Ups vs Fedex Analytical Report

The Express mail industry in the United States had a volume of $16-17 billion on expedited shipments in the year 1996. In the years before shipment volumes has risen 15-20% per year. However due to higher competition prices have fallen which resulted in a rise of only 10-15% in total revenues. As an example of this stands the revenue and the operating margin of the biggest player that make up 45% of the market. Federal Express’ revenue has more than quadrupled in the ten years prior 1996, however its operating margin has more than halved. (Exhibit 2) The

By capitalizing on this strategy, FedEx was able to boost its average delivery volume in 1976 to 20,726 packages per day via its three services, Priority-One, Standard Air, and Courier Pack, compared with an average of 10,521 delivered daily the prior year. Clearly the company’s calculated use of strategically-located hubs, nighttime flight routes, and limited package size allowed the company to carve out a niche by reliably delivering packages on an immediate, overnight basis.

This analysis investigates the management policies of the two primary competitors of the Air Delivery & Freight Services industry. I use ratio analysis to peek under the covers of profitability to understand how management, investment and financial management activities impact the overall performance of FedEx and UPS and study how the ratios change over time for FedEx.

The US express mail industry is highly consolidated. 85% of the market is served by 3 service providers. There are six second tier players who serve the remaining 15%. FedEx and UPS lead the industry in services and innovation. The following trends have been observed in this Industry.

FedEx has not fared as well as UPS in financial performances. FedEx¡¦s total revenue has grown 60% from 1996 to 1999 while their net income has doubled in the same period. FedEx¡¦s acquisition of RPS will challenge UPS for the ground delivery business and affect the sustainability of UPS¡¦s advantage in the ground deliver business. FedEx has been competing well in the higher-end, high-service segment of the package delivery market. Although, digitations of documents and emergence of electronic signatures is threatening the express business which FedEx has the advantage over UPS.

UPS is a global package delivery business that specializes in not only managing the movement of goods, but the information and funds that moves with those goods in more than 200 countries and territories worldwide. UPS’s target market is primarily U.S. companies that ship business to business via ground delivery and whose delivery time is not

The main factors inhibiting both companies are each other, both companies have attained a market dominance that is hard to overcome by any of them. In FedEx case, their financials have been their weakest spot. FedEx poor financial performance has been a big problem for the company, proof of this is the downgrade FedEx bonds have had in past years. In UPS, I would say one of their inhibiting factors is their lack of innovation. UPS has not been able to innovate and work with the technological improvements. Part of this is due of being first in the market, UPS was founded in 1907, FedEx in 1971, FedEx has gained a reputation of the leader in innovation and modernization, UPS as the follower. Also, UPS workers union have represented a huge problem for them, workers union strikes have had a huge hit in the company finances.

The two core elements of the business are the overnight delivery service and the ground-based delivery service. The overnight service utilized aircraft in a hub-and-spoke network system that covers much of the globe, with the objective of delivering packages overnight or as quickly as possible to as many locations as possible. This is the company's premium service and the one that is most commonly available around the world. UPS competes with FedEx, DHL and TNT, along with

United Parcel Service (UPS), is the world’s largest express package delivery firm that handled more than 4.7 billion packages and documents in 2015. This global transportation and logistics service provider operates in more than 220 countries, and offers an array of supply chain management solutions (UPS Fact Sheet, n.d.). The firm has diversified its products and/or services to include freight forwarding and logistics services via air, ground, rail, and sea. U.S. Domestic Package operations, International Package operations, and Supply Chain and Freight operations are the three operating segments UPS. Through technology advancements UPS delivers online package tracking, e-commerce services, and specialized

FedEx has two major customers who consist of businesses and individual customers. These business customers have accounts with FedEx to arrive at their location to pick up packages daily or weekly. Two-thirds of FedEx’s business comes from these customers so FedEx curves their operations to satisfy this clientele. Since FedEx’s competition is trying to acquire some of this clientele they have begun to operate and market to this clientele more effectively. Individual customers are also in FedEx’s internal environment. These customers represent one-third of their business. With increased competition from competitors FedEx has marketed to this market substantially. They have created boxes that are prepaid for shipment as long as the contents fit into the box. This has effectively increased business amongst individual customers for FedEx.

With the air cargo deregulations in 1977, the company was able to use larger aircrafts like Boeing 727s to further improve their operational efficiency and performance, leading to rapid growth of the company. By 1980, it had established its position in the industry and had a growth rate of 40% and became the first company to reach the USD 1 billion revenue-mark within 10 years of inception. Following international acquisitions in 1984, Federal Express started its operations in Europe & Asia. In 1994, Federal Express official adopted ‘FedEx’ as its primary brand and became a symbol of overnight parcel delivery services.

In any organization, financial analysis is one of the most basic parts of evaluation of a company operation in any business environment. As businesses operate, it is very important that the managers know the real environment for which a firm carries out its activities. The competitions evident in the market are substantial to the decision making process of a firm. Also, firms need to give much attention to the market forces of a particular industry to make sure that they are able to make these forces turn to their advantage. This paper will indicate the UPS 's bussiness enviroment, porter’s five forces, trends in the package delivery industry ,factors for success in the UPS 's industry, UPS 's relative strengths, the appropriate benchmark companies for valuation purposes, and the UPS 's accounting policies and methods,.

United Parcel Service, a logistics company has established itself through its strong corporate culture, continuous ability to innovate, and its far-reaching global network. The company has maintained a competitive advantage over the years by implementing continuous growth strategies—the first was geographic expansion, next the early adaptation of electronic tracking technologies, and then came a series of acquisitions. Although UPS is financially strong and is able to maintain its role in the courier and delivery industry—it is vital that UPS continue to act strategically as to strive for long-term success. UPS is heavily dependent on the U.S. economy and it is important that it find greater and more profitable ventures

The parcel service industry is made up of four main competitors. These competitors are UPS, FedEx, Airborne Express, and the U.S. Postal Service. Since 2000, American consumers have spent more than $50 billion to ship parcels, packages, and overnight letters. New parcel distribution patterns developed due to the way U.S. manufacturing companies are operating. The Internet has expanded the reach of direct marketing, particularly with retail transactions requiring home delivery. Globalization has also created the need for parcel carriers to expand worldwide.

Studying FedEx, UPS and their competitive relationship in the decade from mid - 80's to mid - 90's gives a good insight for the companies' and industry's future. The two companies have different strategic goals and are operating in the same industry but in different main markets: FedEx is working on "producing outstanding financial returns" and focuses on the overnight air market while UPS is looking for "earning reasonable profit" and its core business is the two-day ground delivery. However, by 1981, the two companies started to have a strong sense