FedEx performance
- How is FedEx performing? How, if at all, does its performance and plans affect your assessment of the sustainability of UPS’s current performance?
FedEx is one of the best global companies that offer transportation and logistics. In the early day of FedEx, its purpose was to deliver overnight packages at night. However, the company grew steadily by the year 1990 and was now transporting over 3 million bags per day (Clayton, Geltner& Hamilton, 2001). In the year 1998, the company acquired the ownership of the roadway package system (RPS) (the second largest business to the business shipper in the USA after the UPS
The acquisition of the RPS gave FedEx financial and economy of scales resources to penetrate the international market, which was the UPS was a dominant competitor. In that case, the sales of the FedEx in the global market grew more than those of the UPS. For example, the profit margin in FY 2001 for FedEx was 10% while that of the UPS was 5%. As a result, FedEx was able to penetrate the market both locally and internationally.
The customer services are vital to any business if the business wants to attract and to have loyal customers all over the world. The quality of service and the customer care department relationship with the clients determine whether the firm will retain its clients or not. The services of the FedEx are exceptional. For example, the company has increased its ground customer, and in FY 2001, the firm reported $ 1.3 billion in terms of revenue. The scenario indicates the expansion of the company market. This expansion of the company market will eventually eat the market for the Ups since the consumers prefer the customer service for FedEx more than that of the UPS.
Although when we consider the multiple of the two companies, the UPS has an advantage over the FedEx Corp. the UPS is a multinational company which enjoys economies of scales and have established its reputation over the years (Dolan, 1997). However, the FedEx had specialized in the transportation of the cargo at night. The acquisition of the UPS changes the market segment of the FedEx companies as it has started gaining more customer than the UPS. The FedEx if they maintain the current progress they may eventually overtake or eat a big chunk of the UPS market. In summary, I believe that FedEx will continue to take the market share of the UPS, and eventually, they may dominate the market.
Refrences
Dolan, P. (1997). Modeling valuations for Europol health states. Medical care, 1095-1108.
Clayton, J., Geltner, D., & Hamilton, S. W. (2001). Smoothing in commercial property valuations: Evidence from individual appraisals. Real Estate Economics, 29(3), 337-360.