Company Is in a Number of Businesses,

¶ … company is in a number of businesses, but primarily the overnight courier and the package delivery businesses. FedEx operates around the world.

The first big idea is that 'choices involve tradeoffs'. This applies to FedEx in a few ways. The company is offering a premium service to customers and charges a premium price for that service. There are a number of different services that FedEx offers, and these services compete with UPS and the USPS. The customer must decide what the right combination of price and service is going to be for the shipment. These choices will affect the total demand for FedEx and the type of demand as well. Understanding how consumers make these choices, especially with respect to the price of the different overnight delivery options, is going to be a key success factor for FedEx that allows it to set its prices closer to the point of profit maximization.

The second big idea is that voluntary exchange makes both sellers and buyers better off, and markets are an efficient way to organize that exchange. All around the world, not just in the U.S., FedEx must compete with post office services. Normally, postal services are run by the government of their nation, and so prices are often set in accordance with political considerations, and service levels are set in accordance with annual budgets for the entire government. FedEx was able to carve out a niche for itself by offering a similar service privately. The company charges more money, but it is more efficient, and clearly the market appreciates this value proposition for FedEx. This is not to say that the postal service lacks value, only that the market (FedEx and its competitors) does a better job of setting price and service levels than the post office does, and that is why the private companies are profitable and the post office is not.

FedEx is in good financial health. The income statement shows that after a few years of stagnation, the company's revenues are growing and so are its profits. The stock price is starting to move upward as well. Even in the recession, FedEx did not take a loss; it always earned profit. The company has a low level of debt, and this level is not increasing. Its equity, however, is increasing. Again, this is a sign of improving financial health.