Qualitative analysis of FedEx and UPS - Essay Example

? Informational Report on FedEx and UPS AFFILIATION: Executive Summary The report is a qualitative analysis of the two top-ranked companies in delivery and logistics industry of U.S. i.e. UPS and FedEx. The management team has already done the financial analysis of the company and wants to understand the working pattern of the respective corporations to make a correct decision about investing in stocks of either of the business entities. Qualitative analysis of FedEx and UPS In this report, the performance of both the companies is reviewed in terms of management structures, business operations, work culture, company’s mission and vision statements, responsibility towards the environment and community, strategic moves, ability of facing the challenges and strategies implemented to gain competitive edge. With the help of these factors, worthwhile information has been gained that provided sufficient data about making a wise verdict about investment. FedEx supersedes UPS UPS has been the market leader in the industry for decades but it faced strong competition from FedEx’s e-commerce strategy that revolutionized the way in which packages, letters and other items are delivered worldwide. FedEx developed the concept of highly efficient and valuable logistics and delivery system so that the customers are provided easy access to the details of their packages. UPS introduced an innovative service “Supply Chain Logistics Services” to regain its lost market share from FedEx. Both corporations are always in the state of tug of war and try to supersede other by exceeding the expectation level of customers. FedEx shares are attractive than UPS FedEx management structure along with other aspects of business operations highlight that the organization has an integrated and well-developed logistics system supported by flexible and innovative work culture which will ensure that the company is able to sustain its position in the market for long time. Since FedEx has a bright outlook, the company should purchase its shares and reap the benefits of investing the capital in a profitable stock. FedEx versus UPS (Delivery and Logistics Industry) The delivery and logistics industry is growing by leaps and bounds and customers these days are looking for the companies that can provide the fastest delivery of parcels, packages, documents and goods around the world. As a result of the emergence of Internet technology, the players of this industry have started their online businesses so that the customers can have access to detailed information about the status of their orders with utmost ease. Businesses that have an online presence are gaining many customers worldwide. Customers are becoming knowledgeable and they search for websites for any organization they come across, hence having an online presence such as the organization’s website is extremely important for all organizations. Shopping or having online services is easy and convenient for the customers and hence some customers prefer online shopping to a very large extent. In today’s world, the logistics world has become popular and an integral part of many corporations as they allow them to undertake their global transactions easily and conveniently (Ellis, 2010). Every player in the respective industry has received huge amount of popularity and there is a lot of publicity about the attitude of the industry towards the efficient working systems in the sector so that they can provide quick service to the customers. The players have even taken considerable steps for highlighting the fulfillment of their Corporate Social Responsibility (CSR) promises that are proving to be beneficial for the society as a whole (Li et al., 2006). Becoming an organization that is socially responsible is extremely important in the business world today as customers develop a positive image for the organization that has corporate social responsibility in them. Brief Background of FedEx and UPS Frederick W. Smith started the Federal Express Corporation in 1971 as part of its inheritance worth $8 million and it has its headquarters in Memphis, Tennessee, USA. When the company started its operations, there were only two competitors in the market i.e. U.S. Postal Service (USPS) and United Parcel Service (UPS) that provided the only mediums for delivering packages and letters quickly. The primary reason the owner decided to initiate his range of products and services was that the companies present in the industry took too much time for delivering the items on time. The owner found out a problem and accordingly worked upon the FedEx business. Under FedEx, there are many subsidiaries such as FedEx Express, FedEx Freight, FedEx Kinko’s, FedEx Ground, FedEx Supply Chain, FedEx Office, FedEx Trade Networks, FedEx Services and FedEx Custom Critical (“FedEx Corporation”, 2012). United Parcel Service (UPS) is the global leader in the package delivery sector and has an excellent quality supply chain service that is offering highly exceptional range of alternatives for synchronization of the movement of funds, goods and information. The company is headquartered in Sandy Springs, Georgia. It started its operations in 1907 Seattle, Washington and has been meeting the expectations of the customers at an accelerating rate. UPS is offering its services to more than two hundred countries worldwide and is operating a huge franchise of supply chain. The companies owned by UPS are UPS Mail Innovations, UPS Capital, UPS Supply Chain Solutions, UPS Airlines, UPS Store, UPS Professional Innovations, UPS Express Critical, UPS Freight and UPS Logistics (“UPS Company History”, 2012). All these companies have systematic strategies through which they operate their working procedures. Important facts and figures of FedEx and UPS A snapshot of the important facts and figures of FedEx and UPS are shown in the following table: Comparison factors FedEx UPS Annual Revenue (FY 2011) $42.7 billion $53.1 billion Number of employees More than 300,000 worldwide 397,100 (75,000 International and 322,100 in U.S.) Average Daily Volume Above nine million shipments for freight, ground, express and expedited delivery services 15.8 million packages and documents Service Areas More than 200 countries More than 220 countries Air Operations 663 fleet serving more than 375 airports globally 531 air fleet for package operations and 704 for supply chain operations; 705 airports are served Ground Fleet About 90,000 motorized vehicles for freight, ground, express and expedited delivery services The UPS Freight has around 6,047 tractors and the figure for their trailers is 20,783. Package operations has 95,125 package vans, motorcycles, tractors and vans along with 2,522 alternative-fuel vehicles Website performance The number of visitors browsing the website is around 32 million and accordingly requests for tracking packages are received. 21.8 million visitors visit the page on daily basis and there are 32.1 million requests for package tracking on daily basis (Source: “FedEx Corporation”, 2012; “UPS Worldwide Facts”, 2012) Vision and Mission of FedEx and UPS The mission statement of FedEx is “to produce high quality financial returns for the shareholders by focusing on development and maintenance of a high value supply chain, business, transportation and other vital information related services by creating companies who work as a collective unit and are managed collaboratively for enhancing the brand image of FedEx. Our customers are our utmost priority and we strive to provide them with the highest quality service in accordance to their requirements. All FedEx companies will ensure that they develop cordial and appropriate relations with the partners, suppliers and employees. In all of our operations, safety is the key factor and all operational activities will be conducted in ways that are compatible with the preeminent professional and ethical standards” (“Mission, Strategy and Values”, 2012). On the other hand, the mission statement of UPS is “we sustain as a financially strong company that is providing a long-term competitive return to the shareholders and we have always been able to fulfill our promise. Our returns have been driven by the exceptional abilities of our employees who know how to transform our company to make it compatible with the changing demands of the industry” (“UPS Company History”, 2012). After analysis of the mission statements of the two companies, it can be concluded that FedEx has developed a well-thought and effective statement that is highlighting its core values along with its responsibility towards each stakeholder. The mission statement of FedEx is comprehensive when compared to the UPS mission statement. Mission statements that comprise focus on all requirements of the business tend to have a better impact on the way employees perform their job. However, UPS’s mission statement is too concise and there is no detailed information about the vision that it is willing to achieve in the long-run. This is a lacking area for UPS and it may need to improve on this area. FedEx has emphasized that it will ensure that it proves to be one of the finest logistics company that will meet the expectations of the customers, shareholders, community and every stakeholder. Strategy of FedEx and UPS According to the FedEx Mission, Strategy and Values (2012), FedEx has a unique and innovative operating strategy that seems to work perfectly for all of its business operations. The main elements of its strategy are that all companies of FedEx compete collectively by ensuring that the brand creates one image worldwide. They are operating independently by focusing on the independent networks so that various needs of the customer can be easily met. Also they are ensuring collaboration by working together as a team which will assist it in creation of loyal relationships that can be sustained by gaining support from the investors, customers and employees. The implementation of the above mentioned strategies by FedEx is allowing it to reap huge benefits and also face success in its industry. UPS is following a focused strategy by ensuring that all of its efforts are supportive for its business expansion activities. By a focused strategy, the areas requiring utmost concern are carries out in a highly efficient manner. The core business performance improves immensely due to a focused strategy. The main aim of UPS is to serve about eight million customers on a daily basis via its highly integrated structure of network. According to Greg (2007), the company has a highly efficient and cost-effective model that is profitable and environmental friendly as well. Since it has a network that is developed with latest technology all goods such as domestic, ground, air, commercial, international and residential can be easily processed and it even ensures that the company is able to maintain its competitive edge in the market. The technology proved to be beneficial for the company as it has allocated its resources in a highly efficient manner. Management Style at FedEx and UPS There is a huge difference between the management styles of UPS and FedEx as the management teams of both companies have entirely different perspectives on running their business. Both the organizations have the same nature of work but have different ways of operating their work procedures. The primary reason for such a variation in the management style is evident from the strategy implemented by the companies in managing their operational activities. FedEx has an innovative culture within its business as it believes in giving leverage to their employees and making them an integral part of the company. The innovative culture is evident from the fact in which unique and innovative products and services are offered by it to meet the changing needs and demands of the customers (“FedEx Innovation”, 2012). An innovative organizational culture always welcomes and promotes new ideas and techniques that may prove to be useful for the organization. Employees feel comfortable in suggesting new ideas in such an organizational environment. On the other hand, the management style in UPS tends to be a more authoritative style as the management team is concerned about its business efficiency rather than trying new things. The organizational culture of UPS is not such that employees may suggest innovative ideas. The main aim of the management team is to provide pre-defined set of rules to the employees so that they are aware of the goals that the organization is targeting for at the end of the year. Although the corporation has undergone drastic changes to make it compatible to the changing demands of the business environment, it still has the same management style that is dominated by authority and power (Ellis, 2010). Past Challenges faced, strategic moves and important decisions of FedEx and UPS When the companies get deviated from their original mission or purpose of existence, then there are huge chances that their business sales get affected to a greater extent. FedEx was the pioneer company in logistics industry that introduced the concept of e-commerce as it allowed it to closely monitor the demands of its customers and offer them the products and services that will best meet their demands. It took complete advantage of this aspect in the industry and even introduced e-business solutions so that its commercial customers could avail its premium quality services that were easily accessible by everyone (Brewester & Dlazell, 2007). However, FedEx started losing its market share when UPS developed and implemented its own e-business strategy so that it can recover its lost in the market share from FedEx. This strategy of doing e-business allowed UPS to become highly successful and it started increasing its market share by developing more customers. When FedEx became too much captivated in enhancing its IT infrastructure, it lost track on the business’s traditional aspects i.e. overnight delivery service. Shifting attention from the core business activity of the firm allowed FedEx to face major losses. However, it soon realized its mistake and started focusing on the competitive edge that it had created in the market by offering the preeminent solutions to the customers of logistics industry (Li et al., 2006). FedEx also faced problems when it introduced Zap Mail in 1984; soon it realized that the concept is not accepted by the customers and it had to stop these services. However, it had to face huge losses from the investment made in the system. Afterwards, the management team had to make every decision wisely and strategically. The strategic move made by the company was focusing on the innovation aspect of the logistics industry by offering superb quality IT solutions for the customers. This particular strategy proved to be a wise step for the organization in moving towards a stable mode again and regain its position back in the market. UPS has always followed a strategic approach by keeping a strong focus on its business and operational activities. When its market share was hit by the entrance of FedEx in the market, it decided to alter its business operations by redesigning its strategy that emphasized the need of developing an e-commerce strategy so that it can recapture its losses in the market share (“UPS Worldwide Facts”, 2012). The management team responded to the competition by entering into the e-commerce segment by setting itself apart and this was done by focusing on the development of Supply Chain solutions. The strategic move made by the company was to expand into the Supply Chain network of the logistics industry and help the corporations in enhancing the efficiency of their complete Supply Chain networks. One mistake that was made by UPS was violating the Equal Employment Opportunity Law as there were many issues regarding equal treatment of employees. For instance, a black lady was fired because she failed to report on time for the job on her first day of work; she was terminated because she was a black woman. In 2012, UPS was alleged for violating the federal government employment law when it allowed its workforce to discriminate against and harass Arabs and Muslims. Hence, the company has negative reputations when the working environment is discussed. However, it is trying to avoid such situations by developing policies that suppress such behaviors in the firm. Future Challenges for FedEx and UPS The world we are residing in is always in a dynamic mode and competition is becoming fiercer with every passing day. Organizations need to constantly keep up with the latest advancements in technology and also keep monitoring and evaluating their business strategies so that they remain competitive in their business industry. Since both FedEx and UPS are operating in the logistics and delivery industry, the main challenges that will be faced by both companies in the future are continuous soaring of fuel prices that can impact their cost and might force them to increase their products and services fees; UPS has a trade union and it will have to fulfill all the member’s rights because otherwise it can hamper its operations to a greater extent. Union based organization has a high risk of facing halt in operations if the union goes on strike. Hence organizations need to be extremely careful in fulfilling all the rights of the employees. One of the biggest threat for FedEx is implementation competitive strategies from UPS and DHL who have started ‘going green’ marketing strategy as they have emerged as low cost service providers in the market who ensure that the customers are provided required services in an environmental friendly way (Morgan & Stanley, 2007). Conclusion and Recommendations After analysis of the detailed information about the leading logistics companies in US, it is suggested that the company invests capital in FedEx shares as it has a more efficient and dedicated workforce along with excellent range of products and services. FedEx’s working environment and mission provide an insight about the long-term goals that it wants to achieve and it has an aim of offering environmental friendly range of products and services that will exceed the expectations of the customers. The performance analysis of the two organizations reveal that FedEx has more potential of earning huge amount of profit in the market as there has been robust growth in its sales and revenue in the last few years. Although its revenue amount is less than that of UPS but there are high chances that FedEx is able to capture more market share by its well-integrated e-commerce website. Hence, the company’s management team should consider investing the money in shares of FedEx. References Brewester, M., & Dlazell, F. (2007). Driving Change: The UPS Approach to Business. New York: Hyperion. Ellis, S. (2010). Change in the Chain: Supply Chain Transformation in the High-Tech Industry. Retrieved November 20, 2012 from http://pressroom.ups.com/pressroom/staticfiles/pdf/whitepaper/UPS_Change_in_the_Chain_White_Paper_final.pdf FedEx Corporation (2012). Retrieved November 20, 2012 from http://about.van.fedex.com/fedex_corporation FedEx Innovation (2012). Retrieved November 20, 2012 from http://about.van.fedex.com/fedex-innovation Greg, N. (2007). Big Brown: The Untold Story of UPS. New Jersey: John Wiley & Sons. Li, B., Riley, M.W., Lin, B. and Qi. E. (2006). A comparison study of customer satisfaction between the UPS and FedEx: An empirical study among university customers. Industrial Management & Data Systems, 106(2), 182-199. Mission, Strategy and Values (2012). Retrieved November 20, 2012 from http://about.van.fedex.com/mission-strategy-values Morgan Stanley. (2007). Transportation: USPS is becoming a more serious competitor to UPS and FedEx. Retrieved November 30, 2012 from http://www.morganstanley.com/institutional/research/pdf/IAIRNPF200703271.pdf UPS Company History (2012). Retrieved November 30, 2012 from http://www.ups.com/content/us/en/about/history/index.html?WT.svl=SubNav UPS Worldwide Facts (2012). Retrieved November 30, 2012 from http://www.ups.com/content/us/en/about/facts/worldwide.html?WT.svl=SubNav Appendix I – Memorandum TO: Carol John, Director of Administration FROM: Danielle Smith, Manager of Market Research DATE: December 1, 2012 SUBJECT: Investing stock in FedEx This is the report that you requested on October 12, 2012 on investing in either UPS or FedEx stocks. As you asked me to recommend you about investing money in profitable stocks that will give good amount of return, the analysis of the information gathered from various researches show that FedEx is the best choice. FedEx has both strong financial performance and management that are the backbones of any successful corporation. It has been present in the market for many years and has been earning consistent amount of revenue since its existence. Even in recession period, the company has been successfully meeting its targeted objectives and is giving adequate ROI to the shareholders. FedEx has an excellent business culture that ensures that it has a highly motivated and well-trained workforce who is continuously striving hard to make valuable contributions in its enhanced performance. As the company is recognized globally for its e-commerce competitive edge, there is huge probability that it will attain exceptionally high profitability in future. All the aspects of the corporation are positive and the strategy of handling threats and challenges has always helped it out from such turmoil. Considering the financial performance, business operational activities and excellence of management team, it is highly recommended that stocks of FedEx are an integral part of the company’s investment portfolio. I am extremely grateful to Jessica Tom and Williams David who helped me in conducting the required research in the market to gather sufficient details about the two companies and provide a justified and authentic recommendation for investment purpose. Thank you so much for providing me the opportunity of working on this project as it helped me in enhancing my knowledge about the delivery and logistics industry. At the same time, it polished my skills about getting accurate and in-depth information about the respective corporations. In case of any questions related to this report, you can contact me any time on my phone number. Read More