PESTEL Analysis of FEDEX
#INTRODUCTION:
FEDEX is a global leader in courier and shipping services. The brand’s financial performance has grown excellent during the recent years. It is because of a global air and ground network and its efficient performance. Main market of FEDEX is United States. It accounts for around two third of the brand’s total revenue. The brand has always focused on building customer trust. Its more than 425,000 employees around the world are working with dedication to serve customers and retain their trust. Its revenue rose to 65.5 Billion dollars in 2018 which was 9% higher than the previous year. In 2018, its net income was also a record 4.6 Billion dollars. FEDEX is one of the most trusted courier and shipping services in US. Its leading edge technology is one of its major strengths. While the company has set ambitious targets for future financial growth, the road ahead can be full of challenges. This is a PESTEL analysis of FEDEX. PESTEL is an acronym for Political, economic, social, technological, environmental and legal. These are important forces in the global industry that can affect businesses in several ways. Take a look at how they affect FEDEX and its position in the global shipping industry.
#POLITICAL:
Political forces have grown increasingly relevant to business in the twenty first century. It is because government and regulatory forces are now playing a more active role than ever in the regulation of businesses. International businesses are particularly facing more heat from these agencies. Political forces are relevant to business in many other ways too. Political stability is important to maintaining economic stability. A stable political environment leads to economic stability and prosperity. On the other hand, political instability or a chaotic environment can lead to business disruption. It can lead to disruption of distribution network and supply chain. Moreover, trade relationships between nations also plays an important role in encouraging business. FEDEX is a global business that operates across 220 countries and territories. US is its main market. However, in other major markets too political stability matters. Trade war between US and China is having a negative effect on international businesses. FEDEX is also subject to the rules and regulations of the several markets it operates in.
#ECONOMIC:
Economic forces have always played a central tole in the context of business. It is because they are directly related to business. the world has been through a major economic recession a few years ago. this period saw a major drop in employment and people’s earnings. Moreover, this drop led to reduction in spending and reduced income for international business. FEDEX serves individuals as well as businesses and government agencies. Economic fluctuations affect businesses that depend on FEDEX for their supply chain needs. This in turn affects the income of FEDEX. IN several of its important markets apart from US, economic fluctuations have affected its revenue. Since FEDEX is based in US, a strengthening dollar is having a poor effect on its revenue. Competition also has a major effect on the business and revenue of FEDEX. Economic growth and stability lead to higher revenue and income. In this way, the role of economic forces for FEDEX has kept growing larger in the 21st century. A healthy and well functioning world economy is favorable for its business.
#SOCIAL:
Social factors are also playing an increasingly important role in the world of business. From businesses’ social image to the changing social trends are all affecting businesses globally. 21st century is remarkable for the rise of social media, the middle class and the millenial generation. Society has acquired a place somewhere near the center of the entire picture. Businesses are working to develop a socially responsible image. They are also investing a lot in social responsibility and community engagement. Sociocultural forces have grown important in the context of marketing too. FEDEX has managed a very good social image which is good for its business. Its dedication to community service was recognized by “FORTUNE which included FedEx among its Top Ten World’s Most Admired Companies and 100 Best Companies to Work For”. (FEDEX ANNUAL REPORT, 2018)
#TECHNOLOGICAL:
Technology is now an important source of competitive advantage as well as a central factor influencing businesses all over the world. Growth in technology has led to major advancements all over the world. More and more businesses are adopting technological solutions to grow their competitive edge and to remain ahead of their competitors. FEDEX has invested a lot in technology and that has led to higher efficiency and better performance. Technology and information have always been the backbone of FEDEX customer solutions. Blockchain is a significant emerging technology with the potential to improve supply chain solutions worldwide. “FedEx joined the Blockchain in Transportation Alliance (BiTA) to explore this new technology within the logistics sector” (FEDEX ANNUAL REPORT, 2018). FEDEX has maintained string focus on technology. It has employed a very large fleet of 670 aircrafts. Apart from that it has 130 automated facilities. There are are 180,000 motor vehicles that pick up and drop off couriers every day. Investing in technology has its own benefits. The investments that it has made over previous several years have led to strong financial performance for the brand. In this way, technology has a major role in the growth of international business brands in the 21st century.
#ENVIRONMENTAL:
Environmental factors are now more important than ever for businesses. Investing in environment and reducing emissions is beneficial in several ways for businesses. Businesses that have an environment friendly image enjoy high level of customer loyalty. Apart from that investing in environment has benefits for both the community and the businesses. Around the world, governments have formed stricter rules regarding environmental protection and emission standards. Businesses are required to comply. However, businesses are also engaging in environmental service out of motivation. Some businesses invest a large sum and resources in environmental protection each year. It has maintained strong focus on emission reduction. Apart from setting ambitious goals for reducing its carbon footprint, the brand has also set major targets to achieve its sustainability objectives. Over the past several years, it has also made impressive gains down its distribution network in terms of sustainability. It is building facilities that produce solar energy to reduce the consumption of non renewable energy in its system. while this reduces operational costs on the one hand on the other it also helps gain consumers’ support and create good will and trust.
#LEGAL:
Law is growing more and more central to business in the 21st century. Legal compliance is an important factor affecting businesses. Law is a lot more stiffer than it was a few decades ago. While on the one hand it works to control unethical practices in business, on the other tough regulations can also hamper business growth. Accounting rules and tax law also have a major impact on the operations and profitability of the global businesses. FEDEX operates in the global environment which subjects it to the laws and regulations of several countries. Compliance is essential and increased compliance burdens are leading to higher operational costs for FEDEX. the UK market is an important market for FEDEX but the regulatory structure in UK is expected to undergo significant changes in next years. This may lead to higher compliance burden. Laws related to labor, environment, taxes and rules and regulations related to trade and aviation also affect FEDEX. This shows the central role that legal factors play in the 21st century in the area of international trade.
#CONCLUSION:
FEDEX is an international brand providing courier and shipping services. It has some major strengths including a strong ground and air network. The financial performance of FEDEX in the recent years has been very good. It is because of its continued investment in technology and other resources. Technology is an important factor that has become one of the biggest source of competitive advantage in the 21st century. However, apart from technology, political and economic factors are also playing an increasingly important role in terms of international trade. FEDEX’s popularity has continued to grow because of its dedication to customer service and efficient services. Law and legal compliance are now more important than ever. Compliance burdens are leading to higher operational costs. However, FEDEX has managed most of these challenges very well because of its strong technological capabilities and extensive network.
SOURCES:
FEDEX ANNUAL REPORT 2018