SWOT Analysis for FedEx
FedEx Corporation (FedEx) is an international company in the transportation sector. The firm is based in the United States, operating from Memphis, Tennessee. It was incorporated in 1997 in Delaware. In 1998, Federal Express acquired Caliber System, leading to the founding of FDX Corporation. The business decision increased services offered by the new firm to small-package ground service. Before then, Federal Express only offered shipping services. The company has expanded its services through mergers and acquisitions to make shipping and package deliveries worldwide more efficient, with more than 166,000 employees supporting its global operations. FedEx has strategically positioned its services to provide international physical transportation.
FedEx incorporates various business approaches, including logistics, freight, and courier services. The management has established a robust information infrastructure to support millions of transactions worldwide with four operational segments, including “FedEx Services, FedEx Freight, FedEx Express, and FedEx Ground” (FedEx Corporation, 2018, p. 3). It is a transportation corporation performing international deliveries of small packages. The company uses useful technology to provide reliable delivery and real-time tracking, making global shipping efficient and reliable.
The company’s financial curve has shown improvement over the years. For the financial year ending May 2018, FedEx reported US$65,450 million, an increase of 8.5% over the previous fiscal year. The operating margin in the financial year was 7.4% lower than 8.4% in 2017. The margin in FY2017 was 7 percent, an increase from 5% in FY2017 (FedEx Corporation, 2018). Evidently, the financial performance shows considerable growth over the year and potential for continued improvement in its sector of operation.
Large Scale of Operations. FedEx offers a wide range of services as an integrated transportation service company. The corporation provides its customers with transportation services, business services, and e-commerce platforms. It operates in various countries besides the United States, including South Africa, the U.K., Canada, China, Mexico, Poland, India, France, and Brazil (FedEx Corporation, 2018). The company has about 60,000 drop-off points and a highly integrated network of transportation and delivery services across the world. Therefore, enhanced capabilities allow the company to operate in the industry by expanding its market and growing its revenue.
Strong Brand Image. FedEx has a strong reputation as the largest express transportation provider in the world, operating in over 220 nations and territories. Furthermore, the firm connects markets comprising over 90% of the global gross domestic product. FedEx is one of the famous names in the international express delivery sector. For example, in 2015, the “World’s Most Admired Companies” reported that FedEx is one of the most admired firms globally (FedEx Corporation, 2018). The brand image enhances the company’s bargaining power and supports its growth in market share and revenue, as well as an important factor in improving the competitive strength of the company.
Overdependence on the U.S. Market. FedEx draws most of its revenue from the United States market. In the financial year 2016, the market accounted for 75.6% of the company’s total revenue (FedEx Corporation, 2017). The risk of concentrating on a single market is that the company is exposed to specific factors in the country, including changes in economic conditions, labor strikes, and increased rivalry. The company could suffer adverse outcomes if a state’s economy fails to grow as expected, thus affecting its financial performance.
Unfunded Employee Post-Retirement Benefits. FedEx has sponsored programs for providing retirement benefits to its staff. Some of the programs include pension plans, postretirement health care plans, and contribution plans. As a result, the company has significant unfunded pension obligations. For example, in the financial year 2016, its pension obligations amounted to $29,602 million, while its assets were $24,271 million, leading to the unfunded status of $5,331 million (FedEx Corporation, 2018). The company has been under pressure to meet the obligation, which affects its liquidity.
Strategic Business Acquisitions. FedEx has achieved considerable growth from acquisitions with the potential to improve its financial position and increase its global market. The company acquired the Netherlands-based TNT Express NV in 2016 to strengthen its international performance (FedEx Corporation, 2018). The acquisitions provide a strong portfolio for the company to operate with strong brands in the global transportation industry. The company has an opportunity to continue expanding its operations in other parts of the world, developed and developing.
Network and Service Expansion. FedEx is focusing on networking to drive business growth. For instance, FedEx’s First Overnight service was expanded to over 4,400 zip codes in the U.S. in 2017. The company has been working with various local and international operators in the industry to grow its network and become competitive (Farhoomand, Ng, & Conley, 2003). Besides, the firm has capitalized on e-commerce and collaborated with other technology companies to achieve its growth objectives. Hence, FedEx has the opportunity to continue growing by partnering and creating other business networks with other service providers in the country and internationally.
Increased Security Requirements. FedEx operates in a high-risk sector necessitating strong security measures to protect its client’s cargo and parcels. Besides, the company faces concerns relating to global terrorism and homeland security. As a result, the company must comply with strict security requirements implemented by governments worldwide. The conditions demand high operating costs for those businesses in the transportation sector. For instance, Full All-Cargo Aircraft Operator Standard Security Plan is a requirement of the U.S. Transportation Security Administration that increases the cost of operating in the country (FedEx Corporation, 2018). The requirements place a significant demand on the state with potential adverse effects during the economic crisis.
Increased Competition. The company operates in the highly competitive LTL Freight sector. Besides, markets are prone to price and service changes, particularly when experiencing little or no macroeconomic development. Some of its competitors are Old Dominion Freight Line, Nippon Express, Deutsche Post, ArcBest, YRC Worldwide, United Parcel Service, XPO, and PostNL Logistics (Birla, 2012). Some of the rivals are stronger financially due to funding from foreign governments, making it possible to raise more capital than FedEx. The competitors pose a threat to the expansion of the company in the global transportation market.
The highly competitive market within FedEx requires the organization to reinvent itself to gain an edge over its rivals. From the SWOT analysis, the company lacks a proper structure for customer service that would increase its competitiveness. For instance, its strengths lie in a strong brand image and large-scale expansion. Thus, customer service is not at the core of the company’s competitive advantage. The corporation would gain a competitive edge by increasing its focus on being customer-centered and providing quality services. The company should refocus on the “whatever it takes” attitude in meeting the client’s needs (Farhoomand, Ng, & Conley, 2003). The development of the internet gives the company an advantage to reach many customers across the world. Hence, it should customize its services to the needs of the different market segments and effectively serve the niche by receiving and responding to real-time feedback. Therefore, FedEx should also improve communications with customers using online platforms.
Besides being more responsive to customers, the company could use technology to improve the efficiency and quality of its services. Online platforms allow companies to innovate and become more competitive than their rivals. For example, as the firm focuses on creating networks, it should include online service providers to reach more customers worldwide (Birla, 2012). It is no longer possible for the company to serve the global market’s needs through physical operations. Thus, to become more competitive, FedEx should cooperate with online operators and retailers to venture into new and improved services in the current markets.
The company should open new operations in developed and developing countries. The initiative will allow FedEx to overcome capital and resource limitations and compete with the most reliable brands in the market. It will also enable the company to meet the demands of security requirements in the United States and other countries across the world. The management should use a strong brand name to create more global networks to expand the market. Strong systems will increase the efficiency and effectiveness in reaching more customers with quality services.
Birla, M. (2012). FedEx delivers: How the world’s leading shipping company keeps innovating and outperforming the competition. Hoboken, N.J: John Wiley & Sons. Retrieved from https://books.google.co.ke/books?hl=en&lr=&id=b7qKi-CzlEsC&oi=fnd&pg=PT5&dq=fedex&ots=yrIO3Gpxrs&sig=Ndo4BDlR8G_Gh2MwXj7Of2ztAlA&redir_esc=y#v=onepage&q=fedex&f=false
Farhoomand, A. F., Ng, P. S. P., & Conley, W. L. (2003). Building a successful e-business: The FedEx Story. Communications of the ACM, 46(4), 84–89. doi:10.1145/641205.64121
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FedEx Corporation SWOT Analysis. (2018). FedEx Corporation SWOT Analysis, Market Line, 1–8.