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Mitchell Vogel

on 10 April 2013

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By: Valmik Karam, R Vogel, Todd Weaver, Shanshan Li BUS 136; Professor Stauble
Global Case Study Introduction Frederick W. Smith founded FedEx in June 18, 1971 with the goals of competing collectively, operating independently, and manage collaboratively.
FedEx(FDX) is a publicly traded company that is traded on the New York Stock Exchange and under the S&P 500. Brief History 1973 1979 •After two years of lobbying led by Federal Express, Congress passes Public Law 95-163 enabling FedEx and other cargo airlines to use larger aircraft with no geographic restrictions on routes.
•Federal Express purchases seven Boeing 727 aircraft, each with a cargo capacity of 40,000 pounds — almost seven times that of the Dassault Falcon. •Federal Express launches COSMOS (Customers, Operations and Services Master Online System), a centralized computer system to manage people, packages, vehicles and weather scenarios in real time. 1977 •Federal Express becomes the first U.S.company to reach revenues of $1 billion without merger or acquisition. 1983 •Federal Express becomes the first company to win the Malcolm Baldrige National Quality Award in the service category. 1990 •FedEx Corp. acquires the Polish courier company Opek Sp.z o.o. (Opek) for $54 million. This acquisition gives its FedEx Express business unit access to a nationwide domestic ground network with an estimated $70 million in annual revenue and 12.5 million shipments annually.
•FedEx Corp. acquires TATEX, a leading French business-to-business express transportation company, for $55 million. This acquisition gives its FedEx Express business unit access to a nationwide domestic ground network which carries 19 million shipments and produces approximately €150 million in revenues annually.
•FedEx Corp. acquires Rapidão Cometa, one of the largest transportation and logistics companies in Brazil, for $398 million. This acquisition brings more than $500 million of annual revenue, and is the latest step in the company’s strategy for profitable growth in FedEx Express's Latin American and Caribbean (LAC) region. 2012 Federal Express relocates operations to Memphis,Tenn.
On the first night of continuous operation, 389 Federal Express employees and 14 Dassault Falcon jets deliver 186 packages overnight to 25 U.S. cities — and the modern air/ground express industry is born.
In this, Overnight shipping was born Marketing Strategies Brand Management FedEx in Sports Marketing Mix Price Product Promotion Place Simple: easy for the customer to access/use
reliable: consistently ranked one of the most trustworthy brands NBA: they endorse "FedEx Global Leaders," Steve Nash, Tony Parker, Manu Ginobli, Luol Deng, and players in the past like Peja Stojakovic, and other international Stars. FedEx is a global leader in assists.
Promotion on NBA TV and NBA.com
NFL: advertising during NFL events while sponsoring many NFL players
FedEx Open (Golf), FedEx Racing (Nascar), FedEx Heritage(High School), FedEx Orange Bowl (NCAA), FedEx Fourm (Memphis, Tennesse), FedEx Field (Landover, Maryland) offers discount program on FedEx grounds specifically
Offers online price estimates has the second largest civil fleet in the world
they offer ground services
home delivery
network provides customs and insurance
provides a toll Free Number Runs print media throughout the year
Spend heavy amounts on commercial adds (Quality adds) Mainly located in the united states and Canada
Reaches many destination with its Air fleet Strategy for international Expansion Related Diversification Strategy FedEx Corporation FedEx Trade Networks:
FedEx Trade Networks is the global freight-forwarding arm of FedEx and is the largest-volume customs entry filer in North America.
In 2002, TowerGroup, a leader in the business of international logistics and trade information technology was re-branded as FedEx Trade Networks Transport & Brokerage, Inc. In 2008, the company began an aggressive global expansion opening offices around the globe. {access to 91% of the world’s GDP}
FedEx Trade Networks Trade Services, Inc., was also formed in 2002. This division incorporates the duty and tax data services of WorldTariff® with Trade & Customs Advisory Services (TCAS), which is designed to streamline, automate, and simplify the international shipping process for customers, as well as provide comprehensive trade information. TowerGroup became the foundation of a new FedEx Corp. subsidiary, FedEx Trade Networks, which in turn acquired WorldTariff, a customs duty and tax information company, a month later. FedEx Supply Chain:
Leverages the strength of the entire FedEx portfolio of companies provides solutions for its customers' most critical supply chain needs; from spare parts to emergency deliveries to the integration of returns into the product life cycle. FedEx Custom Critical:
In 1947, FedEx Custom Critical was founded as a pickup-and-delivery trucking company called Roberts Cartage and became the visionary of the industry. It became the first carrier to focus solely on customized surface expediting.This new market niche provided exclusive-use, non-stop service that matched vehicle size to the customer's shipment, moving faster and at a lower cost than airfreight. FedEx Services coordinates sales, marketing, information technology, customer service, and worldwide supply chain services support for the global FedEx brand. This includes the data management and networking expertise behind the package tracking capabilities for FedEx Express, FedEx Ground and FedEx Freight, along with e-commerce services, customer contact services, and other functions of the corporation’s professional services company. FedEx TechConnect:
Was established in 2006 as a subsidiary of FedEx Corporate Services, Inc., to align customer contact centers, worldwide revenue operations, claims, trace and package engineering within FedEx’s professional services company. Kinko's customer base had continued to evolve and now included mobile professionals and commercial print buyers. The company realized it could not service the needs of these customers or make a meaningful connection using a one-size-fits-all approach. In addition, Kinko's had to find a way to better manage orders and workflow across its network. FedEx acquired Kinko's in February 2004. Two months later, Kinko's was re-branded as FedEx Kinko's Office and Print Services. FedEx Ground:
For Fed Express Ground, it is for the delivery in America and it use railway and car to ship the goods which in September 2002, the Home Delivery completed its expansion and now available nationwide, serving virtually every US address. FedEx Freight is a leading U.S. provider of less-than-truckload (LTL) freight services. FedEx Freight is known for exceptional service, reliability and on-time performance.For large-volume shipments, allows for shipments greater than 4,000 lbs and using 10 feet of trailer space, up to a full (28-foot) trailer. Today, FedEx Freight is an LTL shipping industry leader that serves the U.S., Canada, Mexico, Puerto Rico and the U.S. Virgin Islands. Rising Costs and Suggestions Conclusion Work Cited FedEx is Big in sports and Sponsors a wide array FedEx Service: A company that revolutionized global business practices and now defines speed and reliability. The company was incorporated in June 1971 and officially began operations on April 17, 1973, with the launch of 14 small aircraft from Memphis International Airport. FedEx Express: FedEx Freight: Diversification at it's Finest FedEx Office and Print Services: "When it Absolutely, Positively has to be there overnight" – 1978–1983 "It's not Just a Package, It's Your Business" – 1987–1988 "Our Most Important Package is Yours" – 1991–1994 "Absolutely, Positively Anytime" – 1995 "The Way the World Works," 1996–1998 "Be Absolutely Sure," 1998–2000 SWOT Analysis of Current Situation Weaknesses Strengths Opportunities Threats Relative Small Size: Compared to UPS, FedEx is considered a rather small company, and in an industry in which consumers have to put their trust in a company to get their product to a place on time, consumers often turn to the largest company with the best reputation.

Margins: FedEx’s net profit margin is only 4.76%, leaving little room for the company to swallow rising input costs.

Declining Cash Flow per Share: In 2012, the company possessed $17.00 of cash flow per share, however in 2013 the average analysts estimates show the cash flow per share only reaching $14.60, representing a 14.12% year over year decline. Competition: The shipping industry is a highly competitive landscape which has several massive companies operating in it, and the competition to offer the best quality for the lowest price leads to margin contraction.

Uncertainty of Oil Prices: FedEx’s average cost per gallon of jet fuel or oil has more than doubled over the past five years, and according to the wide majority of analysts, oil and jet fuel prices are only set to rise further into the future, squeezing FedEx’s margins as they face the decision of swallowing the pain or passing it onto their customers.

Weather Uncertainty: Like we have seen most recently with Hurricane Sandy, natural disasters can bring business to a complete stand-still, leaving FedEx with no capabilities to fly their planes and get their packages to the right place at the right time. Revenue Growth: In 2008, FedEx reported revenue of $38 billion; in 2012 the company reported revenue of $42.7 billion, representing a year over year annual growth rate of 2.96%, and while this may not seem like an explosive number, the caliber of growth is solid and expected to accelerate into the future, with 2015 revenues reaching nearly $49 billion.

Established Distribution System: The company possesses a massive fleet of airplanes, trucks, locations, and employees, and is distinctly established and has the capability of transporting thousands of packages every day.

Institutional Vote of Confidence: 78% of shares outstanding are held by institutional investors, displaying the huge amount of confidence long-term and big-money investors have in the company and its future.

Money on the Balance Sheets: The company currently has $1.176 billion in cash or cash equivalents on its balance sheet, a large cushion for times of economic downfall. Acquisitions: During the 2012 year FedEx has acquired Rapidao Cometa, Opek Sp., and TATEX; and further acquisitions are a strong possibility into the future, as FedEx has the capability and money to do so.
Holiday Season: A large portion of FedEx’s business is derived from the holiday season rush, and it is crucial that they execute perfectly to take full advantage of this opportunity, as they are expecting an 13% increase in shipments, and have prepared by hiring their usual wave of seasonal workers.

Gaining Market Share: There is fierce competition in the shipping industry, especially around the holiday season, and FedEx has been running a fierce marketing campaign recently to try to capture crucial market share, which would significantly help business. Government Regulation Problems: Results Solution After 9/11, the US government has been regulating Air shipment more and more Every new country has a different set of regulations. Because of new Regulation in the USA, FedEx has a higher domestic cost Non homogeneous regulation between countries makes every expansion extremely costly due to problems in setting up individual hub-and-spoke distribution. Decrease cost fixed operation costs for domestic transportation Find partners in new country to set up new hub-spoke transportation systems overseas. Cost of Resources Result Problem Solution Rising Fuel Costs High cost to train employees high equipment procurement cost Rising fuel costs increase variable costs, making package transport more costly with every increase in fuel price training employees consumes 3% of revenue, and takes 3 to 4 weeks where the trainee is not earning revenue for the company
FedEx has the most expensive fleet of any package delivery company because it buys the most expensive highest quality equipment. create more efficient routs, and buy more efficient vehicles
create a partnership program for training new employees
standardize fleet size which will decrease maintenance cost. Change in Market Result Problem Solution More people are opting for slower packages Slower packages are cheaper. Because FedEx has such a high cost structure, people opting for slower packages for cheaper means FedEx spends has less profit per package shrink fleet of high cost Airplane transport and reserve air shipments for only high paying customers such as one day delivery, or premium transport "WeLiveToDeliver" 2009–present "This is a Job for FedEx," 2001–2002 "Brown Bailout" 2009–present "The World On Time" 2009–present •Highest cost structure of its major rivals
o Losses Internationally

•FedEx’s potential gains at least in the short term are focused around market share, not in increasing its profit margins.
o High cost structures incurred to stick with business principle

•Concentrating on developing alliances with carriers in place for homogeneous markets
o Competitors such as, UPS, DHL International and Airborne, have established their own network of alliances

Most Recent Expansion In China

•FedEx expanded aggressively in CH. FedEx opened a new $150 million Asia-Pacific hub in Guangzhou, the heart of the Pearl River Delta, where more than 40% of China's exports are generated. With this FedEx have many distinct advantages over the competition in China. The biggest being FedEx has 30 weekly US to China air frequencies, more frequencies than any other US cargo carrier, and the new hub centrally located will aid in efficiency and reliability. No change in Marketing Domestically
Continued Expansion
Acquisitions Increased Market Share
Followed by Profits Thank You!!!!! "Regional Facts | About FedEx." About FedEx. N.p., n.d. Web. 4 Mar. 2013.

"History of FedEx Operating Companies | About FedEx." About FedEx. N.p., n.d. Web. 4 Mar. 2013.

Stauble, Vernon R. Marketing Principles and Practices: An Introductory Approach. [Ojai, Calif.]: Novus Pub., 2007. Print

"FedEx Execs Discuss Aggressive Expansion Strategy in China." - Seeking Alpha. N.p., n.d. Web. 04 Mar. 2013.

"FedEx Trade Networks Continues Global Expansion." FedEx Trade Networks Continues Global Expansion. N.p., n.d. Web. 04 Mar. 2013.

Schlangenstein, mary. "FedEx Falls After Lowering 2013 Forcast Amid Asia Cuts." Bloomberg Businessweek News From Bloomber. www.businessweek.com/news/2013-03-20/fedex-cuts-2013-forecast-on-shift-to-cheaper-shipments (accessed April 7, 2013).

Elliott, Stuart. "ADVERTISING; Delivered Just in Time for Kickoff." The New York Times. The New York Times, 08 Sept. 2011. Web. 1 Apr. 2013.

"BusinessVoice." FedEx's Marketing Nightmare. N.p., n.d. Web. 01 Apr. 2013.

"Chairman’s Letter." FedEx Annual Report 2012. N.p., n.d. Web. 01 Apr. 2013. FORTUNE “World’s Most Admired Companies” – 2010 #13, 2009 #7, 2008- #6, 2007- #7, 2006- #4 Business Week “50 Best Performers” – 2006 Financial Times “UK 50 Best Workplaces” – 2007- #31 InfoWorld “100 Most Innovative Corporate IT Solutions” – 2007 FedEx won the Customer Services of the Year Award 2011 in the ‘Parcel and Deliveries’ category. - 2011
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