UPS Vs FedEx: Competitive Position

To maintain a competitive position in the marketplace, a company must have a plan to stay on top. This plan needs to include the company’s long-term goals, an understanding of the marketplace, and a way to differentiate itself from its competitors. This plan will be the companies long term competitive strengths. A big strength that both FedEx and UPS, and all other big companies, have is that they all have a mission statement/goal/objective they are working towards. If each person/department had different goals they were working towards, then they wouldn’t be as successful as they are.

In today’s highly competitive, Internet based, and global marketplace, it is more important than ever for companies to have a clear plan for achieving their goals.

FedEx, the second largest delivery business, has a strong and large global network that will play a role in its long-term goals. FedEx has been in business for over 40 years. It is now in over 220 countries worldwide, which will make it difficult for other companies to come in and try to overtake this sized business. FedEx also has the advantage that it has already been around for 40 years, because they are now a strong, successful, established brand. It will be highly unlikely that a similar company will come in and sweep the competition away. Another long-term competitive strength FedEx has is its huge entry barrier. For new businesses to enter this category, or even expand, it requires enormous capital investments, which FedEx already has. If FedEx wants to expand to more countries, they already have the resources required to do so. Along with having the capital to expand, FedEx can also afford to close a store or two, whereas a new company cannot afford because it would mean greater percentage loses for them. FedEx can also afford to wipe out their competition by undercutting the new competitor’s prices to build up even larger volumes of orders.
FedEx has a strong management team that has led them to be a successful business for over 40 years, and counting. Fred Smith, founder and CEO, was able to get FedEx through good and bad economic times. FedEx forms the largest holding of 13.14% in the iShares Transportation Average ETF (IYT). Similar companies included in the ETF are United Parcel Service (UPS), Expeditors International (EXPD), and Con-way (CNW) with 7.6%, 4.19%, and 3.19% holdings, respectively.

UPS has great competitive strengths that has made it the largest delivery service business in the world. UPS has a well established global distribution and supply chain networks. UPS has over 1,900 facilities, 96,000 vehicles, and 248 planes. It would be almost impossible for a new competitor to come in and try to beat UPS with such a high inventory scale. Additionally, UPS is using technology that is helping them realize their goals of being extremely efficient, which will help them in the long run because they will be able to provide greater customer satisfaction at less costs. UPS uses an On-Road Integrated Optimization & Navigation system (ORION) which uses modeling and data from planning systems to be more efficient. Throughout the years, UPS has also added more services to decrease the chances of customers switching to a competitor.

Another long-term competitive strength is the strong company culture. It not only attracts many people to want to work there, but it also has high retention rates because they offer stock options and other compensation programs to their employees. UPS is able to provide these benefits to its employees because of their impressive financials. They have built a strong asset base and they maintain consistency in its free cash flow growth. All of this also allows them to successfully run a business on a global scale, while still being able to invest in technology, transportation equipment,

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