The Battle of Value Fedex Corp. vs United Parcel Service Inc. 106363010 Ruby Chen 106363048 Candice Huang 106363070 Joy Hsiao 106363071 Daniel Liu 106363079 Ed Lai 106363084 Sabrina Yu

Company profile 1

United Parcel Service, Inc. FedEx Corp. United Parcel Service, Inc. Established 1971/6/18 1907/8/28 Founder Fred Smith Jim Casey Kind of Logistics Focus on air-express segment. Consolidated parcel delivery (Ground & Air) Key to Success Hub-and-spoke distribution pattern Efficiency Overseas expansion methods Tend to cooperate with local company Tend to M&A Others The largest package-delivery company

Domestic market 2

Differences in the Domestic Market (US) FedEx Corp. Operational leader -- innovative, entrepreneurial Purchase own planes to transport packages. Hub-and-spoke distribution pattern. Promote-from-within policy --- Great place to work. Use COSMOS to manage information. United Parcel Service, Inc. Industry follower --- bureaucratic Offering overnight service with half of Fedex’s price, however, settle into regular price in 1990s. Transport packages by using the cargo space of commercial passenger planes. Demand for machinelike precision --- Strike. Use DIADS to manage information. Base on the intense competition, the two companies always duplicate the other’s move. Even match each other’s investments in capital almost exactly. Fedex Positioning, market image To low down unit cost Promote from within policy- take care of employee participation, effective grievance sometimes result in a chat with Fedex Smith himself. UPS: The key to success is efficiency. Every route is time-down to traffic light. Demand machinelike precision, drivers have to keep precise schedules without considering all kinds of variables.

Financial performance 3

ROE = Net Profit Margin x total assets turnover x equity multiplier Comparison of ROE DuPont Analysis ROE = Net Profit Margin x total assets turnover x equity multiplier

Comparison of Net Profit Margin & Total Asset Turnover

Comparison of Net Profit Margin & Total Asset Turnover

Comparison of Working Capital Turnover

Financial performance of FedEx and UPS   FedEx UPS Total asset turnover Higher Lower Working capital turnover Marginal profit Allocative Efficiency of Resources More efficient Less efficient Times interest earned Current Ratio Times interest earned & fixed-charge coverage ratio MVA

Comparison of Times interest earned & Current Ratio

Financial performance of FedEx and UPS   FedEx UPS Total asset turnover Higher Lower Working capital turnover Marginal profit Allocative Efficiency of Resources More efficient Less efficient Times interest earned Higher debt-paying ability Current Ratio Times interest earned & fixed-charge coverage ratio MVA

Comparison of Rental Expense Times interest earned = EBIT/ Interest Expense Fixed-charge coverage ratio = EBIT/ (Interest Expense +rental Expense)

Financial performance of FedEx and UPS   FedEx UPS Total asset turnover Higher Lower Working capital turnover Marginal profit Allocative Efficiency of Resources More efficient Less efficient Times interest earned Higher debt-paying ability Current Ratio Times interest earned & fixed-charge coverage ratio More Less Renting expense MVA

Comparison of MVA

Financial performance of FedEx and UPS   FedEx UPS Target Superior financial return Long-term competitive return Total asset turnover Higher Lower Working capital turnover Marginal profit Allocative Efficiency of Resources More efficient Less efficient Times interest earned Higher debt-paying ability Current Ratio Times interest earned & fixed-charge coverage ratio More Less Renting expense MVA

Overseas market 4

Differences in the Overseas Market Expand its routes in Latin America and Caribbean. Introduce FedEx AsiaOne. Acquire air route serving China. FedEx enter Europe market. Establish Chinese HQ. Established EU hub in Brussels. Sold out European hub to DHL. FedEx Corp. 1984 1985 1988 1992 1995 2001 2003 United Parcel Service, Inc. Begin air service between US and EU. Begins direct flights to China. Contracts with local partner for package delivery within China. UPS acquire 10 European courier services. Spend $1billion+ to expand its European operations. Fedex AsiaOne = a next-business-day service between Asia countries and US, via a hub in Philippines.

China Market Main focus : import/export package market. World’s largest economy in 2039. The market of air cargo had been growing at 30% annually and expected to increase in the same pace for the next 5 years. Fedex and UPS Main focus : import/export package market. Challenge and riks: Unstable political factors: Different interpretations of law by regional governments Lack of legal framework Government that often dictate commercial relationships Nonperforming loans that put pressure on China’s banking sector. Social: Widening gap of living standard between urban and rural area. Lack of skillful labors. Nonperforming loans that put pressure on China’s banking sector. Liability by government for retirement program of state-owned enterprises.

While entering China market….. Based on Times interest earned and Current ratio: FedEx Weaker debt-paying ability Higher default risk Issue stocks to raise funds. UPS Better debt-paying ability Lower default risk Issue bonds to raise funds. Relatively