Assignment Writing Help on What is FedEx’s Strategy for Success in the Marketplace


is FedEx’s strategy for success in the marketplace?

Fedex  strategy success relies primary on customer
closeness and accomodation of  both
product leadership customer value proposition and operational excellence, which
involves meeting customers needs, motivating and empowering employees and
improving their working place activities (Duggan, 27).

It is noted that business
that embrace client closeness are likely to attract customers as they are able
to know and react to ones needs than its rivals. At the same time firms that
depend on operatioanal excellence delivers 
products and services faster, more suitably and at lower prices compared
to rivals (Noreen et al. 4). In addition, the author notes  that business that adopt customer value
proposition sway their clients to select their products  as they offer  superior and quality  products comapared to its rivals.

Through customer-value
proposition FedEx aims to improve its products and services by enhancing
competition over its rivals. Product leadership customer-value has enable it to
provide and ease access and use of products with better pricing to its clients.

Customer intimacy and
operational ecxellence is supported in Form 10-K. It notes, ‘‘FedEx continues
to maximize  its brand by offering its
customers with convenient and smooth access to its range of investment business
solutions. With aim to improve its 
customer experience by meeting its needs and demands.” (FedEx Form 10-K,
4). Futhermore, customer intimacy is evidenced by the fact that each division
of FedEx operates independently this allows each segment to achieve customer
demands. While Its operational excellence is a proof of improved organization
and a way of creating superior and exclusive customer experience and satisfaction
that has earned them customer loyalty. And providing to customers best cost
efficiency through operative end to end processes in customer service delivery.

Moreso, customer value
proposition is achieved by seamless and aligning business process towards
achieving customer business system while product ledarship is achieved by FedEx
divisions offering customers with the best and leading products in the market
(FedEx Form 10-K, 4).

2. What
are FedEx’s four main business segments?

major business divisions includes the following: FedEx Freight, FedEx Express, FedEx
Kinko’s and FedEx Ground (FedEx Form 10-K, 3).

Traceable fixed cost occur
due to the existence of a particular segment and is likely to disappear over
time if the segment stops to exist or disappears whereas common fixed cost come as a result of the overall operation of the
company  and it would not disappear even
if a specific segment is eliminated (Noreen, 427).

FedEx Express traceable
fixed cost are the cost to operate its facilities at Memphis International Airport
which include aircraft maintenace hangars, flight training and fuel facilities,
adminstartive offices and warehouses (FedEx Form 10-K, 24). other traceable
fixed cost include, the cost involved in owning 557 airplanes (FedEx Form 10-K,

FedEx Ground traceable
costs includes, the cost to operate their offices and information data centers and
the cost of FedEx Ground president and CEO’s salary (FedEx Form 10-K, 25-29).

FedEx Freight’s
traceable costs are cost of owning vehicles and trainers and the cost of
operating their headquarters (FedEx Form 10-K, 26).

 FedEx Kinko’s traceable cost are its offices operating
cost, employes snd CEO salaries. (FedEx Form 10-K, 27).

While examples of common
costs that are not traceable to the four business segments are  cost of equipments and the salary of the FedEx
CEO (FedEx Form 10-K, 19).

3. Identify one example
of a cost center, a profit center, and an investment center for FedEx

An example of a cost
center is customer service unit and profit center is Kinko’s office and Print
Centers (FedEx Form 10-K, 11-17), while all 4 business divisions can be  investment centers.

4. Give three examples of fixed costs
that are traceable or common depending on how FedEx defines its business

The salary of employees and CEO is
traceable fixed cost to the FedEx Express and common to all to segments of
FedEx (FedEx Form 10-K, 24-26).

The cost of operating one the above
sorting and handling facilities is traceable to that specific facility though
the operating cost of specific facility is common to all trucks dropping off or
delivering packages to that facility. The salary of Executive Vice President T.
Michael Glenn would be traceable to FedEx’s Market development and
communications departments though, would be common to all four-business
divisions (FedEx Form 10-K, 27).

margin, turnover and return on investment in 2005 for each of FedEx’s four
business divisions.

1. Showing margin, turnover and return on investment

Four Segments
Sales $19,485              $4,680                    $3,217                $2,066
$1,414                $604                      $354                    $100
assets (2005)                
$13,130             $2,776                    $2,047 $2,987
assets (2004)                
$12,443              $2,248                   $1,924                  $2,903
op assets (2004+2005)/2
$12,787             $2,512                    $1,986                  $2,945
Margin $7.3%             $12.9%                   $11.0%                 4.8%
Turnover   1.52 1.86                        1.62                      0.70
(margin * turnover)                
11.1% 24.0%                     17.8%                  3.4%

Compute the residual income earned in

2005 in each of FedEx’s four segments

Noreen et al (437) defines residual
income as ‘‘the net operating income that an investment earns above the minimum
required return on its operating assets.’’

Table 2. Residual income

four segments                 
operating assets (a)
$12,787             $2,512                 $1,986                   $2,945
operating income                 
$1,414                $604                   $354                      $100
return 15% * (a)                  
$1918                 $377                   $298                      $442
$-504                 $227                     $56                      $-342

If FedEx assess all of its senior
managers using residual income, would the managers of both segments pursue the
investment opportunity?

The $20 million investment option
provides ROI of $20% will be 20,000,000 / 4,000,000. FedEx Ground has a
calculated ROI of 24%. Consequently, it would not be advisable for the FedEx
Ground managers to pursue this investment option since the ROI for the
investment is 4% less than their current ROI and it is likely to lower its
overall ROI. However, evaluation of FedEx Express managers based on ROI allows
them to pursue the new investment opportunity since their ROI of 20% is greater
than its calculated ROI of 11.1% consequently; the venture would raise segments
net return on investment.

Managers of the both business segments
are free to pursue this investment opportunity if they are evaluated on the residual

 As indicated below the new investment
opportunity would increase the residual income of both segments by $1 million.

Table 3. Calculation of the Residual

Two Segments
Income previously calculated
$-504 $227
operating income (investment)                

$4 $4
ROI new investment (15*20)                     
$3 $3
Income from investment                             
$1 $1
Income after investment                            
$-503                 $228

Works Cited

Eric, Brewer Peter, and Garrison Ray. Managerial Accounting for Managers. 2nd ed.
New York: McGraw-Hill/Irwin, 2011. Print.

Kevin. Design for operational Excellence: A Breakthrough Strategy for Business
Growth. McGraw Hill Professional, 2011. Print.

‘‘United States Securities and Exchange
.’’ Form10-K FedEx Corporation. 2005. Print.


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