FedEx’s SWOT Analysis

FedEx
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FedEx Corporation is the leading global transport and logistics company. Interestingly, the company’s concept was originally written as a concept paper by the founder Wallace Smith in a term paper while doing his undergraduate studies at Yale University. The company has grown to become a global leader. Here is a look at the SWOT analysis of FedEx. Before we jump to FedEx’s SWOT analysis, let’s go through the company overview as below.

Company Overview

NameFedEx Corporation
Websitehttps://www.fedex.com/
FoundersFrederick Wallace Smith
Chief Executive Officer (C.E.O.)Frederick Wallace Smith
TaglineWhere now meets next
HeadquartersMemphis, Tennessee, U.S
Type of CorporationPublic
Year FoundedApril 17th, 1973
Revenues (2019)$21.5 B
Key Products/ServicesCourier, Logistics, Freight, Sales, Marketing, Information Technology, Communications, Customer Service,  Technical Support, Billing and Collection Services, Back-Office Functions
Key CompetitorsUnited Parcel Service (UPS), DHL, Nagel, CEVA Logistics, Blue Dart, Royal Mail, C.H. Robinson, Deutsche Post, DB Schenker, GLS, XPO Logistics, YRC Freight,  Uber Freight

Now let’s go through the detail FedEx’s SWOT analysis consisting the strengths, weaknesses, opportunities and threats as follow:

FedEx’s Strengths

Strong brand

The company has a strong brand name and brand recognition globally. It is well reputable for high quality service, reliability and speed. According to 2021 Forbes Global 2000 list of the globe’s largest companies, FedEx is ranked 119. It is the biggest transportation and logistics company globally. It rose from 513 last years to take over the top spot from UPS in the transportation sector.  

COVID 19 brought more opportunities for the brand’s excellent performance. This has seen a 23% increase in year-over-year sales, net income rose by 183%, the company delivered more than 100 million doses of COVID vaccine across the globe. FedEx has continuously worked on its brand by consistently offering dependable delivery services over the years. The brand remains well-trusted by its customers.

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Global presence, extensive worldwide supply chain and networks

Given the brand is a global one; it has its presence in over 220 countries with 2200 offices, 13 express hubs, 370 service locations, and 1950 operation express stations. The company’s operations across the globe mean the company has reached areas where its competitors may not reach. Given its superior experience in the industry, the company is able to be competitive and increase competitive revenues.

Profitable acquisitions

Through strategic acquisitions, the company has been able to broaden its global reach in offering its services. Here is a list of the company’s acquisitions

  • Kinko’s Inc. (2004)
  • Parcel Direct (2004)
  • Watkins Motor Lines (2006)
  • Prakash Air Freight (2007)
  • TATEX (2012)
  • GENCO (2015)
  • TNT Express (2016)
  • Northwest Research (2017)
  • P2P Mailing LTD (2018)
  • Flying Cargo Group (2019)
  • ShopRunner, an e-commerce platform

Technological advantages

FedEx has invested in technologies that have enabled the firm to operate efficiently and with precision. This technology investment is critical as it supports the shipment of over 14 million shipments every day. The company made huge investments in 700 aircrafts and in over 180,000 vehicles. The company has also made a reservation of 20 fully electric cars from Tesla. To increase efficiency in its operations, the company is keen on sustainability and is using alternative fuel vehicles. These huge investments acts an entry barrier for new entrants who may not afford such capital

Huge service portfolio

Through strategic investments, FedEx has built a huge service portfolio. With such differentiation, the company is able to adequately meet the needs of particular niches and even emerging needs among customers. Its portfolio is made up of FedEx Express, FedEx Ground, TNT Express, and FedEx Freight. The company is also in the process of expanding FedEx Freight Direct services to deliver bulky and heavy items into business premises and homes.

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FedEx’s Weaknesses

High operating costs

With an eye on top-notch customer satisfaction, the company has invested heavily in innovative services which call for huge operating costs. With operating costs on the increase year over year, FedEx’s operating profits continue to reduce year over year. This means the company will not have free cash flows to invest in other projects.

Overdependence on one market

FedEx heavily relies on the North American Market. In 2018, more than half of its revenues came from this market. This approach fails to diversify business risks that could befall the company. In the event of political, economic, environmental, and social crises that heavily affect this particular market, then the company is at risk of closure.

Lack of diversification

FedEx services are not fully diversified. The modern customer however is looking for diversification of products and services to provide a wide range of choices. With the availability of information and choices over the internet, FedEx’s customers are prone to doing business with other companies that offer more personalized choices. Competitors could easily take advantage of this weakness to gain competitive advantages over FedEx.

Bad customer care

Complaints have arisen over FedEx’s customer care experiences. Complaints include tiresome and frustrating claim policies, inappropriate behavior by drivers, and bad handling of packages. This could easily harm the image of the company in an industry that is very competitive.

FedEx’s Opportunities

More expansion into emerging economies

There is now more and more demand in emerging markets like Asia, Africa, and Latin America. FedEx could tap into the growing demand in these areas. The company could consider acquisitions in these areas rather than starting from scratch.

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Growth in e-commerce

With COVID 19, there was even more growth in e-commerce which rides on delivery services. FedEx could capitalize on this growth for more expansion.

Diversification of portfolio

Diversification into the online retail space coupled with a global distribution network and supply chain could offer the brand competitive advantages for customers who shop online and looking for deliveries.

Innovation

FedEx has a major interest in innovation and is currently one of the leading innovative companies in the logistics space. Its innovations include an autonomous robot delivery service daily, package tracking, Blockchain technology, and platooning of its highway trucks to improve their safety.

FedEx’s Threats

Stiff competition

The logistics space has many competitors; and although the company rose up with great strides to beat competition, there is need to beware of competition as it threatens the company’s sustainability

New entrants like Amazon and Uber Freight.

Amazon, a former client of FedEx is breaking from FedEx to establish its own logistics company which could be a significant threat to FedEx.

Anti-globalization ideologies, anti-trade policies and global trade wars

FedEx largely depends on friendly trade policies, globalization policies to access and operate in countries globally. Any change in trade policies, trade wars, sanctions and embargoes, trade controls, and any anti-globalization ideologies are sure to impact negatively on the brand’s performance. Take for instance trade tensions between China and the US.

Looming global recession

Some of the major customers for FedEx are already sliding into recession. Recession will affect the purchasing power of customers which threatens FedEx’s profits.

Unstable fuel prices

Oil prices have remained highly volatile even with the production cut that has reduced the prices for fuel globally. Uncertainty always increased risk and therefore increases cost.

Currency fluctuations

Given the company trades globally, any fluctuations in currencies’ exchange rates could mean a decrease in the company’s revenues.

Conclusion

FedEx has made remarkable progress in the recent past and with persistent effort in the same direction and taking into account diversification, and strategic expansion among others, the company is set to continue on an upward path.

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