FedEx (FDX) SWOT Analysis / TOWS Matrix / MBA Resources
Air Courier
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for FedEx (United States)
Based on various researches at Oak Spring University , FedEx is operating in a macro-environment that has been destablized by – increasing commodity prices, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing government debt because of Covid-19 spendings, technology disruption, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google,
wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that FedEx can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the FedEx, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which FedEx operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of FedEx can be done for the following purposes –
1. Strategic planning of FedEx
2. Improving business portfolio management of FedEx
3. Assessing feasibility of the new initiative in United States
4. Making a Air Courier sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of FedEx
Strengths of FedEx | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of FedEx are -
Innovation driven organization
– FedEx is one of the most innovative firm in Air Courier sector.
Operational resilience
– The operational resilience strategy of FedEx comprises – understanding the underlying the factors in the Air Courier industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Air Courier industry
– FedEx has clearly differentiated products in the market place. This has enabled FedEx to fetch slight price premium compare to the competitors in the Air Courier industry. The sustainable margins have also helped FedEx to invest into research and development (R&D) and innovation.
Learning organization
- FedEx is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at FedEx is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at FedEx emphasize – knowledge, initiative, and innovation.
High brand equity
– FedEx has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled FedEx to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– FedEx is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Air Courier industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Strong track record of project management in the Air Courier industry
– FedEx is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Air Courier
– FedEx is one of the leading players in the Air Courier industry in United States. Over the years it has not only transformed the business landscape in the Air Courier industry in United States but also across the existing markets. The ability to lead change has enabled FedEx in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– FedEx has one of the best training and development program in Transportation industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Cross disciplinary teams
– Horizontal connected teams at the FedEx are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Highly skilled collaborators
– FedEx has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Air Courier industry. Secondly the value chain collaborators of FedEx have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of FedEx in the Transportation sector have low bargaining power. FedEx has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps FedEx to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of FedEx | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of FedEx are -
Compensation and incentives
– The revenue per employee of FedEx is just above the Air Courier industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on FedEx ‘s star products
– The top 2 products and services of FedEx still accounts for major business revenue. This dependence on star products in Air Courier industry has resulted into insufficient focus on developing new products, even though FedEx has relatively successful track record of launching new products.
Lack of clear differentiation of FedEx products
– To increase the profitability and margins on the products, FedEx needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, FedEx has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Air Courier industry over the last five years. FedEx even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
No frontier risks strategy
– From the 10K / annual statement of FedEx, it seems that company is thinking out the frontier risks that can impact Air Courier industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to strategic competitive environment developments
– As FedEx is one of the leading players in the Air Courier industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Air Courier industry in last five years.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, FedEx is slow explore the new channels of communication. These new channels of communication can help FedEx to provide better information regarding Air Courier products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, FedEx has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
FedEx has a high cash cycle compare to other players in the Air Courier industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of FedEx supply chain. Even after few cautionary changes, FedEx is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left FedEx vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though FedEx has some of the most successful models in the Air Courier industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. FedEx should strive to include more intangible value offerings along with its core products and services.
FedEx Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of FedEx are -
Developing new processes and practices
– FedEx can develop new processes and procedures in Air Courier industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, FedEx can use these opportunities to build new business models that can help the communities that FedEx operates in. Secondly it can use opportunities from government spending in Air Courier sector.
Learning at scale
– Online learning technologies has now opened space for FedEx to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects FedEx can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help FedEx to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Lowering marketing communication costs
– 5G expansion will open new opportunities for FedEx in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Air Courier industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– FedEx can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, FedEx can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help FedEx to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Air Courier industry, but it has also influenced the consumer preferences. FedEx can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– FedEx has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Air Courier sector. This continuous investment in analytics has enabled FedEx to build a competitive advantage using analytics. The analytics driven competitive advantage can help FedEx to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– FedEx can improve the customer journey of consumers in the Air Courier industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. FedEx can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, FedEx is facing challenges because of the dominance of functional experts in the organization. FedEx can utilize new technology in the field of Air Courier industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats FedEx External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of FedEx are -
Environmental challenges
– FedEx needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. FedEx can take advantage of this fund but it will also bring new competitors in the Air Courier industry.
Shortening product life cycle
– it is one of the major threat that FedEx is facing in Air Courier sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for FedEx in the Air Courier sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, FedEx may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Air Courier sector.
Easy access to finance
– Easy access to finance in Air Courier industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. FedEx can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on FedEx demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Air Courier industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for FedEx in Air Courier industry. The Air Courier industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– FedEx has witnessed rapid integration of technology during Covid-19 in the Air Courier industry. As one of the leading players in the industry, FedEx needs to keep up with the evolution of technology in the Air Courier sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Stagnating economy with rate increase
– FedEx can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Air Courier industry.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. FedEx needs to understand the core reasons impacting the Air Courier industry. This will help it in building a better workplace.
Increasing wage structure of FedEx
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of FedEx.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of FedEx business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– FedEx needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Air Courier industry regulations.
Weighted SWOT Analysis of FedEx Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at FedEx needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of FedEx is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of FedEx is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of FedEx to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that FedEx needs to make to build a sustainable competitive advantage.
