FedEx VALUE CREATION AND ECONOMIC PROFIT United Parcel Service

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MEIHO UNIVERSITY

CASE STUDY FOR FINANCIAL MANAGEMENT

CASE 4:
The Battle for Value, 2004:
FedEx Corp. vs. United Parcel Service, Inc.
VALUE CREATION AND ECONOMIC PROFIT

Lecture: 鍾 紹 熙 老 師 Group 3: F49802134 胡 秋 草 F49802153 高 玉 享 箮 Presentation date: 16th Apr 2012
I. OUTLOOK OF CASE 4
Case 4 mentions about the competition between two leading companies in package- delivery market. FedEx which is the largest foreign presence in China, with 11 weekly flights, serving 220 Chinese cities, so the company’s volumes in China had grown by more than 50% between 2003 and 2004. UPS which is the world’s largest package-delivery company and dominant parcel carrier in US, serving 200 cities in 2003. FedEx had
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Ever true to its humble origins, the company maintains its reputation for integrity, reliability, employee ownership, and customer service. For UPS, the future promises even more accomplishments as the next chapter in the company 's history is written.
III. THE BATTLE BETWEEN FEDEX AND UPS
1. Competition in the Express-Delivery Market
a. Percentage of large shippers FEDEX RULES AIRS AND UPS RULES GROUND (%)

Overall, the two companies split the small segment of the Express-Delivery market. There are ground market and air-express market. While UPS has dominated the ground area, the air-express has often been FedEx’s playground.

b. Capital-investment expenditures The graph shows that from 1992 to 2003, cumulative capital Expenditures of FedEx and UPS regularly rise. Although the FedEx’s CCE is more than UPS, during this period, the two companies matched each other’s investments in capital almost exactly.
c. Price competition
Table1: Summary of Announced List-Rate Increase
UPS
1998
1999
2000
2001
2002
2003
2004
Average
UPS ground
3.6%
2.5%
3.1%
3.1%
3.5%
3.9%
1.9%
3.1%
U.S domestic air
3.3%
2.5%
3.5%
3.7%
4.0%
3.2%
2.9%
3.3%
U.S export
0.0%
0.0%
2.9%
2.9%
3.9%
2.9%
2.9%
2.2%
FedEx
1998
1999
2000
2001
2002
2003
2004
Average
FedEx ground
3.6%
2.5%
3.1%
3.1%
3.5%
3.9%
1.9%
3.1%
U.S domestic air
3.5%
2.8%
0.0%

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