The firm’s current customers include everybody who uses FedEx services to deliver their letters, parcels and goods to the destinations they have chosen within a certain period of time. The company’s potential customers are untapped markets and customers with unique needs that FedEx is yet to accommodate. From the case study, it is notable that most of the current and potential customers are seeking to find the fastest means to deliver their parcels, in the safest possible ways that cost effectively and readily affordable.
According to Ferrell and Hartline, most of the customers use the firms services to derive a number of services in distribution of parcels, goods and in business communication with different parties in different locations, as in the example of the case of business entity to a customer or doctors who want the certain deliveries of medicine (537). It can generally be said that most of the customers use FedEx services in their daily livelihood and business operations.
Customers purchase FedEx products from different offices located in various towns, at airports, drop off points and in places where they have agreements with other companies in the market such as the DHL, U.S.
Customers purchase FedEx products when they need them depending on the urgency of their needs. From the case study, we note that FedEx offers a variety of products with different time requirements. For example, they offer late night pick-ups, weekend services and same day services among others. FedEx products are purchased when consumers need them and they happen to be the only efficient option available. However, there are also potential customers who do not purchase FedEx products because of the lack of market penetration in some areas, high cost of some of the products, ignorance of the existence of the products in the market, and preference to use the competitors’ products.
According to Hartline and Ferrell, Customers select FedEx products depending on a number of factors including, the urgency of the delivery, nature of the delivery, safety of the delivery, the bulkiness of the delivery, the cost of delivery, availability of the service in their area and presence or absence of a competitor service (535). For example, a customer who needs same day delivery for a perishable good will choose express delivery. In general, most people purchase FedEx products because they find them efficient in achieving their desired needs.
The most basic feature of FedEx service is that they strive to accommodate all the customers’ needs by providing them with the fastest and safest means of delivery at all times (Ferrell, and Hartline 534). FedEx has penetrated into the market to reach full potential by acquiring other small firms that offer individual pieces. On the other hand, their competitor like UPS has relied on its large customer base by continuously offering cheap ground shipment that is fuel-efficient during the time it is the market leader.
There is a general anticipated change in customers’ needs because of the improvement of infrastructure, competition and changes in information and communication technology (Ferrell, and Hartline 537). Most customers are expected to demand for efficient means of deliveries in terms of cost, time and safety.There is anticipated decrease for need of FedEx products, as most of the customers will have alternative means like access to internet and other forms of communication. Competition is another factor that will eventually lead to change in customers’ needs by the presence of a variety of efficient products and a variety of choices for the consumers.
Work Cited
Ferrell O. C., and Michael D. Hartline. Marketing strategy (5th ed.). USA: South-Western College, 2004. Print
FedEx Company has a key strategy, which it uses in the market place in order to maintain its success. This is to leverage and extent one of its greatest assets, the FedEx brand, and to provide the customers with convenient, seamless access to their entire portfolio of integrated business solutions (Berger, 2011). In addition, FedEx Company performs well because of its operational excellence. The company is working hard to incorporate its business divisions so that customers have a main point of contact. This is very important as it helps them access the company’s products at a central place (Lussier, 2009).
FeDex has adopted customer intimacy since, companies who attract customers by understanding and responding effectively to individual needs better than their competitors, succeed in the market place. Therefore, the operational excellence is and remains the most important aspect of FedEx’s strategy. The evidence of the company’s customer intimacy and operational excellence is clear since the company declares that their strategy is to provide customers with convenient, seamless access to their entire business solutions (Lussier, 2009). The company’s effort to enhance customer experience, like improving the qualities and abilities of the sales professionals, is another evidence of this strategy.
In addition, the company allocates a single agent for every given customer to handle their issues effectively. Moreover FeDex allows allows each segments to operate independently because this strategy allows them to respond to the customer demands well. Extra evidence is seen where the company states that it is a leader of reliable global delivery and freight services. Evidence of product leadership is evident where the company states that it believes that seamless information integration is important in obtaining a single point of contact for their customers (Birla, 2005).
The four business segments of FedEx include; FedEx Express, FedEx Ground, FedEx Freight, and FedEx Kinko’s. The FedEx Express is categorized as the world’s largest express transportation company that offers timely delivery. This segment serves more than 90% of the world’s gross domestic product market (Berger, 2011). FedEx Ground mainly provides small package ground delivery while FedEx Freight is a re-known provider of freight services in the United States. Lastly, is FedEx Kinko, which offers document solutions, finishing, and presentation services (Berger, 2011).
The traceable and observable fixed costs for any company first of all exists simply because the firm exists (Lussier, 2009). For FedEx Express segment, the traceable costs are the costs incurred in operating its main sorting facility, which is located at Memphis, in Tennessee. The costs include the high expenses incurred in maintaining the aircrafts, cost of training flight workers, fuel for the aircrafts, and the other administrative costs like rents and salaries for the administrators.
Moreover, another example would include the cost of running the regional hubs or central focal points of the company in Newark, Oakland, and Fort Worth. The FedEx Ground segment traceable fixed costs comprise of the compensation costs paid to the president and chief Executive Officer of FedEx Ground, and operating its numerous facilities and hubs in the regions throughout the world (Berger, 2011).
One of the company’s cost centers is FedEx Express,and specifically its sorting facility that is situated at Memphis, Tennessee while an example of a good profit center would be represented by FedEx Kinko’s Office and Print Centers (Berger, 2011). In addition, FedEx Kinko, FedEx Express, FedEx Ground, and FedEx Freight which are the four segments of the company can be categorized as the as the company’s investment centers (Birla, 2005).
A fixed cost is defined as a cost that does not change with an increase or a decrease in the amount of goods or services produced. The cost is not dependent on the level of production of the company. One of the traceable fixed cost for this company is the cost incurred in maintaining or operating its facilities at Memphis International Airport. This may comprise of costs incurred in paying for administrative offices and warehouse. Others include cost of owning airplanes, vehicles, and trailers. Furthermore, one common cost, which is likely to be invisible, is the cost incurred in paying the salary of the Chief Executive Officer, Fredrick Smith and sponsorships offered by the company (Birla, 2005).
The Return on Investment is a measure used in evaluating the efficiency of an investment or a number of investments so that a firm can make a decision. On the other hand, residual income refers to the income an individual remains with after paying debts. Since the ROI of $20 million is 20%, which is less than a previous rate of 24%, it is not logical for the managers to select such an investment, which is 4% less in terms of the Rate of Return. Similarly, it is advisable for the FedEx Express managers to undertake this investment if evaluation is done on ROI. This is because ROI of 20% is greater than the previous one calculated at 11.1%, which would increase the total ROI. Therefore, the managers should only pursue the investment if calculated using residual income (Lussier, 2009).
References
Berger, A. (2011).Case Study – FedEx Corporation: Strategic Management. New York: GRIN Verlag, 2011.
Birla, M. (2005). FedEx Delivers: How the World’s Leading Shipping Company Keeps Innovating and Outperforming the Competition. New York: John Wiley & Sons, 2005.
Lussier, N. R. (2009). Leadership: Theory, Application, & Skill Development. New Yoprk: Cengage Learning, 2009.
FedEx has identified the role that the right of health policy plays in employee productivity. When a group of adults from diverse backgrounds is brought together by the management to work for the general good of a given firm, the firm should avoid negative consequences of failing to involve members of the staff to make a contribution to the firms’ decision making especially if the issue at hand directly affect them.
The diversity in background, culture, religion, among others, goes a long way in determining the level of one’s personality. There are those who do not give much attention to their health or that of their families, but there are others whose health comes first before any other thing. These two diverse groups would, therefore, require different health plans. When the firm limits them to one conventional service provider, then it becomes hard to satisfy both groups.
When the firm decided to introduce the provision of the several health care plans for their employees, the result was that every individual would choose freely the plan to subscribe to. This instilled in them an increased sense of self-worth, respect as well as a feeling of belonging. Consequently, the level of productivity went high.
From the case study, benefits increased for the firm, this is because employees subscribed to cheaper plans than the company had compelled them to enroll earlier. With a cheaper plan, the firms were remitting less in tax and, thus, saving a lot more than they previously did.
Health care provision is the greatest form of employee motivation that a firm can ever invest in. People can only increase productivity when they are in good health. Health coverage for employees also takes care of the situation when an accident takes place at the place of work. Employees work with increased zeal and passion for the job that they do while well aware that incase of an accident then their employer has them covered. Additionally, some health care policy providers offer several incentives. These incentives vary and offer a wide variety of benefits to clients who do not make a claim for a certain period of time. This makes employees exercise caution while carrying out their daily activities, thereby, minimising instances of accidents. This makes both the firm and the employee benefit in the long run.
Disease management programs would vary depending on the specifications of the firm. FedEx, for example, has most of its employees lifting boxes most of the time. It, therefore, ensures that it has a wellness centre to keep their employees physically fit. Other companies with the different situation would have different programs. A manufacturing firm would enroll its employees on different programs such as firefighting skills. These programs help reduce instances of injuries, with few cases of injury in the firm very little claims get forwarded. The company saves a lot of money through such preventative measures. An employee who lifts very heavy cartons would easily break aback if not physically preconditioned, and with a broken back, the employee becomes less productive and would most definitely make a claim to his/her policy. Chances of fires breaking out in manufacturing firms are normally very high. Skills on how to fight fire outbreak or escape safely from fire accidents prevent fire accidents at the workplace and, hence, the number of claims or court cases surrounding fire accidents.
Training programs make employees exercise caution in their health. Training helps employees avoid habits and activities that people innocently pick up without knowing the effects that these would have on their health in the long term. Having training programs within the firm that enlighten them on some of these and their possible consequences would encourage them to exercise caution and, in this way, the firm lengthens the lives of its workforce and, concurrently, reducing the number of claims it would have otherwise paid.
A firm that has a nursing hotline just like FedEx minimises its spending rate. Accidents at the place of work require urgent attention. With this urgent attention, a bad situation is prevented from degenerating into a worse one. Some inconsequential injuries that would lead to fainting or just mere strains receive immediate first aid attention, and this discourages the individuals from taking sick leaves and going to the hospital. Admission into a hospital would mean that the cover gets into play and the firm is made to begin paying bills.
In retrospect, health is the number one determinant of the level of productivity in every firm. A firm that takes care of its employees’ health, just like FedEx is likely to receive positive growth. Health services provision is a good strategy to motivate employees and helps the firm to retain its current employees as well as attract other, more competent staff. Additionally, the fewer claims that the firm would be required to pay to reflect positively in the firm’s books of account, and this is normally the overriding aim of any investor.
Package storage and the delivery system combine electronically controlled lockers arranged at or near customer locations. Each locker is unlocked by a courier, preferably with a short-range transceiver or transmitter carried on the courier’s person. The customer can unlock the compartment and receive the delivered parcel. Cryptographically signed communications are employed along with nonvolatile usage logs to diminish the risk of loss of a package or deception by a courier or customer. The cells may be stackable, permitting a delivery courier to add divisions in the event a customer receives too many deliveries to fit into a single portion. Each cubicle has, of course, a physical location, and has linked with it an address code indicative of the physical location, for example by means of a legible or definite representation of the precise latitude and longitude. A batch hand-carried to such a box suitably bears the address code. A merchant can considerably reduce the risk of credit card fraud by requiring the use of such codes for the straightforward reason that a fraudulent transaction may be traced to a specific physical location. A substantial amount of airfreight consists of express-delivery bulk shipments that are carried by integrated carriers. Integrated carriers are companies such as Federal Express, United Parcel Service, and DHL, all of which specialize particularly in the air transportation of small packages and the related ground collection and distribution. Such carriers fly high-value or time-sensitive parcels on airplanes that carry only such parcels. UPS is a bigger company than FedEx, it is also more profitable and more financially stable than its rival. This paper analyzes the financial statements and the financial ratios of the two companies to understand where UPS is doing better and where FedEx has the upper hand so to speak and make some recommendations based on the analysis.
FED-eX history
FDX Corporation is a holding company for Federal Express Corporation and other businesses that provide prompt delivery of packages, letters, and other shipments within the United States and worldwide. Federal Express Corporation, also called FedEx, virtually invented the overnight-delivery industry, and within ten years rose from a startup operation to a $1 billion company.
Among the company’s few delinquents was Zap Mail, a satellite-based system for electronic delivery of documents that was overtaken by the facsimile (fax) machine. In 1986 Federal Express Corporation lost $300 million on the service. Although Federal Express Corporation enjoyed a strong reputation and substantial market lead, competitors began making gains in the 1980s. United Parcel Service of America, Inc. (UPS), a longtime leader in package delivery, invested heavily in technology and aircraft in the mid-1980s and slowly but surely increased its share of the express-delivery market (STACEY, p.20).
FedEx Balance Sheet
Source: Thomson Financial
Currency: USD
ASSETS
05/31/05
05/31/04
05/31/03
Cash And ST Investments
1,039.00
1,046.00
538.00
Receivables (Net)
3,297.00
3,027.00
2,627.00
Total Inventories
250.00
249.00
228.00
Other Current Assets
683.00
648.00
548.00
Current Assets – Total
5,269.00
4,970.00
3,941.00
Property Plant & Equipment – Net
9643
9037
8700
Total Investments
#N/A
#N/A
#N/A
Other Assets
5,492.00
5,127.00
2,744.00
Total Assets
20,404.00
19,134.00
15,385.00
LIABILITIES & SHAREHOLDERS’ EQUITY
05/31/05
05/31/04
05/31/03
Accounts Payable
1,739.00
1,615.00
1,168.00
ST Debt & Current Portion of LT Debt
369.00
750.00
308.00
Income Taxes Payable
288.00
291.00
#N/A
Other Current Liabilities
1,063.00
1,014.00
1,135.00
Current Liabilities – Total
4,734.00
4,732.00
3,335.00
Long Term Debt
2,427.00
2,837.00
1,709.00
Other Liabilities
1,221.00
1,154.00
1,059.00
Total Liabilities
10,816.00
11,098.00
8,097.00
Shareholders’ Equity
Minority Interest
0.00
0.00
0.00
Preferred Stock
0.00
0.00
0.00
Common Equity
9,588.00
8,036.00
7,288.00
Retained Earnings
8,363.00
7,001.00
6,250.00
Total Liabilities & Shareholders’ Equity
20,404.00
19,134.00
15,385.00
Rate Used to Translate From USD to USD
1.00
1.00
1.00
FedEx Income Statement
Source: Thomson Financial
Currency: USD
5 YR INCOME STATEMENT
05/31/06
05/31/05
05/31/04
Net Sales or Revenues
29,363.00
24,710.00
22,487.00
Cost of Goods Sold
9,246.00
7,329.00
6,705.00
Depreciation, Depletion & Amortization
1,462.00
1,375.00
1,351.00
Gross Income
18,655.00
16,006.00
14,431.00
Selling, General & Admin Expenses
12,289.00
11,012.00
10,027.00
Operating Expenses – Total
26,844.00
22,835.00
21,024.00
Operating Income
2,519.00
1,875.00
1,463.00
Non-Operating Interest Income
21.00
20.00
6.00
Earnings Before Interest And Taxes (EBIT)
2,473.00
1,455.00
1,462.00
Interest Expense On Debt
182.00
147.00
140.00
Pretax Income
2,313.00
1,319.00
1,338.00
Income Taxes
864.00
481.00
508.00
Minority Interest
0.00
0.00
0.00
Equity In Earnings
0.00
0.00
0.00
Net Income Before Extra Items/Preferred Div
1,449.00
838.00
830.00
Extra Items & Gain(Loss) Sale of Assets
0.00
0.00
0.00
Net Income Before Preferred Dividends
1,449.00
838.00
830.00
Preferred Dividend Requirements
0.00
0.00
0.00
Net Income Available to Common
1,449.00
838.00
830.00
Rate Used to Translate From USD to USD
1.00
1.00
1.00
Currency: USD
UPS’s history
United Parcel Service of America, Inc. (UPS), and largest package-delivery corporation in the world. The company provides shipment of letters, parcels, and freight worldwide. Based in Atlanta, Georgia, UPS is one of the largest privately-owned companies in the United States. The business was founded in 1907 in Seattle, Washington, by 19-year-old Jim Casey, who saw the need for private delivery service. At the time, the United States Postal Service had not yet familiarized its parcel post system. Casey named his company American Messenger Company, and with a team of six messengers, began delivering messages and meals by bicycle. Soon the company acquired a Ford Model T automobile and seven motorcycles to bear parcels for retail businesses. In 1913 the company merged with an ambitious service to form Merchants Parcel Delivery. By 1918 it was delivering packages from three of Seattle’s major department stores to their customers. By this time the company had adopted its signature brown color used on all of its trucks and uniforms (Friedman, p. 123).
In the late 1970s and early 1980s, Federal Express Corporation began drifting business from UPS by specializing in overnight deliveries with airplanes. UPS began offering a comparable air-delivery service in the early 1980s and invested profoundly in technology and aircraft. The company as well expanded its presence in the international shipping market. In 1991 the company budged its headquarters to Atlanta. (Friedman)
UPS Balance Sheet
Source: Thomson Financial
(www.Tobsefin1.swlearning.com 2007) Currency: USD
ASSETS
12/31/06
12/31/05
12/31/04
Cash And ST Investments
1,983.00
3,041.00
5,197.00
Receivables (Net)
6,220.00
6,361.00
6,051.00
Total Inventories
0.00
0.00
0.00
Other Current Assets
1,174.00
1,601.00
1,357.00
Current Assets – Total
9,377.00
11,003.00
12,605.00
Property Plant & Equipment – Net
16779
15289
13973
Total Investments
#N/A
#N/A
#N/A
Other Assets
6,680.00
8,459.00
5,973.00
Total Assets
33,210.00
35,222.00
33,026.00
LIABILITIES & SHAREHOLDERS’ EQUITY
12/31/06
12/31/05
12/31/04
Accounts Payable
1,841.00
2,352.00
2,266.00
ST Debt & Current Portion of LT Debt
983.00
821.00
1,187.00
Income Taxes Payable
101.00
180.00
#N/A
Other Current Liabilities
2,091.00
1,752.00
1,518.00
Current Liabilities – Total
6,719.00
6,793.00
6,483.00
Long Term Debt
3,133.00
3,159.00
3,261.00
Other Liabilities
995.00
1,903.00
972.00
Total Liabilities
17,728.00
18,338.00
16,642.00
Shareholders’ Equity
Minority Interest
0.00
0.00
0.00
Preferred Stock
0.00
0.00
0.00
Common Equity
15,482.00
16,884.00
16,384.00
Retained Earnings
17,676.00
17,037.00
16,192.00
Total Liabilities & Shareholders’ Equity
33,210.00
35,222.00
33,026.00
Rate Used to Translate From USD to USD
1.00
1.00
1.00
Competition
FedEx Ground implements its stock courier on a self-substantial expert model – UPS does not. The differences between these two companies and their methods of doing business are unhindered, and observers are watching with interest as the opposing worldviews emerge into evident results subsequently. FedEx has had ingressive success in the last several years since they scooped in to fill the void that was created by the UPS Teamsters strike in 1997. At the time UPS fired 10,000 workers when the load supply crashed and FedEx bought RPS (a ground package delivery service based in Pittsburgh) as an outcome. RPS was dependent on a contractor model using self-reliant builders to dispatch packages rather than outright employees and FedEx kept this unmarred. FedEx may have initially used expert drivers as a way to deteriorate costs and use the competitive side to win market share from their contender UPS. Now it is a way of life (Friedman, p.3).
The analyst to the authorized representative questioned whether it is a long-term success stratagem or a short-term cost-cutting gimmick that instigates immediate and rapid growth, doubtful of being completely sustainable. Proposers say it is a new and better way of doing business. UPS is a very strong company that stands firmly behind its own business model and has no tenacity of adopting any of the FedEx contractor strategies. They believe their fortitude in business will win out in the long run because of a more important package offered to their employees that inculcates more sincerity and motivation, and certainly better service to the customer. FedEx Ground has replete itself in its flexible and growing business channels, trying new things and being innovative in a very competitive field. The individualistic model of FedEx is under some legal delving from court authorities, however (Greg p. 20).
Financial ratios
PROFITABILITY RATIOS
12/31/06
12/31/05
12/31/04
Return On Assets
12.68
11.66
11.08
Return On Invested Capital
21.45
19.10
17.36
Cash Flow To Sales
11.92
14.96
16.55
Cost of Goods Sold To Sales
21.55
19.03
14.30
Gross Profit Margin
74.78
77.11
81.48
Operating Profit Margin
13.97
14.48
14.06
Pretax Margin
13.69
14.27
13.45
Net Margin
8.84
9.09
9.11
ASSET UTILIZATION RATIOS
12/31/06
12/31/05
12/31/04
Asset Turnover
1.43
1.21
1.11
Inventory Turnover
#N/A
#N/A
#N/A
Capital Expend Pct Total Assets
8.76
6.61
7.36
Capital Expend Pct Sales
6.49
5.14
5.81
LEVERAGE RATIOS
12/31/06
12/31/05
12/31/04
Total Debt Pct Common Equity
26.59
23.57
27.15
LT Debt Pct Common Equity
20.24
18.71
19.90
LT Debt Pct Total Capital
16.83
15.76
16.60
Equity Pct Total Capital
83.17
84.24
83.40
Total Debt Pct Total Assets
12.39
11.30
13.47
Common Equity Pct Total Assets
46.62
47.94
49.61
Total Capital Pct Total Assets
56.05
56.90
59.48
Dividend Payout
37.53
35.94
36.24
Cash Dividend Coverage Ratio
3.59
4.58
5.01
Working Cap Pct Total Capital
14.28
21.00
31.16
LIQUIDITY RATIOS
12/31/06
12/31/05
12/31/04
Quick Ratio
1.22
1.38
1.74
Current Ratio
1.40
1.62
1.94
Cash And Eqt Pct Current Assets
21.15
27.64
41.23
Receivables Pct Current Assets
66.33
57.81
48.00
Accounts Receivable Days
48.29
53.20
54.35
Inventories Days Held
#N/A
#N/A
#N/A
Currency: USD
Source: Thomson Financial
PROFITABILITY RATIOS
05/31/06
05/31/05
05/31/04
Return On Assets
7.86
5.37
6.24
Return On Invested Capital
12.94
8.85
10.31
Cash Flow To Sales
10.59
9.53
11.63
Cost of Goods Sold To Sales
31.49
29.66
29.82
Gross Profit Margin
63.53
64.78
64.17
Operating Profit Margin
8.58
7.59
6.51
Pretax Margin
7.88
5.34
5.95
Net Margin
4.93
3.39
3.69
ASSET UTILIZATION RATIOS
05/31/06
05/31/05
05/31/04
Asset Turnover
1.44
1.29
1.46
Inventory Turnover
37.06
30.73
28.00
Capital Expend Pct Total Assets
11.69
8.26
10.94
Capital Expend Pct Sales
7.62
5.14
6.72
LEVERAGE RATIOS
05/31/06
05/31/045
05/31/04
Total Debt Pct Common Equity
29.16
44.64
27.68
LT Debt Pct Common Equity
25.31
35.30
23.45
LT Debt Pct Total Capital
20.20
26.09
19.00
Equity Pct Total Capital
79.80
73.91
81.00
Total Debt Pct Total Assets
13.70
18.75
13.11
Common Equity Pct Total Assets
46.99
42.00
47.37
Total Capital Pct Total Assets
58.89
56.83
58.48
Dividend Payout
5.80
7.88
7.23
Cash Dividend Coverage Ratio
37.04
35.67
43.58
Working Cap Pct Total Capital
4.45
2.19
6.74
LIQUIDITY RATIOS
05/31/06
05/31/05
05/31/04
Quick Ratio
0.92
0.86
0.95
Current Ratio
1.11
1.05
1.18
Cash And Eqt Pct Current Assets
19.72
21.05
13.65
Receivables Pct Current Assets
62.57
60.91
66.66
Accounts Receivable Days
39.31
41.76
41.54
Inventories Days Held
9.85
11.88
13.04
Graph 1. Comparison of the financial ratios
Comparison of the financial ratios
The Company constitutes in three segments: U.S. Domestic Package operations, International Package operations, and Supply Chain & Freight operations. As of December 31, 2006, the Company delivered stocks each business day for 1.8 million shipping customers to 6.1 million consignees in over 200 countries and territories. During the year ended December 31, 2006, UPS freighted an average of 15.6 million pieces per day worldwide. Furthermore, its hand-to-hand delivery capabilities are available to clients in over 175 countries and territories. Year over year, United Parcel Service, Inc. has been able to grow funds from $42.6B to $47.5B. Most impressively, the company has been able to trim down the percentage of sales devoted to income tax expense from 5.18% to 4.85%. This was indefatigable that led to a bottom-line growth from $3.9B to $4.2B.
In 2004 FedEx Ground had about 17,000 contract workers. In 2003 it brought in nearly $4 billion in revenue. Currently, it operates 27 centers and is planning on opening 10 new sites doubling its volume capacity to 5.8 million parcels per day. It is venturing double-digit annual revenue growth. It is estimated that most FedEx Ground contractors work 10 to 12 hour days, without overtime commission. They are paid on a complex bulk-rate formula based on how many pickups and deliveries they make, with bonuses for good service. Drivers can make $40,000 to $70,000 a year. The drivers use trucks bearing FedEx colors and logos, wear FedEx-style uniforms and serve customers of FedEx Ground. However, they must pay for and retain their own trucks, uniforms, supplies, gas, maintenance, and other costs. They get no company benefits. A FedEx contract generally covers one route, but it is possible for one person to own up to four contracts, which can raise the earning gradient to more than $100,000 per year. Because of this indubitable contracts are vendible in and of themselves, sometimes bought and sold like businesses for as much as $30,000 plus. Contract instructors go through an initial two-week training agenda and then are on their own. The business does not administer its daily routines but does conduct customer satisfaction surveys. The business is severe results-oriented, if the customers are happy that is all that counts (Benjamin, p. 34).
Ratio Comparison
Profitability Ratios
When comparing the profitability ratios the ROA and ROI for both the companies both returns on asset and return on investment are higher for UPS and in the past three years although there has been an increase in ROA and ROI for both companies UPS is doing much better than FedEx. In addition, the ratio of cash flows to margin and all the other profitability margins are significantly higher for UPS than for FedEx. It can be seen that the ROI for UPS has been consistently rising while for FedEx there was a fall experienced in both ROA and ROI in 2005 but they seemed to have recovered from that fall.
Asset utilization ratio
The asset turnover ratio shows that both companies are quite close in their asset utilization, while inventory cannot be compared as the figure is not available for UPS. Capital Expend Pct Total Assets is higher for Fed-Ex while Capital Expend Pct Sales is slightly higher for FedEx. Therefore Asset utilization ratios are quite close and there is no significant difference. The Asset turnover for FedEx is more consistent than UPS this suggests that FedEx utilizes its assets more efficiently than UPS and therefore it is more efficient. But in the final year (2006) UPS seems to have recovered significantly in its efficiency.
Leverage ratio
In the leverage ratio section the debt to equity ratio is almost the same with the FedEx ratio being slightly higher, however, what is significant is that the ratio has come down drastically since 2005 when it was 44%, while UPS is stable. While the long-term debt to equity ratio is higher for FedEx but shows that in 2005 a large portion of the debt was short-term debt but even long-term debt of FedEx was 35%. Long-term debt as a percentage of capital is quite stable for UPS while there is a sharp rise visible in 2005 for FedEx. And it is higher for FedEx compared to UPS, while the equity to the capital ratio I am higher for UPS. The debt to asset ratio is higher for FedEx, while the Equity to asset ratio is higher for UPS. Dividend payout and the cash dividend ratio also show FedEx to be a more leveraged firm than UPS, however, the dividend ratio is much stronger for UPS than it is for FedEx.
Liquidity
In terms of liquidity of the company UPS has significantly higher quick and current ratios, the company is less risky in terms of its liquidity than FedEx. Though Cash and Equity as a percentage of Current Assets for both companies are within similar ranges, while Receivables as a percent of Current Assets is also similar. While Accounts Receivable Days are much higher for UPS than for FedEx. It should be noted that both the current and the quick ratio for UPS although more than FedEx is declining in the past three years, this trend is the very opposite of FedEx whose quick and current ratios have been improving notably over this three years period.
Recommendations
Even though Federal Express Corporation relished a strong status and significant market retinue, competitors began making benefits in the 1980s. United Parcel Service of America, Inc. (UPS), a longtime stellar in package delivery, invested overpoweringly in proficiency and aircraft in the mid-1980s and step by step increased its dividend of the express-delivery market. The ratios show that UPS is a much more stable and more profitable company for its shareholders as compared to FedEx, which is not only less profitable but has higher financial leverage as compared to UPS. In terms of Assets, utilization UPS is a stronger company and even from a lender’s perspective, it is more attractive. However, UPS is less liquid than FedEx as its receivable days are quite high and even the current and quick ratios are much higher.
In 1989 Federal Express Corporation bought Tiger International, operator of Flying Tigers cargo airline, to acquire new global routes. In 1996 Federal Express Corporation began impartment processing and ferreting capabilities on its World Wide Web site, allowing customers to go through shipment information and access details on the position of their shipments. The following year the company informed it would begin contributing three-day portage service within the United States, a move targeted at increasing its competitiveness with UPS in lower-cost, ground-based transporting services. (Niemann, Greg) In 1998 Federal Express Corporation acquired Caliber Systems, a freight company that operated a variety of delivery forces, and established the holding company FDX business. Based on the company history, business analysis, industry analysis, and performance analysis, we have the following inputs for Federal Express. Pledge that the employees, especially pilots, are well salaried. Since Federal Express is a service company, employees are critical to its success. Place pilots’ salaries at or above the industry average. They need to continue a strong presence on the Internet, in case of an endeavor and find ways to make their e-commerce user-friendly and money-making (Benjamin, p.3).
It cannot be denied that UPS is a bigger concern than FedEx and also much more profitable too as the ratios indicate however, it should be noted that UPS cannot be complacent about the lead it over its main rival, the analysis suggests that FedEx has become more efficient using leverage in one year and also it has been consistent in the rise of its profits and also its efficiency in terms of asset utilization. In addition, it is a more liquid company, UPS has high accounts receivable rate as compared to FedEx, and figures might indicate that there is a certain stabilization and maturity visible in UPS which is not present in FedEx which has been growing and becoming more efficient in its operations.
There is a need for UPS to become more efficient in its utilization of assets and even in the case of receivables, it can cut down on the high number of receivables it has compared to FedEx. These changes along with a superior profitability ratio will go a long way in making UPS a more stable and yet more efficient organization.
References
Benjamin, Marc; (BUSINESS) The Fresno Bee (Fresno, CA); They Deliver When Federal Express needs help fast, a Fresno firm gets the call. (2000)
Saunders, Stacey; Alaska Business Monthly; Federal Express Expands to Offer Variety of Delivery Options. (2001)
Thomas L. Friedman, Insourcing, and The World Is Flat: A Brief History of the Twenty-first Century, New York: Farrar, Straus and Giroux, updated and expanded, 2006.
Niemann, Greg; John Wiley & Sons; “Big Brown: The Untold Story of UPS”.., 2007.
The business-level strategy of a company is one that it follows to position itself against its rivals, anticipating the changes in technology and business environment and changing according to them, and identifying the generic strategy of the organization. In the case of UPS, the company had been one of the leading companies with a market share of 18 percent in the US after FedEx and 19 percent in Europe after DHL. The company has had a strategy using its unique Supply Chain Solution (SCS) to move any form of freight or package anywhere in the world. This system enabled the company to provide business solutions like overseeing “global freight shipments, filled orders, performed technical repair, deployed critical parts, and managed customs brokerage.” (Dess, Lumpkin, & Eisner, 2008, p. 25). For this UPS undertook vertical integration and they differentiated their product offering through their services. For vertical integration, UPS acquired companies like Menlo Worldwide Forwarding and Overnite. Further, the company gained further competitive advantage by establishing more than 3000 retail outlets all over the US, which gave them direct access to the customers.
The business segments of UPS are US domestic package services, International package operations, and supply chain and freight. In comparison, FedEx, UPS’s biggest competitor has business segments like Express, Ground, Freight, and Kinkos. UPS differentiates itself from FedEx in its product and services offering. FedEx is a purely Express Freight transporter while UPS provides customer services for companies, which provide both costs saving to the companies as well as convenience to customers. One such example is UPS’s tie-up with laptop companies like Toshiba. They repair and return laptop computers within 24 hours through the UPS store retail network. This enabled UPS to gain a competitive advantage over its competitor FedEx. UPS has gained ground as a leading 3PL (third-party logistics company) company in the US.
The revenue of UPS’s business segment from 2001 through 2006 has increased. It has increased from $30321 in 2001 to $47547 in 2006. In 2006 the US domestic packages segment gained in revenue by 6.5 percent, International packaging service by 14 percent, and Supply chain freight services by 33 percent. The overall growth rate in 2006 was 11.7 percent. Therefore, the growth rate has been maximum in the Supply chain and freight segment of UPS’s business. In terms of profit, UPS has experienced a decline in overall profit in 2006 from 23 percent in 2005 to 8 percent in 2006. The decline in profit has been due to the decline of 98 percent. Therefore, the growth percentage of the overall company has gone down. In the case of FedEx, the overall revenue has been increasing from 2002 through 2005; however, there had been a decline in growth percentage in 2006. The profit growth rate has declined in 2006 from 2005. There has been a slump in profit in that of Kinkos. This indicates that in both the companies the decline in profit has been through their retail outlets.
The main aim of both the companies is different even though they are in the same business. Based on the current analysis, it can be deduced that UPS should concentrate more on its supply chain solutions and try to gain more alliances with corporate in order to gain an upper hand in solutions business utilizing its widest range of retail outlets. On the other hand, FedEx must try to gain a competitive advantage in the overnight delivery system both in the US and worldwide. This will help both the companies gain a competitive advantage through the differentiation of their product offering and utilizing their core competencies.
References
Dess, G. G., Lumpkin, G., & Eisner, A. B. (2008). UPS and FedEx in the Express Package Delivery Industry. In G. G. Dess, G. Lumpkin, & A. B. Eisner, Strategic Management: Creating Competitive Advantages (4th Eds) (pp. 21-31). Boston: McGraw-Hill Irwin.
FedEx is a shipping company that was founded in 1971in Memphis. The founder of this company was a former Marine with the United States of America: Fredrick W. Smith. Beginning its services in 1973, it majorly used its name: Federal Express, to enable it to acquire quick contracts from the government. It quickly became a leader in its line of business through various steps that it undertook. One such move was application of jet planes in service delivery, especially after cargo airline deregulation. Further still, there was the pioneering of a distribution paradigm called spoke hub. With the change of name from Federal Express to FedEx in 2000 it aggressively started its advertising campaigns thus becoming more popular. This can also be attributed to the fact that it employed overnight shipping. Its major competitors in its line of business include USPS, UPS and DHL.
Sending an international mail via FedEx while in the United State of America is quite simple. All that is needed to be done is just putting the mail that is to be sent in an international destination into a FedEx bag that is designated as international mail service. Next, a call to FedEx using their known number i.e. 1.888.339.6245 would enable you order supplies for packaging airways bills that are preprinted. Before sending, these mails are sorted after being stamped. This is usually done by FedEx personnel or if not possible then their designee would do that. After stamping, they are then shipped to their respective designate countries and handed over to the authorities in charge of postal deliveries in that particular country. Normally this mode of shipment is used for commodities that are considered low valued for example goods for household use, CDs, or films.
Personal Experience with FedEx
While sending printed materials mostly in form of books to a friend of mine in Saudi Arabia, I decide to use FedEx. This was especially so since these materials were urgently needed. I did follow all of the FedEx procedure involved while sending materials to international designations and within a short while, I had paid for the postage and they were off. I was however promised that they would be received in Saudi Arabia within a maximum of 11 days. I did track the mail via their web enable service. True to their words, it only took 4 days to arrive in Saudi Arabia. The mail was now in the Hands of there Saudi Arabia Authorities. I was even prompted to tell my friend to give it maximum 2 days. However, 24 hours did not lapse before my friend finally called me to let me know that she had received the mail.
Therefore my little encounter with the FedEx services was just fine. Their staffs were so willing to help and could give you any information that you did want to have. This was such a nice pleasure and I can now even comfortably send something of a higher value via FedEx to people around off course after insuring it. They simply know how to keep their word. Most importantly however is the fact that although I paid for a standard service, my sent mail got delivered in time period that is designated as premium. That was quite cool.
Experiences Form Other FedEx Ground Service Customers
While that is just part of my experience, there are other various people with varying views about FedEx. One of the many FedEx customer that I got chance to talk to was Jar Hum. He rates the company as fast in delivery. His experience with FedEx is through his regular purchases at Newegg.com and Buy.com. Since these two merchants mostly use FedEx to deliver his purchased products, he has had positive encounters with the company. He fondly calls the serve by FedEx as reliable. He states that even sometimes, the maximum period of delivery i.e. 5-7 days is beaten.
Ahmed however has not been so lucky with FedEx. In his experience, after ordering for a computer part online, the online merchant decides to ship it via FedEx. Luckily, it required that the receiver signs for it on delivery. After waiting and checking on the FedEx website for 3 days, he noticed that information had changed from “Package on FedEx Vehicle for Delivery” to “Delivery exception”. To him, this meant the package had been delivered to a wrong address and there was therefore no one by the name Ahmed to sign for it. Ahmed however on contacting the customer care service was treated well and professionally. However the fact that he had to wait for one extra week to get his package delivered was most upsetting to him.
Mariah on the other hand had some package whose label implied that it contained materials that were hazardous. Since she runs a company, she thought well, it might have delivered to the right address. But later while confirming the address, she noticed that it was meant to be delivered to another company across the street. When she contacted FedEx, she was put on hold for over 20 minutes before some lady explained to here that the package was going to be collected the following day. However, after 2 weeks of continuously calling and no one from FedEx showing up, they decide to call the destined company to come and collect their package. Surprisingly, a week later, someone from FedEx did show up claiming to have come to collect a package.
Finally, Zulia seems to be particularly annoyed at this issue of FedEx loosing her packages that were being sent to hare clients. To her, the refund that she often receives does not cover up for discontented customers on the other end of the line. She out mostly dislikes the FedEx services but still she continues using them. This is because of their cheap FedEx ground which is cost effective to her business.
FedEx Employees
The employees, especially responsible for receiving phone calls, handle all frustrations from customers. While most of them do argue that they try their level best to solve their client’s issues, they cannot assure them that packages that have been delivered wrongly would not get another wrong delivery. Mostly it is out of their hands and is only there to try and calm down their customers. To them, the best they can do is call the driver and let them know of an error that they had made in delivery and hope the driver correct his or her mistake as soon as possible.
Conclusion
The various encounters that customers have with their service providers are very critical. This is because hardly a client would recall a smooth flow of services extended after some time. However, these same clients would keep that one bad experience with their service providers almost for the whole eternity. Therefore to ensure satisfaction in case of any mishap in service delivery, it should be resolved the soonest time possible.
The importance of information in tracking providing timely updates on different status changes cannot be overestimated. The article “A Road-Map to Personalized Context-Aware Services Delivery in Construction” (2009) addresses the issue of information delivery in the context of the construction industry. The main focus of the article is mainly on context-aware information delivery (CAID), an interaction paradigm that promises to make information delivery responsive to workers’ demands. The suitability of the article is two-fold. On the one hand, construction and project management are interrelated spheres, where each construction is a project which management relies on the project management principles. Accordingly, it is a sphere in which reporting and status changes are largely important. The article is useful in explaining the enabling technologies for which context-aware technologies in construction are applicable. Those technologies, in that regard, are applicable for tracking and status reporting in different projects regardless of the industry. The technologies include location-based services, sensor networks, RFID, and others (Aziz, Anumba, & Peña-mora, 2009, p. 463).
A company for which identifying a suitable method for tracking and reporting is vital was FedEx. FedEx is a Memphis-based global transport company that managed the issue of reporting and tracking the status of their deliveries for both customers and employers through the implementation of wireless technologies. The method actually consists of several technologies implemented at once. The most important of which is wireless delivery of information to update package status, which works with portable PDAs that track its location through Global Positioning System (GPS), and transmit data through wireless connections (Aziz, et al., 2009; Murphy, 2003).
If considering each delivery of a package as an individual and separate project, the next generation of wireless information allows tracking such project and reporting its status. For a service such as transportation and logistics, the timely delivery of information is crucial, and in that regard, its case is paralleled to the article. Similar factors are important in both cases, including aspects such as location-based services, the environment in which the technology operates, and the issues of concern such as the security of the transmitted information and the integrity of information. The changes of context in the case of FedEx are also similar to the case of constructions where different contexts can be represented by the different stages for package delivery, i.e. warehouse, truck, office, etc. Thus, it can be stated that the implementation of wireless technology at the time (2001), along with other innovations such as GPS was an appropriate method for addressing the issue with tracking and status reporting for FedEx.
Methods to reduce conflict within a project team
Conflicts in teams are an inevitable aspect, specifically when they are concerned with project management. Managing the conflicts in teams is essentially important for the success of the project. The article “How NOT to manage a project: Conflict management lessons learned from a DOD case study” by Sutterfield, Friday-Stroud, and Shivers-Blackwell (2007), addresses the issue of conflicts in managing projects. The article narrates the conflicts that occurred during the management of a field Department of Defense (DoD) project, outlining its root causes. The importance of the article is in the lessons it provides to reduce and manage conflict during projects (Sutterfield, Friday-Stroud, & Shivers-Blackwell, 2007). The article sets a framework for managing the conflict, which is based on identifying its symptoms and selecting the strategy appropriate for a specific situation, i.e. avoiding , competing, accommodating, compromising, and collaboration (Sutterfield, et al., 2007, p. 222).
The company that faced a similar situation is Wells Fargo Financial, a part of the Wells Fargo & Company group, providing financial services and lending solutions to customers (Wells Fargo, 2010). The company focuses on their employees and on establishing a favorable atmosphere at the workplace, which can be seen through their collaborative team approach in their interaction with employees (Brusman, n.d.). The company successfully addressed the issue of potential conflicts within the team s through several steps. First of all, the company established 24-hour access to Employee Assistance Counseling, a service that addresses any personal or work-related issues the employee might have (Brusman, n.d.). Additionally, the company developed a handbook for team members in which the employee learns how to behave in different situations at work. For example, when having a conflict with another team member, the handbook advises the employee is advised to refer to HR professional in the company whose responsibilities is “[f]acilitating the resolution of a conflict with your manager or a team member” (Wells Fargo, 2011, p. 2).
It can be concluded that the framework provided in the article can be useful for HR professionals indicated in the case of Wells Fargo. The company devotes considerable attention to their employees and their well being and thus, the reduction of conflicts can be seen one of many aspects through which the company reaches such goal. A common aspect that can be derived from the article is the importance of a timely management of the conflict, a factor that Wells Fargo recognized.
References
Aziz, Z., Anumba, C., & Peña-mora, F. (2009). A Road-Map to Personalized Context-Aware Services Delivery in Construction. Journal of Information Technology in Construction, 14, 461-472.
Brusman, M. (n.d.). Psychologically Healthy Workplace Award. Working.
Murphy, J. V. (2003). Global Logistics & Supply Chain Strategies. Supply Chain Brain.
Sutterfield, J. S., Friday-Stroud, S. S., & Shivers-Blackwell, S. L. (2007). How NOT to manage a project: Conflict management lessons learned from a DOD case study. Journal of Behavioral and Applied Management, 8(3), 218-238.
In recent years, FedEx faced criticism for its treatment of independent contractors. Many of them claim increased duties and risks without proper benefits and compensation. In other words, the independent contractors are supervised similarly to the employees while denied the law protection and bonuses of full-time employment. For example, FedEx sets the requirements for contractors on the vehicle’s appearance, maintenance, and operation. However, the company does not provide the vehicles or compensate the contractors for the insurance and maintenance costs. Moreover, FedEx demands a set amount of working time from the contractors, which is more similar to the full-time employment contract. On the other hand, in independent contract cases, the company usually just provides the amount of work without regulating the process, only considering the result. Furthermore, the organization generally pays for the overall accomplished order in these types of contracts (Dubal, 2018). This practice contradicts FedEx’s actions, which currently pays its contractors per delivery numbers, types of deliveries, and safety records. Thus, FedEx’s current treatment of its independent contractors is similar to that of its full-time employees.
To resolve this issue, FedEx needs to revise the delivery agreement with its independent contractors. The main problem with FedEx’s current approach is that the independent contractors have no “say” in the supposed agreement. Therefore, FedEx must negotiate basic rights, duties, and responsibilities with its independent contractors. The finalized delivery agreement should reflect the essence of the independent work. In other words, as a result of these changes, the contractors need to have an opportunity to manage their tasks and select their working hours on the basic level. This approach to the issue will guarantee FedEx’s compliance with legal requirements and allow the company to avoid violating the law and rights of independent contractors.
Reference
Dubal, V. B. (2018). Employment law: the employee vs. independent contractor dichotomy. The Judges’ Book, 2(1), 10. Web.
FedEx is a huge package delivery company that was founded in 1971 by Fred Smith. The idea of this company previously was a topic of the course paper of young Fred at the university of Yale. After he graduated, he was lucky to make his dream come true. Several years later, the company called Federal Express established its headquarter in Memphis. The company first experienced losses because of huge expenditures on the planes (Murray). After almost ten years have passed, the Federal Express gained a reputation as one of the most prosperous and highly financed companies in the U.S. In 1978, the company managed to set positions in the equity market and gain huge annual revenue.
Nowadays, the company is highly recognized and has a great investments basis. FedEx offers different services from local mail delivery to international logistics services (Forman). The company uses both air and auto transport to provide logistic services. FedEx owns the greatest amount of transport for international shipments. It has the fourth-largest fleet in the whole world.
How FedEx’ Operations Were Improved by Its Location?
The central point of a successful logistics company is its location and hubs all around the world, chosen to be points of departure. FedEx chose a very convenient location to develop business overseas in many countries. In 1987, the founder started with Britain, the Netherlands, and the United Arab Emirates (Murray). Nowadays, the company has over two hundred hubs in different countries. Later, Federal Express opened a subsidiary company in China (Murray). It let the company move forward and develop international delivery in Asia. Thus, carefully and logically chosen location of the hubs, subsidiary companies, and constant development help FedEx to be one of the leaders in the delivery sphere.
How does FedEx’ Location Strategy Differ from Its Competitors?
The main differentiating factor in the location strategy of FedEx and other logistics companies is the choice of the locations of hubs. FedEx always strives not only for the quality development of the delivery but also to erasing the borders and expanding companies’ horizons (Heizer and Render). Thus, the company was the first to plunge into the Asian market of the package. This courage, determination, and ability to monitor the market and demands in different countries let the company gain a competitive advantage. Moreover, FedEx was one of the first logistics companies which successfully adopted e-commerce on all hubs territory (Bhasin). Even though the expenditures were quite high first, the losses paid off quickly, and the company equipped all the hubs with modern technologies and internet awareness. This decision definitely leveled the quality of the services and gave another competitive advantage.
How has FedEx Affected Memphis, TN area?
FedEx has six large hubs in the U.S., but the main one is located in Memphis, Tennessee. Most of the packages go through the hub in Memphis because it is the central logistic hub where all the parcels are distributed (Bhasin). The headquarters and the storage of the air and auto transport are also located there. The opening of FedEx definitely influenced Memphis in both positive and negative ways. First of all, Memphis became a huge package operational center which includes only the newest technologies and machinery. FedEx contributed to the technological transformation of the TN area. Speaking about negative aspects, it necessary to mention the crowdedness with machines and people. As far as Memphis was earlier, the small quiet area now the constant overnight aircraft and massive storages of technologies, automobiles, and planes can leave an unpleasant impression on the citizens.
The company to be considered in this paper is FedEx. FedEx is a company that specializes in “overnight delivery of high-priority packages, documents, and heavy freight” (FedEx Corporation, Par. 2). This company is considered to be “the leading transportation company in the world that provides fast and reliable delivery to each and every US address” (Denton, 1992, p.12). This paper is going to consider operations management at FedEx and its global strategy.
Operations management at FedEx
The FedEx Company has been making the necessary efforts to ensure it effectively carries out its operations without much inconveniences (Operations Management – FedEx 2011),. The company has realized that delays in delivery can bring in detrimental effects. For instance, in the year 2002, the company went in to partnership with NASA in order to offer its ramp tower facility for “Metron Aviation’s Surface Management system, in an effort to reduce delays and optimize its operations in Memphis” (Customer case Study, n.d, p.1).
On basis of the ‘surface Management System’ performance, this company carried out its operations with Metron Aviation to organize and boost the system to offer a wider scope, which encompassed the inclusion of “new data feeds like TMA (‘Traffic Management Advisor’) for sequencing arrivals” (Customer case Study, n.d ,p.1).
The surface system of Metron Aviation offered the FedEx Company with, as pointed out, “real-time and forward-looking information that improved surface resource allocation, allowing strategic decisions to be made for arriving aircraft as much as 30 minutes prior to touchdown” (Customer case Study, n.d p.2).
Beginning from the year 2004, a time when the system was deployed at the ‘FedEx Ramp Tower’, this system has gone up to the level that offers support to the “Memphis airport Authority” and a large number of other FedEx users. These include, “the Hub Control Room, Aircraft Service Attendant, Global Operations Center, Gate Desk, Line Maintenance, Crew Bus Dispatch, Flight Coordination and Corporate Aviation” (Customer case Study, n.d, p.2).
FedEx Global Strategy
This company pursues a global strategy. This strategy matches the company’s operations since they offer delivery services worldwide. “The FedEx global network spans 210 countries, broken down in to four express networks”( FedEx, 2010, Para. 1). The company does not necessarily have to engage in customizing its service and this is because it is standardized. This is in line with the company’s “low cost structure approach that ties in to a typical global strategy” (FedEx, 2010, Para 1).
For the reason that the company doesn’t have to increase the costs for service customization, this makes it possible for the company to utilize the cost advantage it has for an aggressive pricing strategy in which success is attained. FedEx is in a position to; instead, engage in the spending of the resources on technology, keeping focus on “the cutting edge and ability to deliver, rather than on customization” (FedEx, 2010, para. 1).
This company is making use of the global strategy in the right way and this is for the reason that it has a “a low cost structure, global standardized services, and a few key locations in 210 countries” (FedEx, 2010, Para. 1).
Conclusion
The FedEx Company provides delivery services to various parts of the world. It is considered a leading company in this industry. The company has been carrying out appropriate measures in regard to operations management in order to avoid delays. It pursues a global strategy and it does this correctly following it low cost structure, ‘global standardized services’, and a few key locations in more than two hundred nations.
References
Customer case Study. Surface operations management. Web.
Denton, K., (1992). Keeping employees: The Federal express approach. SAM Advanced Management Journal, 57 (3), pp. 10 – 13.
