Internal Analysis of FedEx

Step 1: Profitability metrics

FedEx, with a market share of 11.7%, has become one of the biggest companies in the courier industry. So far, with a series of merging and resources restructuring, FedEx has achieved a revenue of 49,500 million dollars, a net income of 1,138 million dollars, and total assets of 37,819 million dollars.

Statistics in Appendix 1 show that the equity price of FedEx rises from around USD 100 in 2013 to USD 162 recently. The price rises steadily in 2013 and 2014. In 2015, the price reaches the peak of USD 184. However, due to the influence of the global financial crisis, the war in the Middle East, and the refugee problem, the price rises and falls in 2015 and finally drops to USD 120 at the beginning of 2016. The development of the E-commerce also brings challenges to the whole carrier industry. However, FedEx takes effective operative measures and investments to achieve a satisfactory performance better than expected. In this month, the equity price surges to USD 160, which shows the public’s confidence in FedEx and proves the great profit FedEx has earned.

Step 2: Comparison with UPS and ALK

By comparison of UPS, FedEx enjoys a lower revenue, a lower gross margin, a lower net income, fewer employees, and a lower market cap, but surpasses ALK in all these metrics. This comparison shows that FedEx still holds a lower market share and a smaller profit than USP, the largest carrier brand in the US. However, its fast growth has exceeded other carrier brands like ALK. Currently, FedEx’s aircraft and handling equipment have surpassed UPS and ALK. As a result, FedEx’s long-term debt is much more than UPS and ALK. It is obvious that FedEx focuses more on the future development and has invested a lot in related equipment and other companies’ acquisitions. Its huge long-term debt may create burdens on its daily operation, but these risks FedEx has taken show its long-term plan and huge confidence in the future. Meanwhile, its fast growth and the long-term plan gives the public positive expectations, which contributes to a much higher equity price than UPS and ALK.

Step 3: Business segment and related activities

(1) In order to differentiate its products and services for a stronger competitiveness, FedEx provides customized services and effective logistics solutions for each customer. Also, FedEx strives to develop mutually rewarding relationships with its employees, partners, and suppliers.

(2) To deal with the competition from the E-commerce, FedEx aims at improving its IT technology and concentrating on the innovation. In 2014, FedEx merged Bongo International, LLC, a provider of cross-border enablement technologies and solutions, to further develop its technology and global business. Also, FedEx plans to express E-commerce reach in China and Japan.

(3) For a larger market share, FedEx pays attention to broaden its brand awareness and global influence by a series of acquisition activities in recent years, like the acquisition of Tianjin Datian W. Group Co., Ltd. in 2007 to step into the Chinese market, the acquisition of Supaswift (Pty) Ltd. in 2014 to broaden its influence in Southern Africa, and the acquisition of GENCO in 2015 to consolidate its market position in native America.

(4) Despite technological developments and the better brand reputation, employees are also an important factor to improve the efficiency and earn customers’ satisfaction. Thus, FedEx adopts effective incentive measures to improve employees’ motivations, allow employees to voice their opinions, and reward employees for their efforts.

(5) To reduce the financial burden from the technological expenditure and acquisitions, FedEx lowers the cost by properly downsizing and simplifying the team structure on the premier of a regular operation.

Step 4: Match activities with the value chain diagram

As shown in Appendix 3, Activity (1) is related to service. Activity (4) and (5) are related to the human resource management. Activity (2) is related to the technology development and (3) is related to marketing & sales.

Step 5: Three types of linkages

Activity (1) improves the quality of service. The improvement of service improves the customers’ satisfaction. And the improvement of customers’ satisfaction, in turn, increases orders and the amount of operation, which means more profits.

Activity (4) and (5) enforce an effective human resource management. The improvement of human resource management improves employees’ efficiency and loyalty. The efficiency increase means more profits and fewer mistakes, which satisfies customers. The satisfaction of customers brings more orders and operation amounts, as well as more profits and a better brand reputation.

Activity (2) and (3) improve the technological development and the marketing results. A better technology and a better marketing strategy improve the operation efficiency and the quality of service. The improvement of the operation efficiency and service quality increases customers’ satisfaction and the interactivity. The increase of customers’ satisfaction brings more operation amounts and profits.

Step 6: Activities identification

Strategy 1: Cost cut – Activity (4) and (5) improves employees’ efficiency and simplifies the team structure. By a more efficient use of resources, unnecessary resources and staff could be reduced to cut the operation cost. Also, Activity (2) focuses on the technology development to improve the efficiency. The efficiency improvement could cut operation in the long term and reduce mistakes.

Strategy 2: WTP increase – Activity (1), (2), (3), and (4) all contribute to the improvement of the market share and the profit. Activity (1) and (4) tries to improve the service to increase the customers’ satisfaction. Activity (2) increases the operation efficiency by the technology development. Activity (3) broadens the brand awareness and enlarges the company’s scale to improve the operation ability. Activity (2) and (3) make sure a higher operation capacity to handle customers’ requirements efficiently to improve the brand reputation and customers’ satisfaction. Activity (1) and (4) directly improve customers’ satisfaction. After customers’ satisfaction is improved, there will be more orders for operation, which means more money and a virtuous circle.

Step 7: Strategies adopted

Promise a fast and qualified service as to differentiate its product from other
couriers. Simplify its operation procedures to increase its efficiency and save time
Merging other couriers and companies to increase its business ability, scale, as well as market share.
Improve its service by the fast handling of complaints and questions from customers, as well as the efficiency in tracking the goods.

Step 8: Activities linkage

All activities adopted aim at improving the brand reputation, increasing the operation efficiency, and increasing customers’ satisfaction. FedEx makes these activities suit for its strategy which differentiates its product and increases its market share. Activity (1), (4), and (5) aims at increasing customers’ satisfaction by a better service. Activity (2) tries to increase the efficiency and convenience of operation. Activity (3) focuses on enlarging the global influence by acquisitions. All these activities are meant to increase the competitiveness and differentiate FedEx’s characteristics as “fast, convenient, and safe.”

Step 9: Issues to face in the future

FedEx faces the decreasing market demand due to the development of e-commerce (e.g. Amazon tries to enter freight), and the outcome of global financial crisis
The competition in the industry grows fiercer and fiercer, especially from its main rival United Parcel Service Inc. and other global couriers like DHL and ALK.