FedEx vs. UPS
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. 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. was 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....