1. The Battle for Values February 22, 2010 Group 4: Karissa Blasko, Adam Kane, Leighton Loop, and Jane Soper

2.  Introduction  Opportunities in China  FedEx and UPS Goals  The Beijing Olympics  Financial Trends  A Winner in China  Conclusion

3. Leighton Loop

4.  FedEx  High volumes in China  UPS  Largest package delivery company globally  In China 15 years longer than FedEx  US and China agreement  Allowed hubs and landing rights in China  Gave FedEx and UPS exclusive rights

5.  Why China?  Fast growing economy  Infrastructure and opportunities  Increasing demands  Room for expansion  Effects of the recession  Almost at pre-crisis levels

6.  FedEx  Local partnership strategy  UPS  Entered the market alone  Challenges for both  No domestic airline routes for foreign airlines  EMS is more affordable  Brand recognition and customer loyalty barriers

7. Karissa Blasko

8.  FedEx: the Hare  “Superior financial returns”  Implied short term orientation and risk  UPS: the Tortoise  “A long-term competitive return”  Implied conservative values

9.  Cultural dimensions  Uncertainty avoidance  Risk adverse  Long-term orientation  Conservative  Collectivist culture  Guanxi

10.  UPS bid  Demonstrated trust  Built brand recognition  Opened the door to future expansion  Severely threatened FedEx

11. Adam Kane

12.  FedEx  Rent Assets  Cash Balance  Issues  UPS  Cash Balance  Expansion: $100M CompanyCurrent Ratio 2003Current Ratio 2008 FedEx1.181.35 UPS1.791.13

13.  FedEx  Debt Load  Fixed Charge Ratio  Low Cap-Ex  Limitations  UPS  Debt vs. Equity

14.  FedEx  SEO  299 Million Outstanding  800 Million Authorized  Issue 400 Million Shares  Raise $31.2B  Disregarding issuance costs

15. 12/31/2003FedExUPS Retained Earnings$6,250 Million$14,356 Million Cash Flow from Operations$1,871 Million$4,646 Million Internal Growth Rate4.86%6.91%  UPS  Internal Financing  Internal Growth Rate  6.91%  Large Operating Cash Flows  Large EOY Cash Balance

16. Jane Soper

17.  Presence  UPS: more hubs in China  Price  UPS: FedEx cut prices below cost  Also produced ill-will  Staying power  UPS: Climate Counts Award,  Cultural assimilation in China

18. UPS hubs in China as of 2009: Shanghai and Shenzhen FedEx hubs in China as of 2009: Guangzhou

19.  A more appropriate goal  FedEx’s goal was ill-suited for the Chinese market  Price was not the determinate factor  UPS gained the trust and build the relationships  UPS’s winning formula will help in future expansion