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166 Part 2: Strategic Actions: Strategy Formulation

KEY TERMS
competitors 144 market commonality 148
competitive rivalry 144 quality 156
competitive behavior 144 resource similarity 148
competitive dynamics 144 strategic action 152
competitive action 152 strategic response 152
competitive response 152 second mover 154
first mover 153 slow-cycle markets 159
fast-cycle markets 161 standard-cycle markets 162
late mover 155 tactical action 152
multimarket competition 144 tactical response 152

REVIEW QUESTIONS
1. Who are competitors? How are competitive rivalry, competitive 4. What factors affect the likelihood a firm will take a competitive
behavior, and competitive dynamics defined in the chapter? action?

2. What is market commonality? What is resource similarity? In 5. What factors affect the likelihood a firm will initiate a competi-
what way are these concepts the building blocks for a compet- tive response to a competitor’s action(s)?
itor analysis?
6. What competitive dynamics can be expected among firms
3. How do awareness, motivation, and ability affect the firm’s competing in slow-cycle markets? In fast-cycle markets? In
competitive behavior? standard-cycle markets?

Mini-Case
FedEx and United Parcel Service (UPS): Maintaining
Success while Competing Aggressively

Identified recently as one of the 50 greatest or most in attempting to create superior stakeholder value and
intense competitive rivalries of all time, FedEx and UPS to avoid direct, head-to-head competition in a host of
are similar in many ways, including their resources, the product segments and markets. In this regard, FedEx
markets they serve, and the competitive dimensions that “intends to leverage and extend the FedEx brand and
they emphasize to implement similar strategies. These to provide customers with seamless access to its entire
similarities mean that the firms are direct competi- portfolio of integrated transportation services,” while
tors and that they are keenly aware of each other and UPS “seeks to position itself as the primary coordinator
have the motivation and ability to respond to the com- of the flow of goods, information, and funds throughout
petitive actions they take against each other. The two the entire supply chain (the movement from the raw
firms are the largest global courier delivery companies in materials and parts stage through final consumption of
what is a highly competitive industry on a global basis. the finished product).”
FedEx and UPS compete in many of the same Thus, while these firms are similar, they also seek to
product markets, including next day delivery, cheaper differentiate themselves in ways that enhance the pos-
ground delivery, time-guaranteed delivery (both sibility of being able to gain strategic competitiveness
domestically and internationally), and freight services. and earn above-average returns. In broad-stroke terms,
However, the firms concentrate on different segments FedEx concentrates more on transportation services and

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Chapter 5: Competitive Rivalry and Competitive Dynamics 167

international markets. (Recently, FedEx was generating growth engine for the foreseeable future. To enhance its
48 percent of revenue internationally, while UPS was ability to compete against UPS and other rivals as well,
earning 22 percent of its revenue from international mar- FedEx is restructuring some of its operations to increase
kets.) Meanwhile, UPS concentrates more on the entire efficiency. Similarly, the firm is increasing its emphasis
value chain while competing domestically. FedEx is the on finding ways for its independent express, ground, and
world’s largest international air shipping firm, while UPS freight networks to work together more synergistically.
is the world’s largest package delivery company. Although the rivalry between FedEx and UPS is
There are many actions the firms have recently taken intense and aggressive, it is also likely that this rivalry
to sharpen their ability to outcompete their primary makes each firm stronger and more agile because each
competitor. In mid-2013, FedEx learned that its contract has to be at its best in order to outperform the other.
to fly domestic mail for the U.S. Postal Service had been Thus in many ways, each of these firms is a “good com-
selected for renewal. UPS also bid on the contract, and petitor” for the other one.
thus it lost this competitive battle to its rival. To support Sources: 2013, FedEx Corp., Standard & Poor’s Stock Report, www.
its strength in logistics as part of the entire supply chain, standardandpoors.com, May 25; 2013; United Parcel Service, Inc., Standard
UPS recently agreed to buy “Hungary-based pharmaceu- & Poor’s Stock Report, www.standardandpoors.com, May 25; L. Eaton, 2013,
FedEx CEO: Truck fleets to shift to natural gas from diesel, Wall Street
tical-logistics company Cemelog Zrt for an undisclosed Journal, www.wsj.com, March 8; V. Mock, 2013, UPS to appeal EU’s block of
amount in a deal to strengthen its health-care business TNT merger, Wall Street Journal, www.wsj.com, April 7; B. Morris &
in Europe, giving it access to the increasingly import- B. Sechler, 2013, FedEx customers like slower and cheaper, Wall Street Journal,
www.wsj.com, March 20; B. Sechler, 2013, Online shopping boosts profit for
ant markets of Central and Eastern Europe.” UPS is also UPS, Wall Street Journal, www.wsj.com, April 25; B. Sechler, 2013, FedEx
emphasizing trans-border European Union services as a fends off rivals for U.S. Postal, Wall Street Journal, www.wsj.com, April 23.

Case Discussion Questions


1. FedEx and UPS have many similar resources and compete 3. Based on information in the case and from your research,
across many of the same markets. How are they different? which of these firms do you predict will be the most successful
Stated differently, how do they differentiate themselves? in the future? Please explain your reasons.

2. What are some of the major and unique strategic actions taken
by each firm? Have these actions been successful?

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