Home » FedEx SWOT Analysis for 2021: 25 Major Strengths and Weaknesses

FedEx SWOT Analysis for 2021: 25 Major Strengths and Weaknesses

FedEx is a global logistics and courier company founded in Memphis, Tennessee, by US Marine Pilot Frederick W. Smith in 1971. From its beginnings as an air cargo carrier, today, the company is one of the most recognizable brands in the world, with truly global coverage.

In this article, we dissect the main internal strengths and weaknesses of the logistics company, as well as the external opportunities and threats that the group is exposed to.

Strengths

1. The FedEx brand is one of the most reputable in the world.
With an operational background going back to 1971, FedEx has become synonymous with the global logistics industry. The company is touted as inventing many of the industry standards that are deployed today.

These inventions have rewritten the way modern logistics companies run their day-to-day operations. A key invention is the use of tracking codes for clients to track their parcels across the world. These innovations and efficiencies have placed FedEx among some of the most trustworthy brands in the world.

FedEx earned its place as the 14th most admired company, according to a survey compiled by Forbes Magazine. (FedEx)

2. Its strong market share offers a competitive advantage.
Leveraging its first-mover advantage in many segments, FedEx maintains a healthy market share in many of the industries in which it operates. This is especially impressive when we consider that the company started as an air carrier in 1971.

It now operates across many spheres and offers complete supply and logistics solutions, from the manufacturing facility to the end-user, as well as offering complex reverse logistics infrastructure solutions where needed.

FedEx maintains 30% of the same-day package market share. (Statista)

3. FedEx has one of the highest brand values.
Through a series of successful mergers and acquisitions, as well as smart innovation creating market-leading efficiencies, FedEx has managed to become a top contender in brand valuation.

Furthermore, FedEx is one of the United States Government’s top contractors, moving some of the US Postal Services packages through FedEx’s SmartPost. FedEx’s market position is further reinforced by its product placement in popular culture, including a feature in the successful movie production “Cast Away.”

FedEx’s brand value is pegged at $18.1 billion. (BizClik Media Limited)

4. Through regional expansion, FedEx offers an extensive global network to its clients.
Within FedEx’s first decade of operation, it expanded into Asia and Europe as an overnight courier. FedEx became the largest full-service cargo airline in the world when it purchased the company Flying Tiger Line.

As FedEx was first and foremost an air-based carrier, it’s not surprising to see that the company has held onto this title, now claiming to be the largest air operator in the world. Although its main market is still clearly North America, its expansion efforts into developing markets have given it a strong foothold outside the United States.

FedEx operates 680 aircraft at 650 airports across the world. (FedEx)

5. Time-critical deliveries are one of FedEx’s strong competencies.
As time-critical packages favor movement by air due to the mode’s rapid and direct nature and considering that FedEx is a market leader in air courier services, the company has become the go-to solution for parcels and packages that require the shortest delivery time. These solutions are important for a range of industries, such as legal documents, to the requirements of the medical industry.

FedEx moves 18 million packages daily. (FedEx)

6. FedEx’s marketing strategies are incredibly effective.
FedEx’s position as becoming synonymous with same-day delivery is certainly not by chance. Through exceptionally innovative and effective marketing tactics, the company has been featured in many feature-length films, including the successful movie “Cast Away” with Tom Hanks. Furthermore, through targeted sponsorship programs, FedEx has become one of the most recognized brands in many sports leagues around the United States.

FedEx.com receives more than 100 million unique daily visitors. (FedEx)

7. Its big investments in information technology have translated into innovative solutions.
FedEx recognizes that its market position relies on its ability to change with the times and continue to offer industry-leading solutions to its customers. This has led to FedEx continually developing new technologies to modernize its processes, creating efficiencies that may give it a competitive edge in the market.

Control over such a large service coverage area relies on a world-class management ecosystem. These efforts have led to FedEx maintaining best-in-class performance statistics in its package delivery operations.

FedEx’s performance of on-time delivery in its parcel services division is at 96%. (Industry Dive)

Weakness

1. Poor driver etiquette harms FedEx’s image.
FedEx’s business model relies on a high number of employees who have direct interaction with its client base. Furthermore, these employees are often on the road, driving FedEx vehicles, offering high exposure of the brand to the public. This opens up the possibility of FedEx drivers damaging the image of the company due to mishaps from light misdemeanors to direct aggressive actions by the drivers of FedEx.

FedEx hired more than 70,000 seasonal workers in 2020. (News Center Maine)

2. Increasing transportation costs have a direct impact on the company’s operational costs.
The costs of links and nodes in a supply chain have a massive impact on the business model of FedEx. Warehousing costs increase with urban expansion, fuel costs increase with legislation and changes in supply and demand, and a change in labor costs have a large effect on the operating model. This all means that FedEx must ensure that its operational activities are completed at industry-leading levels of efficiency.

Business logistics costs increased to $1.63 trillion. (Transport Topics)

3. Lack of diversification into e-commerce places risk on the company.
Amazon’s departure from FedEx initiated the introduction of Amazon into the courier industry. FedEx now considers Amazon to be a key competitor.

FedEx has historically focused on its core competencies of logistic services, whereas its key competitors are leveraging their own logistics capabilities in their e-commerce activities and infrastructure. It would be logical for FedEx to evaluate how it could best support an e-commerce business.

The United States e-commerce market size is expected to grow to $563 billion in 2025. (Statista)

4. A complicated claims procedure leaves a negative impact on the customer service levels it offers its clients.
As FedEx’s core business is the delivery of parcels and packages, and considering 4% of its package deliveries are completed at an unsatisfactory level, there needs to be a claim procedure available to its clients to ensure consistency in its customer service levels. One weakness of FedEx is that the claim procedure offered for parcels damaged, lost, or stolen is not up to the standard of its competitors.

43% of respondents in a survey claim to have been affected by parcel theft. (C+R Research)

5. Demand fluctuation leads to short-term capacity constraints.
Online retail certainly has its seasonal demand forces, with increased demand in online purchases during certain events throughout the year, like the holiday season leading up to Christmas. The supply chain that supports online retail needs to adjust its capacity to facilitate this increased demand. This requires a company to have flexibility when it comes to its capacity responses.

Passenger transport is down 72%, leading to an 8% decrease in freight capacity in air transport due to a lack of aircraft operating. (Industry Dive)

6. FedEx has an over-reliance on the North American market.
Sticking true to its roots, FedEx has become a major player in North America. The Asian, European, Middle East and African markets offer an opportunity for FedEx to expand.

There is exceptional trade volume between China and India, which is largely serviced by FedEx’s competition, as well as high trade volumes coming out of Africa and South America. Through strategic mergers and acquisitions, these markets offer growth opportunities for FedEx.

FedEx reduced its workforce by 6,300 in Europe. (Al Jazeera Media Network)

Opportunities

1. Becoming Carbon Neutral is important to consumers.
More and more consumers demand environmentally responsible operations from the corporations that they support, and a growing number of governments are placing greater pressure on organizations to comply with their increasingly stringent laws.

An example of such laws is the emergence of a complete ban on internal combustion delivery vehicles in many European cities to tackle pollution and climate change. These zero-emission zones are well suited to FedEx’s electric vehicle policies.

Since 2009, FedEx has cut its carbon emissions by 40%, while its package volume has increased by 99%. (FedEx)

2. Increased innovation can offer further efficiencies to the company.
New technologies bring with them new opportunities for efficiencies. Early adopters of technology that brings incremental efficiencies award the adoptee with competitive advantages. Considering the rate of technological change, and FedEx’s position in the market, it is well-positioned to assume this early-adopter role and to develop its technologies.

77% of online shoppers abandon their carts if they are not satisfied with the shipping options on offer. (The Loadstar)

3. FedEx could analyze how to profit from the boom in e-commerce and the resulting increased demand for the services that FedEx offers.
Increased demand in online retail boosts the services that support these transactions. A major service provider to the online retailers is the logistics companies that fulfill the orders purchased on these sales platforms.

Furthermore, these transactions need to be supported by supplementary services like reverse logistic systems that global service providers, such as FedEx, are well suited to execute due to the many locations in which they operate.

FedEx’s ground unit sales revenue increased by 20%, to $6.4 billion. (Digital Commerce 360)

4. FedEx could integrate artificial intelligence and digital technology into its operations.
Cutting-edge technology allows companies to offer services that give competitive advantages. FedEx has partnered with Microsoft to develop artificial intelligence solutions which have the potential to offer clients near real-time parcel tracking, as well as improve the company’s analytical capabilities, which will drive further efficiencies. This is just the start of these exciting technological developments.

The technology that FedEx’s same-day delivery bot, Roxo, is based on has completed 10 million hours of real-world operation. (FedEx)

5. Large growth is forecasted in emerging markets.
Increased adoption of e-commerce in developing economies is opening up digital retail to the masses, with large markets now having access to goods produced across the world. This decentralized marketplace relies on logistic systems that offer cost-effective, seamless solutions that interface the producer to the consumer. An increase in these online transactions has a direct impact on the activity of logistic companies like FedEx.

Online retail sales are expected to increase to a value of $2.5 trillion by 2024 in the Asia Pacific Region. (Octomedia Pty Ltd)

6. Mergers and acquisitions offer FedEx an opportunity to expand into previously untapped markets.
As FedEx has focused on building market share in its core competencies in its key markets, other industries and marketplaces offer new growth to FedEx. The company could purchase or partner with existing players within these sectors. FedEx has enjoyed success with its mergers and acquisitions in the past and is well-positioned to expand through this method.

SF Holding Company surpassed FedEx in Asia by acquiring a $5 billion stake in Kerry Logistics. (The Loadstar)

Threats

1. The Anti-Globalization Movement continues to threaten the sector.
Good business for shipping companies like FedEx comes in the form of large orders over large distances. In contrast to this, there is a growing sentiment toward supporting local businesses and bolstering local economies, with initiatives like #buylocal. These initiatives are gaining momentum in countries that are attempting to curb their reliance on imports by producing locally. FedEx’s global business is supported by international trade.

FedEx operates the largest airline in the world, at 17,503 million ton-kilometers per year. (Statista)

2. Fuel price fluctuations directly impact FedEx’s operations.
FedEx relies on a fleet of diverse vehicles to facilitate its shipping business, and these vehicles mostly run on fossil fuel. One of FedEx’s biggest costs is the fuel that its vehicles consume. Therefore, any fluctuations in the price of fuel will impact its operational costs. Diversifying the types of vehicles that it uses will mitigate the impact of a fluctuation in fuel costs.

Since 2012, FedEx has saved a combined 5.4 billion liters of jet fuel. (DVV Media International Limited)

3. Global warming-related weather anomalies affect the company’s service levels.
Shipping companies like FedEx bridge the geographical gap between producer and consumer. This requires the company to overcome many permanent and temporary obstacles between certain origins and their destinations.

The increased occurrence of adverse weather conditions means an increased risk for FedEx’s operations as it transports packages around the world. Furthermore, as the world becomes more interconnected, adverse weather events in one part of the world can add congestion across the globe, negatively impacting FedEx’s service levels.

A snowstorm in Memphis, Tennessee, caused a $350 million adverse impact on FedEx’s operations. (Supply Chain Dive)

4. FedEx faces increased competition from within its sector.
FedEx’s largest competitor in the United States, UPS, regularly takes the top spot among shipping companies operating within the region. FedEx and UPS operate different business models within the same sector, therefore, creating interesting comparisons in their respective results.

FedEx has superiority in parcels that are carried in the air, often time-sensitive parcels, while UPS has the main market share in ground-based packages. Furthermore, now that Amazon has divorced itself from FedEx, the industry has gained a competitor from one of its main clients. In the international game, FedEx faces strong competition from players in Asia.

Amazon purchased 50 aircraft to cut its reliance on FedEx. (CNBC)

5. Onerous labor laws impact FedEx’s employee base.
With a largely fluctuating labor to respond to seasonal demand, managing FedEx’s exposure to risks in the labor force is important. FedEx can increase its labor force by up to 16% during peak demand periods. FedEx’s large pilot workforce is unionized, while its driver network is independent contractors. Conversely, UPS works with mainly permanent employees as its driver network.

FedEx employs a workforce of 425,000 employees across the globe. (Jacobin)

6. Intergovernmental conflict is a risk to FedEx’s global operational nature.
While trade business is the backbone of the shipping and logistics industries, any events that negatively impact the volumes of trade between two regions will impact the operations of a logistics company such as FedEx. The trade war between China and the United States negatively impacted trade volumes between China and the U.S., which in turn decreased the demand for FedEx’s services.

High U.S. tariffs were imposed on $370 billion worth of products imported from China. (Diplomat Media Inc.)

Throughout time, FedEx has managed to stay relevant in the dynamic world of moving products due to its high levels of innovation, quality of service, and global reach. These combined strategies have and likely will cement its place in the sector for the foreseeable future.

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