FEDEX Swot Analysis

FedEx Corporation

Company Profile

Publication Date: 18 May 2010

www.datamonitor.com

Asia PacificAmericasEurope, Middle East & AfricaLevel 46245 5th Avenue119 Farringdon Road2 Park Street4th FloorLondonSydney, NSW 2000New York, NY 10016EC1R 3DAAustraliaUSAUnited Kingdom

t: +61 2 8705 6900t: +1 212 686 7400t: +44 20 7551 9000f: +61 2 8088 7405f: +1 212 686 2626f: +44 20 7551 9090e: [email protected]: [email protected]: [email protected]

ABOUT DATAMONITOR

Datamonitor is a leading business information company specializing in industry analysis.

Through its proprietary databases and wealth of expertise, Datamonitor provides clients with unbiasedexpert analysis and in depth forecasts for six industry sectors: Healthcare, Technology, Automotive,Energy, Consumer Markets, and Financial Services.

The company also advises clients on the impact that new technology and eCommerce will have ontheir businesses. Datamonitor maintains its headquarters in London, and regional offices in NewYork, Frankfurt, and Hong Kong. The company serves the world's largest 5000 companies.

Datamonitor's premium reports are based on primary research with industry panels and consumers.We gather information on market segmentation, market growth and pricing, competitors and products.Our experts then interpret this data to produce detailed forecasts and actionable recommendations,helping you create new business opportunities and ideas.

Our series of company, industry and country profiles complements our premium products, providingtop-level information on 10,000 companies, 2,500 industries and 50 countries. While they do notcontain the highly detailed breakdowns found in premium reports, profiles give you the most importantqualitative and quantitative summary information you need - including predictions and forecasts.

All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic,mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor plc.

The facts of this profile are believed to be correct at the time of publication but cannot be guaranteed. Please note that thefindings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faithfrom both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Datamonitorcan accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.

FedEx Corporation © Datamonitor

FedEx Corporation

TABLE OF CONTENTS

Company Overview..............................................................................................4

Key Facts...............................................................................................................4

SWOT Analysis.....................................................................................................5


FedEx CorporationTABLE OF CONTENTS

COMPANY OVERVIEW

FedEx offers overnight courier services, freight services, logistics solutions, and business supportservices. The company is one of the world's largest express transportation companies, deliveringsmall packages throughout the US as well as to 220 countries worldwide. FedEx is headquarteredin Memphis, Tennessee and employs about 280,000 people.

The company recorded revenues of $35,497 million during the financial year ended May 2009(FY2009), a decrease of 6.5% compared to FY2008. The operating profit of the company was $747million during FY2009, a decrease of 64% compared to FY2008. The net profit was $98 million inFY2009, a decrease of 91.3% compared to FY2008.

KEY FACTS

FedEx CorporationHead Office942 South Shady Grove RoadMemphisTennessee 38120USA

1 901 818 7500Phone

1 901 395 2000Fax

http://www.fedex.comWeb Address

35,497.0Revenue / turnover(USD Mn)

MayFinancial Year End

280,000Employees

FDXNew York Ticker


FedEx CorporationCompany Overview

SWOT ANALYSIS

FedEx offers overnight courier services, freight services, logistics solutions, and business supportservices. It operates the world's largest express transportation company. FedEx has a strong brandimage. During 2009, the company was named the Fortune's sixth best admired company all overthe world. Strong brand image besides driving domestic revenues, facilitates international expansion.However, the company is threatened from the growing popularity of internet, which could affect themail volumes, resulting in lower revenues for the group.

WeaknessesStrengths

Dependence on the US marketStrong brand imageWeakening financial performanceLarge scale of operations

ThreatsOpportunities

E-substitutionInternational expansionIntense competitionExpanding Chinese market

Growing global transportation servicesindustry

Strengths

Strong brand image

FedEx has a strong brand image. It is amongst the most recognized names in the globe expressdelivery services segment. For instance, during 2009, the company was ranked seventh in FORTUNEmagazine’s “World’s Most Admired Companies” list, the eighth consecutive year the company hasbeen ranked in the top ten on the list. In addition, FedEx continued to be rank highest in customersatisfaction in the University of Michigan Business School National Quality Research Center’sAmerican Customer Satisfaction Index in the express delivery category. More recently, in March2010, the company was named as the top 20 world’s most admired companies, according to a surveypublished in FORTUNE magazine. In its annual report on corporate reputation, FORTUNE magazinelisted FedEx as the 13th most admired company.

The company operates its four business segments under the FedEx brand name: FedEx Express,FedEx Ground, FedEx Freight, and FedEx Services. FedEx promotes its brand through print andbroadcast advertising, corporate sponsorships, and special events. The company's advertising andpromotion expenses were $379 million in FY2009, $445 million in FY2008, and $406 million in 2007.


FedEx CorporationSWOT Analysis

The company's strong brand image drives its retail business.The strong brand image besides drivingdomestic revenues, facilitates international expansion as well.

Large scale of operations

FedEx provides transportation, e-commerce, and business services.The company operates throughfour business segments: FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services.

FedEx Express is one of the largest express transportation companies, engaged in packages andfreight deliveries throughout the US and to more than 220 countries worldwide. FedEx Express hasan integrated global network, comprising 57,000 drop-off locations, 654 aircraft, and 51,000 vehiclesand trailers. FedEx Ground Package Systems (FedEx Ground) serves customers in the NorthAmerican small-package market, focusing primarily on business and residential delivery of packagesweighing up to 150 pounds. FedEx Ground conducts its operations primarily through 22,500owner-operated vehicles and 31,500 company-owned trailers.

FedEx Freight provides regional next-day and second-day and interregional less-than-truckload(LTL) freight services. FedEx Freight operates approximately 59,000 vehicles across 480 servicecenters. To provide FedEx Home Delivery service, FedEx Ground leverages its existing pickupoperation, and hub and linehaul network. FedEx Home Delivery's operations are often co-locatedwith existing FedEx Ground facilities to achieve further cost efficiencies.

FedEx Services is a provider of document solutions and business services. It offers access totechnology for copying and printing, professional finishing, document creation, internet access,computer rentals, video conferencing and direct mail, web-based printing, and the full range of FedExday-definite ground shipping and time-definite global express shipping services.

FedEx's large scale of operations and ensuing benefits enable it to serve a broad customer base,which improves its revenue generating capacity.

Weaknesses

Dependence on the US market

Although FedEx has expanded to other international regions, it still depends on the US market formajority of its revenue. The company generated almost 73% of its revenue from the US marketduring FY2009. This high dependence on the US could have a dampening effect on the company'srevenues if the economy and/or the company's sales in the US do not grow as expected. Furthermore,the concentration of operations in this area increases the company's exposure to country specificfactors such as labor strikes, changes in economic conditions, and most importantly, increasingcompetition from other players in the market.

Weakening financial performance



FedEx has recorded weak financial performance in FY2009.The revenues of the company declinedby 6.5% from $37,953 million in FY2008 to $35,497 million in FY2009. In addition, there has beena significant decline in revenues from its key segments in FY2009. For instance, the revenues fromthe FedEx Express segment declined by 8.4% compared to FY2008. Similarly, the revenue fromthe FedEx Freight segment and FedEx Services segment declined by 10.5% and 7.5%, respectively,in FY2009.

The profitability position of the company also declined significantly. FedEx recorded an operatingprofit of $747 million during FY2009, a decrease of 64% compared to FY2008. The net profit was$98 million in FY2009, a decrease of 91.3% compared to FY2008. Further, the operating margin ofthe company declined from 5.5% in FY2008 to 2.1% in FY2009; and net margin declined from 2.9%in FY2008 to 0.3% in FY2009. The company’s return on assets also declined from 4.4% in FY2008to 0.4% in FY2009.

A continuation of this trend will reduce availability of resources to pursue growth plans and diminishinvestor confidence.

Opportunities

International expansion

FedEx has been taking initiatives to expand its international presence, especially in key marketssuch as China, India, and Europe. During 2007, the company made several acquisitions in thesemarkets, in order to generate long-term growth, productivity, and profitability. For instance, FedExExpress acquired its Indian service provider, Prakash Air Freight (PAFEX), for $30 million. PAFEX,a privately-held company, was one of the largest domestic express companies operating in India,with more than 384 offices and depots serving nearly 4,400 destinations.

In addition, the company has started next-morning domestic delivery service in China, which isavailable in more than 40 cities and counties throughout the country.The new China domestic serviceis supported by a money-back guarantee and real-time package status tracking. Further, FedExExpress has launched a dedicated direct flight between Manchester in the UK and the US.

The company's expansion initiatives will enable the company to expand its global reach and reduceits business risks related to the US market.

Expanding Chinese market

FedEx has been increasingly focusing on the Chinese market, one of the key growth markets inAsia. China has continued to dominate the Asian region in terms of activity and growth. Accordingto Datamonitor, the Chinese air express market is expected to grow at about 34%, thrice the globalaverage of about 11% during 2005-20. Moreover, it is predicted that China would become the sixth



largest express market in 2010. In addition, according to the American Institute of Aeronautics andAstronautics' forecast, China's air cargo is expected grow at an average 11.2% per year until 2020.

The company has significant operations in China. It operates an Asia Pacific hub at the GuangzhouBaiyun International Airport in Southern China to leverage the fast-growing China and Asia Pacificmarkets. Further, In 2007, FedEx signed a lease with Hangzhou Xiaoshan International Airportopening its Chinese transfer centre in the city, which can sort up to 9,000 packages per hour. Furtherin 2007, the company purchased Tianjin Datian W. Group's (DTW Group) 50% share of theFedEx-DTW International, a priority express joint venture; and also the DTW Group's domesticexpress network in China for approximately $400 million in cash. Moreover, the FedEx transfercentre in Guangzhou Baiyu Airport was opened in 2009. It is the company’s largest facility outsidethe US.

The company, with its increased focus, is well positioned to benefit from the growing Chinese market.

Growing global transportation services industry

The transportation services industry, primarily comprising of freight transportation by road, rail, air,and marine, witnessed stronger growth during 2004-08. This industry generated total revenues of$2,965.6 billion in 2008, representing a compound annual growth rate (CAGR) of 6.3% for the periodspanning 2004-08. In 2013, the industry is forecast to have a value of $3,252.1 billion, an increaseof 9.7% since 2008.The transportation services industry's production volumes increased at a CAGRof 5.7% 2004-08, to reach a total of 25,396.3 billion freight tone kilometers (FTK) in 2008. In 2013,the industry is forecast to have a volume of 29,279.5 billion FTK, an increase of 15.3% since 2008.

FedEx offers freight and logistics services. An expanding end market is likely to drive the demandfor the company's services.

Threats

E-substitution

FedEx faces its biggest ever threat from the growing popularity of internet. In recent years, electronicemail has more or less replaced the postal letter as a means of communication. Advances such asfree email services, wireless broadband, and text messaging (SMS) are adversely affecting traditionalmail services, especially in urban areas.The postal mail business delivers information such as lettersand bank statements as well as printed matter such as direct mail and periodicals, which can nowbe accessed faster through the internet (for instance, electronic banking). Further, the first-classmail volumes have also been affected by the telephone, fax machine, and other electroniccommunications. If substitution of traditional mail by digital alternatives continues, mail volumes willdecrease, resulting in lower revenues for the company.

Intense competition



FedEx competes with many companies and services on a local, regional, and international level.The transportation and business services markets are both highly competitive and sensitive to priceand service, especially in periods of little or no macro-economic growth. Some of the company’scompetitors have more financial resources which enables them to raise capital more easily. Thecompetition has led to a very competitive pricing environment within the industry. If the pricingenvironment becomes irrational, it could limit FedEx’s ability to maintain or increase prices (includingfuel surcharges in response to rising fuel costs) or to maintain or grow its market share. In addition,maintaining a broad portfolio of services is important to keeping and attracting customers. If thecompany’ competitors offer a broader range of services or more effectively bundle their services, itcould impede FedEx’s ability to maintain or grow its market share.



Copyright of FedEx Corporation SWOT Analysis is the property of Datamonitor Plc and its content may not be

copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written

permission. However, users may print, download, or email articles for individual use.

FEDEX Swot Analysis

Documents

Transcript of FEDEX Swot Analysis