The Battle for Value, 2004: Fedex Corp. vs. Ups Study Case

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Case 4
THE BATTLE FOR VALUE, 2004: FEDEX CORP.
VS. UNITED PARCEL SERVICE, INC.
Set in June 2004, this case invites the student to assess the financial performance of FedEx Corp. and United Parcel Service, Inc (UPS). The two firms have competed intensely for dominance of the overnight express package industry. This case is intended for use in an introductory discussion of corporate value creation and its sources. Questions for Students

1. Contrast between Corporate excellence and Financial excellence. If you had to identify one of those companies as excellent, which company would you choose? On what basis did you make your decision? More generally, what is excellence in business?

2. Explain and assess EVA (economic profit).
3. Compare and contrast financial ratios.
4. Prepare to describe in class the competition in the overnight package delivery industry, and the strategies by which those two firms are meeting the competition. What are the enabling and inhibiting factors facing the two firms as they pursue their goals? Do you think that either firm can attain a sustainable competitive advantage in this business?

5. Why did FedEx’s stock price outstrip UPS’s during the initiation of talks over liberalized air cargo routes between the U.S. and China? Assuming a perfectly efficient stock market, how might one interpret a 14% increase in FedEx’s market value of equity?

6. How have FedEx and UPS performed since the early 1990s? Which firm is doing better? In class, prepare to discuss the insights you derived from the two firms’ financial statements, financial ratios, stock-price performance, and economic profit (economic value added or EVA). Also, prepare to describe how EVA is estimated, and its strengths and weaknesses as a measure of performance.
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