1. The Battle of Value Fedex Corp. vs United Parcel Service Inc.
Ruby Chen Candice Huang
Joy Hsiao Daniel Liu
Ed Lai Sabrina Yu

2. Company profile 1

3. United Parcel Service, Inc.
FedEx Corp.
United Parcel Service, Inc.
Established
1971/6/18
1907/8/28
Founder
Fred Smith
Jim Casey
Kind of Logistics
Focus on air-express segment.
Consolidated parcel delivery (Ground & Air)
Key to Success
Hub-and-spoke
distribution pattern
Efficiency
Overseas expansion methods
Tend to cooperate with
local company
Tend to M&A
Others
The largest
package-delivery company

4. Domestic market 2

5. Differences in the Domestic Market (US)
FedEx Corp.
Operational leader -- innovative, entrepreneurial
Purchase own planes to transport packages.
Hub-and-spoke distribution pattern.
Promote-from-within policy --- Great place to work.
Use COSMOS to manage information.
United Parcel Service, Inc.
Industry follower --- bureaucratic
Offering overnight service with half of Fedex’s price, however, settle into regular price in 1990s.
Transport packages by using the cargo space of commercial passenger planes.
Demand for machinelike precision --- Strike.
Use DIADS to manage information.
Base on the intense competition, the two companies always duplicate the other’s move.
Even match each other’s investments in capital almost exactly.
Fedex
Positioning, market image
To low down unit cost
Promote from within policy- take care of employee participation, effective grievance sometimes result in a chat with Fedex Smith himself.
UPS:
The key to success is efficiency. Every route is time-down to traffic light. Demand machinelike precision, drivers have to keep precise schedules without considering all kinds of variables.

6. Financial performance3

7. ROE = Net Profit Margin x total assets turnover x equity multiplier
Comparison of ROE
DuPont Analysis
ROE = Net Profit Margin x total assets turnover x equity multiplier

8. Comparison of Net Profit Margin & Total Asset Turnover

9. Comparison of Net Profit Margin & Total Asset Turnover

10. Comparison of Working Capital Turnover

11. Financial performance of FedEx and UPS
FedEx
UPS
Total asset turnover
Higher
Lower
Working capital turnover
Marginal profit
Allocative Efficiency of Resources
More efficient
Less efficient
Times interest earned
Current Ratio
Times interest earned &
fixed-charge coverage ratio
MVA

12. Comparison of Times interest earned & Current Ratio

13. Financial performance of FedEx and UPS
FedEx
UPS
Total asset turnover
Higher
Lower
Working capital turnover
Marginal profit
Allocative Efficiency of Resources
More efficient
Less efficient
Times interest earned
Higher debt-paying ability
Current Ratio
Times interest earned &
fixed-charge coverage ratio
MVA

14. Comparison of Rental Expense
Times interest earned = EBIT/ Interest Expense Fixed-charge coverage ratio = EBIT/ (Interest Expense +rental Expense)

15. Financial performance of FedEx and UPS
FedEx
UPS
Total asset turnover
Higher
Lower
Working capital turnover
Marginal profit
Allocative Efficiency of Resources
More efficient
Less efficient
Times interest earned
Higher debt-paying ability
Current Ratio
Times interest earned &
fixed-charge coverage ratio
More
Less Renting expense
MVA

16. Comparison of MVA

17. Financial performance of FedEx and UPS
FedEx
UPS
Target
Superior financial return
Long-term competitive return
Total asset turnover
Higher
Lower
Working capital turnover
Marginal profit
Allocative Efficiency of Resources
More efficient
Less efficient
Times interest earned
Higher debt-paying ability
Current Ratio
Times interest earned &
fixed-charge coverage ratio
More
Less Renting expense
MVA

18. Overseas market 4

19. Differences in the Overseas Market
Expand its routes in Latin America and Caribbean.
Introduce FedEx AsiaOne.
Acquire air route serving China.
FedEx enter Europe market.
Establish Chinese HQ.
Established EU hub in Brussels.
Sold out European hub to DHL.
FedEx Corp.
1984
1985
1988
1992
1995
2001
2003
United Parcel Service, Inc.
Begin air service between US and EU.
Begins direct flights to China.
Contracts with local partner for package delivery within China.
UPS acquire 10 European courier services.
Spend $1billion+ to expand its European operations.
Fedex AsiaOne = a next-business-day service between Asia countries and US, via a hub in Philippines.

20. China Market Main focus : import/export package market.
World’s largest economy in 2039.
The market of air cargo had been growing at 30% annually and expected to increase in the same pace for the next 5 years.
Fedex and UPS
Main focus : import/export package market.
Challenge and riks:
Unstable political factors:
Different interpretations of law by regional governments
Lack of legal framework
Government that often dictate commercial relationships
Nonperforming loans that put pressure on China’s banking sector.
Social:
Widening gap of living standard between urban and rural area.
Lack of skillful labors.
Nonperforming loans that put pressure on China’s banking sector.
Liability by government for retirement program of state-owned enterprises.

21. While entering China market…..
Based on Times interest earned and Current ratio:
FedEx
Weaker debt-paying ability
Higher default risk
Issue stocks to raise funds.
UPS
Better debt-paying ability
Lower default risk
Issue bonds to raise funds.
Relatively