FedEx Corporation, ranked 47th in the Fortune 500 index, posted higher growth than United Parcel Service (UPS) for the 2019 fiscal year that ended on May 31, 2020. It posted annual revenues of $69.69 billion with a $540 million net income.
Although the net income is 88.2% lower compared to the previous fiscal year, FedEx remained committed to going the extra mile in order to revamp its delivery network and fulfill its commitment to deliver boxes to residential doorsteps.
Amidst the intense competition in the express delivery, courier, and shipping services, FedEx’s performance and market standing remain strong.
As a global brand, it operates in 220 countries with the United States as its largest source of revenue. While technological innovations are creating opportunities, prevailing health conditions and political instability in some areas of the world create challenges for FedEx.
In line with these, the following sections present a SWOT analysis highlighting the brand’s strengths and weaknesses, as well as possible external opportunities and threats.
FedEx SWOT Analysis: Strengths
The company has a strong brand recognition at a global level. Consumers instantly consider FedEx for its delivery needs. Notably, FedEx built its brand recognition through its consistently dependable services through the years. Overall, brand recognition remains one of FedEx’s strengths, and the brand is well-trusted by consumers.
As a global brand, FedEx provides services to roughly 220 countries, with nearly 2200 offices, 370 service locations, 13 Air Express hubs, 39 Ground hubs, and 1,950 operation express stations. The company operates in the Americas to Europe, Asia, and across the world. This is considered a strength because the company’s global reach means that it has operations in places that its competitors do not have. These operations are done through an extensive air and ground network that are some of FedEx’s important assets.
FedEx’s technological capabilities allow the firm to operate efficiently and precisely. These technological capabilities facilitate the delivery and pick up of over 14 million shipments daily. FedEx made significant investments in its nearly 700 aircrafts, and over 180,000 vehicles. With this level of technological capability, it will be difficult for competitors to match the scale of service FedEx has to offer.
FedEx owns a large service portfolio, having built this up through strategic investments. Through this extensive portfolio, FedEx can consistently target emergent customer segments and fulfill needs in those segments. Part of the FedEx portfolio are FedEx Express, TNT Express, FedEx Ground, and FedEx Freight, with the company further expanding its FedEx Freight Direct services to deliver heavy, bulky items into homes and businesses.
- High Operating Costs. Due to FedEx’s goals in satisfying customers and rolling out innovative services, the company has been incurring high operating costs. For example, its operating costs have been increasing yearly, which rose from $47.3B in 2016, $55.3B in 2017, to $60.6 billion in 2018. Increasing operating costs reduces the profitability of FedEx that could be invested in other projects and assets.
- Overdependence on the North American Market. Over-reliance on a single market is risky. In the event that there are economic, political, social, and environmental crises in that given market, a company could be vulnerable to be affected by these factors. FedEx is currently over-reliant on the North American market for its revenue. Indeed, half of its revenue in 2018 was generated from the North American market.
- Lack of Diversification. FedEx lacks diversification of its services. Today, consumers have become fickle and discerning mostly because of the availability of information over the Internet, resulting in them doing business with companies that offer different services. FedEx’s lack of diversification could be a weakness that competitors can exploit by offering services that FedEx does not.
- Bad Customer Service. There have been complaints involving FedEx and its drivers’ behavior and instances of inappropriate handling of packages. These harm the company’s reputation and image that, in a competitive industry, can result in the decline of the customer base. FedEx’s claim policies are also frustrating, with complaints taking a long time to resolve for damages of goods while in transit.
FedEx SWOT Analysis: Opportunities
Expansion into Emerging Markets
Emerging markets represent excellent business opportunities for FedEx, particularly with improvements in economic performance in these places. Indeed, in emergent markets in Asia, Africa, and Latin America, there has been an increased demand for courier, logistics, and freight services. FedEx can increase its competitive advantage by expanding to these places.
It would bode well for FedEx to venture into e-commerce and strengthen its online presence. Industry experts have forecasted that the global retail e-commerce market will have sales that increase from $3.5T in 2019 to $6.5T in 2023. FedEx can seize these opportunities to grow and expand in the e-commerce market.
FedEx can further diversify its portfolio to encompass e-commerce investments. As mentioned earlier, e-commerce holds many opportunities for growth and expansion for the company.
AI and Digital Technology
Into the 21st century, AI and digital technologies hold significant promise for FedEx. Through these technologies, it can further increase customer satisfaction and efficiency in operations. These technologies in particular can address the aforementioned weaknesses such as the improvement of customer experiences. They can also be used to enhance FedEx’s core offering of service delivery.
- New Rivals. FedEx currently operates in an intensely competitive market. The company constantly has to be on its toes, especially since new rivals are poised to enter the market, including Amazon–a customer of FedEx–and Uber Freight. Uber and Amazon have the same access to resources that FedEx has and as such, are positioned to possibly outperform FedEx. This can result in reduced customers for FedEx.
- Currency Fluctuations. FedEx delivers services around the world. Consequently, it transacts in different currencies. In the event that currencies fluctuate, the company’s revenue could reduce. Moreover, when the US dollar strengthens in value worldwide, this will lead to reduced income for US-based businesses like FedEx.
- Fuel Prices Fluctuations. FedEx uses fuel to deliver packages worldwide. It operates its own fleet of aircraft, as well as trucks and other motor vehicles. Currently, FedEx already has high operating costs. In the event that fuel prices increase, operating costs for FedEx will also increase. This can translate to reduced earnings.
- Uncertainties. All businesses have to deal with uncertainties such as the COVID-19 pandemic. Notably, COVID-19 resulted in lockdowns in many countries. Travel was severely constrained because of the lockdowns. With its fleet of vehicles, including aircrafts, FedEx faces the threat of continuing reduced operations until the COVID-19 pandemic is over.
- Global Recession. Recession in global economies can disrupt FedEx’s operations. Currently, a significant number of FedEx customers are sliding into a recession because of the impacts of COVID-19. Thus, FedEx’s profits will dramatically drop and may continue to decline into 2021.