fedex corp

STRATEGIC MANAGEMENT CASE ANALYSIS

PRESENTATION 1

FEDEX CORPORATION

FedEx was established in 1973 by Frederick Smith

A global player in express delivery business, global logistics and supply chain management

Organization of FedEx: FedEx Express FedEx Ground FedEx Services FedEx Freight

EXPANSION OF FEDEX

• FedEx Global Logisticcs

• FedEx Ground

• FedEx Custom Critical

• FedEx Freight

Caliber Logistic Caliber

Technology

RPS

Robert Express

- Caribbean Transportati

on- Viking Freight

FDX COR

P

FedEx Services

FedEx Trade Networks

Vision, Mission & Objective

Vision To become world leader in express

delivery and supply chain industry before year 2020

Mission To provide quick, reliable delivery of

packages/documents and integrated supply chain management services through innovative technology, efficient operation, and well-established global network at competitive prices

ORGANIZATIONAL CHART

Chairman, CEO and President (Frederick W. Smith)

Chief Financial Officer and Executive Vice President (Alan B. Graf Jr.)

CEO and President of FedEx Express

(David J. Bronczek)

APAC

CANADA

EMIA

CEO and President of FedEx Trade Networks Inc (G. Edmond Clark)

CEO and President of FedEx Freight (Douglas G.

Duncan)

CEO and President of FedEx Service (Rick Faieta)

EVP SERVICE, IT, and Intl Mktg

CEO and President FedEx Global Supply

Chain

President and COO Fedex CIS

CEO and president of FedEx Ground

(David F. Rebholz)

INDUSTRY ANALYSIS

INDUSTRIAL, MATERIAL & UTILITIES

AIR FREIGHT & COURIER SERVICES

DHL

UPS

FedEx

TNT

DEUTSCHE POST

Establised in 1969. Taken over by Deutsche Post World Net in 2002

DHL’s Business divisions: The MAIL division

▪ provides services across the entire mail value chain, to more than 140 countries.

The EXPRESS division ▪ transports courier, express and parcel shipments all over the

world under the DHL brand. The GLOBAL FORWARDING/FREIGHT division

▪ Providing international logistics services, carrying goods by rail, road, air and sea.

The SUPPLY CHAIN/CORPORATE INFORMATION SOLUTIONS ▪ provides warehousing, distribution, transport and value-added

services.

United Parcel Service

Established in 1907, and has grown into a US$30 billion corporation today

The strongest competitor for FedEx in US market

Operates in three segments: US Domestic Package operations International Package operations Supply Chain & Freight operations.

Formed a strategic alliance with Open Market, Inc, to design a complete Internet commerce solution in providing integrated logistics and fulfillment

TNT

Is the business of transferring goods and documents globally. TNT’s business divisions:

Express▪ door-to-door express delivery service

Mail ▪ services for collecting, sorting, transporting and distributing domestic and

international mail. Other Networks.

▪ special services

TNT Logistic Approach Procurement and Inbound Logistic Manufacturing support Outbound Logistic and Distribution Aftermarket Services

Sales Figure among Competitors

YEAR FEDEX UPS TNT DHL TOTAL

2004 24,710.00 36,582.00 11,962.35 60,351.12 133,605.47

2005 29,363.00 42,581.00 11,051.13 57,191.30 140,186.43

2006 32,294.00 47,547.00 13,275.18 83,617.77 176,733.95

2007 35,214.00 49,692.00 16,070.50 82,250.26 183,226.76

2008 37,953.00 51,486.00 15,583.80 79,945.25 184,968.05

YEAR FEDEX UPS TNT DHL TOTAL 2004 18.49 27.38 8.95 45.17 100.00

2005 20.95 30.37 7.88 40.80 100.00

2006 18.27 26.90 7.51 47.31 100.00

2007 19.22 27.12 8.77 44.89 100.00

2008 20.52 27.84 8.43 43.22 100.00

MARKET SHARE COMPUTATION:

Market Share in 2008

20.52

27.84

8.43

43.22

FEDEXUPSTNTDHL

Sales Growth (2004-2008)

2004 2005 2006 2007 2008 -

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

80,000.00

90,000.00

FEDEXUPSTNTDHL

% Growth (1 year basis)

FEDEX UPS TNT DHL

(15.00)

(10.00)

(5.00)

-

5.00

10.00

15.00

20.00

2005200620072008

FedEx Core-Business

FedEx Corporat

ion

FedEx Express

FedEx Express

FedEx Ground

FedEx Ground

FedEx Freight

FedEx Freight

FedEx Services

FedEx Services

FedEx Express

FedEx Express

FedEx Ground

FedEx Ground

FedEx Freight

FedEx Freight

FedEx Services

FedEx Services

FedEx Express

FedEx Express

FedEx Ground

FedEx GroundFedEx

FreightFedEx FreightFedEx

Services

FedEx ServicesFedEx Express

FedEx GroundFedEx Freight

FedEx Services

FedEx Express

2007 2008 2009 –

$ 5,000

$ 10,000

$ 15,000

$ 20,000

$ 25,000

$ 30,000

RevenueProfit

2008

2009

-70 -60 -50 -40 -30 -20 -10 0 10 20

profitssales

Sales and Profit Figure for FedEx Express

Sales and Profit Growth for FedEx Express

• Has 57k drop off locations, 654 aircrafts, approx. 51k vehicle and trailers• Offers wide range of shipping and delivery services (Local and Intl)• Available to 220 countries and territories (5 zones)• Landed an agreement with US Postal Service to provide domestic air transport service to US Postal Service• Competes with UPS, DHL, TNT

FedEx Ground

Serves customer in U.S and North America small package market : business and residential delivery

Operates hub and spoke sorting and distribution system Has approx 22.5k owner operated vehicles and 31.5k

company-owned trailers

2007 2008 2009 –

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

SalesProfit

2008

2009

-15 -10 -5 0 5 10 15

ProfitSales

Sales and Profit Figure for FedEx Ground

Sales and Profit Growth for FedEx Express

FedEx Freight

Provides range of freight services To U.S, Canada, LAC, Europe and Asia Competes with UPS freight, DHL freight, Con-Way

Freight and YRC worldwide Inc.

2007 2008 2009(1,000)

–

1,000

2,000

3,000

4,000

5,000

6,000

SalesProfits

2008

2009

-120 -100 -80 -60 -40 -20 0 20

ProfitSales

Sales and Profit Figure for FedEx Freight

Sales and Profit Growth for FedEx Freight

FedEx Services

Provides Sales, Marketing, Info Tech, and customer service support.

Offers range of supply chain solutions through FedEx Global Supply Chain Services

Also provides docs and business service.

2007 2008 20091,850

1,900

1,950

2,000

2,050

2,100

2,150

2,200

Sales

Sales

2,008

2,009

-8 -7 -6 -5 -4 -3 -2 -1 0 1

sales

sales

Sales for FedEx Services Sales Growth for FedEx Services

% Contribution of Each Subsidiaries to Sales (Financial Year 2009)

5.52 19.68

12.3362.46

FedEx Services segment

FedEx Ground segment

FedEx Freight segment

FedEx Express segment

BCG Matrix

BCG Matrix for FedEx

STARQUESTION

MARK

CASH COW DOG

FedEx Ground19.85%

FedEx Freight

12.44%FedEx Service

5.57%

FedEx Express

63%

Mark

et

Gro

wth

Market Share

PORTER FIVE FORCES, IE MATRIX

& STRATEGIES

Threat of New Entrants

LOW Economies of Scale (truck, airplane,

global network) High capital requirement

Threat of Substitutes

LOW Minimal substitute products available for

physical goods Only some documents can be sent by

Internet, Email and Fax

Bargaining Power of Suppliers

Depend on type of purchases HIGH

Aircraft LOW

IT products Truck Maintenances and repairs

Bargaining Power of Buyers

HIGH Intense competition in express delivery

industry Low switching cost More bargaining power for corporate

customers (e.g. Dell Computers, Cisco Systems)

Potential Competitive Threats

High Global competitors – UPS, TNT, DHL

(with equally strong resources) High fixed cost and high exit barrier lead

to aggressive competition

SWOT Analysis

Extensive use of IT and new technological devices (S1)

First mover advantages – world leader in overnight delivery (S2)

Integrated logistic and management services provider (S3)

Key partnership with big corporations (S4) FedEx goodwill –recognized worldwide

(S5) Strong resources (S6)

STRENGTHS

SWOT Analysis (cont.)

Subsidiaries allocated all over the globe, coordination among all the subs might be a challenge(W1)

FedEx Services still not making profits despite growth in sales (W2)

Failed to achieve targeted sales in US market (W3)

WEAKNESSES


OPPORTUNITIES

Globalization and trade deregulation create new business opportunities (O1)

Deregulation of airline and trucking industries (O2)

Outsourcing trends by customers (O3)

Continuous growth in B2B, B2C & C2C (O4)


THREATS

Fierce competition (T1) Innovation is easily imitated by

competitors (T2) Terrorism (T3) HIN1 and bird flu (T4) Rising inflation and fuel prices (T5)

IFE Matrix

Key Internal Factors Weightage (%) Rating Weighted Score

STRENGTHS

Extensive use of IT and new technological devices (S1) 20 4 0.8First mover advantages – world leader in overnight delivery (S2) 15 4 0.6

Integrated logistic and management services provider (S3) 10 4 0.4

Key partnership with big corporations (S4) 10 3 0.3

FedEx goodwill –recognized worldwide (S5) 10 3 0.3

Strong financial resources (S6) 10 3 0.3

WEAKNESSES FedEx Services still not making profits despite growth in sales (W2) 15 2 0.3

Failed to achieve targeted sales in US market (W3) 5 1 0.05

Poor coordination among the subsidiaries (W1) 5 2 0.1

TOTAL 3.15

Key Internal Factor Evaluation Matrix

EFE Matrix

Key External Factor Evaluation Matrix

Key External Factors Weightage (%) Rating Weighted Score

OPPORTUNITIES

Globalization and trade deregulation create new business opportunities (O1) 15 4 0.6

Deregulation of airline and trucking industries (O2) 15 4 0.6

Outsourcing trends by customers (O3) 15 3 0.45

Continuous growth in B2B, B2C & C2C (O4) 10 3 0.3

THREATS

Fierce competition (T1) 15 2 0.3

Innovation is easily imitated by competitors (T2) 10 2 0.2

Terrorism (T3) 5 1 0.05

HIN1 and bird flu (T4) 5 1 0.05

Rising inflation and fuel prices (T5) 10 2 0.2

TOTAL 2.75

IE Matrix

IFE score : 3.15 EFE score : 2.75

4.0

3.0

2.0

1.0

3.0 2.o1.0

TOTAL IFE WEIGHTED SCORE

TO

TA

L E

FE W

EIG

HTED

SC

OR

E

STRATEGIC ANALYSIS

Lies in the ability to leverage its: the expertise of its various subsidiaries. Information and logistics (virtual and

physical) infrastructure. strong strategic alliances with customers

and suppliers. effective marketing (branding, pricing)

capabilities supply chain management capabilities

Key Success Factors

STRATEGIC ANALYSIS

Key Success Factors To achieve above average returns by

offering High quality of service – accurate, fast,

reliable Innovative, value added and extensive

service offerings and supply chain solutions.

Competitive prices

Strategy Recommendation

Short term Integrated Cost Leadership and Differentiation

Strategy▪ Global key account management▪ Key partnerships with major customers▪ Advance IT devices providing real-time information▪ Continuous innovations and first mover advantages▪ FedEx Online▪ Continuous improvement of organizational operation

and cost reduction program ▪ E.g. Spent US$1.1 billion in 2002 for purchase of fuel▪ Purchasing policy of 2-3 suppliers or use fuel saving

vehicles


Short term Market Penetration Strategy

▪ Increase market share by aggressively targeting at fast developing countries (BRIC) and member countries of AFTA

▪ Reduce its dependence on US market sales (more than 60%)

▪ Reduce the risk of fierce competition with UPS in US market


Long term Restructuring Strategy

▪ Optimize FedEx Express and FedEx Ground’s operation▪ Consist more than 80% of total sales for FedEx▪ E.g. same pick-up team for customers

▪ Improve synergy among subsidiaries▪ Leverage the existing resources among subsidiaries▪ Shared activities, exchange of competencies

(knowledge, staffs, success stories)▪ Regularly assess the current and new locations for

office and warehouse and take advantage of different time zone in different countries to shorten the lead time for deliveries


Long term Financial Strategy

▪ Sell and lease back of aircrafts: 648 aircrafts with value of US$5.8 billion

▪ Huge fund for business expansion, tip-top condition of aircrafts, tax advantages, no problem with old aircrafts

Concentric Diversification▪ Outsourcing trend of supply chain by customers is on

the rise▪ Demand Responsive Model▪ Innovative technology and information system▪ Part of re-engineering strategy to turnaround the

FedEx Services into profitability


Long term Cooperative Strategy

▪ For minor areas, form JV, partnerships or subcontract the delivery services to local postal companies or couriers to capture the business opportunities

TOWS MATRIX

Possible strategies for FedEx

Maxi Maxi strategy (O+S)

(O1, O4) + (S3+S5+S6) = Market penetration

(O1, O4) + (S5, S6) = Cooperation

(O2, O3) + (S1, S2) = Expand domestically

Maxi Mini Strategies (O+W)

W2 + (O3, O4) = Concentric diversifcation

W3 + O2 = Expand domestically

Mini Maxi Strategies (T+S)

(S4, S1) + (T1, T2) = Concentric diversification

S4 + (T3,T1) = Financial strategy (S6, S4) + (T1, T5) = Integrated

cost leadership and differentiation strategy

S1 + (T1,T2) = Improving human resources

S3 + (T2, T4) = Market penetration

Mini Mini Strategies (T+W)

W1 + (T1, T2) = Restructuring W1 + (T3, T4) = Improve synergy

THANK YOU

fedex corp

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