Bachelor of .Art, Metropolitan State University of Minnesota, 2003

Master of Business Administration, Argosy University, 2005

A Paper Submitted to Dr. William Kelly of Saint Mary’s University of Minnesota in Partial Fulfillment of the Requirements for the Degree DOCTOR OF EDUCATION



Copyright © 2005

Alyou Alem Tebeje


Alyou Alem Tebeje

Organizational change and the ethical dimension of FedEx Corporation


FedEx Corporation headquartered in Memphis, Tennessee, is a global provider of transportation, e-commerce, and supply chain management services. The Company operations are primarily are Ground, Express, Freight, and now Kinko`s. FedEx Corporation provides worldwide express delivery, small parcel ground delivery, freight delivery, global logistics, and office services & document management for mobile professionals. FedEx has established heavy foreign investments including hubs in Belgium, China, Hong Kong, Paris, Toronto, and Miami to Latin America.  FedEx competes primarily with United Parcel Service and with DHL Worldwide Express for the market of international and domestic delivery of parcels and freight.  Today, Federal Express is with annual revenue of 24.7 Billion as fast and reliable services of more than 3.3 million packages and documents each night and 7.5 million pounds of freight every day.  FedEx has more than 150,000 employees, 366 airports in 210 countries, 648 planes and 42,000 vehicles in its integrated global network, (


Federal Express is an express transportation company, founded in 1973 by Frederick W. Smith. During his college years, he recognized that the United States was becoming a service-oriented economy and needed a reliable, overnight delivery service company designed to solely transport packages and documents. He wrote a Yale term paper on this idea, and received a ‘C’. His professor thought it would never work. Fortunately for Frederick Smith, he didn’t take it to heart and ended up building that company he dreamed of. He found investors willing to contribute $40 million, used $8 million in family money, and received bank financing. He started Federal Express with over $80 million, making it the largest company of its time ever funded by venture capital.


Federal Express became successful so quickly because all their competition became weaker at the same time. They built a hub in Memphis, Tennessee, where all packages from the United States would be loaded on the correct transport and shipped out each night. FedEx become a $28.6 billion. corporation delivering peace of mind to its customers for more than 30 years. Their portfolio of services has changed, but one thing remains the same. They focused on the needs of our customers and the communities in which we live and work.

The FedEx Mission Statement

Federal Express is committed to our People-Service-Profit FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information services through focused operating companies competing collectively, and managed collaboratively, under the respected FedEx brand. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx companies will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. All corporate activities will be conducted to the highest ethical and professional standards. (FedEx Corporation 2005)


FedEx Vision

FedEx’s vision of global connectivity – since 1973, they have sought to connect the world with our time-certain express delivery service.  FDX Corp., a $28.6 billion holding company, provides comprehensive transportation, logistics, and supply chain management solutions on a worldwide scale. To satisfy worldwide demand for fast, time-definite, reliable distribution, Federal Express continues to build and refine a uniquely integrated, all-cargo express network.  This network relies equally on transportation infrastructure, information technology and dedicated Federal Express people for its seamless global operation. FDX and Federal Express, in particular hold a People-Service-Profit philosophy. The ‘People’ goal is the continuous improvement of management’s leadership. The ‘Service’ standard is 100 percent customer satisfaction. The ‘Profit’ goal is much like any other company’s goal, and is essential to long-term viability.

FedEx History

In 1971, the modern air/ground express industry was born in Little Rock, Ark by Frederick W. Smith.  In 1965, he wrote a term paper about the passenger route systems used by most airfreight shippers at Yale University. He added on his term paper some new research on resolving distribution system inefficiencies and developed the working idea of FedEx.  Smith chose the name Federal Express for the name feeling it was good at attracting public attention and had obvious name recognition potential. The company incorporated in June 1971, and began operations on April 17, 1973, (

On that first night of operation, Federal Express’ fourteen aircraft delivered 186 packages from Memphis to twenty-five U.S. cities, (  Mr. Smith selected Memphis for the company’s hub because of geography and weather.  Memphis was the geographical center for the target market cities in the small package delivery sector.  The Memphis International Airport was also willing to make necessary improvements for the new company and had additional hangar space available.

Even though Federal Express did not show any profit until July 1975, it had become the leading carrier of high priority packages in the express shipping industry it had created.  The company grew rapidly after the air cargo industry deregulated in 1977.  The deregulation permitted Federal Express to use much larger aircraft: Boeing 727’s; McDonnell-Douglas DC-10’s, and MD-11’s; and Airbus A-300’s and A-310’s.  Federal Express began advertising in 1974 with a budget of $150,000 in just six markets.  The advertising featured the fleet of aircraft with the slogan:  “Federal Express – A Whole New Airline for Packages Only.”  After the first commercial aired, the number of packages shipped jumped from 3,000 per night to 10,000 per night.  By November 1988, Federal Express’ package volume reached the 1 million package-per-night mark.

Federal Express had firmly established itself by the middle of the 1980’s.  They were the first U.S. company to reach the $1 billion revenue mark within 10 years of startup without mergers or acquisitions. During the 1980’s and 90’s, FedEx began concentrating on its international business.  Through a series of acquisitions, FedEx now serves over 210 countries on six continents.  FedEx is the world’s number one express shipping company.  They handle 3.3 million packages and documents every night and move 7.5 million pounds of freight daily.  They have the world’s largest all-cargo air fleet (648 planes) with the ability to lift 26.5 million pounds every day.  These planes service 366 airports around the world, flying over ½ million miles a day.  In the United States alone, their couriers drive over 2.5 million miles each day.  Worldwide, they have 150,000 employees, 1,400 Service Centers, 34,000 drop-boxes, and 7,800 authorized shipping centers,

Industry Analysis

FedEx revenue in 2004 was $6.98 billion in 2004 up 23% from $5.69 billion the previous year, operating income of $579 million, up from $200 million a year ago, and net income of $330 million, up from $128 million the previous year, ( During fiscal 2004, the company economy was sluggish. The current economic slowdown is hurting FedEx, UPS, DHL and the smaller players in the parcel and document delivery business. Economic conditions have deteriorated more the company anticipated.  The problem exacerbated because of high fuel price and the growing competition from UPS, DHL, and other smaller delivery companies, however on May 2005, FedEx posted third quarter earnings per share of $1.03, a 51 percent increase from a year ago. The increased earnings were due largely to a continued growth in International Priority shipments and ground deliveries, FedEx said. The company also reported a 9 percent rise in revenue on domestic express shipments with an average daily volume increase of 6 percent, (

Porter’s 5-Forces Model for FedEx


Porter’s Five Forces Model is used as a quick way to understand the pressures of the industry. Forces can be very weak, weak, moderate or powerful. This is a strong force in this industry because the competitors use price cuts to compete, there is a low cost and ease to switching brands, and the companies in this industry diversify and acquire other companies for strategic growth and synergy.

Threat of New Entrants

New entrants are potential competitors. New entrants are a weak force in the industry. The easier it is for new companies to enter the industry the greater the competition in the industry. New entrants will often attempt to break into the industry with low prices, innovative products, or new features and benefits. When it is difficult to enter an industry, the threats of new entrants is low. Another factor threatening potential entrants is trade tariffs and international regulations. Most companies currently in the industry have already established relations with foreign countries. New companies will have to prove themselves to foreign companies, suppliers, and customers. Any smaller company will not be able to achieve these right away, not allowing them to compete on prices.

Threat of Substitute Products

“All firms in an industry are competing, in a broad sense, with industries producing substitute products. ………. identifying substitute products is a matter of searching for other products that can perform the same function as the product of the industry.” — Michael Porter

A substitute product provides the same functionality but is not identical to potentially competitive products. Substitute products constrain industry profitability by limiting the selling price companies in the industry can charge. If package rate is too high, people will start using different service. Businesses and individuals that wish to ship cargo and packages can do it with other modes of transportation such as trucks, trains and boats. However, the customers that use air freight transportation usually desire convenience, speed, and low cost. Traditional transportation modes do not offer all three of these. Businesses and Individuals who want to ship documents can use e-mail, the Internet, and Facsimiles. Moreover, if the quality of the substitute is higher, buyers will switch to the substitute. That’s why more people fly than take the bus across country. Here are some suggested strategies and tactics you might consider to reduce the threat of substitute products.

Power of Suppliers

“Suppliers can exert bargaining power over participants in an industry by threatening to raise prices or reduce the quality of purchased goods and services.” — Michael Porter

Suppliers are a moderate force in the industry. Powerful suppliers drive down the profitability of companies in the industry because they can charge higher prices for the products and services they sell. Weak suppliers are not likely to bargain on price or impose demands on companies in the industry. Here are some suggested strategies and tactics you might consider to reduce the power of suppliers. The bargaining power of suppliers over an organization exercised through price fluctuations and threatening quality of goods and services.  FedEx suppliers are involved in vehicle manufacturers, airplane manufacturers, fuel suppliers, labor, airports, and shipping materials manufacturers.  However, once a company has invested in a supplier’s Internet procurement services, that supplier then becomes relatively powerful.  The customer then relies on the supplier for one of its most mission critical areas, obtaining supplies.

Buyers /Customers Power

                              “Buyers compete with the industry by forcing down prices, bargaining for                                     higher quality or more services, and playing competitors against each                            other — all at the expense of industry profitability.” — Michael Porter

Buyers/customers are a moderate force in the industry. Powerful buyers drive down profitability because they bargain for lower prices, demand better product features for the same price, and play one competitor against another. Weak buyers are not likely to be as price-sensitive or to impose demands on companies in the industry. Here are some suggested strategies and tactics you might consider to reduce the power of customers, whether they are individuals or organizations. The only difference is companies, such as Federal Express who have value-added services that allow a higher price. Also, the buyers of the services in this industry are reactionary. They do not know the technology before it happens. They become dependent on the technology, service and speed offered by the companies in this industry and will pay for it..

Rivalry among Competitors

“Rivalry among existing competitors takes the familiar form of jockeying for position — using tactics like price competition, advertising battles, product introductions, and increased customer service warranties.” — Michael Porter

Rivalry among competitors in the industry is powerful. Competitors can drive down industry profitability by cutting prices or offering more product features for the same price. When rivalry is most intense, competitors often compete head-to-head on price. When competition is disciplined and constrained by industry norms, rivalry is weak. Here are some suggested strategies and tactics you might consider to lower the intensity of rivalry with competitors. FedEx competitors include United Parcel Service, Airborne Express, Emery Worldwide, DHL Worldwide, BAX Global, and United States Postal Service. FedEx holds 46.5 percent, the largest portion, with UPS and Airborne Express as the largest competitors. FedEx is clearly a large, strong, and growing express transportation company.

Federal Express Corporation

“FedEx Corp. (NYSE:FDX) provides customers and businesses                                         worldwide with a broad portfolio of transportation, e-commerce and                                 business services with annual revenues of $29 billion, the company offers                                     integrated business applications through operating companies competing                               collectively and managed collaboratively, under the respected FedEx                          brand,”.

FedEx is a market leader in transportation, information, and logistics solutions. Federal Express Corporation provides strategic direction for five major operating companies FedEx Express, FedEx Ground, FedEx Custom Critical, FedEx Logistics/Freight. FedEx Trade Networks, FedEx Supply Chain Services, and FedEx Kinko’s. Each company operates independently, focused on its market segment, but also competes collectively under the powerful FedEx brand worldwide


FedEx Express

FedEx is the world’s largest express-transportation company, offers consumers the world’s most advanced and reliable global air/ground express distribution network. FedEx Express, a subsidiary of FedEx Corp., connects areas that generate 90% of the world’s gross domestic product in 24-48 hours with door-to-door, customs-cleared service and a money-back guarantee. The company’s unmatched air route authorities and infrastructure make it the world’s largest express transportation company, providing fast, reliable and time-definite transportation of more than 3.1 million items to 215 countries each working day. FedEx Express employs approximately 138,000 employees and has more than 50,000 drop-off locations, 643 aircraft and approximately 43,000 vehicles in its integrated global network, (


FedEx Ground & Home Delivery

FedEx Ground, the second largest small-package ground carrier in North America and operating unit of FedEx Corp. FedEx Ground, FedEx Home Delivery is dedicated exclusively to residential delivery. As of March 2005 FedEx Ground currently handles 2.8 million packages on a typical day and provides paychecks to more than 50,000 employees and contractor drivers. Annual revenue exceeds $4 billion, (

FedEx Ground drivers are independent contractors who purchase their white vehicles with company logos, and employ subcontractors to do the actual delivery. As FedEx Ground has grown, and booming and has become fierce rival to UPS.


FedEx Custom-Critical

FedEx Custom Critical, North America’s largest time-specific, critical-shipment carrier, and a subsidiary of FedEx Corp. [NYSE: FDX], has changed the names of two operating companies within its group, Passport Transport and Auto Trans Express, to FedEx Custom Critical Passport Auto Transport and FedEx Custom Critical Auto Trans, respectively, ( FedEx Custom Critical provides the fastest, door-to-door service available, with same-day or next-day delivery of urgent freight, valuable items or hazardous goods. The White Glove Services division recently created to meet the demands of fragile, hazardous, perishable, sensitive, irreplaceable or high-value freight.  The company’s Charter Air division offers an array of expedited air solutions to meet customer’s critical delivery times. FedEx Custom Critical provides 24/7 service, using its trucking fleet for ground-expedited service and providing an array of air options including exclusive-use charters.


FedEx Logistics/Freight

FedEx Freight is known for exceptional service, reliability and on-time performance. FedEx Freight provides service to virtually all U.S. zip codes, including Alaska and Hawaii. FedEx Logistics/Freight offers complete supply chain solutions targeted to customers in the aerospace, automotive, health care, high technology, industrial, and consumer products industries. The FedEx Freight Segment also includes FedEx Custom Critical, North America’s largest time-specific, critical shipment carrier; and Caribbean Transportation Services, the leading provider of airfreight forwarding services between the United States and Puerto Rico, (


FedEx Trade Networks

FedEx Trade Networks is a leading provider of international trade services specializing in U.S. and Canadian customs brokerage, international freight forwarding, transportation, consulting, and a variety of trade facilitation solutions. FedEx Trade Networks Inc. helps customers of all sizes solve the intricacies of shipping goods globally. FedEx Trade Networks offers innovative e-commerce products and services including EDI partnerships and Global Trade Data, a web-based tool that allows companies to track and manage imports and exports. As part of the FedEx family of companies, FedEx Trade Networks has the resources and support to help you conduct business anywhere in the world.


FedEx Supply Chain Services

FedEx Supply Chain Services offers a portfolio of services that helps turn supply chain management into a competitive strategy. By outsourcing these modular and scalable solutions to a trusted provider, you can focus on your core competencies, reduce costs, and improve customer service, ( FedEx Supply Chain Services provides transportation management, fulfillment and fleet services to improve the supply-chain performance of its customers, and offers process discipline through flexible and scalable solutions. Their service orchestrated delivery to specialized customs-clearance and returns programs, we have the resources and technology to quickly move your goods from one end of the supply chain to the other-and back again if needed. Customers demanding greater supply chain reliability and value can now look to FedEx Supply Chain Services for even more innovative solutions. FedEx Supply Chain Services provides transportation management, fulfillment and fleet services to improve the supply-chain performance of its customers, and offers process discipline through flexible and scalable solutions.


FedEx Kinko’s

FedEx Kinko’s a  new way  of business approaching  offering you our broadest range of services ever, FedEx Kinko’s has virtually everything your business needs to be more efficient, more effective and more productive. Their services includes high Speed Copies, Self-Serve Computer Station, Self-Serve Copies,  Color Copies, Offset Printing, Color Printing, Binding & Finishing, Faxing,  Laminating, Thesis Binding, Resumes, Presentations, Graphic Design, Laser Prints, Enlargements & Reductions.


Company Analysis

FedEx Corporate Culture

The company’s culture is the key for success. Corporate culture is the manifestation of organizational behaviors, and the right culture will help generate profit for your company. Corporate culture is powerful ways to transform your company into a high-performance organization. FedEx Corporate culture is a belief system of strongly shared core values universally shared by an organization’s membership.  FedEx has worked hard to build a culture that includes a history of strong internal financial controls and clear and transparent disclosures. FedEx is dedicated to the principle that customers are most important asset to their business. Their core philosophy that governs every activity at FedEx is People-Service-Profit (PSP). The P-S-P Philosophy is like an unbroken chain. There are no clearly definable points of entry or exit. Each link upholds the others and is in turn supported by them. The people link is supported by profit, which is supported by service, which is supported by people.


S.W.O.T Analysis

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and threats. SWOT analysis is an important tool for auditing the overall strategic position of a business and its environment. Strengths and weaknesses are internal factors, and opportunities and threats are external factors.


Company Strengths

FedEx is synonymous with overnight shipping. FedEx continues to differentiate itself with more options for its customers. FedEx historical strengths is as known customer service, reliability and efficiency, while redefining the future of the business services marketplace. FedEx Kinko’s is now the fourth core FedEx company, along with FedEx Ground, FedEx Freight and FedEx Express.  Federal Express operates on a global scale. They operate in 215 countries, (  They provide services that appeal to most of the world. They have such a large market in which to operate, and thus realize tremendous revenues. They can also achieve global economies of scale.

As FedEx businesses become more competitive in the global marketplace, information and technology have become increasingly important. Global competition has driven economic progress. FedEx sees innovation as the successful exploitation of new ideas and it is central to meeting this challenge. It involves investments in new products, processes or services and in new ways of doing business. FedEx have first-mover advantage in name recognition because of this innovation. This has helped them to remain the industry leader. FedEx has always been a leader in innovation of new technologies.  Technology and Federal Express uses and continues to search for new technology. They allow spending of $1billion a year, 10% of total revenues, for information technology, (

FedEx will always have competent in innovation, and exploitation of new ideas. The top managers are in charge of strategic direction. Frederick Smith built an industry leader, and kept it in that position since 1973. The FDX portfolio management strategy focuses on its core strength “Overnight express service”. FedEx as first mover in the industry has advantage in several areas. FedEx is a global express transportation company. FedEx advances in technology and communication throughout the company’s operations. FedEx is a great brand. Great brands provide a source of identification and an assurance of quality, package and documents arrived as promised. FedEx provided with more than just coast-to-coast package delivery service, they provided with a sense of security as “overnight delivery”. FedEx really works hard to making shipping your domestic or international package or document simple and straight forward.


Company Weaknesses

FedEx who developed the guaranteed overnight delivery idea set prices considerably above what customers had been paying. FedEx prices are across the board, higher than their competitors are. This can be a weakness if their customers do not perceive a difference between Federal Express and its competitors’ services. FedEx had a history of labor disputes with pilots association, this dispute is definitely an internal weakness. Labor disputes if the dispute affects a substantial part of an entire industry. If FedEx employees went on strike, their competitors UPS and DHL could gain an advantage

Company Opportunities

FedEx is the world largest express air cargo industry’s first direct flight from China to Europe, and continue to expand Central Japan. The company will provide daily service from China to Europe. FedEx leads the express industry in connecting our global customers with the world’s fastest growing market, China. Federal Express can continue to expand globally. Federal Express and the U.S. Postal Service created a strategic alliance in which USPS delivers FedEx packages to homes across the nation, and FedEx carries first class, Priority, and Express mail around the world. FedEx as one of the top two e-business innovators, and industry leadership in extending its online management tools to business customers.

“The company has rolled out a series of customer-facing, online and                               wireless applications that analysts say are integral to FedEx customers                            involved in e-business; aggressively pushed large customers onto the                                Internet; and continued to deploy cutting-edge technologies,” e-Week                               says. According to e-Week, “FedEx appears to be ahead of the competition                         in pushing such business-to-business innovation, (”.

Company Threats

Higher fuel prices are the threats for companies that haul freight by aircraft. Prices for jet fuel and gasoline have doubled in many areas in the past year, which is bad news for aircraft owners who measure fuel consumption in gallons per hour. Federal Express raised their prices and developed contracts with oil suppliers to cover fluctuating fuel costs and volatility of supply. Most airline cargos passing on the fuel cost to customers by adding a surcharge is the only option left to freight companies.

FedEx Business relays on the countries economic and political conditions, language, cultural and religious practices, and many other factors are often very different from what exists in the United States. It is subject to national laws and rules.  As a global company, they are subject to much more risk deepening impact on the global economy.

Shipping companies already well established in China. DHL International Ltd. holds more than 30% of Chinese shipping market, and UPS emphasized global network and stability creating an image worldwide.


FedEx Competitors

FedEx’s Top Competitors include United Parcel Service Inc. and Deutsche Post AG’s DHL, and U.S. Postal service. The companies are having a strong effect on each other, one is causing the other to follow suite by innovating technology.


United parcel Service (UPS)

UPS is the world’s largest package delivery company and a global leader in supply chain services. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide. With a fleet of 88,000 package cars, vans, tractors and motorcycles, UPS concentrates its transportation efforts in a variety of categories that include safety, technology and the environment, ( UPS concentrates its operations primarily domestic and international letter and package delivery. it is also a global provider of specialized transportation, logistics and financial services.

                        “UPS delivers packages each business day for 1.8 million shipping                                   customers to 6.1 million consignees in over 200 countries and territories.                                     During the year ended December 31, 2004, it delivered an average of                                     more than 14.1 million pieces per day worldwide. Its supply chain                                                 solutions capabilities are available to clients in 175 countries. UPS                                    operates a ground fleet of more than 88,000 vehicles, ranging from                           custom-built package cars to large tractors and trailers, and nearly 600                               airplanes, (”.

U.S. market is just one battleground in an intensifying global parcel war between the three express delivery giants. There are only a few companies that can provide global solutions to customers, and UPS is one of them, However, skeptics doubt that global growth will come quickly enough for UPS to offset weakness in its domestic package business, which still accounts for nearly three-quarters of sales.


Deutsch Post AG (DHL)

Deutsche Post has grown out of its mailbox. DHL Smart and Global Mail (formerly known as Deutsche Post Global Mail), provides mail handling and parcel delivery services. Through its DHL unit, the company is one of the world’s leading providers of express delivery and logistics services. The German government controls a 57% stake in Deutsche Post, (

DHL with annual revenues over $32 billion in 2004, DHL is the global market leader of the international express and logistics industry, specializing in providing innovative and customized solutions from a single source. DHL’s express service links 120,000 destinations in more than 220 countries and territories. The company maintains about 5,000 offices, and it operates a fleet of some 75,000 vehicles. DHL offers expertise in express, air and ocean freight, overland transport and logistics solutions, combine with worldwide coverage and an in-depth understanding of local markets.             Over 160,000 employees are dedicated to providing fast and reliable services that exceed customers’ expectations, (

Deutsche Post has grown out of its mailbox. Through its DHL unit, the company is one of the world’s leading providers of express delivery and logistics services. Deutsche Post, which does business as Deutsche Post World Net, remains Europe’s largest postal service provider, ( DHL provides traditional and same-day letter delivery, online bulk mail management, and mail process outsourcing. In addition, the company offers financial services, through majority-owned Deutsche Post bank.

United States Postal Service (USPS)

United States Postal Service (USPS) is America’s largest non-profit boating organization a government mailing service. They offer the most reasonable shipping rate than private companies (UPS, FedEx, DHL).

“Since 1775, the Postal Service has connected friends, families, neighbors                                     and businesses by mail. An independent federal agency visits 142                                     million homes and businesses every day and is the only service provider                                  delivering to every address in the nation. The Postal Service delivers more              than 46 percent of the world’s mail volume-some 206 billion letters,                                      advertisements, periodicals and packages a year-and serves seven million                                    customers each day at its 37,000 retail locations nationwide,                                                 (”.

FedEx Strategy

The Main Point Strategy

The unique FedEx operating strategy works seamlessly and simultaneously on three levels. Operate independently by focusing on our independent networks to meet distinct customer needs. Compete collectively by standing as one brand worldwide and speaking with one voice. Manage collaboratively by working together to sustain loyal relationships with our workforce, customers and investors,(

Strategic Vision

FedEx is acting on common vision of an integrated, end-to-end operating resource management system that leads to recommendations for overall positioning, selecting marketing objectives, reformulating strategic vision and segmentation approaches. FedEx focused on three primary growth strategies. Improve service levels, lower unit costs, improve customer access and connectivity, and establish international leadership and sustain profitability.

The major Strategy

A collaborative sales process that leverages their shared customer relationships, aggressive global marketing of the broad FDX portfolio to targeted prospective customers, and a strategic application of information systems to reduce costs Sales & Sales Growth. Federal Express is a very large company, and their sales are shown in Figure 2 on Page 1 of the Appendix. Federal Express had revenues of $13.3 billion in 1998, grown 15 percent from 1997. Federal Express has also had steady growth for the past five years, signifying a very strong company.


Customers, Markets, and Services

Federal Express serves business-to-business, business-to-individual and individual-to-individual accounts. Federal Express’ markets include over 200 countries where 90 percent of all the world’s revenues originate. Federal Express provides both document and freight deliveries as well as supporting services.

Federal Express was one of the first companies to recognize that manufacturing plants were shifting from developed to developing countries where labor costs were lower.  They recognized the potential profitability of these international markets and the need for domestic companies to acquire the parts developed by their foreign manufacturing plants for local assembly.  Federal Express took significant steps in the early 1980’s to expand its global reach to accommodate those potential market areas.  After several international acquisitions, Federal Express began service to Europe and Asia in 1984.  Regularly scheduled service to Europe began the following year, and direct scheduled cargo service to Japan began in 1988.

Federal Express’s most significant acquisition was realized in 1989 when they bought Tiger International, Inc. and Flying Tigers.  This addition made them the world’s largest full-service all-cargo airline.  The Flying Tigers acquisition brought in routes to 21 countries, all their 747 and 727 aircraft, their worldwide facilities, and their international Air Freight expertise.  The Flying Tigers divisional headquarters was moved from Honolulu to Hong Kong to reinforce Federal Express’ commitment to the Far East market.

Federal Express continued their expansion plan for strategic development in the Pacific Rim.  They leveraged their way into China by acquiring Evergreen International Airlines’ all- cargo route authority.  Under this authority, Federal Express became the sole U.S.-based all-cargo carrier with aviation rights to serve China.  Federal Express now operates ten weekly flights into China, soon to be eleven, although they recently lobbied for twelve (recently the competition, UPS, was awarded six new flights into China and FedEx was denied an additional flight by the Department of Transportation (FedEx 2000e). Although trailing Fed Ex in the number of flights, UPS is now in a more competitive position.  Fed Ex continues to lobby and compete for coveted route authority).

In 1995, Federal Express opened its Subic Bay hub in the Philippines, permitting greater comprehensive service to the Pacific Rim Markets.  They launched an intra-Asian overnight service through FedEx AsiaOne.  This network is based on the same hub-and-spokes model used so successfully in their U.S. operations. In 1981, FedEx first introduced express delivery service to Latin America and the Caribbean by locating an office in Puerto Rico.  They continue to focus on international growth in South and Latin America by bringing in more aircraft, expanding freight services and providing direct routes to more countries (Fed Ex website 2001). In October of 1997, they announced plans to build a new hub at Miami International Airport to service flights from Latin America and the Caribbean as well as provide an important link in the company’s global network.

Today, FedEx AsiaOne serves 16 major economic and financial centers in the Pacific Rim region and maintains regional headquarters in Hong Kong, Tokyo, and Singapore.   Federal Express employs over 5,000 people throughout 30 Asia-Pacific countries and territories. They service over 50 countries throughout the South and Latin American regions and continue to expand their role in Latin America by providing more services and a broader network.

In July of 2000, they launched new “FedEx International First” service with 8am delivery from Argentina, Brazil, Chile, Mexico, Panama, Uruguay, Venezuela, Costa Rica and Guatemala to the U.S. and Europe. FedEx now provides next-day service between the select Latin American countries and North America, as well as 48-hour service to Europe and South America all backed by their money-back guarantee and customers may track their items with FedEx’s advanced tracking technology (FedEx 2000f). In January, FedEx took another step to strengthen their market in Europe.  An alignment with La Poste Group, one of the world’s leading postal organizations, will benefit FedEx customers by enabling them to take advantage of the ground infrastructure established within Europe by La Poste Group, while allowing La Poste Group customers the benefit of international access established by FedEx’s air network (FedEx 2000d). This is another strategic development since the opening of their hub at Roissy-Charles de Gaulle in September and the launching of the FedEx Euro One Network.  “Our alliance with the La Poste Group is consistent with our global mission to strengthen our position as a leading supply chain solution provider for our customers worldwide.”  President of FedEx in Europe states, “FedEx is experiencing strong momentum in the European market, with excellent growth rates, this agreement will build on that momentum with potential new sources of volume and revenue” (FedEx 2000d).

In the last few weeks, FedEx has launched several new flights to connect the world.  Five additional flights per week between Europe and Asia, further expansion from Europe to extensively cover the Nordic regions and three flights per day connecting Europe, the Middle East and India. This type of expansion has placed FedEx in a position of international preeminence, serving over 210 countries in Africa, Asia, Australia, Europe, North and South America. FedEx’s absolute commitment to the domination of the international package delivery industry is evidenced by their heavy foreign investments throughout Asia, the EU and South America (FedEx 2000d).

Further Development of Asia, South America and the EU

FedEx also recognizes the profit potential of expanding their shipping services into the international e-commerce market.  Six months ago they launched a cutting-edge web application program interface called WebAPI throughout Latin America and the Caribbean.  Once this program is integrated into the website of an e-commerce business they can enhance and simplify the shipping process by providing immediate shipping information and tracking.  When a customer places an order, shipping and billing information is automatically forwarded to the vendor.  Businesses can sell and distribute their products immediately, worldwide, once they have incorporated the FedEx WebAPI software into their systems (FedEx 2000a).

FedEx customers in various countries now have full access to a variety of other services and country-specific information, in their own native language, thanks to the newly redesigned  The country pages provide customers with a wealth of information at their fingertips.  Including online FedEx account registration; the nearest drop off location; service and packaging information for every country; FedEx consumer information, including company history, description of services and recent press releases; and e-mail for comment, concerns, questions and important contact numbers (FedEx 2000a).

Key personnel, especially in IT, in their overseas divisions are from that country and often multilingual.  This staffing policy monopolizes on their understanding of the population’s perspective about business practices, labor law and the government’s sentiment (Maxfied 2001).  Employees in the Miami hub are bilingual to aid them in their communications with South and Latin American countries.  Many employees in South and Latin America are fluent in Spanish, Portuguese and English.

Alliance Strategy

FedEx is no longer a lone package delivery provider; they work as partners in a variety of beneficial contractual alliances.  Some agreements are between FedEx and other carriers such as the United States Postal Service and the Uruguayan Postal Service, to an end that the customers of both carriers receive improved delivery services.  Some partnerships are with other service providers like NETSCAPE and Nextlinx, resulting in FedEx’s ability to provide their own customers new products.  Other alliances are between FedEx and businesses that initially relied on FedEx only for carrier services but also receive logistical support, supply and inventory control expertise; and assistance in establishing and building their e-commerce business.  The ties between FedEx and the Fujitsu Corporation are so integral, their connection is practically seamless.  Although FedEx has many types of alliances, those with other carriers are the most visible to the general public On January 10, 2001, FedEx Express and the U.S. Postal Service (USPS) approved two service contracts – one for domestic air transportation of postal express shipments, the other for placement of FedEx drop-boxes at U.S. post offices. This public-private alliance will provide greater choice, reliability and convenience for American consumers (FedEx 2000a).

FedEx expects the two agreements that make up this contract to bring in $7 billion during the next seven years.  The contract includes the following: FedEx Express, will provide air capacity for transportation of certain postal services. The air transportation agreement is expected to take effect in late August and will generate approximately $6.3 billion in revenue. FedEx Express will have the option to place a self-service drop box in every U.S. postal location. This non-exclusive retail agreement will be launched with an operational test in February, and FedEx expects to place more than 10,000 drop-boxes throughout the country within the next 18 months. FedEx expects this to produce approximately $900 million in increased drop box revenues.  At the same time FedEx was making this agreement with our own postal service, they were also making similar arrangements with foreign postal services (FedEx 2000a).

Marketing Strategies

FedEx strategies are consistent with its corporate mission of having its customers be completely satisfied at the end of every transaction.  It is noted as a market leader because they excel in four strategic techniques: FedEx is operationally excellent; they have developed customer intimacy; they offer their unique value / specialty of providing high service reliability at a very low cost; and they use a variety of advertising campaigns.

To be operationally excellent means, that a company provides middle-of the-market products at the best price, with the fewest inconveniences.  This is a basic marketing technique that must be practiced by a true market leader.  FedEx offers a very wide range of products and services that are convenient to its customers.  Customers can access services electronically, through an account manager over the telephone, or at its service locations.  Packages are delivered to homes and businesses.  Customers can receive packages overnight, within two or three days or they can arrange to have packages delivered by appointment.  FedEx knows that it has an excellent operation because it is reflected in its increasing growth in revenue from year to year.

Customer intimacy means that a company has cultivated relationships and they provide not what the market wants, but what specific customers want.  This is another marketing technique that must be practiced.   FedEx listened to customers who were very concerned about getting time-definite delivery and less concerned about the mode of transportation.  These customers were prepared to pay to get their packages delivered on time.  Today, FedEx is considered to be an industry innovator and market leader in the package delivery business.

Many companies have their own unique value or specialty that will help it stand out from other companies in the same market.  FedEx offers value to its customers by providing them with a very high rate of service reliability at a reasonably low, competitive cost.  All the programs offered by FedEx communicate their value to every customer.  The FedEx name is synonymous with service reliability because of its state-of-the-art delivery tracking system.  Customers can do to-the-minute tracking on all packages by either using software that allows them to go directly to the FedEx database or through contact with customer service.

FedEx uses a variety of advertising techniques for marketing its products.  These include direct mail, telemarketing, attendance at trade shows, and a toll-free product hotline.  When they start service in a new city, FedEx first sends a team of 4 or 5 sales persons to introduce business leaders to the services that FedEx offers.  This is accompanied with ads that are placed in local media (radio and television) and direct mail that is sent to potential customers.  FedEx publishes a magazine, Via FedEx, which is geared towards the secretaries and administrative assistants who are usually the primary shipping decision makers.

A trend among Air Freight shippers is to use the Internet for communication with customers and even obtaining shipping contracts with companies selling on the Internet. This alliance with the fastest-growing industry will bring exponential growth to the Air Freight industry, above and beyond what they would normally have realized without this. This industry should remain attractive, with concentration on competition for market share, service differentiation, and brand image. Current Advertising has been aimed at being better than the competitor for different reasons.

Financials Analysis

There are several factors to look at when judging the financial strength of FedEx, as with any company.  Profitability is a major factor for obvious reasons.  FedEx has to remain profitable in order to maintain and grow the business.  Liquidity, another factor, is the ability to convert assets into cash equal to its current market value.  Liquidity can be a valuable resource for funds when a company hits on hard times.  Asset management ratios go hand-in-hand with liquidity.  These ratios indicate how efficiently a firm uses its assets to grow the business through expansion and sales.  Debt management, also known as financial leverage management, is the company’s ability to manage current and future debt and how much debt is incurred through financing of new projects.  Also as a part of debt management is the firm’s capacity to meet short-term and long-term obligations (Moyer, et al., 69).


Company profits show how well a firm is making financial decisions.   Financial measures used to account for profitability are Return on Equity (ROE), Return on Invested Capital (ROIC) and Return on Assets (ROA).  These measure how effectively management is making decisions about profits and sales, assets and stockholders’ investments.  Over the last five years, FedEx has acquired a ROE that is 19% lower than the industry average.  But, in 2000, FedEx’s ROE was 14.91%, while the industry’s was 14.74%.  This is largely due to the fact that FedEx does not pay dividends to its shareholders.  It, instead, reinvests the money into expanding the business (Investments from 2001).

Their ROA and ROIC have also been slightly lower than the industry over the past five years due to FedEx’s aggressive nature in buying smaller companies.  Because FedEx uses so much of its own capital to invest in these companies, and because it takes time to restructure the companies, it is not a big surprise that the returns would be lower.   Looking at the most recent year’s returns, FedEx’s numbers are definitely on the rise.  In 2000, ROA was slightly higher at 6.13% than the industry at 5.67%.  ROIC was 8.16%, which beats the industry average of 7.42% (Quicken Investments for Excite 2001).


To determine FedEx’s liquidity we use a current ratio.  This ratio looks at current assets vs. current liabilities to determine what amount of their assets can be converted to cash to pay off debt.  A firm in excellent condition would have a 1.5:1 ratio.  FedEx has maintained 1.34 against the industry average of 1.46.  FedEx is in good shape with this ratio (Market Guide from 2001).

Another ratio used to measure liquidity is the quick ratio.  This method removes inventories from the current assets, which provides a better measure of liquidity than the current ratio.    FedEx’s quick ratio is 1.10 versus the industry’s ratio of 1.23.  FedEx does a fairly decent job of managing its assets and liabilities so that it has a balanced amount of liquidity.  It is possible to have too much liquidity, which can be burdensome when trying to obtain short-term and long-term loans, but FedEx does not have this problem (Market Guide from 2001).

As a whole, FedEx has maintained an acceptable liquidity state for several years.  The individual companies under FedEx have all had differing liquidity states, but all have been reasonable.  Due to the fact that its long-term debt is minimal, FedEx’s liquidity is slightly higher than the industry’s.  At the end of May, ’00, cash and cash equivalents were $89 million for the whole company.  By August 31st they totaled over $100 million.  FedEx has, for the past 5 years, always had between $85 and $132 million in cash and cash equivalents.

“Cash flow from operations and FedEx’s commercial paper program and revolving bank credit facility will adequately provide for the Company’s working capital needs for the foreseeable future.”  These capital resources provide FedEx necessary flexibility “to access the most efficient markets for financing capital acquisitions, including aircraft, and are adequate for the Company’s future capital needs” (Quicken Investments for Excite 2001).

Asset Management

Asset management is used to measure how well the company reinvests in itself and other companies to generate sales and expand business.  It is very apparent that FedEx does an excellent job of this.  It is difficult to open a newspaper or see the news without hearing about FedEx buying a smaller company to expand sales in this and other countries. Two methods are used to measure asset management: inventory turnover and asset turnover.   The inventory turnover ratio is determined using the cost of sales over average inventory.  FedEx has an inventory turnover ratio of 5.82, which is considerably lower than the industry’s ratio of 8.00.  This means FedEx has a larger investment in inventory relative to the sales being generated than the average company in this industry (Market Guide from 2001).

Total asset turnover is sales divided by total assets.  This ratio is used to measure how well a firm uses all its resources to generate sales.  FedEx’s asset turnover ratio is 1.62, while 1.53 is the industry’s ratio.  So, even though they may have a little too much inventory on hand, FedEx does well in generating revenues from all assets including inventory (Market Guide from 2001).

Debt Management

FedEx’s debt/equity ratio is one reason why analysts consider the company to be strong.  This ratio measures the amount of financial leverage FedEx uses when it finances any assets with fixed-charge financing.  Over the past five years it has averaged .40, which is 37.3% lower than the industry average.  That means the company may not be as financially constrained by interest payments as its competitors.  

Financial Indicators

We use several other financial ratios to determine the health and well being of publicly traded companies.  One of those that is most frequently used to determine stock value is the Price-to-Earnings (P/E) ratio (figure 9).  This ratio indicates how much is at stake for the stockholder in the company.  In figure 9 we find that FedEx is slightly below the industry average and half that of the S&P 500 average. This low P/E may flag FedEx as a riskier investment than, say UPS, or even TNT Group.  It may also indicate that FedEx has lower growth prospects than the other competitors with a higher P/E.

Another set of ratios that are important to investors is the dividend-policy ratios.  These are the payout ratio and the dividend yield.  The payout ratio is the percentage of net income paid to shareholders as dividends.  Lower payout ratios are better because the companies have a greater cushion to continue dividends when times are hard.  In figure 10 we find that FedEx has no payout ratio.  That is because FedEx does not provide dividends.  This is perhaps the one major fault with FedEx management policy.

Several analysts suggest that any company that doesn’t pay cash dividends is not worth investing in. For a short-term investment this may be true.  Short-term investments are usually made to generate income.  But, for the long-term investor, FedEx is an ideal candidate to add to his portfolio.  There is plenty of evidence to indicate that FedEx is doing very well and will continue to grow and be profitable in the years to come.  And by not paying dividends, FedEx puts that money back into the company and uses it to invest in new ventures and growth.  FedEx has acquired several smaller companies in recent years to open up new business lines and support the growth of existing lines.  This is part of their strategic plan to build a solid foundation of networked businesses that support and work with each other.  FedEx may consider marketing themselves as a strong long-term investment.  This will generate new revenues that they can turn around and invest in their current and new business.

Because of the purchases of other companies, FedEx has acquired a substantial amount of short-term and long-term debt in recent years.  While the company is not in any immediate financial danger, having too much debt can cause problems.  It can affect future purchases, the ability to acquire new debt and liquidity.  This would cause FedEx’s numbers to change drastically for the worse.  We recommend that FedEx seriously manage their debt and maintain a good ratio here.  Having a strong team of financial and business managers is key.  FedEx might want to use some of its assets to pay down a portion of the debt before making anymore purchasing decisions.  This will lower their debt while maintaining their strong liquidity ratios.  It will position them as a strong corporation in the industry and give investors peace-of-mind that FedEx can manage and maintain their business now and into the future.

As stated previously, many financial advisors believe FedEx to be a poor investment solely because it does not pay dividends.  FedEx has good reason for not paying dividends now while it is establishing itself as a powerhouse in the transportation industry.  As another recommendation, we suggest FedEx consider paying dividends in the future.

Something to remember is a company that does not pay dividends is looked at as not as strong as those that do pay dividends.  A company that starts off paying high dividends and then later has to cut back because of cash flow or any other reason, is looked at as if it were on the verge of going under.  This hurts the company because investors panic and pull their money, causing stock to drop considerably and quickly.  As part of our recommendation on paying dividends, we suggest FedEx start out slowly, paying small monthly dividends and perhaps a yearly bonus based on earnings and profit.  That way FedEx can control what it pays out and maintain revenues and cash flows.  FedEx can gradually raise the amount it pays on dividends each year or every few years and slowly do away with the yearly bonus.  This allows them time to adjust to paying out

FedEx Financial Situations

For the full fiscal year, FY00, FedEx Corp. reported earnings of $2.32 per diluted share.  This was up 10% from $2.10 per share in 1999, which included $91 million of strike contingency costs.  Additional consolidated results for the fiscal year:

  • Revenue of $18.3 billion, up 9% from $16.8 billion the previous year
  • Operating income of $1.22 billion, up 5% from $1.16 billion a year ago
  • Net income of $688 million, up 9% from last year’s $631 million

“Our unparalleled global express network is delivering very strong growth, particularly in Asian and European markets,” said Frederick W. Smith, Chairman, President and CEO. “Revenue from our premium FedEx International Priority® service grew 21% in the fourth quarter and 18% for the full year (FedEx Corporation 2000a).

“FedEx is well positioned for continued growth, as businesses large and small are increasingly relying upon us to streamline their supply chain and reduce inventory costs through innovative transportation, logistics and information solutions,” said Smith (FedEx Corporation 2000a).

Alan B. Graf, Jr., Executive Vice President and Chief Financial Officer commented, “In the fourth quarter, the average daily volume growth rate improved at FedEx Express, with growth in U.S. domestic express traffic reaching its highest level in more than a year. Fuel prices resulted in $84 million in additional expense during the quarter and $273 million for the full fiscal year.  The increase in fuel expense in the fourth quarter was offset by revenue generated by fuel surcharges at FedEx Express, which increased from 3% to 4% in April” (FedEx Corporation 2000a).

“In fiscal 2001 FedEx expects to improve growth and profitability largely through new initiatives that are allowing us to offer the entire spectrum of FedEx services through a single point of access. We also intend to better serve small and medium sized businesses by giving them more choices and easy-to-use, information-rich solutions to meet all their shipping needs–from express to more economical ground-based transportation. While there will be increased expenses resulting from the new initiatives, particularly in the first quarter, we anticipate another record year for sales and profit as well as improving returns and cash flow.” (FedEx Corporation 2000a)

The company completed its 15 million-share repurchase program during the fourth quarter.


The FedEx organization has worked diligently here in the United States to establish a positive image for their dedication to customer service, dependability and innovative technology.  FedEx demonstrates their commitment to refining its services to provide customers with the fastest and most reliable express delivery in the industry and they will need to adopt this philosophy internationally. They are known for their highly satisfied and loyal employees and they mold exemplary management with a desirable skill set.  FedEx trains great executives that are accustom to fast growth, complex business models, and global businesses and have a maniacal focus on the customer (Hamilton 1999).

While focusing on global expansion and growth, Fed Ex will have the challenge of duplicating this successful business style abroad while remaining sensitive to cultural differences.  They must be willing to change and adapt in a foreign market while reaching their goal.  U.S. executives must be able to communicate with and gain the respect of local management and staff.  They must teach and convey the importance of customer service, on-time deliveries and dedication while at the same time creating job empowerment and a pleasant work environment.  Localized management that is empowered to make their own decisions is in the best position to evaluate their capability of achieving success while remaining within corporate strategy (Eisenhardt and Sull 2001).  A former employee proclaims, “I cried when I left Fed Ex”, that is what I call job satisfaction (Hamilton 1999).

FedEx organization deals with the formal structure, internal working, and external environment of complex human behavior within organizations. Based on the FedEx history, company analysis, industry analysis and performance analysis, I have the following recommendations for Federal Express. Ensure that the employees, especially pilots, are well compensated. Since Federal Express is a service company, employees are critical to its success. Place pilots’ salaries at or above the industry average. They need to maintain a strong presence on the Internet, in case of a shakedown, and find ways to make their e-commerce user-friendly and profitable. They need to keep prices within 10 % of their competitors’ prices, or make sure that their customers view their service as worth the price. (  FedEx company framework of organizational procedures is to ensure stability, predictability, and reliability of performance; yet, with no stability or predictability in the environment these theories only fall short of their expectations.




FedEx Historical Timeline, (n.d). Retrieved on March, 28, 2004.,

FedEx Investor Relations, (March 17, 2005), third Quarter report Earnings Releases             Memphis, Tenn.,

FedEx Express, (March 1, 2004),

FEDEX CORP, (Jul-2004) FedEx 10-K  Annual Report,   

Bourdeau, Marie-Claude; Loch, Karen D.; Robey, Daniel; Straud, Detmar, “Going

Global: Using Information Technology to Advance the Competitiveness of the

Virtual Transnational Organization,” Academy of Management Executive,

November 1998.

Cetron, Marvin J., Ph.D., “Twelve Critical Trends That Will Keep Federal Express Flying High in the Future,” August 1999.

Federal Express Organizational Commitment Study, Employee Loyalty At FedEx,

Human Resources Analysis, December 1999.

Henriott, Lisa, “Transforming Supply Chains Into e-Chains,” Supply Chain Management

Review Global Supplement, Spring 1999.

Intranet:  History and Communications Relations, “A Brief Overview of Our History,”

Federal Express Intranet (, 1996

Intranet: “FedEx Extends Brand to Family of Services,” Federal Express Intranet

(, Monthly updates.

Intranet:  ITD Homepage, “Employee Involvement Begins in ITD’s Competency

Modeling Project, Federal Express Intranet (, Monthly updates

Mintzberg, Henry, “The Fall and Rise of Strategic Planning,” Harvard Business Review,

January-February 1994.

Talisman Technologies, Federal Express Recruiting Project, June 1997








2004 Transportation Companies Ranked by Revenue

Company                                                                                 Market Cap

United States Postal Service (USPS)                                     68, 996.00M

Deutsch Post AG (including DHL)                                        51,739.00M

Deutsche Bahn Aktiengeselschaft                                         35,431.80M

United parcel Service                                                             36, 582.00 M

Société Nationale des Chemins de Fer Français                    28,270.90 M

FEDEX CORP                                                                        24.700.00M





FDX Pvt1 UPS Pvt2 Industry
Market Cap: 28.59B N/A 81.65B N/A 463.54M
Employ­ees: 240,000 160,7541 384,000 707,4852 4.00K
Rev. Growth (ttm): 9.90% N/A 9.20% N/A 16.20%
Revenue (ttm): 28.69B 27.57B1 36.58B 69.00B2 1.20B
Gross Margin (ttm): 28.00% N/A 30.58% N/A 33.04%
EBITDA (ttm): 3.87B N/A 6.53B N/A 81.82M
Oper. Margins (ttm): 8.42% N/A 13.64% N/A 5.51%
Net Income (ttm): 1.41B N/A 3.33B 3.07B2 36.97M
EPS (ttm): 4.624 N/A 2.931 N/A 0.88
PE (ttm): 20.47 N/A 24.91 N/A 19.05
PEG (ttm): 1.19 N/A 1.58 N/A 1.19
PS (ttm): 1.00 N/A 2.25 N/A 0.48



Financial Analysis


Valuation Ratios
Valuation Ratios Company Industry Sector S&P 500
P/E Ratio (TTM) 20.79 20.84 25.25 21.63
P/E High – Last 5 Yrs. 35.29 35.27 61.85 42.10
P/E Low – Last 5 Yrs. 16.06 16.05 15.75 15.68
Beta 0.57 0.60 0.62 1.00
Price to Sales (TTM) 1.02 0.99 1.73 2.91
Price to Book (MRQ) 3.18 3.19 3.48 3.96
Price to Tangible Book (MRQ) 4.62 4.58 4.28 7.16
Price to Cash Flow (TTM) 10.25 10.37 13.85 14.92
Price to Free Cash Flow (TTM) 26.08 26.08 35.52 25.56
% Owned Institutions 74.56 68.29 55.41 65.42


Dividends Company Industry Sector S&P 500
Dividend Yield 0.29 0.29 1.26 2.09
Dividend Yield – 5 Year Avg. 0.10 0.10 1.05 1.59
Dividend 5 Year Growth Rate NM -100.00 13.27 9.06
Payout Ratio (TTM) 5.78 5.48 22.33 29.24





Growth Rates
Growth Rates(%) Company Industry Sector S&P 500
Sales (MRQ) vs Qtr. 1 Yr. Ago 21.07 21.71 19.34 17.65
Sales (TTM) vs TTM 1 Yr. Ago 22.09 21.88 15.98 15.85
Sales – 5 Yr. Growth Rate 8.06 8.83 7.81 9.78
EPS (MRQ) vs Qtr. 1 Yr. Ago 50.66 57.27 13.03 16.83
EPS (TTM) vs TTM 1 Yr. Ago 98.63 99.55 36.56 24.82
EPS – 5 Yr. Growth Rate 5.60 4.96 18.53 13.63
Capital Spending – 5 Yr. Growth Rate -6.41 -5.95 0.82 2.86




Financial Strength
Financial Strength Company Industry Sector S&P 500
Quick Ratio (MRQ) 0.83 0.84 1.22 1.21
Current Ratio (MRQ) 1.02 1.04 1.48 1.70
LT Debt to Equity (MRQ) 0.27 0.31 0.50 0.63
Total Debt to Equity (MRQ) 0.37 0.41 0.57 0.79
Interest Coverage (TTM) NM 5.60 16.32 11.8



Profitability Ratios
Profitability Ratios (%) Company Industry Sector S&P 500
Gross Margin (TTM) 28.00 29.11 31.56 46.01
Gross Margin – 5 Yr. Avg. 27.87 29.06 31.47 45.53
EBITD Margin (TTM) 13.50 13.03 18.73 21.65
EBITD – 5 Yr. Avg. 12.39 11.84 18.44 20.37
Operating Margin (TTM) 8.42 8.12 12.69 21.29
Operating Margin – 5 Yr. Avg. 6.19 5.79 11.89 18.31
Pre-Tax Margin (TTM) 7.83 7.51 10.45 18.16
Pre-Tax Margin – 5 Yr. Avg. 5.58 5.17 10.23 17.11
Net Profit Margin (TTM) 4.93 4.74 7.43 13.37
Net Profit Margin – 5 Yr. Avg. 3.47 3.36 6.62 11.43
Effective Tax Rate (TTM) 37.06 36.54 33.93 30.29
Effective Tax Rate – 5 Yr. Avg. 37.67 38.08 35.80 33.46




Management Effectiveness
Management Effectiveness (%) Company Industry Sector S&P 500
Return On Assets (TTM) 7.26 7.17 6.93 7.40
Return On Assets – 5 Yr. Avg. 5.35 5.15 6.47 6.63
Return On Investment (TTM) 9.80 9.79 9.01 11.17
Return On Investment – 5 Yr. Avg. 7.00 6.73 8.41 10.50
Return On Equity (TTM) 16.84 17.05 15.39 19.47
Return On Equity – 5 Yr. Avg. 12.02 11.59 14.73 18.75




Efficiency Company Industry Sector S&P 500
Revenue/Employee (TTM) 119,538 129,240 252,216 747,493
Net Income/Employee (TTM) 5,888 5,950 28,793 99,408
Receivable Turnover (TTM) 9.30 10.18 14.41 10.20
Inventory Turnover (TTM) 82.62 81.25 45.64 13.16
Asset Turnover (TTM) 1.48 1.54 1.12 0.96




Income Statement | Balance Sheet | Cash Flow
12 Months Ending 05/2004 05/2003 05/2002 05/2001 05/2000
In Millions of U.S. Dollars (except for per share items)
Revenue 24,710.0 22,487.0 20,607.0 19,629.0 18,256.9
Other Revenue
Total Revenue 24,710.0 22,487.0 20,607.0 19,629.0 18,256.9
Cost of Revenue 10,732.0 9,887.0 8,942.0 9,019.0 8,283.0
Gross Profit 13,978.0 12,600.0 11,665.0 10,610.1 9,973.9
Selling/ General/ Administrative Expenses 10,728.0 9,778.0 9,099.0 8,263.4 7,598.0
Research & Development N/A N/A N/A N/A N/A
Operating Income before Depreciation 3,250.0 2,822.0 2,566.0 2,346.7 2,375.9
Depreciation/ Amortization 1,375.0 1,351.0 1,364.0 1,275.8 1,154.9
Interest Income 20.0 0.0 0.0 0.0 0.0
Unusual Income (435.0) 0.0 119.0 0.0 0.0
Other Income, Net (5.0) (15.0) (22.0) 0.6 22.7
Total Income Avail. for Interest Expense 1,455.0 1,456.0 1,299.0 1,071.5 1,243.8
Interest Expense 136.0 118.0 139.0 144.0 106.1
Income Before Tax 1,319.0 1,338.0 1,160.0 927.6 1,137.7
Income Tax 481.0 508.0 435.0 343.2 449.4
Minority Interest 0.0 0.0 0.0 0.0 0.0
Net Income from Continuing Operations 838.0 830.0 725.0 584.4 688.3
Net Income from Discontinued Opers. 0.0 0.0 0.0 0.0 0.0
Net Income from Total Operations 838.0 830.0 725.0 584.4 688.3
Extraordinary Income / Losses 0.0 0.0 0.0 0.0 0.0
Income from Cum. Effect of Acct Chg 0.0 0.0 (15.0) 0.0 0.0
Income from Tax Loss Carryforward 0.0 0.0 0.0 0.0 0.0
Other Gains/Losses 0.0 0.0 0.0 0.0 0.0
Net Income 838.0 830.0 710.0 584.4 688.3
Normalized Income 1,273.0 830.0 606.0 584.4 688.3
Preferred Dividends 0.0 0.0 0.0 0.0 0.0
Net Income Available for Common 838.0 830.0 725.0 584.4 688.3
Preferred Dividends 0.0 0.0 0.0 0.0 0.0
Basic EPS from Continuing Opers. 2.80 2.79 2.43 2.02 2.36
Basic EPS from Discountinued Opers. 0.00 0.00 0.00 0.00 0.00
Basic EPS from Total Operations 2.80 2.79 2.43 2.02 2.36
Basic EPS from Extraordinary Inc. 0.00 0.00 0.00 0.00 0.00
Basic EPS from Cum Effect of Acct. Change 0.00 0.00 (0.05) 0.00 0.00
Basic EPS from Tax Loss Carryf’d. 0.00 0.00 0.00 0.00 0.00
Basic EPS from Other Gains (Losses) 0.00 0.00 0.00 0.00 0.00
Basic EPS, Total 2.80 2.79 2.38 2.02 2.36
Basic Normalized Net Income/Share 4.25 2.79 2.03 2.02 2.36
Diluted EPS from Continuing Opers. 2.76 2.74 2.39 1.99 2.32
Diluted EPS from Discountinued Opers. 0.00 0.00 0.00 0.00 0.00
Diluted EPS from Total Operations 2.76 2.74 2.39 1.99 2.32
Diluted EPS from Extraordinary Inc. 0.00 0.00 0.00 0.00 0.00
Diluted EPS from Cum Effect of Acct. Change 0.00 0.00 (0.05) 0.00 0.00
Diluted EPS from Tax Loss Carryf’d. 0.0 0.0 0.0 0.0 0.0
Diluted EPS from Other Gains (Losses) 0.00 0.00 0.00 0.00 0.00
Diluted EPS, Total 2.76 2.74 2.34 1.99 2.32
Diluted Normalized Net Income/Share 4.19 2.74 2.00 1.99 2.32
Dividend Paid Per Share 0.22 0.20 0.00 0.00 0.00




Income Statement | Balance Sheet | Cash Flow
12 Months Ending 05/2004 05/2003 05/2002 05/2001 05/2000
In Millions of U.S. Dollars (except for per share items)
Cash and Equivalents 1,046.0 538.0 331.0 121.3 68.0
Marketable Securities 0.0 0.0 0.0 0.0 0.0
Receivables 3,027.0 2,627.0 2,491.0 2,506.0 2,547.0
Inventories 249.0 228.0 251.0 269.3 255.3
Other Current Assets 648.0 548.0 592.0 552.4 414.5
Total Current Assets 4,970.0 3,941.0 3,665.0 3,449.1 3,284.7
Gross Fixed Assets (Plant, Prop. & Equip.) 20,311.0 19,017.0 17,576.0 16,412.0 14,742.5
Accumulated Depreciation & Depletion 11,274.0 10,317.0 9,274.0 8,311.9 7,659.0
Net Fixed Assets (Net PP&E) 9,037.0 8,700.0 8,302.0 8,100.1 7,083.5
Intangibles 4,000.0 1,063.0 1,063.0 1,082.2 500.5
Other Non-Current Assets 1,127.0 1,681.0 782.0 708.7 658.3
Total Non-Current Assets 14,164.0 11,444.0 10,147.0 9,891.0 8,242.4
Total Assets 19,134.0 15,385.0 13,812.0 13,340.0 11,527.1
Accounts Payable 1,615.0 1,168.0 1,133.0 1,255.3 1,120.9
Short Term Debt 750.0 308.0 6.0 221.4 6.5
Other Current Liabilities 2,367.0 1,859.0 1,803.0 1,772.8 1,763.6
Total Current Liabilities 4,732.0 3,335.0 2,942.0 3,249.5 2,891.0
Long Term Debt 2,837.0 1,709.0 1,800.0 1,900.1 1,776.3
Deferred Income Taxes 1,181.0 882.0 599.0 455.6 344.6
Other Non-Current Liabilities 2,348.0 2,171.0 1,926.0 1,834.4 1,730.0
Minority Interest Liability 0.0 0.0 0.0 0.0 0.0
Total Non-Current Liabilities 6,366.0 4,762.0 4,325.0 4,190.1 3,850.8
Total Liabilities 11,098.0 8,097.0 7,267.0 7,439.6 6,741.9
Preferred Stock Equity 0.0 0.0 0.0 0.0 0.0
Common Stock Equity 8,036.0 7,288.0 6,545.0 5,900.4 4,785.2
Common Par 30.0 30.0 30.0 29.9 29.9
Additional Paid In Capital 1,079.0 1,088.0 1,144.0 1,120.6 1,079.5
Cumulative Translation Adjustment 0.0 0.0 0.0 0.0 0.0
Retained Earnings 7,001.0 6,250.0 5,465.0 4,879.6 4,295.0
Treasury Stock (28.0) (50.0) (41.0) (73.9) (583.0)
Other Equity Adjustment (46.0) (30.0) (53.0) (55.8) (36.1)
Total Capitalization 10,873.0 8,997.0 8,345.0 7,800.5 6,561.5
Total Equity 8,036.0 7,288.0 6,545.0 5,900.4 4,785.2
Total Liabilities & Stock Equity 19,134.0 15,385.0 13,812.0 13,340.0 11,527.1
Total CommonShares Outstanding 300.0 298.6 298.2 298.6 298.6
Preferred Shares 0.0 0.0 0.0 0.0 0.0
Treasury Shares 0.0 0.4 0.4 0.0 0.0
Basic Weighted Shares Outstanding 299.0 298.0 298.0 288.7 291.7
Diluted Weighted Shares Outstanding 304.0 303.0 303.0 293.2 296.3
Number Of Employees 84,500 82,000 87,400 88,000 96,000
Number Of Part-Time Employees 49,000 48,000 48,200 56,000 53,000




Income Statement | Balance Sheet | Cash Flow
12 Months Ending  05/2004  05/2003  05/2002  05/2001  05/2000
In Millions of U.S. Dollars (except for per share items)
Net Income/Loss 838.0 830.0 710.0 584.4 688.3
Depreciation and Amortization 1,375.0 1,351.0 1,364.0 1,275.8 1,154.9
Deferred Income Taxes (8.0) 0.0 14.0 (16.0) (7.4)
Operating Gain/Losses 149.0 434.0 116.0 209.8 54.0
Extraordinary Gain/Losses 0.0 0.0 0.0 0.0 0.0
Increase/Decrease In Receivables (307.0) (197.0) (88.0) 61.7 (404.5)
Increase/Decrease In Inventories 0.0 0.0 0.0 0.0 0.0
Increase/Decrease In Other Current Assets 10.0 39.0 63.0 (112.5) 70.7
Increase/Decrease In Payables 841.0 272.0 81.0 102.4 107.5
Increase/Decrease In Other Current Liabilities 0.0 (858.0) 0.0 0.0 0.0
Increase/Decrease In Other Working Capital 122.0 0.0 (32.0) (61.8) (38.4)
Other Non Cash Items 0.0 0.0 0.0 0.0 0.0
Net Cash from Continuing Operations 3,020.0 1,871.0 2,228.0 2,043.8 1,625.2
Net Cash from Discontinued Operations 0.0 0.0 0.0 0.0 0.0
Net Cash from Operating Activities 3,020.0 1,871.0 2,228.0 2,043.8 1,625.2
Sale Of Property, Plant, Equipment 18.0 22.0 27.0 274.4 189.8
Sale Of Short Term Investments 0.0 0.0 0.0 0.0 0.0
Purchase Property, Plant, Equipments (1,271.0) (1,511.0) (1,615.0) (1,893.4) (1,627.4)
Acquisitions (2,410.0) 0.0 (35.0) (477.0) (257.1)
Purchase Short Term Investment 0.0 0.0 0.0 0.0 0.0
Other Investing Changes Net 1.0 (1.0) 11.0 (16.8) (13.4)
Net Cash Investing Activities (3,662.0) (1,490.0) (1,612.0) (2,112.7) (1,708.1)
Issuance Of Debt 1,599.0 0.0 0.0 743.5 517.7
Issuance Of Capital Stock 115.0 81.0 88.0 28.7 15.5
Repayment Long Term Debt (319.0) (10.0) (320.0) (650.3) (115.1)
Repurchase Capital Stock (179.0) (186.0) (177.0) 0.0 (606.5)
Payment of Cash Dividends (66.0) (60.0) 0.0 0.0 0.0
Other Financing Charges,Net 0.0 1.0 3.0 0.4 13.9
Net Cash from Financing Activities 1,150.0 (174.0) (406.0) 122.3 (174.5)
Effect of Exchange Rate Changes 0.0 0.0 0.0 0.0 0.0
Net Change in Cash & Cash Equivalents 508.0 207.0 210.0 53.3 (257.4)
Cash at Beginning of Period 538.0 331.0 121.0 68.0 325.3
Cash at End of Period 1,046.0 538.0 331.0 121.3 68.0







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