Fedex Case Study
Fed Ex Case Issue: Federal Express is a strong recognizable brand with growth potential, but the company faces a multitude of challenges with rising fuel prices, increased value of living, as well as a decline in the economy. FedEx also encounters issues with competition and even negative publicity due to various lawsuits involving violations against EEOC laws and regulations. SWOT Analysis: Strengths: • Best leader in express shipping o 99% of deliveries are on time • Expansion of operations into international markets o Purchase of Tiger International Strong brand image associated with products, quality, and reliability Weaknesses: • Expensive compared to other services • Increased amount of debt • Decreased expansion in Europe Opportunities: • Expansion of online consumer services • Offer larger variety of shipping services • Global business growth Threats: • Technological advancements o E-Commerce • Competition o Overnight delivery market matured rapidly • Rising fuel prices • Decline in worldwide economy • Rising costs associated with employee salaries and benefits • Negative publicity due to lawsuits
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Critical SWOT Factors: Federal Express needs to focus on their strengths in the company, as well as pursuing their opportunities. FedEx built its foundation on being the fastest and most reliable postal service in the United States, and has taken these principles overseas in foreign markets. The FedEx brand name and image is critical toward the company’s on-going success and future growth opportunities. Being globally known, as well as having a strong foothold in almost every country will allow FedEx customers to more willingly accept new services offered by the company.
Such factors for expansion and competitive advantage will include offering online services. The world is becoming more technologically advanced day by day, with the use of Internet services; FedEx will be able to adhere to the world’s online progression. Currently, FedEx is aggressively moving into e-commerce in order to fulfill business-to-business and business-to-consumer merchants. Moreover, the company needs to focus more on reducing their labor costs, as well as finding a way to decrease fuel costs. With the price of oil rising continually each year, FedEx’s fuel costs have risen up to 30% within the past three years.
Despite the fuel costs, the company’s labor costs have risen even higher; the largest expense FedEx endures. This is immensely critical since the company has suffered a multitude of lawsuits regarding unfair pay. According to EEOC laws, FedEx is still under investigation whether the company is violating terms and policies under Title VII of the Civil Rights Act. The distinction between independent contractors and employees for the company is imperative, because under the federal law, if the company treats the contractor as an employee, the company has certain legal obligations, such as overtime pay and withholding taxes.
If FedEx is in violation of these laws and more lawsuits continue to sprout, the company may be in jeopardy of losing their strong and loyal brand image that has been built upon for decades. . Alternative Solutions: 1. Federal Express should move toward integration of expansion within e-commerce to an online subsidiary for consumer retailers. By collaborating with a large and well-known retailer such as WalMart or Target, FedEx would strengthen not only its name, but also its revenue within the marketplace. FedEx could integrate with a retailing company by partnering with each other.
Therefore, they would be able to share benefits with and increase each company’s revenue. For example, if FedEx integrated with WalMart, WalMart would be able to have discounts on shipping products and goods. Likewise, FedEx would be able to always have a buyer that would represent a majority of their profits, further increasing revenue. Also by collaborating, both companies will gain more market power and increase their brand image. Through e-commerce strategies, both companies could increase their technological strengths and online consumer industry growth power, by providing faster and more efficient shipping for consumer needs.
Technological advancements and use of products and services over the Internet will provide opportunities and expansion in the future years for FedEx. Another long-term advantage would be increased publicity. Any company engaging in a new marketing plan, especially through e-commerce will become noticed through public relations. Allowing consumers to shop online with the integrated company will allow the products they purchase to be delivered even faster and as time goes by, product shipping may even decrease in price.
If FedEx decides to collaborate with a retailer, the company should focus an immense amount toward promotional efforts, using multiple media outlets. There could be traditional media used, such as television, radio, newspaper, and magazine advertisements. Then, FedEx could spend time developing its social media through Facebook and Twitter, using promotional tactics by giving free samples, coupons, and discounts. The company can spend more on e-marketing using the pay-per-click techniques by becoming first on every search engine page and spending money for their advertisements to appear on banners.
This will hopefully also increase word-of-mouth communication through brand loyalty and customer satisfaction. The technology market is growing rapidly in every product and service industry. It is imperative to focus on this aspect in order to gain a greater amount of market share, especially by merging and sharing services with a well-known and respected retailer. 2. Federal Express can increase their revenue, as well as their services by allowing consumer travel options. The company already has one of the largest airlines in the world, and has thousands of skilled employee pilots.
FedEx could offer last minute discounted airline tickets to the public in order to gain additional revenue from already existing system transportation use. This would be immensely feasible and easy to execute. FedEx is already a well-trusted brand name. Consumers would feel safe to fly with the company. Also, transportation has established itself as fast, efficient, and reliable. FedEx is the clear leader in express shipping with 99% of deliveries being on time. This means, consumers would have no worries of missing their flight or anticipation of delays.
Everything runs smoothly with Federal Express; “Our absolutely, positively spirit puts our customers at the heart of everything we do,” states one of the six themes that frame FedEx efforts. The target audience for these discounted tickets could be anyone, especially since FedEx transports nearly everywhere. With the decline of the economy and fuel prices on the rise, consumers will be more than eager to purchase discounted airline tickets. Likewise, there is usually space on FedEx aircrafts that is never put into use. By selling discounted tickets, this will increase revenue for FedEx and create an entirely new segment of services.
Distribution of airline tickets would be on a first-come, first-serve basis. Likewise, ticket prices would be based on travel-time and current market price, and then the tickets would be reduced accordingly. Promotion of these airline tickets would be seen through every media outlet, but mostly e-marketing. Brand loyalty programs would be implemented, allowing the most loyal customers of FedEx to be given the opportunity to take advantage of the discounted air travel first. With the prices of fuel steadily increasing and the economy still discouraged, Federal Express can create opportunities or consumers, as well as themselves. Discounted airline tickets flying with FedEx could be a giant step in the company’s future. 3. Federal Express needs to focus on employees, making sure all personnel working for FedEx is treated with respect and lawful expectations. Throughout the past several years, FedEx has received many lawsuits pertaining to EEOC laws regarding unfair pay and benefits. A major lawsuit pertained to the FedEx Ground/Home Delivery drivers regarding whether they are independent contractors or employees of the company.
The company is controlling almost everything about the ‘independent contractors,’ even prohibiting them from working for other companies. FedEx strictly dictates working hours and routes, requires them to wear FedEx uniforms and purchase company scanners, and enforces all company rules upon them. Under EEOC laws, these conditions constitute for the ‘independent contractors’ to be employees under federal law. This factor is significant, for employees are entitled to certain benefits and compensation such as, overtime pay and withholding taxes.
Federal Express has built part of its image upon the company’s enviable corporate culture and workforce. The company has even been named as one of the “100 Best Companies to Work For” and one of the “World’s Most Admired Corporations” from Fortune Magazine. If FedEx really prides itself with its care and respect for its workers, they would adhere to EEOC laws. Likewise, if FedEx can clear up their policies and pay to their workers, the company would gain positive publicity. This would amplify the company’s positive reputation even more, increasing their brand image as a whole.
In addition, to gain competitive advantage over competitors in regards to employees, FedEx should reassign teams from one project to another to effectively distribute people with critical talent, instead of assign employees to specific business units. Using job enlargement, as well as job enrichment will provide employees and workers with a sense of autonomy that will help increase motivation and productivity. This would also allow for pay cuts and employee dismissals for those who are not fulfilling duties or are not a major asset to the Federal Express team. It is vital to the company to terminate those who lack high productivity.
FedEx then can focus on compensating those who greatly contribute their skills and knowledge toward the company. With the cost of living steadily increasing, FedEx needs to reward employees who implement the best abilities in continuing to strengthen the company and foresee its growth and expansion opportunities. Recommendation: The best recommendation for Federal Express would be to integrate and collaborate with a consumer retailer and to focus the integration through e-commerce. FedEx is the clear leader in express shipping, controlling more than 49% of the market in the United States.
By building a relationship and a lifetime value customer with a large consumer retailer, FedEx will begin to create a competitive advantage over almost all other postal services. One of the greatest strengths of FedEx is their brand image and customer loyalty. Expanding on these strengths to create new service online will easily be accepted and used by current customers, as well as potential consumers. Also in long-term results, FedEx will be able to reduce shipping costs. By collaborating with a major retailer, FedEx will begin to increase revenue, thus reducing shipment costs through purchases made within the retailer.
E-commerce will enable FedEx to expand more internationally. There has been tremendous growth within the Asian market, but FedEx has not had success with its European markets. After the e-commerce strategy underway, FedEx can emerge in European markets once again, establishing information networks in each country. The company will now have the global infrastructure to support its operations. Likewise, the FedEx international foundation will be much stronger and more developed; therefore increasing global market power.
Federal Express will also be able to increase positive publicity not only in the United States, but in foreign markets as well. The new overseas operations will be a gateway toward more employment options, creating new opportunities for FedEx to expand. FedEx will also begin to expand its distribution methods by creating more service options overseas. The vast target market of FedEx has the potential growth to expand in nearly every country, especially when integrated with another global company; the opportunities are endless. FedEx will need to change their advertising and marketing plan in order to become successful in e-commerce.
Using traditional media, as well as e-marketing and social media will enhance its awareness. Promotional efforts will be imperative toward increasing brand recognition and the integration of two company offerings. FedEx could offer free shipping, coupons, and discounts to new customers. There could also be a loyalty program for returning customers to increase loyalty and promote word-of-mouth communication. Technological advancements, as well as expanding target markets are one of FedEx’s greatest opportunities to improve its success and growth in the marketplace. Federal Express is a mature, recognizable company with a great amount to offer.