1. UPS VS. FEDEX

2. UPS vs. FEDEX Situation shows a fast cycle business
Marked by neck-to-neck competition
Advantage developed imitable
Speed of service can be easily matched
Use of I.T. Can be easily imitated
Differentiation through service provides no barrier
Business is one where customer loyalty is slow, switching cost is low and main consideration is price and reliability

3. ‘97
‘98
‘99
‘00
‘01
UPS
INCREASE IN SALES
10.4%
9.1%
10.1%
2.9%
INCREASE IN OPEX
4.7%
6.4%
5.6%
INCOME/SALES
4.0%
7.0%
3.3%
9.7%
7.8%
FEDEX
11.8%
5.7%
8.8%
7.5%
8.2%
5.0%
8.9%
1.4%
3.2%
3.8%
3.0%

4. COMPARATIVE DATA UPS FEDEX 340 PLANES 153,000 TRUCKS 359,000 EMPLYS
13 MILLION PACKAGES
36.2 PCKG/EMPLY/YR
85 PCKG/TRUCK/YR
38,235 PCKG/PLANE/YR
LABOR COST 7.88 CENT/ATM
PCT GROUND BUSINESS 53%
INTRNTNL BSNS $3.6B
LOGISTICS BSNS (2001) $1.4B
FEDEX
650 PLANES
44,000 TRUCKS
215,000 EMPLYS
5 MILLION PAKCAGES
23.2 PCKG/EMPLY/YR
113 PCKG/TRUCK/YR
7,692 PCKG/PLANE/YR
LABOUR COST CENT/ATM
PCT GROUND BUSINESS 17%
INTRNTNL BSNS REV $3.8B
LOGISTICS BSNS (1993) $500M

5. COMPETITIVE APPROACHES
Fedex has been an innovator and competing as a differentiator and Prospector
UPS has been consistently been pursuing an efficiency strategy and an Analyzer
focused on operational excellence
Services pioneered by Fedex were imitated by ups
UPS was able to do this while maintaining its discipline in attaining high efficiency
End point of activity chain is delivery through ground service
This is where Fedex is vulnerable

6. DISTINCT ADVANTAGE
UPS has been able to manage its cost effectively at almost evey critical area and points in its value chain
Offer logistical and outsrcg services to dlvr value
Appropriate value thru improved capacity utilization
This was not easy for Fedex to copy because of earlier investment decisions
Fedex as first mover in innovating did not provide sustainable advantage
Ups copied and developed relative advantage
Fedex has been more willing to take risk
Also has better presence in terms of infrastructure globally

7. KEY ISSUES Services offered is very price sensitive
This is a buyers’ market
Economies of scale appears to be a problem with Fedex
Unutilized capacity
Lower productivity in spite of no union
Success depends on an integrated cost reduction-differentiation approach
Fedex does not seem to have the discipline to attain efficiency
Reflected in the oversized BLS division
Failed to increase efficiency and provide sustainable cost advantage to customers
Use of subcon of ground delivery fraught with reliability problem

8. FUTURE DEVELOPMENTS Expected increase in package deliver to homes
UPS has an advantage here with its historical presence in this segment
Growth in logistics business
Challenge to ups will come from the likes of DHL
Those best able to differentiate and manage whole value chain effectively will succeed
Increased competition from new entrants into us market
In a highly competitive market, being the mover does not ensure success,
Being the last to response is a sure failure
Success depends more in effective execution.

9. FUTURE MOVES: FEDEX
Fedex’s merger with Caliber System may overcome current weakness in ground services
Success depends on ability to ensure productivity increase
Fedex’s alliance with USPS may improve capacity utilization
Besides carving a bigger share in us, need to tap into global strength
Need to recognize limits of improvement in speed and logistics solutions
Given history of relying on technology, Fedex may become a pioner in M2M applications

10. FUTURE MOVES: UPS
The UPS mindset is one that focuses on relative advantage and executing an Analyzer approach effectively
On-line capabilities provide an installed base with a captive market
Managing industrial relations is going to be critical
Fedex can retake lost ground by positioning to pounce before collective bargaining
May want to consider alliance with DHL to prerempt competition
Mutual use of complementary assets