FEDEX VS UPS Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

1. Summarize the case

U.S. AND CHINA DEAL

U.S and China were able to reach a consensus regarding US commercial cargo planes to be allowed to land on Chinese soil, due to an agreement between the two countries there was a substantial increase in number of commercial cargo flights. With this pact, history was created between the two countries. The two cargo transportation companies that benefited the most out of it were FedEx and UPS as they were the only two US companies, which were allowed to serve the Chinese market.

This agreement was not a surprise to the market as the talks for this agreement had been started since February. The impact of this agreement had already been absorbed by the S&P500 FedEx's share price had risen substantially about 5times faster than UPS; the affect was seen mainly because FedEx had greater approach and reach in China than UPS.

Even though FedEx had greater market dominance in China, but UPS was still the world's largest package-delivery company including USA.

China had become the target market for both companies as the US market matured and no more growth could be achieved in that market. In order to be able to differentiate itself from UPS, FedEx became focused upon innovation and leadership tools and methods. In the past, UPS had not been known to be a standard setter but it was known as an industry follower. By looking at what FedEx had achieved through innovation, UPS also underwent a serious makeover to reposition and re-brand itself as a leader rather than follower.

It was a battle of epic proportion between FedEx and UPS as the Chinese markets were seen as a test, which would determine the survival of each company. So the questions were raised, which company had the potential to attract this market that was required to win this war.

FEDEX CORPORATION

FedEx was an idea of an undergraduate student, Fred Smith of Yale University that he presented in his term paper. His strategy was that the company should buy their own planes rather than sending cargo on passenger planes, the most key and innovative strategy of Fred was to set up customized central hub and terminals at each airport to permit cheaper and faster service.

Inspired by his idea, Fred started up the company Federal Express Corporation with $95-million, invested his inheritance of $4 million and raised further $94 million by pitching to venture capitalist.

Continuous operations started in 1973, on the first night 196 packages were delivered overnight by 389 FedEx employees in 25 U.S. cities.

The company faced heavy losses and the company was nearly closed, but the company saw a turnaround in 1976 and was able to make a modest profit was $3.6 million on an average package volume of 19,000. Throughout this decade, FedEx made continues expansions by acquiring trucks, plains and raising capital, the success led the company to generate more revenue than U.S. air-delivery Company.

Many other companies started to follow the FedEx strategy leading to high competition in the industry by 1891, Emery Air Freight had imitated the hub system whereas UPS had moved into the overnight air market. But with the quality of services that FedEx was providing and the way it had branded itself in the market; FedEx overcame the threats and continued to increase in size, operations and revenue by reaching $1 billion in revenue in 1983.

The service quality of FedEx had set the national standard for which the President of U.S.A. presented FedEx with the Malcolm Baldrige National Quality, this was the first time when a service organization received this award. The key to success for FedEx was not only its operational efficiency but also its people pleasing skills with its motto of "People-Service-Profit". The company had high emphasis on customer satisfaction and to able to achieve that they continuously motivated their employees and earned the reputation of great place to work at.

With the deregulation of airlines and trucking industry, FedEx was able to purchase Boeing 727's and set up integrated regional trucking system that led to cost saving. Rising inflation and increase in competition led to manufactures to reduce their inventory and focus on Just In Time system, where the companies would not hold material for goods’ manufacturing but once an order was received; the company would order the material at that moment and to be able to operate such a system, they required reliable logistics service that led to an increase in demand for FedEx services.

With all the positive outcomes, FedEx was able to build assets worth $15.4 billion and profits of $830 million with revenue of $22.5 billion by the end of 2003.

UPS PARCEL SERVICE INC

United Parcel Service of America was founded by the merger of American Messenger Company and Motorcycle..............................

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