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This case examines two very different
strategies employed by shipping giants
FedEx and UPS in their respective attempts
to expand their business into China in the
1990ǯs.

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FedEx is one of the
worldǯs largest express
transportation
companies, providing
information and
logistic solution
Services.

 
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FedEx will produce superior financial returns for
shareowners by providing high value-added supply
chain, transportation, business and related
information services and ensure that Customer
requirements will be met in the highest quality
manner and mutually rewarding relationships with
its employees, partners and suppliers. Safety will be
the first consideration in all operations following
highest ethical and professional
standards.

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º Entered Chinese market in 1984.
º bundance of modern, western style
advertising.
º Established its own air routes in sia, flying
its own aircraft in and out of China.
º Partnered with an aggressive local company
to build a large network of trucks and
distribution centers.
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º ggressive advertising campaign
º
ighly controlled distribution system with
constant information about the status of
shipments.
º FedEx has its own air service in and out of China.

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º ack of personal relationship building
within China
º n order to fill their aircraft, FedEx is forced
to take on many cheaper packages with very
low profit margins.

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º ultinational corporations with Chinese

operations that already use FedEx
elsewhere.
º Customers who particularly value or
require constant information regarding
shipment status.

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º Shipping companies already well
established in China. (D
 nternational
td. holds more than 30% of Chinese
shipping market)
º ery large investment in China based
infrastructure including $880 million
acquisition of Flying Tiger ine nc. to
establish its own air routes in sia.

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º Continue to focus on multinational corporations
already using FedEx. Outline benefits of using
FedEx for intra-business shipping.
º Call on other Chinese businesses to build
relationships. Expanding to these businesses is
essential to support the large investment in China.
º Sponsor local and national events such as the
Chinese New Year and the Olympics.
º Send representatives to China to build personal
relationships

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º Year 1 Ȃ Continue to call on multinational
customers in China.
º Year 2 Ȃ 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.
º Year 3 Ȃ Evaluate possible need for more air
service to the Chinese region.
º Year 4- Sponsor the 2004 Olympic games.
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UPS is one of the
worldǯs largest express
carrier and package
and delivery company
specialized in
transportation and
logistics services.

 
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s the world's largest package delivery
company and a leading global provider of
specialized transportation and logistics
services, UPS continues to develop the
frontiers of logistics, supply chain
management, and e-Commerce ... combining
the flows of goods, information, and funds."
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º Entered Chinese market in 1988.
º inimal advertising with an old-fashioned
twist.
º Used Dragonair, a
ong Kong airline, or
other regional carriers, leasing space, to fly
in and out of China.
º For ground delivery, UPS piggybacked on
the operations of Sinotrans, a government
owned transportation company.
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º UPS invested just a fraction of what FedEx
had put into sia.
º UPS emphasized global network and
stability creating an image Dznot merican,
but more worldwide.dz
º Sought to build relationships discreetly, on
Chinese terms.
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º UPS lacked its own air service in China,
making them less logistically versatile than
FedEx.
º Unlike FedEx, UPS does not have many of its
own trucks and drivers in China to build
further brand recognition.

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

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º ike FedEx, shipping companies already
well established in China pose a threat.
º hile 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.

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º Continue to focus on building relationships
with multinational customer base as well as
with new Chinese customers.
º Eventually, UPS should consider launching
its own air service to China in order to keep
up with FedEx and their logistical
supremacy.

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º Year 1 Ȃ Continue focus on building relationships
with large China-based businesses, as FedEx is
more focused on its existing multinational base.
dd more Dzbrowndz UPS trucks in Chinese cities to
boost brand awareness.
º Year 2 - dd more trucks in smaller Chinese cities
as necessary. Evaluate air service needs.
º Year 3 Ȃ By this time UPS should consider adding
its own air service to China in order to keep up
with FedEx.

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º Opened a dedicated express-handling facility at the

uangtian nternational irport in Shenzhen in South
China (1999).
º n 2002, FedEx became the first shipping company to offer
money back guarantee on late packages in China.
º On September 2, 2003, FedEx launched its first direct flight
from Shenzhen to its hub in nchorage, laska to keep up
with increasing demand in South China region.
º "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 sia Pacific Division President David .
Cunningham Jr., 2003
º FedEx plans to move hub to China after 2007.

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º DzUPS, which began direct air service to China in 2001, has
experienced double digit growth in the U.S.-China market
in each of the last three years and its current flights
between China and the U.S. are operating at near capacity.
UPS successfully entered the China market in 1988. ast
year, 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.dz a
 
 

º n 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. ]]
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FedEx entered into China in 1984

through a joint venture, while UPS
entered China in 1989 through an
agent partnership relationship.
Critically examine the contrasting
strategies adopted by both the
companies, while entering and
expanding their services network in
China.
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FedEx had followed an aggressive, high
investments strategy, while UPS followed a
conservative, low investments approach.
Critically examine the contrasting
elements in both the companiesǯ strategies
with a focus on advertising and promotion,
target customers and the investments
made till the late 1990s. hat benefits and
disadvantages do you perceive in the
overall approach of both the companies
while expanding in China?
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3. n the early years of the new millennium,
the rivalry between FedEx and UPS in the
Chinese logistics market had intensified
further. Examine the moves and
countermoves followed by both companies
during the period. ccording to you, what
strategies should both companies adopt to
improve their market share in China?

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