Competing with contrasting strategies

1. FedEx and UPS in China
Competing with Contrasting Strategies

2. Case Overview
 This case examines two very different strategies
employed by shipping giants FedEx and UPS in their
respective attempts to expand their business into China
in the 1990’s.

3. The FedEx Approach
 Entered Chinese market in 1984
 Abundance of modern, western style advertising
 Established its own air routs in Asia, flying its own
aircraft in and out of China.
 Partnered with an aggressive local company to build a
large network of trucks and distribution centers.

4. SWOT Analysis – FedEx
Strengths:
 FedEx has largest own air services in and out of China.
 Highly controlled distribution systems with constant
information about the status of shipments.
 Aggressive advertising campaign.
 FedEx called itself global evangelist for high-tech and
just in time delivery.

5. Weaknesses:
 Lack of personal relationship building within
China
 In order to fill their aircraft, FedEx is forced to
take on many cheaper packages with very low
profit margins.

6. Opportunities:
 FedEx was focusing first on MNC’s with
Chinese operation that already used FedEx
else where.
 Customers who particularly value or required
constant information regarding shipment status.

7. Threats:
 Shipping companies already well
established in China. Ex: DHL
International Ltd.
 FedEx invested $880 million for acquiring
Fly Tiger Line Inc. to increase cargo
carrier routs in Asia.

8. Recommendations – FedEx
 Continue to focus on MNC’s already using FedEx.
Outline benefits of using FedEx for intra-business
shipping.
 Call on other Chinese businesses is to build
relationships. Expanding these businesses is
essentials to support the large investment in China.
 Sponsor local and national events such as the Chinese
new year and the Olympics.
 Send representatives to China to build personal
relationships.

9. The UPS Style
 Entered Chinese market in 1988.
 Minimal advertising with an old fashioned twist.
 Used Dragon air, a Hong Kong airline, or other regional
carriers, leasing space, to fly in and out of China.
 For ground delivery, UPS piggybacked on the
operations of Sinotrans, a Govt. owned transportation
company.

10. SWOT Analysis – UPS
Strengths:
 UPS invested just a fraction of what FedEx had
put into Asia.
 UPS emphasized global network and stability
creating an image “not American, but more
worldwide.”
 Sought to build relationships discreetly, on
Chinese terms.

11. Weaknesses:
 UPS lacked its own air service in China,
Making them less logistically versatile than
FedEx.
 Unlike FedEx, UPS does not have many of its
own trucks and drivers in China to build further
brand recognition.

12. Opportunities:
 Like FedEx, can build around its multinational
customer base with Chinese operations.
 UPS can pass on cheap cargo to target the
more lucrative document and small package
market, since they do not need to fill an aircraft.

13. Threats:
 Like FedEx, shipping companies already
well established in China pose a threat.
 While UPS contends it will add its own
airplane in China when it becomes
necessary, by that time FedEx may
already be far ahead in this area.

14. Recommendations – UPS
 Continue to focus on building relationships with
multinational customers base as well as with new
Chinese customers.
 Eventually, UPS should consider launching its own air
service to China in order to keep up with FedEx and
their logistical supremacy.