the battle for value: fedex vs ups

THE BATTLE FOR VALUE:FEDEX CORP. VS. THE UNITED PARCEL SERVICE, INC.

R. Purwendi DarmintoDian AtikaMade Sedana YogaErshad Haekal

MagdalenaTaufan Anggi BrataAgnesia KharismaCanggih Sakina Hans

Video FEDEX

Video UPS

The Battle for Value: FedEx vs. UPS

FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business, and related information services through focused operating companies competing collectively, and managed collaboratively, under the respected FedEx brand.

FedEx Mission Statement


We serve the evolving distribution, logistics, and commerce needs of our customer worldwide, offering excellence and value in all we do. We sustain a financially strong company, with broad employee ownership, that provides a long-term competitive return to our shareowners.

UPS Mission Statement


FedEx History Business model conceived by Fred Smith in an undergraduate

term paper. Invests $4 million of his own capital and raises and addition

$91 million. Launches in 1971 By 2003

50,000 Delivery Trucks 625 Cargo Planes 217,000 Employees Handles 2 billion packages $22.5 Billion with 37% margins


UPS History Started in 1907 by 19 year-old Jim Casey then called American

Messenger Company. Became Unite Parcel Service of America in 1929 and began

shipping packages on commercial airliners. By 2003

• 88,000 Ground Trucks• 583 Planes• 360,000 Employees• $2.9 Billion in profits on

$33.4 Billion

FedEx UPS

Ground Vehicles 50,000 88,000

Aircraft 625 583

Employees 216,500 360,000

Packages Shipped Daily 5.4 million 13 million

Assets $15.4 billion $28.9 billion

Revenues $22.5 billion $33.4 billion

Net Income $830 million $2.9 billion

Head-to-Head

The Battle for Value, 2005: FedEx vs. UPS

$0.00 $10.00 $20.00 $30.00 $40.00

Assets

Revenues

Net IncomeUPS

FedEx

FedEx - UPS 2003 Financials



Significant Dimensions of Competition1) Customer Focus

• Listening carefully to the customer’s need• Providing customized solution• Committing to service relationships

2) Price Competition• Both of firms had settled into a predictable pattern

of regular price increases.

3) Operational Re-engineering• In order to have a reduction of unit costs,

business-process re-engineering was implemented to squeeze unnecessary steps and costs out of service.


Significant Dimensions of Competition4) Information Technology

• FedEx use COSMOS (Customer ,Operations, Service, Master On-line System)

• UPS relied on DIADs ( Delivery Information Acquisition Devices)

5) Service Expansion• FedExarmed with volume discounts and superb quality• UPSmade a customer interfaces by installing 11,500 drop-off boxes

6) Logistic ServicesProviding total inventory control of customers, including purchase orders, receipt of goods, order entry and warehousing, inventory accounting, shipping, and account receivable.

• The European Market– In 1992, FedEx sold operations to DHL after

sustaining an estimated $1 Billion in losses since 1984.

– FedEx continues to deliver throughout Europe, however, leveraging local partners.

– UPS enters the European market place in 1988.

– Acquires 10 local providers.– Announces $1 Billion of investments in that

market– Targets to grow European business to 1/3 of

total operations.


• The Breaking Into China– Economist suggest China will be the worlds

largest economy by 2039.– Chinese air cargo is growing at a steady rate

of 30%.– Import/Export shipping market is estimated at

$1 Billion. – Intra-China Shipping estimated at $800 Million.– In 2004, the US and China strike an new

transportation accord. • Five times the number of in/outbound flights• Permitted to establish hubs• Access to all airports

The Battle for Value: FedEx vs. UPS2005

• The Breaking Into China (cont.)– FedEx and UPS already serving China– FedEx maintained a larger presence in China

• Direct flights to Beijing, Shenzhen, and Shanghai• 11 weekly flights, twice as many as UPS• Served 220 Chinese cities.• FedEx volumes grew by more that 50% between 2003

and 2004– UPS was active in China since 1988

• Direct flights to Beijing and Shanghai• 6 weekly 747 flights• Served 200 Chinese cities• UPS reported 60% growth in shipments

since 2001.

The Battle for Value: FedEx vs. UPS2005

Timeline of Competitive Developments

1982 2003

1982Offers 10:30 AM delivery

1982Establishes next-day air service

1984Acquires Gelco International,

launches Asia-Pacific operations

1986handheld barcode scanner

1985European hub in Brussels

1987Warehouse services to IBM

1988UPS's first air fleet

1989Acquires Tiger International

1990Malcolm Balbridge Award

1990Offers 10:30 AM guarantee

for next-day air

1991Saturday delivery,

Electronic sign. tracking

19922-day delivery

1992Expands delivery to 200 countries

1994Website for package tracking

1994Website for

package tracking

1995Guaranteed 8 A.M. overnight delivery

1995Acquires air-routes serving China,

Establishes Latin America Div.

1999UPS IPO

1999Creates new hub at CDG Airport in Paris

2000Acquires all-cargo air service

in Latin America

2001Acquires Mail Boxes Etc.,

begins direct flights to China

1985Intercontinental air service

between US and Europe

2000B2C home-delivery service

2001Carries USPS packages,

Acquires American Freightway Corp.

2002Home delivery to

cover 100% of U.S.

2002Guaranteed

next-day delivery

2003Acquires Kinko's,

establishes Chinese headquarters

2003Contracts with

Yangtze River Express, Reduces

ground-delivery time

2003

Return on AssetsThe higher the return the better the profit performance for the companyFormula: Net Income / (Fixed Assets + Net Working Capital)

UPS gain higher ROA in the recent years

ROA

2003

Return on equity measures the rate of return on the ownership interest of the common stock owners.It measures a firm's efficiency at generating profits from every unit of shareholders' equity. ROE shows how well a company uses investment funds to generate earnings growthROE at 15%-20% considered as good.

UPS gain better ROE in the recent years

ROE

WACCA company’s assets are financed by either debt or equity, as an increase in WACC notes a decrease in valuation and a higher risk. FormulaWACC = [Kd(1-t) x D/(D+E)] + [Ke x E/(D+E)]

UPS gain lower WACC in the recent years

WACC

Economic Value Added: A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".)FormulaEVA = Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)

UPS gain higher EVA in recent year

EVA (Annual)

Market Value Added: The higher the MVA, the better. A high MVA indicates the company has created substantial wealth for the shareholders. A negative MVA means that the value of management's actions and investments are less than the value of the capital contributed to the company by the capital market (or that wealth and value have been destroyed) Formula: MVA = company’s market value – invested capital

UPS gain higher MVA in recent year so UPS management can create value to the company more than Fedex

MVA

2003

Net Profit margina measure of profitability. A low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss, or a negative margin. Profit margin is an indicator of a company's pricing strategies and how well it controls costsFormulasNet Profit Margin = Net Profit / Revenue

UPS have higher net profit margin so better cost controlling

Net profit Margin

http://en.wikipedia.org/wiki/Profit_(accounting)

The price of stock of UPS higher than FedEx.

The value of the company also reflect in the price of stock which come from the performance of the company,.

Stock Price,Dec 31

Dividend Per ShareDividends are a form of profit distribution to the shareholder. Having a growing dividend per share can be a sign that the company's management believes that the growth can be sustained. FormulaDividend Per Share = Dividend / No. of Shares

Dividend per share of UPS higher than FedEx with growing rate.

Dividends per share

FedEx 20.25% 87.73% 46.93% 88.04% 157.06% 214.72% 438.04% 248.47% 292.64% 429.57% 528.02%UPS 12.16% 27.03% 41.89% 58.11% 66.22% 116.22% 646.95% 535.14% 489.19% 581.95% 705.95%Standard&Poor's 500 Index 7.06% 5.41% 41.36% 70.01% 122.72% 182.12% 237.21% 203.02% 163.50% 101.93% 155.20%

Both FedEx and UPS have annual return higher than Standard and Poor’s 500 index but UPS have higher annual return compare to FedEx in recent years.

Annual Return

Company of Excellence

Due to given financial data, UPS tend to have better performance than FedEx in these following instruments. Return on Assets Return on Equity WACC Economic Value Added Market Value Added Net Profit Margin

All these 6 ratios analysis show the effectiveness of management in create the value to the company which will be shown on Stock Price, Dividend per share and Annual Return. Dividend depend on Revenue which show the performance of company,

the battle for value: fedex vs ups

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