Fed-Ex: Employing Strategy in a Competitive Environment - Case Study Example

 Fed-Ex: Employing Strategy in a Competitive Environment Abstract: FedEx was incorporated in 1997 as a holding company. The company provides numerous services including transportation, e-commerce and other business services under the FedEx brand. It has four business segments which include FedEx Ground, FedEx services, Federal Express Corporation and FedEx Freight. Federal Express Corporation is a transportation company offering delivery services within one to three business services to a majority of global destinations. FedEx Express has more than 57,000 drop-off locations, more than 700 planes and more than 50,000 vehicles and trailers in its global trade network. Fed-Ex: Employing Strategy in a Competitive Environment Introduction: The company offers three package delivery services in the United States which include FedEx First Overnight, FedEx Standard Overnight and FedEx Priority Overnight which are backed by money-back guarantees (Allen, 2009). The company also offers international express and freight services backed by money-back guarantees to other countries such as Canada, China, India and United Kingdom. The service includes real-time tracking and real-time customs clearing in order to meet the client’s needs (Allen, 2009). FedEx Ground provides ground-delivery services of small-packages for every business in Canada and the United States. FedEx Freight provides freight delivery services to major destinations in the United States and Canada. FedEx Corporate services provide major companies with marketing, sales and information technology support services (Xu, 2005) . FedEx Express is current the second largest airline company in the world in terms of aircrafts numbers since it has more than 700 planes and has placed orders for additional planes. FedEx Custom Critical is a time specific and critical delivery subsidiary which delivers mail door-to-door within Canada and United States. FedEx Trade Networks provides international trading services including customs brokerage, ocean freight forwarding, information technology and e-clearance (Xu, 2005). This subsidiary provides clearance services for FedEx Express in the major international hubs. It also provides other value-added services such as international trade advisory services such as the Customs-Trade Partnership against Terrorism and custom information publishing for more than 100 custom areas in the world. FedEx Trade Networks has more than 100 trade locations which are located in North America, Middle East, China and Latin America (Allen, 2009). FedEx Kinko’s provides business and personal publishing solutions through more than one thousand digitally connected locations in more than 10 countries. FedEx Services which is a subsidiary of FedEx TechConnect, provides businesses with support services such as sales, marketing and customer services. FedEx Mobile provides services through web-enabled mobile phones like iPhone and Blackberry which allow customers to track down their shipping packages and access drop-point data. Other business areas include provision of signs, and computer rentals. The company has concluded major acquisitions including AFL Pvt Ltd of India and TATEX of France (Xu, 2005). The major competitors include Con-Way Freight, YRC Regional Transportation, United Parcel Service, DHL, UPS, TNT, ABF Freight System Inc and Old Dominion Freight Line. The strategic mission of FedEx is to provide high quality and value-added services in logistics, transportation, and information technology services to its customers. FedEx has excelled in establishing cordial working relationships with all stakeholders. The core competitive advantage of FedEx is information technology infrastructure which provides support services to different companies in the world. However, there is stiff competition from other competitors such as UPS and DHL which also provide freight and package delivery services to major destinations in the world (Xu, 2005). FedEx Environmental Scan In analyzing the external environment surrounding FedEx operations, we shall utilize PEST analysis technique. This environmental scanning tool is an abbreviation of Political, economic, social-cultural, and technological factors which may hinder or enhance the success of a company in the industry (Allen, 2009). Political environment The political environment includes the systems of government, political stability and government-intervention in business (Allen, 2009). Both the United States Department of Transportation and Aviation Authority exercise a lot of control and scrutiny on the operations of Freight companies. The Aviation and Transportation Security Act of 2001 has increased costs for FedEx operations since the company has to incur extra costs in ensuring cargo security. Many countries including the US have various legislations which control the amount of noise emitted by aircrafts (Ferrell & Hartline, 2011). Economic environment The economic environment includes all the economic variables such as interest rates, exchange rates, rate of economic growth, disposable consumer income levels and global trade agreement which may hinder or enhance the competitive advantage of a firm (Pride, Hughes & Kapoor, 2012). The world economy is currently integrated by globalization thus there are minimal barriers of establishing operations in other countries (Allen, 2009). The Asian economies such as China have not been adversely affected by the recent global recession which faced many countries in the world (Ferrell & Hartline, 2011). The decline in consumer incomes in the US will reduce the amount of package delivery customers in the country. The unemployment rate in the US is still at an average of 10% despite bailout packages by the Federal government. The US economic growth is on the decline due to adverse impact of recent financial crisis thus this will negatively impact on operations of FedEx. Currently, oil prices are unpredictable since oil producing countries have reduced their supply of aviation fuel (Ferrell & Hartline, 2011). FedEx will also be negatively affected by the rising costs of insurance premiums due to terrorism concerns in many parts of the world (Warner, 2010). Social-cultural environment Recent shifts to e-commerce and increase in the number of internet users will enhance FedEx TechConnect business and FedEx Trade Networks business. Increase in literacy levels will increase the volumes of packages transported in the US. Most of the consumers have turned to online shopping due to convenience thus FedEx will be able to increase its delivery volumes in small-package business especially FedEx Overnight delivery package services. Many multinational companies arte currently outsourcing their logistics services thus FedEx can increase its business capability by attracting these companies to its customer portfolio. However, modern consumers are enlightened and demand more personalized services which satisfy their unique needs (Allen, 2009). Technological environment The technological environment consists of all information communication technologies. FedEx has improved the information technology infrastructure and allows customers to track down the packages in real-time and also access data on custom services in many custom areas. FedEx has been able to cut down costs by utilizing wireless communications (Ferrell & Hartline, 2011). Through the use of internet, the company has reduced the marketing and customer service costs considerably (Pride, Hughes & Kapoor, 2012). Improvements in manufacturing technology have allowed FedEx to acquire modern and cost-effective aircrafts that can transport large amounts of cargo globally. However, instances of hacking and unauthorized access of customer information may damage FedEx’s reputation (Warner, 2010). Competitive strengths of FedEx FedEx has an integrated information technology infrastructure since most of the shipments are automated. The company offers personalized and cheap services by allowing the customer to track their shipments in real-time (Warner, 2010). The company has completely integrated its services since customers can obtain bill of landing and e-mail notifications when their packages reach destinations (Palepu, 2007). The company has extensive product portfolio including ocean freight services, logistics, ground, trade services, and customs brokerage and package express services. FedEx operations are conducted in divisions thus allowing all divisions to compete collectively. FedEx corporate culture is flexible to changes in the market (Warner, 2010). The organizational structure is decentralized thus employees can make appropriate decisions within a limited time (Ferrell & Hartline, 2011). FedEx has maintained good reputation in the market which has enabled it experience customer loyalty. The company offers overnight services to entire US citizens that are backed by customer tracking services and money-back guarantees (Ferrell & Hartline, 2011). The company has formed many strategic alliances and acquired numerous package drop-off sites in the US (Palepu, 2007). Competition and potential FedEx competitive strategy FedEx is experiencing stiff competition from UPS. UPS controls more than half of the US Express and Ground package shipping business in the US. UPS has a wide network of mailboxes in the US market. FedEx will have to compete by gaining more market share for Express and Ground services in the US. The company has enough financial resources to establish its own operations and desist from forming strategic alliances with UPS. FedEx will have to add more value to its service in the US through the use of technology. FedEx should form strategic alliances with major online shopping companies for the delivery of the small packages in all the places in the US (Warner, 2010). Assuming the US economy is declining, the company can change its strategic by embracing cost-saving strategies such as use of internet marketing. The company will also differentiate its services by adding value added services such as money-guarantee back and free online tracking of the packages. The company will have to form additional strategic alliances with shopping malls to act as drop-off sites for packages instead of opening new independent outlets (Allen, 2009). Impact of global competition on FedEx business strategy Global competition from companies like DHL which has established considerable presence in foreign markets like Middle East and Europe will negatively affect FedEx market share. FedEx should respond by making more acquisitions in those markets and forming strategic alliances with established companies in those foreign markets (Allen, 2009). Conclusion FedEx is a leading company in global logistics and transportation industry. The company provides online parcel and package delivery services in the US. The company has embraced use of technology to reduce operating costs and increase market share. References: Allen, K.R. (2009). Launching new ventures: an entrepreneurial approach. Boston. HoughtonMifflin. Ferrell, O.C & Hartline, M.D. (2011). Marketing strategy. Mason. Cengage Learning. Palepu, K.G. (2007). Business analysis and valuation: IFRS edition, text and cases. London. Thomson Learning. Pride, W.M., Hughes, R.J & Kapoor, J.R. (2012). Foundations of business. Mason. Cengage Learning. Warner, A.G. (2010). Strategic analysis and choice: a structured approach. New York. Business Expert Press. Xu, J. (2005). Market research handbook: measurement, approach and practice. Lincoln. iUniverse. Read More