For the first 2010/2011 fiscal quarter ending Aug 31, FedEx Freight generated revenue of $1.26 billion, up 28% from last year's $982 million, but made a loss of $16 million -- down from an income of $2 million a year ago (2010, FedEx).
FedEx Corp. reported gross revenue of $9.46 billion in the quarter, up 18% from $8.01 billion the previous year; operating income of $628 million, a 99% increase from $315 million last year; and net income of $380 million, a gain of 110% from $181 million in 2009/10 (2010, FedEx).
On September 15, FedEx shares dropped by 3.4% on the news that profits in the quarter ending August 31 (the first quarter of fiscal 2011) had totaled $380 million. Although they had doubled relative to the immediately preceding quarter, this profit level was still seen as somewhat below market expectations (2010, Company Profiles).
According to Investor's Business Daily, the company also announced it was cutting 1,700 jobs in its struggling North American trucking business and gave cautious future guidance, pointing to 'somewhat slower' economic growth. Revenue in the quarter rose by 18% to $9.46 billion, above forecasts. Total package volume grew by 6%, with international business leading the way, compared to only 3% growth in the U.S. (2010, Company Profiles).
Legal and Regulatory Forces
FedEx Ground is tightening its standards for independent contractors, responding to concerns raised by several states, in its latest maneuver between the organization and labor unions, over FedEx Ground's use of owner-operators rather than employees. FedEx sent a letter to contractors, telling owner-operators of trucks they should incorporate under state law rather than organize as partnerships or sole proprietorships as well as treat their personnel as employees, giving them 180 days to comply with the new standards.
These new guidelines are more than likely to widen the chasm between FedEx and its independent contractors. Some states have threatened to challenge FedEx's classification of drivers as independent contractors rather than employees.
Federal legislation also could affect FedEx's use of owner-operators. Sen. John F. Kerry introduced legislation in December to toughen standards for employers using contractors. The bill is supported by the Teamsters union, which has led challenges to the classification of workers as independent contractors at FedEx Ground (Cassidy, 2010).
Personal factors greatly influence purchasing decisions. Although FedEx's target falls in a variety of categories, occupation and economic circumstances will be vital in targeting consumers most likely to use the services. With few competitors within the market, the ability to influence consumer perception of FedEx is vital to its success. Perhaps the most important factor in influencing perception is the ability to adapt the services to the needs of its consumers.
Strategic plans serve the function of signposts for those involved in subsequent decisions. A coordinated strategic plan to establish and monitor the achievement of regional goals and priorities is fundamental to implementing a coordinated approach to enhancing effectiveness and growth. By specifying goals and objectives, plans can also give planners and decision makers a structure for allocating funding to those goals and objectives. The challenge is ensuring that initiatives to implement the goals and objectives are funded, completed, and appropriately assessed to determine if they have achieved this strategic plan addresses the following key strengths, weaknesses, threats and opportunities which apply to FedEx now and in the foreseeable future:
The company has over 53,000 drop-off locations, operates more than 677 aircraft and has more than 51,000 vehicles in its integrated global network.
FedEx is amongst the most recognized names in the globe express delivery services segment.
Competing worldwide with its main rival UPS, FedEx potentially benefits from a tighter focus on the express delivery sector, rather than a much more widely defined logistics business (2010, Company Profiles).
Although FedEx Office has expanded to other international regions, it still depends on the U.S. market for majority of its revenue. The company's high dependence on the U.S. market could have a dampening effect on its revenues if the economy and/or the company's sales in the U.S. do not grow as expected.
Furthermore, the concentration of operations in this area increases the company's exposure to country specific factors such as labor strikes, changes in economic conditions and most importantly, increasing competition from other players in the market (2010, Company Profiles)
Its Ground network delivery system, though large, lags behind that of UPS.
The copy and print market in the U.S. is highly fragmented. Hence, FedEx Office is focusing on capturing market share by providing additional products and services.
Rigorous cost control and the ability to adjust to changing market conditions positions. FedEx to expand market share in its key business segments; it may be able to gain business following the decision of DHL to withdraw from the U.S. market. (2010, Company Profiles)
At times of rising fuel prices, FedEx is particularly exposed to the impact of rising costs (2010, Company Profiles)
Technology such as e-mail and advances in online security methods may give consumers other choices for delivery of documents.
The threat of terrorism, as was recently seen in Europe with explosive material being shipped to the U.S.
Union contracts and political maneuvers
A weakening economy
FedEx must decide to which consumer segments it wishes to market. A review of the segmentation choices are as follows:
Geographic segmentation which divides the market into different geographic areas such as, nations, states, regions, counties, cities or neighborhoods
Demographic segmentation divides the market based on age, gender, occupation, education, religion, family size, family life cycle, race, nationality and social class
Psychographic segmentation uses psychology and demographics to divide the market based on psychological/personality traits, lifestyle, or values
Behavioral segmentation divides the market based on buyers' attitudes of the product, knowledge of the product, or the use of or response to a product (Kotler & Keller, 2009).
To choose the segment(s) FedEx must consider several factors. The segment must have purchasing power, be large and profitable enough to serve, be reachable, be distinguishable from other segments, and programs must be able to be developed to serve the segment (Kotler & Keller, 2009). The segment selection must be made with care; segments that cover a small part of the market may not reach sales and profit targets and those too large may lack the resources to properly serve the segment (Blois & Dibb, 2000). Additionally, it would be difficult to target several segments. "Most organizations do not have the resources, products, or inclination to target lots of segments" (Blois & Dibb, 2000, p. 397).
V. Marketing Strategies
The creation of a clear target market strategy is at the heart of an effective business strategy (Simkin, 2008). There are other companies in the industry and FedEx must target a more specific group of potential customers if they want to be successful. Dividing this market into smaller groups of people who share specific needs and characteristics is market segmentation (Kotler & Keller, p.208). This allows FedEx to customize its service offerings and strategies. According to Kotler & Keller (2009) there are two broad groups of variables used to segment customer markets.
One group of variables is called descriptive characteristics which includes geographic, demographic, and psychographic. Behavioral segmentation is another variable which divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product (p.223). FedEx's market consists of consumers and business users who prefer to use a single service for all of their shipping needs. In some circumstances more than one variable can be used to segment a particular market (Blois & Dibb, 2000). Marketers must decide whether a single or multivariable approach is the most suitable for their particular business. Variables FedEx should target would fall in the categories of income, education, age and social class. A combination of income, occupation, education, possessions, and ethnic group provides a measure of an individual's socio-economic status. Using these various variables would enable FedEx to target its chosen segments more effectively.
Previously handled by five separate systems, the creation of FedEx Corporate Services led to the reorganization of company systems, providing one access point to reach sales, customer services, billing and automation systems. At the center of this subsidiary is knowledge generation, bringing together sales, marketing, information technology, e-commerce, and customer service into one group. This one-source solution center gives FedEx a competitive advantage, allowing businesses achieve their shipping, logistics, supply chain, and e-business objectives. Customers, whether they are corporations or household consumers, benefit from an integrated information source (Farhoomand, Ng, & Conley, 2003).
Front line staff has access to all previous records kept in the company's central databases on each existing customer. By accessing this information, staff members can customize customer service. They can also suggest integrated supply chain and e-commerce solutions that cross-sell services and choreograph customer solutions. Customers can access up-to-the-minute information…