FedEx vs UPS
Renan Schiavetto
FIN 32080 – section 11
Dr. James Boyd
03/01/2015
FedEx vs. UPS write up
1. 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? With the increasing amount of online shopping, shipping companies such as FedEx and UPS have had a rise in the amount of packages processed per day. FedEx was the pioneer when it comes to overnight shipments, also FedEx focused more on air shipping, which made overnight shipments possible around America, and international shipments were faster than UPS since FedEx specialized into moving packages through airplanes instead of the UPS ground shipping strategy. The way UPS started to compete with the overnight delivery system was by undercutting FedEx’s prices, which increased UPS’s share on the overnight delivery system’s market, however by 2004 both companies were offering roughly the same price for overnight delivery. What the case shows is that FedEx originally had the competitive advantage on the overnight market over UPS, but as the delivery systems started to become more similar, UPS appears to be catching up with FedEx.
2. 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? When the talks over liberalized air cargo routes between the U.S and China began, FedEx stock price rose at a higher rate than UPS’s for the simple fact that FedEx was a company that specialized in air cargo already, plus it already had routes to China before the talks started. If the market is perfectly efficient, one might interpret that since FedEx
FIN 32080 – section 11
Dr. James Boyd
03/01/2015
FedEx vs. UPS write up
1. 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? With the increasing amount of online shopping, shipping companies such as FedEx and UPS have had a rise in the amount of packages processed per day. FedEx was the pioneer when it comes to overnight shipments, also FedEx focused more on air shipping, which made overnight shipments possible around America, and international shipments were faster than UPS since FedEx specialized into moving packages through airplanes instead of the UPS ground shipping strategy. The way UPS started to compete with the overnight delivery system was by undercutting FedEx’s prices, which increased UPS’s share on the overnight delivery system’s market, however by 2004 both companies were offering roughly the same price for overnight delivery. What the case shows is that FedEx originally had the competitive advantage on the overnight market over UPS, but as the delivery systems started to become more similar, UPS appears to be catching up with FedEx.
2. 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? When the talks over liberalized air cargo routes between the U.S and China began, FedEx stock price rose at a higher rate than UPS’s for the simple fact that FedEx was a company that specialized in air cargo already, plus it already had routes to China before the talks started. If the market is perfectly efficient, one might interpret that since FedEx