. Doing business the most ethical way will lead to long term success

    (Ling, 2007). FedEx started the process of converting to hybrid trucks in 2003, but hit some

    major roadblocks. The recent spill of BP and economic factors could lead to oil prices rising

    exponentially, and could create an advantage for FedEx over its competitors if it continues to go

    green and convert all their trucks to hybrids.

    FedEx global business expansion sounds great, but going away from its cash cow

    operations in the United States may not lead to success. While businesses try to keep their heads

    above the water, the cost of expansion outweighs any market share they could gain. In order to

    be successful you cannot over extend yourself and jeopardize other parts of your business (Reiss,

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    2010). Also the more you expand overseas the more emphasis you have on currency risk, which

    could result in a losing proposition for the company. Expansion may drive new government

    restrictions may apply and force FedEx to change some of their core strategies (Alsever, 2010).

    Business expansion will continue to be on the forefront, but going green is the best strategy

    today.

    Implementation

    FedEx has a complete understanding of going green, but needs to implement it effectively

    in order to reach their goals. After failing to reach their first goal, set in 2003, of having all

    hybrid trucks in 2010, FedEx must learn from their key mistakes. FedEx must commit to a large

    enough order to drive down the unit cost of the new vehicles (Risher, 2009). Going to hybrid

    vehicles should start in the U.S. and once they have ironed out all the problems then start

    producing them for their overseas divisions. Profits will be enhanced long term due to the

    incredible amounts of money FedEx will save on gas.

    FedEx should set strategic goals and maximize on any government subsidies. Marketing

    can also tout FedExs green initiative and tie it to reduced rates for the consumer. FedEx should

    also investigate the new battery electric vehicles (BEVs), and incorporate them when the

    technology and price are right (Loveday, 2010). FedEx must commit to the significant up-front

    cost in order to achieve economies of scale and reap substantial dividends down the road.

    Control

    1. We will measure the reduction of gas usage companywide to ensure, that the technology

    being implemented, will meet the targeted goals financially to support the global fleet

    conversion. This measurement will ensure that the completed conversion of U.S.

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    domestic transports is sustainable for future ROI. Even if the change to the greener

    vehicles is not deemed profitable certain benefits needs to be given significant credence

    such as public perception, marketing options, and competitive advantages of technical

    competence.

    2. Competitive benchmarking needs to be monitored between our largest competitors (UPS,

    USPS) to distinguish ourselves as different and helpful to a patrons reasoning for

    picking FedEx and the environment causes it supports. Individual markets that embrace

    this Green culture need to be the focus and continuing expansion in those large urban

    areas like Chicago, New York, Los Angeles, Austin, and so forth.

    3. Executives will have formal control over many areas that involve FedExs technology

    improvements and business process reengineering where technology and creativity

    (Parnell, 2008) give a customer an appeal to shop you over a competitor. The cost of

    conversion if very high to green technology, so FedEx executives need to be vigilant to

    monitor the introduction of technologies that promise certain attributes or levels of output

    while capturing the devotions and hopes of people and inevitably dont deliver.

    4. Standards need to be contestant that they continually replace a certain percentage of

    gasoline on a continual basis. However if efficiencies decline the technologies could be

    abandoned resulting in significant short term financial, and long term inventory losses.

    5.

    Implementation of these technologies needs to be certain and precise that FedEx doesnt

    end up having to fix out of control problems. The management of a crisis is the ultimate

    goal and making sure parts, technology, and knowledge are uniform and is efficient

    enough to justify the cost and risk. While we monitor and observe to see if numbers do

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    seem unfavorable because its better to avoid an issue of ambiguity of cause, effect, and

    means of resolution, and a belief that the organization must respond quickly (Parnell,

    2008) to ensure some salvation of investment.

    Future Prospects for the Company

    As FedEx proceeds into the future, they must be vigilant. FedExs biggest risk exposure

    includes: unpredictable economic and political conditions, increased prices in fuel and other

    supplies, customer retention, and relations with foreign countries. In order to be prepared and

    least effected, FedEx must develop strategies that will allow them to remain profitable in an

    unsteady market. Suggestions would be for FedEx to remain current on the risks of a global

    recession and aware of the current and future relations with foreign countries. Another

    suggestion would be for FedEx to try and negotiate fuel prices for future purchases. If they are

    able to do so, than an increase in fuel prices will not hinder them as it might others in the

    industry. This gives FedEx time to continue research and development of alternative fuel

    sources (Loveday, 2010). FedEx must devise strategies to offset problems such as: speed,

    complexity, and the trade-off between size and flexibility. With these measures, FedEx will be

    better able to anticipate and adapt to changing situations.

    The rapid advancement of technology along with the growth of online shopping provides

    many opportunities for FedEx. If FedEx continues to focus on and improve their green

    advancements, they have every bit of potential to gain a competitive edge in the industry

    (Loveday, 2010). Social trends are moving towards a greener approach in all areas of life,

    FedEx does not want to get caught playing catch-up to its competitors (Gunther, 2009). By

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    following this strategy, FedEx will have the opportunity to gain revenue and increase market

    share.

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