5. Founding
(1971):
Frederick Smith's
acquisition of
Arkansas Aviation
Sales
Original
name:
Federal
Express
Aimed for a contract with
the Federal Reserve Bank
Commenced
operations in 1973 with
14 small aircraft
Profitability
and
Deregulation:
First profit in
1975
Instrumental in
lobbying for air
cargo deregulation
(1977)
Became the
world's largest
all-cargo fleet
Milestone
(1983):
Reached $1 billion in sales
without mergers or acquisitions
within a decade
Name Change
(1994):
Officially
rebranded as
FedEx
Global
Expansion
(1995):
Acquisition-led entry
into Europe, Asia,
and China
Strategic
Investments
(2014):
About 90% of
FedEx’s $1.2
billion investment
to boost capacity
and infrastructure
Addressed rapid growth in
online consumer goods
orders
Hiring 50,000 seasonal
workers for increased holiday
demand
Acquisition
Proposal
(April 2015):
Offer to acquire Dutch
delivery firm TNT
Express N.V. for $4.8
billion
European Commission
raised antitrust concerns
in July 2015
Investigation into potential
market dominance and
competition issues
HISTORY
5
7. • Lack of specialized executive
roles.
Issue :
• FedEx's organizational
structure lacks executives with
titles such as COO, CTO, CSO,
HRM, or R&D. This could
impact the company's ability to
focus on critical areas and
expertise, potentially hindering
innovation and strategic
development.
Explanatio
n :
7
9. • Absence of a written vision
statement.
Issue :
• FedEx does not have a
documented vision
statement, which may result
in a lack of clear long-term
direction for the company. A
vision statement could guide
strategic decisions and align
the organization towards a
common goal.
Explanatio
n :
9
10. • Environmental impact and
large carbon footprint..
Issue :
• Operating a fleet of 700
aircraft and over 60,000
vehicles contributes to
significant fuel consumption
and noise pollution. Despite
efforts to reduce carbon
emissions, the size of the
operation poses
sustainability challenges,
and the company needs to
address these concerns to
meet evolving environmental
expectations..
Explanatio
n :
10
11. • Inefficiencies in
FedEx Express.
Issue :
• Despite being the
main revenue driver,
FedEx Express
does not operate as
efficiently as FedEx
Ground. The
company should
address operational
inefficiencies to
enhance the
performance of its
key business
segment.
Explanatio
n :
11
13. • Decline in net income
from 2014 to 2015.
Issue :
• The significant
decrease in net
income raises
concerns about the
company's financial
performance. A
careful analysis of the
reasons behind this
decline is essential to
implement corrective
measures and ensure
sustained profitability.
Explanatio
n :
13
15. • Erosion of margins by
e-commerce
competitors.
Issue :
• Traditional
competitors like UPS
and Deutsche Post
are facing challenges
from new entrants
like Google, eBay,
and Amazon. The
emergence of these
competitors,
especially in the e-
commerce sector,
could impact FedEx's
market share and
profitability.
Explanatio
n :
15
18. • UPS, headquartered in Atlanta, Georgia, was founded in 1907 and operates in the
package delivery business, providing logistics and financial services both in the
United States and internationally.
Overview
• Reported total revenues of $58.2 billion, with about 75 percent of revenues derived
from U.S. operations.
Financials (2015):
• Divided into U.S. Domestic Package, International Package, and Supply Chain &
Freight segments.
Operating Segments
• Delivers packages to over 220 countries and operates in 195 countries, offering a
range of services, including financing, risk mitigation, and consulting.
Global Presence:
• Actively expanding internally, acquiring firms in Latin America, Europe, and Asia-
Pacific. Focused on becoming a global player, especially in China, Vietnam, Africa,
and potentially Mexico.
Expansion and Strategy
18
1. UNITED PARCEL SERVICE (UPS):
19. • The USPS, established over 235 years ago, is the oldest postal service in
the U.S. It employs 488,000 workers and delivers to over 150 million
residences, businesses, and post office boxes.
Overview
• Total revenues of $67.8 billion, operating expenses of $73 billion, resulting
in a $5.5 billion loss.
Financials (2014):
• Divided into First Class Mail, Standard Mail, Packages, International, and
Periodicals.
Bussiness Segments
• Facing challenges due to declining mail volume, aggressive cost-saving
measures, and accusations from competitors (UPS and FedEx) regarding
pricing strategies. USPS is heavily unionized, contributing to certain
restrictive policies.
Challenges :
19
2.UNITED STATES POSTAL SERVICE (USPS):
20. • Considered the world's largest courier company, Deutsche Post,
headquartered in Bonn, Germany, reported 2014 revenues of €29.4
billion, competing directly with FedEx and UPS through DHL Express.
Overview
• Revenues of approximately $35 billion USD, profits of approximately
$1.65 billion USD .
Financials (2014):
• Operates in over 220 countries and competes globally with DHL
Express.
Global Presence:
• Directly competes with FedEx and UPS through its DHL Express
shipping company, acquired in 2005.
Competition:
20
3. DEUTSCHE POST (DPW.DE):
22. 22
COMPETITORS
PORTER’S 5 FORCES
• Historically, FedEx, UPS, US Postal Service, Deutsche Post, TNT
International, and large national postal services were the main players
in package delivery.
Traditional Competitors
• E-commerce growth has brought new competitors like Google, eBay,
and Amazon, offering delivery services, especially in large cities.
New Entrants:
• Exhibit 6 provides market share data for rival firms in the package
delivery industry.
Market Share Data:
• Amazon and Alibaba, with their large size and package volume, have
eroded into the profit margins of big transport firms like UPS and
FedEx.
Erosion of Margins
24. 1. AIR FREIGHT DEMAND
24
• High jet fuel prices historically led to a shift towards trucking and
slower transportation modes.
Historical Context
• Falling oil prices in 2014–2015 resulted in a rise in air freight demand.
Recent Changes
• FedEx Express and UPS together account for 80% of the domestic air
cargo ton-mile revenues.
Market Share:
• Despite an improving economy and lower oil prices, the outlook for
international air freight demand is uncertain due to competition from
ocean shipping companies, new ports, and faster shipping times.
International Market Challenges: :
25. 2. INTERNATIONAL MARKETS :
25
• International markets contribute to over 50% of airfreight ton-miles
and have been steadily increasing.
Importance for Growth:
• Asia experiences nearly 20% year-on-year growth, while domestic
volumes grow around 4% annually.
Regional Growth:
• Both companies capitalize on international trends, with a particular
focus on China and Germany.
Strategic Moves by FedEx and UPS:
• International rates tend to offer higher margins due to the
disproportionate use of next-day services.
International Market Challenges: :
26. 3. LESS THAN TRUCK LOAD (LTL) :
26
• FedEx Ground and UPS dominate the LTL segment, accounting
for a majority share in a $50 billion industry.
Market Share:
• LTL shipments typically consist of 1,000 to 1,500 pounds and are
commonly used in business-to-business or retail-to-consumer
segments.
Segment Characteristics
• LTL operations require a large hub structure, an area where both
UPS and FedEx Ground have a presence.
Infrastructure Requirement:
• : Labor costs are high in LTL, with many drivers represented by
the International Brotherhood of Teamsters Union.
Labor Costs:
27. 4. NATURAL GAS POWERED TRUCKS :
27
• The trucking industry had high expectations for natural gas-powered trucks in the U.S.
Industry Expectations:
• Sales in 2013 and 2014 were below expectations, with only 10,000 trucks sold in 2014
compared to an expected 16,000.
Sales Performance:
• Premiums on natural gas trucks and the availability of fueling stations in limited regions
are challenges.
Challenges:
• UPS stands out with a fleet of around 300 gas-powered trucks and 700 tractors,
showcasing a commitment to alternative fuel sources.
UPS's Role:
• Despite challenges, natural gas trucks offer cost savings over time, with a potential
recovery of the price premium paid in around 4 years at current fuel prices.
Economic Benefits:
32. FEDEX'S
FUTURE SUCCESS :
32
• Oil prices fell nearly 60 percent in the U.S. from
Summer 2014 to early 2015.
1.Oil Price Impact (2014-
2015):
• CEO of Old Dominion Trucking noted that oil price
fluctuations do not directly impact the trucking
business.
2.Trucking Industry
Response:
• FedEx missed Q2 2014 earnings estimates due to
reduced fuel surcharges from the drop in oil prices.
3. FedEx's Financial
Performance (2014-2015):
• FedEx's performance contrasted with UPS, which
experienced a stock price drop and reported flat
earnings in January 2015.
4. Competitor
Comparison:
• FedEx acquired GENCO Distribution System, Inc. in
January 2015, aiming to enhance logistics offerings.
5. Strategic Acquisition
(January 2015):
33. FEDEX'S
FUTURE SUCCESS :
33
• Despite challenges, FedEx reported a 23 percent
increase in Q2 2014 profits and a 5 percent rise in
revenue compared to the same period in 2013.
6. FedEx's Strong
Performance:
• In mid-2015, FedEx signed a deal to buy 50 Boeing
767-300 freighters, signaling a commitment to
modernize its fleet and improve operational efficiency.
7. Strategic Fleet
Modernization:
• Despite difficulties, FedEx remains confident about its
future, as evidenced by strategic acquisitions and
investments.
8. Confidence in
Future Growth:
• FedEx's CEO emphasized the company's distinction
from UPS, highlighting its resilience in the face of
industry challenges.
9. Differentiation
from Competitors:
• FedEx's strategic moves and financial resilience
position the company well for future growth despite
challenges in the industry.
10. Overall
Conclusion:
34. RECOMMENDATIONS
34
FedEx Corporation should enhance its organizational structure by incorporating specialized
executive roles and formalize a clear vision statement for unified direction.
Intensifying sustainability efforts is crucial, considering the environmental impact of its extensive
operations.
Diversifying strategic approaches beyond global expansion is recommended to mitigate
geopolitical and economic risks.
Addressing operational inefficiencies within FedEx Express and understanding the reasons
behind the decline in net income from 2014 to 2015 are essential for sustained profitability.
Proactively responding to the erosion of margins by e-commerce competitors and staying
vigilant on changes in air freight demand, particularly in international markets, are key
considerations.
Capitalizing on international market trends, optimizing Less than Truck Load (LTL) operations,
and continuing strategic fleet modernization efforts will strengthen FedEx's position.
Investing in technology, infrastructure, and innovation to navigate the dynamic logistics industry
successfully.
Continuous adaptation and proactive measures will ensure FedEx's sustained growth and
competitiveness.
