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FEDEX FedEx??Marketing??Plan Dedication??to??Innovation,??Service??&??Responsibility MKTG??6352 2011 Table??of??Contents?? 1. 2??Letter??of??Recommendation?? ……………………………………………………………………………………………………………………. . 3 1. 3??Executive??Summary??…………………………………………………………………………………………………………………………… 4 1. 4??Introduction,??Background,??summary??and??update??of??the??case??study??…………………………………………………………….. 1. 4. 1??Introduction??………………………………………………………………………………………………………………………………….. 5 1. 4. 2??Background……………………………………………………………………………………………………………………………………. 5 1. 4. 3??Summary??of??the??Case??……………………………………………………………………………………………………………………… 1. 4. 4??Update??on??FedEx??……………………………………………………………………………………………………………………………. 5 2??Situation??Analysis??……………………………………………….. …………………………………………………………………………………… 6 2. 1??Market??Summary??………………………………………………………………………………………………………………………………. 2. 1. 1??Target??Market??Analysis??……………………………………………………………………………………………………………….. 6 2. 2??SWOT??Analysis??………………………………………………………………………………………………………………………………….. 7 2. 2. 1??Strengths??…………………………………………………………………………………………………………………………………… 2. 2. 2??Weaknesses??………………………………………………………………………………………………………………………………. 8 2. 2. 3??Opportunities??…………………………………………………………………………………………………………………………….. 8 2. 2. 4??Threats??……………………………………………………………………………………………………………………………………… 2. 3??Competition??Analysis??…………………………………………………………………………………………………………………………. 9 2. 3. 1??Primary??Competitor??……………………………………………………………………………………………………………………. 9 2. 3. 2??Secondary??Competition??…………………………………………………………………………………………………………….. 0?? 1 2. ??Keys??to??Success??……………………………………………………………………………………………………………………………….. 0?? 1 2. 5??Macro??Environment??Analysis ……………………………………………………………………………………………………………. 0?? . 1 2. 5. 1??Economy??…………………………………………………………………………………………………………………………………. ?? 1 2. 5. 2??Culture??……………………………………………………………………………………………………………………………………. 0?? 1 2. 5. 3??Politics,??Rules??and??Regulations?? …………………………………………………………………………………………………… 1?? . 1 2. 5. 4??Technology??………………………………………………………………………………………………………………………………. ?? 1 3??Marketing??Strategy??………………………………………………………………………………………………………………………………… 1?? 1 3. 1??Mission??Statement??………………………………………………………………………………………………………………………….. 1?? 1 3. 2??Marketing??Objectives??………………………………………………………………………………………………………………………. ?? 1 3. 3??Financial??objectives??…………………………………………………………………………………………………………………………. 2?? 1 3. 4??Positioning??strategy??…………………………………………………………………………………………………………………………. 2?? 1 3. 5??Marketing??Mix??Strategies??…………………………………………………………………………………………………………………. ?? 1 3. 5. 1??Product??Strategy??………………………………………………………………………………………………………………………. 3?? 1 3. 5. 2??Price??Strategy??……………………………………………….. …………………………………………………………………………. 3?? 1 3. 5. 3??Promotion??Strategy??…………………………………………………………………………………………………………………… 4?? 1 3. 5. ??Place??strategy??…………………………………………………………………………………………………………………………… 4?? 1 6??References??……………………………………………………………………………………………………………………………………………. 5?? 1 7??Appendix??………………………………………………………………………………………………………………………………………………. 7?? 1 2??|??P a g e 1. ??Letter??of??Recommendation Blockbuster Inc. Chief Executive Officer, 3610 Hacks Cross Road, Memphis, TN 38125 United States, Dear Mr. Frederick W Smith, Thank you for giving me the opportunity to analyze your business and present my research to you. I will now attempt to summarize my findings in this letter, which are detailed out in the marketing plan. FedEx must be congratulated on its accomplishments thus far. It represents fruition of an idea that was borne out of a research paper and lived to survive the realities of the day.
As also stated in your annual report 2010, FedEx’s commitment to responsibility, service and innovation is truly remarkable. However, in my opinion the potential for expanding the horizons that currently constraint FedEx are very achievable in today’s ever changing business climate. My primary recommendation that is detailed in the plan below, suggests an aggressive approach to expanding geographically in the emerging economies of today like Brazil, China, India & Russia. My findings suggest that focusing on the US market invariably will increase your company’s risk exposure and leave it dependent on the health of US conomy. While FedEx is highly diversified in the US economy serving various industries and consumer segments, the lesson learnt from the financial collapse of 2008 and the following recession with double digit unemployment is that diversification across the globe can help mitigate and increase survivability of the company. Therefore, addressing the unique needs of these emerging markets is both a need and an opportunity for FedEx to expand financially. Technology is changing how we live in today’s world.
Emergence of e-commerce and mcommerce is reshaping how we do business. FedEx has done a great job of making technology an integral part of its offering. The emerging trends in the industry indicate that more of technology can only help FedEx in devising products and services that satisfies the customers and reduces costs for the company. FedEx Supply Chain systems must be marketed vigorously as companies that are constrained by lack of large capital still seek the expertise of managing their business without losing focus on their core competencies.
A renewed effort to market FedEx services is therefore required. I hope you will find this research useful and present you with credible evidence to act on these ?? proposals. I thank you again for the opportunity. 3??|??P a g e 1. 3??Executive??Summary FedEx is good example of a company living up to its stated mission objectives. The focus on innovation, customer satisfaction and responsibility has made FedEx a market leader in the express delivery segment and one of the leaders in smaller packages, ground shipping segment.
The current strengths of the company have allowed it to expand and be profitable in the US market. Historically, FedEx has survived several economic downturns and is a better company for its rich experience in the courier and freight transportation industry. It is now time for FedEx to step outside its geographical comfort zone and expand to markets that are mostly untapped and hold immense potential for growth and expansion. These markets are those of emerging countries like Brazil, Russia, India & China.
While FedEx still faces immense competition from UPS and other international providers like DHL, TNT; FedEx is positioned favorably because of its large investments in the state of the art infrastructure and ability to control operating costs. FedEx’s brand is well respected and can easily be localized to expand its following. Another area for growth as indicated by trends in the industry is the service sector. Explosion of technology in e-commerce, mobile computing, shipment tracking, other services like supply chain logistic support, marketing and IT can help position FedEx as a market leader.
FedEx is well positioned to gain bigger market share and profitability if it can market its strengths, capitalize on the opportunities while improving its weaknesses and negating the threats. 4??|??P a g e 1. 4??Introduction,??Background,??summary??and??update??of??the??case??study 1. 4. 1??Introduction FedEx Corporation (“FedEx”) provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively, under the respected FedEx brand.
These companies are included in four reportable business segments: FedEx Express, FedEx Ground, FedEx Freight, FedEx Services. 1. 4. 2??Background FedEx was founded by Frederic W Smith in 1973 with a part of $8 million inheritance. At that time UPS and USPS were the only providers of courier services delivering letters and packages that often took several days to reach the destination. Fredrick W Smith, while still at Yale wrote a paper on the overnight delivery service. On April 17th, 1973 FedEx began shipping packages overnight from Memphis, TN. . 4. 3??Summary??of??the??Case The case presented below is a marketing plan for FedEx and includes a detailed SWOT analysis of FedEx. The plan identifies FedEx target market and the underlying demographics and a comparative analysis against its competitors in the macro environment that it operates in. The plan then attempts to establish mission objectives for FedEx and details a marketing plan that includes product, price, promotion and place strategy to achieve those objectives. 1. 4. 4??Update??on??FedEx
At the time of writing this plan FedEx is has already embarked on a globalization strategy that by its announcement on May 4th that it has opened five new offices in its Europe, Middle East and Africa (EMEA) region. 5??|??P a g e 2??Situation??Analysis 2. 1??Market??Summary 2. 1. 1??Target??Market??Analysis FedEx provides a portfolio of transportation, e-commerce and business services to its customers who can be individuals and business that have a need to ship packages or freight from one location to another. 2. 1. 1. 1??Primary??Target??Market
The primary target market for FedEx consists of individual customers and business that have a need to ship packages, documents, and freight from one place to another in an assured and timely manner. Generally, these customers and businesses also desire to track their packages as it is in transit to confirm the delivery. For FedEx, the primary market consists of business and consumers that desire to use FedEx Express service which offers time certain delivery within 1-3 business days serving markets that comprise more than 90% of the world’s gross domestic product (FEDEX Corporation, 2010, p. ). 2. 1. 1. 2??Primary??Market??Demographics FedEx provides services for individuals and businesses spanning different sectors of the overall economy like retail, wholesale, healthcare, public administration and finance and insurance. Demand demographics therefore depend on the level of activity in these sectors, which in turn is affected by a wide range of factors. For example, demand for wholesale and retail trade sectors is influenced by variables such as household disposable incomes, interest rates and general economic conditions, as these variables influence consumer spending habits.
The demand from the healthcare sector is affected by factors such as the general health of the population and the aging of the population. In addition, the level of outsourcing by these sectors also determines demand for this industry. An increase in businesses outsourcing delivery activities increases demand for local messenger and delivery companies. Density of business and households is also a factor in FedEx’s market presence. Generally, metros have higher concentration of small, medium and large businesses, and also have encompassing neighborhoods that tend to use FedEx’s services.
An increase in the number of businesses leads to an increase in demand for delivery services. Similarly, the number of households can also lead to a subsequent increase in demand for services, as it increases the number of delivery points. Similarly, the industry has benefited from an increase in e-commerce, as these services have eliminated some of the layers between consumers, wholesalers and manufacturers. As a result, delivery volumes have increased as shipments between manufacturers and consumers are often smaller size, but higher in frequency (Andrews, 2011, p. 14).
Therefore, presence of technology savvy, educated, young population lends to the demographics of the areas that FexEx provides its services to and from. 6??|??P a g e 2. 1. 1. 3??Secondary??Target??Market The “Other” segment as shown in Figure 1, relates to services, such as logistics and supply chain management consultancy services. This segment has been growing strongly in the last five years, as companies continue to outsource logistics and shipping operations (Andrews, 2011, p. 15). These services were provided under FedEx Supply Chain Systems, but since Sept, 2009 have been consolidated under FedEx Express.
The company offers a range of supply chain solutions, including critical inventory logistics, transportation management, fulfillment and fleet services. The company focuses on information technology sensitive business to meet the needs of its customers and to drive transportation business to other FedEx operating companies (FEDEX Corporation, 2010, p. 10). 2. 2??SWOT??Analysis 2. 2. 1??Strengths As shown in figure 2, FedEx is immensely diversified and operates in multiple market segments.
The diversified nature of FedEx’s market concentration acts to mitigate risks facing any one particular sector of the economy as “bearish” trends in one segment can be offset by “bullish” trends in the other. This diversification prevents concentration of FedEx revenues from any one sector of the economy and reduces its risk profile. FedEx leverages technology and is considered a technology friendly company. This allows the company to operate efficiently and gain synergies from different operating units in different market segments (Onesource, n. . , sec. SWOT). FedEx’s web site www. fedex. com offers features that allows the customers to print labels, track shipments & notify shipper automatically. This reduces the operating costs and therefore enables FedEx to offer better pricing to the customers. FedEx’s Supply Chain systems use state of the art software, integrated with remove tracking of inventory that provides logistical support to companies that do have the capital or the expertise to manage this operation themselves.
FedEx Supply Chain is also an emerging trend with small, mid-size companies and provides an increasing revenue base to FedEx. FedEx is the market leader in the ‘express’ delivery market segment and has 2nd largest market share in the delivery of ‘small’ packages by its ‘ground’ services. Ground service is provided to 100% of the continental US population and overnight service of up to 400 miles to nearly 100% of the continental US. FedEx brand is also well recognized and the company ranked 13th in FORTUNE magazine’s “World’s Most Admired Companies” list for the ninth consecutive year.
FedEx Express employs approximately 141,000 employees and has approximately 59,000 dropoff locations (including FedEx Office centers), 664 aircraft and approximately 49,000 vehicles and trailers in its integrated global network (FEDEX Corporation, 2010, p. 10). 7??|??P a g e 2. 2. 2??Weaknesses FedEx is generating most of the revenue from the US market. This weak geographic concentration restricts its market share and growth options. In 2010, 2009 and 2008 revenues from the US market accounted for 71. 55%, 72. 3% and 76. 92% of the overall revenue (Onesource, n. d. , sec. SWOT). FedEx has declining revenues at an average of -4. 3% since 2009. This decline would hamper its financial position and disable it to carry out its growth and expansion plans. The decline occurred in the all the operating segments of FedEx, except in FedEx ground where it is lagging behind UPS in the market share. 2. 2. 3??Opportunities As the world’s economy has become more fully integrated, companies are sourcing and selling globally.
With customers in more than 220 countries and territories, FedEx can facilitate this supply chain through their global reach, delivery services and information capabilities. If FedEx can focus on the long-term expansion of their international presence, especially in key markets such as China, India, Europe and Latin America, they will be able to capture a sizeable portion of the market in these emerging economies. In February 2011, FedEx completed the acquisition of AFL Pvt. Ltd. (AFL) and its affiliate, Unifreight India Pvt. Ltd. (UFL), through which it further enhanced its international and India business offerings.
In December 2010, the company entered into an agreement to acquire a Mexican domestic express package delivery company, MultiPack, through which FedEx could enhance its capabilities in the Mexican domestic market with a broader portfolio of transportation and logistics options under its brand. The company could further expand its service offerings and geographical presence by partnering or acquiring such potential companies and garner higher market share (Onesource, n. d. , sec. SWOT). Emerging technologies in e-commerce and supply chain management can help reduce operating costs and increase profitability and market share for the company.
FedEx already provides supply chain logistical services to small and mid-sized companies. These operations can be further streamlined by making latest information technology investments, deploying RFID, mcommerce, “hybrid” vehicles and using alternative fuels in the airplane fleet can further reduce the operating costs. Growth of services industry along with e-commerce can be a significant market for FedEx. FedEx Supply chain is an area with immense potential for growth as companies look to outsource their operations that are not considered to be their core competency.
Although, this trend is observed only in the small and mid-sized companies it can be a valuable stream of revenue for FedEx. 8??|??P a g e 2. 2. 4??Threats FedEx is involved in numerous lawsuits (including many that have been certified as class actions) and state tax and other administrative proceedings that claim that the company’s owneroperators or their drivers should be treated as our employees, rather than independent contractors. It expects to incur certain costs, including legal fees, in defending the status of FedEx Ground’s owner-operators as independent contractors (FEDEX Corporation, 2010, p. 71).
In addition, currently FedEx Express employees are covered under Railways Labor Act that is a subject pending before US senate that is trying air cargo under National Labor Relations Act (NLRA). This development has the potential for employees to organize into local bargaining units, as they can unionize locally and government-led mediation is not a required step in the negotiation process (FEDEX Corporation, 2010, p. 18). High fuel prices and recessionary economy can dent FedEx’s revenue. As seen in figure 3, both of these factors which were in play in 2008-2009 significantly reduced FedEx’s demand and decreased revenue for the company.
Seasonal fluctuations affect volumes, revenues and earnings. Historically, the U. S. express package business experiences an increase in volumes in late November and December. International business, particularly in the Asia-to-U. S. market, peaks in October and November in advance of the U. S. holiday sales season. Normally, the fall is the busiest shipping period for FedEx Ground, while late December, June and July are the slowest periods. For the FedEx Freight LTL Group, the spring and fall are the busiest periods and the latter part of December, January and February are the slowest periods (FEDEX Corporation, 2010, p. 1). This seasonality pattern in the business means that any loss in the peak period cannot be made up for in the lean period, therefore profitability during the peak period is deciding factor for the overall performance of the company (Onesource, n. d. , sec. SWOT). 2. 3??Competition??Analysis 2. 3. 1??Primary??Competitor Primary competition for FedEx in the US market is from UPS Inc (United Parcel Service). UPS and USPS (United States Postal Service) have existed even prior to FedEx in 1973 and have dominated the market in different market segments.
In international market FedEx is facing fierce competition from DHL, UPS, TNT, other foreign postal authorities, freight forwarders, passenger airlines and all-cargo airlines. Many of FedEx Express’s international competitors are government-owned, -controlled or -subsidized carriers, which may have greater resources, lower costs, less profit sensitivity and more favorable operating conditions than FedEx Express (FEDEX Corporation, 2010, p. 9). 9??|??P a g e 2. 3. 2??Secondary??Competition FedEx’s secondary competition is from local couriers and messenger services (bicycle couriers).
These services are localized and operate very efficiently as they do not require huge infrastructure to compete and are familiar with the local conditions. These couriers and messenger services are also able to provide cheaper pricing for most needs of the local market. FedEx is also facing competition from emerging technologies in email, fax and scanning which allow electronic transmission of documents with reliability and in many cases also meets the legal requirements to be construed as “true originals” if accompanied by electronic signatures. 2. 4??Keys??to??Success
FedEx must invest in global expansion and spread its operations to emerging economies such as those of BRIC nations (Brazil, Russia, India & China). This will also diversify its revenue base from being US dominated and heavily dependent on US economy. In addition, with the growth of services sector like e-commerce, FedEx must build capabilities to expand its services footprint and establish a client base that subscribes to its supply-chain, marketing, IT services. To compete in small package “ground shipping” segment, FedEx must offer better pricing than its biggest competitor UPS.
To reduce the operating costs of its trucks and airplanes, FedEx may have to look to hybrid vehicles, alternative fuels and fuel efficient airplanes as an investment. FedEx must also resolve its labor dispute with truck operators to prevent any damage to its brand image. 2. 5??Macro??Environment??Analysis 2. 5. 1??Economy Since 2008 US and most of global economy has been hit hard by recession. This resulted in economic slowdown and high unemployment. As a result both the business and the consumer segment of the market have cut expenditures and control their losses.
As shown in figure 2, FedEx has experienced lower than normal average volumes of shipments through its service offerings during these times. High oil prices are also hurting FedEx’s bottom line as it has a large fleet of airplanes to carry cargo. The high oil prices have been reflected in its lower net income and profitability which has affected its stock value for the investors. 2. 5. 2??Culture In the advanced economies like that of the US, to stay competitive businesses have to act fast and to keep up with that pace requires exchange of documents or freight at the fastest possible speed.
FedEx Express service is in line with this expectation of expedited delivery of important documents and merchandise. For consumers, fast shipping with reasonable pricing is of greater value and therefore ground shipping segment can cater to this market expectation. Another 10??|??P a g e important aspect that subconsciously affects the consumer behavior is the ability provided by FedEx to track their shipments that conveys reliability. Recently, with advance in information technology more and more emphasis is being paid to electronic transmission of documents as it saves time, is less costly and has an even lesser impact on the environment (e. trucks and airplanes don’t have to burn fuel and require no paper). 2. 5. 3??Politics,??Rules??and??Regulations NLRA is one of the key regulations that can have a significant bearing on FedEx’s labor force. Although, currently the employees of FedEx Express are covered by Railways Labor Act of 1926 (RLA), the senate is considering imposing NLRA instead of RLA. This would allow employees to unionize locally and impact local operations if they decide to strike.
The air operations of FedEx are regulated by the FAA (Federal Aviation Administration) and TSA (Transportation Security Act). The ground operations are governed by regulations set by Department of Transportation (DoT). Both the ground and air fleet must comply with EPA (Environmental Protection Agency) standards. For its international operations, FedEx must comply with customs and tariffs for the country or economic zone that it operates in. 2. 5. 4??Technology E-commerce and web enabled services are becoming the norm even for the brick and mortar companies.
FedEx must devise a technology strategy that is driven by customer satisfaction, to build technology solutions that will solve their customers’ business problems with simplicity, convenience, speed and reliability. Using internet to provide information about the packages, build mobile applications for mobile devices like Blackberry, iPhone, iPad will be the key to providing the information to the customers. Since FedEx has large investments in infrastructure like trucks, sorting facilities, and airplanes using the best and the safest technology for these investments is also imperative.
Technologies like alternative fuels, hybrid trucks, and solar energy for air-conditioning can make a significant reduction in the operating costs. 3??Marketing??Strategy 3. 1??Mission??Statement FedEx’s must act according to its stated goal of dedication to service, to innovation, to responsibility that delivers a competitive advantage to their customers. The business and consumers that use FedEx are its key stakeholders and must be able to perceive the value addition that FedEx attaches to its service offerings.
It must adapt to the changing requirements of its customers and what they expect from a responsible company. 11??|??P a g e 3. 2??Marketing??Objectives Since globalization is the dominating trend, FedEx should incorporate a place strategy that expands its international operations. Currently, FedEx revenues are highly dependent on the domestic business in the US and it will be well served if it can mimic the growth of its competitor UPS in this segment which according to Demery (2011), UPS’s revenue increased 9. 8% to $2. 90 billion from $2. 4 billion, and operating profit rose 4. 4% year over year to $446 million from $427 million in the international operations. To improve overall profitability, technologies like e-commerce must be exploited and offered to its customers. FedEx has made some strides in this direction by deploying its customer friendly portal like www. fedex. com and tracking applications on mobile devices. Since these are emerging technologies in themselves, there is scope to explore operational efficiencies from these emerging technologies and adapt them to business applications.
Electronic Trade documents (ETD) is one such area which lets customers submit customs documents electronically, which reduces paper usage and saves them time and money. By innovating its product strategy such offerings can be brought to the market for the consumers benefit. 3. 3??Financial??objectives Figure 4 provides a reasonable template of financial objectives FedEx can follow to meet the stockholder expectation vis-a-vis its immediate competitor UP (Andrews, 2011, p. 24).
As noted in the figure growth in revenue and operating income is the key to give FedEx a competitive advantage. If FedEx can expand revenue growth and control expenditures it can achieve the financial returns on its stock that are comparable to industry average and S&P 500 as shown in figure 5 (FEDEX, 2010, p. 9). 3. 4??Positioning??strategy Operating in a competitive environment with UPS as its main competition in the US market for ground shipping, FedEx can devise strategy to compete effectively in this market segment.
The gap between UPS and FedEx market share in this segment is glaring ??? a 37. 2% for UPS and 22% for FedEx as shown in figure 6. FedEx has a lot of room to position itself in gaining some market share and also wrest some of the market from “other” category that includes local messengers and delivery services that include larger participants like Dynamex Inc. , and Velocity Express Corp (Andrews, 2011, p. 25). It is suggested that FedEx either consider alliances or acquisitions to make inroads in this market segment. 12??|??P a g e 3. ??Marketing??Mix??Strategies 3. 5. 1??Product??Strategy The core competency for FedEx is to ship packages and freight from one location to another. Although, in US it has most major markets covered by its network, FedEx can expand the network by forming alliances or acquiring local messengers. Potentially, this can allow FedEx to gain some market share and offer services to a market segment that it has not been able to reach. However, this expansion of network can also significantly strain FedEx profitability if it requires capital investment from the company.
Franchising can be explored to reduce this burden and reach a larger market. The rise and popularity of e-commerce, web applications, mobile platforms, and integrated supply chain systems are a growing market segment for FedEx. Investing in IT and infrastructure resources can help FedEx take the first mover advantage and offer benefits like speedier delivery and lower prices to the customers. 3. 5. 2??Price??Strategy In the international market where FedEx is trying to gain a foothold market penetration strategy can be followed. The growing markets of China and India