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ITEC – University of Science, Ho Chi Minh City, Vietnam
Financial & Strategic Analysis Report
Class HC12B
FedEx CorporationStrategic Management
Professor: Vahid Victor Keyhani
Group 3Trần Ái My - 332966
Trần Quang Khôi - 332969
Phạm Thùy Trang -332964
Nguyễn Trọng Tấn - 332955
Nguyễn Thị Trà My - 332953
Ngô Thùy Phương Thảo - 332942
Table of contents
Company overview.....................................................................................3
Mission statements......................................................................................4
Vision statements........................................................................................5
Objectives....................................................................................................6
Strategies....................................................................................................6
Corporate social responsibility (CSR)........................................................6
SWOT.........................................................................................................9
SWOT analysis............................................................................................9
Financial analysis......................................................................................18
Matrix analysis..........................................................................................22
Appendix 1 – Financial ratio – based on FedEx annual report.................23
Appendix 2 – Competitive Profile Matrix (CPM)....................................24
Appendix 3 – External Factor Evaluation Matrix (EFE)..........................25
Appendix 4 - Internal Factor Evaluation Matrix (EFE)............................26
Appendix 5 – Strategic Position and Action Evaluation (SPACE) Matrix 27
Appendix 6 – Grand Strategy Matrix........................................................28
Appendix 7 – The Quantitative Strategic Planning Matrix (QSPM)........29
COMPANY OVERVIEWFedEx Corporation (FedEx) is a provider of transportation, e-commerce and business services. The
company offers time certain delivery services and international trade services such as customs
brokerage, and global ocean and air freight forwarding. It also provides small-package ground delivery
services across North America. In addition, it offers residential delivery services in the US. FedEx
provides less-than-truckload (LTL) freight services. The company also provides in-store services, online
services and business solutions. FedEx operates through four segments: FedEx Express, FedEx Ground,
FedEx Freight and FedEx Services.
FY15 Revenue: $47.5 billion
Team Members: More than 325,000
Countries and Territories
Served: More than 2201
The company reported revenues of (US Dollars)
US$45,567 million for the fiscal year ended May 2014
(FY2014), an increase of 2.9% over FY2013. In FY2014,
the company’s operating margin was 7.6%, compared to
an operating margin of 5.8% in FY2013. In FY2014, the
company recorded a net margin of 4.6%, compared to a
net margin of 3.5% in FY2013. The company reported
revenues of US$11,939.0 million for the second quarter
ended November 2014, an increase of 2.2% over the previous quarter.
1 http://investors.fedex.com/company-overview/overview-of-company/default.aspx
MISSION STATEMENTS FedEx Corporation will produce superior financial returns for its shareowners by providing high value-
added logistics, transportation and related business services through focused operating companies.
Customer requirements will be met in the highest quality manner appropriate to each market segment
served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and
suppliers. Corporate activities will be conducted to the highest ethical and professional standards.2
Recommended Mission Statement
For a mission statement to be effective, it is necessary to have nine components, which is customers;
products or services; markets; technology; concern for survival, growth, and profitability; philosophy;
self-concept; concern for public image; and concern for employees. For FedEx mission statement, they
have stated 7 over 9 components above:
Products or service: ‘logistics, transportation and related business services’
Technology: ‘high value-added’ service
Concern for survival, growth, and profitability: ‘…produce superior financial returns for its
shareowners…’ and ‘…Customer requirements will be met in the highest quality manner…’
Philosophy and Concern for public image: ‘Corporate activities will be conducted to the
highest ethical and professional standards’
Self-concept: ‘…high value-added…’, ‘…the highest quality manner…’, and ‘…mutually
rewarding relationships…’
Concern for employees: ‘FedEx will strive to develop mutually rewarding relationships with
its employees, partners and suppliers’
However, their customer and market component is not clearly stated. For that reason, we suggest that
their mission statement should be:
FedEx Corporation will produce superior financial returns for its shareowners by providing high value-
added logistics, transportation and related business services through focused operating companies in
more than 220 countries. Worldwide customer requirements will be met in the highest quality manner
appropriate to each market segment served. FedEx will strive to develop mutually rewarding
2 http://about.van.fedex.com/our-story/overview/
relationships with its employees, partners and suppliers. Corporate activities will be conducted to the
highest ethical and professional standards.
VISION STATEMENTS
It’s what we do
A more connected world means more opportunities. That’s why customers count on our diverse portfolio
of transportation, e-commerce, and business solutions. Our air, ground and sea networks cover more than
220 countries and territories, linking more than 99 percent of the world’s GDP.
It’s why we matter
In a connected world, the power of technology, transportation, information, and ideas compounds and
multiplies. Businesses big and small create jobs that lift their communities. For people who are hungry
for the education, goods, services and jobs that can improve their lives, a connected world is a better
world.
It’s who we are
We are consistently ranked among the world’s most admired brands and employers. More than 300,000
FedEx team members are absolutely, positively focused on safety, the highest ethical and professional
standards, and the needs of our customers and communities.3
3 http://about.van.fedex.com/our-story/overview/
OBJECTIVES
Financial Goals
FedEx Corporation provides strategic leadership and consolidated financial reporting for the FedEx
family of companies, managing a broad portfolio of transportation, e-commerce and business services.
FedEx Corporation has clearly outlined goals and strategies for the future.4
Long Term Goals
1. Achieve 10%+ operating margin
2. Increase EPS 10%-15% per year
3. Grow profitable revenue
4. Improve cash flows
5. Increase ROIC
6. Increase returns to shareowners5
STRATEGIESFedEx plans to focus on these five strategies to grow as a business.
1. Grow core package business
2. Grow internationally
3. Grow our supply chain capabilities
4. Grow through e-commerce & technology
5. Grow through new services & alliances 6
CORPORATE SOCIAL RESPONSIBILITY (CSR)FedEx recognize that their impact is greater than the services they provide. They are committed to being
a great place to work, a thoughtful steward of the environment and a caring citizen in the communities
where they live and work. They are passionate about sustainably connecting people and places and
improving the quality of life around the world.
4 http://about.van.fedex.com/our-story/overview/5 http://investors.fedex.com/company-overview/mission-and-goals/default.aspx6 http://investors.fedex.com/company-overview/mission-and-goals/default.aspx
Environment and efficiency
FedEx is always looking for ways to pick up and deliver shipments efficiently, seek out new forms of
renewable energy, and help make communities and the planet more sustainable for future generations by
carrying out some programs such as carbon-neutral envelope shipping program launched in 2012; FedEx
Fuel Sense, which engages team members to examine every phase of aircraft operations; and so forth7.
Disaster readiness and relief
With its commitment to supporting disaster relief efforts around the world, FedEx donated the first
vehicle of its kind – Disaster Response Unit (DRU) - to be used in Washington D.C. in 2009. The new
DRU will help Salvation Army workers and volunteers better serve the community by providing meals
to needy and displaced residents during and after natural disasters. In addition, the custom-designed and
built unit features a fully functional kitchen where workers and volunteers can prepare meals for
approximately 2,500 people per day. They also work with various relief organizations including the
American Red Cross, Direct Relief, and Inter-Action to deliver relief supplies (food and medicine) to
communities in need.8
Pedestrian and road safety
FedEx focus on this because more than 3,200 people lose their lives and 136,000 are seriously injured in
vehicle-related crashes around the globe every day, almost half of which are motorcyclists, pedestrians,
and children. Besides comprehensive internal driver safety policies, programs, and training, they support
road safety initiatives around the world implemented by organizations such as Safe Kids Worldwide,
EMBARQ and UN road safety programs (whose goal is to save five million lives by 2020).9
Community and philanthropy
7 http://about.van.fedex.com/social-responsibility/environment-efficiency/8 http://about.van.fedex.com/social-responsibility/disaster-relief/9 http://about.van.fedex.com/social-responsibility/pedestrian-road-safety/
In addition to their three core areas of Disaster Readiness and Relief, Pedestrian and Road Safety, and
Environmental Sustainability, FedEx also support investments in education, health, and diversity, as well
as local projects that enhance community well-being.
FedEx volunteers also donated and planted 1,000 native tree seedlings and helped teach Filipino students
about the environment. Besides, there are philanthropic and volunteer programs, such as its support for
EMBARQ, the World Resources Institute’s Center for Sustainable Transport helping safely and
economically connects people living in emerging countries (Brazil, India, and Mexico) to jobs and a
better life. Moreover, FedEx work with organizations like Teach For America, Junior Achievement, and
FIRST Robotics to promote youth education and inspire students to embrace innovation and forward
thinking.10
10 http://about.van.fedex.com/social-responsibility/community-philanthropy/
SWOTStrengths Weaknesses
Diversified business operation
Strong information system networks
Strong market position
Brand equity
Technology infrastructure
Physical assets
Sustainable development
Overdependence in U.S. market
Declining market share in Sector
Cost of infrastructure in expanding international
market
Decentralized operations
Delivery-staff need training
Covering loss in financing and investing activities
by profit in operating activity
Opportunities Threats
International expenses
Expanding Chinese market
Online shopping
Using cooperative strategies
Challenging competitors through
merger & acquisitions
Growing potential customers
Growing global transportation
Increasing transportation cost:
Economic slowdown in China:
E-substitution:
Current economic situation in U.S. market
Vulnerable to increasing reach by major
competition:
Cost-cutting initiative:
Green initiative makes it costly to keep up with
standards.
SWOT ANALYSIS
Strengths
1. Diversified business operation:
FedEx operates through four segments: FedEx Express (57% - $27.2B, FedEx Ground (27% - $13.0B),
FedEx Freight (13% - $6.2B) and FedEx Services (3% - $1.5B).
2. Strong information system networks:
All the helping information is easily founded in the well-structured website, fedex.com, for shareholders,
for example, invoicing information, customer service and other FedEx Office services to its customer.
Particularly, in this website, they are enormous amount of information that facilitate customer in
ordering, controlling, checking their shipping schedule, and also filling complain reports. For investors,
they can found all the data of company operation, quarterly or annually financial statement, stock price
history, and latest news.
3. Strong market position:
This can be considered to be a competitive advantage over its competitor. They also high – rank in many
well-known magazines, such as in 2014, FORTUNE magazine for “World’s Most Admired Company”,
and Corporate Responsibility Magazine’s “100 Best Corporate Citizens”. Other institute such as
FORBES/ REPUTATION Institute give them the reward for “America’s Most Reputable Companies”,
and Great Place to Work Institute for “World’s 25 Best Multinational Workplaces”. Their customer
satisfaction is the highest based on the ranking of University of Michigan Business School National
Quality Research Center’s American Customer Satisfaction Index in the express delivery category.
FedEx’s express won the Institute Of Transport Management’s ‘Best Global Cargo Hub’. All this reward
that they have been received is the solid base for their international expansion.
4. Brand equity:
The company image is identified as high quality with numerous and unique benefits for its customer.
FedEx’ reaction for the moment of truth is capture customer’s trust and satisfaction for their fast,
premier overnight delivery and back up by their detailed and feasible website. With other stakeholders,
such as employees and partners, the company is keeping their promise to work ethically and develop a
mutual rewarding relationship which is proved by their ranking in ‘100 Best Companies to Work for in
America” for 13 years.
5. Technology infrastructure:
In order to have such a company’s size and successful today, technology infrastructure, especially IT, is
the main force for today’s position. With the burden of process gigantic customer’s information and
request (over 50 million unique visit website monthly, more than 50 million package tracking request
daily and more than 9 million packages shipped daily using FedEx automated tools), they need a
combination of various and cutting-edge technologies which is expensive to maintain and customized.
Their solution is to build their own and private cloud which allow them to actively fixing and
rearranging their data and transform to any hardware they want. Also, using cloud is helping them to
process information faster which boosts their productivity.
6. Physical assets:
They have an impressive number fleet of aircrafts and vehicles and operation facilities. More than
100,000 owned and contracted motorized vehicles for express, ground, freight and expedited delivery
services; around 5,000 operating facilities; 650 aircraft, more than 375 airports served worldwide. FedEx
Freight Corporation alone has 60,000 vehicles and trailers from a network of 492 service centers. This is
a strong base and force for their serving capabilities.
7. Sustainable development:
This is not an accident that sustainable development becomes a worldwide trend for big companies. It is
eco-friendly and most of the time, saving cost for the company. FedEx follow the trend and their effort
finally have a result as from 2007 till now, FedEx Fuel Sense team member have saved 334 million
gallons of jet fuel, equal to 3.25 million metrics tons of carbon emission avoided, five year ahead of their
goal on vehicle fuel efficiency.
The key goal of their sustainable development:
Increasing to 14.1 percent in vehicle fuel efficiency since 2005, half way to 20 percent by
2020
Reducing aircraft emissions of 20 percent by 2020, achieving an 8.33 percent reduction
against the 2005 baseline
Procuring 25,000 megawatt-hour of renewable energy credits of 2008 fiscal year 2008 goals,
and continuing to install solar-electric system, which a current capacity of 3.92 megawatts.
Weaknesses
1. Overdependence in U.S. market
Their sale revenues in U.S. account for 72.2% and 27.8% in international market (2014). Although
getting a lot of revenue from one region is desirable, however, for FedEx, there are hidden risks for
overdependence in one region. The change in economic, politic, government policy and climate will
affect deeply their operation which probably leads company to a financial crisis. In addition, this
situation restricts the capability of the firm to expand into new regions and markets.
2. Declining market share in Sector
Operation Profit
Margin2014 2013 2012 2011 2010
FedEx 7.56 % 7.76 % 7.46 % 6.05 % 5.75 %
Industry 12.48% 11.89% 10.68% 11.73% 12.03 %
From the table above, although FedEx increase over the year, compared with the industry, they are time
they are half way below industry average (2010). This is probably the sign that they are
underperformance and decline market share. It is likely that the reasons that behind this decreasing is a
weak competitive advantage in service and no new innovation over years.
3. Cost of infrastructure in expanding international market
One of the goals FedEx want to achieve is to expand their market to new region outside of U.S. This
mean they have an outflow of cash which need to buy infrastructure, joint-venture or buy back local
company, and to cope with local government policy. New market, China and India, which cultural and
working condition is different in the U.S, can be costly as their operation is not optimized and probably
over cost.
4. Decentralized Operations
As FedEx have around 5,000 operating facilities, the decentralized circumstance will lead to an overlap
in their working territory and probably the redundancy in resource. That mean more cost, more burden in
the financial strength, and more ineffective in customer service.
5. Delivery-staff need training
Nevertheless, FedEx is famous in the customer’s satisfaction; there still have scandal about the attitude
of the delivery staff. For example, a delivery staff has thrown the package which is fragile over the gate
of the customer’s house. This customer decides to post the video of the incident in YouTube and receive
controversial feedback. After that, the management and even the CEO have to officially apologize to this
customer. This incidents have damage some of company’s reputation. The unionized driver in one hand
help saving cost, but the other hand, these drivers which are not officially employees of the company,
cannot follow the philosophy, the climate, and the culture of the firm.
6. Covering loss in financing and investing activities by profit in operating activity
(millions of
dollars)2014 2013 2012 2011 2010
Net operating
profit4,264 4,688 4,835 4,041 3,138
Net investing
profit(3,551) (3,803) (4,049) (3,419) (2,781)
Net financing
profit(2,719) (1,184) (244) (287) (692)
From above information, FedEx is clearly efficiency in their operation but leave the financing and
investing sector in loss. This has to do with the ineffectiveness in planning the business. Focus too much
on operating yet loss on investing and financing will hurt the company in the long term. The company
needs to revise their way of allocation their resource in their activities.
Opportunities
1. International expended
FedEx has been taking initiatives to expand its international presence, especially in key markets such as
China, India, and Europe. During 2007, the company made several acquisitions in these markets, in
order to generate long-term growth, productivity, and profitability. For instance, FedEx Express acquired
its Indian service provider, Prakash Air Freight (PAFEX), for $30 million. PAFEX, a privately-held
company, was one of the largest domestic express companies operating in India, with more than 384
offices and depots serving nearly 4,400 destinations. In addition, the company has started next-morning
domestic delivery service in China, which is available in more than 40 cities and counties throughout the
country. The new China domestic service is supported by a money-back guarantee and real-time package
status tracking. Furthermore, FedEx Express has launched a dedicated direct flight between Manchester
in the UK and the US. The company's expansion initiatives will enable the company to expand its global
reach and reduce its business risks related to the US market. In 2014, the company’s subsidiary also
announced the establishment of new container freight station in Chicago to sort freight travelling to
Puerto Rico. This service is planned to benefit customers shipping to Puerto Rico from North America,
including in Canada and Mexico. The customers will receive a single invoice for their less-than-
truckload (LTL) and full-container-load (FCL) Puerto Rico shipments through this new container freight
station.
2. Expanding Chinese market
FedEx has been increasingly focusing on the Chinese market, one of the key growth markets in Asia.
China has continued to dominate the Asian region in terms of activity and growth. According to
Datamonitor, the Chinese air express market is expected to grow at about 34%, thrice the global average
of about 11% during 2005. Moreover, it is predicted that China would become the sixth largest express
market in 2010. In addition, according to the American Institute of Aeronautics and Astronautics'
forecast, China's air cargo is expected grow at an average 11.2% per year until 2020.
The company has significant operations in China. It operates an Asia Pacific hub at the Guangzhou
Baiyun International Airport in Southern China to leverage the fast-growing China and Asia Pacific
markets. Furthermore, in 2007, FedEx signed a lease with Hangzhou Xiaoshan International Airport
opening its Chinese transfer center in the city, which can sort up to 9,000 packages per hour. Further in
2007, the company purchased Tianjin Datian W. Group's (DTW Group) 50% share of the FedEx-DTW
International, a priority express joint venture; and also the DTW Group's domestic express network in
China for approximately $400 million in cash. Moreover, the FedEx transfer center in Guangzhou Baiyu
Airport was opened in 2009. It is the company’s largest facility outside the US.
3. Online shopping
Throughout the world online buying has grown exponentially. IBIS World research forecasts an 8.6%
per year increase in online revenues over the next five years. Growth of online shopping has been
characterized by strong consumer demands and the increasing number and type of goods available. An
11% annual increase in parcel volume is likely to continue according to Australia's Postal Chief
Executive. Around 30% Africans become more familiar and proficient with online shopping. In South
Africa, 51% of individuals with internet access shop online. In Kenya, 18-24% population makes online
purchases. In the U.S., Forrester Research shows that $248.7 billion online sales are expected by 2014. A
compounded growth of 10% is forecast for the next five years. In Western Europe sales are expected to
reach 14 billion euros ($155.7 billion), a growth of 11% percent annually. Considering that the country
is in a major recession, the increase in online buying is a good sign. A survey of U.S. online customers
found that 82% are satisfied with buying experiences that began and ended with the online store.
Satisfaction dropped to 61% when they researched online and then bought in a store.
4. Using cooperative strategies
The firm’s main opportunity is to use cooperative strategies to create value for a customer that exceeds
the cost of constructing value in other ways (Desarbo, Jedidi & Sinha 2001) and to establish a favorable
position relative to competition. Living examples are the two that FedEx already engaged in. In an
alliance between the firm and the U.S. Postal Service (USPS), the company roughly transports 3.5
million pounds of USPS packages daily on its planes and will earn FedEx more than $7 billion - $6.3
billion in transportation charges and $900 million in drop box revenue in the seven-year deal with USPS
(Ulfelder 2001). The second alliance was with worldwide professional services firm KPMG, which
intent is to deliver total, end-to-end supply-chain solutions to large and mid-sized companies. Another
opportunity seen for FedEx is the opportunity to take advantage of the recent development.
5. Challenging competitors through merger & acquisitions
In 2000, FedEx acquired Tower Group International, a leader in international logistics and trade
information technology. Tower Group became the foundation of a new subsidiary, FedEx Trade
Networks, which in turn acquired WorldTariff®, a premier customs duty and tax information company,
one month later. In 2006, FedEx acquired ANC Holdings Ltd, a U.K. domestic express transportation
company, and rebranded it as FedEx UK. In 2007, FedEx acquired Tianjin Datian W. Group Co. Ltd.’s
50 percent share of the joint venture between FedEx and DTW International Priority Express, along with
DTW Group’s domestic express network in China. FedEx then launched a domestic express service for
the Chinese market. Then, FedEx Express acquires Indian service provider Prakash Air Freight Pvt. Ltd.
(PAFEX). In 2011, FedEx Express acquires the logistics, distribution and express businesses of AFL
Pvt. Ltd. and its affiliate, Unifreight India Pvt. Ltd. In 2012, FedEx Corporation acquires express
transportation company TATEX and acquires transportation and logistics provider Rapidão Cometa in
Brazil.
FedEx Trade Networks is now one of North America’s largest-volume customs entry filers and a leader
in International Ocean and air freight forwarding and trade facilitation. With the value of global trade
now at more than $18 trillion, FedEx has continued transforming its business to better align with
projected worldwide population and economic growth. One key to that has been the acquisition of
numerous transportation companies that allow us to directly serve specific markets and provide better
service to our customers.
6. Growing potential customers
As the world’s economy becomes more fully integrated, and as barriers and borders to trade continue to
decrease, companies are sourcing and selling globally. The increase in global sourcing and selling has
led companies to streamline their supply chains and open new markets. With customers in more than 220
countries and territories, FedEx facilitate this supply chain through their global reach, delivery services
and information capabilities. According to the Boeing Company’s World Air Cargo Forecast Team, air
cargo traffic will expand at an average annual rate of 6.2% for the next two decades, and express air
cargo has grown at more than twice the rate of total worldwide air cargo traffic, averaging more than
16% annually over the last decade. This is an opportunities for FedEx
7. Growing global transportation
Transportation is one of the world’s largest industries. Its sectors range from taxis to trucks, airplanes,
trains, courier services, ships, barges, warehouses and logistics services. In total, during 2015, core
transportation revenues in the U.S. will be a projected $974.4 billion according to Plunkett Research
estimates. Worldwide, these revenues will be a projected $4.8 trillion. This includes air, rail, water,
pipeline, courier and warehousing segments. The total revenue of freight transportation by airports and
all carriers is $207.7 billion in 2014, an increase of 19% since 2010.
Threats
1. Increasing transportation cost:
The price of fuel has increased tremendously. Back in 90s, fuel cost about 50 cents per gallon. Now, it’s
$2.57 per gallon.
2. Economic slowdown in China:
Economic slowdown in China will lead to the slowdown in economic of Europe and U.S. market as
China is their primary creditor as well as their biggest export market. With the crash from Shang Hai
stock market, falling 70% value in one week and recently, the dumping price of the Yuen has really
effect one way in another to the business of FedEx with their heavy investment over the last several
years by adding new planes to export goods and expand of its hubs and network. The company also
reported that its earnings fell 1 percent in 2012.
3. E-substitution:
FedEx faces its biggest ever threat from the growing popularity of internet. In recent years, electronic
email has quickly replaced the postal letter as a means of communication. Advance technologies such as
free email services, wireless broadband, and text messaging (SMS) are negatively affecting traditional
mail services, especially in urban areas. The postal mail business delivers information such as letter and
bank statements as well as printed matter such as direct mail and periodicals, which can now be accessed
faster through the internet (for instance, electronic banking). Furthermore, the first-class mail volumes
have also been affected by the telephone, fax machine, and other electronic communications. If
substitution of traditional mail by digital alternatives continues, mail volumes will decrease, resulting in
lower revenues for companies.
4. Current economic situation in U.S. market
The slowing economic market negatively impacted the company’s division. Prior to today’s earning
report, the company had reported the retirement of older transportation within its US domestic express
market and plans for restructuring its network in order to match capacity with the reduced demand for
freight.
5. Vulnerable to increasing reach by major competition:
FedEx competes with many companies and services on a local, regional, and international level. The
transportation and business services markets are both highly competitive and sensitive to price and
service, especially in periods of little or no macro-economic growth. Some of the company’s competitors
have more financial resources which enables them to raise capital more easily. The competition has led
to a very competitive pricing environment within the industry. If the pricing environment becomes
irrational, it could limit FedEx’s ability to maintain or increase prices (including fuel surcharges in
response to rising fuel costs) or to maintain or grow its market share. In addition, maintaining a broad
portfolio of services is important to keeping and attracting customers. If the company’ competitors offer
a broader range of services or more effectively bundle their services, it could impede FedEx’s ability to
maintain or grow its market share
6. Cost-cutting initiative:
Due to the global economic downturn, FedEx Corp is stepping up cost-cutting measures to boost profit
margins as sluggish global economic growth curbs shipping volumes and increases customer demand for
lower-priced delivery options.
7. Green initiative makes it costly to keep up with standards:
FedEx has a diverse range of environmental and fuel conservation efforts reaching into all phases of its
operation, such as strategic route planning and vehicle optimization — even reducing the use of in-gate
aircraft auxiliary power units and replacing much of its airplane fleet. But the lack of a national fueling
infrastructure severely limits the company’s potential use of AFVs in the U.S., as does the lack of a
national standard for biodiesel. Finally, this process is very expensive and very hard to follow in the
future.
FINANCIAL ANALYSIS1. Trending
The company reported revenues of $45,567 million for the fiscal year ended May 2014 (FY2014), an
increase of 2.9% over FY2013. In FY2014, the company’s operating margin was 7.6%, compared to an
operating margin of 5.8% in FY2013. In FY2014, the company recorded a net margin of 4.6%,
compared to a net margin of 3.5% in FY2013.
Liquidity ratios refer to cash equivalence of assets and FedEx’s ability to maintain sufficient cash to
meet its obligations. The ratios used in this section are used to measure how quickly FedEx is able to pay
its bills by using cash on hand or readily converting some assets into cash.
The current ratio is desired to be as high as possible because theoretically FedEx would like to have as
many assets as company can and at the same time have as few liabilities as FedEx possibly can. FedEx’s
current ratio is in fluctuation but almost higher than UPS and the industry.
Quick ratio’s trend is very similar to that of current ratio but the assets that are in this ratio are even more
liquid than in the current ratio. FedEx maintains a very high ratio because they have a very small amount
of liabilities compared to the amount of revenue they collect.
The point of cash ratio is almost the same as the current ratio; to assess how readily the firm can pay its
current liabilities with its cash on hand. FedEx’s cash ratio is the biggest during the past far year
(Appendix 1). We find this to be satisfactory because FedEx is becoming the leader in shipping for the
industry and this ratios show their competitiveness against UPS and the industry.
Financial leverage ratios show a firm’s ability to overcome its debts and interests.
Debt ratio is defined as the proportion of a company's assets that are being financed with debt and used
to determine the financial risk of a business. FedEx’s ratio (Appendix 1) greater than 1 indicates that a
company may be putting itself at risk of not being able to pay back its debts while UPS which has a low
ratio indicates that the bulk of asset funding is coming from equity.
The times interest earned ratio measures the ability of an organization to pay its debt obligations.
FedEx’s overall ratios in the past 5 years of less than one indicates that a business may not be in a
position to pay its interest obligations but still improving because they are investing a higher percentage
of their operating income for other resources or projects to yield higher returns (Appendix 1).
Activity ratios measure how efficiently a company uses its assets to generate revenue. Inventory
turnover is the average number of times in a year that a business sells and replaces its inventory. FedEx’s
inventory turnover has increased through years. The common management perception is that inventory
turnover should be extremely high, since this means that FedEx are operating a business with a smaller
cash investment in inventory. Account receivable turnover evaluates the ability of a company to
efficiently issue credit to its customers and collect funds from them in a timely manner. Its high and
stable ratio indicates a combination of a conservative credit policy and an aggressive collections
department, as well as a number of high-quality customers. Total asset turnover, also called management
efficiency ratio, indicates how well a company uses its assets to generate revenue, so a higher ratio is
always more favorable. So is UPS.
Profitability ratios measure the success of the firm, by way of generating profit. ROA measures how
efficiently a company can manage its assets to produce profits during a period, whereas ROE is a
profitability ratio that measures the ability of a firm to generate profits from its shareholders investments
in the company. According to Appendix 1, FedEx’s ROE is nearly double its ROA and their trends are
nearly the same, which means the ratios fluctuated from 2010 to 2014 (increased between 2010 and
2012, decreased from 2012 to 2013, and the increased since then).
The growth rate typically represents the compounded annualized rate of growth of a company's
revenues, earnings, dividends and even macro concepts - such as the economy as a whole. Earnings per
share (EPS) measure the amount of net income earned per share of stock outstanding. FedEx’s EPS
fluctuates throughout 5 years and its ratio is higher than that of UPS, which means FedEx is more
profitable and has more profits to distribute to its shareholders. Dividend per share is a measure of the
dividend payout per share of common stock, which used to estimate the amount of dividends an income
investor might expect to receive if he or she were to buy a company's common stock. Its dividend per
share has risen from 2010 to 2014, which indicates higher management's willingness to make consistent
payouts to investors.
The performance of FedEx for the past 5 years implies that FedEx is a leader in the industry and has
continually improved over the course of the past 5 years.
2. Forecasting
YearStock
price
1 2010 92.96
2 2011 83.51
3 2012 90.39
4 2013 143.05
5 2014 173.66
Predictions:
2015: $182.996
2016: $205.09
a. Income Statements
We feel that the U.S. service industry has been steadily growing the past five years and will continue to
grow in the future. To forecast for 2015 we took the average of the growth rates of the previous three
years and multiplied it by the 2014 Revenues. We applied this to the current year (being 2015), and
continued doing this until 2018. In the year 2016 we increased the growth rate to 6.36% and starting in
2017 we held a constant growth rate of 6.3% per year.
0 1 2 3 4 5 60
50
100
150
200
f(x) = 22.094 x + 50.432R² = 0.775307743490677
Stock PriceLinear (Stock Price)
Number of Years
Stoc
k Pr
ice
To find the forecasted numbers for the operating expense section of the income statement, we divided
each expense by revenues for that year and took the average of the past three years. For example, in the
year 2016 we multiplied revenue by 0.9 (the average growth for the previous three years for salaries and
employee benefits) and found the value was $45,424.
We found net income as a percentage of operating income and averaged the past three years of data to
compute our growth for the current year. Since the ratio for the past three years were nearly the same (at
about 14%), we applied this to all subsequent years.
b. Balance Sheet
We first found an average growth over the past five years for total assets to be able to forecast for the
next 4 years. We then applied that percentage growth for the next three years. Then, starting in 2014, we
increased this growth by 10.3% per year, finally leveling off at 12.6% starting in 2017. This gave us a
forecast for total assets for the next 4 years.
c. Cash Flow
The statement of cash flows was a difficult financial statement to forecast because the numbers
fluctuated greatly from year to year. Because of the high fluctuations, estimating would not serve a
meaningful purpose since our predictions would not be very accurate. A couple of the numbers we
forecasted were kept at a steady rate at the beginning of the period such as proceeds from stock
issuances, dividends paid, cash, and cash equivalents. We concluded that dividends should never
decrease because it may show that the company is in financial trouble. Also, a large increase may hurt
retained earnings because the company may need to finance other projects.
MATRIX ANALYSIS1. Competitive Profile Matrix (CPM) – Appendix 2
According to the score in the Appendix 2, FedEx is good at optimizing management and increasing service
quality while using advertising to promote their brand image. They enhance the allocation of resource in
global expansion, particularly China and India. However, as the economic is unstable, their financial
position is likely affected which lead to a new disadvantage in keeping their market share in a high
competitive price race. Although they have good service and it is reasonable that the customer loyalty score
is relatively high, they need to train more their delivery staff as their incident with customer is damaged the
company’s reputation and affected the customer loyalty score. In conclusion, FedEx is doing well with their
market yet need to actively planning their strategy for the expansion and consider more about their delivery
staff attitude. In the Competitive Profile Matrix (CPM), FedEx score the highest with 2.69 as compared to
UPS, 2.36, and DHL, 2.58
2. External Factor Evaluation Matrix (EFE) - Appendix 3The EFE matrix is a tool to identify and evaluate FedEx’s potential opportunities and threat. As FedEx’s
strategy is to expand their regions, according to the result, 2.89, they have capture well the opportunities and
conduct a cooperative strategies to enter international market, especially China, with high demand for
growing potential customers, growing global transportation as well as the spreading of Internet into new
economies. They enjoy these opportunities available to the fullest which facilitate challenging competitors
through merger and acquisition local companies at their new market. Beside this, FedEx invest in the
potential online shopping business which to be soon, leading a new trend for consumption.
However, their plan have to account all the facing threats, which is the increasing transportation cost, the
slowdown in Chinese economic, the targeted market they want to penetrate, and the current economic
situation in U.S., their main market. These threats will increase cost and possibly invent problem that
represent a diversion from their main goal. FedEx leave behind their competitors thanks to their optimized
management and investments in technology, yet their competitors is growing fast and expand their reach in
international playfield which should be a notice for FedEx for moving forward. The cost from their daily
operation and from green initiative to keep up with the standard is another point they should have attention
for.
In conclusion, FedEx is well using their opportunities for further growth yet should beware of the threat that
is now can be handled.
3. Internal Factor Evaluation Matrix (EFE) – Appendix 4FedEx works in a diversified business operation with mass investment in information systems networks and
technology infrastructure. They also have a strong physical asset, and practice the sustainable development.
This entire factor helps them to build a strong market position and good brand equity for the firm. Although
the existence of weakness factors, such as overdependence in U.S. market with a decentralized operation,
loss covering by operating activities from investing and financing activities, and training needed for
delivery-staff, FedEx with a strong strength still able to score 2.99, a quite high score.
4. Strategic Position and Action Evaluation (SPACE) Matrix – Appendix 5
The company is located in the aggressive quadrant (1;1,5) , which means they are using their internal
strengths to take advantages of external opportunities, overcome internal weaknesses, and also avoid
external threats. According to appendix 1, it shows that FedEx’s financial position is growing, but unstable.
Additionally, FedEx may face with risks because of high competitive pressure and elasticity; therefore, it’s
necessary to create something new in order to compete with their competitors. In competitive position area,
FedEx’s product quality and technology advancement are really high, so that are the reason why they can
keep its market share and gain customer loyalty. Lastly, for the industry, FedEx has enough good factors to
expand their business such as high productivity or extended leverage.
5. Grand Strategy Matrix – Appendix 6In this matrix, FedEx is also located in the first quadrant, because FedEx has various products to choose
from, and they always try to improve their services by taking advantage of external opportunities not only to
satisfy customers’ expectation but also to differentiate with their competitors
6. The Quantitative Strategic Planning Matrix – Appendix 7From the key factors of SWOT, our group suggests 2 strategic alternatives for FedEx: expansion to new
market and restructured. After doing the matrix, we choose the first strategic as the score is higher, 4.42 than
the other, 2.5. All the factors we evaluate, both from inter and external represent the possibility to growth
further with the strength, the opportunities while the company have to dealt with the weakness in their
organization and the threats outside.
ConclusionThe expected result from all matrix and analysis our group has done is that FedEx will successful expanding
their market, make profit, and increasing their amount of customer.
APPENDIX 1Financial Ratios – based on FedEx Annual Report
($ in millions) 2010 2011 2012 2013 2014Liquidity ratiosCurrent ratio 1.57 1.70 1.69 1.96 1.82Quick ratio 1.48 1.61 1.60 1.88 1.74Cash ratio 0.42 0.48 0.53 0.86 0.55Leverage ratiosDebt-to-total assets ratio 0.12 0.10 0.10 0.15 0.24Debt-to-equity ratio 0.14 0.11 0.11 0.17 0.31Long-term debt-to-equity ratio 0.47 0.48 0.67 0.60 0.82
Times-interest-earned ratio 24.97 37.34 61.40 30.94 21.56Activity ratiosInventory turnover 30.61 32.65 35.81 35.99 36.83Fixed assets turnover 2.41 2.53 2.47 2.40 2.33Total assets turnover 1.39 1.44 1.43 1.32 1.38Accounts receivable turnover 8.34 8.58 9.07 8.78 8.35Average collection period 43.75 42.54 40.23 41.57 43.74Profitability ratiosGross profit margin 65.72% 63.70% 63.08% 62.86% 62.58%Operating profit margin 5.75% 6.05% 7.46% 5.76% 7.56%Net profit margin 3.41% 3.69% 4.76% 3.52% 4.60%Return on total assets (ROA) 4.75% 5.30% 6.80% 4.65% 6.34%Return on stockholders' equity (ROE) 8.57% 9.54% 13.80% 8.97% 13.73%
Earnings per share (EPS) 3.76 4.58 6.42 4.93 7.35Price-earnings ratio 20.51 20.54 14.32 21.03 20.56Growth ratiosSales $34,73
4$39,30
4$42,68
0$44,28
7$45,56
7Net income $1,184 $1,452 $2,032 $1,561 $2,097Earnings per share (EPS) 3.76 4.58 6.42 4.93 7.35Dividends per share 0.44 0.48 0.52 0.56 0.60
APPENDIX 2Competitive Profile Matrix (CPM)
FedEx UPS DHL
No Key factors Weight Rating Score Rating Score Rating Score
1 Advertising 0.12 3 0.36 3 0.36 2 0.24
2 Service quality 0.15 3 0.45 3 0.45 3 0.45
3 Price competitiveness 0.11 3 0.33 3 0.33 3 0.33
4 Management 0.1 4 0.4 2 0.2 3 0.3
5 Financial position 0.1 2 0.2 2 0.2 2 0.2
6 Customer loyalty 0.09 2 0.18 3 0.27 2 0.18
7 Global expansion 0.22 2 0.44 1 0.22 3 0.66
8 Market share 0.11 3 0.33 3 0.33 2 0.22
Total 1.00 2.69 2.36 2.58
APPENDIX 3External Factor Evaluation (EFE) Matrix
No Key factors Weight Rating Score
Opportunities
1 International expanded 0.2 4 0.8
2 Expanding Chinese market 0.05 3 0.15
3 Online shopping 0.05 3 0.15
4 Using cooperative strategies 0.1 4 0.4
5Challenging competitors through merger &
acquisitions0.05 2 0.1
6 Growing potential customers 0.05 3 0.15
7 Growing global transportation 0.08 3 0.24
Threats
1 Increasing transportation cost 0.1 3 0.3
2 Economic slowdown in China 0.1 4 0.4
3 E-substitution 0.05 2 0.1
4 Current economic situation in U.S. market 0.05 2 0.1
5Vulnerable to increasing reach by major
competition0.02 1 0.02
6 Cost-cutting initiative 0.05 1 0.05
7Green initiative makes it costly to keep up
with standards.0.05 3 0.15
Total 1.00 2.89
APPENDIX 4Internal Factor Evaluation (IFE) Matrix
No Key factors Weight Rating Score
Strengths
1 Diversified business operation 0.05 2 0.1
2 Strong information system networks 0.1 3 0.3
3 Strong market position 0.1 3 0.3
4 Brand equity 0.05 3 0.15
5 Technology infrastructure 0.17 4 0.68
6 Physical assets 0.05 2 0.1
7 Sustainable development 0.1 3 0.3
Weaknesses
1 Overdependence in U.S. market 0.1 4 0.4
2 Declining market share in Sector 0.07 2 0.14
3Cost of infrastructure in expanding
international market0.03 2 0.06
4 Decentralized operations 0.03 2 0.06
5 Delivery-staff need training 0.05 2 0.1
6Covering loss in financing and investing
activities by profit in operating activity0.1 3 0.3
Total 1.00 2.99
APPENDIX 5Strategic Position and Action Evaluation (SPACE)
Matrix
Internal Strategic Position External Strategic Position
Financial Position (FP) Stability Position (SP)
Stock
EPS
Financial position average
3
2
5
Technology change
Competitive pressure
Elasticity
Risk
Environmental position average
-1
-0.5
-2
-0.5
-4
Competitive Position (CP) Industry Position (IP)
Market share
Product quality
Customer loyalty
Capacity utilization
Technology
Control
Competitive position average
-1
-0.5
-1
-1
-0.5
-1
-5
Growth
Profit
Financial stability
Extended leverage
Ease entry
Productivity
Industry position average
1.5
2
1
1
0.5
0.5
6.5
APPENDIX 6Grand Strategy Matrix
SLOW MARKET GROWTH
WEAK COMPETITIVE
POSITION
STRONG COMPETITIVE
POSITION
Quadrant I
1. Market development2. Product development
RAPID MARKET GROWTH
APPENDIX 7The Quantitative Strategic Planning Matrix (QSPM)
STRATEGIC ALTERNATIVESExpansion to
new marketRestructured
KEY FACTORS Weight AS TAS AS TAS
OPPORTUNITIES
1. International expand 0.2 4 0.8 - -
2. Expanding Chinese market 0.05 3 0.15 - -
3. Online shopping 0.05 2 0.1 - -
4. Using cooperative strategies 0.1 2 0.2 - -
5. Challenging competitors through merger
& acquisitions0.05 - - - -
6. Growing potential customers 0.05 2 0.1 - -7. Growing global transportation 0.08 1 0.08 3 0.24
THREATS
1. Increasing transportation cost 0.1 2 0.2 - -
2. Economic slowdown in China 0.1 3 0.3 - -
3. E-substitution: 0.05 - - - -
4. Current economic situation in U.S.
market0.05 - - 3 0.15
5. Vulnerable to increasing reach by major
competition0.02 1 0.02 - -
6. Cost-cutting initiative: 0.05 - - 3 0.15
7. Green initiative makes it costly to keep
up with standards.0.05 - - 3 0.15
1.00
KEY FACTORS Weight AS TAS AS TAS
STRENGTHS
1. Diversified business operation 0.05 - - 2 0.1
2. Strong information system networks 0.1 3 0.3 - -
3. Strong market position 0.1 2 0.2 - -
4. Brand equity 0.05 2 0.1 - -
5. Technology infrastructure 0.17 3 0.51 - -
6. Physical assets 0.05 - - 3 0.15
7. Sustainable development 0.1 2 0.2 - -
WEAKNESSES
1. Overdependence in U.S. market 0.1 - - 1 0.1
2. Declining market share in Sector 0.07 - - - -
3. Cost of infrastructure in expanding
international market0.03 2 0.06 - -
4. Decentralized operations 0.03 - - 2 0.06
5. Delivery-staff need training 0.05 2 0.1 2 0.1
6. Covering loss in financing and investing
activities by profit in operating activity0.1 - - 3 0.3
1.00 4.42 2.5
