The fedex strategic audit report

FedEx Corporation is a publicly-traded entity that, through its diverse activities, offers logistics, e-commerce, and business services. FedEx Ground, FedEx Express, FedEx Freight, TNT Express, and FedEx Services are its five business divisions. FedEx Express has the highest market share in the United States. FedEx Express operated in more than 220 countries worldwide as of 2016. The revenue reported in the 2016 fiscal year was $50.4 billion, an improvement from $47 billion in 2015. The net profits, on the other hand, was $1.8 billion. 2016 financial year can be described as the year in which the company reached a new height as one of the businesses that operate in a unique manner in the world (“Chairman’s Letter - FedEx Annual Report 2016,” n.d.). All the company stakeholders benefited from the increased revenues. FedEx Express and FedEx Ground accounts for approximately 96% of the revenue generated in the United States. The company has a large consumer base which is diverse by design. The company operates in a strategy that involves collaborative management, collective competition and independent operation of the five business segments. The company looks forward to increased revenue margins and profitability in the 2017 fiscal year.

Company History

FedEx, the largest airline in the world that specializes in cargo particularly parcel delivery. Fred Smith, the current chief executive officer, came up with the idea of company logistics while studying at Yale University. Smith began the Federal Express after graduating from Yale in 1971 with $4 million which he had inherited from his father and a venture capital of $91 at Little Rock national airport, Arkansas but two years later, relocated the operations of Federal Express Memphis, Tennessee. On April 7, 1973 (”FedEx Profile, History, Founder, Founded, Ceo | Courier Companies | SuccessStory,” n.d.). Federal Express started its air operations from Memphis Airport with only 18 packages on board the Dassault Falcon jet. Despite being the most highly financed new company in the U.S history, Federal Express operated at a loss. The company realized its first profit of $ 3.6 million in 1976. Formerly known as Federal Express, the company espoused the name FedEx in 1994. Currently, FedEx has 688 air crafts along with the orders of 62 Boeing 777, 757-200 and 767-300F which is the largest fleet of aircraft worldwide. FedEx has shown great success and potential since it began its operations.

Analysis of Mission and Vision Statement

FedEx mission statement is to produce superior financial returns for its shareholders by providing efficient services through the focused operating companies. In each market segment, the expectations and requirements of the customers will be fulfilled in the highest quality manner (”FedEx Profile, History, Founder, Founded, Ceo | Courier Companies | SuccessStory,” n.d.). Safety will be the topmost consideration in all operations, and corporate activities will be carried out in the highest standards ethically and professionally. FedEx will foster mutual and rewarding relationships with its suppliers, partners, and employees. The vision statement for FedEx is a commitment in providing a thoughtful environment stewardship, customer experiences outstandingly while fostering a friendly environment to work in.

The company’s strategy is to work simultaneously and effortlessly on three specific levels. Foremost, they need to compete collectively and always appear as one company and brand before the world (Freight, Industrials & Year, 2017). Secondly, the company needs to manage its operations collectively in order to maintain healthy relationships with their investors, suppliers, and workforce. Lastly, the companies should operate independently by focusing on the market segments and individual networks with the aim of meeting the customers’ needs distinctly. In addition to the mission and vision statements, FedEx has strong policies that include the privacy policy, whistleblower policy, political contributions policy as well as the auditor policy in place (”FedEx Profile, History, Founder, Founded, Ceo | Courier Companies | SuccessStory,” n.d.). The policies maintain loyalty to the customers, employees, and investors through integrity. The policies deal with a wide range of hazards such as corruption, loss, and risk along with exposure. These policies align with the mission, vision, and goals and they perform an excellent job of outlining the details involved in the protection and maintenance of the company’s integrity.

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Review of the Mission and Vision Statement

The mission and vision statements of FedEx emphasis on the production of financial reports that are superior by meeting the demands and expectations of the customers, conducting corporate activities ethically and professionally as well as through the focused operating companies. Given the key strategic factors, FedEx needs to revise their vision and mission statements by incorporating their commitment to both technological advancements and innovations along with customizing their customer business solutions. The logic of this recommendation is the evolvement of business needs due to the emergence of new technologies as well as the increased evolvement of the services offered by FedEx that has customized the integrative solutions to logistics for both B2B and e-commerce clients. FedEx has been at the forefront in the utilization of new technologies to modify the systems that interface with FedEx directly. The business services and solutions have revolutionized not only the shipping systems but also popularized the modern inventory systems. The imperative for FedEx to remain as a global leader in the shipment industry and increasingly gain the market shares is to incorporate the technological innovations in the operations of the business along with the business solutions presented to customers.

Corporate Governance

Board of Directors

The directors are elected during the annual stockholders meeting, and they hold the office till the next annual meeting of the stockholders. Despite the absence of term limits, the mandatory age retirement that is 72 is dictated by the policies. The directors meet in the absence of the management annually. The Chairman of the Nominating and Government Committee directs the meeting in the absence of the Chairman of the Board (Howie, 2014). The board of directors reviews the government practices and policies yearly, and they make changes when they see fit. The board consists of an internal member and ten external members. To promote diversity, FedEx employs highly qualified directors including women such as Dr. Shirley Jackson and Dr. Susan Swachb. According to the bylaws, the CEO shall be the Chairman of the Board unless the members decide otherwise. The CEO presides all the meetings of the Board of Directors as well as the stockholders. The current leadership structure attains a balance between FedEx’s independent oversight and dependable leadership.

Board Members and Length of Service

Frederick Smith, aged 72 is the founder, CEO, President and the Chairman of the Board of FedEx. Since January 1998 up to now, Smith is serving as the CEO, President, and Chairman of FedEx. Since 1965, he has been serving the company as the Chairman of the FedEx Express. From April 1983 to January 1998, he served as the CEO, President, and Chairman of the FedEx Express. From 1977 to January 1988, he was the CEO of FedEx Express and the FedEx Express since June 1971 to February 1975.David Bronczek, aged 62 is the Chief Operating Officer and President since January 2000 up to now. From January 1998 to January 2000, he was the Executive Vice President as well as Chief Operating Officer of FedEx. Between June 1995 and January 1998, he served as the Senior Vice President of the FedEx in the Mediterranean, Africa, and Europe. Bronczek was the Vice President of the Canadian operations of FedEx between 1976 and 1987.

Alan Graf, aged 63 serves FedEx as the Executive Vice President and the Chief Financial Officer. Between February 1996 and January 1998, he was the company’s President and Chief Financial Officer. Since December 1991 to February 1996, he was the Chief Financial Officer and the Senior Vice President of FedEx Express (”FedEx Corp (FDX) People | Reuters.com,” n.d.). Graf served as the Vice President and Treasurer of FedEx between August 1987 and December 1991. From 1980 to 1987, he was a senior financial analyst and held various financial, managerial positions. David Cunningham, aged 55 serves as the Chief Executive Officer and President of FedEx Express which is a subsidiary of FedEx Corporation. Initially, he was the Regional President of the Asian Pacific Region and recently he was the Chief Operating Officer and Executive Vice President. In his current position, Mr. Cunningham will oversee the leadership of the FedEx Express Group. He will also be a member of the FedEx Corporation’s Strategic Management Committee.

Michael Ducker, aged 62 is the current President and the CEO of FedEx Freight since January 2015. Between December 2009 and January 2015, he served as the Chief Operating Officer, President of FedEx Express International and Executive Vice President. Mr. Ducker was the Senior Vice President of the Asian Pacific Region of FedEx Express between September 1995 and December 1999. Since 1978 to 1995, he held various operational, managerial positions at FedEx Express.

The senior management team comprises of Fredrick Smith who is the CEO of FedEx Corporation, Alan Graf Jr. who is the Executive Vice President and Chief Financial Officer. He oversees all financial functions such as internal audits, accounting controls along with taxes. He has served in the company since 1980. Robert B. Carter serves as the Chief Information Officer and Executive Vice President for Information Services. He has served in FedEx since 1993 and had an experience of over 30 years in implementation as well as development systems. Michael T. Glen is the Executive Vice President of Market Development and Corporate Communications. He is also the CEO of FedEx Corporate Services (”FedEx Corp (FDX) People | Reuters.com,” n.d.). He is in charge of retail operations, marketing and sales for all operating companies of FedEx. Christine P. Richards is the Executive Vice President, Secretary, and General Counsel. She ensures that all global activities comply with the local, state, federal and international regulations. She is also in-charge of the domestic, government, security and legal affairs for all subsidiaries and operating companies of FedEx.

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TWOS Analysis

The Twos analysis is a significant management tool that assists in identifying the strategic alternatives available to the company by looking into the strengths, weaknesses, threats as well as opportunities. The following is a TOWS matrix for FedEx Corporation.

Strengths

The company has a strong brand image

It operates in large scale

The company has invested in technological infrastructure

It has a culture of high performance

It is the leading company in the deliveries made overnight.

Weaknesses

FedEx operates in a decentralized setting

The company had had weak profitability margins over the past five financial years

Opportunities

FedEx can expand internationally

Advance technologically

Extending outsourcing services

FedEx can venture into global markets especially in the developing countries

Utilize technology innovation and provide business solutions for those companies that wish to outsource FedEx services.

The company can restructure as well as centralize its operations to reduce redundancies.

FedEx can abandon the projects that are generating losses to increase the profitability margin.

Threats

Stiff competition from companies in the industry

Increasing fuel prices

Economic distress

New environmental regulations

The company can use its brand image as well as its culture of high performance to reduce its prices and thus increase the market share and gain a competitive advantage over its rivals

FedEx can create a partnership with other small transport companies especially in the developing countries and increase the market share.

FedEx can identify the environmentally friendly alternatives and utilize them to comply with environmental regulations

The company can increase the number of fuel suppliers to increase competition end reduce the prices.

From the above analysis, FedEx has an alternative of retaining the existing business strategy and focus on re-engineering it. For instance, it can push for a higher performance culture by focusing on consumer satisfaction through improved customer services (Wang & Pettit, 2016). If the company’s segments compete collectively, operate independently and be managed collaboratively, there is a high probability that the segments will focus the products and services its offering and enhance consumer satisfaction. FedEx can establish organizational policies as well as procedures to support the current strategy. Secondly, the company can adopt a growth strategy in which it uses its strong brand image and its ability to operate in large scale to expand into the developing markets across the world (Howie, 2014). That way the company will increase its market share in the industry which will, in turn, increase its revenue and profit margins. Similarly, entering into the partnership with the small companies in the targeted developing countries in the transport industry is another alternative the company has that will increase its networks, market share, and profitability. FedEx can use its new technological advancements to support the new partnerships or acquisitions to enhance consumer satisfaction (Wang & Pettit, 2016). The growth strategy will increase the company’s customer as well as FedEx global presence. The only setback with the growth strategy is that the initial cash outlay needed to fund the projects is quite high and will cause financial constraints to the company before the projects start making profits. Besides, alliances rather than acquisition are a strategy that will not add competitive advantage to the company.

Retrenchment is another strategy that the company has thus centralizing activities and reduce redundancies. That way, there will be cost saving due to the eliminated salaries, wages and other costs associated with the management of human resource. The fourth strategy that FedEx has is to adopt cost leadership (Parnell, 2013). Cost leadership strategy involves reducing its prices or charging less than their competitors do. Finally, FedEx has an opportunity to adopt the differentiation strategy in which it stays ahead of its rivals in the industry by offering the same services in a unique way.

Recommended Strategy and Its Implementation

The most appropriate strategy for the company is fine-tuning the existing strategy. If the firm segments compete collectively, operate independently and manage the company in a collaborative manner will allow the company to recover financially by enhancing customer satisfaction and increasing its profitability (Wang & Pettit, 2016). Since the company has expanded at a slow pace, it would be advisable to continue expanding at such a pace and continue to utilize technological advancement. That way, the company will be making profits in the long run. In the meantime, FedEx should continue to focus on reducing its operating expenses as well as providing business solutions to the companies that need to outsource its services as their short-term strategy (Wang & Pettit, 2016).

The company is operating in the second stage of the business development cycle. Therefore, it is appropriate for the company to implement the strategy in which its competes collectively, operates independently and adopts a collaborative management style in all its business segments. The strategy creates synergy across the operating businesses through the strengthening of the company’s brand, satisfy the specific consumer needs and allow the top board directors to oversee the operations in all business segments. The implementation of the strategy should begin at the highest level of management in the organizational structure and move down to the lowest level of management. The different business operating under FedEx should be structured in a way each serves the needs of a particular consumer group. The top management in every segment should ensure that all procedures are carried out to ensure that they achieve the set goals. Such programs as consumers’ service survey feedbacks, maintaining a sound organizational structure, preparation of operating budgets, review of employees’ performance and sustainability programs will facilitate implementation of the strategy.

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References

Chairman’s Letter - FedEx Annual Report 2016. (n.d.). Retrieved from http://annualreport.van.fedex.com/2016/chairman-letter

FedEx Corp (FDX) People | Reuters.com. (n.d.). Retrieved from http://www.reuters.com/finance/stocks/companyOfficers?symbol=FDX

FedEx Profile, History, Founder, Founded, Ceo | Courier Companies | SuccessStory. (n.d.). Retrieved from https://successstory.com/companies/fedex-corporation

Freight, I. A., Industrials, L. S., & Year, F. (2017). FEDEX CORP.

Howie, D. (2014). Express way: FedEx Corp. is based in Memphis, Tennessee, and it’s here that the main super hub of FedEx Express and its air operations are centered. Rolls-Royce Magazine.

Parnell, J. A. (2013). Strategic management: Theory and practice. Sage Publications.

Wang, Y., & Pettit, S. (Eds.). (2016). E-Logistics: Managing Your Digital Supply Chains for Competitive Advantage. Kogan Page Publishers.