FedEx Corporation

Strategic Audit
May 14, 2004 MGMT 449

Prepared by: Clement Chen Lisa Duong Hideo Yang Marny Susanty Mario Vellandi Andrea Betro

This company for this case analysis was chosen by me, Mario Vellandi. I found FedEx interesting because they are one of the top four logistics companies in the world with 2002 group revenues of $24.2 billion. Since I was studying the transport industry, I found them to be an excellent company to analyze while in Strategic Management. Research Process To prepare for this case, I had performed primarily all the research for this case. This process involved first going to the firm’s SEC filings on its website, then downloading the .rtf version of its 2003 10-K, and the following 10-Qs and pre-announcements. After having read and highlighted some 65 pages and notating applicable data for each section of the strategic audit, I copied the data into individual Word documents titled after each respective category. I also utilized company info from the investors section of its site. Next I used the standard and news search functions of Google, among other sites, by combing the term fedex with a combination of various business terms such as competition, weaknesses, swot analysis, and commercials. I had also used combinations with competitors’ names and specific business functions. Next, I had used the advanced features to limit my searches in two ways: by data type, and by domain extension. I found relevant existing secondary research on FedEx by searching for PowerPoint presentations, Adobe PDFs, and by Word documents. By limiting searches to educational institutions (.edu), I was able to find some quality data sources. After having ciphered through my various news articles, I made a news document and added relevant other data to the various Word documents previously created. Distribution I then sent out the various documents to my team members and told them to email me with questions. I expected them to read the material and give 100% of what they could. My Sections I solely wrote the material for the following sections: Abstract, Corporate Governance, Operations & Logistics, Information Systems, Human Resources, R&D, and Implementation. I contributed material and helped revise the data for the Task Environment Summary I found the information available quite extensive after having learned of the wide product-mix that FedEx has. What I have discovered is that the intelligence gathering process does not end until the final analysis and conclusions are drawn and presented. New and interesting data is always available and can significantly change your perception in the swot analysis. But being able to effectively filter all the info sources one obtains to only those that lie in primary scope of the research, may be the greatest skill of all. Mario Vellandi

through a network of more than 1.S. • FedEx Kinko’s – Provides personal and business publishing/copying solutions as well as being a FedEx shipping center.. time-specific. Inc.FedEx Ground is North America's second largest provider of business and residential money-back-guaranteed small-package ground delivery service. . FedEx has accumulated its portfolio of companies through some important acquisitions. After accumulating $2. In 2001. With this infrastructure serving as the umbrella between the different companies’ operations. Custom Critical. Trade Networks. and lastly its Supply Chain Services companies. trade advisory services. door-to-door delivery of time-critical and special-handling shipments within the United States. it acquired American Freightways to complete the eastern US half of its Freight Company. the merger was a success.Comprises the consolidated sales. it acquired Gelco International allowed it to expand operations into Europe and the Far East. over 150 lbs in both the United States and international markets. Tiger’s employees were all union. residences through its FedEx Home Delivery service. FedEx can increase its service coverage and market share over time and be better equipped to face challenges from UPS and DHL. e-clearance and air and ocean freight forwarding. After having considered all the circumstances and factors affecting the company. within one to three business days and serving 214 countries including every U. In 1984. FedEx’s primary competitive advantage has been its IT infrastructure. FedEx acquired Caliber Systems which (through its large subsidiaries) gave it its Ground. we aim to inform educators and analysts of the various important factors in the company’s internal and external environments that affect what strategies the firm should pursue. • FedEx Ground . as heavy freight operations were more capital intensive and cyclical than small package distribution.Offers non-stop. there exists a very large synergistic force that is driving the company forward.S. By acquiring small to medium sized regional firms in the industries each subsidiary operates in. In this strategic audit. information technology. FedEx Ground provides low-cost residential delivery to nearly 100% of U. packages. client-provided software. In 2004. along with their functions. Canada and Europe. This acquisition took some adjusting to. and website. and expertise in Europe and Asia. Freight (West).Abstract FedEx was incorporated in 1997 to serve as the holding company parent of FedEx Express and each of their other operating companies listed. address. • FedEx Freight – One of the top 5 carriers providing next-day and second-day regional LTL (lessthan-truckload) heavyweight consolidated freight services. • FedEx Services . Additionally. subsidiary. behind UPS. multi-piece shipments and freight up to 150lbs. 1988. we recommend that FedEx pursue a growth strategy. company offering time-certain delivery of envelopes.1 billion in debt and much work. Ten years later during a UPS strike. • FedEx Trade Networks – Provides international trade services including customs brokerage.200 digitally connected locations in 10 countries. it acquired Tiger International which gave FedEx a huge international freight network by adding valuable routes. combined with the company philosophy of “operating independently. it acquired Kinko’s. as follows: • FedEx Express – Largest U. Additionally. competing collectively”. landing slots. • FedEx Custom Critical . we find increased importance in developing strategic alliances with various firms in geographic regions where mutual relationships and long-term new market growth is feasible.S. marketing and technology support for FedEx Express and FedEx Ground and offers extensive supply chain management solutions through its FedEx Supply Chain Services.

Current Situation A. principally due to higher IP (International Priority) revenues in Asia. Approximately 3. For the third quarter. B. mix and relocation costs of replacement personnel required. up 8% from last year's $886 million • Operating income of $112 million. Strategic Posture Mission FedEx Corporation will produce superior financial returns for its shareowners by providing high value-added logistics.9%. Corporate activities will be conducted to the highest ethical and professional standards. favorable contract renewals and growth in their interregional freight service. down from 12. Management teams continue to examine additional cost reduction opportunities as they focus on optimizing their networks. up from 4.6%. timing. there are only modest expectations of an increase in pension cost. The increase in FedEx Freight Segment revenues during the third quarter of 2004 was due to year-over-year increases in LTL yield and LTL average daily shipments Contributing to the increase in LTL yield during the third quarter and nine months of 2004 were a 5. their outlook anticipates revenue growth in all reportable segments for the remainder of 2004. transportation and related information services through focused operating companies.9% general rate increase on June 30. the FedEx Freight segment reported: • Revenue of $630 million. Europe and the U. Voluntary early retirement incentives with enhanced pension and postretirement healthcare benefits were offered to certain groups of employees at FedEx Express who were age 50 or older. up 3% from $109 million a year ago • Operating margin was 11. partners and suppliers.9% the previous year FedEx Express total revenues increased in both the third quarter and nine months of 2004. 2003. led by continued popularity of their home delivery service Operating income increased in the third quarter and nine months of 2004 due to volume growth. Performance As a result of a strengthening worldwide economy.3% the previous year For the third quarter. yield improvements and increased productivity. improving their service offerings. enhancing the customer experience and positioning FedEx to increase cash flow and financial returns by improving their operating margin. Safety will be the first consideration in all operations.S IP revenues increased significantly on volume growth (10% for the third quarter and 5% for the nine months) and higher yield (10% for both periods). The response to these voluntary programs substantially exceeded their expectations. as 2004 actual asset returns have substantially improved the funded status of the pension plans in spite of a continued decline in the discount rate. The ultimate costs and savings from their business realignment initiatives will depend. . among other things. For 2005. Fed Ex Ground revenues increased in the third quarter and nine months of 2004 due to higher volumes and yield improvement. up 32% from $28 million a year ago • Operating margin was 5. up 11% from last year's $568 million • Operating income of $37 million. on the number.I. FedEx Corporation will strive to develop mutually rewarding relationships with its employees. the FedEx Ground segment reported: • Revenue of $960 million.600 employees accepted offers under these programs during the first half. Customer service requirements will be met in the highest quality manner appropriate to each market segment served.

FedEx will not offer any loans or extend credit to Board Members. which covers seven essential criteria regarding business/personal relationships. 6. Policies Treat all customers equally with a consistent service quality to ensure 100% customer satisfaction. Stockholders and other parties may make direct communication to any board member via mail. Board members who are company employees receive no additional compensation. The Board encourages senior management to make presentations by managers who can “provide additional insight into items being considered or who have potential for greater responsibility. and furthermore a 3 year plan that outlines ownership minimums to be met by that future date. and have two basic legal obligations to the Company and its stockholders: a) exercising due diligence in making decisions and in oversight of company management. There are no term limits. The Board Chairman and CEO is under one office. Board members and senior management must own significant shares of stock. The Board members must meet the independence requirements of the NYSE. Board of Directors Membership and participation in corporate governance in addition to guidelines on operations policies are outlined in a formal policy entitled “Corporate Governance Guidelines”. commitment to the firm. Corporate Governance A. 4. b) duty of loyalty to the company in regards to making decisions based on the best interests of the firm and its stockholders. 13. To adapt to changing customer needs to ensure customer satisfaction. 5. Potential conflicts of interest must be reported immediately. 11.” 10. . 7. Integrate with other companies when there is a common synergy that helps save costs and provide new business opportunities. Board Directors must meet 10 minimum qualifications that cover level of expertise. This outline is quite extensive and covers the important points as follows: 1. excluding any personal interests. Improve FedEx’s competitive position. have been developed. 12. Maintain an environment where employees feel safe enough to take the risk and become innovative in pursing quality. 3. Built a variety of systems to provide a variety of choices to customers. Strategies Implement new technological innovations to differentiate FedEx. service and customer satisfaction II. and corporate fit among others. open-mindedness. 8.Objectives To protect and respect the environment through outstanding environmental performance and efficiency in the conduct of its operations. Board Members are to promote the best interests of the company. 2. 2004 annual meeting will address requiring each director to be elected annually. To improve on the ability to compete collectively. To differentiate the company from competitors. Board Members may hold office only if they are age 71 or under. reassign teams from one project to another to effectively distribute people with critical talent. To dynamically align resources to critical priorities while improving cycle time and return on investment. 9. Cut costs to gain a competitive advantage over competitors Instead of assigning employees to specific business units. A proposal at the Sept.

Compensation committee. and no conflicts of interest. The Board Members. Hyde. CIO. CIO. Liipfert. President and CEO FedEx Corporation.Chairman. Packet Design Management Company. FedEx Express. IT committee chairwoman. Kenneth Glass . 3) John A.Chairman and Managing Partner. Smith . Greer Family Consulting & Investments. 10) Frederick W. Walsh . International. 3) Alan B.Chairman. Smith .P. Middle East & Africa region (EMEA). Executive Vice President. CEO. FedEx Corp. their occupation. FedEx Express. Rensselaer Polytechnic Institute. 7) J. CDW Corporation. Audit committee chairman. we can see that the firm is very concerned about maintaining an image to its shareholders and others that signifies commitment. 13) Peter S. CFO. 9) Rajesh Subramaniam . 6) David J. Canadian Region. Jackson – President. FedEx Corp. President and CEO First Horizon National Corporation. Anheuser-Busch. FedEx Services.. Edwardson . IT committee.Chairman.Chairman and President.Executive V. Michael Glenn . 4) Robert B. CEO. Audit committee. CEO. From the outline of FedEx’s corporate governance policies. FedEx Express.P. McPherson and Hand. Frederick Smith. Top Management Officers and Positions are as follows: 1) Frederick W. LLC. President. Bernhard. To ensure that all members are informed of the firm’s operations. committee memberships are as follows: 1) James L. Graf. Rebholz . FedEx Express. Information Technology Oversight Committee – Oversight of major IT related projects.Executive V. FedEx Corp.Chairman and CEO. 4) Judith L. Nominating & Governance Committee . Diageo plc. Willmott . FedEx Corp. LLC. Verner. Secretary. 8) Shirley A.. Elliott . Express Freight Services.P. 12) Paul S. 2) T.P. Barksdale Management Corporation. Estrin . General Counsel. . meetings with senior management are frequent. Audit Committee member.R. LLC. Chairman of Nominating/Governance committee. Compensation Committee . No committee membership.President.Executive V.. . Seeing that only one board member is internal is an interesting point..Executive V. Barksdale .Identifying potential new directors and oversight of FedEx's corporate governance practices. 9) George J. Operations & Systems Support. FedEx Services. Jr. Smith . Compensation and IT oversight committees.. Mitchell – Chairman. Compensation and Nominating/Governance committee.14.President and CEO.Chairman and CEO. Busch IV – President. 11) Joshua I. 5) Kenneth R.Performance evaluation and sets directors’ compensation in addition to overseeing FedEx's employee-benefit plans administration. B. Willmott Services. Market Development & Corporate Communications. Audit committee. FedEx Corp.Managing Director. independence. unless given approval by the aforementioned.President. Ducker . 10) Robert W.Executive V. LLC. III – Chairman. Compensation committee chairman.. 5) J.President. Compensation committee.Executive V. Coaching Group. Masterson . 2) August A. Pittco Management. Bronczek . All the other members comes from a variety of backgrounds and each can make substantial contributions to the firm in terms of knowledge and experience. 7) David F. 8) Michael L. Inc. 6) Philip Greer . Company announcements and interaction with outsiders is limited to the Board Chairman and CEO.. Carter .P. Inc. Europe. International.P. President. The Board of Directors has four committees with the following descriptions: Audit Committee – Oversight of FedEx's independent auditors and the integrity of FedEx's financials. FedEx Express.Group CEO. IT and Nominating/Governance committee.

. we believe that top management is sufficiently skilled to cope with and properly address likely future challenges at any of the operating units. Top Management has a systematic approach to strategic management though its structure and as outlined in the company’s “Corporate Governance Guidelines”. FedEx Trade Networks. FedEx Custom Critical. Also. CEO. Edmond Clark .11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21) 22) Juan N. acquired for its FedEx Freight company. Latin America-Caribbean region (LAC).S. resembling the various company units. Rick Faieta . COO.S. CEO. Brad B. Reed . Witt . Duncan . Gary Kusin . FedEx Freight West. FedEx Freight.S. Considering the breadth of operations FedEx Corp. Douglas G. FedEx Ground. We can see that the extensive number of officers. Lovetro . although his particular title at the previous firm is unknown. FedEx Trade Networks Transport & Brokerage 23) Douglas E.(Jack) Pickard . gross domestic product—U. and barriers and borders to trade continue to decrease. Gerald P. only Douglas Duncan (CEO formerly of Viking Freight) are part of management. Hyde’s spending hundreds of millions of the company’s money to secure naming rights to the stadiums of the Washington Redskins and the Memphis Grizzlies (both directors are minority owners of the teams). Marticke . Additionally. FedEx Trade Networks. • Steady growth in U. Regarding international experience. it is assumed internal hires were made unless otherwise noted on the company website or 10-K. Daniel J. provide quite a bit of operational feedback to the Board of Directors in addition to encouraging lower-level managers to provide information to top management. For all the various offices.. • Continuing recovery in the U.President. CEO. 2003 analyst report from Nicolas Owens from Morningstar. As outlined in the “Corporate Governance Guidelines”. CEO. CEO.P. has and the number of officers (23) CEO. FedEx Ground. President. FedEx Freight.President. the bios show experience for the officers of FedEx Express: International.President. staggered board elections.R. Societal Environment Economic Opportunities • Globalization—as a trend.. Cento . CEO. FedEx Ground. FedEx Supply Chain Services. FedEx Kinko’s.President. FedEx Express.President.Executive V. Caribbean Transportation Services. Sullivan .President. FedEx Freight East.P. “FedEx’s supermajority provision. He mentioned his concern over Fred Smith’s and J.Executive V. CEO. ethical decision making is an important element of the commitment made to management participation. skills. Keith E. according to a Dec. all the various officers have extensive knowledge. There is however some negative critique of FedEx’s management. the world's economy has become more fully integrated. and its charter’s lack of a shareholder special meeting provision preclude any meaningful change spearheaded by shareholders. that individual investors aren’t given much input. Leary . Rodger G.P. Owens mentions (contrary to the company’s projected impression). CEO.President. John G.President. Of the two companies FedEx Corp. Patrick L. Gary Kusin of FedEx Kinko’s was recruited from the acquisition. CEO. GDP related to international trade has increased substantially over the past 30 years and continues to grow. External Environment: Opportunities and Threats (EFAS Exhibit 1) A. According to the Executive Biographies found on the company website.” III. Johnson . and experience in their related fields. G.President. economy .Executive V.

Threats • High implementation. and firstquarter earnings are roughly 23% higher than they were a year ago.4% in March. it's experimenting with a digital/ink pen called Anoto Chatpen. which is saving the company $25 million each month by eliminating human involvement in processing packagetracking requests.S. uses Bluetooth wireless technology to transport written information. • The rising costs in transportation security and insurance. an economy with 1. Continued recovery in Asia’s economy—it may have a favorable impact on the growth of the transportation industry with the acceleration of domestic as well as foreign trade.4 percent. employment jumped in April with a 288. It provides evidence of a labor market recovery. the national unemployment rate fell to 5. these factors are indicating that more Americans are finding work and making major purchases. especially in international freight due to the continuing threats from terrorism. It could have an adverse effect on FedEx operations.S economy grew at an annual rate of 4. China’s growing economy. o Threats • Unpredictable energy prices—a substantial reduction of oil supplies from oil-producing regions or refining capacity and other events as well causing a substantial reduction in the supply of aviation fuel. • The Internet— gets about 4. that followed another 0. o While china’s GDP represented only a percent of world GDP last year. Although the reaction is less enthusiastic on Wall Street. such as a signature or an address. into a database.4% increase in February. within a decade it promises to be the world’s second economy after the U. assisting its single-point-of-access concept. made by Ericsson. it accounted for fully 13% of the world’s growth. cost-efficiency aircrafts make it ideally for FedEx as an air cargo carrier to operate globally. o Although some contend that there are sings of cooling in China’s economy.7% in March 2004. o Partially due to Bush’s tax cuts that are fueling the current recovery. o Americans' incomes also rose solidly in March.6% in April from 5.S. o In Asia. Many Americans consider the job market the most important indicator of the economy’s health.5 million unique visitors a month. especially the manufacturing sector. o The Chinese have become major buyers around the world of everything. economic growth is starting to look healthy again. increasing by 0.• • The U. • Improvements in aircrafts—the high capacity.3 billion people double in size every 10 years is likely soon or later to have a tremendous impact on the rest of the world’s economies and certainly on the transportation industry in which FedEx operates. that came on top of a 0.2% during the first quarter.7% in the first quarter. o Consumer spending rises by 0. o China’s economic growth reached 9.000 rise in non-farm payrolls. o U. Technological Opportunities • Improved information technology—enabling FedEx to integrate subsidiaries and business functions altogether. . and China’s importance in world industrial output is even greater. The cigarsized device. maintenance and failure cost associated with the adoption of sophisticated information technologies.5 percent gain in February—the increase is encouraging since income growth is a main factor in people's willingness to spend in the future. • Improvement in wireless technology—FedEx is looking into wireless technology to cut costs and improve customer service. and inflation is starting to come back. China consumes between 20 and 40% of many major raw materials.

Threats • Many of FedEx Express' competitors in the international market are government-owned.S. This represents an opportunity for FedEx as a provider of small-package delivery service. . benefit derived from highly integrated information system may not be quantifiable for evaluation purposes. o E-commerce is a major catalyst of the economy and remains a vital growth engine for businesses today. affect the ability of FedEx Express to operate its aircraft in the most efficient manner. o Both the U. certain airport operators have local noise regulations.238 people in 37 countries worldwide revealed that almost a quarter of internet users have shopped online and 15% plan to do so during the next six months. all of which are easily completed online. which limit aircraft operations by type of aircraft and time of day. o The survey involving interviews with 42. including new requirements for cargo security. o FedEx Express' international operations are also subject to noise regulations in certain countries Sociocultural Opportunities • Growing Internet users and e-commerce. online banking and online research for their future purchases.• • • • Due to the complexity of today’s businesses.S. Growing concern over hacking and protection of customer information. Failure in large-scale information technology systems could damage a company’s image and credibility—for FedEx. o These regulations have had a restrictive effect on FedEx Express' aircraft operations in some domestic areas. all-cargo air carriers—FedEx has an opportunity to offer single-carrier service to many points not served by its principal competitors. Department of Transportation (or DOT) and the Federal Aviation Administration (or FAA) exercise regulatory authority over FedEx Express and may. and more favorable operating conditions than FedEx does. • The Aviation and Transportation Security Act. such as e-mail. • Change in sales channel combinations used by retailers. planning trips. less profit sensitivity. • Change in consumer behavior. or information-intensive services. it may in the future adopt securityrelated regulations. o Signed by President Bush on November 19. FedEx can satisfy the consumer requirement of convenience. o It entails that they may have greater resources. from time to time. • In addition to the Federal Aviation Act of 1958 that regulates aircraft noise.S. Political-Legal Opportunities • FedEx Express currently holds certificates of authority to serve more foreign countries than any other U. Rate of Internet penetration—to better serve household and small business customers outside the U. o Consumer purchases over the Internet continue to grow. • People are increasingly using the Internet as a time-saving resource. it can also create a logistic nightmare. 2001. o People engage in numerous activities online. which could impact FedEx’s air operations or otherwise increase its costs. government-controlled. need to be assessed from country to country. the timing and market readiness for its single-point-of-access concept. or government-subsidized carriers.. lower cost. • Under the Federal Aviation Act of 1958. With its sophisticated online services.

provides its customers access to an integrated set of business solutions and offers a number of initiatives to enhance customer experience. • Consumers today demand more for personalized services. o It can be a difficult task for FedEx and other businesses to satisfy all customer needs and still be profitable.• • According to one study. and more businesses are outsourcing their non-core operations. o Such FedEx’s posture toward environmentalism gives consumers an impression that FedEx does make contribution to environmental protection and safeness. With internet access. buyers can easily and quickly compare prices and services of other carriers to FedEx’s. Bargaining Power of Buyers Opportunities The enhanced infrastructure FedEx has through alliances with such companies as La Poste may cause customers to perceive FedEx as a better company to do business with due to expanded service coverage and reliability. o Threats • Customers have become less tolerant of service failures and likely to expect better services that are more than the average. time-volume contracts with large customers are the norm. companies are increasingly expected to take greater responsibility for environmental consequences. the fact that FedEx exploits new technology as soon as it becomes available makes the barrier even harder to overcome since regularly updated technology is harder to imitate. Large buyers can easily negotiate rates and can play competitors against each other to obtain lower prices. Threats Since shipping is a ubiquitous service and while FedEx is not the only carrier in the various market segments it operates in. In the Freight (LTL) segment there is an additional negotiated discount rate that may constitute up to 60% off the initial gross • • • . This represents a growing demand for the business-to-customer package delivery service. 37% of US retailers are selling through a combination of the Internet. FedEx uses environmental-friendly recycled and recyclable packaging and has attempted to reduce harmful emissions into the environment through the usage of hybrid vehicles. and total business-to-business e-commerce revenues will reach $1. • B. up from 26% doing the same in 2003. Conclusion: We do not believe new entrants pose a threat to the firm. o Today. online retail sales would reach $88. Due to the extremely competitive industry nature of its Freight and Trade Networks subsidiaries. To respond. The rise of environmentalism. these conditions allow customers a variety of choices. Business customers increasingly seek for a single solution that can meet all of their global transportation needs. as a result. o According to recent projections.3 trillion by calendar year 2005. Acquiring a large fleet of aircraft and/or trucks along with quickly creating a large efficient distribution network are the primary operational hurdles that deter potentials entrants. in stores. o FedEx. and catalogs. in addition to the massive marketing costs needed to establish a presence (within an already very competitive industry). Task Environment Threat of New Entrants Opportunities There is a high barrier for new entrants to overcome because it is very expensive and timeconsuming to start up a major shipping company. Lastly.1 billion.

South America. UPS has about 55% of the market share. Conclusion: Although FedEx makes a great effort to maintain mutually beneficial supplier relationships. it may strengthen the customer-supplier relationship. According to many trucking executives.charges before various possible surcharges (fuel. it cannot effectively control the prices it pays for professional IT services. and had differing cultures and service levels. We believe there is a substantial opportunity for both parties to continue expanding their partnership. user friendly IT services for tracking and account oversight. Additional strategic alliances and acquisitions in Europe. Although certain long-term IT projects can be outsourced abroad to save money. Bargaining Power of Suppliers Opportunities FedEx has ensured that they have the best suppliers with a scorecard system where FedEx scores its suppliers to measure its their performances while the supplier in return gets to give FedEx feedback on how FedEx can improve. and Asia pose significant opportunities. Rivalry Among Competing Firms Opportunities FedEx and the US Postal Service had signed a 6 year agreement where FedEx would deliver USPS priority. the parties have agreed at times to increase the volume shipped/drop boxes placed. Buyers are thus able to retain a large degree of bargaining power. provide these suppliers a great amount of bargaining power. shared business data and personal messages. overweight. Since the deal landed in 2001. statements. thus consultants and contract programmers contributing to it are very important to the company. were archrivals. Threats of Substitute Product or Services Threats Although FedEx has differentiated itself with the reliability of its services coupled with powerful. and first-class mail through its air network. the primary product (shipping) is standardized and alternative suppliers are plentiful. Yellow Freight had acquired Roadway Express. Because the system helps both sides. In the LTL industry in 2004. electronic communications such as EDI. These two companies had largely dominated this market segment. and other technologies offer an alternative for delivering bills. Conclusion: Substitute Products for business and personal data exchange pose a threat to FedEx. FedEx cannot bargain with suppliers for remedying crucial business functions that need immediate attention. Threats FedEx’s tracking and ERP systems are very crucial to their business operations. in exchange for the right to place FedEx drop boxes in US post offices. Conclusion: Although alliances may help FedEx expand its services. Even though USPS has a smaller market share they still have the best delivery network of mailboxes. Outsourcing activities such as aircraft/truck maintenance and acquiring or leasing the services of regional carriers where FedEx needs to expand operations. it still may not be enough. Threats In the US market for Express and Ground shipping. express. • • • • • • • • . Fax machines. and hazardous materials among others). there is a large anticipation of a customer spillover because many clients have unfavorable views of either Yellow or Roadway and will see the merger negatively. and many other operational functions. USPS has about 15% and FedEx has about 22%.

5% to 6% in the next five years. The decision-making responsibilities are kept as close to the affected point as possible. With DHL’s acquisition of Airborne Express finalized earlier this year. Thus this is a threat to FedEx. Internal Environment (IFAS See Exhibit 2) A. A good example of this is in China where Sinotrans.S. However. Employees are capable of responding to the constantly changing environment that is characterized by a decentralized authority structure. the combined company will make it a formidable competitor of UPS. If the quality of life issues surrounding flight schedules aren’t well addressed. The government was the one that allowed competition against USPS. government may impose additional security related regulations. Conclusion: Although the shipping industry is quite competitive. Since UPS has a union that covers all employees except independent auditors. Special Interest Groups Opportunities FedEx does make an effort to protect the environment. Because of these efforts. the nation’s most prominent domestic airfreight carrier has started partnerships with UPS and DHL. Relative power of Union. . Conclusion: While the ALPA may call a strike against FedEx and the U. Government. pose a significant threat. The enactment of new government regulations are unpredictable and may have a negative or positive effect on FedEx. a strike is very possible. they are also the ones that gave USPS the advantage of competing directly with private companies without having to pay state or federal tax. FedEx corporate environment possessed the characteristics of an organic organization whose environment constantly changes and uncertainty usually dictates a much higher level of fluidity and flexibility. The FedEx ALPA agreement can be amended as of May 31. may allow trade restrictions on certain countries to be lifted increasing trade/transport options in addition to certain foreign governments deregulating their domestic transport markets. we find these factors may be only partially offset by long-term trends in decreased governmental trade regulations. Threats FedEx’s pilots belong to the Airline Pilots Association (union). • • • • • IV. there are various opportunities and threats in the form of strategic alliances and acquisitions that pertain to its domestic and international express segments. FedEx also has to abide by government regulation of foreign country in which they do business in. The government is also the ones that control regulatory actions affecting aviation rights and labor rules. They reduce harmful emissions into the environment through the usage of hybrid vehicles and its usage of recycled and recyclable packaging. 2004 and negotiations are well underway. a potential UPS strike will give FedEx Ground a considerable opportunity to attract new customers and steal market share from UPS. and had threatened to strike four years ago.S. The U.S. The threat is that some analysts are predicting DHL/Airborne’s market share will jump from 1.• • Possible strategic alliances and acquisitions by UPS and DHL in geographic markets where FedEx is present. So the relative power of special interest group of environmentalist is an opportunity. and the U. environmentalist groups probably will not pose a threat to FedEx and may even support FedEx’s operations. both of which greatly affect FedEx. Postal Service. Corporate Environment FedEx operates its company divisionally while giving them the ability to compete collectively. FedEx Express and Home Delivery.

made Fortune’s list of Best Companies to Work—a fully integrated—which gets about 4. Weaknesses Collective bargaining agreement with Air Line Pilots Association signed May 1999 expires May 2004. reliability and speed. ground. they will reciprocate with the impeccable service the customer demands. although none have been successful. Marketing Strengths • High brand awareness—with the image of high-quality service. freight. • The full portfolio of offerings to meet various customer needs—FedEx’s service portfolio includes: express.14 when customer service gets to deliver the highly anticipated fifth Harry Potter book on the first day that the book became available to the public. Past attempts by labor organizations to attempt groups of employees. it costs 4 cents to track a package online. o FedEx works closely with its customers and emphasizes maintaining long-term customer relationships. o FedEx. o MyFedEx. trade facilitation and electronic commerce solutions. Corporate Resources 1. • Flexibility to meet specific customers’ requirements. . saving the company $25 million each month. the first commercial vehicle that runs on hydrogen and only emits water. o Approximately 70% of FedEx shipments are automated. o Through an alliance with General Motors. supply chain. which combines the resources of its operating company Web sites to create a one-stop LTL information source. documents and freight to 214 countries. if employees are taken care of. • Green marketing—showing its concern for environmental problems. logistics. o For example. • Synergies from multiple operating units—which are created by seamless information integration. Good reputation as an employer.5 million unique visitors a month. o FedEx Express Delivering packages. compared with $2. Corporate Culture Strengths Belief that success hinges on the first “P” of the People-Service-Profit philosophy. o Each subsidiary generally serves a separate and distinct sector of the market and free to focus exclusively on the market sectors in which it has the most—a customer portal that goes beyond simple tracking and tracing capabilities to offer personalized services for registered users. make freight shipping easier and bring customers closer to their own account information. • ISO 9001 certification. including a bill of lading generator and e-mail delivery notification. in June 2003. the HydroGen3. C. which is currently the most rigorous international standard for Quality Management and Assurance. customs brokerage. • Emphasis on e-commerce and information technology. o Freight.FedEx. a list dominated by smaller companies.B. o A high level of service quality for its global express and ground operations is evidenced by ISO 9001 certification. o These represent huge implications for both FedEx and its customers. FedEx delivers packages in a fuel cell vehicle. • Turning to relationship marketing. o The decision-making responsibilities are kept as close to the affected point as possible. and FedEx uses recycled and recyclable packaging. FedEx teamed up with Amazon.

• (1) FedEx Express provides air capacity for transportation of Priority Mail. Overnight service to approximately 92% of the United States population. Sells and markets the full portfolio of services offered by subsidiaries and provides customer-facing solutions that meet customer needs. Saturday delivery. Offers the most comprehensive international freight service in the industry.S. Agreements with the U. shopping centers. signature and appointment delivery. FedEx Freight Has a fully integrated Website. resulting in more costeffective solutions and enhanced levels of customer service. offering services for international businesses. underscoring the need for more aggressive. FedEx Supply Chain Services (subsidiary) • Offers an extensive range of supply chain management services. FedEx Services To enhance its single-point-of-access strategy. real-time tracking and advanced customs clearance. make freight shipping easier and bring customers closer to their own account information. while FedEx Ground is the second. • Low share of voice in advertising. such as day-specific. Weaknesses • FedEx Express lags behind its competitor DHL in foreign Also provided to 100% of the Canadian population through a subsidiary. corporate or industrial parks and outside U. Post Office location.o o o o Overnight service virtually extends to the entire United States population. and premium services. Backed by a money-back guarantee. ground and e-commerce services. giving no intensive for customers who seek lowcost shipment. fulfillment and fleet services. • Similar price structures to the competitors’. including extended evening delivery. • Service benefits not easily communicated. Express Mail and First Class Mail for the U. Postal Service that run through August 2008.S. • Little differentiation in service width and depth against competitive offerings. convenient. Provides ground service to 100% of the United States population. .S. FedEx Trade Networks A leading provider of international trade services.S. including transportation management. Much of marketing activities for FedEx Express and FedEx Ground are combined under FedEx Services to more effectively sell the entire portfolio of express. complexity of its offering mix may confuse customers. most of which are not offered by competitors. customized service. • UPS is the largest provider of business and residential ground delivery services in North America. • Its management programs use advanced electronic data interchanges to speed communications between customers and their suppliers. Post Offices. • (2) FedEx Express has the option to place a self-service drop box in every U.FedEx. FedEx Ground: FedEx Home Delivery Offering unique. targeted media relations. o Analysis of January 2000 to December 2001 media coverage revealed ineffective or negative reporting of the FedEx advertising messages. which combines the resources of its operating company Websites to create a one-stop LTL information source— including a bill of lading generator and e-mail delivery notification. Postal Service. Freight. Alliances with certain retailers for drop-off sites—providing customers the opportunity to drop off packages at locations in office buildings.

Additionally.923 4.39 to $3. High MVAs indicate high investor expectations for the company to generate considerable amounts of EVA.7% cost of capital.28. FedEx Ground.4x and 17. FedEx is recommended to devise effective brand promotions perhaps through corporate sponsorships and special events in addition to traditional print and broadcast advertising. this would result in 5 year average of return on capital of 7%. The EPS estimates for FY04 and FY05 have been raised from $3. integrate and leverage the Kinko’s business. vehicle and sort capacity. especially those relating to aircraft. operating incomes. respectively.5% to 7. compared to the same period’s 8.811 875 -596 -250 -182 13. Over the past several years they have experienced significant year-over-year increases in pension cost. Their ability to effectively operate. to shifting customer volume levels.00 to $4. Top-line growth is expected by some analysts at 8% over the next five years.o o The implication is that.036 8.10 % "Y" "-X" 43 48 70 47 1 28 88 45 source: eva.45 and from $4. its moderate pricing power and its service mix development should allow operating margins to increase from 6. respectively. 2003 MVA Rankings Tier 1: 45 largest market-cap companies with sales of more than $7 billion Compa ny name United Parcel Service Inc Fedex Corp MVA 2002 3-yr chang e in MVA 3-yr chang e in EVA ROA C Compa ny Type PRVit Rank Perfor mance Valu atio n 2002 1999 EVA Risk 17 101 36 353 57. they implemented average list price increases of 1. Freight. FedEx is currently the official sponsor of the National Football League for worldwide delivery service. while excluding some accounting distortions. Finance Strengths They have been able to manage their cost structure for capital expenditures and operating expenses and match them. and Express segments all experienced increases in revenues.3x.9% in the same period. Weaknesses In January 2004. 2. The P/E estimates for FY04 and FY05 are 21. EVA is “an . $14 million in business realignment costs were incurred during the third quarter of 2004 ($429 million in the nine months).5% at FedEx Express. FedEx continues to greatly rely on operating leases to acquire use of its airplanes. The FedEx Ground segment-operating margin was negatively affected by an operating loss at FedEx Supply Chain Services. Operating leases of its aircraft allow FedEx to retain more cash.1 0% 5. Approximately $65 million of savings were realized in the third quarter ($90 million in the nine months). and operating MVA measures how much value the company has created for its shareholders in excess over the used amount of Capital. despite its high brand awareness. If one was to count the leased aircraft as invested capital.558 -6. reflected primarily in lower ongoing salaries and benefits costs. this type of promotions will further enhance the image of FedEx brand.9% at FedEx Ground and 2. which in turn makes for a “higher leverage and lower returns on invested capital than the balance sheet implies…net debt/total capital remains close to 70%” (Owens).

Maryland.estimate of true economic profit. profit that accrues to the company’s shareholders after all operating costs (including taxes) and financing expenses” are covered. Fort Worth. while a negative EVA spells “economic loss and value-destruction”. Upon analysis. The system goes from 0-100. ROAC is Return on Average Capital “indicates productivity in allocating and managing capital. A $1.8 million by the end of 2009. “-X” companies are losing EVA and “destroying wealth while they are growing Sales at a rate less than 15% on average”. Paris.” and disregards growth. many of their new facilities will be “co-located with existing FedEx Ground facilities. Subic Bay. Due to the increased popularity of the FedEx Home Delivery Service. it did have a very stable PRVit score in comparison to a 5 point lower score by UPS. we see UPS has a much higher MVA in 2002 than FedEx although for the three year period UPS had declining profit growth. (eva. whereas UPS’s had increased. reliability and profitability from each of the businesses. The Subic Bay. In 2003. Oakland.does not account for risk (and the cost of capital). FedEx showed a negative EVA most likely attributable to the high operating costs of FedEx Express.8 billion six-year expansion plan for FedEx Ground was made in 2003. and value and is calculated by subtracting the R score from P score.d. and Hagerstown. “Y” companies are established firms that have a positive EVA and are earning returns above their cost of capital. Operations and Logistics Strengths Each of FedEx’s subsidiaries serves a separate and specific market sector where it has expertise. This has allowed for later shipment cutoff times offered. hubs. A high score of 67-100 indicates a “Buy”. compete collectively. means investors should “Sell” or avoid.” In 2003. and Toronto. which would “nearly double its daily package volume capacity from 2. London. Two operating agreements with the US Postal Service through 2008 had been made to offer domestic air transport for postal shipments while giving FedEx Express the option to have .” This strategy is known as the “operate independently. Philippines. Cincinnati. FedEx Freight and FedEx Trade Networks combined resources to offer Less-thanContainer-Load (LCL or consolidated shipments) services via two new services: FedEx Trade Networks Ocean Transport (US<->Europe. Tennessee. capacity on flights between Europe and Asia were increased in addition to increased flight frequencies into Hong Kong. 3.. risk.. import/export). regional hubs include Newark. The decision was made because expansion in Subic was unfeasible due to Subic’s primary function for port terminals. and FedEx Trade Networks Ocean-Ground Distribution (Asia->US. This includes adding 10 new central distribution hubs and expanding 23 existing c. Philippines hub will be relocated (locally) to Clark International Airport under a $450 million investment plan with a 25 year lease. The second US major hub is in Indianapolis. and without reasonable hope of an important reversal of trends. and S-Net Freight and Capital Distribution Services in Asia. manage collaboratively” and is noted in the 2003 10-K in addition to other strategies under “FedEx Operating Strategy”. FedEx Express operates three major world hubs: Memphis. In 2003. the firm modified the incentive compensation plan of each company to be tied to FedEx’s total performance.5 million to 4. Four of the ten new central distribution hubs should be operating by 2006 in the following cities: Memphis. Chicago. Although FedEx had a higher Risk score.. A score of 0-33 indicates a very competitive task environment. then dividing this amount by the V score. in addition to expanding/relocating more than 300 facilities. Dallas. International hubs include Tokyo. The international aspects are handled through FTN Transport & Brokerage by agreements with GeoPost and Frans Maas in Europe. Los Angeles. A score of 50 signifies a balance between the firm’s intrinsic and traded value. PRVit is a performance and investment analysis tool by Stern Stewart It takes various indicators from a firm’s performance. whereas FedEx’s had increased. FedEx also agreed to purchase ten Airbus A380 to complement long-term needs of the FedEx Express global network. import only). which results in “optimal service quality levels. A positive EVA indicates actual profit.

In May 2004. and through voluntary cash severance incentives offered to eligible employees. reducing fuel costs by onethird. By mid-2003. replacing drop boxes with full-service counters.S. “will start building a 330. such as a signature or an address. FedEx Supply Chain Services is a subsidiary of FedEx Services.000 drop boxes were available at U. Post Office location. FedEx Services and Motorola introduced the FedEx PowerPad. FedEx Home Delivery. FedEx continues to greatly rely on operating leases to acquire use of its airplanes. which will encompass the services of FedEx Express. Ground. Examples include: Maersk Logistics. Kinko’s stores. wireless access to the FedEx network. 5. operated primarily with 15. which is currently “the most rigorous standard for Quality Management and Assurance.” The company plans to put 18 additional vehicles in selected cities within the year. which allows for flexibility in scheduling and adjusting to variable periods of demand. and Services are ISO 9001 certified. 4.100 U.self-service drop boxes in every U. Weaknesses No data available or weaknesses known.S. made by Ericsson. FedEx Ground as of mid-2003. “FedEx Ground handlers wear ring scanners that capture and transmit package data. it's experimenting with a digital/ink pen called Anoto Chatpen. Post Offices in around 325 metropolitan areas.S. All Part-time employees at FedEx are offered full benefits Union participation is limited only to its pilots. In March 2004. In March 2004. FedEx Corp. a PocketPC based on MS Windows which was specifically designed to increase customer service levels “by equipping FedEx Express couriers with online. FedEx plans to offer FedEx Ground. Human Resources Strengths FedEx Express has over 52% of its employees being part-time.” The synergy of the two companies is very profound. FedEx’s only union. Ground. near real-time.” With the acquisition of Kinko’s in 2004. FedEx Express started utilizing in Sacramento its new OptiFleet E700 hybrid electric vehicles which “will decrease particulate emissions by 90%. FedEx Express has been able to reduce its workforce to meet flat growth rates in its domestic business through "early retirement incentives with enhanced pension and postretirement healthcare benefits" to certain employees aged 50+. and FedEx Express “shipping services at all 1. UPS Supply Chain Solutions. The cigar-sized device.000-barrel fuel storage and pipeline system. reduce smog-causing emissions by 75% and travel 50% farther on a gallon of fuel. 5.300 owner-operated vehicles and 17. FedEx Express. This maintains a lowered strategic scope and identity for FedEx SCS. Having the trucks being owner-operated keeps asset costs low and is a common practice among LTL carriers in the industry.” In Asia. and not a distinct company such as other large companies have. giving it a 13 day fuel supply during peak consumption days.600 company-owned trailers. FedEx announced an exclusive distribution deal with Saks. New negotiations have recently begun.” Weaknesses The air operations of FedEx are vulnerable to strikes from its pilots which belong to the Air Line Pilots Association. uses Bluetooth wireless technology to transport written information. Research & Development Strengths FedEx works continuously on improving and upgrading their e-commerce and technological capabilities. .” Additionally. into a database. In 2003. and Home Delivery. and OOCL Logistics.

there can be serious ramifications for short-term operations suspension. A consequence of the overly popular early retirement and severance program at FedEx Express has resulted in a need for replacement management and staff. which “allows access to other carriers and complete integration solutions through certified third-party automation solution providers. Robert B. 70% of FedEx shipments were automated. a Enterprise content management (ECM) system for processing U. cancellation. o FedEx Global Trade Manager. integrated SCM platform with Cap Gemini Ernst & Young. Information Systems Strengths Primary customer IS solutions include: o FedEx Ship Manager Software. Douglas Witt.” o WorldTariff from FedEx Trade Networks provides continuously updated customs duty and tax info for more than 118 nations.” As of mid-2003. o FedEx Certified Solution Program.These programs were instated on August 1. a web-based system for enhanced level of shipment visibility. o FedEx EDI Electronic Invoice and Remittance. Carter with their “20/20 Vision Award” in 2003. o FedEx Consolidated Return Service. CIO Magazine awarded FedEx’s CIO." IBM provided to FedEx Trade networks in 2004.” o FedEx NetReturn API. country regulation/duty/embargo information.. which simplifies reverse logistics (returns process) for merchants by providing a low-cost. It would . which sends invoice data electronically into the Accounts Payable systems of its clients." This is a result of its flyers working primarily at nighttime and the growth of FedEx's international business. which integrates with a company’s order/inventory management apps. Weaknesses The Airline Pilots Association contends that FedEx "often forces its pilots to put in as many hours as it can and gives them little say on flight schedules. o FedEx Expressclear. o FedEx was launched in 2002. Some pilots are flying longer and "more tiring" flights. 2003 and expired during the second fiscal quarter. and tracking. going “beyond simple tracking and tracing. which provides import/export forms.S. MyFedEx. 6. FedEx Supply Chain Services announced in Sept. and server for pickup. their customers will have enhanced visibility to movement in their supply chain. lower customer operational costs and free up customer capital for investment in other areas.600 employees accepted these offers. which substantially exceeded expectations. o Customer Link from FedEx Custom Critical is “an integrated proprietary shipment control system with two-way satellite communications. licensing requirements. If a new agreement with the pilots' union isn't reached. Customs and Border Protection documents. a worldwide electronics customs clearance system. "With these services on an integrated platform. 2003 that it would launch an enhanced. API. which offered a customized portal solution for registered customers that offered personalized services. streamlined process. allowing customs agents in other countries to review shipment information before it arrives and process it faster. in addition to deferring some of the employee departure dates to May 31 so that Human Resources can adequately find and replace the Personnel it requires. Over 3. the CEO of FedEx SCS was quoted as saying. providing us with the ability to better manage customer inventory.

and $100. a 100% payback after one year. Pro: • FedEx currently has a good financial standing. There are no problems holding it back to the stability alternative. B. Pro: • FedEx will earn more US market share. Con: • FedEx will not be able to eliminate competitors out of the competition. This is a major competitive advantage for SAP customers and a new revenue and marketing channel for FedEx.result in faster clearances. • Competitors in international may take advantage and excel to a higher level of competition to make it harder for FedEx to compete with them. Pro: • FedEx may gain market shares • FedEx may win over some of it competitors. Weaknesses No data available or weaknesses known V. Currently FedEx is going strong. • FedEx may expand into a new market. Stability: Continue to use current family of companies to compete collectively. Con: • There is an investment risks as with any investment • Acquiring another company means increasing expenses as well. Strategic Alternatives Growth: Use the money saved from lowering ongoing salaries and benefit costs to invest in companies that offer synergies to the FedEx family of companies. $120. Con: • FedEx’s growth in other areas will be put on hold. • FedEx may lose international market shares. Its financials continues to grow. • FedEx may succeed and become dominant in US market. In April 2004. They are already gaining more market shares internationally as they . Analysis of Strategic Factors (SFAS see Exhibit 3) Strategic Alternatives and Recommended Strategy A. Stop extensive funding to investments in the international market. • FedEx will not dominate the market. Its revenue growth has increased by 11% to $630 million in the FedEx Freight segment. the synergy may not be there as originally thought. Retrenchment: Focus dominating one market at a time starting with the US market. FedEx Freight segment’s operating income has increased 32% to $37 million.000 yearly savings in warehouse consolidation. FedEx Trade Networks announced an agreement with SAP AG to provide its WorldTariff service to SAP customers through the SAP Global Trade Services. • New company may not work well with current operations. • FedEx will be able to defend its current competitive position in the industry. Recommended Strategy The most suited alternative for FedEx is the growth alternative of investing in companies that offer synergies to the FedEx family of companies with the money saved from lowering ongoing salaries.000 annual reduction in operating costs. VI.

. FedEx Services Since the Supply Chain Services subsidiary is the only operational arm that brings in revenue (the rest gives marketing strategies and tech support to Express and Ground). cross-company promotion. FedEx Express Volume growth at the Express market in the U. and business districts. to unique customers with expedited transport needs. it will be quite important to continue adding more drop boxes in post offices. FedEx Kinko's This company has been doing extremely well and has serious potential for increased sales at the Express and Ground operations in the US. But in Asia it definitely is growing dramatically each year. FedEx Freight While this company operates in a very competitive industry. we'll have immediate customers and presence. we believe that there's still quite some room for volume expansion through marketing campaigns. Vietnam. and by promoting the FedEx brand. and B2C e-commerce. They have to continue expanding operations there otherwise they lose out to DHL or UPS who will be happy to take some share from them. Additionally.VII. as well as adding additional stores according to Kinko’s original growth plan. FedEx Custom Critical Since this is a niche market with perhaps limited growth. by heavily emphasizing the FedEx brand. selected retail partners. and offer a higher quality service that better serves the shipper and consignee. They have also succeeded in the past with investments in companies offering synergies to FedEx. continued their globalization strategy. process the cargo faster. Examples include film/television studios and various sports teams. Particular areas of specialty services deserving attention are reverse logistics (returns management). but perhaps now is not the moment. FedEx Trade Networks The alliances and joint ventures are really what are making this company grow. Kinko's as a business model in specific country markets has tremendous potential for itself and increased Express sales growth. we recommend that SCS take a proactive step in convincing existing large clients of its strengths and capabilities while pursuing a low-cost operational strategy (the SBU incurred losses in its Q2 earnings for 2004). In order to counter the long-term potential threat DHL. etc. In doing this. there is further potential for the Home Delivery Service.S. we think eventually the SCS should be its own company. The potential with Frans Maas for gaining market share in Eastern Europe is very lucrative in the long term. We also recommend acquiring companies with agents in specific country markets with high growth potential. in addition to immediate growth in Southeast Asia (Thailand. we recommend this company to continue marketing its services. We recommend following the firm’s plans for shipping centers in all its existing stores.) with regional partners there. Implementation We recommend the following strategies for each of the operating companies while considering the competitive environment each company operates in. has been flat. . FedEx Ground Although this company is still a distant #2 behind UPS. reduce the number of external intermediaries. it has room for growth by acquiring a handful of SMALL regional LTL firms (thus expanding service coverage). and expanding existing facilities or opening new strategically placed hubs. For the time being.

The U. 0. FedEx should continue with their successful path and rely on their computer generated data for evaluation and control.55 0 0.10 2 0. less profit sensitivity and more favorable operating conditions Their unpredictable actions may negatively impact FedEx.18 0. a digital/ink pen.13 FedEx has an enhanced infrastructure. FedEx is experimenting with Anoto Chatpen. FedEx uses SAP R/3 as their ERP system. 0.14 3 0.09 3 0. offer similar service for a similar or cheaper price.42 0. FedEx exploits technology as soon as it becomes available.65 5 0. FedEx's major competitors. enabling the company to provide superior service to their customers and solidify their own evaluation and control information strategies.65 It gives FedEx the opportunity to provide small-package delivery service. 0. government-controlled. all-cargo air carrier. or governmentsubsidized carriers. 0. Being the industry leader in technology. External Factor Analysis Summary Weighted Score Weight Rating Comments The improvement helps FedEx achieve its single-point of access concept. and SFAS Exhibits Exhibit 1 Key Internal Factors Opportunities FedEx is improving its information technology.06 1. Many of FedEx's international competitors are government-owned. 0.32 0. lower costs.11 Threats Some businesses are setting up alternative delivery networks. FedEx has about 22% of the market share while UPS has 55% of the market share. FedEx accomplished this through alliances with such companies as La Poste.18 3.07 3 0.13 5 0.21 Government businesses have greater resources. which transport written information into a database. The number of people making internet purchases is increasing worldwide. the company has led the industry in introducing new technology.63 .S. Evaluation and Control Information systems are a distinct competency for FedEx.S.08 FedEx Express holds certificates of authority to serve more foreign countries than any other U. IX.09 2 Differentiation is hard in this industry. UPS and USPS.00 3 0. TOTAL SCORE 4 0.VIII.2 0. Department of Transportation and Federal Aviation Administration has right to exercise regulatory over FedEx Express. EFAS. 0.27 5 0. IFAS.

04 4 2 4 3 0.09 0.06 0. 0.08 0.45 0.32 0.02 1.13 0.09 5 0.28 By mid-2003. meaning a high leverage.0 2 0.24 0. and reliability 0. and Operating Margins Intensive Brand Promotion Increased activity in foreign markets Strong R & D Quickly becoming more automated Integrating hybrid vehicles into delivery fleet Weaknesses Behind DHL in Foreign Markets FedEx air operations are vulnerable to strikes Realignment costs very high Costs for customers increased 7% return on capital compared to a 8.Exhibit 2 (IFAS) Internal Factor Analysis Summary Weighted Score Weight Rating Key Internal Factors Strengths Brand name Increasing Revenues.06 2 0.06 Mostly affects FedEx Ground 0.07 5 4 4 2 4 0.7% cost of capital FedEx Supply Chain Services is affecting other areas negatively Little differentiation in services provided versus their competitors TOTAL SCORE Comments Known for high-quality.04 3.15 0. speed.68 .10 0.05 0. 70% of shipments were automated Currently being tested in Sacramento.05 0.08 3 0.03 2 0.1 0.60 0.12 Calculated by including leased aircraft as invested capital.65 0. CA distribution area 0.36 0. Operating Income.12 0.24 0.

30 .10 .Exhibit 3 SFAS (Strategic Factor Analysis Summary) Key Strategic Factors Operationally Excellent (S) Known for reliability (S) Excellent marketing (S) No service distinction (W) Very high cost (W) Improvement in technology (O) Operate globally (O) Small delivery package (O) Competitors (T) Change in transportation policy (T) Total Score Weight Rating Weighted Score .20 2.20 .30 .60 .05 .15 .10 .10 1.00 3 3 2 3 3 2 3 2 3 2 x x .10 .15 .15 .30 .15 .05 .05 .15 .05 .30 .55 x x x x x x x x Duration IT LT x x x x x ST x x x x . Versatility key to FedEx. Saks deal http://memphis.html SAP and FedEx Trade Networks Come Together to Ease Global Trade SEC Filings: 2003 Annual Report. 2004 4th quarter Pre-Announcement.eyefortransport.bizjournals.asp?news=41252&nli=freight&ch= .yahoo.html FedEx Completes Acquisition of Kinko's FedEx starts talks with pilots.References: Websites: FedEx to Begin Building Massive Fuel Tank Farm at Memphis. hoping to avoid another slugout FedEx Trade Networks opens borders with IBM content management solution http://www-306.eyefortransport. The UPS Store rings up first year success" price objective raised DHL and Airborne Express ready to face the competition in the US http://www.asp?news=40555&nli=freight&ch= FedEx's China sales up 40% http://www.kinkos. Cap Gemini Ernst & Young Harness Respective Experience to Bring Greater Supply Chain Value to Customers FedEx China business booming http://www.newratings.html FedEx to remain in Philippines http://www.nsf/cs/TKNC5UCPZS?OpenDocument&Site=cmportfolio FedEx Supply Chain Competition keeps post office hopping http://greenvilleonline. 2004 3rd quarter 10-Q. Articles: FedEx " Airport New Fedex Express Hybrid Electric Trucks Begin Service http://www.atimes.