Philippine School of Business Administration-Manila

826 R. Papa Street,

Sampaloc, Manila City

“A Product Development Policy pertaining to E-Commerce”

SUBMITTED TO:
Prof. Erwin C. Zabala, DBA, PD-SML

SUBMITTED BY:
Mendoza, Carl Gabriel
Camu, Beauty Lorien
Obligado, Esme
Balatong, Kathlyn
Chua, Lemuel Steven
Arcena, Lyca
Magdaog Jr., Michael Angelo
Mendoza, Mydes Elaine
Costumbrado, Renz Cel
Marquez, Vina

May 2024
 I. CASE BACKGROUND

FedEx started in 1971 in Memphis, Tennessee, when Frencerick Smith, who is also the
current CEO, decided to buy and create a controlled interest in Arkansas Aviation Sales. There
was a gap for being unable to deliver the packages on designated days. Therefore, Smith decided
to develop an idea for handling the delivery effectively. It is named Federal Express to be able to
create a contract with the Federal Reserve Bank and catch the consumer’s attention and interest.
The corporation has 57,000 drop-off locations, 700 aircrafts, and 62,000 vehicles. It has
operations in over 220 countries and employs over 220,000 workers.

In 1975, the company embarked on its first profit, which was used in lobbying for the
deregulation of air cargo in 1997. As a result of this, FedEx is able to use larger aircraft; today,
FedEx is the world’s largest cargo fleet. By 1983, they reached $1 billion in sales; they were the
first in the U.S. to achieve this revenue without acquisition within ten years of their operations.
FedEx also started in 1995 to open its services in Europe, Asia, and China.

Presently FedEx operates through three main divisions: FedEx Express, FedEx Ground,
and FedEx Freight. FedEx Express is the world's largest express transportation company,
offering time-sensitive delivery options with global reach. Their revenue comes from domestic
US, international shipments, and even "international domestic" services within foreign countries
where they're expanding. They're investing heavily to modernize their fleet in the coming years.
FedEx Ground focuses on package delivery across the US and most of Canada, reaching nearly
all residences. Their "SmartPost" service leverages the US Postal Service for less urgent
deliveries at a lower cost. Ground boasts the highest daily package volume but earns less per
package compared to Express.

The company faced both opportunities and challenges in an increasingly competitive and
rapidly evolving market. The rise of e-commerce and globalization presented new avenues for
growth, while technological advancements and changing customer expectations demanded
continuous innovation and adaptation.

In 2014, FedEx ramped up global expansion with a new Mexico City hub to expedite
service within Mexico and to the US. New hubs and acquisitions in Asia and Latin America
targeted growing trade opportunities. To support this and rising costs, FedEx raised shipping
rates in 2015. In January 2015, FedEx also acquired GENCO Distribution System, Inc. to further
improve its logistics in the US and Canada. Aside from that, in April 2015, FedEx made an
attempt to acquire Dutch delivery firm TNT Express N.V. (TNTEY); however, on July 13, 2015,
the European Commission (EC) raised concern that the combined entity, if approved, would
dominate the market, thereby stifling the competition and causing prices to soar.

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 Despite its strong position in the market, FedEx faced competition from both traditional
rivals like UPS and USPS, as well as emerging players in the e-commerce and last-mile delivery
sectors. Additionally, regulatory issues, economic fluctuations, and environmental concerns
added layers of complexity to the company's operations. In response to these challenges, FedEx
remained committed to its core values of delivering exceptional service, fostering a culture of
innovation, and investing in its people and technology. The company continued to expand its
global footprint, enhance its service offerings, and streamline its operations to stay ahead of the
curve.

II. ENVIRONMENT ANALYSIS

A. GENERAL ENVIRONMENT

A.1 OPPORTUNITIES
A.1.1. SOCIO-CULTURAL-DEMOGRAPHIC FORCES
The attitudes of consumers towards spending on goods, especially online, has
increased drastically. The rapid growth had seen FedEx delivering 26 million packages in
one day during the Christmas season (Page 434, Paragraph 5). Seeing as consumer
spending has an upward trend for the following years, the need for express delivery will
also rise as a result, particularly with regard to online spending, wherein consumers will
have the goods or products delivered either locally or internationally.

A.1.2. TECHNOLOGICAL FORCES

E-Commerce has also been gaining popularity among consumers. Buying and
spending on goods online from websites such as eBay and Amazon are seeing an upward
trend, with the two E-commerce platforms offering their own delivery services but only
in major cities such as San Francisco, Los Angeles, and Manhattan (Page 439, Paragraph
2). As such, FedEx must adapt to the new trend of consumer spending and create their
own online buying and selling platform before the rising competitors start to dominate
the new industry, especially since they have their own delivery services which have only
impacted FedEx marginally at present, but may continue to change in the upcoming
years.

A.1.3. ECONOMIC FORCES

Currently, the economy of the United States is stable enough to project a 3-4%
annual growth rate from the current $200 billion net worth for the package delivery
industry until 2020 (Page 439, Paragraph 1). This means that local expansion in terms of
hubs and trucks can be feasible seeing as there would be more potential package
deliveries to be done over the years.

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 International Markets have also seen a huge growth rate which impacts the
airfreight industry, something that FedEx should monitor as an express transportation
company. While domestic volumes are growing at 4% a year, international volumes such
as those in Asia are growing at almost 5 times the amount (20%) a year alongside a
higher margin thanks to international rates (Page 441, Paragraph 4). FedEx must not only
prioritize its domestic markets, but also invest more on FedEx freight seeing the
significant upward trend when it comes to international markets.

A.1.4. ENVIRONMENTAL FORCES

Fuel-efficient engines have been developed over the years, allowing delivery
companies to reduce not only its fuel consumption, but also its carbon footprint (Page
436, Paragraph 3). Utilization of the new engines will allow delivery companies to be
more environmentally-friendly and economically sustainable in an industry that consists
of large carbon footprints and hefty cost of revenue .

A.1.5. POLITICO-LEGAL FORCES

Delivery companies are threatening antitrust lawsuits against USPS due to their
policy of being able to offer discounts, mostly because of charging higher rates on
first-class, while other companies are unable to since it will lead to a loss of revenue
(Page 440, Paragraph 6). If the lawsuit is successful, it will be able to ensure a level
playing field once USPS complies with the law, making the competition fair for everyone
involved especially since at present time USPS has been growing by 20% annually for 5
consecutive years (2009-2014), something that neither no other delivery company has
achieved.

A.2 THREATS
A.2.1. SOCIO-CULTURAL-DEMOGRAPHIC FORCES
Rival UPS is investing 2 billion dollars to extend its global presence in Asia,
Europe, and the Americas while also updating its operations in the United States to
incorporate automated package sorting (Page 434, Paragraph 1). Since the pandemic a lot
of people are using various e-commerce and it is the future. FedEx should have a
strategic plan such as its rival UPS to stay relevant in its space

A.2.2. TECHNOLOGICAL FORCES

UPS already has a fleet of around 300 gas-powered trucks and 700 tractors and
already financed several natural-gas filling stations that helps them to be fuel efficient
(Page 441, Paragraph 5). Rival firms have already invested in natural gas powered trucks
which made it hard for FedEx to make sales and deliveries. They also missed a chance to

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 invest in diesel powered trucks which is 20 percent more fuel efficient compared to using
gas.

A.2.3. ECONOMIC FORCES

FedEx’ rival firm UPS has doubled net income and almost double market capital
compared to them. UPS did this having fewer employees than FedEx (Page 439, Exhibit
5).With the rise of e-commerce FedEx might have a hard time catching up with its rival
firms. FedEx has less market share in its mailbox rentals and its mail delivery services
both in the USA and other countries.

A.2.4. ENVIRONMENTAL FORCES

The demand for air freight is rising, hence higher consumption of FedEx’ jet
planes (Page 441, Paragraph 2). The international freight demand in early 2014 was up by
less than one percent. International shipping has become the trend for consumers. Using
non renewable resources such as oil could harm the environment in the future. Keeping
up with demands has been the company’s goal, but keep in mind what abusive use of non
renewable resources such as oil could do to the environment.

A.2.5. POLITICO-LEGAL FORCES

As the European Union's antitrust authority, the EC is scrutinizing whether the
forthcoming agreement, which involves two major global players in small package
delivery, complies with the EU Merger Regulation. The European Commission (EC) has
expressed apprehensions regarding potential competition constraints should the deal
come to fruition (Page 434, Paragraph 2). The EC is worried that if approved, the merged
entity would wield significant market control in the small package sector, leading to
reduced competition and heightened prices. FedEx should abide by the policies set by the
EC to avoid constant pressure from the organization in its operations.

B. OPERATING ENVIRONMENT

B.1 OPPORTUNITIES
B.1.1. RIVALRY AMONG COMPETING FIRMS
Foreign markets will remain crucial to the airfreight industry's future expansion.
Over half of air freight ton-miles in 2014 came from overseas markets, and that
percentage has been rising ever since. In contrast to volumes in Asia, which are growing
by around 20% annually, domestic volumes are only increasing by about 4% annually
(Page 441, Paragraph 4). As the international market continues to expand and cover a
large volume, it gives an opportunity for the company to reach more consumers. As a
result, the profit and target market will increase and will be able to cater more consumers.

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B.1.2. POTENTIAL ENTRANTS
As e-commerce expands, delivery services are being offered by new competitors
like Google, eBay, and Amazon. Many of these same-day delivery services are now
limited to major cities like Manhattan, Los Angeles, and San Francisco. Although it's
unclear if Amazon and Alibaba can grow into massive package delivery companies as
well, they have reduced the margins of the major transportation companies (Page 439,
Paragraph 2). Because of the rivalry among competing firms, e-commerce has helped
them to grow and expand more in their businesses and offer new services. Moreover, as
one company continues to expand and grow, the other companies have become provoked
as well to do the same thing. Companies have been given the opportunity to expand and
strategize about which elements and aspects they can improve.

B.1.3. SUBSTITUTE PRODUCTS

Rival corporations are continuously minimizing operations, replacing numerous
personnel with machines, and combining mail routes as the volume of mail continues to
drop due to the rising use of email, bank draft billing, and the switch from electronic
advertising to Internet (Page 441, Paragraph 1). These changes in the operations and
e-commerce have given the company an opportunity to offer new services that align with
the changes in the market. As a result, it would help them to adopt and create new
products or services because of the external changes.

B.1.4. BARGAINING POWER OF SUPPLIERS

The agreement is valued at $9.97 billion at list prices and includes options for a
further 50 767Fs. Companies may acquire the new planes over the course of the
2018–2023 fiscal years. With this transaction, various companies’ order count for 767Fs
rises to 106, further advancing certain company's efforts to update its inventory (Page
442, Paragraph 3). As the technology and machines are continuing to develop and grow,
it would be an opportunity for the companies to acquire new enhancements to be able to
create new suppliers and machineries. In this way, companies would be able to produce
and widen their target market.

B.1.5. BARGAINING POWER OF BUYERS

The demand for aviation cargo increased by more than 2% between May 2013
and May 2014. Due to historically high aircraft fuel prices, many consumers have chosen
slower modes of transportation, such as trucking, over more prompt delivery of goods,
due to the lower cost (Page 441, Paragraph 3). Consumer preferences have a huge impact
on every company, since consumers have switched their demand and preferences, it could
affect the company and even other external factors such as oil prices. With these external
issues, it would give companies an opportunity to grow and be part of changing
preferences of the consumers.

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B.1.6. INDUSTRY GROWTH
Demand for air cargo rose over 2% from may 2013 to may 2014 (Page 441,
Paragraph 3), coupled with positive growth rates in international markets, which
accounted for more than 50% air freight in 2014 (Page 441, Paragraph 4). could indeed
be seen as opportunities for FedEx corp. to expand its operations, increase revenue, and
strengthen its position as a leading global logistics provider

B.1.7. SHAREHOLDERS’ ACTIONS

In April 2015, FedEx offered to acquire Dutch delivery firm TNT Express N.V
(TNTEY) for approximately $8.75 per share, or $ 4.8 billion (4.4 billion). However on
July 13, 2015, the European Commission (EC) raised concerns about completion being
restrained in the event of the deal materializing. As the antitrust watchdog of the
European Union, the EC is investigating whether the impending deal, involving two key
global players in the field of small package delivery, abides by the EU Merger
Regulation. The EC is concerned that the entity, if approved, would dominate the market
for small packages, thereby stifling competition in the space and causing prices to soar (
Page 436, Paragraph 2). FedEx has been growing in the logistics sector since the last
decades it has expanded its global reach and become a global behemoth to provide
transportation, ecommerce and business services in Internationally.

B.1.8. CREDITORS’ ACTIONS

In a global expansion, FedEx opened a new hub in Mexico City in 2014 to help
aid in shipments to more than 800 shipping locations across Mexico. The hub should
better enable 2 shipping across Mexico and speed delivery between Mexico and the
United states. Currently, Mexico is the third-largest U.S trade partner, accounting for 13.5
percent of all U.S trade. Also the New Mexico city hub is expected to expedite service to
Latin America, where revenues are growing rapidly. FedEx also opened a new hub in
Osaka, Japan in 2014 to better facilitate transport of shipments from Asia to the United
States ( Page 438, Paragraph 5).

B.1.9. COMMUNITY PERCEPTIONS

The trucking industry had high hopes for natural gas powered trucks, especially
in the US where natural gas is plentiful (Page 442, Paragraph 7). Natural gas powered
trucks produce lower emissions compared to traditional diesel trucks, resulting in reduced
air pollution and improved air quality in communities where FedEx operates. If FedEx
can capitalize on this trend, they could improve its public image and reputation for its
commitment to sustainability and cleaner transportation services.

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B.2 THREATS
B.2.1. RIVALRY AMONG COMPETING FIRMS
USPS is aggressively training employees to reduce waste, making many rural post
offices part-time post offices, and offering discounts up to 58 percent to customers who
mail 50,000 parcels a year. These cost saving plans are expected to save the USPS around
$500 million annually (Page 440, Paragraph 2).

B.2.2. POTENTIAL ENTRANTS

E-commerce platforms like Google, eBay, and Amazon, could have entered new
markets, offering a wide range of products and services to customers worldwide. These
platforms might have developed their own logistics networks or partnered with local
carriers to provide delivery services, potentially competing with FedEx on a global scale
(Page 438, Paragraph 2).

B.2.3. SUBSTITUTE PRODUCTS

While air freight demand remained strong in 2015, the emergence of competitive
alternatives such as ocean shipping with quicker transit times and lower costs could pose
a threat to FedEx’s air freight business, particularly for certain types of cargo and
shipping routes. This increased competition may lead some customers to opt for ocean
shipping over air freight, particularly for less time-sensitive or bulky shipments (Page
441, Paragraph 3).

B.2.4. BARGAINING POWER OF SUPPLIERS

High jet fuel prices (Page 441, Paragraph 3) increase the operating costs for
FedEx, as fuel is a significant expense in its transportation operations. This puts pressure
on FedEx to negotiate better pricing or cost-saving measures with its suppliers to offset
the impact of fuel price increases.

B.2.5. BARGAINING POWER OF BUYERS

USPS offering significant discounts, such as 58% off, to customers who mail
50,000 parcels a year could potentially impact the bargaining power of buyers of FedEx
Corp (Page 440, Paragraph 6). Buyers who send a substantial volume of parcels may be
incentivized to negotiate more aggressively with FedEx for better pricing or discounts.
They could use USPS’s discounted rates as leverage during negotiations with FedEx,
seeking comparable or better pricing to maintain their business.

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B.2.6. INDUSTRY GROWTH
Traditional delivery giants like FedEx are under siege. E-commerce titans like
Amazon, with their vast scale and aggressive delivery options, are eroding margins and
threatening their dominance. Same-day delivery, limited to a few cities now, could spread
fast. FedEx should adapt to the current changes in the trends or they will lose their
dominance in the ever changing industry (Page 439, Paragraph 2).

B.2.7. SHAREHOLDERS’ ACTIONS

UPS and FedEx are furious that the USPS can offer lower shipping rates while
they have to raise prices. They argue this is unfair because the USPS charges their richer
customers more for options such as first-class mail which allows them to be able to offer
discounted prices to the majority of their consumers. In addition, both UPS and FedEx
have accused USPS of offering subsidies to customers to ship with them and even
charging less for package delivery than revenues derived. USPS’s proprietary pricing
information does not allow. FedEx or UPS to get a clear picture of the situation, but both
FedEx and UPS are threatening antitrust lawsuits against USPS. As a result of USPS’
moves, its package business has grown over 20 percent annually from 2009 to 2014. By
law, the USPS must pay its own way, and does not receive taxpayer support (Page 440,
Paragraph 2).

B.2.8. CREDITORS’ ACTIONS

FedEx corp. acquired GENCO Distribution System, Inc. in January 2015. The
GENCO acquisition is expected to further FedEx’s commitment to its customers by
improving logistics offerings. GENCO is a large third-party logistic provider in the
United States and Canada. FedEx plans to allow GENCO to operate as a subsidiary and
keep its management team. The new subsidiary will, however, report through FedEx’s
Ground business segment (Page 441, Paragraph 8).

B.2.9. COMMUNITY PERCEPTIONS

In 2014, UPS announced it is expanding its service that allows customers to pick
up packages at convenience stores, dry cleaners, UPS shops, and many other businesses.
UPS has found many customers browse online, then shop in stores, because they are
unable to sign for packages delivered to their home during working hours (Page 440,
Paragraph 2). FedEx should offer flexible delivery options to allow customers to have
more control over their deliveries to combat this threat. This includes evening and
weekend delivery windows or designated drop-off closer to their homes, Invest in
Delivery Technology, and Expand locker Network.

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 C. INTERNAL ENVIRONMENT

C.1 STRENGTHS
C.1.1. MARKETING
Brand Reputation and Variety of Services - 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. Safety will be the first consideration in all operations. Corporate activities will
be conducted to the highest ethical and professional standards (Page 436, Paragraph 1).
Customers have faith in FedEx, and the business has a strong global reputation.
Furthermore, a wide range of services implies that any potential customer in a market can
rely on the company to satisfy their needs.

C.1.2. PRODUCTION/OPERATIONS
Global Presence - FedEx does business in over 220 countries and employs over
220,000 workers. The company is composed of subsidiaries: FedEx Ground, FedEx
Express, FedEx Freight, and FedEx Services. Revenues for fiscal year-end of May 2014
were $45 billion, or about $10 billion less than top competitor United Parcel Service
(UPS). In fact, rival UPS is spending $2 billion to expand internationally in Asia, Europe,
and the Americas, and is modernizing its U.S. operations to automatically sort packages.
UPS expects its revenues to rise 7 percent annually through 2018, so FedEx needs an
excellent strategic plan going forward (Page 434, Paragraph 1). FedEx's extensive air and
ground network, spanning 220 nations, is considered a strength due to its global presence
and ability to reach areas where its competitors are not present.

C.1.3. FINANCE
Financial Strength - FedEx reported 2015 revenues of $47.4 billion with net
income of over $1 billion (down from over $2 billion in 2014), as revealed in Exhibit 3.
The firm paid 35 percent taxes in fiscal year 2015, and has over $3 billion in goodwill on
the balance sheet, as indicated in Exhibit 4 (Page 437, Paragraph 2). Based on its Altman
Z score and its 6 out of 10 Financial Strength Rank, FedEx appears to be in relatively
good financial standing with little risk of bankruptcy.

C.1.4. ORGANIZATION AND MANAGEMENT

FedEx uses a divisional-by-product (Page 434, Paragraph 6). Whereby it enables
the business to function successfully in a geographically scattered market, the
organizational design enables the business to manage operational faults and prevent
losses from arising from any single component of the operation.

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 The company is composed of subsidiaries: FedEx Express, FedEx Ground, and
FedEx Freight (Page 434, Paragraph 1). where it makes it possible for the business to run
effectively worldwide.

C.1.5. HUMAN RESOURCES

FedEx does business in over 220 countries and employs over 220,000 workers
(Page 434, Paragraph 1). Having more than 220,000 employees supporting operations in
more than 220 countries contributes to the company’s reputation of quick shipment.

C.1.6. RESEARCH AND DEVELOPMENT

Efforts made to reduce carbon emissions are a part of FedEx’s overall strategy and
the company reports its fleet miles per gallon has dropped 14 percent since 2005 with a
goal of a 20 percent reduction by 2020. The declines are partly from newer more
fuel-efficient engines, but also from building more strategically located hubs and dispatch
facilities (Page 434, Paragraph 2). This not only affects the environment but also to boost
the capacity of FedEx for timely delivery and also to reduce fuel cost.

Also, the company uses recycled paper in most of their shipping packaging. Most
FedEx envelopes are made from 100 percent recycled paper, and boxes contain a
minimum of 40 percent recycled content. FedEx also has recycling programs in place for
a variety of items, including batteries, printer ink cartridges, lights, paper, oil, tires,
plastics, and many other products (Page 434, Paragraph 3). FedEx finds ways to
significantly lessen their environmental footprint and run more sustainably in order to
preserve the world for future generations. Additionally, a significant change in packaging
trends has occurred as a result of the recent ten years' expansion of e-commerce.
Consumers of today demand packaging that is biodegradable, eco-friendly, and sourced
ethically and sustainably, with recyclable materials and multiple uses.

C.1.7. INFORMATION SYSTEMS

FedEx is also acquiring firms around the world in locations such as the United
Kingdom, Poland, China, South Africa, India, Brazil, and many others. It is FedEx’s
strategy to establish a strong footprint in these areas for domestic package delivery (Page
434, Paragraph 5). FedEx as a global brand diversifies its operations and information by
acquiring firms around the world. By having information globally, FedEx can combine
different strategies used by different locations to achieve rapid growth over a short period
of time.

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C.2 WEAKNESSES
C.2.1. MARKETING
FedEx’s market share placed second after UPS in USA Mailbox Rental and mail
delivery both in USA and non-US markets, while it has the highest percentage in cargo
airplanes (non USA) (Page 439, Exhibit 6). UPS’s larger market share may provide it
with advantages in terms of economies of scale, pricing power, and network coverage,
making it more difficult for FedEx to compete on equal footing. This could result in
FedEx facing challenges in acquiring new customers, retaining existing ones, and
expanding its market presence. To combat this, FedEx may need to invest in advertising,
promotions, and branding initiatives to enhance visibility, credibility, and preference
among target audiences.

C.2.2. PRODUCTION/OPERATIONS
FedEx Corp.'s high fuel consumption, increased noise pollution, and large carbon
footprint are some of its drawbacks. Aside from that, they also incur additional costs to
safeguard goods during transportation (Page 436, Paragraph 2). High fuel consumption
not only increases operating costs but also contributes to environmental concerns, such as
air pollution and greenhouse gas emissions. It exposes the company to risks associated
with volatile fuel prices and environmental regulations aimed at reducing carbon
emissions. Additional operating costs could result in higher charges for transporting the
goods driving down customers’ demand and prompting them to seek alternative services.

FedEx Ground and UPS both compete in LTL (Less than Truck Load), which
requires a large hub structure and high labor cost (Page 441, Paragraph 5). Maintaining a
large hub structure involves significant capital investment and ongoing operational costs.
While hubs can improve efficiency by centralizing operations and facilitating sorting and
distribution, they also require substantial resources to build, maintain, and operate. If
demand for LTL services fluctuates or if hubs are underutilized, this can lead to
inefficiencies and increased costs for the company. Additionally, high labor costs can
erode profit margins and make it challenging to remain competitive, particularly if labor
productivity is not optimized.

C.2.3. FINANCE
According to the FedEx income statement, it made a total revenue of $47.4 billion
in 2015 and had a net income of over $1 billion, which was lower than $2 billion in 2014
(Page 438, Exhibit 3). While on the balance sheet, the company’s total liability was equal
to $17.8 billion in 2014, which climbed to $22.1 billion in 2015, with over $3 billion in
goodwill (Page 438, Exhibit 4).

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 From the data provided in exhibit 3 and 4, we can compute and compare the
profitability of the company for the year 2014 and 2015, such as its net profit margin,
Return on Total Asset (ROA), and Return on Stockholders’ Equity (ROE). The firm’s net
profit margin in 2015 was 0.022 and 0.046 in 2014, while its ROA is 0.028 in 2015 down
from 0.063 in 2014. Lasty, the firm’s ROE is 50% lower than the previous year. This may
indicate that the company is experiencing decreased efficiency in its operations in the
current year, resulting in higher expenses and lower net income relative to its total assets.
On the other hand, high goodwill could indicate that the company's acquisitions or
investments are not generating the expected returns. Which could lead to impairment
charges or write-downs, reducing net income.

C.2.4. ORGANIZATION AND MANAGEMENT

FedEx appears not to have a written vision statement (Page 436, Paragraph 1).
While the company has emphasized its mission, it is important to articulate both the
vision and mission for clarity and alignment within the organization. The absence of a
written vision statement may lead to confusion among employees, stakeholders, and
customers regarding FedEx’s objectives. Vision statements are essential as it will convey
FedEx’s identity, values, and long-term goals to users. Without it, FedEx may face
disadvantage in attracting investors and customers, as well as its decision-making
processes and strategic alignment.

FedEx uses a divisional-by-product organizational structure, but the firm does not
appear to have executives with popular titles such as COO, CTO, CSO, HRM, or R&D
(Page 434, Paragraph 6). Divisional-by-product allows FedEx to organize its operations
effectively in each division. However, the absence of executives like CTO may result in a
gap in strategic oversight or specialized expertise and leadership in certain areas.
Furthermore, lacking a designated HRM could lead to inconsistencies in HR policies and
practices across divisions, potentially leaving employees without adequate monitoring
and support.

C.2.5. HUMAN RESOURCES

FedEx uses a divisional-by-product organizational structure, but the firm does not
appear to have executives with popular titles such as HRM (Page 434, Paragraph 6).
Lacking an executive to HRM may struggle in developing HR strategies, resulting in lack
of clear strategic direction, unalignment with FedEx HR objectives and inadequate
practices such as recruitment and training strategies.
UPS’s stock price dropped nearly 15 percent in one week in January 2015 after
reporting flat earnings and a 6 percent sales gain (Page 442, paragraph 1). This negative
market reaction to UPS’s flat earnings and a 6 percent sales gain may impact investor
sentiment towards FedEx and its stock performance. Consequently, concerns about job

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security, compensation, and future prospects among FedEx employees may rise,
impacting their engagement and potentially leading to decreased productivity and work
quality within the FedEx workforce.

C.2.6. RESEARCH AND DEVELOPMENT

FedEx SmartPost business uses the United States Postal Service (USPS) to deliver
smaller packages that are less time sensitive. However, SmartPost only generated $983
million of the $11,617 million the segment reported in 2014. Daily average package
volume for FedEx Ground and FedEx SmartPost are $4,588 and $2,186 million,
respectively. FedEx Ground receives on average $9.10 per package, whereas SmartPost
generates $1.78 of revenue per package. (Page 437, Paragraph 2). The SmartPost as a
segment and process development of FedEx provides low revenue (only $983) on its
overall segment revenue ($11,617), despite the volume of packages. Additionally,
SmartPost’s revenue per package is notably lower compared to FedEx Ground, with
SmartPost generating only $1.78 per package while FedEx Ground receives $9.10 per
package. This indicates that SmartPost contribution to segment overall revenue is
relatively low, indicating potential profitability as shown in revenue per package despite
handling a considerable volume of packages.

FedEx uses a divisional-by-product organizational structure, but the firm does not
appear to have executives with popular titles such as R&D (Page 434, Paragraph 6). The
lack of an executive specifically responsible for research and development (R&D) poses
a weakness in promoting innovation within FedEx, this hinders the competitive edge of
the company.

C.2.7. INFORMATION SYSTEMS

Traditionally, FedEx, UPS, US Postal Service, Deutsche Post, TNT International,
and large national postal services in other nations were the main drivers of package
delivery, along with many smaller local companies. However, with e-commerce growing,
new delivery competitors such as Google, eBay, and Amazon are offering delivery
services (Page 439, Paragraph 2). This expansion of competition brings heightened risks
of data breaches and cybersecurity threats within FedEx's information systems.

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 D. EXTERNAL FACTOR EVALUATION MATRIX

Weighted
Key External Factors Weight Rating Rating Values
Score
OPPORTUNITIES:
1. Global Markets,
especially in Asia, are (4) – Superior
0.29 3 0.87 Response
growing exponentially
per year
(3) – Above Average
2. Growing Popularity
0.17 3 0.51 Response
of E-Commerce
3. Rise in Demand for (2) – Average
0.11 4 0.44
Air Cargo Response
4. Stable and Growing
0.04 4 0.16
US Economy (1) – Poor Response

THREATS:
1. The European
Commission (EC) Overall Rating:
expressing
0.19 2 0.38 > 2.5 – High
apprehensions regarding
Response
potential competition
constraints 2.5 – Medium
2. Emergence of Response
E-Commerce and its 0.10 2 0.20
effect on the industry < 2.5 – Low
3. Rivals investing to Response
0.07 4 0.28
extend global presence
4. Emergence of
competitive alternatives 0.03 4 0.12
such as ocean shipping
TOTAL WEIGHTED
1.00 - 2.96
SCORE

Conclusion: The opportunities are continually being utilized for the benefit of the company and
the possible repercussions from the imminent threats are being dealt with efficiently by the
corporation, showing high responsiveness when it comes to external factors affecting the
business.

14
 E. INTERNAL FACTOR EVALUATION MATRIX

Weighted
Key External Factors Weight Rating Rating Values
Score
STRENGTHS:
1. Global Presence and
0.28 4 1.12 (4) – Major Strength
Brand Reputation
2. Variety of Services 0.18 3 0.54 (3) – Minor Strength
3. Divisional-by-product (2) – Minor Weakness
0.09 3 0.27
organizational structure
(1) – Major Weakness
4. Financial Strength 0.08 3 0.24

WEAKNESSES:
1. Underperforming in
terms of Market Share, Overall Rating:
show lack of Marketing 0.20 2 0.4
> 2.5 – Strong
from the corporation
Internal Position
2. Risks in maintaining
large hub structure and 0.10 2 0.20 2.5 – Average
high labor cost Internal Position
3. Unsatisfactory
performance of < 2.5 – Weak Internal
0.08
segments such as 0.04 2 Position
SmartPost
4. High fuel
consumption, noise
pollution, and carbon 0.03 4 0.12
footprint
TOTAL WEIGHTED
1.00 - 2.97
SCORE

Conclusion: Fedex has shown that it has a strong internal position especially when it comes to
capitalizing on its opportunities and somewhat minimizing the adverse effects of the threats.

15
 F. COMPETITIVE PROFILE MATRIX

CRITICAL FEDEX UPS USPS

SUCCESS WEIGHT
FACTOR Rating Weighted Rating Weighted Rating Weighted
Score Score Score

1. Number of
0.35 2 0.70 2 0.70 4 1.40
Employees

2. Number of
0.25 2 0.50 3 0.75 4 1.00
Vehicles

3. Volume of
Domestic Mail 0.20 3 0.60 4 0.80 4 0.80
Delivery

[Link] Segment 0.20 3 0.60 3 0.60 4 0.80

OVERALL
1.00 - 2.40 - 2.85 - 4.00
SCORE

Rating Values: 4 = major strength, 3 = minor strength

2 = minor weakness, 1 = major weakness

Conclusion: United States Postal Service (USPS) receives the highest number making it the
strongest delivery company in the industry. Given its major strengths among its competitors, it
exhibits its expertise in the field. The competitive profile matrix is designed to gather and assess
pertinent information in a way that facilitates FedEx's decision-making process effectively.

16
 G. ASSUMPTIONS

G.1 GENERAL ASSUMPTION STABILITY

The economic, sociocultural, and demographic environments are stable since the
economy of the United States of America is projected to grow at around 3-4% per year until
2020 and the attitudes of consumers is deemed to be positive with regards to their spending of
goods which results in more shipping.

G.2 INDUSTRY GROWTH PROSPECT

The market presents a promising opportunity which can be observed not only in the 4%
projected industry growth for domestic volumes, but also in the international volumes growing at
20% per year.

G.3 COMPANY'S COMPETITIVE POSITION

The competitive strengths of the company are its global presence and brand reputation,
variety of services, and its divisional-by-product organizational structure which allows it to
perform better than its competitors.

III. STATEMENT OF THE PROBLEM

The major problem of the business policy case of FedEx Corp. is sustainability in the global
market, as evidenced by the following:

a) Low Market Share

b) Risks in maintaining large hub structures and high labor cost
c) Unsatisfactory performance of segments such as SmartPost
d) High fuel consumption, added noise pollution and carbon footprint

17
 IV. ALTERNATIVE COURSES OF ACTIONS
A. TOWS Matrix

Strengths Weaknesses
1. Global Presence and Brand 1. Underperforming in terms
Reputation of Market Share, show lack of
2. Variety of Services Marketing from the
3. Divisional-by-product corporation
organizational structure 2. Risks in maintaining large
4. Financial Strength hub structure and high labor
cost
3. Unsatisfactory
performance of segments
such as SmartPost
4. High fuel consumption,
noise pollution, and carbon
footprint
Opportunities SO Strategies WO Strategies:
1. Global Markets, especially 1. Engage in E-Commerce 1. Increase in Advertising and
in Asia, are growing (S1, S4, O1, O2, O3) Promotion of Services
exponentially per year (W1, W2, O1, O3)
2. Growing Popularity of
E-Commerce
3. Rise in Demand for Air
Cargo
4. Stable and Growing US
Economy

Threats ST Strategies: WT Strategies:

1. The European Commission 1. Further Expansion and 1. Change in Organizational
(EC) expressing Additional Hubs Structure and Improvement of
apprehensions regarding (S1, S3, T1, T3) Segments
potential competition (W1, W2, W3, T2)
constraints
2. Emergence of
E-Commerce and its effect on
the industry
3. Rivals investing to extend
global presence
4. Emergence of competitive
alternatives such as ocean
shipping

18
 Strengths Weaknesses
1. Global Presence and Brand 1. Underperforming in terms
Reputation of Market Share, show lack of
2. Variety of Services Marketing from the
3. Divisional-by-product corporation
organizational structure 2. Risks in maintaining large
4. Financial Strength hub structure and high labor
cost
3. Unsatisfactory
performance of segments
such as SmartPost
4. High fuel consumption,
noise pollution, and carbon
footprint

Opportunities SO Strategies WO Strategies:

1. Global Markets, especially 1. Product Development 1. Market Penetration
in Asia, are growing (S1, S4, O1, O2, O3) (W1, W2, O1, O3)
exponentially per year
2. Growing Popularity of
E-Commerce
3. Rise in Demand for Air
Cargo
4. Stable and Growing US
Economy

Threats ST Strategies: WT Strategies:

1. The European Commission 1. Market Development 1. Market Development
(EC) expressing (S1, S3, T1, T3) (W1, W2, W3, T2)
apprehensions regarding
potential competition
constraints
2. Emergence of
E-Commerce and its effect on
the industry
3. Rivals investing to extend
global presence
4. Emergence of competitive
alternatives such as ocean
shipping

19
 B. INTERNAL-EXTERNAL MATRIX

IFE TOTAL WEIGHTED SCORE

Strong Average Weak
(3.0-4.0) (2.00-2.99) (1.0-1.99)

High
I
(3.0-4.0) II III

EFE
TOTAL Medium
IV V
WEIGHTED (2.0-2.99) VI
SCORE

Low
VII
(1.0-1.99) VIII IX

EFE = 2.96
IFE = 2.97
Grow and Build (Cell I, II, IV) – Intensive, Integrative
Hold and Maintain (Cell III, V, VII) – Market Penetration, Product Development
Harvest and Digest (Cell VI, VIII, IX) – Retrenchment, Divestiture

20
 C. GRAND STRATEGY MATRIX

QUADRANT II RAPID MARKET GROWTH QUADRANT I

1. Market Development
1. Market Development 2. Market Penetration
2. Market Penetration 3. Product Development
3. Product Development 4. Forward Integration
4. Horizontal Integration 5. Backward Integration
5. Divestiture 6. Horizontal Integration
6. Liquidation 7. Concentric Diversification

WEAK COMPETITIVE POSITION STRONG COMPETITIVE POSITION

1. Retrenchment 1. Concentric Diversification

2. Concentric Diversification 2. Horizontal Diversification
3. Horizontal Diversification 3. Conglomerate Diversification
4. Conglomerate Diversification 4. Joint Venture
5. Divestiture
6. Liquidation

QUADRANT III SLOW MARKET GROWTH QUADRANT IV

IFE = 2.93
G.2 INDUSTRY GROWTH PROSPECT:
The market presents a promising opportunity which can be observed not only in the 4%
projected industry growth for domestic volumes, but also in the international volumes growing at
20% per year.

21
 D. SUMMARY OF STRATEGIES

STRATEGY OPTIONS TOWS IEM GSM TOTAL

A. INTEGRATION STRATEGIES
1. Forward Integration 1 1
2. Backward Integration 1 1
3. Horizontal Integration 1 1
B. INTENSIVE STRATEGIES
1. Market Penetration 1 1 1 3
2. Market Development 1 1 1 3
3. Product Development 1 1 1 3
C. DIVERSIFICATION STRATEGIES
1. Concentric Diversification 1 1
2. Conglomerate Diversification
3. Horizontal Diversification
D. DEFENSIVE STRATEGIES
1. Joint Venture
2. Retrenchment
3. Divestiture
4. Liquidation

ALTERNATIVE COURSES OF ACTION:

The proposed courses of action (ACA) were identified based on the Strategic Factor
Analysis, Competitive Profile Matrix, TOWS Matrix, Internal-External Matrix and further
validated through the evaluative dimensions of the Grand Strategy Matrix. The Strategic Factor
Analysis revealed that the company has utilized the opportunities and minimized the effects of
the threats from external factors while also maintaining its strong internal position by improving
their strengths and addressing their weaknesses. The Competitive Profile Matrix indicated that
FedEx ranks the lowest among the three companies being compared (FedEx, UPS, and USPS),
while USPS had received the highest rating. TOWS Matrix pointed out that intensive strategies
such as market penetration, market development, and product development are the keys to
maximizing the opportunities and strengths of the company while also dealing with the threats
and weaknesses that the company faces. The Internal-External Matrix revealed that FedEx opted
to implement a Hold and Maintain strategy which further substantiates the usage of intensive
strategies. Moreover, the analysis of the market growth and competitive position of the company
from the Grand Strategy Matrix indicated that the appropriate strategies that must be pursued by

22
the company fell under Quadrant I. These findings could be attributed to the 4% domestic and
20% international growth of the industry as well as the strong internal position and competitive
strength of the company. In totality, the Summary of Strategies Matrix confirmed that the most
feasible alternatives are Market Penetration, Market Development, and Product Development.
Therefore strategies Market Penetration, Market Development, and Product Development would
best address the major problem of the firm under study.

V. RECOMMENDED ALTERNATIVE AND ACTION PLAN

A. QUANTITATIVE STRATEGIC PLANNING MATRIX

Market
Market Dev’t Product Dev’t
Key Strategic Factor WEIGHT Penetration
RATING WT. S RATING WT. S RATING WT. S

OPPORTUNITIES:
1. Global Markets,
especially in Asia, are
0.29 2 0.58 3 0.87 4 1.16
growing exponentially
per year
2. Growing Popularity
0.17 2 0.34 2 0.34 4 0.68
of E-Commerce
3. Rise in Demand for
0.11 2 0.22 3 0.33 4 0.44
Air Cargo
4. Stable and Growing
0.04 3 0.12 4 0.16 4 0.16
US Economy
THREATS:
1. The European
Commission (EC)
expressing
apprehensions 0.19 1 0.19 3 0.57 4 0.76
regarding potential
competition
constraints
2. Emergence of
E-Commerce and its 0.10 1 0.10 2 0.20 4 0.40
effect on the industry

23
3. Rivals investing to
0.07 4 0.28 4 0.28 4 0.28
extend global presence
4. Emergence of
competitive
0.03 3 0.09 3 0.09 3 0.09
alternatives such as
ocean shipping
Sub-Total 1.00 - 1.92 - 2.84 - 3.97

STRENGTHS:
1. Global Presence
0.28 4 1.12 4 1.12 4 1.12
and Brand Reputation
2. Variety of Services 0.18 2 0.36 2 0.36 4 0.72
[Link]-by-produ
ct organizational 0.09 3 0.27 3 0.27 3 0.27
structure
4. Financial Strength 0.08 3 0.24 4 0.32 4 0.32

WEAKNESSES:
1. Underperforming in
terms of Market
Share, show lack of 0.20 4 0.80 3 0.60 3 0.60
Marketing from the
corporation
2. Risks in
maintaining large hub
0.10 3 0.30 2 0.20 3 0.30
structure and high
labor cost
3. Unsatisfactory
performance of
0.04 4 0.16 3 0.12 3 0.12
segments such as
SmartPost
4. High fuel
consumption, noise
0.03 2 0.06 4 0.12 2 0.06
pollution, and carbon
footprint
Sub-Total 1.00 - 3.31 - 3.11 - 3.51

OVERALL SCORE - - 5.23 - 5.95 - 7.48

24
The Quantitative Strategic Planning Matrix results indicated that ACA Product Development
obtained the highest overall score which means that this is the best alternative course of action
that could significantly address the identified major problem. Evaluation indicated that not only
would the Product Development strategy utilize the brand reputation and financial strength of the
company better than the other alternative courses of action, but it will also address some of the
growing trends and issues that the company has to take into consideration such as the growth of
E-Commerce, the lack of variety when it comes to the serves of FedEx, as well as the restrictions
being put into place by the European Commerce as the service to be implemented aims to cater
to international shipping rather than domestic shipping, thereby lessening the threat to domestic
competitions in Europe.

B. ACTION PLAN
BEST ACA: Product Development
BUDGET
FUNCTIONAL TIME
OBJECTIVE STRATEGIES Three Years
AREA FRAME
Total
Increase in
advertising
46,427.68
Promote the new million
Increase of Sales by
Marketing E-Commerce service 3 years
4%
Partnering with 4% Increase
Online Sellers/Drop
shippers
Reduced Inventory
55,137.94
Efficiency in due to Online
Production/ million
Inventory Sellers/Drop shippers 3 years
Operations
Management holding their own
4% Increase
inventory
1,575.38
Borrowing when
Finance Low financial cost 3 years
credit costs are low
46% Increase
Innovate new ideas 27,856.61
to surpass million
R&D competition in the Increase in R&D 3 years
E-Commerce
industry 4% Increase

25
 Implement
18,571.07
automation for
Economical and million
Information documents such as
Efficient Data 3 years
Systems shipping forms,
Transfer
invoices, and
4% Increase
purchase orders

VI. FINANCIAL PROJECTIONS

A. SALES FORECAST

YEAR SALES, USD MILLION GROWTH RATE

2014 $45,567 (47,453-45,567)/45,567 = 0.04
2015 $47,453
Ave. Growth Rate = 0.04
Forecast:
YEAR SALES, USD MILLION
2016 $47,453 x 1.04 = 49,351.12
2017 49,351.12 x 1.04 = 51,325.16
2018 51,325.16 x 1.04 = 53,378.17

B. INCOME STATEMENT FORECAST (in million USD)

FORECAST
ITEMS 2015 2016
BASIS
Sales (Revenues) $47,453.00 Computed 4% $49,351.12
Cost of Sales (Cost of
$16,984.00 CGS/Sales $17,663.36
Goods Sold)
Gross Profit (Gross
$30,469.00 $31,687.76
Contribution Margin)
Operating Expenses: $28,602.00 OE/Sales $29,746.08
Operating Income
$1,867.00 $1,941.68
(Income from Operations)

26
 Interest Expenses $235.00 Rate increase = 0.46 $343.10
Other Income/Expenses - $5.00 Same as 2015 -$5.00
Income Before Tax $1,627.00 $1,593.58
Average Tax Rate =
Tax $577.00 $573.69
0.36
Net Income $1,050.00 $1,019.89

Reference Value:
Interest Expense = US $25,069 for year 2014

Forecast for 3 years:

ITEMS 2016 2017 2018 TOTAL

Sales (Revenues) $49,351.12 $51,325.16 $53,378.17 $154,054.46

Cost of Sales (Cost of
$17,663.36 $18,369.89 $19,104.69 $55,137.94
Goods Sold)
Gross Profit (Gross
$31,687.76 $32,955.27 $34,273.48 $98,916.51
Contribution Margin)
Operating Expenses $29,746.08 $30,935.92 $32,173.36 $92,855.36
Operating Income
(Income from $1,941.68 $2,019.35 $2,100.12 $6,061.15
Operations)
Interest Expenses $343.10 $500.93 $731.35 $1,575.38

Other Income/Expenses -$5.00 - $5.00 - $5.00 - $15.00

Income Before Tax $1,593.58 $1,513.42 $1,363.77 $4,470.77

Tax $573.69 $544.83 $490.96 $1,609.48

Net Income $1,019.89 $968.59 $872.81 $2,861.29

27
 C. BALANCE SHEET FORECAST (in million USD)

FORECAST
ITEMS 2015 2016 2017 2018
BASIS

Cash $3,763.00 Computed 4% $3,913.52 $4,070.06 $4,232.86

Accounts Ratio of
5,719.00 5,947.76 6,185.67 6,433.10
Receivables Receivables/Sales
Ratio of
Inventory 498.00 517.92 538.64 560.18
Inventory/Sales
Other current No change over
961.00 961.00 961.00 961.00
assets 2015
TOTAL
CURRENT 10,941.00 11,340.20 11,755.37 12,187.14
ASSETS
No change until
2018; FedEx
PPE 20,875.00 receives aircraft 20,875.00 20,875.00 22,869.00
for the year worth
1,994 million
No change over
Goodwill 3,810 3,810.00 3,810.00 3,810.00
2015

Intangible Assets - - - -

No change over
Other Assets 1,443.00 1,443.00 1,443.00 1,443.00
2015

TOTAL ASSETS $37,069.00 $37,468.20 $37,883.37 $40,309.14

No change over
Current debt 9.00 9.00 9.00 9.00
2015
No change over
Accounts payable 5,948.00 5,948.00 5,948.00 5,948.00
2015
Total current
$5,957.00 $5,957.00 $5,957.00 $5,957.00
liabilities
No change until
Long-term debt 7,249.00 2018; FedEx
7,249.00 7,249.00 9,243.00
receives aircraft

28
 for the year worth
1,994 million
No change over
Deferred liabilities 2,639.00 2,639.00 2,639.00 2,639.00
2015
No change over
Other liabilities 6,231.00 6,231.00 6,231.00 6,231.00
2015
TOTAL
$22,076.00 $22,076.00 $22,076.00 $24,070.00
LIABILITIES
No change over
Common stock 32.00 32.00 32.00 32.00
2015
Adjusted based
Retained earnings 16,900.00 17,299.20 17,714.37 18,146.14
on Asset - Liability
No change over
Treasury stock -4,897.00 -4,897.00 -4,897.00 -4,897.00
2015
Paid in capital and No change over
2,958.00 2,958.00 2,958.00 2,958.00
other 2015

TOTAL EQUITY $14,993.00 $15,392.20 $15,807.37 $16,239.14

TOTAL
LIABILITIES & $37,069.00 $37,468.20 $37,883.37 $40,309.14
EQUITY

29