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UPS VS. FEDEX

UPS VS. FEDEX. UPS vs. FEDEX. Situation shows a fast cycle business Marked by neck-to-neck competition Advantage developed imitable Speed of service can be easily matched Use of I.T. Can be easily imitated Differentiation through service provides no barrier

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UPS VS. FEDEX

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  1. UPS VS. FEDEX

  2. UPS vs. FEDEX • Situation shows a fast cycle business • Marked by neck-to-neck competition • Advantage developed imitable • Speed of service can be easily matched • Use of I.T. Can be easily imitated • Differentiation through service provides no barrier • Business is one where customer loyalty is slow, switching cost is low and main consideration is price and reliability

  3. UPS 340 PLANES 153,000 TRUCKS 359,000 EMPLYS 13 MILLION PACKAGES 36.2 PCKG/EMPLY/YR 85 PCKG/TRUCK/YR 38,235 PCKG/PLANE/YR LABOR COST 7.88 CENT/ATM PCT GROUND BUSINESS 53% INTRNTNL BSNS $3.6B LOGISTICS BSNS (2001) $1.4B FEDEX 650 PLANES 44,000 TRUCKS 215,000 EMPLYS 5 MILLION PAKCAGES 23.2 PCKG/EMPLY/YR 113 PCKG/TRUCK/YR 7,692 PCKG/PLANE/YR LABOUR COST 13.97 CENT/ATM PCT GROUND BUSINESS 17% INTRNTNL BSNS REV $3.8B LOGISTICS BSNS (1993) $500M COMPARATIVE DATA

  4. COMPETITIVE APPROACHES • Fedex has been an innovator and competing as a differentiator and Prospector • UPS has been consistently been pursuing an efficiency strategy and an Analyzer • focused on operational excellence • Services pioneered by Fedex were imitated by ups • UPS was able to do this while maintaining its discipline in attaining high efficiency • End point of activity chain is delivery through ground service • This is where Fedex is vulnerable

  5. DISTINCT ADVANTAGE • UPS has been able to manage its cost effectively at almost evey critical area and points in its value chain • Offer logistical and outsrcg services to dlvr value • Appropriate value thru improved capacity utilization • This was not easy for Fedex to copy because of earlier investment decisions • Fedex as first mover in innovating did not provide sustainable advantage • Ups copied and developed relative advantage • Fedex has been more willing to take risk • Also has better presence in terms of infrastructure globally

  6. KEY ISSUES • Services offered is very price sensitive • This is a buyers’ market • Economies of scale appears to be a problem with Fedex • Unutilized capacity • Lower productivity in spite of no union • Success depends on an integrated cost reduction-differentiation approach • Fedex does not seem to have the discipline to attain efficiency • Reflected in the oversized BLS division • Failed to increase efficiency and provide sustainable cost advantage to customers • Use of subcon of ground delivery fraught with reliability problem

  7. FUTURE DEVELOPMENTS • Expected increase in package deliver to homes • UPS has an advantage here with its historical presence in this segment • Growth in logistics business • Challenge to ups will come from the likes of DHL • Those best able to differentiate and manage whole value chain effectively will succeed • Increased competition from new entrants into us market • In a highly competitive market, being the mover does not ensure success, • Being the last to response is a sure failure • Success depends more in effective execution.

  8. FUTURE MOVES: FEDEX • Fedex’s merger with Caliber System may overcome current weakness in ground services • Success depends on ability to ensure productivity increase • Fedex’s alliance with USPS may improve capacity utilization • Besides carving a bigger share in us, need to tap into global strength • Need to recognize limits of improvement in speed and logistics solutions • Given history of relying on technology, Fedex may become a pioner in M2M applications

  9. FUTURE MOVES: UPS • The UPS mindset is one that focuses on relative advantage and executing an Analyzer approach effectively • On-line capabilities provide an installed base with a captive market • Managing industrial relations is going to be critical • Fedex can retake lost ground by positioning to pounce before collective bargaining • May want to consider alliance with DHL to prerempt competition • Mutual use of complementary assets

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