Ups vs Fedex Analytical Report
COMMUNICATION COMPARISON FedEx vs. UPS Background: The basis of the analytical report will be comparing Fed Ex and the United Postal Service (UPS). These two companies are the top in their industry. Each company trying to achieve the role of the industry leader they constantly battle head to head combining strategy and brute force. Fed Ex was incorporated in 1971, but did not officially begin operations until April of 1973. Fed Ex started out delivering to only 25 cities and did not start to expand until 1977. UPS was founded in 1907 starting out with a Model T Ford and a few motorcycles.
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UPS has since grown its fleet into 15,000+ trucks along with a large fleet of aircrafts and services over 200 countries and territories. Originally called FDX Corp. , FedEx Corp. was formed in January 1998 with the acquisition of Caliber System Inc. Through this and future purchases, FedEx sought to build on the strength of its famous express delivery service and create a more diversified company that included a portfolio of different but related businesses. In January 2000, FedEx unleashed the power of its global brand. In a move to further integrate the company’s portfolio of services, FDX Corp. as renamed FedEx Corporation. In addition, Federal Express became FedEx Express, RPS became FedEx Ground, Roberts Express became FedEx Custom Critical, and Caliber Logistics and Caliber Technology were combined to make up FedEx Global Logistics. To centralize the sales, marketing, customer service and information technology support for FedEx Express and FedEx Ground, a new subsidiary named FedEx Corporate Services (FedEx Services) was formed and began operations in June 2000. A New Competitor Michael E. Porter’s Five-Forces Model is the most effective way to identify the competitive environment of any industry.
The first force to consider is the threat of a new competitor. The threat of a new competitor is low, the sub factors of this force consist of product differentiation, and cost disadvantages that are independent of size; economies of scale. UPS has stated that they have achieved economies of scale and scope through their claim of being the one business entity of the industry to have one single network operation for all shipments kinds. Both UPS and FedEx have created giant shipping businesses, FedEx delivers to over 200 counties with over 3 million express deliveries each day to achieve the economies of scale.
With regard to conquering the product differentiation UPS and FedEx have created a barrier due to customer loyalty. UPS is over 100 years old and FedEx was established in 1973. The next force to be resolved is the buyers bargaining power over the service they are providing. Some businesses within the industry stand out. Specifically with FedEx being the first to develop overnight letter, Saturday delivery, guarantees of money back, and several other services. The quality of UPS’ services specifically affects how much power a buyer has. UPS’ introduced supply chain solutions and operations for freight for example provide many quality services that are very important to buyers. ” These services include financial services, the ability for international trade, consulting, freight management, and distribution along with logistics. The Bargaining Power of Suppliers: The third force is classified as being moderate in power; it is the power of bargaining by suppliers. Depending on what is being supplied determines how much bargaining power the supplier truly gets.
The Threat of Substitute Products and Services: The forth force is the threat of substitutes for products and services attained in the industry. This force is designated as low in the threat of substitute services. FedEx and UPS are strong competitors in this force. The customer has the option choose another competitor if unhappy; substituting and risking a negative consequence. This warrants not using substitutes. Intense Rivalry within Industry: This last force is to see if there is rivalry between competitors.
In 2009 FedEx launched a multimillion –dollar campaign aimed at its rival UPS, “Why is mega-corporation UPS trying to use its political clout to get a bailout from the U. S. Congress, leaving you to pay the tab”. Rival UPS calls FedEx the only company in the transportation industry with ‘ground’ employees covered by a railroad and airline law. Most of the forces are from moderate to low besides the threat of intense rivalry which signals that this is an attractive industry to be within. Business Level Strategy: From the beginning UPS and FedEx both had very different strategies in the delivery industry.
UPS was focused on ground transportation, as more of a substitute for United States Postal Service. UPS has over 100,000 ground transportation vehicles compared to only 20,000 ground vehicles in service at FedEx. The focus of FedEx has always been to be an air delivery company that is trying to pursue a strategy of being able to deliver a parcel the next day. FedEx proves this focus with nearly 700 jets in service compared to only 300 at rival UPS. FedEx and UPS both say the market of overnight delivery as the direction to pursue.
UPS was able to accept this and move forward allowing its ground department to absorb the expense, while FedEx suffered a great deal and we hit with higher cost do to them having to hire independent contractors. Over the years, these two companies have changed their overall positioning strategy in the domestic delivery industry. As these two companies move into the future they are relying on their brand names. Brand loyalty plays a key role in the division for these two companies because customers have a specific carrier preference, allowing there to be a cost differential.
Technology: Technology plays an important role at FedEx. It is a fact that FedEx uses electronic transactions and delivery for nearly 5 million shipments a day. The company decided to develop an integrated messaging solution to easily link customers with its subsidiaries and to process the increasing number of business transactions. FedEx chose Global exchange Services’ (GXS) integration technology, Enterprise System, to develop FedEx Net. FedEx Net allows data exchange between computers of any platform at anytime and anywhere.
It connects trading partners, customers and vendors with near real-time, event-driven and interactive communication capabilities. FedEx Net processes more than 4. 5 million business transactions per day and provides extensive professional data services to more than 5,000 global trading partners. (reference) customers can Receive Express and Ground tracking and invoice data, business documents covering shipping, tracking, invoicing and remittance. Since its implementation in 1996, FedEx has been able to save more than US $50 million by bringing in-house functions previously performed by third party VANs. (Reference).
FedEx Trade Networks’ is another electronic system that the company uses to gain worldwide network and thus solves transportation challenges every day around the world. UPS uses SMS Tracking system, one of the most sophisticated tracking systems that allow tracking the status of your shipments quickly and efficiently. Some of the features used are mobile phone, to receive an update of your shipment, get time in transit information and track your shipments. Geographical coverage: The FedEx delivery company, the world’s most important courier service, provides a good example of how intermodal transport operates.
The FedEx network is built around a single hub airport located on each continent. The American hub is located in Memphis, Tennessee, the Near East one is located in Dubai, and Subic Bay, Philippines acts as the Asian hub and, Roissy, France represent the European hub. These redistribution points act as bridges between international relations. Beside its strategic hub airports web, FedEx is present in more than 325 airports in 212 countries around the world. UPS operates supply chains for major companies in 45 countries, with about five million square feet of distribution space and 35 centralized locations worldwide.
Today UPS, or United Parcel Service Inc. , is a global company with one of the most recognized and admired brands in the world servicing more than 200 countries as the largest express carrier and package delivery company in the world. Earnings UPS: MSN reports: “The result: a fourth-quarter profit of $757 million, nearly triple the amount from a year earlier. The only blemish was UPS’ money-losing freight business, which ships larger items such as gym equipment, grand pianos and automobiles. The company issued a forecast for 2010 earnings that’s consistent with Wall Street expectations.
UPS, based in Atlanta, pinned its strong performance in the final three months of 2009 on a good holiday shipping season and solid international business. Significant growth in online retail sales gave a bump to domestic results. UPS saw strong volumes shipping goods ordered on sites like Amazon. com and BestBuy. com. Also, in November, Manheim Inc. , a vehicle auction company, tapped UPS to oversee its entire supply chain for moving millions of used vehicles each year to the wholesale market. Fourth-quarter profit equaled 75 cents per share, versus a profit of $254 million, or 25 cents per share, a year earlier.
Revenue fell 2. 5 percent to $12. 38 billion from $12. 70 billion. Analysts surveyed by Thomson Reuters were expecting a profit of 74 cents a share on revenue of $12. 25 billion. For 2010, UPS expects earnings per share in a range of $2. 70 to $3. 05. Analysts were expecting earnings of $2. 81 per share. Capital spending will total roughly $1. 8 billion, below the historical range, although up from $1. 6 billion in 2009. This reflects a reliance on improved technology and fewer employees. UPS is cutting 1,800 management and administrative jobs, less than 1 percent of its global work force, as it shrinks its U.
S. small package segment, which represents roughly 60 percent of annual revenue. UPS and rival FedEx Corp. have seen signs of improved demand. In December, FedEx said the U. S. economy had reached a “turning point,” but stopped short of predicting a full recovery. Kuehn said the current quarter will be the most challenging of 2010. That’s mostly because of the gradual nature of the economic recovery. International growth is expected to continue. In its fourth quarter, UPS’ package volume rose 1. 4 percent. During the holiday shipping season, global volume exceeded 22 million packages on eight days.
It twice exceeded 24 million packages. For the fourth quarter, air volume increased with next-air up 2. 8 percent. In the quarter, UPS introduced mobile applications for iPhone, iPod and BlackBerry devices. Executives said Internet buying and shipping continues to grow. International operating profit jumped 27. 6 percent. All regions experienced export volume growth, led by Asia and the U. S. ” Earnings FedEx: [“MEMPHIS, Tenn. , June 22, 2011 … FedEx Corp. (NYSE: FDX) today reported earnings of $1. 75 per diluted share for the fourth quarter ended May 31, compared to $1. 3 per diluted share a year ago, a year-over-year increase of 32%. Fourth Quarter Results FedEx Corp. reported the following consolidated results for the fourth quarter: Revenue of $10. 55 billion, up 12% from $9. 43 billion the previous year Operating income of $888 million, up 28% from $696 million last year Operating margin of 8. 4%, up from 7. 4% the previous year Net income of $558 million, up 33% from last year’s $419 million Revenue and earnings increased due to continued strong yield improvement in all transportation segments and volume growth of ground and international express shipments.
FedEx Freight’s return to profitability also improved operating results. Full Year Results FedEx Corp. reported the following consolidated results for the full year: Revenue of $39. 3 billion, up 13% from $34. 7 billion the previous year Operating income of $2. 38 billion, up 19% from $2. 00 billion last year Net income of $1. 45 billion, up 23% from last year’s $1. 18 billion Adjusted earnings per share of $4. 90, up from $3. 76 per share a year ago (Fiscal 2011 earnings per share exclude the impact of certain one-time costs” see table)
Capital spending for fiscal 2011 was $3. 4 billion, of which $2. 0 billion was for investments in aircraft and related equipment. Outlook FedEx projects earnings to be $1. 40 to $1. 60 per diluted share in the first quarter and $6. 35 to $6. 85 per diluted share for fiscal 2012. This guidance assumes the current market outlook for fuel prices and continued moderate growth in the global economy. The company reported earnings of $1. 20 per diluted share in last year’s first quarter. The capital spending forecast for fiscal 2012 is $4. billion, which includes the delivery of aircraft as well as progress payments toward future aircraft deliveries, along with investments in facilities, vehicles and information technology in support of the company’s global growth strategy. The company will benefit from the tax expensing/accelerated depreciation provisions included in the Tax Relief Act of 2010 passed last December. FedEx Express Segment For the fourth quarter, the FedEx Express segment reported: Revenue of $6. 63 billion, up 13% from last year’s $5. 88 billion Operating income of $429 million, up 4% from $413 million a year ago
Operating margin of 6. 5%, down from 7. 0% the previous year FedEx International Priority (IP) average daily package volume increased 6%, led by exports from Asia. IP revenue per package grew 8% due to higher fuel surcharges, the favorable impact of exchange rates, and improved weight per package and yield management actions. IP freight pounds increased 13% with revenue per pound up 6% due to higher fuel surcharges and the favorable impact of exchange rates. In total, IP package and freight revenue increased 15% and pounds increased 9% year-over-year. U. S. omestic revenue per package grew 10% due to higher fuel surcharges, yield management actions and increased weight per package, with slightly lower U. S. domestic average daily package volume. Operating income improvements were driven by strong yield growth, particularly in U. S. domestic package services, and by volume growth in IP package and freight services. Results were negatively impacted by increased retirement plan expenses and the reinstatement of certain compensation programs. FedEx Ground Segment For the fourth quarter, the FedEx Ground segment reported: Revenue of $2. 26 billion, up 15% from last year’s $1. 96 billion
Operating income of $417 million, up 31% from $319 million a year ago Operating margin of 18. 4%, up from 16. 3% the previous year FedEx Ground average daily package volume grew 6% in the fourth quarter driven by increases in the business-to-business market and the FedEx Home Delivery service. Revenue per package increased 7% primarily due to yield management actions and higher fuel surcharges. FedEx SmartPost average daily volume increased 24% due to growth in e-commerce and gains in market share. FedEx SmartPost revenue per package increased 8% primarily due to growth in higher-yielding services and increased fuel surcharges.
Operating income and margin increased primarily due to higher package yield and volume. FedEx Freight Segment For the fourth quarter, the FedEx Freight segment reported: Revenue of $1. 31 billion, up 6% from last year’s $1. 23 billion Operating income of $42 million, up from an operating loss of $36 million a year ago Operating margin of 3. 2%, compared with (2. 9%) the previous year Less-than-truckload (LTL) yield increased 13% primarily due to yield management actions and higher LTL fuel surcharges. LTL average daily shipments decreased 8% as a result of the yield management actions.
The segment returned to profitability in the quarter due primarily to the higher LTL yield. Last year’s results included an $18 million impairment charge related to the goodwill associated with the acquisition of Watkins Motor Lines. Strong yield growth and efficiencies resulting from the January 30, 2011 combination of the FedEx Freight and FedEx National LTL operations are expected to drive a substantial improvement in operating results in fiscal 2012. The net cash effect of the combination was immaterial, as cash proceeds of $88 million from asset sales offset severance and other cash outlays. ] –Source FedEx. Mission Statement: Comparing the two mission statements FedEx’s mission statement focuses more on the financial return. FedEx also states that customer requirements will be met in the highest quality manner appropriate to each market segment served. While UPS’ mission statement focuses on the customer’s needs. UPS speaks of being employee owned and promise to provide a long term return to its shareholders. UPS is making the excellent choice in focusing on the ones who run the business as well as the customers. This is even more evident when comparing the web pages of both companies.
The FedEx page is totally focused on new business and customer service. Links are provided to open an account, track shipments, find locations, or even get pricing information. However, the UPS page, though setup to handle customer needs went a step further providing access to a report called a sustainability report. This report details performance for the previous year and also informs the customer of the direction of the company. UPS prides itself on being transparent concerning business results and future goals. The UPS page clearly held the advantage for someone looking for company related information. Logos:
UPS has used four logos in the life of the business. The first logo was adopted in 1916, a shield with an eagle carrying a package. The second logo was unveiled in 1937 including another mainstay of the company’s identity – “UPS,” for United Parcel Service. The third was the removal of the strings; UPS felt this limited their ability to represent new services. The fourth logo rebranded UPS; it was the first change to the logo in 42 years. FedEx’s logo is an abbreviation of the company’s original name, Federal Express which was chosen to symbolize a nation’s marketplace and help in obtaining government contracts.
The original logo was designed in 1973; it consists of the full name ‘Federal Express’ in a diagonal position with blue and white background. In 1994 the FedEx logo experienced and innovative change. Behind the logo’s simplicity lays and arrow located in the negative space between the ‘E’ and the ‘x’ pointing rightwards. This arrow is used to form a subliminal advertisement, symbolizing forward movement and thinking. Also, FedEx uses color in its logo to represent operating units. The ‘Fed’ is blue in all of the logos but the ’Ex’ color represents the operating units of FedEx.
For example, green is for ground, orange is for express, yellow is for Trade Networks, and red is for Freight. The FedEx logo has been given several awards and is often regarded as the best creative design ever. Advertising message: “Relax, its FedEx” Is the advertising message used to promote the company’s services. The main message throughout the campaign is that the portfolio of FedEx services will help small businesses meet their needs in a timely basis. “What Can Brown Do For You? ” Is the message UPS proclaim as the current leading global provider of specialized transportation and logistics services, “moving at the speed of e-business”.
UPS dominates the challenges of e-commerce by focusing on the movement of goods, information, and funds. Corporate Strategy Conclusion: Although both companies, Fed Ex and UPS provide the same service to the end user, each has unique strengths and weaknesses. The approach to adopt innovative technology differs between the two, creating advantages and disadvantages. This study proved the success and failures of each company’s communication style with retrospect to their adopting innovated technology options. There have been many changes within the Express Delivery Service Industry.
These changes range from global expansion including the increase of competitor acquisitions; to the creation of innovative technology. Although the approach to adopt innovative technology differs between the two, creating advantages and disadvantages, FedEx and UPS are the two businesses that parallel the overall data within this industry. These two businesses are extremely different culturally they are both considered powerhouses of the industry. References: About UPS. (2008). UPS. Retrieved May 25, 2011 from http://www. ups. com/content/us/ en/about/index. html Business Journal.
Retrieved May 25, 2011 from http://www. bizjournals. com/ memphis/stories/1998/01/12/daily1. html FedEx Corporation. (2008). FedEx Facts. Retrieved May 25, 2011 from http://about. fedex. designcdt. com/our_company/company_information/fedex_corporation FedEx Corporation, Ratios and Returns. (2010). Forbes. Retrieved June 6, 2011 from http://finapps. forbes. com/finapps/jsp/finance/compinfo/Ratios. jsp? tkr=fdx FedEx Corp. Reports Higher Fourth Quarter Earnings. (2011). FedEx. Retrieved June 22, 2011 from http://news. van. fedex. com/node/17501 Financial Statements, FedEx Corporation. 2010). Google Finance. Retrieved June 6, 2011 from http://finance. google. com/finance? fstype=ci&q=NYSE:FDX Financial Statements, United Parcel Service, Inc. (2010). Google Finance. Retrieved June 6, 2011 from http://finance. google. com/finance? fstype=bi&q=NYSE:UPS Five Forces Analysis. Retrieved May 25, 2011 from http://members. tripod. com/wenbwu/ fedex. htm United Parcel Service, Inc. , Ratios and Returns. (2010). Forbes. Retrieved June 6, 2011 from http://finapps. forbes. com/finapps/jsp/finance/compinfo/Ratios. jsp? tkr=UPS UPS Companies. (2008). UPS.
Retrieved May 25, 2011 from http://www. ups. com/ content/corp/companies/index. html UPS Quarterly Profit Nearly Triples Over a Year Ago. (2010). Associated Press. Retrieved June 22, 2011 from http://www. msnbc. msn. com/id/35196349/ns/business-personal_finance/t/ups-quart erly-profit-nearly-triples-over-year-ago/ Today’s UPS. (2008). UPS. Retrieved May 25, 2011 from http://www. pressroom. ups. com/about/today/0,1972,,00. html http://finapps. forbes. com/finapps/jsp/finance/compinfo/Ratios. jsp? tkr=fdx http://findarticles. com/p/articles/mi_m0EIN/is_2003_Sept_4/ai_107246144/ Muller, G. 1995) Intermodal Freight Transportation, 3rd Edition, Eno Transportation Foundation http:// www. fedex. com http://www. investors. ups. com/phoenix. zhtml? c=62900&p=irol-irhome http://www. fastcompany. com/1716317/fedex-vs-ups-by-the-numbers http://www. ups. com/content/us/en/about/index. html? WT. svl=Footer http://about. fedex. designcdt. com/our_company/company_information/fedex_history Dividend Metrics |Ticker |Name |Current Dividend Yield |5 year Dividend Growth |1 year Dividend Growth | |FDX |FedEx Corp |0. 4 |8. 68 |6. 82 | |UPS |United Parcel Service Inc |2. 59 |7. 33 |4. 44 | [pic] [pic] Stock Metrics |Ticker |Name |Trend Analysis |Price |Trading Volume | |FDX |FedEx Corp |+55 |92. 05 |2516786. 5 | |UPS |United Parcel Service Inc |+85 |74. 47 |4072876. 75 | [pic] [pic] [pic] [pic] [pic]