Economic Analysis Report for Fedex

Economic Analysis Report for FedEx

In this paper, I will analysis FedEx Corporation and the product and services offering. I will analyze its current market value by identifying its competitors, the nature of the product and service. I will examine the market on how easy it is to enter or exit the market and its supply and demand. Lastly I will make a recommendation on its future growth.

Federal Express (FedEx) corporation was founded in 1971. Since 1971 FedEx has grown into a company that has over 1600 location worldwide and 290,000 employees (FedEx Corp). According to (Farhoomand, NG, & Conley, 2003) "FedEx is one of the largest express transportation company in the world. FedEx holds over 50% of the market share and revenue of more than $ 19 billion of revenue in the United States. FedEx specializes in overnight express, ground, and freight package delivery transportation services. FedEx Corporation operates under four brands of services. The four brands of service include FedEx Express, FedEx Ground, FedEx Freight and FedEx Services. The FedEx express services consist of document and package transportation, and cargo distributions. In addition their ground service includes small package delivery, sorting and inhaul service. Next their freight service included airfreight forwarding, freight shipping, air expedite transportation services. Lastly FedEx offers critical inventory logistics, transportation management. Fulfillment and fleet services, document solutions, printing and video conferencing needs (FedEx Corp).

FedEx Competitors

According to (The Economist, 2012) there are four dominating express package business: FedEx, UPS based in America and DHL and TNT based in Europe. Each competitor is dominating within a particular region. Although FedEx have a footprint overseas majority of its revenue is from the US. In the US FedEx is in direct competition in its freight, ground and express services. The market it nearing 50/50 in the type of service, price and volume outputted between both companies. According to (The Economist, 2012) FedEx and UPS in the United States are nearing duopoly. Duopoly is when two companies like FedEx and Ups collide on price and output. It is said that these two companies are a basic form of a monopoly. If FedEx and UPS become a duopoly it will cause higher prices for customers (Investopedia, 2012). When pricing are increased it will caused customer to look for other alternatives of shipping. Another indirect competitor who is already a monopoly for its first class mail service is USPS. However, the demand for mailing options has change over time. Technology has shifted the demand for postal mail. The USPS has entered the arena of small packaging transportation and has increased its advertisements to offer consumers a cheaper way to ship. Their motto for small packages is if it fits it ships all at one low price. The launch of this offering was a direct opposition to FedEx and other couriers to try to regain its way back into the market in the US. However, because of these two larger competitors the USPS only share a small portion of the package handling market. Since there are only four firms in the market, whenever FedEx decided to make a change in its market, they must consider how the other 3 competitors will react to the change. It is almost imperative that when a change is made by the competitors, FedEx must be strategic in its offering to maintain its portion of the market share.

Entry into the Market

FedEx operates in an Oligopoly market structure. There are only three other companies that provide the identical services as FedEx. Science the structure consist of the "Big Four" it is very difficult for a new company to enter into the market. According (Tierney, 2012) many of the small independent parcel couriers struggled to raise enough capital required to operate. For example a smaller courier named Streamlite was forced to shut