FedEx (FDX) SWOT Analysis / TOWS Matrix / MBA Resources
Air Courier
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for FedEx (Germany)
Based on various researches at Oak Spring University , FedEx is operating in a macro-environment that has been destablized by – geopolitical disruptions, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs,
increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, 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 Germany
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 -
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.
Innovation driven organization
– FedEx is one of the most innovative firm in Air Courier sector.
Organizational Resilience of FedEx
– The covid-19 pandemic has put organizational resilience at the centre of everthing FedEx does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Air Courier
– FedEx is one of the leading players in the Air Courier industry in Germany. Over the years it has not only transformed the business landscape in the Air Courier industry in Germany 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.
Diverse revenue streams
– FedEx is present in almost all the verticals within the Air Courier industry. This has provided FedEx a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
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.
High switching costs
– The high switching costs that FedEx has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Effective Research and Development (R&D)
– FedEx has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – FedEx staying ahead in the Air Courier industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of FedEx in Air Courier industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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 Germany 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.
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.
Weaknesses of FedEx | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of FedEx are -
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.
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.
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.
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 bargaining power of channel partners in Air Courier industry
– because of the regulatory requirements in Germany, FedEx is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Air Courier industry.
Capital Spending Reduction
– Even during the low interest decade, FedEx has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Air Courier industry using digital technology.
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.
Skills based hiring in Air Courier industry
– The stress on hiring functional specialists at FedEx has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High operating costs
– Compare to the competitors, FedEx has high operating costs in the Air Courier industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract FedEx lucrative customers.
Low market penetration in new markets
– Outside its home market of Germany, FedEx needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 -
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.
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.
Creating value in data economy
– The success of analytics program of FedEx has opened avenues for new revenue streams for the organization in Air Courier industry. This can help FedEx to build a more holistic ecosystem for FedEx products in the Air Courier industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help FedEx to increase its market reach. FedEx will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
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.
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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Air Courier industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. FedEx can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. FedEx can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
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.
Building a culture of innovation
– managers at FedEx can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Air Courier industry.
Threats FedEx External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of FedEx are -
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.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of FedEx.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Air Courier industry are lowering. It can presents FedEx with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Air Courier sector.
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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, FedEx can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate FedEx prominent markets.
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.
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.
High dependence on third party suppliers
– FedEx high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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.
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.