Assignment 5: Capstone

FedEx Corporation

BUS499 Bus Admin Capstone

Introduction

This assignment will determine the impact of FedEx Corporation’s mission, vision, and primary stakeholders on its overall success. The researcher will analyze the five forces of competition to determine how they will impact FedEx Corporation. A SWOT analysis will be created to determine FedEx’s major strengths, weaknesses, opportunities, and threats. The researcher will outline a strategy based on the SWOT analysis to capitalize on the strengths and opportunities, and threats. Varies levels of and types of strategies will be discussed to determine which will be more effective for FedEx to use to maximize the corporation’s competiveness and profitability. The researcher will outline a communications plan to use to make the recommended strategies known to all stakeholders. Two corporate governance mechanisms that is used by FedEx will be selected and evaluated on how effective they are at controlling managerial actions. The effectiveness of leadership will be evaluated within FedEx, so that at least one recommendation for improvement will be recommended. The final part of this assignment will assess efforts and provide examples of FedEx being a responsible and ethical corporation citizen. The impact that these efforts will be determined to see how this may or may not affect their bottom line.

Background of FedEx Corporation

FedEx Corporation provides an extensive portfolio of transportation, e-commerce and business services. FedEx Corporation is a holding company for FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services. The organization is divided into operating companies in which each company is operating independently to focus on servicing the distinct needs of their customers. (about.van.fedex.com/our-story/overview)

FedEx Corporation will produce superior financial returns for its shareowners by providing high-value-added logistics, transportation, and related business services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its team members, partners, and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards. (about.van.fedex.com/our-story/overview/)

• Mission Statement & Vision Statement

FedEx has several primary stakeholders that include their board of directors, management, investors, and the federal government. There are also stakeholders, like employees and customers that share interest in the success of the company but do not have as much as much investment in the company. (about.van.fedex.com/our-story/overview)

• Primary Stake Holders

Five Forces of Competition

The entry of new competitors in the shipping and freight industry is low. The nature of the industry creates high capital expenses to operate. Existing companies have created a significant barrier to entry in regards to the amount of daily production and distribution. FedEx alone creates a huge barrier with their strong brand image and the diverse services they offer. In the current economy, it is very unlikely for new companies to enter the market. (http://about.fedex.designcdt.com/corporate)

• Threat of New Entrants

Bargaining Power of Buyers

The bargaining power of buyers in this industry is medium, but it continues to grow as FedEx expands to Asia and other countries. Another factor that contributes to the bargaining power of buyers is the environmental movement. Buyers may prefer to purchase or use services from companies that are dedicated to operating in a “greener” environment. Also, with the current economy, customers are looking for the best deals and/or prices. Convenience is also a major decision factor in the mind of the buyer. They want a one stop shop to fill all of their needs and wants. FedEx must continue to adapt to these needs to retain their customers. (http://about.fedex.designcdt.com/corporate)

Threat of Substitute Products and Services

The threat of substitution is a very high force for FedEx Corporation. The major cause of this force is the growing popularity of the internet. In a short time, email has become the popular way of communication decreasing the usage of postal mail substantially. Technological advances including text messaging and wireless broadband have made it possible for customers to receive mail faster via internet. These time and money saving advancements have reduced demand for FedEx services and lowered operating income. FedEx has addressed this problem by offering customers the ability to transfer electronic documents through the FedEx website. This service is available in 71 countries and will continue to grow in the near future. (http://about.fedex.designcdt.com/corporate)

Bargaining Power of Suppliers

Due to the inherent capital costs of starting up in the shipping and freight industry, the bargaining power of suppliers is high. For this reasons why this force is in the high category is the availability to serve many different customers in the same and other industries. The biggest advantage for FedEx is their large fleets and ability to negotiate volume discounts for fuel. (about.fedex.designcdt.com/corporate)

Rivalry among Competing Firms

Even though the transportation industry is huge, there is still intense competition especially in the LTL freight industry. This is high force among the others in the Porter’s Five Forces. One of the biggest factors is the sensitivity to price and service; especially in the current economy where there is little to no growth. FedEx has a very broad competition as they compete in a local, regional and international level. Two major factors play a part in FedEx’s 3current and future standings among competitors, the first one being price and the second being the portfolio of services. (about.fedex.designcdt.com/corporate)

Strengths and Weaknesses

FedEx has several great strengths including a strong brand image, global presence, innovation, and best in technology. A strategy that FedEx should select to take maximum advantage of its strengths is the differentiation strategy (Hitt, et al, 2013, p 115). FedEx is much more differentiated from its competitors on a global aspect. They stand at the top as far as a global express delivery corporation is concerned. FedEx offers the most support, money-back guarantee, and the capability to packages from the delivery packages from the customers’ homes. They also have differentiation in quality. They have spent a large amount of investment capital on their logistics and operations for its transportation systems. This assures smooth coordination and deliveries which results in high levels of quality service and help maintain their competitive advantage.

FedEx’s weaknesses include high prices relative to its competitors, lagging UPS in the ground delivery market and exposure to economic conditions and fuel prices. However, of the three, lagging UPS in the ground delivery market is the most significant weakness for FedEx. FedEx should work to maintain a controlling stake in the express delivery market while luring shares from UPS in the domestic ground delivery. FedEx can do this by further differentiating itself from UPS integrating the differentiation strategy through actual innovation and service offerings or simply through manipulation in consumer perception.

Threats and Opportunities

The various threats that affect FedEx Corporation are fuel prices, regulations from foreign governments, external competition. The major threat to the FedEx business is the major competitors within their market segment. The express package and fright market is highly competitive. FedEx main competitor is UPS. The cost to enter the market and compete with either of these companies would be immense. FedEx and the competition in the industry compete on factors such as price, geographical coverage, reliability, frequency and capacity of scheduled service, ability to track packages and innovative service offerings. If FedEx fails to launch an innovative service or fail to efficiently serve its customers, the growing competition could lure away its customers, resulting in lower profitability for the corporation. Recommendations for dealing with FedEx’s threat of competition is to concentrate on expanding in more emerging markets. UPS is their toughest competitor in the domestic market as well as in the international market. Through acquisition and mergers, the company will achieve a tremendous amount of growth to each of its various operations and their total revenue will increase comparatively.

The opportunities presented to FedEx would be through their e-commerce and information technology. Information technology has played an important role in the growth of FedEx in terms of coverage and customer base. Through IT, FedEx has increased the number of customers with new entrants being outstanding (United States SEC, 2015).

FedEx Corporation SWOT Analysis

FedEx is an integrated transportation services provider engaged in offing overnight courier services, freight services, logistics solution, and business support services. The company’s strong brand image not only enhances its bargaining power, but also helps strengthens business and revenues growth. However, industry’s strong competitive landscape may exert additional pressures on the company’s operations and could adversely impact FedEx’s performance. (FedEx Corporation SWOT Analysis. (2015).

SWOT Analysis

FedEx should strive to embrace the online shipping market which has grown tremendously in the last 5 years alone and will only continue to soar. Dynamic changes in technology offer FedEx new opportunities for offering more options to consumers internationally who wants to conduct all their shipping needs online. FedEx should consider contracting with other online companies that use shipping services to gain an even bigger brand recognition and trust.

• FedEx should consider keeping the current strategies already in place and focus on fine tuning the current strategies. FedEx should also continue to encourage a high performance culture focused on customer satisfaction by meeting different customer needs. They should continue to use compete collectively, operate independently, and manage collaboratively to section the operating companies so that each company can continue to focus on its specific services and products. The benefit of this option is that FedEx has made extensive efforts in organizing the business and has policies and procedures in place to support the existing strategic plans. The disadvantage of keeping the current plan is that the economy is at a standstill and the financial position of the organization is suffering.

FedEx Express has a plan to improve profitability and secure the long-term viability of their business in the upcoming years. They plan to do this by focusing on the things they do best and the areas of our business with the greatest growth potential.

FedEx and UPS are the largest global courier delivery services; FedEx has a net income of about $2 billion on revenues of $42 billion while UPS is larger, with a net income of about $3 billion and revenues of $53 billion. Both companies are headquartered in the U.S. FedEx has a larger fleet of airplanes while UPS has a larger fleet of ground vehicles. FedEx has a deal with the US Postal Service, the SmartPost Service, and FedEx picks up and processes e-commerce shipments and transports them via jet to their location, and USPS makes the final delivery to the recipient. (FedEx Corporation. Rep. New York: Datamonitor)

Corporate Governance mechanisms

• The cost leadership business strategy is an alternative for FedEx to consider. FedEx could lower their prices. By charging less than competitors, FedEx would be able to increase its market share and gain a competitive advantage. The drawback to this option is that FedEx would have to cut operating costs to counter act the price reduction. These cutbacks would have to include staff and any unessential expenses which will increase the pressure for the remaining employees as there will be more work to do and less people to do it. FedEx could supplement this obstacle by increasing the number of its fuel suppliers to create more competition among the suppliers in an attempt to drive down the price.
  • Communications plan outline
  • Since its beginning, FedEx has placed great importance on effective communication, both internally and externally. T. Michael Glenn, Executive Vice President of Market Development and Corporate Communications described the FedEx approach as, “Communication is the center of everything at FedEx. You can’t execute it if you can’t communicate it.” FedEx calls this their Integrated Communication Function. At its core, integrated communication involves constant monitoring of situations and quickly distributing this information to employees, customers and other stakeholders. Communication is a key factor at any corporation. In times of strategic change this will affect both employees, customers and stakeholders, it imperative for a company to have a very effective communication plan. Effective communication can be the difference between success and failure with all stakeholder groups (http://about.van.fedex.com). FedEx could use the following communication plan to communicate recommended competiveness and profitability strategies to stakeholders:

The Board of Directors has adopted several different guidelines to further its longstanding goal of providing effective governance of the Company’s business and affairs for the long-term benefit of the Company’s stockholders. These Guidelines are reviewed periodically and revised as appropriate to ensure the effective functioning of the Board of Directors and high quality corporate governance. (investors.fedex.com/governance-and-citizenship/policies). The two corporate governance mechanisms that were evaluated for this assignment are:

Procedures for the review and preapproval of related person transactions are set forth in the policy attached hereto as Appendix A. If a Board member develops an actual or potential conflict of interest with the Company that is not covered by the attached policy, he or she should immediately notify the Executive Vice President, General Counsel and Secretary or his or her designee of all material facts and circumstances regarding the conflict. Any significant conflict must be resolved, or the Board member should resign. In addition, if a Board member becomes aware of a corporate opportunity that could benefit the Company, he or she must first present the opportunity to the Board of Directors for consideration and not attempt to personally profit from the opportunity unless the Company declines to pursue it. (investors.fedex.com/governance-and-citizenship/policies)

• Conflicts of Interest and Related Person Transactions; Corporate Opportunities.

The Board of Directors is responsible for monitoring the Company’s compliance with legal and regulatory requirements and overseeing the Company’s corporate integrity and compliance programs. The Board has delegated much of this responsibility to the Audit Committee. In furtherance of this responsibility, the Audit Committee will periodically discuss the implementation and effectiveness of the Company’s corporate integrity and compliance programs with the Company’s Executive Vice President, General Counsel and Secretary and its Corporate Vice President and Global Chief Compliance & Governance Officer. In addition, the Audit Committee will periodically review the Company’s Code of Business Conduct and Ethics, which sets forth the basic ethical principles all Board members, officers, employees and contractors must follow, and recommend any proposed changes to the Board of Directors for approval. (investors.fedex.com/governance-and-citizenship/policies)

• Corporate Integrity and Compliance.

FedEx Leadership Effectiveness

FedEx’s high-performance culture drives employees to excel at their jobs. In a service industry, such as FedEx, every employee is a key player in implementing the strategic plan. It is imperative for FedEx management and strategic planners to continually provide FedEx employees with the evolving strategic plan’s policies and procedures so that the employees at every level can make it happen. In order to provide the level of service and quality necessary to become, and to remain, the leader in the air express cargo transportation industry, Federal Express has developed a unique relationship with its employees, based on a people-first corporate philosophy. Leadership Evaluation and Awareness Process (LEAP) is a process implemented to improve leadership effectiveness and retention within FedEx. LEAP is compulsory for any employee who wants to progress to management level positions within the company. The purpose of LEAP is to evaluate a candidate’s leadership potential and ensure that the individual carefully considers his or her interest in and aptitude for leadership. (http://about.van.fedex.com)

FedEx-Responsible Corporate Citizen

The FedEx name is equal with integrity and reliability throughout the world.  Their reputation is an important strategic asset in which they try to protect and enhance at all times. It is important for them to have a strong corporate in today’s environment. FedEx has a long term commitment to comply with the law wherever they operate and they try to maintain a high standard of business and personal ethics. Every FedEx director, officer and employee is expected to comply with the policies that are set in the Code of Business Conduct and Ethics.  FedEx contractors and global service participants performing services on behalf of FedEx or operating under the FedEx brand name are also expected to comply with every part of the Code that apply to them.

This is essentially the idea of ethical leadership. A successful leadership is about more than financial returns it’s also about constantly earning trust. At FedEx, ethical commitment is summarized in one word and that word is respect with a few simple principles: respect for customers, respect for colleagues, respect for the company and respect for the communities. Ethics is not just a concept at FedEx and trust is taken very serious. Ethics is put into action everyday as part of a culture in which integrity and ethical conduct are recognized, valued and demonstrated. One example is, every year, thousands of team members volunteer to make their local communities better places to live, work and play. (http://about.van.fedex.com)

Citizenship at FedEx, are committed to being a great place to work, a thoughtful steward of the environment and a caring citizen in the communities where they live and work. They are passionate about connecting people and places and improving the quality of life around the world. FedEx is committed to actively supporting the communities they serve through strategic investment of their people, resources and network. Their corporate resources include financial contributions in kind charitable shipping services and volunteer services by team members at FedEx. (http://about.van.fedex.com)

References

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Concepts and cases: Competiveness and globalization (10th ed.). Mason, OH: South-Western Cengage Learning.

Frederick W. Smith, founder of FedEx. Retrieved from http://www.forbes.com/companies/fedex/

FedEx Corporation. Rep. New York: Data monitor. 18 May 2010

FedEx Corporation SWOT Analysis. (2015). FedEx Corporation SWOT Analysis, 1-8)

http://about.van.fedex.com

Wheelen and Hunger, Concepts in Strategic Management and Business Policy: Achieving Sustainability, Prentice-Hall, 12th edition, 2009.

investors.fedex.com/governance-and-citizenship/

about.van.fedex.com/our-story/overview