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