Fedex vs. Ups

Topics: Free cash flow, Term, Value Pages: 2 (456 words) Published: July 15, 2007
The shipping industry is currently dominated by two firms, UPS and FedEx. The firms comprise a duopoly in the domestic shipping industry. New parcel distribution patterns influenced by the emergence of online shopping and globalization have increased the demand for consistent and reliable shipping methods. In addition, these firms offer a multitude of commerce enabling and operating costs, both firms are looking for ways to streamline efficiency and profitability. FedEx company strategy is to operate independently, compete collectively, and manage collaboratively. Their independent hub and spoke business platform allows them to quickly adapt to a changing business environment. They are an asset-light company and offer a broad range of services to customers. FedEx operates in more countries than UPS, and they want to continue to focus their efforts on expansion in the European and Asian markets. In addition, FedEx has fewer domestic stops per mile, and is striving to increase market density in all locations as a means to further increase profit margins. UPS company is focused on sustaining long-term growth. UPS hppes to facilitate global commerce and expand their global intergrated network. Unlike FedEx who expands through smaller company acquisitions, UPS leverages internal and external growth synthesis. Through reinvestment in company growth expenditures, UPS has created the only truly globally integrated network in the industry. I would recommend UPS as the better short term investment and FedEx in the long term. While both companies have an excellent reputation and promising future, there is statistical evidence that leads me to the above conclusion. UPS is positioned as the better short run company because they posses a higher EVA valuation, greater net margin, and superior free cash flows. Higher profit margins and increasing free cash flows both contribute to the economic value added of the company and reinforce the notion that UPS is...
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