FedEx Company has a key strategy, which it uses in the market place in order to maintain its success. This is to leverage and extent one of its greatest assets, the FedEx brand, and to provide the customers with convenient, seamless access to their entire portfolio of integrated business solutions (Berger, 2011). In addition, FedEx Company performs well because of its operational excellence. The company is working hard to incorporate its business divisions so that customers have a main point of contact. This is very important as it helps them access the company’s products at a central place (Lussier, 2009).
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FeDex has adopted customer intimacy since, companies who attract customers by understanding and responding effectively to individual needs better than their competitors, succeed in the market place. Therefore, the operational excellence is and remains the most important aspect of FedEx’s strategy. The evidence of the company’s customer intimacy and operational excellence is clear since the company declares that their strategy is to provide customers with convenient, seamless access to their entire business solutions (Lussier, 2009). The company’s effort to enhance customer experience, like improving the qualities and abilities of the sales professionals, is another evidence of this strategy.
In addition, the company allocates a single agent for every given customer to handle their issues effectively. Moreover FeDex allows allows each segments to operate independently because this strategy allows them to respond to the customer demands well. Extra evidence is seen where the company states that it is a leader of reliable global delivery and freight services. Evidence of product leadership is evident where the company states that it believes that seamless information integration is important in obtaining a single point of contact for their customers (Birla, 2005).
The four business segments of FedEx include; FedEx Express, FedEx Ground, FedEx Freight, and FedEx Kinko’s. The FedEx Express is categorized as the world’s largest express transportation company that offers timely delivery. This segment serves more than 90% of the world’s gross domestic product market (Berger, 2011). FedEx Ground mainly provides small package ground delivery while FedEx Freight is a re-known provider of freight services in the United States. Lastly, is FedEx Kinko, which offers document solutions, finishing, and presentation services (Berger, 2011).
The traceable and observable fixed costs for any company first of all exists simply because the firm exists (Lussier, 2009). For FedEx Express segment, the traceable costs are the costs incurred in operating its main sorting facility, which is located at Memphis, in Tennessee. The costs include the high expenses incurred in maintaining the aircrafts, cost of training flight workers, fuel for the aircrafts, and the other administrative costs like rents and salaries for the administrators.
Moreover, another example would include the cost of running the regional hubs or central focal points of the company in Newark, Oakland, and Fort Worth. The FedEx Ground segment traceable fixed costs comprise of the compensation costs paid to the president and chief Executive Officer of FedEx Ground, and operating its numerous facilities and hubs in the regions throughout the world (Berger, 2011).
One of the company’s cost centers is FedEx Express,and specifically its sorting facility that is situated at Memphis, Tennessee while an example of a good profit center would be represented by FedEx Kinko’s Office and Print Centers (Berger, 2011). In addition, FedEx Kinko, FedEx Express, FedEx Ground, and FedEx Freight which are the four segments of the company can be categorized as the as the company’s investment centers (Birla, 2005).
A fixed cost is defined as a cost that does not change with an increase or a decrease in the amount of goods or services produced. The cost is not dependent on the level of production of the company. One of the traceable fixed cost for this company is the cost incurred in maintaining or operating its facilities at Memphis International Airport. This may comprise of costs incurred in paying for administrative offices and warehouse. Others include cost of owning airplanes, vehicles, and trailers. Furthermore, one common cost, which is likely to be invisible, is the cost incurred in paying the salary of the Chief Executive Officer, Fredrick Smith and sponsorships offered by the company (Birla, 2005).
The Return on Investment is a measure used in evaluating the efficiency of an investment or a number of investments so that a firm can make a decision. On the other hand, residual income refers to the income an individual remains with after paying debts. Since the ROI of $20 million is 20%, which is less than a previous rate of 24%, it is not logical for the managers to select such an investment, which is 4% less in terms of the Rate of Return. Similarly, it is advisable for the FedEx Express managers to undertake this investment if evaluation is done on ROI. This is because ROI of 20% is greater than the previous one calculated at 11.1%, which would increase the total ROI. Therefore, the managers should only pursue the investment if calculated using residual income (Lussier, 2009).
Berger, A. (2011).Case Study – FedEx Corporation: Strategic Management. New York: GRIN Verlag, 2011.
Birla, M. (2005). FedEx Delivers: How the World’s Leading Shipping Company Keeps Innovating and Outperforming the Competition. New York: John Wiley & Sons, 2005.
Lussier, N. R. (2009). Leadership: Theory, Application, & Skill Development. New Yoprk: Cengage Learning, 2009.