FEDEX COMPANY

PREPARED FOR: PhD Pham Quoc Khanh (lecturer)

PREPARED BY Do Viet Dung Casper ITP F04 037

SUBMISSION DATE: 8th January, 2013

TABLE OF CONTENTS

INTRODUCTION .......................................................................................................................... 3 LO3. UNDERSTAND APPROACHES TO STRATEGY EVALUATION AND SELECTION . 4 1. Analyze possible alternative strategies relating to substantive growth, limited, growth or retrenchment ................................................................................................................................ 4 a. b. c. 2. a. b. c. d. e. f. Five years objectives ........................................................................................................ 4 The stages for five years................................................................................................... 4 Alternatives for FedExs strategies .................................................................................. 5 An appropriate future strategy for FedEx ............................................................................ 8 Analysis of suitability....................................................................................................... 8 Analysis of feasibility....................................................................................................... 9 Analysis of stakeholders Acceptability........................................................................... 9 Analysis of risk............................................................................................................... 10 Score and ranking ........................................................................................................... 11 Selection and improvement ............................................................................................ 11

LO4. UNDERSTAND HOW TO IMPLEMENT A CHOSEN STRATEGY .............................. 12 3. a. b. 4. 5. a. b. Compare the roles and responsibilities for strategy implementation ................................. 12 Sub-objectives or targets ................................................................................................ 12 Activities to archive each target and department to carry out each activity .................. 12 Evaluate resources requirement to implement a new strategy for FedEx .......................... 15 Target and timescales for achievement in FedEx to monitor a given strategy .................. 18 Action plan for each department in line with objectives of different stages .................. 18 Measurement .................................................................................................................. 22

CONCLUSION ............................................................................................................................. 23 REFERENCES ............................................................................................................................. 23

INTRODUCTION This report is about the various approaches to strategy evaluation and selection which are applicable to FedEx Company. Firstly, the report will provide to FedEx possible alternatives for FedExs strategies which can be used to archive five year objectives of FedEx which are limited growth, substantive growth, and retrenchment growth strategy. After that, the report will evaluate these alternative strategies base on the analysis of suitability, feasibility, stakeholders acceptability, and risk. Thus, the report shows how to implement a chosen strategy through the roles and responsibilities for strategy, resources requirements and targets and timescales for achievement.

LO3.

UNDERSTAND

APPROACHES

TO

STRATEGY

EVALUATION

AND

SELECTION 1. Analyze possible alternative strategies relating to substantive growth, limited, growth or retrenchment a. Five years objectives The vision of FedEx Company is make it possible for people and business to connect and collaborate with each other, no matter where they in the world and FedExs mission is producing superior financial return for its shareowners through provide high value-added logistic, transportation and related business services by focused operating companies. In addition, FedEx also has to meet customer requirement based in the highest quality manner appropriate to each market segment served and FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Based on that, FedEx actually set up the objectives for the next 5 year which is expanding the business to the new markets and bring to customers perfect services to make FedExs express and transportation service is the first choice of customers based on that increase profit 18% at the end of 2017. The objectives of FedEx will be evaluated based on SMART technique Evaluation Specific YES Measurable YES Achievable YES Relevant YES Timetable YES

b. The stages for five years To make the effective of objectives is highest, FedEx actually divide the completed time objectives to three stages. The first stage is three years (2013 to 2015), in this time FedEx will increase its revenue by 10 percent annually based on the increase of sales and customers and the second stage (2016) will be for completing the growth of the market share in all the market by 8 percent. The last stages (2017) will be the time FedEx creates new alliances and services for new markets leads to the expansion of the business of FedEx.

c. Alternatives for FedExs strategies Limited growth Market penetration: The growth which based on the market penetration is not related to the business activities of the company in new market or creating new products/ services. It is a strategy in which the company can increase market share using current products or services (Clark, n.d.). For example with the case of FedEx Company, FedEx may provide lower price of services, good quality of service and also using the promotion in order to advertise the existing services. Thus, FedEx can improve the competitive ability to compete with competitors to attract new customers and also increase the use of current customers. Product development: By creating new products/ services to serve the same market the company can provide these new products/ services to existing customers and grow the business of the company without tapping new markets. With the case of FedEx, continuing the FedEx commitment to the pursuit and development of technologies, FedEx will strive to provide innovative solutions and services for customers (FedEx Coporation, n.d.). Based on that, FedEx will have the advantages in the competition with its competitor but it also make the competition is harder because it leads to the innovation of competitors. Market development: It involves introducing the company products/ services to new markets. For example, FedEx can enter a new country, a new city, and even targeting a market segment. Thus, FedEx could attract more new customers and make a good image in customers mind. But market development strategy will take higher cost and more time from FedEx. Substantive growth Substantive growth strategy includes four main types which are horizontal integration, vertical integration, related and unrelated diversification. Furthermore, substantive growth strategy is frequently implemented through acquisition, merger or joint venture rather than organic growth. (Thompson, 2001) Horizontal integration: it is a strategy in which the company can increase its market share by taking over a similar company in the market. Furthermore, this merger can be made in the same geography or probably in other countries to increase the number of customers (Anon., n.d.). For the case of FedEx, horizontal integration can help FedEx holds more
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market share and make more profit in the new markets even old markets. On the other hand, horizontal integration will be a good way for FedEx completes the objective of increasing 10% revenue annually from 2013 to 2015 and also increase the market share of all the markets (2016) while FedEx has more market share. Vertical integration: It is the process based on that the company can control some steps of the production or distribution of the product or service in order to increase the companys or entitys power in the market place (Anon., n.d.). For example, by using vertical integration FedEx can reduce the transportation cost by building a hub in the airport where the packages are sorted based on their destinations and after that the packages will stay at the hub until they are delivered by plane, improve supply chain coordination, or increase entry barriers to potential competitors. Related diversification: the company can develop the old product or service to new ones and there is a relationship between existing product/ service and new product/ service. Unrelated diversification: There is no discernible relationship between existing and new products, services and markets. The main advantage of unrelated diversification is make high financial benefits and profits from the new investment and for the case of FedEx; unrelated diversification can is the way for FedEx can get the third stage of objective (2017) which is creates new alliances and services for new markets leads to the expansion of the business of FedEx. Conclusion: Substantive growth strategy is a perfect strategy for FedEx because depend on it FedEx can complete all stages of five years objectives and the only work for FedEx is considering how to use unrelated diversification, horizontal integration and vertical integration in the highest effective way. Retrenchment strategies While corporate strategies prefer finding ways to expand business, they often face tough economic times and need a more conservative approach. The retrenchment strategy provides corporation a chance to regroup, preserving resources for the greater good and it includes divestment, bankruptcy, and liquidation. Honestly, the retrenchment strategy is not matched for FedEx Company in order to complete the five year objectives.

Alternative strategies for FedExs stages Alternative strategies Limited growth Stage 1 By using market penetration, FedEx can attract new customers and make the use of current customers increase so make the revenue of FedEx increase. By using market development, FedEx also could attract more new customers and make a good image in customers mind by introducing new services to new markets By using horizontal integration FedEx holds more market share and make more profit in the new markets even old market and vertical integration help FedEx reduces the cost Stage 2 Based on market penetration, the market share of FedEx will increase. Stage 3 Based on the product development, FedEx can create new alliances and services for new markets leads to the expansion of the business of FedEx.

Substantive growth strategy

FedEx should use horizontal integration because when FedEx merges with a local similar company of the foreign market; FedEx can take advantage of the reputation of this local company to increase the market share.

By using unrelated diversification FedEx will can make new product/ service or develop existing product/ service for new markets in order to expand its business

Figure 1: Alternative strategies for FedExs stages

2. An appropriate future strategy for FedEx a. Analysis of suitability Alternative strategies Limited growth Suitability To complete the first stage of five year objective from 2013 to 2015 and the second ones, FedEx can introduce the services to the new customers in new markets such as Vietnam, Lao, and other countries in South East Asia through market development in order to attract more potential customers. Furthermore, introducing its services should goes with the promotion FedEx will send a small gift for potential customers who usually purchase its services. On the other hand, FedEx will use competitive price in existing services to increase the use of current customers. But besides that, FedEx also should consider about the cost of strategy because market penetration will take lower cost and shorter time than market development. About the third stage (2017), product development is objectives of the third stage FedEx provide new services to customers but it is quite of expensive and take a long time to develop the services. Substantive growth In the first stage and second stage of FedEx, by merging similar local companies in the foreign markets FedEx can get the trust of customers of foreign countries and reduce the risk of loss from the different about traditional, culture, and even customers think from that there is more market share and more profit for FedEx. About the third stage of FedEx, there is more risk for FedEx when it joins in new fields through new service and new markets. Because of new service and new markets so there are not many customers know and trust the service of FedEx.

Figure 2: Analysis of suitability

b. Analysis of feasibility Alternative strategies Limited growth Feasibility Financial Management: it is easy for FedEx management to balance existing operations as well as managing expansion into new markets when FedEx uses limited growth because the financial and logistic challenges of rapid growth are usually too complicated for even skilled managers to handle in the effective way. (Richards, n.d.) Human resources: FedEx does its business through more than 200,000 staffs that have good skills and professional behavior so it leads to FedEx can make a good image in customers mind. Furthermore, it is easy for FedEx completes promotion works and develop services based on its staffs. Substantive growth External relation and partnerships: based on the good external relationship and the correlation relationship with partners, it is easier for FedEx merges other companies. Technologies: By improving the technologies innovation, FedEx also can create new services for new markets. Figure 3: Analysis of feasibility c. Analysis of stakeholders Acceptability Alternative strategies Limited growth Stakeholders Acceptability If FedEx Company uses limited growth strategy, FedEx can avoid the massive debt that often accompany rapid growth strategy furthermore, this debt will be very costly especially when FedExs sales are not high as expected. Thus, banks are interested with the financial situation of FedEx so FedEx can get the support from banks. When FedEx introduces the services to the new customers in new markets and gives them the competitive prices so FedEx could get the trust of customers and they will accept the brand of FedEx.

Substantive growth

By improving the technologies innovation, FedEx can create new services in better way so FedEx will create good image in customers mind. Furthermore, the greatest advantage of substantive growth strategy is the fact that it will lead to more growth in the future and wealth tends to growth exponentially. Thus, FedEx will have high return on investment and strong financial position. Through the achievement of substantive growth, FedEx not only bring benefit to its owner and employees but also increasing the wealth of society at large. Thus, FedEx will get the loyalty of its employees and the support from the government. Figure 4: Analysis of stakeholders acceptability

d. Analysis of risk Alternative strategies Limited growth Potential risk Economic risk: When using limited growth strategy, the competitors of FedEx may be able to take market share by adopting their own rapid growth strategies. FedEx will have to face the competitive challenges from its competitor to maintain and increase its market shares. Financial risk: in general way most of investors and shareholders are primarily interested in a limited duration for their investment no more than few years. They want to take the profit from their investment so the manager of FedEx who use the limited growth strategy could face the substantial pressure from them to grow FedEx quickly. Substantive growth Risk from the different of culture, traditional and economic situation in foreign markets: when FedEx joins in the new markets FedEx may have some problems from economic situation such as inflation rate or interest rate even the decision of

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customers based on their culture and traditional. Political risk: FedEx has to consider about the rules which was made by the government for example tax rules. Figure 5: Analysis of risk e. Score and ranking Alternative strategies Limited growth Substantive growth Scores (1 10) Suitability Feasibility Acceptability 9 9 9 8 8 9 Figure 6: Score and ranking Risks 8 6 Total 35 33

f. Selection and improvement According to the score and ranking, it is easy to see that the limited growth strategy is better than substantive growth strategies for FedEx Company. But FedEx also use the substantive growth strategy in some special situations because it can bring exponentially profits for FedEx. Furthermore, when FedEx wants to join in the new markets in order to approach new potential customers FedEx needs to merge or take over a local company to take advantage of the branch of the local company in order to build its good image in customers mind. On the hand, the substantive growth strategy also helps FedEx controls some part of production or distribution in order to reduce the cost.

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LO4. UNDERSTAND HOW TO IMPLEMENT A CHOSEN STRATEGY 3. Compare the roles and responsibilities for strategy implementation a. Sub-objectives or targets Stage 1: Increase the revenue by 10 percent annually from 2013 to 2015 Maintain the existing customers and increase the number of new potential customers Increasing the frequency of transactions per customer and make each of customers use services more Stage 2: Increase 8 percent of market share in all the market in the year 2016 Increase the market share in potential foreign markets such as Vietnam Improve the competitive ability of FedEx to compete with other competitor Stage 3: Crease new alliances and services for new markets in the year 2017 Invest more money in the process of improving technology innovation Improve the quality of FedExs employees. b. Activities to archive each target and department to carry out each activity

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Objectives Increase the revenue by 10 percent annually from 2013 to 2015

Sub-Objectives

Activities to archive the objectives

Department to carry out the activities

Maintain the existing Producing good services after sales for Customer Support Department: in customers and increase customer and provide discount price, which the number of everything that related to new gift to potential customers and old customers service will be solved. They customers to increase the loyal of will ensure that customers always satisfy customers. per about FedExs services with FedExs service. through staffs of FedEx will create and complete

potential customers

Increasing the frequency Using promotion activities to introduce Marketing Department: in which the of transactions

customer and make each newspapers, magazines, the internet the projects that will be used for of customers use and television in order to make more introduce, advertise, and promote the new customers know about the service services of FedEx of FedEx to customers.

services more

Furthermore, marketing department will ensure that FedEx has good reputation in customers mind.

Increase 8 percent of market share in all the market in the year 2016

Increase share

the in

market Making the new projects that will help Business Planning Department: they potential FedEx runs its business in new markets will have the responsibility to analyze the

foreign markets such as in which there is only few or no research, cost and implication of an Vietnam competition from other companies for investment from that make detailed market share. projects which helps FedEx can enter the new markets. Improve the competitive FedEx needs to advertise to customers Marketing Department:
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ability compete

of

FedEx with

to the information about services of

other FedEx through the internet, television, newspapers, and magazines to improve the competitive of FedEx. Thus, FedEx will have the advantage is the

competitor

competition for market share with other competitors. Crease new alliances and services for new markets in the year 2017 Improve the quality of FedEx has to train its staffs to become Training Department: In which staffs FedExs employees people who have good skills and of FedEx will be trained to become most professional behavior after that FedEx skilled staffs and have professional will divide them into development behavior these staffs can contribute new teams in order to research for creating ideas for creating new alliances and new alliances and services services. Invest more money in By improving the technology Development Department: They have

the process of improving innovation, it is easier for FedEx to missions to improve the technologies technology innovation. create new services for new markets. through innovation in order to meet the requirement of customers.

Figure 7: Activities to archive each target and Department to carry out each activity

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4. Evaluate resources requirement to implement a new strategy for FedEx

Sub-Objective Maintain the

Key activities to archive the objectives

Resources for each activity

existing Producing good services after sales for Financial resources: FedEx will make an account

customers and increase customer and provide discount price, gift to in which the amount of money will be used for the number of new potential customers and old customers to show the grateful of FedEx to potential customers and old customers through gifts or discount prices of services. FedEx should invest in this account about 15 percent of the annual revenue for each Increasing the frequency Using promotion activities to introduce about year; for example, the revenue of 2012 was $42 of transactions per FedExs services through newspapers, billion so the money FedEx should use for the account is about $ 6.3 billion. It is not a big number but it is necessary for show the grateful of FedEx to potential customers. Besides that, FedEx also should spend about $ 9billion to promotion activities in the entire world. Human resources: Furthermore, FedEx will have to ensure the staffs in customer support department and marketing department are enough in order to support customers in the effective and fast way. FedEx also needs to contract with newspapers, magazines and television for promotion activities.
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potential

customers. increase the loyal of customers.

customer and make each magazines, the internet and television of customers use

services more

To ensure this thing, FedEx should divide the staffs in 2 departments in to small groups and each of small group will undertake one step of works. For example, FedEx will divide customer support department into 3 groups and marketing department into 4 groups. Increase the market Making the new projects that will help FedEx FedEx will have to ensure about the quality of staffs in business planning department, they actually must be most skilled people and have professional behavior. (Human resources). FedEx should make a team includes examiners based on them FedEx can choose and hire good staffs. Improve the competitive Advertising to customers the information about FedEx also needs to contract with newspapers, ability compete competitor of FedEx with to services of FedEx through the internet, magazines and television for promotion activities

share in potential foreign runs its business in new markets markets such as Vietnam

other television, newspapers, and magazines to based the human resources from marketing improve the competitive of FedEx so FedEx department will have the advantage is the competition for market share with other competitors

Invest more money in Improving the technology innovation, it is Financial resources and human resources: FedEx the process of improving easier for FedEx to create new services for has to have strong financial and a good department technology innovation. new markets. for training employees to maintain the process of

Improve the quality of FedEx has to train its staffs to become people improving the technology innovation and after that
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FedExs employees

who have good skills and professional create new services for new markets. FedEx should behavior after that FedEx will divide them into invest about $4 billion for the process of improving development teams in order to research for the technology innovation. creating new alliances and services

Figure 8: Resources for each activities

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5. Target and timescales for achievement in FedEx to monitor a given strategy a. Action plan for each department in line with objectives of different stages Strategy stage 1 Department: Marketing, Customer Support Objective Main activities Target Time

Maintain the existing The staff of Customer Support Department Increasing the loyal of customers and 3 customers and increase will be divided into 2 main groups. the number of receive customers requirement or complain directly face to face in service center of FedEx. Group 2: They have to answer customers questions through telephone center or the official website of FedEx Group 3: they have mission to communicate with potential or old customers about the gift or discount prices policy for them. built good reputation of FedEx in years new Group 1: They will have responsibilities to customers mind.

potential customers.

Increasing the frequency The Staff of Marketing Development will be To make more new customers know 2 first of transactions per divided into 4 groups about the service of FedEx it leads to years

customer and make each Group 1: they are people who give the ideas the number of customers and also the of customers use about marketing campaigns and after that they growth of profit will make these campaigns are detailed.
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services more

Group 2: They have responsibility that is contacting directly to television, newspaper, and magazines and after that make the contract. Group 3: they are people who determine the target market which the promotion activities aim to. Group 4: They will hand the problems which related to the financial of promotion activities to ensure that the money invested into promotion activities will be matched with the financial situation of FedEx Company. Figure 9: Strategy stage 1 Strategy stage 2 Department: Marketing, Business Planning Objective Increase share the in Main activities Target Time

market FedEx will make a team which includes skilled Joining in the new markets in the easy 4 potential examiner who have experience in order to help way to increase the market share. months

foreign markets such as FedEx can hire good skilled and professional Vietnam behavior staffs who can work in Business Planning Department to make new projects

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that help FedEx joined in effectively new markets. Furthermore, FedEx divides Business Planning Department into 2 teams. Team 1: they will make research about potential market through understanding about the customers think, traditional. Team 2: they will evaluate the success ability of project when it enters one new market, if the success ability is high, FedEx will carry out this project. their culture and

Improve the competitive Using ability compete competitor of FedEx with

same

activities

with

marketing

Improving the competitive of FedEx. 6 Thus, FedEx will have the advantage is months the competition for market share with other competitors.

to department in strategy stage 1

other

Figure 10: Strategy stage 2

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Strategy stage 3 Department: Training, and Development Objective Main activities Target Time

Invest more money in FedEx should invest about $4 billion for the Make the process of creating new 1 years the process of improving process technology innovation. of improving the technology services easier based on the support of technology innovation

innovation.

Improve the quality of Create short-term and long-term training FedEx FedExs employees

will

divide

them

into 8

courses in which employees will be completed development teams in order to research months their skills. for creating new alliances and services

In these training courses, FedEx still pay To support the process of creating new salaries for them to motivate them train harder alliances and services

Figure 11: Strategy stage 3

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b. Measurement Firstly, in order to evaluate the success of five years objectives FedEx need measure the effectiveness of the activities and the sub-objective which will be done by departments. To measure the effectiveness of activities FedEx should consider about the activities are completed at the deadline time or not and consider about how each department completed sub-objectives. Thus, FedEx can complete the five years objectives only after when it completes the departments objective. The measurement will be carried out based the differences between real achievements and expected achievements such as in number of customers, sales and market shares. Firstly, to know about FedEx achieves the objective of stage 1 or not, they have to know the difference of the numbers of customers of previous years and the frequency of transactions per customer through each of years. This difference will show the effectiveness of departments such as customer support department and marketing department in attracting new customers and maintaining current customers. At the end of each year, the financial department of FedEx Company will count the sales of the FedEx and if the sales increase it leads to the increase of revenue and it also means that the objectives of marketing department, customer support department were archived. The market share of FedEx will be measured based on the

increase of revenue, if the revenue increases it means that the market share increase and the objective of business planning department was archived.

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CONCLUSION This report is supported by the information which is from the internet, magazine and the course book BPP Business Strategy. Based on that, FedEx will have good evaluation about the alternative strategies and FedEx can choose one of these strategies for implementation.

REFERENCES Anon., n.d. What is Vertical and Horizontal integration?. [Online] Available at: http://bizdharma.com/blog/what-is-vertical-and-horizontal-integration/ Clark, W., n.d. Growth Strategies. [Online] Available at: http://www.ehow.com/info_7748386_growth-strategies.html FedEx Coporation, n.d. FedEx Innovation. [Online] Available at: http://about.van.fedex.com/fedex-innovation Lynch, W., n.d. What Is "Corporate Retrenchment Strategy"?. [Online] Available at: http://www.ehow.com/info_7890404_corporate-retrenchment-strategy.html Richards, L., n.d. Advantages & Disadvantages of Limited Growth Strategies. [Online] Available at: http://www.ehow.com/info_8532268_advantages-disadvantages-limited-growthstrategies.html Sherman, F., n.d. Advantages & Disadvantages of Limited Growth Strategies. [Online] Available at: http://smallbusiness.chron.com/advantages-disadvantages-limited-growthstrategies-41321.html Thompson, J. L., 2001. Understand Corporate Strategy. s.l.:s.n. BPP, Business strategy course book 2012

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