Fedex SWOT analysis
SWOT Analysis of FEDEX
FEDEX is a leading global provider of express delivery, courier and shipping services. While competition in the industry has grown intense rapidly, Fedex's financial performance has also grown better due to several factors. Apart from technological capabilities, the brand has also focused on making its distribution network more efficient. FEDEX is a global brand with its network delivering services across 220 countries. In 2018, its revenue increased by more than 9% compared to the previous year. US is its largest market. More than 425,000 employees are working wth dedication for FEDEX around the world to make every FEDEX experience an outstanding one. Apart from efficient delivery, FEDEX also focuses on good customer service. It has invested in cutting edge technology to make pick up and shipping more convenient for customers. Its investment in ground automation has started paying off. FEDEX has some distinct strengths. However, the market is also full of challenges and apart from growing competition, the changing technological, economic and political scenario also poses major challenges before the brand. This is a SWOT analysis highlighting the strengths, weaknesses, opportunities and the threats before the brand.
- Brand Recognition :- FEDEX has built strong brand recognition in US and abroad. Brand recognition is a key strength driving strong business throughout the world. FEDEX has emerged as a key supply chain partner for businesses. Strong brand recognition of FEDEX is based on its consistent delivery of reliable services through past several years. Apart from efficient delivery of services, the brand has focused on customer service which has resulted in higher trust and greater brand awareness.
- Global Presence :- FEDEX is a global brand which serves customers across more than 200 countries. Its global network including air and ground network provides delivery of packages and freight to more than 220 countries and territories through a large range of U.S. and international shipping services.
- Innovation and technological capabilities :- FEDEX has always focused on technological innovation for higher efficiency and superior customer service. It has adopted cutting edge technologies that allow customers to conveniently pick and drop off from more than 50,000 locations in US alone. Every day it picks up and delivers more than 14 million shipments. FEDEX has employed a fleet of 670 aircrafts and more than 180,000 motor vehicles for pick ups and delivery each day. Moreover, Hub expansion and investments in technology have made FEDEX's ground network the most highly automated ground network. There are more than 130 automated facilities allowing FEDEX to clear higher volumes during the holidays. It is also investing in fleet modernization and has purchased aircrafts like Boeing 777F that use less fuel per pound of payload.
- Sound financial performance :- The brand's financial performance in the recent years has kept growing stronger. In 2018, its revenue rose by around 9% as compared to the previous year. Revenue rose to 65.5 Billion and Net Income reached 4.6 Billion dollars in 2018. The brand is on its track to reach the target of improving its net operating income by 1.2 to 1.5 Billion from 2017 to 2020. Its revenue in 2016 was 50.4 Billion dollars and increased to 60.3 Billion dollars in 2017 and then 65.4 Billion dollars in 2018. Fedex is geared towards increasing its revenue faster in future.
- Broad service portfolio :- FEDEX has brought a broad portfolio of services for its customers to suit the needs of a diverse range of customer segments. Varying customer segments have varying needs that need being fulfilled. Fedex caters to the needs of small and large businesses as well as individual customers. It offers a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively, under the FedEx brand. Its primary operating companies include Fedex Express, TNT express, Fedex Ground, ad Fedex Freight.
- Strategic acquisitions :- The company has made a series of strategic acquisitions to improve its portfolio of services. In March 2018, it acquired P2P Mailing Limited which is a leading provider of worldwide, low-cost e-commerce transportation solutions, for £92 million ($135 million) in cash from operations. It also acquired Northwest Research Inc., a leader in inventory research and management for $50 millions. TNT express collects, transports and delivers documents, parcels and freight to over 200 countries and territories. Fedex acquired this company for 4.4 Billion dollars in 2016.
- High Operating Costs :- The operating costs for Fedex have kept growing year over year. In 2016, its operating expenses were 47.3 Billion dollars which increased to 55.3 Billion dollars to 60.6 Billion dollars in 2018.
- Low scope for differentiation :- The overall level of competition in the parcel industry has increased a lot. This has led to reduced scope for differentiation in services. Competing brands are aggressive about improving their market share. Most of them provide a similar array of services.
- Over-dependence on the US markets :- Fedex depends on the US market for a very large part of its revenue. In both 2017 and 2018, US accounted for more than two third of the brand's revenue. Its international revenue in both the years was just around half of its revenue from US. This shows its over dependence on the US markets.
- Seasonality of business :- Fedex's another weakness is its seasonality of business. Its businesses are cyclical in nature. As seasonal fluctuations happen, they affect volumes, revenues and earnings. US business peaks in late November and December whereas its international business peaks before the Holiday season. So, seasonality can have a major affect on its business and revenue.
- AI and digital technology :- Technology offers the biggest opportunities in the twenty first century. In the parcel industry too AI and digital technology can be used to provide the customers with better and improved experiences. Fedex can also use these technologies to engage its customers better and for marketing.
- Partnerships :- FEDEX has excellent technological capabilities and resources. The brand has emerged as an excellent supply chain partner offering great solutions for supply chain issues. It can strike more partnerships with other brands that can help it improve its range of services and capabilities.
- Diversification :- Diversifying into related fields will also help it grow its business and sales as well as revenue. Fedex is financially strong and investing in new businesses can help it overcome some key challenges that are obstructing faster growth in the international markets.
- Asian economies :- The Asian economies are among the fastest growing currently. India and China offer major opportunities of growth for brands like Fedex. The company must try to grow its presence in these markets to grow its international segment revenue. Moreover, increasing its presence in these markets will also help the brand reduce its dependence on the US market.
- Competitive threat :- Competition in the parcel industry has grown intense. Top competitors of FEDEX include UPS, USPS, and DHL. All these brands invest aggressively in marketing as well as research and innovation. Battle for market share in parcel industry is intense. UPS is at the top with the highest market share. Fedex is also investing aggressively in developing capabilities that can help it overcome the competitive pressure and grow its market share. However, the intense competition is still the biggest threat in the way of growth.
- Regulatory threat :- The regulatory environment has grown intense around the globe which is being a barrier to fast international expansion. Apart from increased compliance related costs, brands have to worry about compliance in the several markets they operate in. Both in US and international markets, the regulatory environment is a barrier to revenue and sales growth.
- Strengthening dollar and economic fluctuations :- Economic fluctuations from time to time in the international markets can affect sales and revenue. Moreover, the continuously strengthening dollar worldwide is affecting the income from international markets. A stronger dollar leads to reduced net income for the US based companies.
FEDEX has retained a strong market share and position in the global parcel and delivery industry. However, its main market is US. Competition in the US parcel industry is very high and to overcome it FEDEX must focus on increasing its presence in the international market. It must try to penetrate thee merging economies deeper. Asian economies are among the fastest growing and offer some major opportunities for FEDEX. FEDEX is investing in innovation and strengthening its technological capabilities including both air and ground network. Stronger dollar and strong competition, both are the biggest threats in its path. Fedex can still achieve faster growth through acquisitions and diversification. Focusing on increasing operational efficiency will also help it reduce operational costs. Use of AI and digital technology will help it engage its customers better and grow its marketing capabilities.
FEDEX Annual Report 2018