FedEx Company’s Strategic Management

Executive Summary

FedEx is one of the leading courier companies in the global market. In the United Arab Emirates, FedEx has become a major provider of various courier services because of the enabling environmental forces. However, this company will need to redefine its marketing strategies both locally and internationally as competition is expected to stiffen. The firm must be capable of offering its clients unique value to create and maintain a pool of loyal customers in the market.

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Introduction

The Selected Industry

The courier industry has experienced massive growth over the recent past. According to Lowe, the transport sector is increasingly becoming important as globalization continues to shape international business (44). Many large companies around the world find it necessary to export their products to the international market.

The city of Dubai has become one of the top global business hubs that act as a transit route for products coming from Europe and East Asia to Africa and other parts of the developing economies. As such, the courier industry has experienced rapid growth as the demand for transport services continues to increase both in the local and international markets. A number of local and international courier service companies currently operate in Dubai, Abu Dhabi, and other major cities in the country. The growth that has been witnessed in this industry clearly shows that more companies are likely going to be attracted to this market.

The Selected Company in the Industry

The company that was chosen for analysis is Federal Express, often known in the global market as FedEx. It is a global courier services company, which has regional offices in the city of Dubai at Jebel Ali Free Zone Service Center. Although the company is headquartered in Memphis, Tennessee, regional offices, such as that in Dubai, operate semi-autonomously. It is currently one of the leading providers of local and international courier services in the United Arab Emirates. Started in June 1981 by Frederick W. Smith, who is also its current chief executive officer, the company has registered impressive growth in the international market, and it is currently one of the most preferred brands among the international providers of transport services.

Company Indicators

Company Mission & Vision & Strategy

In its mission statement, it is clear that FedEx strives to develop mutually rewarding relationships with partners, team members, and suppliers (Eden and Ackermann 32). The firm seeks to develop a close working relationship with various stakeholders to help it achieve the much-needed growth in the market. The company also has a commitment to its shareholders as it seeks to increase the value of their investment. The vision of this firm is to become the leading courier services provider in the global market. The following are the main strategies it is currently using in the market to achieve its vision:

  • The company is keen on understanding the changing needs of its customers and developing products that meet these needs in the best way possible.
  • The firm has formed a strategic partnership with the relevant companies to ensure that it achieves the set goals and objectives.
  • The firm has expanded its operations in the global market to increase its market share and the value of shareholders’ investment.

Company Size and Growth Rate

According to Schmidlin (41), there is stiff competition in the international courier services industry. A number of firms have sprung up to take advantage of the growing market, and FedEx is one of them. The company achieved massive success in the 1990s and remains one of the fastest-growing multinational courier companies. The figure below shows the market share of this company against other leading courier service providers.

Express delivery market structure.
Fig 1. Express delivery market structure (Wahlen et al. 28).

As shown in the above figure, DHL has the largest market share in the industry, followed by UPS. FedEx comes closely in position three. These three leading courier service companies control about 80% of the market share.

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Market Size

FedEx is currently the third-largest courier services company in the world, controlling about 21% of the market share at the global level. In the United Arab Emirates, it remains one of the dominant players in the market, controlling over 30% of the market share (Schmidlin 41). The market remains competitive, but this company’s brand is one of the most trusted in the local market.

Products/Services

FedEx has been keen on expanding its product lines as a way of increasing its revenue sources and dealing with the increasing competition in the market. Currently, the main products of this company include the following:

  • Post delivery;
  • Express mail;
  • Freight forwarding;
  • Third-party logistics.

Profitability

FedEx’s operates from one international sea and airports to another in various countries. As such, most of the financial statements that it releases only show its global profits. In the financial year that ended on December 31, 2016, the company’s revenue was USD 50.365 billion, while the profit was USD 1.82 billion (51). The financial statements of the company show that its profits are on the rise.

Internal Resources and Capabilities

Capital Requirements

To achieve success in the market, this company needs internal resources and capabilities able to withstand the market forces. The company’s increasing market revenues means that it can generate the capital needed for expansion from its internal sources instead of borrowing from financial institutions. It also has a stable financial resource capable of facilitating proper market research. In 2016, it had an operating income of USD 3.07 billion (Schmidlin 77).

Capacity Position

In the United Arab Emirates, FedEx is one of the top logistics solution companies. It is in the third position in the global market, and its impressive growth means that it may achieve even a higher market position in the near future.

Human Resources & Management Capabilities

According to Schmidlin (68), FedEx employs over 400,000 people all over the world. In the United Arab Emirates, the company has over 500 highly skilled employees working in various departments. The first also has a team of dedicated human resource managers who are able to direct the employees towards achieving the set goals and objectives. Its high human resource management capabilities have been reflected in having a team of highly satisfying employees both locally and in the international markets.

Technology Capabilities

FedEx is one of the logistics companies that have embraced the emerging technologies to offer quality services to the customers. Most of its operations are automated to reduce human handling. The firm uses modern communication technologies to enable its customers to track the movements of their products while on transit. The emerging technologies also make it possible to communicate easily with its clients in the market. Internally, the employees and managers use emerging technologies to enhance efficiency in service delivery.

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External Market Environment

Entry and Exit Barriers

The United Arab Emirates’ government has been keen on promoting growth of service industry and other industries to reduce the economy’s reliance on oil and gas export. As such, the bottlenecks to entry of foreign firms have been eliminated. It is easy for foreign companies to enter and exit this market whenever they feel necessary. It means that the level of competition may become stiffer.

Industry Attractiveness

The industry is very attractive, specifically given the growing global trade. More goods and parcels are entering and leaving the United Arab Emirates than ever before. The demand for courier services is going up not only locally within the United Arab Emirates but also at regional and global level. It creates the opportunities for the existing and new players in this industry.

Level of Consolidation

The market is consolidated, with companies always striving to form strategic partnership whenever it is necessary. For instance, sometimes FedEx would partner with DHL to ensure that they help each other in reaching greater markets than their current capacities as individual firms.

Customer Characteristics

One of the most significant characteristics of the customers in the market is that they are very demanding. Most of them are organizational customers who rely on these courier services companies to help them move their goods from one location to the other. They are time conscious and are keen on having their products with least damage possible.

Industry Driving Forces

The driving forces in the industry vary. One of the most important driving forces in this industry is technology. Technology is redefining the operational approach of the companies in the logistics industry. Competition is another important driving force that makes it necessary for companies to redefine their products and product delivery methods to help win the customer loyalty. The changing customer preferences and needs in the market also make it necessary for companies to redefine their operations.

Competitive Analysis

The strength of FedEx is in its huge financial power that can enable it to support ambitious development projects. Its team of highly skilled employees also enables it to adapt to the emerging changes in the market with easy. On the other hand, its main rival DHL enjoys a strong brand and the fact that it dominates the European market. The main weakness of both FedEx and DHL is that they are slow in adapting the new environmental conscious operational strategies that minimize pollution both at the sea and in air.

The market has attractive opportunities that both FedEx and DHL can take advantage of in their operations. The demand for the products they offer is on the rise both locally and internationally. The emerging technologies are also making it easy for them to conduct their businesses. However, both firms must be ready to deal with the existing threats in the market. Competition is the biggest threat in the market. Global terrorism and cybercrime are some of the emerging threats faced by these two companies.

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Porter’s Five Forces Model

Using Porters Five Forces Model may help in identifying the forces in the industry that this firm will have to deal with. Figure 2 below shows these forces.

Porters Five Forces Model.
Fig. 2. Porters Five Forces Model (Parnell 76).

The threat of new entrants, as discussed above, is high because the government of the United Arab Emirates has eliminated most of the barriers to entry that existed before. The rivalry among the existing competitors is also high, especially among the top players such as FedEx, DHL, and UPS. Most of the customers that these companies serve are organizational buyers, making their bargaining power very high. However, the bargaining power of the suppliers is relatively low because of the options that exist in the market. The threat of substitute products in the market is very low because the services that they offer lack proper substitutes. Customers must use the existing players.

Current Position of Your Company in the Industry

FedEx is currently top positioned in the local industry within the United Arab Emirates in terms of the popularity of its brand, the number of employees, and the value of services that it delivers in the market. It is currently ranked third globally, after DHL and UPS, in the global courier industry. The growth rate of the company in the market shows that it has the potential of becoming the leading player in this industry at the global level.

Future Company Outlook

FedEx is currently one of the top players and fastest growing companies in this industry. It has a very bright future if the growth and profitability of the firm can be maintained. Locally in the United Arab Emirates, this firm is likely going to be dominant. The external forces, especially government regulations and developments in technology are all likely going to benefit this company in the future.

Business Strategy Recommendation

Assessment of Company’s Strategic Plan

The analysis of FedEx strategic plan conducted above shows that the management has been keen on understanding the emerging needs of customers and developing products which meet these needs appropriately. The company has a fleet of vans, trucks, ships, and cargo planes to ensure that it delivers its services to the customers in the most efficient way. Locally in the United Arab Emirates, the company has developed systems and structures to ensure that its services can be delivered to the customers in time and in good condition.

The company’s strategic plan clearly demonstrates that FedEx understands the threat posed by other rival companies. It explains why its strategic plan is keen on benchmarking and embracing the industry best practices. The management still needs to do more to ensure that the firm remains competitive in the market despite the emerging changes in the market.

Strategic Recommendations

FedEx’s strategies in the market demonstrate that it understands the forces that may affect its operations in the market. The management should be ready to deal with the possible threats and weaknesses identified in the section above to ensure that its success is not jeopardized. The following strategic recommendations should be taken into consideration:

  • FedEx should have a marketing research department that is responsible for monitoring the emerging trends and how the firm can embrace such changes.
  • The company should continue relying on technology to improve its operations both in terms of service delivery and communication.
  • The company should consider forming more strategic partnerships with the relevant firms that it can work together with to enhance quality of the services.
  • The employees of this company should be taken through regular training to sharpen their skills.

Works Cited

Eden, Colin, and Fran Ackermann. Making Strategy: Sage Publications. SAGE Publications, 2013.

Lowe, David. Commercial Management: Theory and Practice. Wiley, Blackwell, 2013.

Parnell, John. Strategic Management: Theory and Practice. SAGE, 2014.

Schmidlin, Nicolas. Art of Company Valuation and Financial Statement Analysis: A Value Investor’s Guide with Real-Life Case Studies. Wiley, 2014.

Wahlen, James, et al. Financial Reporting, Financial Statement Analysis, and Valuation. Cengage, 2014.

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