联邦快递 案例分析

1. What should the compensation plan look like? Why are the Express and Ground Plans so different?

The compensation plan should include the salary and incentive plan like the conditions to get basic salary and the qualification to get bonus. Also include the punishments like what kind of behavior is will lose the qualification of getting bonus. Another important item is the scope of validity of these criteria. Before the integration of two sales forces, they use different evaluation systems.

Express and Ground service are meeting different market competition. I will specifically analyze the difference of two plans in the following respects:

a.Minimum sales volume for bonus:

For Express, accessing new customers is of no difficulty with its superb reputation. So setting 96%of the planned sales objective is reasonable but the minimum for ground is only 50 percent since the time and efforts of getting new customers are quite different.

b. Income structure:82% of the average ground account executives ‘s compensation come from salary because it is but only 70%of Express sales people’s income are from salary because signing new customers is more difficult for the Ground so bonus does not account for a high percentage for the Ground.

c. Adjustment: Event occurred more frequently to Express service than to Ground which made original goals of Express inappropriate. But for the ground, sales goals are set annually and rare to change since it will take more time to win back or sign a new customer if they leave. Besides, Ground set sales objective based on individuals because the success of sales largely depend on the account executives’ own personal connection.

2. Compare the profitability of the Ground business vs. the Express business.

Express business is delivered by air and always with anon-time delivery guarantee. The cost of express business is higher compared to ground delivery since the speed required carriers to ship goods by air. The target of express service is time-sensitive documents and valuable items.

The ground businessrefers to deliveries made within 6 days, currently always within 3 days and also with a guarantee. The transportation is always made by vans, trucks and trains. So the speed is slower than overnight and the costs are also lower than express.

The distinction between express and ground is becoming blurry.It is reasonable to predict that ground service will eat into part of target customers of express business with its low price and increasing delivery speed. It will especially pose threats to two-to-three day express service because the speeds of both are possibly the same, which means the value propositions are the same to customers, but the costs (marginal profit and prices) are different. Overall, I expect the profitability of ground will increase while the express service will somehow fall down.