The Package War: Fedex vs. Ups
33 Pages Posted: 21 Oct 2008
This case allows students to observe two competing businesses transform themselves over time. By following the competitive actions and reactions over more than 10 years, students gain an appreciation for how rivals raise the competitive ante, search for new ways to add customer value, and come to realize that sustaining a competitive advantage is difficult.
THE PACKAGE WAR: FEDEX VS. UPS
It seemed in January 1995 that the intense rivalry between Federal Express (FedEx) and United Parcel Service (UPS) would continue unabated. Although the two firms were expected to report increases in profits for calendar year 1994, analysts were concerned about the sustainability of this performance. Both firms had expanded their service offerings dramatically, reengineered operations, transformed corporate cultures, and wrung major productivity improvements from their organizations. Additionally, they had ventured boldly into the application of new technology, and committed massive amounts of new capital to acquire firms, routes, and equipment. The rapid pace of corporate transformation continued, with no time for digestion or reflection. Analysts wondered whether these efforts would create stronger firms, delighted customers, and higher performance and value, or whether the competitive strategies would ultimately be self-destructive. What motivated the torrid pace of transformation at these two firms? What might account for the path that their rivalry had taken? What changes had their rivalry imposed on the two firms internally, in their organizations, and operations? Were the firms flexible enough to withstand the unforeseen shocks that lay ahead? Would either firm, or both, succeed?
UPS history and corporate culture
In 1980, with profits of $ 189 million on sales of $ 4 billion, UPS delivered its 1.5 billionth package. Founded by Jim Casey in 1907 as a bicycle messenger service in Seattle, Washington, UPS had grown to become the leading carrier service in the United States. UPS acquired a small company with common-carrier rights in Los Angeles in 1922, and by 1953 had expanded its services to provide contract delivery for retail stores in major cities throughout the United States. It was not until 1953, however, that the company decided to compete directly with the United States Postal Service (USPS) in the common-carrier business. That same year UPS introduced its Two-Day air service. Its early success was based on the maintenance of low overhead costs. Following George D. Smith's succession as chief executive officer in 1962, the company experienced tremendous growth, doubling its sales and profits by retaining $ 31.9 million on sales of $ 548 million by 1969.
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Keywords: competitive analysis, competitive decision making, competitive dynamics, customer service
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