Fed Ex case
Evyn Newman
FedEx Marketing Case
January 26, 2015
Company Analysis
FedEx targets the small package shipment market. Their mission is to be efficient for their customers while having the option to generate new volume. Their goal is to enter the air cargo market and they need the Courier Pak in order to gain a competitive edge. The main benefits of the CP are its high profit margin and the small amount of volume they take up. The variable costs of the CP are much smaller than Standard Air Service packages and Priority One packages. The variable costs for CP are $4.25, Standard Air Service: $9.21, and Priority One: $10.60. Not only does it have the lowest variable cost, it also yields the highest profit margin at 66% while SAS is 27% and Priority One is 55%. Due to the low variable cost and high profit margin, FedEx should implement the CP in order to penetrate the small package shipment market.
Customer Analysis
The major customers in 1976 for the Courier Pak (CP) would be the “emergency,” “rush,” and “special handling” markets. Table A shows that the “emergency” and “rush” markets made up around 19 million shipments annually with an estimated 20% growth each year. A review of these markets demonstrates that there is about 870,000 small shipments every day. The Courier Pak is definitely an economically viable solution for Fedex. Looking at the contribution margin for Priority One (P-1), Standard Air Service (SAS), and Courier Pak (CP) we can see that P-1 has a CM of $12.96, SAS has a CM of $3.41, and CP has a CM of $8.25. Fedex generally saw its planes reach maximum volume before maximum weight with an average of 10 lbs per cubic foot. Looking at the average weight of P-1 (14 lbs), SAS (14 lbs), and CP (1 lbs) we can see that Fedex would be looking at a margin of $8.25/pound for CP compared to $.93/pound for P-1 and $.24/pound for SAS. Looking at the estimate of 10 lbs per cubic foot we can see that CP’s volume to weight is about .1 cubic feet compared to 1.4
FedEx Marketing Case
January 26, 2015
Company Analysis
FedEx targets the small package shipment market. Their mission is to be efficient for their customers while having the option to generate new volume. Their goal is to enter the air cargo market and they need the Courier Pak in order to gain a competitive edge. The main benefits of the CP are its high profit margin and the small amount of volume they take up. The variable costs of the CP are much smaller than Standard Air Service packages and Priority One packages. The variable costs for CP are $4.25, Standard Air Service: $9.21, and Priority One: $10.60. Not only does it have the lowest variable cost, it also yields the highest profit margin at 66% while SAS is 27% and Priority One is 55%. Due to the low variable cost and high profit margin, FedEx should implement the CP in order to penetrate the small package shipment market.
Customer Analysis
The major customers in 1976 for the Courier Pak (CP) would be the “emergency,” “rush,” and “special handling” markets. Table A shows that the “emergency” and “rush” markets made up around 19 million shipments annually with an estimated 20% growth each year. A review of these markets demonstrates that there is about 870,000 small shipments every day. The Courier Pak is definitely an economically viable solution for Fedex. Looking at the contribution margin for Priority One (P-1), Standard Air Service (SAS), and Courier Pak (CP) we can see that P-1 has a CM of $12.96, SAS has a CM of $3.41, and CP has a CM of $8.25. Fedex generally saw its planes reach maximum volume before maximum weight with an average of 10 lbs per cubic foot. Looking at the average weight of P-1 (14 lbs), SAS (14 lbs), and CP (1 lbs) we can see that Fedex would be looking at a margin of $8.25/pound for CP compared to $.93/pound for P-1 and $.24/pound for SAS. Looking at the estimate of 10 lbs per cubic foot we can see that CP’s volume to weight is about .1 cubic feet compared to 1.4