FedEx is a big name in the courier service and logistic industry. The company was established by Fredrick W. Smith in 1972. The company specializes in the delivery of the parcels and documents across the globe. The company has staff of more than 200000 employees. It is mainly famous for the overnight shipping services which are easy to track and also provide the real-time updates about packages and locations. The company is operating under four major categories;
• FedEx services
• FedEx Freight
• FedEx Express
• FedEx ground. (FedEx, 2019).
Porter five forces analysis helps the company in making strategic decisions carefully. This provides the external factors analysis of the company. This model helps in identifying the opportunities for the company and the detailed insights of the threats. Here is the detailed Porter five forces analysis of FedEx;
Bargaining Power of Buyers
The bargaining power of buyers in the courier and logistic industry is high. FedEx has huge consumer base, both individuals and companies who operates mainly in e-commerce business. Many companies also have courier contracts with FedEx. However, as the service is not only provided by FedEx, there are other companies also offering the same services. There are many chances for the consumers to switch to other companies because of the low prices. This is easy for the consumer as switching cost is low in the industry. However, FedEx and DHL usually compete with each other in prices and offer bulk discounts to be reasonable for the companies (Dokumen, 2015).
Bargaining Power of Suppliers
Bargaining power of suppliers in the logistic industry is low. This is mainly because of the standardized products or services. Moreover, easy availability of the backward integration also plays a role in lowering the bargaining power of suppliers. The suppliers are more as compare to the buyers. However, aircraft, vehicles, and ship supplier shave high bargaining power because of the specialization. Hence, it is necessary for the company to maintain good relationship with suppliers to have high profit margin (UK essays, 2018).
Threats of New Entrants
FedEx is a well-established company who has a strong brand image in the global logistic industry. Threat of the new entrants in the courier and logistic industry is low. This is mainly because of high capitalisation. Huge distribution channels and networks are required to operate in the industry. Ships, aircraft carriers, vehicles for by road transportation are needed which are quite expensive. Furthermore, it is difficult for the new entrant to compete with the giant companies in the market, who has built their strong brand image. There are strict rules and regulations by the government which is another barrier of entry for the new entrants (Khamy and Golubov, 2005).
Threats from the Substitute Products
Threat of the substitute products is very low in the logistic industry. This is mainly because of less alternatives. The main substitute of this is the air delivery services offered by many companies. However, FedEx has maintained this force through the development of high marketing objectives across the world. The company has built strong brand image by marketing strategies and high-quality services. FedEx has identified its importance in the market and provide broad range of services to its consumers. Moreover, the company has realized the fact that online shopping has increased the delivery service system. Thus, FedEx attract huge consumer base with its marketing techniques (UK essay, 2018).
Rivalry of Existing Players
There are few companies in the logistic industry who are sharing the market share. These are the competitors of the FedEx. The providers of the shipping services like United Parcel Services, DHL, etc. are competing with FedEx. Prices of the rivals are also competitive and switching cost is also low. This means FedEx have to compete with them in quality and innovation basis. However, DHL has left the US industry. Besides this, FedEx is also facing competition from local courier services, like Government postal offices, TCS etc. This leads towards fierce competition among the companies. Hence, the competition level in the logistic industry is moderate (Dokumen, 2015).
References
Dokumen, 2015. Porter five forces of FedEx and DHL. [Online], Available at: https://dokumen.tips/documents/porters-five-forces-dhl-fedex.html, [Accessed on: 8th December, 2019].
FedEx, 2019. About us. [Online], Available at: https://about.van.fedex.com/, [Accessed on: 8th December, 2019].
Khamy, M. and Golubov, Y. 2005. FedEx in the global market. [Online], Available at: https://www.mcafee.cc/Classes/BEM106/Papers/2005/FedEx.pdf., [Accessed on: 8th December, 2019].
UKEssays. 2018. FedEx: Porter’s 5 Analysis. [Online]. Available at: https://www.ukessays.com/essays/business/analysis-of-fedex-in-the-transportation-industry-business-essay.php?vref=1, [Accessed on: 8th December 2019].