Marketing Analysis of FedEx using Porter's Five Forces

 

Figures about the company

FedEx has certainly been impacted by the health crisis, but the results have been on the rise for several months now. In 2021, the company's total revenue was $84 billion. In the United States, freight includes more than 20,000 vehicles and 320 service centres. At the beginning of 2016, FedEx acquired TNT, thereby holding more than 88% of the company's capital. It should also be noted that the FedEx group has 150,000 vehicles and 140,000 employees and provides its services in 220 countries. The company owns 650 aircrafts and delivers 12 million packages a day, serving more than 375 airports worldwide. It is now the world leader in express transport.

In this article, we will study the Porter forces of the group. Thus, highlighting a number of threats that can potentially weigh on the company, we will define whether these are high or rather low. Porter's forces is a strategic analysis that helps us better understand the external environment of the group, as well as its internal environment. It is generally supplemented by other analyses such as the marketing mix, the SWOT matrix, or the PESTEL analysis.

 

Fedex's Porter Forces

 

Porter Forces	Intensity of Threat
New entrants	Weak
Substitution Products/Services	Moderate
Bargaining Power of Suppliers	Moderate
Bargaining Power of Customers	Moderate
Existing Competition	High

 

 

The new entrants

FedEx has an international reputation that has existed for many years, which gives it undeniable strength in the entire sector. Today, the group is considered to be one of the main leaders in the parcel transport sector in the world, and it is, therefore, quite complex for potential new entrants to position themselves at the same level, or in any case, it would take a very long time. Note also that FedEx has important values, a reputation that is difficult to dethrone, as well as a relatively high customer satisfaction rate in the United States. Moreover, the barriers to entry are high because this sector, in particular, requires a large number of investments of all kinds, which can discourage a large number of new players. Indeed, there is the cost of premises, trucks, adjoining security, suppliers, and finally, all the costs inherent in communication. For a new company and a fortiori in a new sector to be able to operate, it must manage to make itself known to the public, both individuals and professionals. Even if it is easier in the online era, it is necessary to have good preparation beforehand and to spend time defining an effective strategy. Overall, building such a network is something that takes a huge amount of time. FedEx owns, as we said above, a large number of planes and vehicles, which generates high maintenance expenses. Finally, the regulations are very strict and, above all, very complex. They change from one country to another, and any newcomer to the sector must know them and practice them.

 

Substitute products/services

FedEx is a company with a large number of competitors, as we will see further in the last paragraph of this report. The main problem is that today, with new technologies that have continued to evolve and progress, many consumers go through more direct delivery services than FedEx to receive or even send their packages. A few years ago, especially in the United States, consumers who bought gifts to send abroad or who needed to be delivered very quickly used FedEx. Today, sites offer their own delivery method and partner with companies that can often cost less than FedEx and can be more convenient for shoppers in some way. Finally, a few years ago, documents that needed to be sent quickly with a mandatory signature used groups like FedEx, but today, with the generalisation of electronic signatures, everything tends to be done by email.

 

The bargaining power of suppliers

FedEx has several areas of activity in addition to the distribution of parcels for companies and individuals. Thus, the group, particularly in the United States, also serves sectors such as retail, health, and also new technologies. Each industry has obligations in terms of parcel deliveries, such as absolute compliance with deadlines (health) or hygiene standards (food). There are, therefore, different types of suppliers who are more like partners, and who help the group develop. This relationship must be based on trust and cooperation because if FedEx needs its suppliers, the opposite is also true.

 

In addition, suppliers who meet a more urgent need may have greater bargaining power in the long term, as this may have a direct impact on the group's activity and customer satisfaction. Like all businesses, FedEx has an obligation to its customers, bonds that can only be held and respected if the suppliers are efficient.

 

The bargaining power of customers

As we mentioned above, Fedex is internationally renowned. It is a globally recognised agency that has a large number of premises in the United States but also in several other countries. The global customer base is large, and this helps to qualify the bargaining power possessed by customers, even though the competition remains very fierce. Today, many companies in the United States prefer to work with FedEx, which is renowned for its efficiency as well as its professionalism, and the quality of its services. You should know that the customers who have the most bargaining power are companies and not individuals. They can negotiate significant discounts when they often use the company for their express deliveries. Of course, it is FedEx's duty to listen and accept these negotiations because there are so many competitors.

 

The existing competition

In 2022, FedEx's main competitors are DHL, UPS, or even TNT, Chronopost, and US Postal Service. Amazon is also among the competitors, and this forces Fedex to review its priorities in terms of marketing strategy. Prices must be set according to this competition so that companies and/or individuals do not want to change providers. Something that is now extremely easy to do with the Internet. In recent years, Amazon has notably multiplied its investments in the transport sector, which represents a significant threat to FedEx.

 

FedEx is still, today, one of the main groups in the parcel and express delivery sector. Porter's strengths analysed the company in terms of potential competitive threats. Overall, FedEx remains a strong company that is not really afraid of the arrival of new entrants to the market since its seniority and the extent of its network give it a position of choice in its field of activity. Substitution services are, above all, linked to new technologies and new means of communication that make it possible to send letters in a more direct way thanks to the electronic signature. The bargaining power of suppliers and customers remains moderate. It is, above all, professional customers who have the most room for negotiation within the group. Finally, the competition is very high, and it will be even more so in the years to come with companies like Amazon that already have a lot of power and extend their skills to other sectors.

 

Sources: Fedex, Statista