FedEx Corp vs United Parcel Service, Inc - Achievements of Direct Air Letter Delivery Business - Case Study Example

Student name Professor Subject: Finance Date Introduction: The 2004 Value Battle, FedEx Corp. vs. United Parcel Service, Inc The FedEx Company gives high economic returns to its shareholders through provision of standardized value-added delivery series, shipping, commerce and other valuable information services. It does this through concentrated management firms’ contending jointly and that pool resources together, under the cherished FedEx trademark (Bruner & Carr, 53). On the other hand, UPS Company supplies the over changing circulation, logistics, and the economic demand of its clients globally. The company majors on providing quality and useful service to the market. It sustains a firm fiscal industry that has brand in the workers shareholding, and this help in providing a lasting profit to the firm’s shareowners (Bruner & Carr, 53). In the year 2004, the US and the Asian economic giant, China, signed a defining treaty on the air-transportation that increased the number of the moneymaking consignment planes operating between the two nations. The treaty gave way for the formation of the air-cargo ports in China as well as the freedom for landing of business airlines in any free landing field. The signing shows one of the major liberalizations in the air transportation in the record books of these countries and the two companies. UPS, which is the only United States air-cargo industry, had freedom to operate in the Chinese market. The made agreement was not a big issue to many US business corporation as the two states had engaged in consultations as early as February 2014. The exchange rates of those firms grew rapidly as from the time the meetings of the treaty began, however, the FedEx’s value income rapidly increased almost five times that of the competitive company, UPS. This is evident in the exhibit 1. FedEx composed of the highest oversea existence in China. It had eleven weekly operating routes; that is twice that of UPS. The business operated in two hundred and two towns in China and had a direct flight to Beijing, Shenzhen, and Shangai (Bruner & Carr, 54). The firm’s (FedEx) operating capacity in the Chinese country grew to alarming rate exceeding fifty percent in the period amid 2003 and 2004. Unfortunately, UPS did not do well in the China’s market as compared to that of FedEx. Nevertheless, it remained the global largest goods transporter firm and the main luggage carrier in US. UPS started its activities in China in the year 1988 as the only cargo deliver firm to provide direct service from its mother country, US. As at 2003, UPS made six weekly Boeing 747 voyages on the way to China, with express journey to Beijing and Shangai, covering almost two hundred cities. The company recorded a sixty per cent increase in flights on its main route from US to Shangai since commencing the trade in the year 2001. Its prediction to the demand thought to surpass that limit. In the time, the US package delivery sector grows, mostly in the Chinese international market, came a strong competition for the two rivalry businesses. FedEx generally incorporated consumer logistics management that widely looked at as creativity, business oriented, and an outfitted principal. In the history books, UPS had the quality of superiority, practical, and manufacturing adherent. However, the company (big brown) aggressively shaded its reputed icon when it became trendsetter and determined explorer. In the mean time, UPS underwent on a great image transformation and repositioned it, self the overall service provider in logistics and delivery chain manager. The signed document of 2004 in the aviation transportation became watershed for the global parcel delivery trade that is over 100 new daily all-cargo transportation ready for utilization with the US as the main business collaborator. Unfortunately, there was no agreed rule on how to distribute these slots between the two major players; UPS and FedEx, as the y were the only firms that led to the signing of the accord that lasted for over thirty years. In addition to this, the emerging locations to other regional transporters will definitely test the firm’s capability to overcome growing competition from other joining companies. A keen look at this scenario shows the growing trend in the gigantic competition occurring between FedEx and UPS, mostly in the field of invention. The successful performance in the Chinese market worked as a determinant factor in the industry for corporate survival. The firm that placed it strategically made the highest score in the market. FedEx Corporation management The firm originated as a term paper of Fred Smith in Yale University business course group. Smith’s policy championed that FedEx to buy planes that can help in the parcel transportation unlike the traditional cargo carrier that competitor commuter aircraft rely on. A part from depending on his jet, Smith main creativity relied on core and beam allotment method. This created much affordable and quick service to the advantage over his competitors. In the year 1971, he used his four million dollars he inherited and collected additional ninety one million dollars into the firm. This made the largest investment as at that time. Its first night nonstop trading in 1973, three eighty-nine workers of FedEx delivered 186 goods to twenty-five US towns. In the beginning, Federal Express Corporation had massive loss that nearly led to the ouster of Smith from his Chief position. In 1976, the company gained reasonable income of three $3.6 million on a daily capacity of nineteen thousand parcels. Throughout the period of 1970s, the firm’s expansion services grew, leading to purchase of additional trucks and airplanes as well as more cash for investment. The method applied proved worthy. Moreover, in 1981, FedEx made the biggest sales volume than any other company in the same field in United States. During this period, stiff competition started. Firms like Emary Air Freight adopted Smith’s hub method and increasing their number of aircrafts. UPS too ventured into the night transport system. The United States Postal Services (USPS) located their night parcel distribution at half cost that of FedEx. For FedEx to overcome competition, they provided quality and reliable night shift services with vigorous advertisement. In 1983, the firm attained one billion dollar profit, which made them seen as the market dominant. During the era of 1990s, it became the undisputed operational player, and achieving the ceremonious Malcolm Baldrige National Quality Award from US president. It became the first business enterprise to hold that award. This success story relates to deregulation and good operational policy, mostly the company’s belief on “people-service-profit” (Bruner & Carr, 55). This philosophy championed for customer focus, quality operation, and human resources input. Extensive behavior supervision, develop within the firm and accessibility of the top leadership gave the company the ladder to grow fast. FedEx expanded within its institutional framework of necessary change in the market set up. Deregulation paved way for use of large aircraft only hence need to buy Boeing 727s, this reduced operating cost. In addition, the deregulation of tracking services led to short-haul spree, making the firm to contend favorably with UPS. Rising inflation and worldwide completion led to the application of just-in-time inventory control. This facilitated demand of FedEx services. Lastly, technological improvement helped the business to attain basic merits in clients ordering, goods, and process evaluation. In the ending year of 2003, the firm asserts base estimated at $15.4 billion and annual profit of $830 million on output of $22.5 billion. Table 2 gives the estimates. The firm comprised of 50,000 trucks, 625 airplanes, 216,500 permanent and non-permanent workers, and transports over 5.4 million parcels daily. United Parcel Service, Inc Formed in 1907 and the largest letter delivery business internationally. It operated on both land and air as the main business activity together with provision of dedicated hauling and logistics activities. It mainly called ‘big Brown’; it had bases in Seattle, Washington, where Jim Carsey operated a massager letter delivery on bicycle referred to as American Massager Company (Bruner & Carr, 56). It later merged with Motorcycle Delivery Company and the new industry concentrated on grouped services. They worked as one body until 1940. It later changed name to UPS. The latter firm ventured into air transport in 1929, where it carried parcels on passenger aircrafts. It grew rapidly in the post wartime and in 1975, it made its major impact serving the entire United States. The same period it made way to West Germany, and Canada. It did most of its deliveries on brown van giving it the trademark. The success feature of UPS depended on its capital base in Atlanta, Georgia. As recorded in the Businessweek, that each road directed to the streetlights that every car made to comply with rules and drivers . . . endured a daily duty connected to time. However, this opinion got rejection from UPS workforce. When the firm tried to bring in some changes in worker management, it encountered industrial unrest. In 1997, all it 190,000 employees went on trick before accepting new terms of engagement. Salaries adjusted and 10,000 permanent jobs created. Additionally, ten thousand full-time slots made. The unrest cost the firm $700 million loss that is one per cent less than trading activity compared to the previous year, 1996. Consequently, the income base dropped to $909 million up from $1.15 billion. The company’s shares were property of UPS’s managers, related siblings, retired workers, and philanthropic groups associated to UPS. It worked as trade setter in self-bonds, where it purchased shares at favorable economic prices that the board of directors determines quarterly (Weber, 2004). At the end of the 20thcentury, and overcome the strike, the newly reformed firm with stiff motivation to work and dedicated executives decided to add easiness in public shares to concur extra aggressive possession method. In 1999, it incorporated tow-for -one share division, in which the business traded in existing stocks for two groups A and B. The organization sold out $109.4 million on its first public offer shares in class B. this generated $5.266 billion total of all risk cost. It then used most of the traded shares to buy sixty-eight million bonds of class A. After the successful launch of IPO, it transferred the group A shares to class B. Both stock had same value in the firm but sector A gave its holders 10 points in each stock, unlike in B, which had only one vote. Before the split and IPO, the company’s economic stability seemed weak and plodding. Unlike FedEx that operated in the night shift, UPS commenced its night route in 1982; this attributes to huge cost of constructing air transport. However, after its publication it joined with other businesses such as the Miami freight transporter and franchised-bases warehouse. It provided packaging, sea ferrying, and postal services in not less than 4,300 local and global destinations. It became more competitive due to varied modification and improved market concentration. From the beginning, it provided substandard cost services but later ventured into technological changes, increased inventories, and planes that improved its service delivery to its clients. In 2003, it changed its logo and extensively worked in the supply-chain business. As Mike Eskew, the CEO, reports that US market is just $60 billion while the international is $3.2-trilion. In the same period, UPS served the entire US in addition to not less than 200 nations. It delivered over 13 million parcels a day. Its local trading income composed of 76% in 2002, worldwide 15%, and other services 9% (Bruner & Carr, 57). The company’s results indicate that it operations contributed to 6% of the US economy (SWOT analysis, 2004). It hired 360,000 labors where 64% unionized, owned 88,000 transport vehicles and 583 planes. By the end of 2003, its assets, income, and earnings ranged $28.9 billion, $33.4 billion, and $2.9 billion in that order. The third exhibit gives these statements on UPS economic records. The rivalry in the direct operation; the $45 billion local US parcel trading divided into three sectors; heaviness, means of carriage, and time of service. The mass segment composed of mails, post, and freight. The transportation mode mainly consists of air and land. Lastly, time delivery depended on overnight, 2-day, 3-day, and regular method. The air method contributed $25 billion of the countries package service business, mainly on mails and parcels. The means of ferrying varied on night shift, air, and land. FedEx Company mostly concentrated on plane direct mode. This left UPS with only 22% of the remaining packages to ferry the following day using air system. The competition that existed between the two firms surpassed the $25 billion US market posing a threat in the coming days. Table 4 indicates the summarized activities that the two companies competed. The basic reference to this rivalry includes areas like: 1) Concentration on clients, as they all targeted the same market. This called for efficient cos6tomer care, giving quality feedback as opposed to quality goods only and lastly creating relational trade with their consumers. 2) Competition in pricing strategy, UPS lowered their cost by half of FedEx in the night carriage. However, towards end of 1990s, they all operated in determined rates. Figure 5 summarizes the latest charging of the two firms. 3) Technological improvement, due price rivalry, cost reduction attained through modernization of effective and efficient management system. These eliminated unwanted inventories in their dealings. 4) Improved method of communication, this became a vital part in their operations. For example, each good FedEx carried had to logged into COSMOS that showed information on parcel movement. While UPS depended on DIADS, that driver’s handhold when scanning parcels barcodes and looking up for client’s signatures. 5) Expansion on service, they both relied on one another’s service provision. FedEx had huge discounts and high quality service so it utilized high eng market. Consequently, UPS consumed its rivals 11,500 delivery boxes. It had 165 direct drives and 371 straight distributions. 6) Logistics services, it had the highest innovation to serve large corporate customers. The aim of the service geared towards stock management like sales orders, receipts of consignments, and transportation. The impact of this stiff competition reflected on their investment cost. The investment cost of the two firms rose very fast amid 1992 and 2003, with FedEx’s 34.6% and UPS’s 36.78%. During this time, they almost matched each other’s investment cost. Global letter delivery business; in the year 2004, direct cargo plane operated in almost half of international market (Harney & Robert, 2004). Although in the whole of 1990s, worldwide trade remained at low rate for the two companies. FedEx developed its European business method and sold some of its offices to DHL. Since its debut in 1984, FedEx lost $1 billion in the European market because of this it depended on local corporations. In the year 1995, it expanded its trading routes to Latin America, Caribbean and incorporated AsiaOne. UPS ventured into the European market in 1988 capturing ten transport services. To gain competitive advantage in the global business, it focuses on system coding on packages. The economic expert analyzed that, China to concur the world industry within eleven years. In addition to China’s economic strength, it leads in mobile and cloth making industry as well as electronic appliances. In the analysis of inter Asian business, it is believed to expand to 16.8% yearly until 2005. The traditional air carriage of China grows at 30% annually. The two giant companies focused on oversea trade not only Chinese market. Some finds shows that the domestic trade in China is at $1 billion unlike that of US, $800 million. One researcher noticed that China would become world’s trading center. The building of manufacturing close to the Pearl and Yangtze reduced the bottlenecks in the supply industry. The created tie between China and US increased weekly flights to 195, 111 planes, and 84 commuter aircrafts. This resulted into a 249 weekly transportation at the end of six-year period. Before the agreement, China only served a small portion of the US ground route. This paved way for the big players to expand their businesses with flexible operation structures. Performance analysis All interested groups in the market watched the competition that existed between the two major firms FedEx and UPS. The common belief was that a company with efficient trading method had to achieve good economic profit. Actually, FedEx set its target on attaining quality service to its clients, at the same time, UPS concentrated on lasting competitive income. The general structure for the two companies The institutional shareholders of FedEx had 70% of its stock. This contributed to the belief that it enabled the firm in setting up its prices. The investors incorporated the idea of many risk estimators that led to improvement in trade of FedEx and UPS in the year 2004. The analysis of direct air letter delivery business looks at the latest activity of the two firms and their achievements. The businesses encountered watershed condition with the easing of market exploration in China. Work cited Bruner, Loraine Carr. Eight Generations and Then Clyde Gerard Dooley. Baton Rouge, La. (10244 Kenlee Dr., Baton Rouge 70815): L.C. Bruner, 1979. Print. Harley, Robert. The Complete Guide to High-end Audio. 3rd ed. Tijeras, N.M.: Acapella Pub., 2004. Print. Weber, Steve. The Success of Open Source. Cambridge, MA: Harvard UP, 2004. Print. Dan Robert, FedEx Plan Expanded Servicein China, financial times, 23 June 2004. UPS press release, 4 November 2004. Print. Morgan Stanley, 6 April 2004. Print. Alexandra Harney and Dan Robert, Comments and analysis, Financial times, 9 August 2004. Web. United Parcel Service, Inc.-SWOT Analysis, Determinator Company Profile, 16 July 2004. Web. Todd Vogel and Chuck Hawkins, Can UPS Deliver the Goods in a New World?, Businessweek, 4 june 1990. Web Jill Hodges, Driving Negotiations; Teamsters Survay Says UPS Drivers among Nation’s Most Stressed Workers, Star Tribune, 9 June 1993. Web. Read More