We conduct a FedEx PESTLE analysis to see what external factors influence the performance of FedEx, such as political, economical and environmental ones.
Imagine you're James Bond, and your secret service has assigned you a task to deliver a package halfway across the globe in three days maximum, but guess what? You can't leave the city. What would you do?
I am sure you're thinking pretty hard, and you are still clueless, but trust me, it is actually possible. Okay, that jaw drop was expected, but don't worry, I'll tell you how.
Have you ever heard the name FedEx? I am sure you must have. You can simply Ship or Air Cargo your package through FedEx to any country you want; it'll reach the desired destination in three days maximum.
FedEx is a multiIndustry company that participates in the transportation of packages and provides designing services. Recently, It has also become a part of the eCommerce industry.
Initially, like any startup, FedEx had a humble beginning. FedEx was a brainchild of an undergraduate student at Yale University. He worked hard on his idea of developing a transportation company that soon started its operations in 1973. From there onwards, it never looked back.
Currently, FedEx is considered among the largest courier companies in the world as per the market cap. A company that many people initially thought would fail managed to generate revenue of $83.95 billion in 2021.
No one had ever thought that FedEx would get so popular that Tom Hanks would play the role of a FedEx troubleshooter in the famous movie Cast Away. So after looking at this exciting journey of FedEx, we decided to conduct a FedEx PESTLE Analysis.
PEST analysis is a handy tool to identify how external factors such as the political, economic, social and technological impact a company's growth. Add the legal, and environmental factors and you've got yourself a PESTLE analysis.
FedEx started its operations in Memphis initially. Now it has spread its operations across the globe. Currently, FedEx is operating in more than 220 countries, which makes it a household name.
It is a difficult job to make sure that the operations run smoothly despite operating on such a big scale. To ensure that, FedEx owns a large number of vehicles and aircraft. FedEx's fleet consists of 684 aircraft, while it owns more than 87,300 vehicles so that no disruption is caused in its operations.
We will now conduct a PESTLE analysis of FedEx to see what external factors influence the performance of FedEx, but before we proceed further, I would recommend you guys look at some of the examples of PESTLE analysis to get a better understanding of this article.
Political factors
Political factors are the very first element of the PESTLE analysis. Political factors strongly impact the business and play an essential role in determining its long-term sustainability.
Since FedEx operates in almost every country across the globe, global politics are a source of risk for FedEx.
To run a smooth business in a country, political stability is crucial. The political instability in some countries where FedEx is active has a significant impact on its operations and growth.
Currently, the political situation of countries like Russia and Afghanistan is unstable due to internal and external conflicts, which negatively affect business activity. A lack of focus on the current situation can adversely affect its revenues and profitability, leading to inadequate capital investments.
Moreover, styles of governments also influence the operations of a business. For example, FedEx primarily operates in countries with a democratic form of government.
One of FedEx's perks is doing business in countries with a democratic form of government. Such governments provide companies with a friendly and supportive environment to carry out their operations.
Talking of supportive policies, governments with a relaxed taxation policy toward businesses are considered a haven for inventors. However, while considering the political factors that influence a company's operations, we must not forget that tax policy broadly impacts businesses.
FedEx should invest in countries where governments facilitate investors and impose low taxes on investors.
Economic Factors
Another critical element of this PESTLE analysis framework is economic factors that affect the performance of a business.
Like any other business, economic factors such as inflation, interest rate, and recessions influence the operations of FedEx.
The economic growth of countries directly impacts the business residing within its geographical boundary. Therefore, if a country is observing economic growth, a good level of economic activity is taking place in that country which is beneficial for any business.
The GDP growth can be an excellent indicator to guide FedEx while making expansion decisions. Therefore, to expand its operations, FedEx Corporation should choose countries with a high GDP growth rate for expansion.
A high economic growth rate provides opportunities for long-term growth objectives and can stimulate the demand for FedEx's products. However, if a country's economy grows slowly, consumers will be more conservative spenders, directly affecting FedEx's revenue growth.
Another economic factor that is considered to be very important is inflation. Inflation is when the cost of living rises, and people spend more money than the number of goods they can purchase. Therefore, it affects companies negatively since it reduces consumer spending on goods and services.
Currently, we are observing high inflation worldwide as post-COVID-19 effects and now due to the Russia-Ukraine war.
Operating in such circumstances can be very damaging for FedEx since high inflation would cause a drop in the demand for FedEx services, and the company's cost of operations would also increase. This would lead to a loss in revenue and market share.
Socio-cultural Factors
Social factors are the third essential component of the PESTLE analysis. Social factors represent the important demographic characteristics such as norms, social values, and customs of a society.
When a business carries out its operations in different countries, that business must understand the social factors of those countries. Therefore, the success of FedEx can be attributed to its ability to identify social factors and adapt its strategies accordingly.
One of the key social factors that impact the operations of businesses is consumer behavior. The amount of money you have available to spend on goods and services is your disposable income.
People who possess more disposable income and are willing to spend more on goods, products, and services to improve their lifestyle will provide exciting growth opportunities for FedEx Corporation.
FedEx should target markets like the USA to operate since it has the highest household consumption in the world. This means operating in such markets could help FedEx in generating high revenue.
Moreover, FedEx should keep a close eye on the demography of its operating countries. Today, in a world where marketing plays a crucial role in making a business successful, you need to know the demographics of the market for efficient marketing.
For instance, FedEx could use marketing strategies targeting immigrants with diverse backgrounds by showing its soft side towards immigrants in a country like the USA, where more than 51 million immigrants reside.
Technological Factors
As the world is getting technologically advanced, FedEx needs to stay connected with modern technological developments to gain a competitive edge and stay relevant in the market.
This article section will discuss some technological factors that have important implications for FedEx Corporation.
Back in the days' businesses only used to look at the infrastructure of a country before expanding their operations in a country, but now to perform well in a market, it is essential to look at the technological infrastructure of a nation.
Countries that have well-developed technological infrastructures are more likely to be able to provide the foundation for cost reductions and innovations in a company.
It is very beneficial for FedEx if they work in countries that have a well-developed technological infrastructure. This is because a country's technological infrastructure supports cost reductions, innovation, and value creation. These factors will help FedEx generate more profits and eventually lead to market dominance.
Moreover, technological innovation is currently creating a significant impact on businesses in every industry. Therefore, the emergence of new technological innovation trends would greatly impact FedEx's product development and marketing strategies.
Emerging technological innovations are the ones that are new in nature but hold the potential to make a significant impact on the company.
To maintain a competitive advantage with its customers, FedEx should adopt technological innovations such as E-commerce to streamline its operations and improve the user experience.
The organization can position itself as an innovative leader in the industry and achieve operational efficiencies that will make FedEx more efficient for its clients.
Legal factors
Legal factors represent all the laws that affect the operations of a business. Governments across the globe make laws to keep the business practices clean, which businesses have to abide by.
FedEx can be sued like any other country if it does not obey the host countries. To reduce these risks, it is necessary to evaluate legal factors. It is possible that up-to-date legislation could provide information on potential risks and how the company can deal with them.
Employment law is a combination of constitutional and statutory factors used to protect employees' rights.
This includes the right to fair wages and working hours, equal treatment for all employees, privacy in the workplace, protection from discrimination, and much more.
Recently, FedEx earned bad publicity when an employee of FedEx sued and won the lawsuit against the company over its controversial policy.
FedEx Corporation must comply with employment laws in countries with strict employment laws to prevent discrimination.
This will help FedEx strengthen its employer brand image, which is important for attracting and retaining the top talent from the market amid the ongoing war for talent.
Although strict business laws usually don't make businesses happy, laws like Intellectual property law protect many companies from getting their patents stolen.
Strict implementation of this law provides a safe playing field for innovative companies like FedEx. It allows it to maximize its profits.
Environmental factors
Environmental factors, such as natural resources and waste disposal, have always been important for all businesses. However, environmental factors have gained higher importance in the business environment due to global warming and climate change.
Since many countries impose heavy fines and even bans on companies that harm the environment due to their practice, FedEx should gain an understanding of all environmental regulations to avoid lawsuits and reputation damage in the market.
Strict laws and regulations to protect the environment push businesses to take action towards reducing environmental harm. FedEx corporation should adopt responsible production and consumption practices, improve its marketing image, and ensure full compliance with environmental regulations.
The development of renewable energy sources emerged as a powerful trend in various sectors. In some world regions, governments even offer attractive subsidies for renewable energy sources.
By taking advantage of these benefits, FedEx Corporation can achieve sustainable business development objectives by investing in renewable energy sources.
This will not only improve the image of FedEx, but it will also cut down the operating costs of FedEx, which will generate high revenues for the company.
FedEx PESTLE Analysis: Final Thoughts
Before wrapping up, let's just summarise what was learned through this article. Initially, we started off by sharing a bit of the background of FedEx and how it currently operates.
Then we proceeded to the PESTLE analysis of FedEx to see how the external factors influence the operations of FedEx. We discussed political, economic, social, technological, legal, and environmental factors affecting the operations of FedEx.
PESTLE analysis is only used to investigate the impact of external factors on an organization. If you are curious to know the internal and external factors affecting FedEx, have a look at the FedEx SWOT Analysis.
In the end, we assume that besides gaining information about the external factors that impact FedEx, now you guys have an understanding of what PESTLE analysis is.
