Fedex Case Analysis

The following case describes FedEx’s transition from a single segment Express shipping company to a fully integrated, multi-faceted corporation. At the beginning, Federal Express was an air express transportation system designed specifically for shipping time-sensitive items like urgent documents or medicines. After receiving a large investment, Federal Express began its first night of operations on April 17, 1973. Within the first 10 years, Federal Express became the first U.S. start-up to achieve $1 billion in revenues. Nevertheless, in the late 1990’s with the development of technology, FedEx began to express concern in some areas of business. E-mail, its competitors (UPS), new innovative supply chain strategies with low production

FedEx Express’s customer segments were based on the amount of revenue FedEx obtained from the particular customer during the previous year. At the top of the pyramid were businesses with more than $10 million in annual FedEx billings. A primary responsibility of account executives assigned to these companies was to analyze the client’s shipping business to negotiate contractual agreements that would typically last from two to three years. At the bottom of the pyramid were small accounts of just $6,000 to $40,0000. In these cases, the account executive’s job was typically to look for ways to increase the use of FedEx at local offices and to report to worldwide account executives of any issues that had come about. The account executives received compensation on achieving particular revenue targets, and the process of determining Express sales goals occurred on a quarterly basis. Account Executives wanted to beat the revenue targets or reach the minimum performance to plan in order to get a sales bonus. Even though there were many sales fluctuations based on changes in customer behavior, account executives would make adjustments in order to meet their goals. In comparison to Express, FedEx Ground shared the hierarchical configuration of sales teams and the geographic reach, but had a smaller customer base. Signing new clients was somewhat more difficult for

One improvement would be to provide better visibility when tracking packages. A bundling price option would allow FedEx Corporation to simplify the process and would result in better tracking. The new IT system would reduce costs in supply chain and would allow their clients to feel more secure working with FedEx. The IT system allows anyone in the FedEx Corporation to track the package of any delivery method and can provide more accurate information to the client. Another improvement Project ARISE should implement would be to develop of a new compensation plan. Express has a larger customer base thus involving more revenue, while Ground is a smaller segment with less customers. As a result, account executives working on Ground may have more difficulty getting compensation for their business. In order to qualify for incentive compensation, the Ground salesperson must reach a minimum of 50% of his/her plan. 60% of this incentive compensation is based on individually established goals which are set once per year. In comparison, Express salespeople are compensated on a larger scale making 96% of one’s planned sales objective. In addition to cash incentives, account executive can also qualify for highly-acclaimed sales awards like the President’s