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Compare FedEx and UPS - Assignment Example

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FedEx was the first US Company to attain US 1 billion in revenues due to rapid expansion in the cargo industry in the 1977. The main…
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FedEx (Federal Express) was started in 1971 by Fredrick Smith while UPS (United Parcel Service) was established in Seattle in 1907 by Jim Casey. FedEx was the first US Company to attain US 1 billion in revenues due to rapid expansion in the cargo industry in the 1977. The main difference in their business strategy was that FedEx invested heavily in aircrafts in order to serve adequately their international customers while UPS invested more in reliable ground transportation vehicles. FedEx ensures reliability by offering overnight delivery services and tracking due to its sophisticated tracking system. UPS is slow in delivery and does not adequately track the customers’ parcels.
Introduction
UPS business operations are divided in to three segments. UPS delivers package, provides transportation, logistics and financial related services both in US and other countries. The three business segments of UPS are US domestic package, International package and Supply chain and Freight business segment (Dennis, 2011). UPS supply chain and freight business segment provides services such as customs brokerage, supply chain management, freight distribution and consulting services such as technology solutions. UPS has 220,000 employees, 523 aircrafts and over one hundred thousand cars, trucks and vans for ground transportation. On the other hand, FedEx has four main business segments that are FedEx ground, FedEx express, FedEx freight and FedEx services. FedEx Express is tasked with shipping services for the delivery packages (Kurtz & Boone, 2009). FedEx also provides custom clearing, ocean and air freight forwarding services and other international trade advisory services (Kurtz & Boone, 2009). FedEx Ground offers ground parcel delivery while FedEx Freight offers the less-than truckload airfreight parcel delivery services that are time sensitive. FedEx Services provides customers with numerous services such as computer rentals, information communication solutions, marketing services, web-based platforms and customer service support (Dennis, 2011). From the business segments of each company, FedEx has managed to diversify the services than UPS that mainly depends on the traditional packages and parcel delivery business segment.
Both UPS and FedEx have extensive regional presence in Europe and Asian continents. FedEx offers time specific delivery in most of the countries especially in Asia through the FedEx Asia one network (Dennis, 2011). FedEx and UPS are the largest companies in the courier industry. FedEx have cheerful customer representatives and extensive global network. FedEx is more reliable than UPS. FedEx land transport may be weaker but it has more than 672 aircrafts that travel in more than 400 airports across the world while UPS has more than thirty thousand vehicles on the ground. FedEx delivers 6.9 million average daily packages while UPS delivers 15.8 million packages per day (Kurtz & Boone, 2009). FedEx has an average of 43,000 ground vehicles while UPS has about 101,900 ground vehicles. FedEx has attained an average 4-year actual business growth rate of 3.1 % compared to UPS’s 2 % 4-year average actual growth rate. In terms of return on equity, FedEx has a 9.5 % return on equity while UPS has 43.3 return on equity. FedEx has a profit margin of 3.7 percent while UPS has a profit margin of 7 percent (Dennis, 2011).
FedEx delivers packages to any destination within the United States including both fast delivery and overnight delivery. FedEx business is based on five strategies that include lowering the unit costs, building close working relationships with customers, improving the service level, establishing international leadership and the maintaining the people-service-profit philosophy. UPS has maintained a credit rating of AAA compared with FedEx BBB rating due to efficient utilization of equity and debt capital (Dennis, 2011). UPS offers fast ground transport at lower prices and senders can receive real time status of their shipments.
SWOT Analysis of FedEx and UPS
Company
Strengths
Weaknesses
opportunities
Threats
FedEx
Brand awareness.
Overnight delivery
Superior parcel tracking technology.
Extensive air fleet.
Increasing debt.
Costly technology innovations.
Small ground transportation presence.
Claims of racial discrimination.
Online customer services delivery.
Increased demand in logistics.
Fierce competition from UPS and DHL.
UPS
Has established a global network.
E-commerce capabilities.
Has build relationships in China
Lack of adequate air presence in China.
High costs of maintaining the trucks and drivers.
Can opt at targeting documents and small parcel packages.
Stiff competition in Asian markets especially from FedEx that is already well established.
Conclusion
FedEx and UPS are competitors in courier industry. FedEx has expanded the business services portfolio in to four main segments unlike UPS that relies on traditional parcel delivery. From the above differences in the two companies, FedEx has been able to gain a competitive edge due to efficiency in delivery, integrated services and extensive global fleet network.
References:
Dennis, W.T. (2011). Parcel and small package delivery industry. North Charleston: CreatSpace.
Kurtz, D & Boone, L. (2009). Contemporary business. Mason: Cengage Learning. Read More
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