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Analytical Report for Company FEDEX The company Federal Express was founded in 1971 by W. Smith in Little Rock, Arkansas but it moved its headquarters to Memphis, Tennessee in 1973. It was the first air cargo company in American history to provide one day delivery service to its customers in 25 cities nationwide. The innovative delivery methods, used by the company, have led to its rapid growth since the time of its founding. When Federal Express became operative in 1973 its fleet consisted of only 14 Dassault Falcons airplanes.
By now the number of its planes has grown to 373. By the year 2004 companys revenue was $ 29. 363 million. Federal Express currently employees 205. 000 people in 210 countries. Its yearly gross income is expected to continue to rise, yet a certain stagnation tendencies affect companys effectiveness on the progressive scale. Many economists point out to the fact that it is going to be an ever-harder task for Fedex to survive competition with its main rivals UPS, DHL and USPS, since it is increasingly forced to win competition on their own field, which are ground delivery services. So far, FedEx management have been dealing with this problem by acquiring smaller delivery companies, rightfully considering it to be the best competition strategy under the circumstances.
In 2001 FedEx had bought American Freight ways and a year later it acquired Viking Freight, which allowed it to considerably increase the scope of its ground operations. In 2004 FedEx bought printing company Kinkos, thus becoming the first self-efficient transportation company in American history. Nevertheless, there are some well grounded doubts about whether Federal Express current operating strategy is going to remain effective as time goes by. This is largely due to the fact that new digital technologies make people less dependant on delivery companies. In this report I will analyze companys strengths and weaknesses and will also outline the business opportunities that might become available to the FedEx managers, if proper competitive strategy is deployed. Strengths: As it was being mentioned earlier, the FedEx is the largest express transportation company not just in U.
S. but in the whole world. It is estimated that FedEx average package volume reaches up to 3. 5 million packages every day. This points out to the fact that FedEx enjoys popularity among great many people. In another words it has established a secular brand name.
Another Fed Exs strength is that its market share in airborne services accounts for 70 % in continental U. S. , which allows this company to obtain certain financial and competitive dividends that, are usually associated with commercial monopoly. This increases companys financial stability by guaranteeing the steady flow of investments. FedEx uses a sophisticated web system to track parcels that are in transit.
Companys competitors have only begun providing similar service to the customers in recent years, while FedEx had established WWW tracking as early as 1997. This allowed FedEx to gain valuable experience in this field. This system makes losing packages along the way practically impossible. We can also mention a legendary reliability of FedEx services. Company advertises that 99 % of parcels get to their destinations on time. But this can be explained by the nature of air carrying rather than by the high operative effectiveness of companys employees.
Nevertheless, FedEx is considered to be much more reliable than its competitors when it comes to delivering goods on time. According to the statistical surveys, for 40 % of people who uses express transportation services, on time delivery is the single most important factor for which they are willing to pay extra money. With the great degree of probability we can say that these people will most certainly choose FedEx over other companies because of its reputation of accurateness and reliability. Weaknesses: We can also mention a few weaknesses, which undermine companys overall effectiveness. The most important of them, in my opinion, is the fact that Fed Exs ability to correspond to the market dynamics is being increasingly undermined, due to its cheer size. The autocratic managing style, practiced by the companys top executives, makes it harder for the local managers to adjust functioning of their branches to the specifics of the areas where they operate.
One of other major Fed Exs weaknesses is that its ground market share accounts for only 13 %. As practice showed, FedEx expectations of more and more people giving preference to the express air transportation proved to be a mistake. Quite contrary, the ground express transportation becomes more popular, due to the fact that there are many new regulations are being introduced recently to make air traffic safer, yet they often result in flight delays. This also makes air cargo services more expensive. FedEx operating model lacks a well-grounded competitive strategy. So far it was based on two principles: expansion and establishing its net abroad.
Yet, the factors of arising global economy and emergence of the new technologies werent taken into account. This resulted in FedEx losing its edge to the smaller competitors when it comes to ground transportation. Many economists predict that in very near future the great number of products will become available locally in the world, making express air transportation unnecessary. Also, since 25 % of all packages sent with FedEx are of informational nature (documents, brochures, books), the new internet technologies will definitely impact this sector of FedEx market. While talking about FedEx weaknesses, one also has to mention a very serious problem that continues to undermine companys efficiency. That is ongoing labor dispute.
Only 10 years ago FedEx pilots were allowed to unionize, on the condition that they will never use strikes as a method of dealing with FedEx labor policies. Right after this, the other personnel also began to demand better wages through organizing itself in unions. Since 70 % of FedEx employees are experts in their fields, boosting the team spirit, hiring illegals and other McDonalds tricks cannot be used to help the situation. Opportunities: There are a few opportunities that FedEx can exploit in the future. Giving its size, it can try investing in filling bigger potion of the ground market without any considerable risk. The maintaining many of its branches abroad operational is not cost-effective; therefore it would be much more appropriate to close them down and divert the freed finances into expansion of ground services in U.
S. At the same time company needs to invest into expansion of its net in Asia as it will allow FedEx as much as 100 % of growth in the next few years. It is predicted that close to 80 % of all consumer goods will be manufactured in that region in very near future. In order for FedEx to beat the competition, which will inevitably come as a result of economy's global trends, it needs to move into potential markets well ahead of time.
In my opinion, FedEx will need to change its essence from express transportation company into global supply provider. The profit that can be gained from becoming a transportation sub-contractor is much more considerable comparing to what can be earned by operating independently. FedEx needs to strive to become a monopolist on its market, it has a potential to accomplish this. This will also make company less susceptible to many threats that come as a result of new geopolitical reality. Threats: Presently UPS has adopted an aggressive air market share gaining policy, which directly threatens FedEx dominance there. If this remains unchallenged, FedEx is likely to lose a considerable portion of its yearly income, since UPS offers competitive prices on its air transportation services.
It is very likely that prices for jet fuel will continue to rise steadily, forcing FedEx to increase tariffs on its products and services. In the long run it can result in FedEx having no other choice but to disband the portion of its air fleet and to lay off many employees. The rising of new broadband services will diminish peoples need in courier deliveries. In my opinion, this is the gravest threat to FedEx, since it has no way of influencing current trends in internet technology. This threat is organically related to another the emergence of non-asset based online providers, such as Expeditors and Circle. These companies employ truly innovative methods of transporting goods and it is expected that their popularity will increase dramatically in the future, as more people get acquainted with them.
The list of threats would be incomplete if we dont mention the impact of rising interest rates on FedEx. Although, one might say that this affect everybody, the companies like FedEx are especially susceptible to it, since issuance of insurance policies is an integral part of how company conduct its business. It can be compensated by the growing rate of inflation, but the problem is that inflation will diminish peoples commercial freedom, which will negatively impact FedEx. Conclusion: FedEx is a company with many unexploited potentials, therefore it can make a desirable object of acquiring. Nevertheless, the further growth of the company can be only achieved if innovative commercial strategy is employed. This is easier said than done though, since current economic trends are marked with high degree of uncertainty.
It is quite possible that FedEx might have to transform itself into different type of company if it is to survive competition in the future. Bibliography: Gillies, A FedEx's Stamp Act (March 18, 2002). Forbes. com.
Retrieved September 21, 2005 from web FedEx Announces FedEx Tracking Plus (May 22, 2002). Denounce Newswire. Retrieved September 21, 2005 from web FedEx Corporation (2005). Answers. Com.
Retrieved September 21, 2005 from web MacNealy, J. Can FedEx Still Fly? (September 12, 2005). The Money Fool. com.
Retrieved September 21, 2005 from web Smith, F. How We Got Started (2003). Fortune. Retrieved September 21, 2005 from web Shook, D. FedEx Keeps Delivering (April 26, 2002).
Bussiness Week Online. Retrieved September 21, 2005 from web Author, A. A. , & Author, B. B. (Date of publication). Title of article. Title of journal, volume number (issue number if available).
Retrieved month day, year, from http: //Web address. The average package volume amounts to approximately 3. 1 million packages daily, weighing in at 25. 6 million pounds annually. Average daily freight volume is about 7 million pounds per day. This level of business generates more than 500, 000 daily calls and 63 million daily electronic transmissions Overtime, the Federal Express has transformed its business strategy, in order to remain competitive.
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Research essay sample on Express Transportation Company Due To The Fact
