Fedex Market SWOT In depth Analysis 13-15 PDF

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Marketing research about FedEx...

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association with service excellence by sponsoring high profile events such as: NBA, NFL, PGA, and auto racing. (―FedEx Marketing and Advertising‖) Strong global distribution capabilities: FedEx provides delivery service to any U.S. address and over 220 countries and territories worldwide. It currently has five headquarters: North America, Latin America, Asia, Europe, Middle East/Africa, and the Caribbean. Additionally, FedEx has strategically placed 16 main hubs to provide better worldwide service. Wide range of transportation services: FedEx offers a wide range of transportation, e-commerce and business services which allow them the capabilities to target a larger global customer base. These services are broken down into four main business segments which operate independently of each other but are managed under the FedEx Corporation umbrella company. This allows each segment to focus their attention on different sectors of the market. The four business segments are: FedEx Express (U.S. and International air-and-ground network for time-sensitive shipments), FedEx Ground, (small packages and low-cost shipping for business-to-business and residential customers), FedEx Freight involves less-thantruckload (LTL) freight domestically and internationally, including real-time estimations on duties / taxes and custom clearance solution), and FedEx Services that provide businesses with finishing documentation services and technology support. ("Annual Report 10-K") Exceptional customer service capabilities: FedEx offers convenience to customers on a wide range of services which meet their needs. The most significant of these was FedEx being the first courier company to introduce internet tracking system to customers. This allows clients to track their packages from initial pick-up to final delivery destination and all the steps in between. Recently, FedEx redesigned their website to enhance customer convenience by providing a single location to seek information on available services and invoicing for all four business segments allowing for continual satisfaction of costumer‘s ever changing needs. Technological and product innovation capabilities: FedEx continues to be the leader in technological and production advancements in the industry. They maintain this competitive advantage by funding two research and development entities: FedEx Innovation Labs and FedEx Institute of Technology (at the University of Memphis). FedEx Innovation Labs are in charge of attainable, short-term research and development, usually with three to five years forecast. In contrast, FedEx Institute of Technology focuses on long-term advancements in the areas of artificial intelligence, biotechnology, geospatial analysis, multimedia arts and nanotechnology. (―FedEx Innovation‖) Weaknesses: Reliance on independent contractors: FedEx relies heavily on independent contractors for a large part of their operations. By definition, independent contractors are permitted to work for a number of different companies at a time. FedEx loses control over the worker's time, efforts, and loyalty as 13

they would with a permanent employee. Furthermore, most contracts permit the independent contractor to substitute another individual or company on any job. This can create a situation where less reliable companies are completing the work or may soil FedEx‘s reputation. Finally, independent contractors make a commitment only to work for the length of the contract. FedEx may have to renegotiate contracts at the end of the contract, possibly paying more for guaranteed results. The rate hike is then passed along to the customers. (Foust ) Increased cost from expanding business relations: FedEx uses independent companies as part of their distribution network; however, some companies limit delivery routes in order to cut costs. In 2008, FedEx Ground had to offer special incentives to encourage California-based single-route contractors to transform their operations into multiple-route businesses or sell their routes to others. Roughly 20% of FedEx Ground‘s workforce is reliant on independent contractors. US business relies on these types of relations in order for FedEx to meet their customer demands. (Lane) Legal costs increase: As with most large corporations, FedEx has to deal with a litany of legal problems. Litigation can include labor disputes, claims of patent violation, or discrimination complaints. State or federal tax complaints can result in Internal Revenue Service audits, and possibly criminal charges. Any cost from defending against legal actions erodes profit or may be passed on to the consumer in the form of higher rates and surcharges. ("Annual Report 10-K ") Opportunities: Expansion into new geographic markets: FedEx is keen on identifying and exploiting opportunities in emerging markets. In order to help in achieving to tap into new markets, they have contracted an independent nonprofit research firm, SRI International, to collect data and analyze potential growth in emerging countries. China is one such country in which FedEx has been exploring expansion possibilities. They recently strategically located a new FedEx Asia Pacific state-of-the-art hub in Guangzhou, China to be able to make deliveries to new areas. ("Annual Report 10-K ") Enter into alliances/ joint venture to expand market share: FedEx entered into a partnership with Kinko‘s. It meant FedEx now offered services at all 1,200 Kinko's stores. This relationship allowed FedEx to offer expanded services and reach more customers without increased overhead costs. ("Annual Report 10-K ") Falling trade barriers in attractive foreign markets: Trade barriers can be defined as government regulation that restricts global trade. FedEx is looking to take advantage of some recent changes in courier laws. European Union transportation officials have proposed a pan-European railroad that would run from Germany to Turkey. The Multimodal Pan-European Transport Corridor, as it being called, would expedite freight movement across Europe and minimize custom delays. Another growth possibility exists in Southeast Asia. Transport companies have long been complaining to the Philippine Bureau of Custom about their antiquated practices 14

and procedure which is largely manual and paper intensive. The government of the Philippines has now invested in an electronic data interchange (EDI) to modernize the process. These are examples of investor opportunities that exist as countries move toward a zero free trade barrier relationship with the global community. (Sowinski ) Threats: Entry of new competitor: The freight-transportation and parcel-delivery industry is highly competitive. FedEx faces intense competition and needs to maintain its competitive advantage and needs to always be aware of new competitors. FedEx‘s most well known competitors are UPS and DHL. A comparison between FedEx and DHL in the Asian Market is a great example of the continued competition. In February 2009, FedEx launched its state-of-the-art hub worth $150 million in the southern city of Guangzho, China. This location was chosen strategically to meet the current demand for increased routes in southern China and prepare for future requirements. In response, DHL announced in November 2008 plans to spend $175 million to build its own southern Chinese hub to be located in Shanghai. It is expected to be fully operational in 2010 and will be able to handle significant amounts of parcel and document deliveries. This boost is expected to raise DHL to the sixth largest delivery service in the Asian market, and place them in direct competition with FedEx for shares of the market. This is a fitting example of the importance of identifying and staying ahead of threats in order to maintain competitive advantage. (Hannon) High fuel costs: In 2008, fuel prices skyrocketed. There was a 40% increase in the average price per gallon of diesel fuel. This directly affected transportation costs. FedEx was forced to add a fuel surcharge to all deliveries to try to offset the increase. (Thomas) Increased security requirements: An increase awareness of global terrorism and homeland security has given rise to stricter security requirements. Concerns for new rules and future regulations for air cargo carriers may lead to a substantial increase in FedEx‘s operating costs. For example, in May 2006, the U.S. Transportation Security Administration (TSA) adopted new rules enhancing many of the security requirements for air cargo on both passenger and all-cargo aircraft. These rules have resulted in increased delivery costs. (FedEx 2008 Annual Report) War and unstable governments: Regional wars can have a profound effect on international courier services. Unstable countries can delay cargo indefinitely as part of political posturing. Some regions of the world are prone to terrorist attacks against US companies. Threats to life or property can become too high to pay insurance premiums. And cargo cannot be delivered timely or safely. For all intents and purposes, violence or threats of violence can create denied regions of the international market. (FedEx 2008 Annual Report) Ecological threats: Growing concern over limiting greenhouse gas (GHG) emissions can have a substantial cost impact on the company. FedEx currently has 677 aircraft and approximately 44, 000 vehicles in its operations. Laws aimed at reducing or eliminating ecological impacts could force FedEx to refit or replace all their aircraft and vehicles. The cost of these 15...