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FedEx UPS Presentation

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FedEx v UPS: The Battle for Value, 2004 Financial Analysis case presentation

FedEx UPS Presentation

  1. 1. The Battle for Value, 2004: FedEx Corp. vs. The United Parcel Service, Inc. Presented by Gerald Onukwaghu Prashant Rajopadhye Miguel Edwards
  2. 2. The Battle for Value, 2005: FedEx vs. UPS <ul><li>FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business, and related information services through focused operating companies competing collectively, and managed collaboratively, under the respected FedEx brand. </li></ul><ul><ul><li>FedEx Mission Statement Excerpt </li></ul></ul>
  3. 3. The Battle for Value, 2005: FedEx vs. UPS <ul><li>We serve the evolving distribution, logistics, and commerce needs of our customer worldwide, offering excellence and value in all we do. We sustain a financially strong company, with broad employee ownership, that provides a long-term competitive return to our shareowners. </li></ul><ul><ul><li>UPS Mission Statement </li></ul></ul>
  4. 4. The Battle for Value, 2005: FedEx vs. UPS <ul><li>FedEx History </li></ul><ul><ul><li>Business model conceived by Fred Smith in an undergraduate term paper. </li></ul></ul><ul><ul><li>Invests $4 million of his own capital and raises and addition $91 million. </li></ul></ul><ul><ul><li>Launches in 1971 </li></ul></ul><ul><ul><li>By 2003 </li></ul></ul><ul><ul><ul><li>50,000 Delivery Trucks </li></ul></ul></ul><ul><ul><ul><li>625 Cargo Planes </li></ul></ul></ul><ul><ul><ul><li>217,000 Employees </li></ul></ul></ul><ul><ul><ul><li>Handles 2 billion packages </li></ul></ul></ul><ul><ul><ul><li>$22.5 Billion with 37% margins </li></ul></ul></ul>
  5. 5. The Battle for Value, 2005: FedEx vs. UPS <ul><li>UPS History </li></ul><ul><ul><li>Started in 1907 by 19 year-old Jim Casey then called American Messenger Company. </li></ul></ul><ul><ul><li>Became Unite Parcel Service of America in 1929 and began shipping packages on commercial airliners. </li></ul></ul><ul><ul><li>By 2003 </li></ul></ul><ul><ul><ul><li>88,000 Ground Trucks </li></ul></ul></ul><ul><ul><ul><li>583 Planes </li></ul></ul></ul><ul><ul><ul><li>360,000 Employees </li></ul></ul></ul><ul><ul><ul><li>$2.9 Billion in profits on $33.4 Billion </li></ul></ul></ul>
  6. 6. The Battle for Value, 2005: FedEx vs. UPS Head-to-Head $2.9 billion $830 million Net Income $33.4 billion $22.5 billion Revenues $28.9 billion $15.4 billion Assets 13 million 5.4 million Packages Shipped Daily 360,000 216,500 Employees 583 625 Aircraft 88,000 50,000 Ground Vehicles UPS FedEx
  7. 7. The Battle for Value, 2005: FedEx vs. UPS FedEx - UPS 2003 Financials
  8. 8. The Battle for Value, 2005: FedEx vs. UPS <ul><li>The Competition </li></ul><ul><ul><li>Price competition </li></ul></ul><ul><ul><li>Operational Reengineering </li></ul></ul><ul><ul><li>Information Technology </li></ul></ul><ul><ul><li>Service Expansion </li></ul></ul><ul><ul><li>Logistic Services </li></ul></ul>
  9. 9. The Battle for Value, 2005: FedEx vs. UPS <ul><li>The European Market </li></ul><ul><ul><li>In 1992, FedEx sold operations to DHL after sustaining an estimated $1 Billion in losses since 1984. </li></ul></ul><ul><ul><li>FedEx continues to deliver throughout Europe, however, leveraging local partners. </li></ul></ul><ul><ul><li>UPS enters the European market place in 1988. </li></ul></ul><ul><ul><li>Acquires 10 local providers. </li></ul></ul><ul><ul><li>Announces $1 Billion of investments in that market </li></ul></ul><ul><ul><li>Targets to grow European business to 1/3 of total operations. </li></ul></ul>
  10. 10. The Battle for Value, 2005: FedEx vs. UPS <ul><li>The Breaking Into China </li></ul><ul><ul><li>Economist suggest China will be the worlds largest economy by 2039. </li></ul></ul><ul><ul><li>Chinese air cargo is growing at a steady rate of 30%. </li></ul></ul><ul><ul><li>Import/Export shipping market is estimated at $1 Billion. </li></ul></ul><ul><ul><li>Intra-China Shipping estimated at $800 Million. </li></ul></ul><ul><ul><li>In 2004, the US and China strike an new transportation accord. </li></ul></ul><ul><ul><ul><li>Five times the number of in/outbound flights </li></ul></ul></ul><ul><ul><ul><li>Permitted to establish hubs </li></ul></ul></ul><ul><ul><ul><li>Access to all airports </li></ul></ul></ul>
  11. 11. The Battle for Value, 2005: FedEx vs. UPS <ul><li>The Breaking Into China (cont.) </li></ul><ul><ul><li>FedEx and UPS already serving China </li></ul></ul><ul><ul><li>FedEx maintained a larger presence in China </li></ul></ul><ul><ul><ul><li>Direct flights to Beijing, Shenzhen, and Shanghai </li></ul></ul></ul><ul><ul><ul><li>11 weekly flights, twice as many as UPS </li></ul></ul></ul><ul><ul><ul><li>Served 220 Chinese cities. </li></ul></ul></ul><ul><ul><ul><li>FedEx volumes grew by more that 50% between 2003 and 2004 </li></ul></ul></ul><ul><ul><li>UPS was active in China since 1988 </li></ul></ul><ul><ul><ul><li>Direct flights to Beijing and Shanghai </li></ul></ul></ul><ul><ul><ul><li>6 weekly 747 flights </li></ul></ul></ul><ul><ul><ul><li>Served 200 Chinese cities </li></ul></ul></ul><ul><ul><ul><li>UPS reported 60% growth in shipments since 2001. </li></ul></ul></ul>
  12. 12. Timeline of Competitive Developments
  13. 13. The Battle for Value, 2005: FedEx vs. UPS Enabling Factors Ditto Cost reduction through economies of scale, IT, Business Process Re-engineering Hub & spoke distribution pattern Innovative, entrepreneurial, operational leader <ul><li>Deregulation </li></ul><ul><ul><li>In airline industry </li></ul></ul><ul><ul><li>In trucking industry </li></ul></ul>Efficiency, Low-cost provider Operations – Malcolm Balbridge National Quality Award for service <ul><li>Leader in logistics & supply chain management </li></ul><ul><ul><ul><li>Customer logistical management </li></ul></ul></ul><ul><li>Technology Innovations </li></ul><ul><ul><ul><li>Customer ordering </li></ul></ul></ul><ul><ul><ul><li>Package Tracking </li></ul></ul></ul><ul><ul><ul><li>Process Monitoring </li></ul></ul></ul>UPS FedEx
  14. 14. The Battle for Value, 2005: FedEx vs. UPS Inhibiting Factors Union Problems, large wage increases Ditto Domestic express market reached maturity UPS FedEx
  15. 24. The Battle for Value, 2005: FedEx vs. UPS <ul><li>Conclusion </li></ul><ul><li>Questions </li></ul>

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