Jeffrey D. Simmons
BUS 630: Managerial Accounting
Professor Dr. Isabel Wan
September 5, 2011
This paper has several goals. First, the managerial accounting question to be analyzed is business strategy. Utilizing financial reports management is able to analyze forward-looking statements of FEDEX Corporation current expectations based on their 2005 10K form. The final goal is to establish qualified information relative to business strategy and accounting practices that will enable management’s business decision with reference to industry share, total industry growth, and profits.
What is FedEx’s strategy for success in the marketplace? Does the company rely primarily on a customer intimacy, operations excellence, or product leadership customer value proposition? What evidence supports your conclusion? FedEx’s strategy for success in the market place relies on a combination of customer intimacy, operational excellence and product leadership customer value proposition. Evidence of customer intimacy and operational excellence is found in FedEx’s 2005Form 10-K which states “to provide our customers with convenient, seamless access to our entire portfolio of integrated business solutions. We are pursuing a number of initiatives to continue to enhance the FedEx customer experience, including improving the capabilities of our sales professionals. For instance, through our FedEx One Call program, we assign a single customer service agent to handle virtually all issues of a customer’s account” (p. 4). Further evidence of customer intimacy is found in the statement that each of FedEx’s business segments operates independently because this strategy allows each segment to anticipate and respond to customer FedEx 3 demands (FedEx Form 10-K 2005, p. 4). Additional evidence of operational excellence is in FedEx’s 10-K where they state they are leader in reliable rapid global delivery of packages, documents and freight and further specialized services such as customs-clearance with a money back guarantee (p. 9). Evidence of product leadership customer value proposition is found in FedEx’s statement that “We believe that seamless information integration is critical to obtain business synergies from multiple operating units. For example, our Web site, fedex.com, provides a single point of contact for our customers to access FedEx Express, FedEx Ground and FedEx Freight shipment tracking, customer service and invoicing information and FedEx Kinko’s office and print services” (FedEx Form 10- K 2005, p. 4). What are FedEx’s four main business segments? Provide two examples of traceable fixed costs for each of FedEx’s four business segments. Provide two examples of common costs that are not traceable to the four business segments. FedEx’s four main business segments are FedEx Express, FedEx Ground, and FedEx Freight and FedEx Kinko’s (FedEx Form 10-K 2005, p. 3). If the segment disappears so does the cost. “A common cost is incurred to support the operations of multiple segments and is not traceable in any way or part to a particular segment” (Noreen, Brewer and Garrison, 2008, p.446). If a particular segment disappears the cost remains and should not change. One traceable fixed cost for FedEx Express would include the cost to operate their facilities at Memphis International Airport which include aircraft maintenance hangars, flight training and fuel facilities, administrative offices and warehouse space (FedEx Form 10-K 2005, p. 24). Another example of traceable fixed cost for FedEx Express would be the cost involved in owning 557 airplanes (FedEx Form 10-K 2005, p. 22). Traceable costs for FedEx Ground would include the cost to operate their offices and information data centers which are located in the Pittsburgh and owned by FedEx Ground...