Fed Ex vs UPS Case Analysis Essay

This essay has a total of 2808 words and 14 pages.

Fed Ex vs UPS Case Analysis

Executive Summery

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.

UPS and FedEx are the leading parcel carriers in the U.S. FedEx has significantly expanded
their capability to compete with UPS's dominant ground delivery service. UPS has continued
its strong marketing efforts in overnight and deferred air services. Both of these
carriers have introduced information systems, which include user-friendly Internet
interfaces. The carriers have also expanded logistical services and improved integration
with customer supply chains.

State of the Environment

State of the General Environment

More and more people are using computers and the Internet. Dual income families have
increased spending; therefore more people are ordering products over the internet at a
high rate. The Internet offers customers a one stop source for global shipping. Due to
this, there has been an increase in using information technology and the Internet for
businesses. This has created an increase in trade and investment along with global
shipping logistics and supply chain solutions. With the increase in globalization,
companies have had to adapt to the diverse work force and the culture of the countries in
which they are conducting business. The parcel service industry is controlled by strict
regulations and federal law. For example, September 11 brought stricter laws and
regulations in the parcel service industry. Operations must maintain federal approval to
operate in the United States.

State of the Industry Environment

The parcel service industry is dominated by four carriers that make up 95 percent of the
industries domestic revenue. Over the years, the industry has had an increase growth rate
over time and an increased role in the economy. This is due to the way manufacturing
companies are now operating. With the growth of the parcel service industry, companies
were able to decrease their inventories. These companies were relying on just-in-time
inventory controls; they now had mass customization and the increasing demand for
logistical services. Manufactures also depended more on the customer, information
technology, and the increase in the use of technology in all parts of the economy.
Companies such as FedEx, UPS, Airborne Express, and USPS shipped parcels at a faster rate
and were more reliable than other rail, motor, and water carriers.

Trends and opportunities of the parcel service industry include globalization, e-commerce,
and supply-chain management. Internet logistics was FedEx and UPS's fastest growing
business. The internet enabled customers to link directly to retailers and their
manufacturers. In 2001, parcel carriers served almost all of the online market. They were
able to provide information on packages to customers through tracking systems on the web.
This allowed customers to plan ahead and decrease delays in deliveries. It also allowed
for faster transactions and lower communication costs. Parcel companies created
partnerships with large Internet retailers. These partnerships allowed parcel service
companies to expand its overall delivery volume. Parcel companies improved tracking by
implementing several technological innovations. These included "laser scanners and bar
codes, state of the art software programs, satellite and cell phone communication
equipment, electronic information interchanges, and the Internet."

Globalization is another major trend. Since the emergence of the Internet, barriers that
use to hinder the business world are now being lifted. Businesses are now able to conduct
business with any other company or consumer throughout the world. This has led to an
increased demand for the parcel service industry. The parcel service industry supplies
much of the growing demand of the global supply chain.

Supply chain management is the third growing trend that can be used to define the package
delivery industry. FedEx and UPS are improving their operations and integrating their
supply chains to better serve their customers, drive efficiencies, eliminate waste and
create more sustainable business models. This will help companies develop and manage their
inventory and shipping logistics. These plans are a much more efficient and effective way
to handle inventory, because the inventory is always in transit. Better inventory and
logistics management also helps to lower costs and speed up distribution. Both the
supplier and the parcel delivery company would benefit, because the suppliers save on
distribution costs and the parcel delivery company receives the delivery business.

State of the Competition

State of the Competitive Environment

When choosing a parcel service, consumers, both individuals and businesses, look for
reliability, fast, inexpensive, and convenient ways to ship a product. The ability to
track shipments is becoming more important to the consumer, therefore the demand for
technological innovations is essential.

The package delivery industry can be broken up into three distinct customer categories.
These include the shipment of small to medium sized packages by those who request shipment
of time-critical parcels, the sending of overnight letters, and the movement of heavy
freight between large corporations. In this industry there are two major competitors that
had many similarities; these companies are FedEx and UPS. Other minor competitors include
Airborne Express, DHL, and USPS. These competitors all offer services in each of the
segments, although each company have similar characteristics, they also have dominant
differences from one another. When choosing a parcel service, consumers, both individuals
and businesses, look for reliability, fast, inexpensive, and convenient ways to ship a
product. The ability to track shipments is becoming more important to the consumer,
therefore the demand for technological innovations is essential.

Competitor Value Chain Analysis

Originally, FedEx and UPS were created for separate purposes. UPS was a multi-ground
delivery service and FedEx was an overnight delivery service. Over the years the two
companies have grown into similar business operations. Although the two companies are
outwardly similar, there are fundamental differences, both financial and non-financial.
One difference is that UPS relies more heavily on its ground delivery service while FedEx
concentrates more on air deliveries. Another difference between the two companies is the
volume of delivery packages. In order for FedEx to manage the inventories from companies
who rely on the end to end manufacturing product, they converted sorting facilities to
warehouses and built new warehouses at home and abroad. UPS had to improve every segment
of the business. This included online, logistics, ground, overnight, and global services.

Both FedEx and UPS have brand name recognition, however FedEx was so dominant that "I'll
FedEx it to you." was commonly used when shipping with any air carrier service. FedEx
spends more money on advertising and promotions than what UPS does. FedEx also responded
to the customer's changing environment by operating completely, independently, and
collectively. UPS's marketing strategy was to expand its marketing workforce. Before 1997,
UPS did not have a sizable marketing workforce. They now have as sales force of over

UPS expanded its service options to one day, two day, three day, and time definite
service. UPS has the capability to get packages to their destination in a very short
amount of time. They did this by expanding to one to six day service depending on what was
requested or the nature of the delivery. Similarly, FedEx can reach almost every business
in the world in as little as one day. The United States Postal Service was a little
different in the placement of the product. They had the ability to reach every address in
the United States and internationally, however they did not specialize in quick or express
deliveries like FedEx and UPS.

The pricing structures of FedEx and UPS are very similar. In both instances, their prices
varied depending on the cost of providing the service. For example, they would not charge
the same amount for a small package to be delivered to nearby location as they would for a
large shipment to be sent internationally. For UPS to compete against FedEx, they had to
offer customers flexibility in price and service.

Competitor SWOT Analysis

UPS Strengths
UPS is part of the largest transportation industry. It is constantly on the move and they
are always making the needed changes in order to appeal to the consumers and stay on the
top of technological advances. They also play a strong role in the economy. Not only are
they looked to as one of the top transportation companies, but they also contributed to a
large percentage of our nation's Gross Domestic Product (GDP). UPS concentrates on
strongly on delivering on its promise. UPS holds 47 percent of the market share. They
provide ground and air parcel services. They are the market leader in the $17 billion
ground segment. UPS has consistent financial success with a AAA credit rating.

UPS concentrated strongly on delivery on its promise and in return UPS built strong
relationships with its customers. They also focus on having strong community commitments
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