FedEx is one of the world’s leading logistics companies. It is based in the U.S. and is one of the most widely used logistics brands in the United States. In the beginning, FedEx was called Federal Express and had several other brands and firms, such as RPS and Robert Express. All of these were marked with the FedEx brand name.
This blog provides a comprehensive examination of the Business Model of FedEx, which addresses its target market, company segments, revenue insights, performance, value position, and SWOT analysis.
Let’s begin by learning more about the company.
As the ‘great idea’ of charter pilot Fred Smith, Federal Express was created in 1971. It started in 1973 and just 10 years later was the first US company in its first decade to earn 1 billion dollars in revenues. Now FedEx is the biggest express delivery corporation in the world (its moniker, ” FedEx,” officially named in 2000).
Nearly 196,000 workers shift more than 3 million things per day to more than 200 countries, up from 110,000 employees and only five years ago! In 1990, FedEx was awarded the Baldrige Award for its very first service firm. In the past, the Company has extended its ground service business with the acquisition of both Parcel Direct and more than 1.100 Kinko facilities (now the FedEx Kinko Office and Print Centers) in 2004, a former Quad/Graphics division.
In the past, the Company has extended its ground service business with the acquisition of both Parcel Direct and more than 1.100 Kinko facilities (now the FedEx Kinko Office and Print Centers) in 2004, a former Quad/Graphics division.
BUSINESS MODEL OF FedEx
FedEx provides transportation, e-commerce, and business services through wholly-owned subsidiaries. FedEx creates value by providing 220+ nations with “high value-added” package delivery services. FedEx’s business philosophy is encapsulated by their founding core, “When it absolutely, positively has to get there overnight”. FedEx remains ahead of the curve by delivering on its promise of fast delivery with greater than 99% reliability.
FedEx relies on its highly efficient operational systems, which are centred on planes, for this purpose. FedEx operates on a hub-spoke concept, which means that instead of travelling straight, FedEx planes fly through one of its strategically located hubs. As a result, products are placed on the shelf right away. As a result of this operational strategy, delivery times are reduced.
Under this segment, we will cover the Operating Segments, Revenue Insights, Performance, Channel, the Value Position and Customer Segment of FedEx
1. FedEx Operating Segments
- FedEx Express: The company’s global network is responsible for providing time-critical and air-ground express services.
- FedEx Ground: Provides dependable business-to-business delivery as well as handy home services. Even though FedEx services customers and businesses all over the world, FedEx Ground is only available in North America.
- FedEx Freight: Offers a variety of LTL (less-than-truckload) options to meet customer requirements.
- FedEx Services: It employs technology to address customer needs, whether they are related to global supply chain challenges or e-commerce issues.
2. FedEx Revenue Insights
FedEx began to flourish in 1973, and there has been no looking back since. FedEx Logistics & FedEx Office, in addition to the four primary critical segments, contribute to total income. FedEx earned $69.2 billion in FY20, with 51 per cent coming from FedEx Express, 33 per cent from FedEx Ground, ten per cent from FedEx Freight, and the remainder coming from others and eliminations. FedEx experienced an annual growth rate of 11.6 per cent from FT16 to FY19.
Factors affecting business and revenue include:
- Overall client demand for a diverse range of FedEx services.
- Macroeconomic and global issues affecting FedEx customers’ markets.
- The volume of transportation services, as measured by cargo weight and average daily volume; and * FedEx’s capacity to adjust its value to fit changing volume levels.
- The yield earned by FedEx is measured in terms of revenue per package or revenue per hundredweight etc.
3. FedEx Performance
The FedEx business and business model alignment of a rather low-margin industry has led to a good operating margin of 5%-8% and a sales revenue of $27.2 billion in the 2015 fiscal year alone. (11) The corporation has also just modified its price model – space is more precious than weight, and this reflects a new price strategy that leads to improved returns. FedEx is well poised to take advantage of its highly efficient model to deliver on its business plan in the years ahead as e-commerce expands internationally.
4. FedEx Channels
FedEx runs a website atwww.fedex.com that gives information and rates on its numerous products and services. The Company runs an online sales channel, allowing clients to buy and administer accounts and invoices. FedEx also offers mobile applications with similar functions on iOS and Android systems. Many FedEx’s products and services are delivered directly through the company’s multi-canal network by members of the personnel – including representatives of customer services, package managers, and couriers.
In-office buildings, shopping centres, and corporate or industrial parks, FedEx runs various FedEx offices, drop-off sites, and national and international sorting systems, as well as FedEx drop boxes. Also serving 136 offices in 120 service locations across North America and Africa, Asia Pacific, Europe, India, Latin America, and the Middle East, FedEx trade networks delivers its services. Including 643 aeroplanes and almost 57,000 groomed cars, the federal government operates its transport fleets and infrastructure.
5. FedEx Value Position
The mark and industry position, the company having one of the most respected and recognizable brands in its sector. It has built the Company as a provider of rapid, on-time package delivery services, and effective customer supply chain solutions over its many years of operation; it provides global reach to business and domestic clients in more than 220 countries and territories across the world. The company provides a suite of services and solutions for general customers and businesses across multiple branches to which it provides tailor-made solutions and technological infrastructure and uses state-of-the-art supply chain technologies to offer its customers the most efficient service possible.
6. FedEx Customer Segments
FedEx supplies customers globally with a range of supply, distribution, and supply chain services. Customers of the Company can be divided into the following:
- Commercial Clients – consisting of SMEs, which supply the packages, distribution services, commercial packaging, and commercial supply chain solutions across multiple business sectors and to whom the Company provides business to business.
- Government and public clients – in particular the US government agencies, to which the Company offers secure logistics and supply solutions.
- Residential Customers – consisting of General Clients to whom the company offers consumer-to-consumer packages.
SWOT Analysis of FedEx
SWOT analysis is a technique in which a corporation assesses two internal aspects (solids and weaknesses) and two external factors (occasions and threats). Let’s see each one in detail.
1. Strengths of FedEx
- FedEx has a vast range of services that have built this up through strategic investments. This broad range allows FedEx to targeted emerging client categories regularly and meets needs within these segments.
- The technological capacities of FedEx enable the company to operate effectively and accurately. The technological capabilities enable more than 14 million shipments to be delivered and collected every day. In its roughly 700 aircraft and more than 180,000 vehicles, FedEx made considerable investments. It is tough for competitors to match the service FedEx has to live with this level of technological competence.
- The corporation has great international brand recognition. Consumers take FedEx immediately into account for their supply demands. FedEx has, through its years of continuously reliable services, acquired its brand awareness.
- As a worldwide brand, FedEx offers services to around 220 countries with close to 2200 offices, 370 service locations, 13 Air Express hubs, 39 ground hubs, and 1,950 express-operation stations. It is active in Europe, Asia, and the rest of the world in the Americas.
2. Weaknesses of FedEx
- The damage produced during the transportation is one of the main difficulties for any transport company, in particular in developing countries. This directly affects the company’s bottom line because the corporation must respect its claims.
- Although transport damages are a matter of fact, FedEx claims rules are known to be unwarranted and claims are barely respected. This becomes increasingly critical as we move to an e-commerce economy.
- The USA is the largest income engine in FedEx, but dependency on something for the majority of income is a risky business idea, but this is no bad thing in and of itself. FedEx recognizes this cleverly and tries to expand more quickly.
- A key problem in a service company is the difficulty of distinction because all services take the differentiation points very quickly. FedEx is a top brand, yet the market is entirely fragmented and flooded by brans, while it offers its competitive advantage.
3. Opportunities for FedEx
- FedEx has a significant advantage over many online shops because of its already working, global network. By joining the online retail market, FedEx can diversify its portfolio.
- FedEx can use its large financial resources to purchase small and medium-sized couriers on these markets to quickly expand, rather than invest enormously in new areas.
- To satisfy customers’ needs, FedEx continually innovates. The trust and business of major companies and regular consumers have been earned. FedEx is one of the most innovative logistics and freight corporations today. For instance,
- Demand for the courier, logistics, and freight services, as well as improvement in the economic situation, is growing fast across rising economies in Asia, Africa, and Latin America. In these economies, FedEx can expand its activity to meet the expanding demand.
- Worldwide e-commerce retail sales are projected to increase from 3,5 billion dollars in 2019 to 6,5 trillion dollars in 2023. FedEx is taking advantage of the increased demand for retail e-commerce delivery services.
4. Threats to FedEx
- Caps in capacity and demand are always problematic for a logistics business. If there is too much capacity and demand is not very great, the corporation is losing out owing to fixed costs. If the demand is too large and the capacity fails, the company faces a loss of opportunity. As a consequence, full capacity against demand is always a challenge for any business, in particular FedEx.
- FedEx is presently free from new market entrants but the margins of other Top 3 brands are also under pressure due to the enormous expenses and competition. Consequently, this price war affects the background more than the end.
- The present fuel consumption in the country is one of the main variables in the external business environment. The higher the fuel expense, the greater the impact it will have on the basis. Similarly, space and work availability is another issue that has an impact on the enterprise.
FedEx is accustomed to leading the way. FedEx undertook some significant digital transformations. For example, FedEx supply managers are working to increase clients’ visibility, control of self-sufficient vehicles like Roxo, the FedEx SameDay Bot that stimulated cutting edge innovation, and to develop their leading tracking technology using their newest FedEx Surround and SenseAware ID technologies. FedEx’s new strategy will contribute to the more effective fulfilment of FedEx’s purple promise and helps FedEx and its customers to live through its finest years.
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