Running head: FEDEX CO.

FedEx Corporation

Basma Fatteh

BAM479-OC

Professor Deborah Harvel-Jenkins

10-4-2020
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FedEx Corporation

Introduction

FedEx Corporation offers customers and businesses worldwide with a wide

range of transportation, e-commerce, and business services. FedEx Services offers

sales, marketing, communications, customer service, information technology,

technical support, billing and collection services, and specific back-office functions

that assists its transportation segments.The company provides unified business

solutions through operating companies competing and operating cooperatively and

innovating digitally under its brand. It accumulates a large annual revenue of $71

billion. FedEx is rated one of the world's top praised and trusted employers. It

inspires its more than 500,000 team members to continue to focus on safety, the

needs of their customers and communities, and the highest ethical and professional

standards.

Mission Statement

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.
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Corporate activities will be conducted to the highest ethical and professional

standards.

Components Status
Customers Yes
Products or services Yes
Markets Yes
Technology Yes
Survival, growth, Yes
profitability
Philosophy Yes
Self-concept Yes
Public image Yes
Employees Yes

Customers- Identifying the customers is essential to attract the targeted audience.

Products or services- Consumers need to know the products or services offered.

Markets- It is important to include the customer base.

Technology- Being up to date in its products and services enables it to be more

pleasing and competitive.

Survival, growth, and profitability- Demonstrates the company’s commitment to

financial gain and prosperity.

Philosophy- Reflects the company’s beliefs, values, aspirations, and ethical

standards.

Self-concept- Describes the company’s advantage and what sets it apart from its

competitors.
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Public image- Portrays to customers the responsiveness of the company to social,

community, and environmental concerns.

Employees- The employees are an integral part of the Company's continued

success and therefore should be included.

Vision Statement (original)

To be an innovative and effective courier service company that leads with initiative

and commitment to create positive relations with all people.

Company Milestones

FedEx remains the industry’s global leader in providing fast, reliable, timely

package delivery services to more than 220 countries and territories.

FedEx Co.

 1973- Federal Express (currently known today as FedEx) began operations

with 389 team members. On April 17, 1973, 14 small aircraft took off from

Memphis and delivered 186 packages to 25 U.S. Though the profit only

appeared in July 1975, it quickly became the premier carrier of high-priority

goods in the marketplace and set the bar for the express shipping industry it

created.

 1983- Federal Express reported $1 billion in revenues, making American

business history as the first company to reach that mark within 10 years of

startup without mergers or acquisitions.

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 1984- After the first of many international acquisitions, intercontinental

operations began with service to Europe and Asia. 

 1989- Federal Express acquired Tiger International Incorporation. It

integrated the Flying Tigers network and became the world’s largest full-

service, all-cargo airline. This includes routes to 21 countries, a fleet of

Boeing 747s and 727s, facilities throughout the world, and Tigers’ expertise

in international airfreight.

 1995- The company adopting the name “FedEx” as its official brand and was

now authorized to serve China through an acquisition from Evergreen

International Airlines. Through this authority, it managed to be the sole U.S.-

based, all-cargo carrier with rights to the world’s most populous nation. 

 2004- FedEx acquired Kinko’s Inc., and rebranded it as FedEx Kinko’s.

FedEx also acquired Parcel Direct, which was a leading parcel consolidator

that it later rebranded as FedEx SmartPost. The acquisition created a FedEx

alliance with the U.S. Postal Service, giving customers in the e-commerce

and catalog segments a cost-effective solution for low-weight, less time-

sensitive residential shipments.

 2013- FedEx added Boeing 767-300F planes to its fleet. The 767s, which are

30% more fuel efficient and have 20% lower unit operating costs than the

previous aircraft. The company launched more than 30 initiatives to improve

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fuel efficiency and cut fuel emissions, such as improvements to in-flight

planning and boosting aircraft operation efficiencies.

 2016- FedEx acquired TNT Express, which happens to be the largest

acquisition in FedEx history. This allowed for the expansion of the FedEx

portfolio by adding more than 50,000 team members and over 30,000

vehicles. It enhances the FedEx Express road network in Europe, parts of the

Middle East and Africa, Asia-Pacific, and the Americas.

 2019- FedEx created a collaboration with Wing Aviation LLC, FedEx

Express launches the first-of-its-kind drone delivery service.

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External Assessment

EFE Matrix

Key External Factors Weight Ratin Weighted

g Score
Opportunities
1. Global expansion in new markets. 0.09 4 0.36
2. Increase in potential customers. 0.08 3 0.24
3. The expansion of e-commerce. 0.08 4 0.32
4. Innovation in technology. 0.07 4 0.28
5. New competitors are low due to high 0.06 4 0.24
capital needed.
6. Increase in mergers and acquisition. 0.06 4 0.24
7. Expansion in global transportation. 0.08 4 0.32
Threats
1. Competing with large scale e-commerce 0.08 3 0.24
like Amazon and Walmart
2. Global health crisis. 0.08 3 0.24
3. Government regulations on emissions. 0.06 4 0.24
4. Weather effects package delivery time. 0.05 2 0.10
5. Economic stability. 0.09 2 0.18
6. Increase in tariffs. 0.06 2 0.12
7. Increase in jet fuel costs. 0.06 4 0.24
TOTAL 1.00 3.36
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Global expansion is important in which it allows for business growth. In

doing so, FedEx extends its business global footprint and increases market share. It

is weighted at 0.09, which is larger than the other factors due to its importance for

the survival of the business. The establishment of new business relationships

enables FedEx to gain an increase in potential customers. Acquisitions have

remained a key global expansion strategy or opportunity for FedEx. It rated a 4,

which is high because it continuously creates mergers and acquisitions to further

grow its business. In 2018, FedEx acquired two important assets. It bought P2P

Mailing Limited for 92 million British pounds in March, enhancing its last-mile

delivery service across the United Kingdom, and Manton Air-Sea for ~$10 million

in October, expanding its logistics and delivery services across Australia (Bhagat,

2019).

Economic stability and the global health crisis factor weighed 0.9 and 0.08,

respectively. If the consumer is unable to consume the product, this will directly

impact the company's revenue. It is also important for the economy to be stable for

the product or service to be available. The global health crisis, for example,

COIVD-19, has impacted FedEx as it did for millions of other companies. As a

result, it emphasized employee safety as the company’s top priority during the

outbreak. In the U.S., there was no more signatures required when receiving a

package. Beyond frequent hygiene reminders for employees, the company says it is
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regularly disinfecting delivery equipment and cleaning common customer areas in

FedEx Office stores every few hours (Garland, 2020). FedEx Office stores also

changed their hours to mitigate COVID-19’s spread.

The expansion of e-commerce is a key factor that is weighted at 0.08

because it creates opportunity for FedEx to increase its profitability. Due to

COVID-19, the e-commerce growth rate for FedEx has quickened. Residential

shipments have spiked as consumers turn to the internet to buy essential supplies

amid sheltering-in-place measures (Richer, 2020). The shift is important, because

business-to-business shipments have usually been the largest and most profitable

part of FedEx’s business, with the company is still working on lowering delivery

costs for lower-yielding business-to-consumer shipments. According to the

shipping industry consultant, Satish Jindel, E-commerce had been growing at about

14% annually before coronavirus and will likely grow at 20% annually for the next

couple years. As a high-level threat, FedEx competes with large scale e-commerce

such as Amazon and Walmart. Amazon has close to 40% share of U.S. e-

commerce.

As a global leader in the transportation and technology industries, it is no

wonder FedEx weighted high in this factor. It is leading in this factor but continues

to seek opportunity. It has a superior response because it created undeniable

efficiency and safety benefits of next generation innovation. In October 2019,

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FedEx launched a small drone delivery pilot program operated by Wing Aviation

LLC, a subsidiary of Alphabet Inc. This is the latest example of FedEx working

with technology leaders to develop cutting edge solutions to meet customer needs.

It also went to far as to enhancing last mile delivery for same-day delivery of

urgent shipments and other exceptional delivery needs. FedEx is exploring new

technologies including computer-assisted vehicles, artificial intelligence, robotics,

and drones. It goes to great efforts to modernize federal laws and regulations that

encourage safety and efficiency advances in transportation technology. FedEx is

reducing aircraft emissions and increasing vehicle fuel efficiency toward its goal of

20% by 2020. FedEx aims to get 30% of their jet fuel from alternative fuels by

2030.

FedEx scored an overall score of 3.36, which is above the midpoint of 2.5.

Management should interpret the total weighted score above average. This

indicates that FedEx is responding very well to opportunities and threats in its

industry.
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Internal Assessment

IFE Matrix

Key Internal Factors Weight Rating Weighted

Score
Strengths
1. Valuable logistics brand. 0.10 4 0.40
2. Strong brand reputation. 0.10 4 0.40
3. A range of services. 0.09 4 0.36

4. Time-sensitive deliveries. 0.09 3 0.27

5. A powerhouse of global network and 0.09 4 0.36
supply chain
6. Strong marketing 0.09 4 0.36
7. Global leader in the transportation and 0.10 4 0.40
technology industries
Weaknesses
1. Delivery staff require more training 0.04 2 0.10
2. Overdependence in U.S. market. 0.07 2 0.14

3. Lack in diversification. 0.06 2 0.12

4. The increase of transportation costs. 0.05 3 0.15
5. Seasonality of business. 0.04 2 0.08
6. Unfavorable claim policies. 0.03 1 0.03

7. High operating costs. 0.05 2 0.08

TOTAL 1.0 3.25

FedEx is one of the most valuable logistics brands. It was among the three

high factors that weighted at 0.10. FedEx is the second most valuable logistics
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brand, with a total value of $18.2 billion. From the year 2017 to 2018, the

company's value grew about 6%. It also has a strong brand reputation. In 2018,

Brand Finance ranked it the strongest brand and 18th most valuable. The brand is

recognized worldwide for its high quality, reliable, efficient transit system. It was

weighted high as a key factor of a Global leader in the transportation and

technology industries. Its survival in the industry is proof enough.

FedEx uses strong market strategies and has a huge global network and

supply chain. These two factors are weighted at 0.09 respectively because of their

importance in the company’s success. Sponsorship is key to strong marketing and

FedEx uses it abundantly. It sponsors many events such as the NASCAR Sprint

Cup series, National Football league (NFL), and the FedEx Cup on the PGA Tour.

Its network and supply chain run deep and is still expanding. FedEx operates in

more than 220 countries across the world, has about 2150 offices, 370 service

locations, 39 Ground hubs, 13 Air Express hubs, and 1,950 operation express

stations. FedEx’s network reaches every corner from America to Europe, Asia, and

across the world.

FedEx offers a range of services such as express transportation services,

package ground delivery services, freight priority and economy services, and

provides business services (print services, sales, marketing, technology services). It

also offers time-critical deliveries. Both these factors weighed at 0.09 each. FedEx
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understands that time is of the essence. They are rated high because FedEx goes

out to of its way to insure timely delivery. They provide overnight shipping and

real-time tracking.

Overdependence in U.S. market weighted at 0.07 and lack of diversification

weighted at 0.06. They both were rated average. As many service businesses,

FedEx’s stability can be enhanced through diversification of its services. Another

key factor is the high operating costs, which weighed at 0.05. The operating costs

continues to increase yearly, which means FedEx is not doing much to reduce it.

The midpoint-weighted score is 2.5 for key internal factors. The total

weighted score for FedEx is 3.25, which is above the mid-point mark. FedEx is

successfully minimizing its weaknesses and focusing on its strengths.

SWOT Analysis

Strengths- FedEx Express invented express distribution and is the industry’s

global leader, that provides rapid, reliable, time-definite delivery to over 220

countries and territories, connecting markets that claim more than 90% of the

world’s gross domestic product within one to three business days. Unmatched air

route authorities and transportation infrastructure, combined with leading-edge

information technologies, make FedEx Express the world’s largest express

transportation company, providing fast and reliable services for more than 3.6

million shipments each business day (FedEx).

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Weaknesses- FedEx gets about two-thirds of its revenue from the United States. If

there was an economic challenge in the US market, FedEx’s revenue may decline

drastically. Another key weakness is the operating costs. The company’s operating

costs have kept growing year after year. FedEx operating expenses for the twelve

months ending August 31, 2020 were $68.460B, a 4.81% increase year-over-year

(macrotrends). FedEx must be careful because an increase in operating expense

lowers profit.

Opportunity- Globalization, expansion of e-commerce, and innovative technology

are major opportunities for FedEx. It is among the leader in each factor, and they

contribute greatly to the growth and success of the company. To stay above, FedEx

continues to globalize, expand in the e-commerce market, and produce more

innovative technology.

Threat- Economic stability has a huge impact on FedEx. A company cannot

produce or make a profit if the economy is not stable enough. Global health crisis

can affect FedEx and other businesses for that matter. The increase in government

regulations and tariffs are also major factors. Government regulations cause

economic barriers and are costly for the company. The U.S. and China have been

engaged in a trade war on issues such as tariffs, subsidies, technology, regulations,

and cybersecurity. Economic stability, global health crisis, the increase in

government regulations and tariffs can all hurt the growth of FedEx.
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Industry Analysis

(Porter’s Five Forces Model)

Bargaining Power of Buyers

In the logistic industry, the bargaining power of buyers is relatively

moderate. As logistics expands worldwide, there is an increase in potential

customers and an increase in demand for express/delivery transportation. There is

also an increase in e-commerce. Many people and companies that usually operate

in e-commerce have a courier contract with FedEx. However, there are other

companies that offer the same services with a difference in the range of prices.

When shipping internationally, FedEx has the upper hand. For domestic shipping,

it is easy for consumers to find other companies that offer lower prices to do

business with. The United States Postal Services (USPS) is one of FedEx’s major

competitor in terms of prices. USPS is one of the most competitively priced

shipping carriers, particularly for packages less than 2 pounds (Brophy, 2020).

Bargaining Power of Suppliers

The freight industry has a wide range of suppliers. The suppliers may

include airports, fuel suppliers, vehicles and airplane manufacturers, and shipping

material manufacturers. With no or limited substitutes, suppliers can increase the

prices for goods and services. Fuel suppliers have high bargaining power since

there are no sufficient substitutes for fuel. The cost of fuel and transportation
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impact delivery companies greatly (Gibbs, 2019). FedEx purchases large quantities

of fuel to operate their aircraft and vehicles, and the price and availability of fuel

can be unpredictable and beyond their control. If the price of fuel increases, so will

the operating expense for FedEx. Due to the limited competition in the aircraft

industry, there are a limit of capacity with the Boeings and airbuses. Therefore,

these suppliers have a high bargaining power. However, because of the many

vehicle manufactures there are, FedEx has a strong bargaining power over their

suppliers. The company does not have to depend on just one vehicle manufacturer.

Threat from substitute products

In the logistic industry, the threat from substitute products is quite low.

Freight shipments are carried by trains, trucks, boats, or aircrafts. FedEx uses all

these forms of transportation. Although some products can be substituted, it has

minimal impact on FedEx. Letter or document delivery can be paperless using

internet services. They can be sent and received using electronic mails. Package

delivery cannot be substituted.

Threat from New Entrants

The threat from new entrants or competitors is low. New competitors require

high capital to be as competitive. They require a large network of distribution

centers and supply chain. “As a global leader in the transportation and technology

industries”, FedEx, has a strong reputation and brand name (FedEx Inc.). Many
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suppliers already have contracts with the most competitive firms in the industry,

which makes it extremely hard for new entrants to do business with them. Another

major barrier is customer loyalty. FedEx has many regular customers which are

loyal due to their long business relationship with FedEx. Tariffs and government

regulations could be possible big issues to new entrants. By becoming globalized,

FedEx is gaining economies of scale, which is another entry barrier for new

entrants. Furthermore, the initial costs for new entrants would be too high to be

likely profitable in the short run.

Rivalry of Existing Competitors

There are several companies that compete with FedEx in the logistic

industry. Some of its competitors are DHL, UPS, USPS, Deutsche Post, and XPO

Logistics. It is a highly competitive market. In 2018, the company was ranked #8

logistics firm by the net revenue (Adamovich, 2020). Its fierce competitors in

ecommerce are Amazon and Walmart. In this very competitive industry, FedEx

observes rivals and makes changes to its operations to maximize its competitive

advantage through innovation and technology, acquisitions/mergers, reducing

prices and making improvements through efficiency and quality. With the

acquisition of Caliber System Inc. in 1998, FedEx had built a powerhouse that

shows potential to grow and expand in e-commerce. To reduce total costs, FedEx

achieved economies of scale by expanding globally. Furthermore, the switching

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cost for customers as well as the variety of services and quality/reputation from the

competitors in this industry increases the rivalry among the existing firms.
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Financial Analysis

Company Industry
Debt Equity Ratio 1.19 1.16
Current Ratio 1.69 1.12
Quick Ratio 1.53 1.02
Interest Coverage -5.15 --
Leverage Ratio 3.99 3.32
P/E Ratio 38.26 38.26
P/E Five Year High 88.11 --
P/E Five Year Low 17.49 --
Price/Sales Ratio 0.98 1.28
Price/Book Value 3.72 2.76
Return on Equity 9.48 11.34
Return on Assets 2.44 4.86
Return on Capital 2.86 5.64
Income/Employee 7.14k 15.56k
Inventory Turnover 36.66 26.00
Gross Margin Ratio 70.21 35.73
Net Profit Margin 1.86 5.00

Financial ratios are used to evaluate a company’s performance and

comparison to its competitors within the same industry. The keys factors in

measuring a company’s financial health are through liquidity, solvency,

profitability, and operating efficiency. The ratio analysis for FedEx is moving in

favorable and unfavorable trends for some key measurements.

FedEx is financially strong and weak in key measurements as indicated by

the financial ratio analysis. FedEx’s gross margin ratio is strong and is 70.21

compared to the industry’s ratio of 35.73. Based on their overall expenses, the

company gained 70.21 in gross margins. Maintaining a high gross margin

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demonstrates a company’s ability for sustained growth. FedEx's profitability is

considerably double the industry standard. The current ratio for FedEx is 1.69,

compared to the industry’s ratio of 1.12; clearly showing its strength and ability to

liquidate. Fedex’s quick ratio is strong. Its quick ratio is 1.53 compared to the

industry’s ratio of 1.02. The higher the ratio, the better a company's liquidity and

financial health; the lower the ratio, the more likely the company will struggle with

paying debts. The leverage ratio is 3.99 compared to the 3.32 industry standard. It

has an advantage because the company can leverage its assets if necessary. The

income/employee ratio is 7.14 compared to the industry standard of 15.56k. This

ratio indicates how much income per employee it takes to produce revenue made.

FedEx is doing good below the industry standards, because it requires less

employee income to produce the revenues that are generated. The weak key

measurements in the ratio analysis can be seen in the net profit. FedEx’s net profit

is 1.86, and the industry-standard is 5.00. This indicates that FedEx is

underperforming in comparison to its competitors. The interest coverage for FedEx

is -5.15, which is a negative number. A minimum of 2.0 is acceptable and to be

considered in good financial health. A higher ratio would show that FedEx has

enough profit to service its debts, but in this case it does not. Another weak

measurement is the return on equity. This is the net income returned to the

shareholders in the form of a percentage—FedEx's return on equity is 9.48

FEDEX CO. 21

compared to the industry’s ratio of 11.34. This implicates that those in the industry

return to shareholders more than FedEx. Its return on assets is 2.44 compared to its

industry of 4.86. Although a positive ROA is an indicator that the company has a

positive profit, other companies in its industry are making more. The return on

capital is 2.86 compared to its industry of 5.64, which suggests that FedEx is not

generating enough money for its contributors and stockholders as the others in the

same industry. The price/book value ratio is 3.72 compared to its industry of 2.76.

It is considered that the stock is overvalued. The inventory turnover is 36.66

compared to its industry of 26.00. Inventory turnover ratio is how many times a

company sells its products and remanufactures them over a certain period. FedEx

is above the industry standards. FedEx is in a weakening position because their

inventory is sitting for almost 37 days before it is manufactured and sold.

FedEx can raise needed short-term capital. It has a quick ratio greater than 1,

which means that it has enough liquidity to pay for its current liabilities. In

comparison to the industry, they are exceeding the industry standards of 1.02. The

quick ratio gauges a company’s short-term liquidity. It helps to measure the short-

term debt compared to its most liquid assets.

FedEx can raise needed long-term capital through debt and/or equity. The

long-term debt to capitalization ratio, which is a variation of the debt-to-equity

(D/E) ratio, portrays the financial leverage of a firm. It measures the proportion of
FEDEX CO. 22

long-term debt a company uses to finance its assets, similar to the amount of equity

used for the same purpose. The debt to equity ratio for FedEx is 1.19, which is very

close to the industry’s ratio of 1.16. This indicates that the company is aggressively

using financing as an opportunity for growth with debit.

FedEx does not have sufficient working capital. The working capital ratio is

calculated by dividing total current assets by total current liabilities, which is also

known as the current ratio. FedEx has a current ratio of 1.69 compared to the

industry’s ratio of 1.12. FedEx has a very high current ratio compared to its peer

group. This indicates that management may not be using their assets efficiently.

Capital budgeting procedures are not quite effective. Capital budgeting deals

with choosing projects that add value to a company in the form of capital

expenditures. FedEx reported Capital Expenditures growth of 0.42% year on year

in the first quarter, to $1,424.00 million, this is much lower than its recent average

Capital Expenditures growth of 6.76%. When compared to its industry, three other

companies have achieved higher Capital Expenditures growth. While Fedex

Corporation's Capital Expenditures increase of 0.42% ranks overall at the position

no. 247 in the first quarter (CSIMarket, 2020).

The dividend-payout policies for FedEx are reasonable. The dividend payout

ratio is expressed in the form of the amount of dividends paid to stockholders

relative to the amount of total net income of a company. The dividend payout ratio
FEDEX CO. 23

for FedEx is 38% (2.60/6.78). A range of 35% to 55% is viewed as healthy and

appropriate from a dividend investor’s point of view. A company that is likely to

distribute roughly half of its earnings as dividends means that the company is well

established and a leader in its industry, which in this case is FedEx. It’s also

reinvesting a large amount of its earnings for growth, which is considered good.

FedEx has good relations with its investors and stockholders. Its strategy is

focused on long-term profitable growth for investors and stockholders. It tries to

generate returns to stockholders as best as it can. FedEx is constantly aiming to

reduce costs and building on synergies between services. It tries to attract investors

and stockholders through its efficiency in technology and services. It seeks

transparency in its financials and continuously updates its investors and

stockholders.

The financial managers of FedEx are experienced and well trained. It is

through the financial statements that show the results of management. From the

appearance of the financials of FedEx, it seems that the company is doing very

well. It is increasing in gross profit and revenue. There are some improvements

needed in some areas such as the increase in operating expense, but overall, its

financial health is much favorable.

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SWOT Matrix

Strengths Weaknesses
1. Strong 1. Overdepend
reputation ence in the U.S.
2. Valuable market
logistics company 2. Has high
3. Global operating costs
leader in 3. Lack in
transportation and diversification
technology

Opportunities SO Strategies WO Strategies

1. Global 1. A strong and 1. Increasing
expansion valuable brand is the expansion
2. The more desirable to internationally will
expansion in e- work with in both help FedEx to be
commerce domestic and less dependent in
3. Increase in international, the U.S market.
mergers and which would help 2. Creating
acquisitions it expand further. more mergers or
2. Use its acquisitions will
innovation in help diversify its
technology to portfolio and
expand in e- reduce operating
commerce. costs.
Threats ST Strategies WT Strategies
1. Economic 1. Having the 1. To avoid
stability latest and best overdependence
2. Competing innovation and and economic
against other big transportation instability
companies in the system can help occurring in the
market set it apart from its U.S. market,
3. Increase in competitors. FedEx should
fuel costs 2. Create increase expansion
technological globally so that its
improvements to operations and
be more fuel revenue is not
efficient. mostly centered in
FEDEX CO. 25

the United States.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix is an

important matching tool that helps managers develop four types of strategies: SO

(strengths-opportunities) strategies, WO (weaknesses-opportunities) strategies,

ST(strength-threats) strategies, and WT (weaknesses-threats) strategies (David &

David, 2017). I chose the SWOT Matrix to best help identify, evaluate, and select

strategies. It combines FedEx’s internal strengths to take advantage of its external

opportunities, improves its internal weaknesses by taking advantage of its external

opportunities, uses FedEx’s strengths to avoid external threats, and uses defensive

tactics to reduce its internal weaknesses and avoid external threats.

SO Strategies

A strategy FedEx can use to apply their strengths to take advantage of the

opportunity of globally expanding would be to use the brand reputation to its

advantage to further expand globally. A strong brand is more desirable to do

business with. Its brand name is well known and can be well advertised through

social media and through sponsor events. Social media is worldwide and massive,

it is used by almost everyone that has access to the internet. Also, being the global

leader in transportation and technology would help enable FedEx to use its

innovation in technology to expand in the e-commerce market. It has worldwide

FEDEX CO. 26

access to many routes and ports, including many modes of transportation as well to

create efficient advances in transportation technology. It can create a much-

advanced drone that would allow it to deliver packages easier and faster, even to

hard to reach places.

WO Strategies

A strategy that FedEx could implement while trying to take advantage of

their opportunities, despite their weaknesses would be to increase global expansion

to help FedEx be less dependent in the U.S market. A large portion of its revenue

comes from the U.S. market. If there were economic challenges in the U.S. market,

FedEx’s revenue may decline heavily. Doing more business outside the U.S. will

help alleviate the financial pressure of being mostly in one single market. Also,

creating more mergers or acquisitions will help diversify its portfolio and reduce

operating costs. Acquisition has become a standard approach to diversification

(Salter & Weinhold, 1978). The savings in operating costs expected after the

merger of two companies is a cost synergy. Cost synergies are cost reductions due

to the increased efficiencies in the combined company (Kenton, 2020).

ST Strategies

A strategy that FedEx could use to avoid threats using the strengths as their

defense mechanism would be to take advantage of its innovation in technology and

its advanced transportation system to fight off competition. Having certain special
FEDEX CO. 27

features and producing the latest technology is a powerful tool that can help set it

apart from its competitors. People prefer latest and most innovative things that can

help make their lives better. In being more advanced in technology and the

transportation system, FedEx will be more favored by consumers. Also, using

technological improvements to be more fuel efficient will help FedEx with the

increase in fuel costs.

WT Strategies

There is only one strategy that FedEx could implement as a defensive tactic

to reduce its internal weaknesses and avoid external threats. For FedEx to avoid

overdependency and economic instability of the United States market, it must

practice global expansion. Economic stability is needed to achieve financial growth

for a business. Many factors affect the economy. A big factor are tariffs. The trade

war between the U.S. and China are deeply impacting FedEx. Expanding to other

countries will help FedEx break away from having most of its operations and

revenue centered around the United States market.

FEDEX CO. 28

Strategic Alternatives

Quantitative Strategic Planning Matrix (QSPM)

Alternative 1 Alternative 2 Alternative 3

Expand globally Expand in the Purchase

Key Factors
e-commerce mergers and
market acquisitions
Weight AS TAS AS TAS AS TAS
Strengths 0.10 4 0.40 3 0.30 2 0.20
 Strong
reputation
 Valuable 0.10 4 0.40 2 0.20 3 0.30
brand 0.09 - - - - - -
 Has a 0.09 - - - - - -
range of
services 0.09 4 0.36 3 0.27 2 0.18
 Time-
sensitive
0.09 4 0.36 2 0.18 3 0.27
deliveries
 Has a 0.10 4 0.40 3 0.30 2 0.20
global network
and supply
chain
 Strong
marketing
 Global
leader in the
transportation
and technology
industries
Weaknesses 0.07 4 0.28 2 0.14 3 0.21
 Overdepe
ndence in the
U.S. market
0.06 3 0.18 2 0.12 4 0.24
FEDEX CO. 29

 Lack in 0.04 - - - - - -
diversification
 Delivery
staff require
additional 0.04 - - - - - -
training 0.05 - - - - - -
 Seasonalit
y of business
 Increase 0.05 - - - - - -
in transportation
costs
 High
operating costs
Total 1.0
Opportunities 0.08 3 0.24 4 0.32 2 0.16
 Expansio
n of e-
0.07 4 0.28 3 0.21 2 0.14
commerce
 Innovatio 0.06 4 0.24 3 0.18 2 0.12
n in technology
 New
competition is 0.06 3 0.18 2 0.12 4 0.24
low
 Increase
in mergers and 0.08 4 0.32 3 0.24 2 0.16
acquisition
 Expansio 0.08 4 0.32 3 0.24 2 0.16
n in global
transportation
 Increase 0.09 4 0.36 3 0.27 2 0.18
in potential
customers
 Global
expansion in
new markets
Threats 0.09 4 0.36 3 0.27 2 0.18
 Economic
stability
0.06 - - - - - -
FEDEX CO. 30

 Increase 0.06 - - - - - -
in tariffs
 Increase 0.05 - - - - - -
in jet fuel costs
 Weather 0.06 - - - - - -
affects package
delivery time
 Governm 0.08 2 0.16 4 0.32 1 0.08
ent regulations 0.08 3 0.24 4 0.32 2 0.16
on emissions
 Global
health crisis
 Competin
g with large
scale e-
commerce such
as Amazon and
Walmart.
Total 1.0 5.08 4.0 3.18

There are three main strategies that could help FedEx strengthen itself

financially with the consumers in mind. One of the strategies that could be

implemented is expanding globally. Globalization creates many opportunities for

growth and success. FedEx can open and operate stations in new locations in Asia

and Europe. This technique would help it gain more strategic ports and access to

improve its supply chain. More locations mean more consumers, hence more

revenue. Another strategy that could be implemented would be to expand in the e-

commerce market. The e-commerce market continues to grow and is very

competitive. With the COVID-19 outbreak, it has increased significantly. Many

people are staying at home and want to avoid going out even for groceries and
FEDEX CO. 31

household items. They end up purchasing the items online. If FedEx could

minimize competition by makes itself more accessible and affordable to

consumers, then it could be able to become more profitable. The third strategy is to

purchase or merge with a competitor to diversify portfolio, lower operating costs,

and increase revenue. Mergers and acquisitions allow for growth and financial

power for both companies involved. With mergers and acquisitions, FedEx will

gain competitive advantages, increase market share, and influence supply chains.

Strategy Recommendation

The strategic alternative that had the most attractive score and would be the

best option for FedEx to go with is to expand globally. Expanding internationally

where FedEx can offer its wide range of services that can make life easier for

consumers, can also help increase revenue for FedEx and properly avoid its

overdependency in the U.S. market. It is not safe for a big corporation such as

FedEx to be financially dependent in one country or market. Economic instability

can occur in any country and at any moment. However, by expanding globally,

FedEx would not be financially concentrated on the U.S. market and would be

instead on the path to continuous growth and profitability. A 2016 survey by Wells

Fargo found that 87 percent of U.S. firms believe that international expansion is

deemed necessary for long-term growth. FedEx would have to expand into

developing countries and create logistics hubs or stations to allow for services and
FEDEX CO. 32

easier access to transport packages across the global supply chain. FedEx can open

and operate a station in Saint Petersburg, Russia and another station in Ankara,

Turkey. Saint Petersburg is a Russian port city on the Baltic Sea. A FedEx station

in St. Petersburg would allow easy access to the countries that lie near to the Baltic

Sea. Those countries are Sweden, Denmark, Finland, Poland, Lithuania, Estonia,

Latvia, and Lithuania. Ankara is the capital of Turkey. Its location and influence

are vital in Turkey. These two cities are strategically located in key areas that

would allow for accessibility and the improvement of its supply chain, which

would help FedEx to further expand and grow. Although the COVID-19 outbreak

has crippled the economy of both Russia and Turkey, packages and trade must

continue. Also, like any other country, these two countries have trade and labor

laws that can impact doing business in their countries. By implementing the

opportunity of expanding globally, FedEx is minimizing weaknesses of

overdependency in the U.S. market and its threat of economic instability of that

market. All while maximizing the strengths of having a strong reputation; valuable

brand; and being a global leader in the transportation and technology industries.

Based on the strategy alternative of expanding in two counties, the evaluation of

the Markkula Center for Applied Ethics found that FedEx is highly ethical and

morally right by expanding services into other developed cities to allow easiness;

accessibility; and affordable services that would make peoples’ lives better.
FEDEX CO. 33

Strategy Implementation

The expansion into emerging markets requires clear and detailed

transparency, however, the most important factor of success will be FedEx’s ability

to build an adaptable and responsive ecosystem of processes, people, and

technologies. The implementation plan will depend heavily on successful

communication between all level of employment involved in the process. FedEx

will need country specific operations with support by locally developed

capabilities and talent. With expansion in the cities of Ankara and Saint Petersburg

being of foreign countries, hence the Asia and Europe markets, it makes sense to

involve all top executives that deal with global decisions. It will be overall headed

by the President and Chief Executive Officer, Donald F. Colleran. He is

responsible for the leadership and direction of the FedEx Express group, which

includes FedEx Express and TNT Express. The FedEx Express is a global network

that provides services to more than 220 countries and territories, and provides

time-sensitive, air-ground express service with the access of more than 650 airports

worldwide. Colleran and his global sales and solutions teams executes on the

FedEx growth strategy and helps customers grow their businesses through selling

solutions, and by allowing for opportunities to reach new markets; eliminate trade

barriers; and the expansion of their businesses globally. Kawal Preet; Regional

President of Asia Pacific, and Karen Reddington; Regional President of Europe

FEDEX CO. 34

and CEO of TNT, will work closely and subhead with Colleran. Due to the location

of the cities being in Asia and Europe, it makes sense to involve Preet and

Reddington. They will be setting up meetings to discuss the matters into the

opening and operation of a station in those two cities, ways to market the opening

of the new stations, how to effectively and efficiently link the global warehousing

and distribution networks, and the finance that is involved in making this possible.

FedEx will need to follow a divisional organizational structure. This type of

structure is an organizational structure that groups each organizational function

into a division. The company’s divisions have control over their own resources,

typically operating like their own company within the larger organization. Each

division consists of its own marketing team, sales team, finance team, etc. The

divisional organizational structure will work well for a large company such as

FedEx to maximize the empowerment of various divisions to make decisions

without everyone having to report to only a few executives as well as minimize the

threat to the other divisions if one division were to fail because the failure of one

division doesn’t directly threaten the other divisions. The global division will

consist of the following teams: marketing and communications, operations, and

finance. Each team has a responsibility of completing its required tasks to achieve

the necessary objectives.

Marketing and Communications Team:

FEDEX CO. 35

 Determine the target market and which products or services of FedEx’s are

they interested in.

 Create marketing strategies and advertise of those two new locations through

campaigns, sponsor events, and social media.

 Use clear and accurate communication channels to send and retrieve

information throughout the organization.

Operations Team:

 Plan and organize the production of opening a new station in these two

cities.

 Acquire needed space to run productions and operations.

 Monitor and manage inventory and the complete operation from start to

finish.

Finance Team:

 Determine and obtain funding needed to open, operate, and manage a station

in the two cities.

 Maintain the financials throughout the process of the operation.

It is important that all team members involved perform their tasks and duties

effectively and efficiently to successfully launch, operate, and manage the two new

stations. Choosing the right people and procedures are very important to the
FEDEX CO. 36

success of the strategy implemented. Planning and implementing the strategy will

require some time. It is estimated that the process will take about 4 or 5 years.

FedEx will need to plan, organize, and manage every step of the operation.

The operation has many parts to it and requires each team member to do their part.

It will need to get its paperwork and documents completed and filed correctly to

avoid loss time. There will be a large amount of paperwork since opening and

managing a building in another country is not something simple. FedEx will need

to find a building to lease/purchase that is in an attractive and visible location to

easily attract customers. FedEx is a global leader in logistics. It is a powerhouse of

global networks and has a massive supply chain. The purchase of TNT, an

international courier delivery services company, has allowed FedEx to accelerate

international trade rapidly. TNT is remarkably fast and has an extensive road

network across Europe providing a wide range of delivery services. It will need to

link its global warehousing and distribution networks all together with these

upcoming two stations included. It will need to link it successfully to create a

smooth distribution network and supply chain. FedEx will need to purchase and

stock inventory. The two new stations need to be fully equipped and ready before

they can be opened and managed. They will need the right number of tools,

equipment, and staff to operate the stations. It will have to run day-to-day
FEDEX CO. 37

operations effectively. The operations team will be headed and managed by

Executive Vice President and CEO (Air Operations), Gregory F. Hall.

The finance is a crucial element of the implementation plan. If there is no

funding for the operation, there is no operation. The finance team will determine

and provide funding needed from start to finish for the operation, which is from the

planning to the implementing and managing of the operation. The best approach to

obtain the funding for opening and managing the two stations will be from the

salary cuts of upper level managements. Additional cuts will be made to

supplement the capital if needed. The finance team will maintain financial progress

and measurements to record status throughout the planning, launching, and

implementation of the two new stations in Ankara and Saint Petersburg.

Marketing and communications are important to the success of the

implementation strategy. FedEx must determine its target market and what

products/services are appealing to them. There should be clear and accurate

communication channels to transport information throughout the organization.

Information needs to be well-understood and easy to relay. Open lines of

communication are crucial and so is the advertisement of the two stations. FedEx

will need to create marketing strategies to advertise the new locations. It can

advertise through many forms such as campaigns and social media. Social media is

a valuable and inexpensive tool that FedEx can use to advertise and announce its
FEDEX CO. 38

two new locations. The marketing and communications team will be headed by

Rakesh Shalia, vice president of Marketing and Communications.

Another important part of the implementation plan is research and

development. It is apparent for FedEx to research and know everything there is to

know about the demographics, culture, and environment of Ankara and Saint

Petersburg since they plan to operate there. There is a culture change in every

country. FedEx needs to adapt with the environment. It will also need to research

ways to improve and develop its products and services to meet the consumers’

needs in that area. FedEx will search and utilize training development accordingly

to enhance and improve the work quality and company image. Research and

development will need to be headed by someone with experience and skills that

will ensure that the needed tasks and further requirements would be fully met.

Human resource management plays a major player in the implementation

plan. It enables the plan to be executed. Human resource will maintain employee

information and handle the hiring process. It is best to hire people that are native to

the area where the stations will be operated. Human resource will ensure that the

employees are educated and skilled for the tasks required. It is very important that

each employee knows what their job is and be comfortable and trained to do so.

Human resource will make certain that the foreign laws and work policies are

practiced for the well-being of the people and the environment.

FEDEX CO. 39

Financing

The three ways FedEx can raise capital are by debt, equity, or a combination of

both debt and equity. The financing options for opening the stations at Ankara and

Saint Petersburg have been considered in the EPS/EBIT analysis:

 Amount needed: $250 Million

 Tax Rate: 42%

 Interest Rate: 5%

 Stock Price: $279.00 per share

 EBIT Range is between $50 million and $200 million

 Common Stock Shares Outstanding: 263 million

COMMON STOCK FINANCING DEBT FINANCING
Recession Normal Boom Recession Normal Boom
EBIT $ 50,000,000.00 $ 100,000,000.00 $ 200,000,000.00 EBIT $ 50,000,000.00 $ 100,000,000.00 $ 200,000,000.00
Interest $ - $ - $ - Interest $ 12,500,000.00 $ 12,500,000.00 $ 12,500,000.00
EBT $ 50,000,000.00 $ 100,000,000.00 $ 200,000,000.00 EBT $ 37,500,000.00 $ 87,500,000.00 $ 187,500,000.00
Taxes $ 21,000,000.00 $ 42,000,000.00 $ 84,000,000.00 Taxes $ 15,750,000.00 $ 36,750,000.00 $ 78,750,000.00
EAT $ 29,000,000.00 $ 58,000,000.00 $ 116,000,000.00 EAT $ 21,750,000.00 $ 50,750,000.00 $ 108,750,000.00
# of Shares 263,896,057 263,896,057 263,896,057 # of Shares $ 263,000,000.00 $ 263,000,000.00 $ 263,000,000.00
EPS 0.11 0.22 0.44 EPS 0.08 0.19 0.41

70% STOCK - 30% DEBT 70% DEBT - 30% STOCK

Recession Normal Boom Recession Normal Boom
EBIT $ 50,000,000.00 $ 100,000,000.00 $ 200,000,000.00 EBIT $ 50,000,000.00 $ 100,000,000.00 $ 200,000,000.00
Interest $ 3,750,000.00 $ 3,750,000.00 $ 3,750,000.00 Interest $ 8,750,000.00 $ 8,750,000.00 $ 8,750,000.00
EBT $ 46,250,000.00 $ 96,250,000.00 $ 196,250,000.00 EBT $ 41,250,000.00 $ 91,250,000.00 $ 191,250,000.00
Taxes $ 19,425,000.00 $ 40,425,000.00 $ 82,425,000.00 Taxes $ 17,325,000.00 $ 38,325,000.00 $ 80,325,000.00
EAT $ 26,825,000.00 $ 55,825,000.00 $ 113,825,000.00 EAT $ 23,925,000.00 $ 52,925,000.00 $ 110,925,000.00
# of Shares $ 263,627,240.14 $ 263,627,240.14 $ 263,627,240.14 # of Shares $ 263,268,817.20 $ 263,268,817.20 $ 263,268,817.20
EPS 0.10 0.21 0.43 EPS 0.09 0.20 0.42

Based on the results, it was clear that it was very close between the common

stock financing, debt financing, majority stock, and majority debt financing. In the

analysis, the recession market; normal market; and boom market for the common
FEDEX CO. 40

stock financing exceeds the majority stock financing by 0.01 in each market. The

common stock financing received the highest numbers in all markets compared to

the other financings. The best choice for FedEx to finance the opening a station at

Ankara and a station at Saint Petersburg would be to use all common stock

financing.

Pro-Forma Income Statement

Pro-forma Income Statement 2020 (value in 000’s)

Period Ending 5/31/2020 5/31/2019 5/31/2018 5/31/2017 5/31/2016
Total Revenue 74,556,500 72,700,000 68,500,000 60,319,000 50,365,000
Cost of Revenue 22,622,000 21,356,000 19,725,000 16,900,000 17,327,000
Gross Profit 50,500,000 51,600,000 47,254,000 43,916,000 33,038,000
Research and Development 5,000,000 0 0 0 0
Sales, General and Administrative 35,070,000 33,543,000 31,984,000 30,050,000 29,056,000
Operating Income 2,732,000 4,555,000 4,376,000 4,786,000 3,077,000
Other Income/Expense Items 56,000 60,000.00 49,000 33,000 22,000
Interest Expense 675,000 591,000 560,000 515,000 336,000
Earnings Before Tax 1,724 661 4,548,000 4,765,000 2,740
Net Interest Income 56,000 60,000 49,000 33,000 21,000
Normalized Income 1,660,800 807,000 4,941,000 2,999,000 2,740
Net Income-Cont. Operations 1,290,000 542,000 4,575,000 2,998,000 2,631,000
Net Income 1,299.00 542 4,579.00 2,997.00 1,820
Net Income Applicable to Common Shareholders 1,310,000 545,000 4,581,000 2,994,000 1,818,000

The pro-forma income statement is designed to portray what the impact of

opening the two stations in Ankara and Saint Petersburg will have on the income

statement of FedEx. It is expected that there will be a 42% increase in net income

for the first year of implementing the plan. There is a deduction of five million

dollars over the course of 5 years for research and development. Once FedEx can

successfully link these two stations with its global warehousing and distribution
FEDEX CO. 41

networks, it would be able to trade (send and receive packages) more efficiently

and effectively. The more FedEx locations there are, the better the distribution

network and supply chain becomes. This would allow for ease and reliability in

FedEx services, which would attract more customers and increase revenue. FedEx

is expected to receive a larger increase of 20% on the income statement for the

years that follow the year 2020.

Conclusion

Finally, the recommended strategy for FedEx to open a station at Ankara and

Saint Petersburg is going to take effort and commitment for the success of the

implementation plan. Having all team members and upper management work

together properly and efficiently with easy access to clear and accurate information

will ultimately lead to better results. FedEx has a strong brand reputation and is a

valuable logistics brand that has many tools and resources at its disposal. It can use

its abundant resources to expand its global network and supply chain effectively.

The implantation of minimizing weaknesses of overdependency in the U.S. market

and its threat of economic instability of that market by the opening of the two

stations in the Asia-Pacific market and European market would make FedEx in a

better position strategically and financially.

FEDEX CO. 42