fedex will keep delivering to the world on time competitive analysis project
TRANSCRIPT
FedEx Will Keep Delivering to the World on Time
Competitive Analysis Project
A quick overview of our companiesFedEx (FDX)• Memphis, TN• 280,000 employees• Fred Smith
UPS (UPS)• Atlanta, GA• 410,000 employees• Scott Davis
FedEx and UPS make 64% of their industry’s revenue
FedEx UPS
Market Capitalization(Industry Avg: 11.9B)
30 B 72 B
Closing Price $93.95 $73.18
EPS (2010) $3.78 $3.56
UPS 37%
FedEx 27%
USPS - 19%
CH Robinson
7%
EIW 4%U T Worldwide 3% Others 3%
Market Share by Revenue Air Freight Industry 2010
Porter’s Five Forces
New Entrants:Low Power
• High Fixed Costs
Industry Rivals:High Power
• Equal competitive power
Suppliers:Low Power• Easy to buy
from various companies
Customers:High Power• Low cost to
switch companies
Substitutes:Low Power
• High switching costs• Commodity
FedEx understands that it’s success lies in its opportunities
Strengths Weaknesses
FedEx• High P/E Ratio• EPS • Largest Air Fleet
UPS• Company Size• Highest Profit
Margin
FedEx• High Operating
Expenses • Undifferentiated
Product
UPS• Lower
performing stocks
• Undifferentiated Product
Opportunities Threats
• New markets• Sustainability to reduce costs
• Rising oil prices• Lower demand for document sending
“A successful shipping company is adaptable, technologically advanced, able to grow financially, market itself well, and reach out to a global customer
base”
ADAPTABLETECHNOLOGICALFINANCIAL GROWTHMARKETABLEGLOBALIZED
Current events affect shipping industry
Rising Oil Prices
2009 Recession:FedEx suffered more
BP Oil Spill Lowers Stock Prices
Recession has impacted UPS
ROS (%) ATO EM ROE (%)
2010 7.0 x
1.47 x
4.17 =
42.09
2009 5.0 x
1.42 x
4.15 =
28.96
2008 5.8 x
1.61 x
4.70 =
44.29
ROS for FedEx plummets due to increased expenses
ROS (%) ATO EM ROE (%)
2010 3.41 x
1.39 x
1.80 =
8.57
2009 0.27 x
1.45 x
1.77 =
0.70
2008 3.00 x
1.48 x
1.77 =
7.70
UPS has higher EM than FDX
ROS (%) ATO EM ROE (%)
FEDEX 0.27 x
1.45 x
1.77 =
0.70
UPS 5.0 x
1.42 x
4.15 =
28.96
UPS is more dependent on debt than FDX
FedEx EM
UPS EM
2010 1.80 4.17
2009 1.77 4.15
2008 1.77 4.70
UPS consistently has a higher EM then FDX
FedEx UPS Industry Average
Profit Margin(%)
2.39 8.34 3.45
ROE(%) 8.57 42.09 12.89
P/E 24.67 20.42 24.5
Ratios that are inconsistent with Industry
FedEx aims to achieve full customer satisfaction
UPS - In-store copy machines
FedEx- Purchased Kinkos FedEx Office- Print Online & Have it Shipped
ADAPTABLETECHNOLOGICALFINANCIAL GROWTHMARKETABLE GLOBALIZED
FedEx leads technologicallyFedEx • Innovative solutions to
real world problems• SenseAware
technology: Medical package tracking
• More intuitive web experience
UPS• Large-business
oriented• “It just works”• Quantum View
Tracking system• Very basic web
presence
ADAPTABLETECHNOLOGICALFINANCIAL GROWTHMARKETABLEGLOBALIZED
FedEx has greater opportunities to grow
FedEx UPSP/E Ratio 24.67 20.42
Amount spent on Oil (2010)
3106 M 2972 M
Electric fleet FedEx has the largest electric fleet in the industry
Hybrids only
Doing business with the environment in mind
• Similar objectives– Technology– Fuel efficiency
• Differing objectives– Carbon neutral option (UPS)– Energy (FedEx)
ADAPTABLETECHNOLOGICALFINANCIAL GROWTHMARKETABLEGLOBALIZED
UPS competes with FedEx to differentiate their similar products
• Speed• Convenience• Reliability
• Kinkos/UPS Store• FedEx distributes
business items more effectively
• UPS focuses on mass marketing
• FedEx uses Segmentation
• FedEx offers lower prices than UPS
Product Place
PromotionPrice
UPS’ We Heart Logistics commercials reach people everywhere
UPS• “That’s Logistics” ad music• Global interaction• Use of NCAA famous coachesFedEx• Use relatable people in commercials to
show how their products meet customers’ needs
FedEx uses Market Segmentation to differentiate itself from competitors
• Goal: Operate independently yet compete collectively.
• Better serve customer needs
• Each segment can better concentrate on its own market
FedEx provides relatively greater value
Rates based on a 5 lb package shipped from MA to CA
Time 1 day 2 days 4 days 5 days 6 days8:00 AM 120.49$ 8:30 AM 108.06$
10:30 AM 86.08$ 3:00 PM 70.00$
77.00$ 62.60$ 45.95$ 33.30$ 16.21$ 38.79$ 30.36$ 12.10$
FedEx UPS
Shipping Rates and Delivery Times
End of Day
ADAPTABLETECHNOLOGICALFINANCIAL GROWTHMARKETABLEGLOBALIZED
Competition arises as companies try to globalize
FedEx• 23% of revenue from
international shipments
• Dominant carrier in Asia
• 664 jets, 62 on order
UPS• 20% of revenue from
international shipments
• Dominant carrier in Europe
• 311 jets, 22 on order
FedEx Will Keep Delivering the World on Time
FedEx• Increasing
internationally• Using innovation to
grow
UPS • Holds greater
market share