FEDEX vs. UPS - CHINA

Entry of UPS • 1996:

Commenced operations through agent with China’s biggest freight

forwarder – Sinotrans and JV with the company

Formed alliances with airlines – Hong Kong Dragon Airlines ltd &

China Eastern Airlines Corp

• 1998:

2mn$ air hub facility at express handling centre at Hong Kong

airport

• 1999:

Post Agreement with Sinotrans ops extended by 22 in 130 cities V/S FedEx’s 144

1999:Entered into Strategic Alliance with 7-eleven, a leading convenience store operating in Hong Kong round the clock

Entry of Fedex1973• Entry into China through acquisition (Gelco Express Intl.).

• Focussed on Chinese entrepreneurs

• Acquired airlines (Flying Tiger Inc & Evergreen International Airlines)

1996

• Receipt of permit from CAAC (Beijing & Shanghai

1998• Launched Express Dist Centres in Beijing and Hong Kong

1999

• FedEx Internet Ship – prepare shipment documentation for consignment to more than 60 countries &online shipment status

Like FedEx, shipping companies already well established in China pose a threat. While UPS contends it will add its own airplanes in China when it becomes necessary, by that time FedEx may already be far ahead in this area

Like FedEx, UPS can build around its multinational customer base with Chinese operations.

UPS can pass on cheap cargo to target the more lucrative document and small package market, since they do not need to fill an aircraft.

Lacked its own air service in China, making them less logistically versatile than FedEx.

UPS does not have many of its own trucks and drivers in China to build further brand recognition.

Invested just a fraction of what FedEx had put into Asia.

creating an image “not American, but more worldwide.”

Sought to build relationships discreetly, on Chinese terms.

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Shipping companies already well established in China.

Very large investment in China based infrastructure including acquisition of Flying Tiger Line Inc. to establish its own air routes in Asia.

Multinational corporations with Chinese operations that already use FedEx elsewhere.

Customers who particularly value or require constant information regarding shipment status.

Lack of personal relationship building within China

In order to fill their aircraft, FedEx is forced to take on many cheaper packages with very low profit margins.

Aggressive advertising campaign

Highly controlled distribution system with constant information about the status of shipments.

FedEx has its own air service in and out of China.

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Advertising & Promotion

Heavily Advertise

Publicizing its services offering in China

Hired popular media company to create brand awareness

Less emphasis on Advertisement

Preferred to project itself as local Chinese company

Sponsor Chinese New Year celebration and Olympic games

• Year 1 – Continue focus on building relationships with large China-based businesses, as FedEx is more focused on its existing multinational base. Add more “brown” UPS trucks in Chinese cities to boost brand awareness.

• Year 2 - Add more trucks in smaller Chinese cities as necessary. Evaluate air service needs.

• Year 3 – By this time UPS should consider adding its own air service to China in order to keep up with FedEx.

Action Plan of UPS

• Year 1 – Continue to call on multinational customers in China.

• Year 2 – Expand advertising focus to large China-based businesses in order grab some of this business from UPS and other local companies. Send representative to China to talk to these companies.

• Year 3 – Evaluate possible need for more air service to the Chinese region.

• Year 4- Sponsor the 2004 Olympic games.

Action Plan of FEDEX

UPS post 2003• UPS took an ownership position in Sinotrans and

also became the first foreign carrier to form a partnership with a domestic Chinese air carrier, Yangtze River Express, cutting a day off delivery times.” UPS Press Release June 18, 2004

• In 2004, the United States signed a new aviation agreement which allowed a five fold increase in air cargo capacity between the two countries over the next six years.

FedEx post 2003

• On September 2, 2003, FedEx launched its first direct flight from Shenzhen to its hub in Anchorage, Alaska to keep up with increasing demand in South China region.

•  "For China to sustain the kind of growth we have seen in the last five years, it is essential that it establishes stronger links to the economies of Europe and the United States." FedEx Express Asia Pacific Division President David L. Cunningham Jr., 2003

• FedEx plans to move hub to China after 2007.

Thank You