the battle for value: fedex vs ups
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The Battle for Value: FedEx vs UPSTRANSCRIPT
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
The Battle for Value: FedEx vs. UPS
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
The Battle for Value: FedEx vs. UPS
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
The Battle for Value: FedEx vs. UPS
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
The Battle for Value: FedEx vs. UPS
The Battle for Value: FedEx vs. UPS
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.
The Battle for Value: FedEx vs. UPS
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 Battle for Value: FedEx vs. UPS
• 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
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,