The External Environment Analysis Commerce Essay

August 8, 2017 Commerce

External environment analysis refers to analysis of events, factors, and entities that surround an organisation. These elements tend to act upon an organisation operation, its chances and hazards. In concern when we talk about external environment analysis of an organisation, we basically concentrate on conditions to which such an establishment operates. This relates to both societal, political/legal, economic, competition, and technological environment. This paper therefore gives external environment analysis of FedEx, a transit company found in the air bringing and cargo services industry.


Federal Express ( FedEx ) is a bringing company found in the logistic industry. Frederick W. Smith established the company, in the twelvemonth 1971 and it chiefly specializes in bringing of paperss and cargo across many metropoliss in the universe. The company employs more than 200000 employees globally, and operates under four chief classs viz. , FedEx Services, FedEx Freight, FedEx Express, and FedEx Ground ( ) .

Designation of the industry

FEDEX can be categorized in the conveyance industry, and its chief domestic rivals are United Parcel Service ( UPS ) , and the United States Postal Service. In add-on to competition at place, the company competes globally with well-established companies such as Deutsche Post ( DHL ) , FCML Couriers, LDH Express, Royal Mail, and other private and public regional bearers. The company has a planetary presence, but USA and Europe is its largest market ( Devan, 2010 ) .

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Porter ‘s five forces model – FedEx Corporation

Supplier ‘s Power

LOW- Merchandises supplied to the industry

Menace of Entry

LOW- High start up costs

Menace of Substitutes

LOW -Limited services for big cargo and air cargo

Buyers ‘ Power

Low – MEDIUM-Shipping picks

Large Buyers

Existing Rivals


Beginning: Datamonitor ( 2009 ) . FedEx, Inc. : company profiles. Retrieved from Lexis Nexis database.

External Environment Analysis

As mentioned earlier, FedEx is found in the logistic industry that is determined by Porter ‘s five forces theoretical account, which includes-

Intensity of Rivalry -Regardless of few rivals, logistic industry still remain a competitory sector due to big Numberss of consumers, low cost of altering suppliers and hapless limit among rivals.

Harmonizing to Parnell ( 2009 ) , assorted type of information is required to measure this porter ‘s force. This competition is measured by elements such as industry concentration that measures the per centum market portion of its rival rivals such DHL, United Parcel Service ( UPS ) , and the United States Postal Service.

The CR ratio of FedEx is moderate and this is attributed by progressive EPS and P/E ratio that tend to battle this disagreement. In prosecuting a competitory advantage over its challengers, FedEx continuously lowers monetary values to derive temporal advantage over its challengers.The company besides employs strategic options which include the construct of increasing size and gross revenues utilizing tactical confederations and internal growing theoretical accounts.FedEx besides maintain a competitory border by concentrating on specific five nucleus schemes that make it turn a company. These schemes include turning nucleus concern bundles, turning e-commerce webs, turning competent new merchandises and confederations, turning internationally, and turning capable supply webs ( ) .

The lone disadvantage of this stuff is that its labour intensive, and at times there is no readily available informations on resources required for each type of service. In decision, we can state the beginning is really believable.

Menace of Substitutes -In contrast to other sectors, the menace for replacements in logistic industry is really low because of low figure of options.This is attributed to handiness of few companies offering air bringing services.

From the article, FedEx maintain this force by set uping high degree of cosmopolitan marketing aim that is aimed at bring forthing high quality merchandises that are trusty across all terminal users. The company focal point on menace of replacement revolves around a selling technique that concentrates on specific client demand.

By and large this article is really conclusive has it spells out the schemes undertaken by the company to crush rival replacements.

Menace of New Entrants -This industry is credited to hold minimum menace of new entrants due to the high costs involved. This includes high cost of operations, and capital equipments.

When appraised with Porter ‘s Generic Strategies, FedEx and its challengers uses a focused-low cost attack that makes entryway of new rivals really hard. Harmonizing to the FedEx Corporation Company, profile ( 2009 ) . For any company to stay functional in the industry, it must see the economic environment particularly GDP.

This stuff is really pertinent and utile to other participants in that it provides intercessions that can be used by other companies to cut down hazards of new challengers come ining the market.

Dickering Power of Suppliers – unlike drink industry, logistic industry tends to hold low bargaining power because they provide their merchandise in majority. Most of the merchandises are tentatively available from other market leaders hence this tends to extinguish bargaining power. FedEx tends to hold low dickering power of providers because most of their merchandises are besides standardized and due to handiness of backward integrating.

Beginnings used here include the company web site and Beijing Review, 49 ( 34 ) , 36-37.As the two beginnings assess the thought ; it emanates that providers uniqueness can be a great index of the nature of intercessions necessary for the successful execution of stable providers bargaining.

Dickering Power of Buyers -just like dickering power of providers, the bargaining power of purchasers is besides low but at times, it fluctuates. Customers have the exclusive discretion to take their suppliers harmonizing to their gustatory sensation and demands, though they do non hold rights to negociate monetary values.

Harmonizing to, hypertext transfer protocol: //, the bargaining power of purchasers is really concrete on doing a peculiar industry successful. Many of purchaser ‘s of FedEx have low bargaining power because most of them are fragmented in different countries hence they have no peculiar influence on the merchandise and its monetary value ( Devan, 2010 ) .

Decision and Future Prospects for the Company

As yearss go by and the company proceeds into the hereafter, direction of the company must be argus-eyed if they want to stay competitory in the market. Just like any company in the industry, FedEx ‘s major hazard includes increased planetary fuel monetary values, fickle economic and political conditions in their mark markets, and client keeping. In order to emerge the victor, FedEx must follow schemes that will give them a opportunity to stay in the market.


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