Q The assignment on Three Year Strategic Plan of the chosen organisation Home, - Three Year Strategic Plan Three Year Strategic Plan Executive Summary Company History Frederick W Smith is the creator of the Fedex company operational idea. As a student of Yale University in 1965, he proposed an operational model to curtail the logistics problems of the companies which can curb the delays in critical freight movement operations like those in medical component logistics, information technology-related parts and electronic components as well. Though the idea did not receive too much attention at the time of proposal, later it proved to be a revolution in airfreight services. The original name of the company is Federal express and it became synonymous to speed and reliability in services. The company started its operation in 1973 and became profitable only by the end of 1975. The company has become chosen service provider for carrying of premium goods and high priority items in the market place. Now the company holds the world’s largest all-cargo air fleet which includes Boeing 777s, 767s, 757s and MD-11s and airbus A-300s and A-310s as well. There is as high as 40% growth rate for the company every year and Federal express registered total revenues of about $1 billion in the year 1983. Intercontinental operations of Fedex started for Europe and Asia from the year 1984. As of 1989, the company acquired Tiger International Inc and later it became integrated as Flying Tigers network. By 1989, Federal express is the world’s largest full-service all-cargo airline service. There are about 21 countries included in the routes and fleet of Boeing 747 and 727s have become part of the acquisition. There is another significant transition of the company in the year 1994, which adopted the name as FedEx as its official brand. Later the company got authorization to serve china from Evergreen International airlines. As of now the company is servicing destinations more than 220 countries and territories throughout the world and has remained as one of the best air freight courier services in the world at present. The titles of the company division’s also undergone change like Federal express became Fedex, RPS became FedEx Ground, and Roberts Express has become FedEx Custom critical. Caliber Logistics and Caliber technology combined to create FedEx Global Logistics. American Freight ways and Viking Freight became FedEx Freight in the year 2001. Kinko’s Inc is acquired by FedEx in 2004. From 2006 to 2017, FedEx continued acquiring different popular freight services in different countries like the UK, China, Hungary, India, Mexico, Poland, France, and Brazil. Africa, North America and Europe (Van, FedEx, 2018). FedEx uses Standard Carrier Alpha Code (SCAC) to keep its data and record of the packages via computerization. Mission Statement The mission statement of the organization (FedEx Corporation) is as follows, FedEx Corporation will produce Superior Financial returns for its shareowners by providing high value-added logistics, Transportation and related business services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers as well. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards. Situational Analysis Current Situation Industry, Market, Situational Analysis Considering the nature of operations of FedEx there are diverse factors impacting the operations of the company on a global perspective. At the outset, the FedEx operations are guided by the political, economic, social, environmental, technical and legal aspects. Since the FedEx need to use the services of the seaport, airport for its operations, the impact of the regulations and rules that make up from time to time by the political parties does have a significant impact on the company. Hence the political influence on the company can be said to be of great importance. FedEx is one of the good revenue-generating companies and further, the economic power of the company is used to boost up its relations with the major political parties in the country. The company worked on to enhance its economy greatly as the business success leads to high taxation for the company, which contributed to the increase in the GDP which ultimately resulted in economic growth. The company is the largest campaigner for 21st-century elections in the country. It has supported for about 45% for Democrats and 55% of its huge donations are provided to Republicans of the country in this century as well. Social factors that are of high concern to the company are the quick delivery as per the schedule, maximum safety to the equipment being shipped. Countries with higher population growth are the potential customer to the company and hence they do make up significant social factors impacting the operations of the company. Technology factors like advancement in the technology for tracking and status update to the customers are being employed by the company for better customer satisfaction and information support. Customers now can know where the consignment is there in the delivery channel and also they can able to find the updates about the delivery, booking etc on the site of the FedEx now. Legal aspects that are significant to the operations of the company include the legislation and rules and regulations prevailing in any country in general. Further, the company is working in accordance with ISO14001 standards and is certified for the same. Also, the company is highly concerned of the environmental factors, all operations of the company are strictly in accordance with the environmental concerns, there is an environmental leader hired by the company for advice on environmental matters and strictly the company follows environmental friendly operations in all its operational executions. SWOT Analysis SWOT Analysis: Strengths: FedEx is enjoying a strong financial position at present. The revenue position of the company is very strong and it is making a good impact over the market at present with its strong market share. The company gathers good customer feedback and reputation from the last long years of experience. FedEx has become synonymous to the trust and reliance in operations. FedEx’s financial performance at present is very good and it is good shape as well. The total annual revenue of the company is good enough to make it highly reputable. The company has good knowledge of both its internal and external operational conditions and it making this knowledge best usage for the same of organizational promotion on the global scale of operations. It is taking advantage of both its internal and external operations for its overall growth and performance as well. Economies of scale are working well for the company and strong global presence and the continuous enhancement of the same is contributing to the operational revenues consistently from a long time. Company managed to have good reliance and trust from the market, developed a strong network of customers and developed a large database for its operations. Further, it is the first mover of technology and also the company is working for networking with the key audience and strengthening the same from a long time. Weaknesses: There are a few limitations of the company as well. The company is not very much good at taking up the market from other countries. As of now, the company market is dependent on the United States alone and there is no prime concern to the markets in the other countries. Further, the retail chain presence of the company is not very good, it needs to be upgraded in order to get further stand and impact in the market by the company. Further, the policies and procedures of the company need to be revised to make them fit more for the business requirements only. Opportunities: There are several good opportunities for the company at present in the retail market and e-commerce operations chain. Taking advantage of these new opportunities can provide extensive opportunities for the company for growth. Further, it will also make good use of the strategic tie-ups together with the mergers and acquisitions in the coming future. Further, if the company works more to understand the lifestyle of the people and interests of the same and if cultivate these components of interests in the mainstream operations of the company, it is more likely that the company can gain a more operational advantage than other companies. Apart from speed and safety, if the company focuses on pleasant and customer service orientation as well, the returns can be more impactive. Further, the changes are technology, government policies etc. need to be included much further and further for organizational promotion. Threats: Competitors are the main threat to operation sustainability at present. The price wars are threatening the company operations. All competitors do have good knowledge of the prices and the external environment as well. If they do play any price games, the company need to able to face the same. Technology advancement needs to be favourably modified to make the service much better and versatile. As such, there are no threats to the bad debts and the bad cash flows for the company at present. However, if the company works on to become ineffective with its failure to manage the capacity vs. demand management, then it becomes a critical weakness of the company. There is a need for strategic renovation of the business operations to let it become sustained of its demand and capacity optimization. Such initiatives will work for the betterment of its operational stand in the country as well on the global perspectives. Environmental Scan and Porter’s Five forces: There are several environmental factors working to impact the operations of FedEx in the country and on a global scale. At the outset, the company operations are not much impacted by several other factors except Government involvement. Government involvement in the provision of the regulations and the rules for controlling the operations of the company is very much significant in deciding the operational framework of the company. There is much to do with the operations of the country using the political factors into consideration. Apart from the political factors, there are other environmental factors that do have a significant impact over the operations of the company in the region. Weather conditions in the region where the services need to be performed do have a serious impact on the working conditions of the company. Coming to the competitive environment, yes there are several global players along with FedEx and they are equally capable in using the technology and knowledge of the external environment in the country as well as in the other countries as well. FedEx needs to be considerate to this competition and need to upgrade the services and the quality of the operations from time to time to meet the competition in the country. Another important environmental consideration of the company is focused on environmental policies and the quality standards that the company is using for its operations from time to time. ISO14001 standards and the environmental-friendly policies are the main drivers of the profile of the operations of the company in the region. Porter’s five forces: The threat of the new entrants is very less in the freight courier services. This is due to the reason that it is very difficult to enter into these markets as the required investment and the expertise is very high and the element of risk is also very high. Hence the new entrants will not enter the market very easily. The threat of substitutes is also not very high in the freight delivery services domain where FedEx is in operation at present. This is due to the fact that there are very few companies working at present in this domain of operations. High quality standards and the customized solutions to the high-end customer needs are limiting the substitutions of the products in this domain by other companies. Bargaining power of the suppliers is very limited for FedEx, as most of the services of FedEx can be obtained from other market leaders as well, there is very less to do with the bargaining power of the FedEx. All market leaders can back integrate all the services offered by FedEx and hence there is only very limited strategic bargaining power left with FedEx here. Bargaining power of the buyers In this domain, there is moderate bargaining power for the buyers available. It is due to the fact that there is a choice available in the industry to select from. There are diverse operational leaders, submitting the products for similar delivery channels, however, the buyers (customers) do not have any capacity to negotiate or bargain the prices of the products as they are fixed and need to be followed as dictated by suppliers. The intensity of Rivalry: There is extensive rivalry in the logistics industry where FedEx is operating at present. The cost of switch over from one company to other is very less in this industry. Further, there is no any demarcation available from one market to another and hence buyer can switch from one product or service to the other and hence it is quite easy for the rival companies to take over the market and same is the case to lose to the market as well. Hence the intensity of rivalry is very high in this market. International Performance: Whenever political instability occurs in any of the host countries where FedEx delivery services are occurring, there will be an immediate problem of cut short of the revenues of the company in the region. Company operations will be suspended and both the delivery and pick up services will get interrupted. Further, there is a continuous threat of the policies and regulations changes in the international market environment and they will impact the performance of the company from time to time in these regions as well. Further, when the company is operating across cross-cultural environments human resources management, liasioning with the local staff and regional policies etc are continuously being monitored in accordance with the cultural tolerance and diversity strategies of the company. Monetary exchange rates do have a considerable impact over the repatriation of the revenues to the host country from time to time. Rather than repatriations, the local taxations and the variation of the same and financial policies of the host countries do have a considerable impact over the operations of FedEx from time to time (Deresky, 2017). Operational Planning Financial Performance: In this space, analyze the financial performance and condition of the organization. Financial performance of the company at present is good and it is in a good advantageous position when compared with the competitors in the country. The main advantage is due to the fact that the company is the pioneer and is in profitable condition for a long time when compared with other competitors in the country. As of the fourth-quarter results announced by FedEx for the year 2018, the total net income of the company is $1.13 billion. Last year the same net income is about $1.14 billion. As per the projected financial position predictions the company is expecting about 9% of revenue growth for the year 2018-19. Operating margins are about 7.9%. Capital spending expected is about 5.6 billion of the year 2018-19. Overall modernizing the operations of fleet, network build-up and alignment are on the list for the company at present. Hence it can be said that the financial performance of the company is strong enough and stable to take up any innovative challenges for the coming immediate future(FedEx,2018). Operational Budget and Assessment Operational Budget and Key ratio Analysis: Hence in line with the current strategic objective of the company to strengthen its weaknesses and with an objective to further promote its strength positions of the company, the company is working for improving its operational margin by about 7.9% and also capital spending budget that include fleet improvements, technology integration and services development is marked at 5.6 billion dollars. Operating margins are expected to be about 7.9% for this year. However for the coming two more years i.e., the financial year 2019-20 and 2020-21, the strategic objectives of the company should include aspects such as an increase in the budget further by about 4billion dollars each for a year. The rationale for investment can be set based on the actual performance benefits the organization is achieving for each of the years can be set as the benchmark. Also, there is a need for the organization to bench mark its revenues to be higher than its revenues in the current year. Each year in the coming years it is expected to be higher than 9% and more(Investing,2018). Some of the key ratios and performance indicators that can be employed for strategic monitoring of the financial condition of the company include, ? Gross Margin – Current rate is 71.31% which is less than 78.31% of the market value – which mean it still needs to upgrade the same in the coming strategic operational periods. ? The net profit margin of the company as per the 5 years average is 4.14% which is less than the industry average of about 5.49%. ? Return on Equity on the 5 years average is 14.17% when compared with the industry average of about 48.07% ? Returns on Assets are about 5.38% which is less when compares with the industry average of 8.26%. ? Returns of investments on 5 years average are 6.47% against the industry average of 10.4%. ? The dividend yield is about 0.56% against the 5 years average of 1.97% at industry average rate. Considering all these aspects still there is considerable strategic planning needed to improve the key ratios and the performance of the company in the coming three years(FedEx,2018). Strategic Goals: Core Strategies and Tactics Strategic Goals Strategic Goals ? Outreaching more market share in the country and in other parts of the world. ? Effective usage of the resources and thereby reducing the expenses and increasing the net margins and profits for the company. ? Working for the betterment of the organization internal pricing systems to keep the prices competitive and to face the competitor's challenge in the country. ? Working for extensive usage of technology to improve service quality. ? Reaching the revenue growth of about 10% in the coming two years. Prioritized Core Strategies Core Strategies ? Internal efficiency improvement to curtail the unnecessary expenses and so making it price competitive and cost leader in the country. ? Enabling the organization to expand its revenue base by expanding its operational services beyond the United States of America. ? Working to take up the technology-enabled ease and comfort to delivery more quickly and comfortable services to the people in need. Recommended Organizational Structure ? Organizational Structure The current organization that CEO/President Mr Smith is taking the rule by means of several of his organizational functional leaders and is working well to manage the company with his visionary leadership and capabilities of running the business with innovation and capabilities. However, still, it is required to decentralize the organizational structure with effective and transformational leaders who can further enhance operational performance. Particularly it can be like taking up the mergers and acquisitions with the regional players and by means, FedEx deputed managers and leaders, the positive features of the respective organizations can be integrated into the organizational performance. Recommended Marketing Positions ? Marketing Positions Marketing positions of the company include several aspects like FedEx like it can spread its operations into several other regions of the unexplored world. Further, the existing marketing domains can be expanded further for the operations by employing new marketing positions in the country. Also, it is needed for the organization to make sure that it can be blossom in the future IT-based marketing sector by strengthening its current retain chain of operations. The marketing position statement can be the same as before: Outperformance with reliability and speed in service. Measuring Success ? Strategic Success A strategic plan can be measured for its success by multiple factors Customer satisfaction indices Operational margins Revenues growth of the company Market share growth of the company Growth of the company dividends Net profit growth Further expansion of the market to new territories and countries Expansion of the services spectrum - All these aspects measure the success of the company.