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FedEx Vs UPS in FedEx Vs UPS in ChinaChina

Made by:- Sandeep, Sanjay, Made by:- Sandeep, Sanjay, Shivam, Rahul, Shivam, Rahul,

Rakesh & RishendraRakesh & Rishendra

(Competing with Contrasting Strategies)

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Case OverviewCase 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.

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FedexFedex FedEx is one of the

world’s largest express transportation companies, providing information and logistic solution Services.

Chairman & CEO:- Frederick W.SmithMD:- Marco Lee

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Mission statement ofMission statement of ……. …….

FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information services and ensure that Customer requirements will be met in the highest quality manner and mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations following highest ethical and professional standards.

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FedEx ApproachFedEx Approach• Entered Chinese market in 1984.• Abundance of modern, western style

advertising.• Established its own air routes 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.

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SWOT Analysis – FedExSWOT Analysis – FedExStrengths: • Aggressive advertising campaign• Highly controlled distribution system with

constant information about the status of shipments.

• FedEx has its own air service in and out of China.

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SWOT Analysis – FedExSWOT Analysis – FedExWeaknesses: • 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.

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SWOT Analysis – FedExSWOT Analysis – FedExOpportunities: • Multinational corporations with Chinese

operations that already use FedEx elsewhere.

• Customers who particularly value or require constant information regarding shipment status.

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SWOT Analysis – FedExSWOT Analysis – FedExThreats: • Shipping companies already well

established in China. (DHL International Ltd. holds more than 30% of Chinese shipping market)

• Very large investment in China based infrastructure including $880 million acquisition of Flying Tiger Line Inc. to establish its own air routes in Asia.

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Recommendations - Recommendations - FedExFedEx

• Continue to focus on multinational corporations already using FedEx. Outline benefits of using FedEx for intra-business shipping.

• Call on other Chinese businesses to build relationships. Expanding to these businesses is essential 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

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Action Plan - FedExAction Plan - FedEx• Year 1 – Continue to call on multinational

customers in China.• Year 2 – Expand advertising focus to large

China-based businesses in order grab some of this business from UPS and other local companies. Send representative to China to talk to these companies.

• Year 3 – Evaluate possible need for more air service to the Chinese region.

• Year 4- Sponsor the 2004 Olympic games.

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UPS (United Parcel UPS (United Parcel Service)Service)

UPS is one of the world’s largest express carrier and package and delivery company specialized in transportation and logistics services.

Chairman & CEO:- Jim KellyVice-President:- Joseph M. Pyne

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Mission statement of UPSMission statement of UPS

As the world's largest package delivery company and a leading global provider of specialized transportation and logistics services, UPS continues to develop the frontiers of logistics, supply chain management, and e-Commerce ... combining the flows of goods, information, and funds."

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UPS ApproachUPS Approach

• Entered Chinese market in 1988.• Minimal advertising with an old-fashioned

twist.• Used Dragonair, 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 government owned transportation company.

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SWOT Analysis - UPSSWOT Analysis - UPSStrengths: • 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.

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SWOT Analysis - UPSSWOT Analysis - UPSWeaknesses: • 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.

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SWOT Analysis - UPSSWOT Analysis - UPSOpportunities: • Like FedEx, UPS 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.

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SWOT Analysis - UPSSWOT Analysis - UPSThreats: • Like FedEx, shipping companies already

well established in China pose a threat. • While UPS contends it will add its own

airplanes in China when it becomes necessary, by that time FedEx may already be far ahead in this area.

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Recommendations - UPSRecommendations - UPS• Continue to focus on building relationships

with multinational customer 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.

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Action Plan - UPSAction Plan - UPS• Year 1 – Continue focus on building relationships

with large China-based businesses, as FedEx is more focused on its existing multinational base. Add more “brown” UPS trucks in Chinese cities to boost brand awareness.

• Year 2 - Add more trucks in smaller Chinese cities as necessary. Evaluate air service needs.

• Year 3 – By this time UPS should consider adding its own air service to China in order to keep up with FedEx.

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Current Update - FedExCurrent Update - FedEx• Opened a dedicated express-handling facility at the

Huangtian International Airport in Shenzhen in South China (1999).

• In 2002, FedEx became the first shipping company to offer money back guarantee on late packages in China.

• On September 2, 2003, FedEx launched its first direct flight from Shenzhen to its hub in Anchorage, Alaska to keep up with increasing demand in South China region.

•  "For China to sustain the kind of growth we have seen in the last five years, it is essential that it establishes stronger links to the economies of Europe and the United States." FedEx Express Asia Pacific Division President David L. Cunningham Jr., 2003

• FedEx plans to move hub to China after 2007.

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Current Update - UPSCurrent Update - UPS

• “UPS, which began direct air service to China in 2001, has experienced double digit growth in the U.S.-China market in each of the last three years and its current flights between China and the U.S. are operating at near capacity. UPS successfully entered the China market in 1988. Last year, UPS took an ownership position in Sinotrans and also became the first foreign carrier to form a partnership with a domestic Chinese air carrier, Yangtze River Express, cutting a day off delivery times.” UPS Press Release June 18, 2004

• In 2004, the United States signed a new aviation agreement which allowed a five fold increase in air cargo capacity between the two countries over the next six years.

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Market Share (%)

31%

25%32%

12%

FedEx

UPS

DHL

Others

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Questions for discussionQuestions for discussion

1. FedEx entered into China in 1984 through a joint venture, while UPS entered China in 1989 through an agent partnership relationship. Critically examine the contrasting strategies adopted by both the companies, while entering and expanding their services network in China.

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2. FedEx had followed an aggressive, high investments strategy, while UPS followed a conservative, low investments approach. Critically examine the contrasting elements in both the companies’ strategies with a focus on advertising and promotion, target customers and the investments made till the late 1990s. What benefits and disadvantages do you perceive in the overall approach of both the companies while expanding in China?

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3. In the early years of the new millennium, the rivalry between FedEx and UPS in the Chinese logistics market had intensified further. Examine the moves and countermoves followed by both companies during the period. According to you, what strategies should both companies adopt to improve their market share in China?

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