The Battle for Value

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Executive Summary

        When China agreed to open over 110 weekly all-cargo flights to over 200 Chinese cities FedEx and UPS jumped at the new market. FedEx took the lead in China because of their innovative style and entrepreneurial corporate culture. What UPS saw was an opportunity to improve their reputation which was often viewed as “big, bureaucratic and an industry follower.”         In an intense battle for dominance in the Market, FedEx found ways to cut costs and get more out of less. FedEx’s founder revolutionized the industry by investing in planes that would be used exclusively for delivering cargo instead of relying on stowing away shipments on commercial flights. What this did for FedEx was the ability to ship more and take control of delivery times. Taking control of delivery times led to FedEx shifting focus to a just-in-time mentality and invented ways for the customer to track their packages. For their planes, FedEx invented a hub and spoke delivery system that brought precise delivery times, propelling FedEx towards becoming the leader in overnight cargo delivery.

        Leading up to the China agreement, UPS was already the world’s leading delivery Company, but knew they had to improve in order to keep up and outdo their competition.  UPS decided to revamp their image and improve its reputation. UPS came into existence in 1904, some would argue that UPS invented package delivery service, but every good manager knows that there is always room for improvement. New opportunities in China would be a true test for UPS and how they would handle the pressure from FedEx.

        Both FedEx and UPS' profits depend on the strength of the U.S. and international economies; a healthy economy means more cargo needing to be delivered. China is a huge market that supplies to other international markets. What this means is that both FedEx and UPS must have the capacity to deliver to places like South America, Africa, Middle East and Eastern Europe and wherever Chinese do business.

Problem Statement

There are at least three issues that can be identified in this present case that can hinder operations of these companies:

• Market Share
• Profits
• Infrastructure longevity  

1.        Market Share

        The opening of the Chinese market, quickly found FedEx’s overnight delivery advantageous. UPS is revamping their operation; will this be enough to take the lead in China.

2.        Profits

        Of great importance for both companies are the facts that both collect tremendous amounts of cash, but what they do with this cash is what directly affects the shareholders and investors of both companies. Looking at both company’s financial statements reveals that UPS is the company that is creating more value for its investors.