Fedex Analysis Essay Example

Fedex Analysis Essay TABLE OF CONTENTS EXECUTIVE SUMMARYII TABLE OF CONTENTSIII LIST OF FIGURESV LIST OF TABLESV 1INTRODUCTION1 PART 1: TRANSPORTATION AND LOGISTIC INDUSTRY2 2EXTERNAL ENVIRONMENT ANALYSIS2 2. 1TECHNOLOGICAL2 2. 2ECONOMICAL2 2. 3MARKET2 2. 4POLITICAL AND LEGAL2 2. 5ENVIRONMENTAL3 2. 6SOCIETAL3 2. 7DEMOGRAPHIC3 3INDUSTRY ENVIRONMENT ANALYSIS4 3. 1PORTER’S FIVE FORCES MODEL4 3. 1. 1Threat of new entrants (Low)4 3. 1. 2Threat of substitutes (Low – medium)5 3. 1. 3Bargaining power of buyers (High)5 3. 1. 4Bargaining power of suppliers (Medium – high)5 3. 1. 5Intensity of rivalry (High)5 4CRITICAL SUCCESS FACTOR6 4. STRONG AND TRUSTWORTHY BRAND6 4. 2ADVANCED IN IT SYSTEMS6 4. 3INTEGRATION TO CUSTOMERS SUPPLY CHAIN6 4. 4LOCATION AND ACCESSIBILITY6 PART 2: FEDEX CORPORATION7 5COMPANY ANALYSIS7 5. 1PRODUCTS AND SERVICES7 5. 2STRUCTURE7 5. 3STRATEGY7 5. 4GENERIC POSITIONING7 5. 5KEY STAKEHOLDERS8 5. 6PERFORMANCE8 5. 6. 1Marketing8 5. 6. 2Operations8 5. 6. 3Human resources8 5. 6. 4Research and development8 5. 6. 5Information Technology8 5. 6. 6Finance8 6COMPETITORS ANALYSIS10 7SWOT ANALYSIS11 7. 1STRENGTHS11 7. 2WEAKNESSES11 7. 3OPPORTUNITIES12 7. 4THREATS12 7. 5POSITIONING OF FEDEX13 8RECCOMMENDATION14 8. 1CORPORATE LEVEL14 . 2BUSINESS LEVEL15 8. 3FUNCTIONAL LEVEL15 8. 4NETWORK LEVEL16 8. 5SUGGESTED IMPLEMENTATION PLAN16 9CONCLUSION17 REFERENCES18 LIST OF FIGURES This is the complete listing of all the figures used throughout the report. FIGURE 1 ILLUSTRATES PORTERS FIVE FORCES MODEL FOR TRANSPORTATION AND LOGISTICS INDUSTRY. 3 FIGURE 2 ILLUSTRATES POSITION OF FEDEX IN SWOT. 7 LIST OF TABLES This is the complete listing of all the tables used throughout the report. TABLE 1 ILLUSTRATES IMPLEMENTATION PLAN OF SUGGESTED RECOMMENDATION13 1INTRODUCTION FedEx is the world leader in transportation and logistic industry. It was founded in 1971 as Federal Express which provides only express delivery services. Over the decades, it has transformed it self to a global logistic and supply-chain management company (Express, Ground, Freight, etc. ) through massive investment in its IT infrastructure and acquisition of Caliber systems, Inc (Figure 1) 1971 1994 Now Figure 1. FedEx Brand Transformation FedEx has always been an innovator in changing how the world works and lives. Today’s FedEx is a network of companies, worth $34 billion, offering the right mix of transportation, e-commerce and business solutions. While each company has a unique history, collectively they exhibit the â€Å"absolutely, positively† dedication to providing specialised solutions for every shipping, information and global trade needs that the world has come to expect from FedEx. But as every cloud has a silver lining, so does FedEx Corporation. Through the reading and analysis of the case study of FedEx Corp. in 2000, provided in De Wit and Meyer (2004, pp. 647-662), some recommendations have been made to address the key issues concerning the organisation, in the context of its structural transformation through e-business. 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With the use of e-commerce in transportation and logistics, the consumer can now even track the progress of the courier at any point of time, at any given hour. 2. 2Economical The globalization of world’s economy has trigger enormous demand for transportation and logistic industry. As businesses expand itself into other countries, whether for seeking the new market or cost reduction, the transportation of goods or raw-material and management of information pertaining with them are essential. To cater to this need, as of 2000, FedEx now operates in 210 countries managing over 10 million square feet of warehouse space worldwide. Other than globalization, there are more economic factors that affect the transportation and logistics industry, for example economic rates, fuel price and economic growth. Economic rates, such as interest rate, inflation rate and currency exchange rate, and fuel price affect the price management of this industry. While economic growth affects the industry in terms of the demand of the services from customers. 2. 3Market Globalization has broadened market for all industry, from nationwide to world wide. The speed and accuracy has become the critical success factors not only for transportation and logistic company but also for their customers as well. As a result, fast and reliable service is not considered as values anymore, it becomes norm which customers expected from every transportation and logistic company. Therefore, to be competitive in this industry, companies must provide value-added-services which create great satisfaction to its customers. 2. 4Political and Legal The transportation and logistic industry is greatly affected by political stability, government policies, and regulations in each country. The deregulation and trade agreement has eliminated boundaries between countries such as U. S and Mexico, and hence, encourage transportation and logistic companies to easily establish and operate within those country. In addition, the regulations on airline and trucking industry also play vital roles on this industry because it directly impacts the core operation of industry. 2. 5Environmental Weather and climate change have great impact on transportation and logistic industry due to the fact that this industry is deeply associated with travel of airplanes, truck, freighter, and other vehicles. The ability to understand and predict weather and climate change can save company from delay, loss of its fleets, all of which is directly proportional to its reputation. 2. 6Societal Social mobility affects this industry in some way. It refers to the dollars consumers are willing to spare at the cost of time; as the most important asset in today’s cut-throat world is time. One of the most important social factors for the transportation and logistics industry is the labour part which helps the organisation carry out the day to day operations and keep the cash charts ringing. 2. 7Demographic The demographic is one external environment that affects transportation and logistics industry, especially the location of the stores; distribution centres hubs and so on. INDUSTRY ANALYSIS FedEx Corporation has been operated in the transportation and logistic industry which mainly involve in delivery, and managing and controlling of goods, information, and other resources like products. 3. 1Porter’s five forces model Figure 1 illustrates Porters five forces model for transportation and logistics industry. 3. 1. 1Threat of new entrants (Low) To be competitive in t his industry, businesses must have their own freighter, airplanes, trucks, etc. This result in very large capital investment required in order to start a business. Moreover, brand awareness is also very crucial. Without strong brand, particular company would not be able to gain trust, which is very important in this industry, from customers. For newly established company in this industry where there are already many strong players, it is not easy to create and strengthen its brand image. As a result, the entry barrier is considered very high. 3. 1. 2Threat of substitutes (Low – medium) Emergent of internet and email do reduce the necessity of express delivery of documents. There are also some moving and shipping services which target private households when they have to move aboard, or international students moving from or to their origin. But these are still in different market segment. There are still no potential alternatives which can fully replace service of FedEx. 3. 1. 3Bargaining power of buyers (High) Since there are many of companies which offer the same service as FedEx and with the increasing contribution of IT in logistics industry, buyers can easily compare prices and offers from different companies and choose the one that cheapest and most suit their needs. FedEx should provide significant service to its customers and have high differentiate products. 3. 1. 4Bargaining power of suppliers (Medium – high) The main suppliers of FedEx are fuel and other energy provider, aircraft manufacturer, and truck manufacturer. The bargaining of vehicles manufacturer is considerably medium because even though FedEx is a big organization which requires big fleet of vehicles and continuous maintenance service, but vehicle manufacturers still has other choice of buyers from various industries. 3. 1. 5Intensity of rivalry (High) The intensity of rivalry is considerably high due to the three strong competitors which are UPS, DHL, and TNT. Need more 4CRITICAL SUCCESS FACTOR 4. 1Brand The reliability and accountability is the most important factor in this industry. Even though the company can make the very low price with easy access and user friendly service, but if the company could not guaranteed the speed and accuracy of its services, customers would not take the risk. 4. 2IT systems The advancement of IT systems leads to more efficient operations which again lead to faster and more accurate services with lower cost. In present, from the comfort of ones home, they can use most of the services offered by FedEx, booking a delivery or tracking the progress of the courier and so on so forth. 4. 3Service quality By providing services which integrate into customers’ supply chain, the company built up barrier to protect its customer from its competitors, as FedEx delivers almost anything anywhere at the quickest time possible, which is not really exclusive but with the continuous innovation and creativity, it helps in customer retention. 4. 4Location and accessibility Location of hub has massive impact on the speed of services. Proper distributed hub location according to geographic and intensity of demand could leads to faster and more responsive services. The accessibility such as customers care centre or user friendly systems also promote more pre and post sales. PART 2: FEDEX CORPORATION 5COMPANY ANALYSIS 5. 1Products and services FedEx corporation start the business with express delivery services as Federal express and the transform it self in to a global logistics and supply-chain management company. At present, FedEx offers wide range services which include express delivery, business to business ground small package delivery, special express delivery, less than truck freight, integrated logistics and warehousing solutions, supply chain management solutions. 5. 2Structure FedEx has been through many transformation of its organization structure with the goal to make it easier and faster for its customer and also to improve efficiency of its operations. Currently FedEx Corporation consists of six subsidiaries which independently operate but collectively compete with its competitors. 5. 3Strategy Base on case study, FedEx has always emphasis on shear innovation, industry leadership and IT development and use it as its key competitive advantages and also use it as the tools to help its customers take advantages of international market. Moreover, FedEx is the first company in the industry which owns all transportation fleet and expands its business through acquiring more trucks and planes. 5. 4Generic positioning . 5Key stakeholders FedEx works in the B2B as well as B2C model, which makes the customers as well as the organisations that it caters to as its key stakeholders. Moreover, its employee from all subsidiaries; its suppliers, such as fuel provider and packaging suppliers, and environmental activist group also constitute a large share of stakeholders. 5. 6Performance 5. 6. 1Marketing FedEx has a strong marketing presence but need to market all of its subsidiaries to gain a bigger market share as only FedEx Express is the dominant one amongst all. It uses the print media as well as TV campaigns to attract customers as well as create awareness for its excellent supply chain systems. 5. 6. 2Operations FedEx’s operation was one of the critical issues in the company as learnt from the case study, where it does not operate efficiently as a whole company. Not only it had different operations department for each division, it also added to the operation costs to great extent, which otherwise could be minimalised by sharing the available resources. 5. 6. 3Human resources FedEx failed in utilisation of its HR as one person was assigned one work only, irrespective of their maximum capabilities. 5. 6. 4Research and development FedEx allocates excessive resources to its RD division in order to keep itself updated with the every-day increasing IT developments in logistics field. But it still stands a fair level in terms of the services offered for customers. 5. 6. 5Information Technology FedEx was the first logistic company which introduce the use of IT to the business in 1984, by using the first PC-based automated shipping system. Since then, FedEx has been always implementing and improving its IT system, from barcode labelling, websites, software, e-Business and so on. FedEx IT has become its competitive advantage for years comparing to its competitors. The information about a package is as important as the delivery of the package itself. —Frederick W. Smith (1979) 5. 6. 6Finance In 1998, FedEx was listed as a US$10 billion company and it used US$1 billion annually on IT developments plus millions more on capital expenditure. And in 1999, it spent US$1. billion on IT from US$17 billion annual revenue. On 31 May year ending sheet, the company out-performed the projections and posted record earnings on 73 percent increasing the net income to US$221 million. Financially, FedEx spent about US$100 million for the reorganization over three years in 2000. In simpler terms, companies operating income as well as net income has been going down since first quarter ending 31 August, 1999. 6COMPETITORS ANALYSIS 6. 1UPS oStrong in logistic and delivery, especially in US. oIT developed as well (spent $9 billion on IT) Formed 5 alliances in 1997 to disseminate its logistics software to e-commerce users oFormed a strategic alliance with Open Market Inc to deliver a complete Internet commerce solution oWorking with IBM and Lotus to standardize formats on the websites oShipped more than 55% of goods ordered over internet and offered over full range of logistics solutions to its customers oOnly market 1 brand UPS 6. 2DHL oStrong in logistic and delivery, especially in Europe. o1993 DHL announced a 4 year US$1. 25 billion capital spending programme aimed at investing in handling system, automation, facilities and computer technology. Launched website in 1995 o25% owned by Deutsche Post and 25% owned by Lufthansa Airlines oDominated UK market oProjected an increase in worldwide turnover of 18% to US$5. 26 billion 6. 3TNT oOnly provide express delivery service. oLaunched website in 1998 oLaunched the first global price checker service on its website that allow customers to calculate the price of sending a consignment from one place to another anywhere in the world o1999, TNT launched QuickShipper, nonstop online access to TNT entire range of distribution services SWOT ANALYSIS 7. 1Strengths †¢Innovation and creativity. †¢Strong and well established research and development centre for IT systems to promote more efficient operation. †¢Very advanced â€Å"Global Operation Command Centre† which allows FedEx to prioritise hundreds of variables (eg. world event, weather patterns, and real time movement of its freighter) involved in the successful operation. †¢Excellent reputation in the industry. †¢Own all transportation fleets. †¢Strong business networks in the US. 7. 2Weaknesses Historical image of the company makes customers perceive FedEx as just an express delivery service company. †¢Complex and inefficient organization structure. There a re too many part of organization that duplicates each other. †¢Entirely reliant on manual labour to a great extent, which can be a prospective weakness in some circumstances †¢ Insufficient promotion of the other sectors and fields where FedEx offers its services †¢Disproportionate branching of FedEx subsidiaries thereby increasing the operating costs which can be otherwise be reduced by sharing the resources. . 3Opportunities †¢Government deregulation of airline industry, permitted the landing of larger freight planes, thus reducing operating cost of FedEx †¢Deregulation of the trucking industry, which allowed FedEx to establish a regional trucking system to lower costs further on short haul trips †¢Trade deregulation in Asia Pacific, which opened new market to FedEx, expanding globally became a priority for FedEx †¢Technological breakthroughs and applications innovations promoted significant advances for customer ordering, package tracing and pro cess monitoring. Rising inflation and global competition gave rise to greater pressures on businesses to minimize the costs of operation, including implementation of JIT inventory management system and created demands for speed and accuracy in all aspects of business. 7. 4Threats †¢FedEx advantages were quickly eroding as newer technologies became more powerful, developed faster, and less expensive – more affordable for its competitors. †¢Potential financial crisis due to too much fixed cost, such as aircrafts, vehicles and other heavy equipments. On the lines of blue ocean strategy, CHEP is a possible/prospective threat to FedEx as it explores altogether new approach in the supply chain industry. †¢Rocketing fuel prices which increase the transporting cost to sky-end. 7. 5Positioning of FedEx Figure 2 illustrates position of FedEx in SWOT. Base on the SWOT analysis, even though FedEx has many strong points but its historical brand image has put limit on almost all of its strength. Due to this constraint, it is known only as Express Delivery Company. As a result, FedEx is currently located in weaknesses-opportunities quadrant. If FedEx could widen the perception of its current and potential customers, and fully utilize its own strength to pursue its opportunities, it would be one of the strongest in its industry. 8RECCOMMENDATION 8. 1Corporate level Get slim: FedEx could shrink down its structure by integrating some division of its subsidiaries together to reduce cost and time caused by duplication of works. And by doing so, it would encourage lateral flow of information between each business unit. And as a result, its operations would be more efficient which leads to more flexible profit margin and more customers’ satisfaction. Add pic Acquire CHEP: CHEP is a global leader in pallet and container pooling services. It is not actually a logistics company. It provide and manage, returnable and reusable supply chain packaging solutions (such as pallets and containers) to help customers to store, protect and move their products through the supply chain in a cost-effective, safe and environmentally sound way. By acquiring CHEP, FedEx will benefit from immediate horizontal expansion of its company and also its customer base. Moreover, acquisition of CHEP will also allow FedEx to integrate more into its customers supply chain and hence create strong barrier from its competitors and substitutes. Take serious concern on environment: Due to the fact that the nature of FedEx businesses required extensive amount of transportation activities which results in largely emission of green house gas that create global warming effect. Therefore, in order to get strong support from community and environmental activist such as Greenpeace, FedEx should then come up with the environmental concern vision to make its fleet cleaner and be more environmental friendly. This could be done by modifying its fleet or support or joint-research with any car company or institute to develop an alternative cleaner power source. Moreover it could establish its own manufacturing plant for shipment package and protection (such as cardboard boxes, paper envelope, bubble wrap, shredded paper) by emphasis on recycle of material. 8. 2Business level Promote brand awareness of all FedEx subsidiaries: Now FedEx is struggling with its historic image which narrows customers’ perception to FedEx as only an express delivery company. To deal with this problem, FedEx should promote all of its services by strong marketing campaign. This could be done by advertisements in television, its website, or major video clip website such as Youtube. Alternatively FedEx could collaborate with 20th Century Fox and DreamWorks Picture to create a film, which represent all the of its services, as it was done before in â€Å"Cast Away†, 2000. 8. 3Functional level Developing and training for multi-task oriented employees: In order to successfully shrink down company structure as proposed before in corporate level recommendation, FedEx should develop a training program for its employee to be multi-task oriented. By doing so, FedEx encourage its staffs to be able to work in more than one job. This does not means that FedEx should overworks its staff, but it should be able to rotate its staff around for different roles such that one staff could delivery a package to customers and in the same time pick up another couple of packages which one suppose to be sent by ground and another one by express air. Create strong marketing division FedEx should establish a separate marketing division which in charge in creating strong marketing strategy for all of its subsidiaries. FedEx should allocate some portion of budget from its research and development to its marketing division in order to support strong marketing strategy which is very vital for creating brand awareness for all of its subsidiaries. 8. 4Network level Alliance with companies in IT industry: The research development and advance in IT systems are one of FedEx competency. But with too high budget allocation, this could cause adverse effect to the company. FedEx should make strategic alliance with IT systems company such as IBM or HP in order to reduce their cost of operation. 8. 5Suggested implementation plan Table 1 illustrates implementation plan of suggested recommendation