FedEx International, Research Paper Example

Executive Summary

FedEx International is one of the largest global shipping and transportation operation. Since the company’s start, it has continually found new ways to do things more effectively. The company overview shows how the company has evolved to one of the global leaders in today’s industry. The company has strong leaders with a vision to change how business is done. They value their employees and use them as resources for improvements. The company’s financial position shows the true strength of their operation. They are one of the top performing shipping companies in the world. Their market shares and profitability shows in comparison with the competition they are faced with daily.

The competitive industry analysis provides an in-depth look at the true competition that FedEx faces on a global level. It also provides an analysis of how the industry is changing. FedEx needs to remain competitive locally and internationally to ensure that other companies do not enter the market and challenge their position. FedEx uses marketing and promotion to promote their initiatives and to secure the company name. The firm’s target customer is vast and needs to be gauged on the location of operation. FedEx has a strong marketing department that is used to create a strong company presence within their markets of operation.

FedEx has also made a commitment to corporate social responsibility. They are continually finding ways to improve their green impact on the communities in which they operate. FedEx also gives back to the community through various initiatives they are committed. The projection of future prospects allows for a strong analysis of where FedEx will be over the next five to ten years of business. Finally, the SWOT analysis will provide a strong insight into the strengths, weakness, opportunities and threats that FedEx international faces.

Corporate Overview

Frederick W. Smith, founder of FedEx originally came up with the idea of the company in a Yale term paper in 1965. The idea was put into action when Federal Express began its operations on April 17, 1973. Federal Express was well established by the 1980s, and its growth rate was increasing at around forty percent annually. By 1983, the company reported $1 billion in revenues making history for ten years of startup. The company began international business in 1984 and had continued to add new locations regularly. FedEx had continually expanded their reach and services to get to where they are today.

FedEx is currently operating worldwide with over 300,000 employees. It is an international business that is continually seeking new ways to expand their business footprint. FedEx offers a significant amount of shipping options and services. “Whether you’re shipping within Canada, to the U.S., or to international destinations around the world, you can count on FedEx to deliver the service excellence you expect for all your package and envelope shipments” (Shipping, np). They provide services that meet the demands for all shipping needs domestically and internationally.

The current leadership at FedEx is Frederick W. Smith as Chairman, President, and CEO. Alan B. Graf Jr. is serving as the Vice President and CFO. Christine P. Richards is the Executive Vice President, Secretary and General Counsel. Robert B. Carter is the Executive Vice President, CIO and FedEx Information Services. And T. Michael Glenn is serving as the Executive Vice President, Marketing Development and Corporate Communications. The leadership is very stable. The CEO is the company’s founder and has been in his current position since the company’s initiation. Is shows the stability of the leadership in the company for over forty years.

The organization structure is FedEx Corporation overseeing the many divisions of FedEx. The portfolio of solutions is shown in the chart below:

The management philosophy of FedEx is to capitalize on all services the employees can provide.

“Founder and CEO Frederick Smith determined to make employees an integral part of the decision-making process, due to his belief that “when people are placed first they will provide the highest possible service, and profits will follow”. Resulting from this principle is the FedEx corporate philosophy: People-Service-Profit” (FedEx Attributes, np). The company has not only shown their value in their workers, but they have also chosen to remain union free.

FedEx has faced legal and regulatory issues in the past ten years. In 2007, FedEx was faced with tax issues for misclassification of operatives as independent contractors. In April 2014, the company was faced with a lawsuit due to a FedEx truck hitting a bus, killing ten people. And in July 2014, they faced a drug indictment. Despite the legal issues they have faced recently, FedEx has been named one of the world’s most reputable companies.

Financial Analysis

FedEx’s balance sheets and income statement for the past five years reflects the solid financial position of the company. The total equity reported in 2011 was 15.22B; 2012 reported 14.73B; 2013 was 17.4B; 2014 was 15.28B and 2015 reported 14.99B. The total liabilities and shareholders equities reported 27.39B; 29.9B; 33.57B; 33.07B; and 37.07B consequently. The cash on hand for 2011 was 2.33B; 2012 was 2.84B; 2013 was 4.92B; 2014 reported 2.91B; and 2015 was 3.76B. The balance sheets and income statement for the past five years show the control of business and their focus on the bottom line.

UPS, one of FedEx’s largest competitors reported for 2013 Net Income of 1.167 Billion, which is an increase of 166% from the previous year. The financial ratios for 2013 reported the following:

• Diluted earnings per share totaled $1.25
• Market Cap $88.92B Profit Margin 6.42%
• Enterprise value $96.35B
• Operating Margin 10.58%
• Forward PE (5 yr) 16.93
• Return on Assets(ttm) 10.45%
• PEG Ratio (5 year Exp) 1.79
• Revenue $56.54B P/S(ttm)
• 57 Net Income(1/31/14) $3.63B (Staff, np).

These are impressive numbers, however FedEx held their own in the face of competition. FedEx reported a revenue of 11.3Billion during the same time period, up 3% from the previous year. The financial ratios for 2013 reported the following:

• Market Cap $45.94B
• Profit Margin 4.79%
• Enterprise value $47.58B
• Operating Margin 8.03%
• Forward PE (5 yr) 14.99
• Return on Assets(ttm) 7.00%
• PEG Ratio (5 year Exp) 1.15
• Revenue $46.23B P/S(ttm) 0.98
• Net Income (1/31/14) $2.21B (Staff, np).

FedEx ratios over the past three years have been very stable. The company has continued to see growth year after year, with minimal changes that they need to worry about. FedEx’s net income position for the past five years was has fluctuated in the total amount of gains they showed each year. 2011 FedEx’s net income was 1.45B; 2012 was 2.03B; 2013 was 1.56B; 2014 was 2.09B; and 2015 was 1.05B.

The company’s stock performance for 2015 reported 158.11 0.68(0.43%). The market cap for 2015 44.65B. For the past five years, ranging from 2011 to 2015 the market cap ranged from a minimum of 20.67B to a maximum of 58.82B. The average was 36.25B. (FedEx Market, np). The FedEx stock prices closed 2014 at 175.7; and 2013 at 143.01. In 2012 the stock prices closed at 90.33 and in 2011 closed at 84.47. The stock prices are consistently increasing by a substantial amount from year to year. The financials show the strong position of the company.

The economic indicators shows the business cycles over the past five years and the impact is has on FedEx. Take for example the demand side, the revenue growth has been steady, (shown in chart below). It shows a total revenue growth for all divisions of FedEx, not just the international division. FedEx has substantially past the industry growth ‘Q/Q’.

FedEx has also conducted a side-by-side analysis of the company’s cost of revenue and industry cost of revenue. FedEx is substantially lower than the remaining industry. FedEx’s operating cost is higher than the industries and the company’s total cost growth is also higher than the industry. The total outcome is reflected in the chart below.

Industry/Competitive Analysis

The major industries that FedEx competes and operates in are transportation and shipping. The company competes in more than one industry and the market as it offers a vast variety of services to meet the consumer’s needs. “A more connected world means more opportunities. That’s why customers count on our diverse portfolio of transportation, e-commerce, and business solutions” (Our Story, np). FedEx is the leader of its competitors in market share. They have continually led UPS, DHL, and smaller competitors in their services, time, and cost.

There are many competitors in the freight and express package sectors. The company’s ability to remain effective is dependent on all the rivals they are facing. In addition to UPS, DHL, there is Amazon and many smaller shipping companies located globally. “Many of FedEx’s other rivals in the international market are government-controlled companies. Despite the tough competition, FedEx has a competitive advantage. It is expanding its solutions for customers through a more efficient business model” (FedEx Can, np). The competition is global, so it is extremely difficult to narrow down all the smaller competitors.

UPS is a global operation employing 435,000 individuals. The company operates 1,990 facilities. They specialize in “Logistics and distribution; transportation and freight (air, sea, ground, rail); freight forwarding to 195 countries; international trade management, and customs brokerage” (UPS Worldwide, np). UPS’s market share is currently 19.6% leading all the competitors in the industry. UPS offers the same quality products and services like FedEx; the largest complaint is that they are slower in delivery time. UPS has faced legal and regulatory challenges by violating federal law for medical leave. They have also faced claims of a hostile work environment. The company has faced challenges several times within the last few years.

DHL is operating globally with 325,000 employees. DHL’s market share is 9.4%, and it has fluctuated over the past three years. DHL has faced challenges with remaining competitive with the growth of other companies such as FedEx and UPS. The company has built a reputation for delivering quality services to their consumers. DHL found themselves facing legal challenges when their competitors, UPS and FedEx are trying to push them out of the business.

The industry conditions are continually changing. The global market is changing the regulations and standard for operation based on location. The increase in prices and a decrease in demand makes it difficult to predict the company’s ability to maintain competitively. “Because of the integrated nature of our global network, our aircraft are interchangeable across routes and geographies, giving us flexibility in our fleet planning to meet changing global economic conditions and maintain and modify aircraft as needed” (FedEx 2014, p. 32).  The company is aware of the changing industry conditions and are continually finding ways to improve how they operate in the industry.

Marketing and Promotion Strategy

FedEx International has a very broad target customer. “FedEx’s ongoing focus on using search marketing as a component of its overall marketing strategy led the company to assemble a team devoted to examining how SEO works in tandem with its other marketing channels” (Advertising, np). The company is striving to reach individual customers, business, locally and internationally as a means to attract new users. The company uses search engine optimization to pinpoint the needs of their customer in an initiative to reach them better.

FedEx has successfully implemented an effective marketing mix and segmentation for its very diverse customer based. FedEx relies on branding content as its new form of marketing. It is a marketing strategy that improves business results. FedEx has found keys to effective content marketing. There are four main steps they contribute to their marketing success:

1. Truly pinpoint your target audient. “Now you’ve got an audience whose persona and interests you can truly focus on and seek to serve with your content” (Brand, np).
2. Strategically choose a theme. It will provide a concentration on the content development and planning. The theme should have two things, First, it’s of high interest and importance to your audience (even if it might be quite arcane or esoteric to people outside the audience group). Second, it resonates with your products, services and brand value proposition — but isn’t all about your products and services” (Brand, np).
3. Drill into relevant and compelling content topics. Focus on the main subject within the theme and it will allow one to draw in their target market.
4. Tailor your content delivery. Use the appropriate channels to reach the target audience and their lifestyles.

FedEx has a very strong internet presence and web-based marketing strategy. It is a key component of its marketing strategy. “As a result of its customer attribution modeling, FedEx has now deployed an omni-channel strategy by connecting its drivers, customer service reps, and other customer-facing agents. “They are bonded by digital,” Mike said. Frontline employees are a part of an interconnected system that can respond to feedback and provide input about the direct and indirect interactions that comprise the attribution model” (Langie, np). A significant amount of business is conducted via the web, and the company has used this as a means to improve their business processes but also to reach new potential customers.

Commitment to CSR

FedEx has made a commitment not only to their employees but to the communities in which they operate. They believe that their social responsibility stems far beyond offering a viable service to their customers. FedEx’s commitment is not just domestically, but globally. “FedEx provides contributions and logistics/ transportation support for emergency and disaster needs. Relationships have been established with several relief agencies to help ensure that aid reaches people quickly and efficiently during times of crisis” (FedEx Community, np). They have also committed to pedestrian and child safety, human and health services, and education. Their CSR is also to the environment and preserving it. “FedEx built a commitment to CSR into the business from the very beginning—dedicating itself not just to moving packages from A to B, but also connecting people, opening them up to the global marketplace to improve the standard of living, and building social capital across the world” (Subramaniam, np). FedEx has committed to an ongoing CSR and continually finding new methods to improve their position.

FedEx has demonstrated their commitment to their employees and communities since they began their operations. “In 2014, we undertook a robust materiality analysis to help us refine our global citizenship strategy and ensure that we are addressing areas of maximum impact. The outcomes of the analysis have helped us to reaffirm, evaluate and prioritize our top material issues at each operating company” (Global, p.7). The long-term focus is not only on giving back to the communities that they operate but limiting and eliminating their environmental issues. The company considers their global efforts and how they can positively impact global business outside of their services offered. They are always looking for new ways to improve old processes, reducing their negative green footprints.

Projection of Future Prospects

The firm analysis shows that the future prospect of FedEx in the next five to ten years will be as successful as their past initiatives. “The effects of the revamp will carry the company well into the next generation of leadership. The FedEx of the future will be an active player in such segments as freight forwarding, rail intermodal, ocean freight, supply chain management, customs brokerage, and postal services” (Solomon, np). The company’s focus on new means to improve old practices will allow them to remain competitive for the years to come.

The company will continue to grow and it will still be in existence. “The new entrants into the delivery business are focused mainly on ground-based local same-day delivery services. This business area forms a minor part of FedEx’s portfolio. The air cargo delivery industry is capital intensive. It wouldn’t be easy for new entrants to beat the network established by larger players” (Expected, np). Redefining how business is conducted will give FedEx an advantage over competition and new entrants. FedEx has an advantage, they have reputability and significant financial backing to target new initiatives and remain competitive.

FedEx will continue to remain competitive and survive by strong leaderships and future plans.

“Close collaboration with customers is key to FedEx peak-season success. Our sales force works closely with customers to anticipate their needs for volume and timing months in advance. Managing capacity to their projections requires a high level of discipline and cooperation, allowing us to meet our commitments efficiently and profitably” (2015, np). The company’s leadership, strong employee base, and plans for the future will allow them to remain competitive for years to come.

Reflection Page

Analyzing FedEx Corporation has provided great insight to a company that has done business well since its initiation. The company has never been dependent upon their past successes as a means to carry them into the future. They have continually searched for ways to improve their methods of operation and increase their bottom line. However, with strong competition such as UPS and DHL among others, FedEx has continually had to find ways to remain competitive. They SWOT analysis provides a strong look at what the company has done well, needs to improve, an opportunity for change, and potential threats that FedEx is facing. The financial analysis of FedEx shows how well their operations are going. When seeing how high their stock prices have been over the past five years is substantial. The market share, however, shows they are not on top; this was very shocking due to financial numbers that were available. UPS showed a stronger market position than FedEx; however, FedEx appears to be stronger all around. It was interesting to see how strong of a marketing department FedEx has in position. One would not assume that a company in this industry would have to depend on marketing to reach their target market. However, shipping is a competitive business. The leaders of the company have been in their position for a significant period, in fact, the CEO started the company. It has allowed me to learn that important part of the company’s success is dependent upon the leadership and its stability. Every growth initiative, change in structure and operation, and consideration for new endeavors has come from or been approved by the company’s founder. It is impressive to see a company go from a small enterprise into a successful global operation under one CEO’s control. The leadership’s structure adds to the importance of all factors associated with FedEx’s structure and operation.

SWOT Analysis

Strengths

• Diversified Business Operations
• Strong leadership foundation
• A very advanced and strong information system network
• A strong operation system in place
• They have a strong market position
• The company is highly reputable
• Large upscale operation that is providing substantial growth
• The company has significant revenue backing their operations and initiatives

Weaknesses

• The company has limited liquidity
• There is a decline in operations efficiency
• The company’s real strength lies in the United States and their international operations are lacking the strength of the local operations

Opportunities

• New global locations the company can reach
• New business processes to employ that will streamline operations and increase profitability
• Strategic expansion
• The strong global economic outlook
• There is a growth in the freight transportation industry

Threats

• Competitors are growing in advancements and continually challenging business
• Seasonality of the business needs
• There is the foreign exchange risk
• The company has to continually work with customs which can slow down business
• There is a growing increase in transportation cost
• The company always faces the risk of substitution

Work Cited

“Branded Content: It’s the New Marketing.” FedEx. 2015. Web. 14 Nov. 2015.

“Global Citizenship Report, 2014.” FedEx. 2014. Web. 12 Nov. 2015.

“Economic Indicators.” CSI Market. 2015. Web. 12 Nov. 2015

“The Evolution of SEO in FedEx’s Marketing Strategy.” MDG Advertising. 2015. Web. 12 Nov. 2015.

“Expected impact on FedEx.” 2015. Web. 15 Nov. 2015.

“FedEx 2014 Financial Report.” FedEx. 2014. Web. 13 Nov. 2015.

“FedEx 2015 Annual Report.” FedEx. 2015. Web. 14 Nov. 2015.

“FedEx Attributes Success to People-first Philosophy.” FedEx. 2015. Web. 14 Nov. 2015.

“FedEx Can Keep Up with the Competition.” 22 Mar. 2014. Web. 12 Nov. 2015.

“FedEx Community.” FedEx. 2015. Web. 14 Nov. 2015.

“FedEx Market Cap.” Ycharts. 2015. Web. 13 Nov. 2015.

Langie, Matt. “Customer Attribution: What FedEx Can Teach Us.” 7 Jul. 2014. Web. 11 Nov. 2015.

“Our Story.” FedEx. 2015. Web. 14 Nov. 2015.

“Shipping and Delivery Services and Tools.” FedEx. 2015. Web. 14 Nov. 2015.

Solomon, Mark B. “At FedEx, say hello to the next 40 years.” 13 Nov. 2012. Web. 11 Nov. 2015.

Staff, Zach. “UPS vs. FedEx: Which is the Better Stock?” 01 Oct. 2014. Web. 13 Nov. 2015.

Szbramaniam, Raj. “Corporate Social Responsibility is Key to Successful Business.” FedEx. 10 Apr. 2014. Web. 14 Nov. 2015.

“UPS Worldwide.” UPS. 2015. Web. 14 Nov. 2015.