STRATEGIC AUDIT OF FEDEX CORPORATION

The strategic audit of FedEx Corporation addresses seven specific major issue areas. The major issues analyzed are: Background; External environment analysis; Internal environment analysis; Strategy; Structure of the organization and control; past performance analysis; and Future performance prediction.

Fred Smith recognized the need for a reliable, overnight delivery service. Smith presented the idea in a Yale term paper in the 1960s, and received a "C" grade for his efforts. Between 1969 and 1971 Smith, however, secured $90 million ($40 million from investors, $8 million from his family, and $42 million in bank financing) to launch Federal Express as the then largest startup funded by venture capital. Federal Express began offering overnight and second-day delivery to 22 American cities in 1973 (FedEx Corporation Overview, 2004).

Today, The FedEx Express unit is one of the five subsidiary organizations that comprise Federal Express. FedEx Express is the global market leader in express transportation. The firm moves an average of three million packages daily (FedEx Corporation Overview, 2004).

FedEx Ground is a subsidiary of FedEx Express. FedEx Ground provides ground delivery of packages in North America. FedEx Freight is a less-than-truckload carrier. FedEx Freight operates throughout the United States. FedEx Freight has two operating subsidiaries FedEx Freight East and FedEx Fr

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omparison Data, 2004). The threat of new entrants is high for the express transportation and logistics industry because of the high costs of developing the infrastructure required to compete effectively in the industry. There are companies, however, that have both the capital and the desire required to enter the industry. DHL is an example. DHL is a wholly owned subsidiary of Deutsche Post AG, the postal service of Germany. In 2004, e-mail poses a significant threat to express letter and package delivery in relation to the transportation of documents. While documents are but one of the hundreds of item types shipped by express transportation, documents contribute a substantial proportion of the industry's revenues. The bargaining power of suppliers is especially high for the express transportation and logistics industry in relation to aircraft fuel. The bargaining power of aircraft manufacturers is lower because of the competition between Boeing and Airbus. The degree of bargaining power of customers varies with the degree of urgency customers perceive in relation to the delivery of their packages. Those customers who are willing to forego delivery-time guarantees and who are willing to allow a few days for delivery have

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