FedEx Marketing Dissertation

...

Nowadays it is the development of e-commerce that is challenging the growth of the courier companies and is changing their customer’s portfolio. The main B2B Business model is now being enriched by new B2C customers. According to the Forester research, the B2C business will grow from roughly 600 Bio USD in 2012 to over 1,3 trillion in 2017, a massive growth.

- Division within the CEP industry:

There are two types of companies in the CEP industry: the global companies with international networks and door-to-door services and the regional/local companies concentrated on domestic markets.

The four global leaders are DHL (Germany) FedEx (US), UPS (US) and TNT (Netherlands). All provide international and domestic CEP services.

Let us analyze their key performance indicators below:

[pic 4][pic 5]

From these figures we can see that:

- DHL has the highest income yet it includes the mail business of Deutsche Post, its owner, but has only a medium profitability. For the comparison with the other players the mail business should be taken out.

- On the express business FedEx comes out as the clear winner so far.

- Yet on the operating profitability side (in % of revenues) UPS has a better rating.

- All companies have a strong business focus in their home markets where they reach their higher operating margins.

- TNT is the smallest of the 4 players and seems in troubles of finding a path to growth and higher margins. The size of its business seems to be the major issue to keep its position in this investment and service driven industry.

To be able to remain competitive and raise the speed and the geographic level of their services these companies had to invest tremendous amount of money in assets such as planes, trucks and delivery cars. We will look at the FedEx Model later.

The competition within this market is high for all companies engaged and a precise positioning of their services, investments as well as business segmentation is of utmost importance as local players like Hermes, La Poste and many others compete with the global players.

- Assessment of the FedEx’s assets and resources:

FedEx was created in 1971 as Federal Express Corporation. It is an American global courier company. With around 400 own aircrafts, more than 100,000 vehicles and 300,000 employees, FedEx acts on a worldwide platform. With its constant acquisition programs, FedEx is considered as one of the major integrators. It is the leader in Express services.

- Analysis of FedEx’s assets:

The global revenue was 45,6M$ in 2014, out of which 27,1M$ from the Express segment (60%) and a 2,1 M$ Operating margin. FedEx has the highest Capex (Fig 2), concentrated on the Express segment (Fig 3).

[pic 6]

[pic 7]

[pic 8]

Fig. 3. www.annualreport.van.fedex.com in Mio USD

- SWOT Analysis:

- Strength:

> Strong brand image

> Own planes (more then 400), vehicles, hubs and landing rights

> Ranked top 3 of the best courier companies multiple years

> Focus on customer satisfaction

> Drivers are independent contractors compared to competitors who are unionized

> Extensive Capex expenditures

> Innovative (403 Mio USD spend in technology equipment)

- Weaknesses:

> High prices

> Not strong in Europe (see Apendix 1)

> Lack of power on the ground delivery compared to UPS

- Opportunities:

> Offering service in more than 200 countries

> Globalization will help FedEx to grow its business on the B2C platform

> Expansion of the online market (e-commerce) which increases the express segment

> Acquisition of TNT to strengthen its business in the European market

> Will to compete against UPS on the domestic’s ground delivery

- Threats:

> High fixed costs (fuel, services)

> Employees are wishing to unionize

> Customers changing to slower and therefore cheaper delivery services

> UPS gaining market shares in the Express delivery market

> Communication through internet (email) overtook the overnight document delivery sector

- International courier segmentation and FedEx’s targeted segments

- Segmentation of the international courier sector:

The courier service is a value-added service and bases itself on a door-to-door delivery. The segmentation can be done according to 3 main factors:

- Destination:

The distinction can be done within the destination of the shipment, either on national or international ground.

- Type of customers:

At the start of this industry, the business used to concentrate on a business-to-business (B2B) delivery. With the development of technology and transportation, the industry opened itself to business-to-consumers (B2C), C2B (return delivery) and C2C.

- Time sensitivity:

Time sensitivity of the delivery is the third key segment. Some deliveries are needed to be done within a day, others a week