With in the courier industry of today it is common to see local businesses start up and attempt to make a name for themselves by lowering the price of input and increasing input, the truth within the present courier industry is that it is very difficult to enter an industry where the majority of business go to the big dogs of the industry which are UPS ,DHL and others ect. The face of the company is very crucial to the company’s development due to the fact that the courier service is an industry, which is extremely competitive and very much based on attracting customer loyalty, which also plays a substantial role. Innovation within this industry comes through updated technology that helps pinpoint all sorts of goods that are being shipping through the company. Referring to input, the only way to assure a place within the industry is through constantly innovating technologies that allow a large number investments and unmistakable quality which will eventually build up a steady and reliable reputation which will eventually attract a constant and reliable customer flow which then allows the company to expand itself either locallty or internationa;.
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Times are changing at an accelerated speed that could never have been anticipated a century ago. The speed of globalization has changed the economic landscape of all industries including the courier industry. Although the years of 2008 and2009 were a rough patch for the industry, the industry giants have recovered and flourished in 2010 and 2011. With this restored health has come a drastic change in workforce trends. Fedex and UPS have both extended their networks heavily in South-East Asia, Africa, and the Middle East. Hubs have emerged in Dubai, Bahrain, and south-east China and Taiwan. http://people.hofstra.edu/geotrans/eng/ch5en/appl5en/img/Map_Air_Freight_Integrators.pdf.
DHL, since it has a rapid and unexpected downturn in profit in the United States has expanded its network in Europe. It is the world’s leading international express service provider. DHL introduced a new triangular service trade between Los Angeles, Leipzig, and Hong Kong. According to Stephen Fenwick, regional CEO of DHL express, “This service is a game changer. This new round-the-world flight will offer customers in key Asian markets the best transit times to Western U.S. and Canada and on into Europe”. http://www.marketwatch.com/story/dhl-boosts-intercontinental-service-with-new-round-the-world-flight-linking-hong-kong-los-angeles-and-leipzig-2012-03-22.
Staying within the realm of Europe, UPS industry giant is working to merge with TNT a Dutch company. All of the key players in the industry have their eyes on Europe, thus Fedex is worried about breaking into Europe with its ground shipping. Fedex although worried about being blocked in Europe, still holds a major presence in Asia UPS already has a larger share of the market than Fedex in Europe, so Fedex can continue to focus its resources on shipping to East-Asia and South-East Asia with its hubs throughout China. What it all comes down to according to analyst Mr. Ross is, “If you think the growth is in Asia, FedEx is better positioned; if you think the growth is in Europe, UPS is better positioned.” In sum, geographic strategy is an essential component of an industry player’s goals. http://online.wsj.com/article/SB10001424052702303812904577293863574322698.html.
On a final note, according to the Wall-Street Journal on March 19th, 2012 UPS and TNT reached an agreement for merging. Therefore, the competitive landscape of the courier industry is becoming even narrower with one less key competitor on the map. UPS expects to see an increase in Europe especially but also in rapidly-developing Latin America and Asia. Where FedEx’s niche is express service, DHL’s international express service, and UPS ground shipping, UPS expects to see further development of its road network in Europe. Fedex has witness tremendous success with its Fedex Express subsidiary. Fedex Express is the world’s largest airline in terms of freight tons. While Fedex ground shipping is successful, UPS’s ground shipping is more successful. So, it is clear that each player in the industry has its own geographic and service specialty. For the new UPS that has now acquired TNT their strength will be in Europe and will expand their road freight network. For DHL, international express service and Europe is its niche. Lastly, for Fedex their regional specialization is in East and South-East Asia with Fedex Express delivering quick air delivery. http://www.marketwatch.com/story/united-parcel-service-and-tnt-express-to-create-a-global-leader-in-the-logistics-industry-2012-03-19
Companies in the courier industry employ a lot of people in order to carry out the day-to-day operations of the company. Both FedEx and UPS have a large corporate structure that is made up of many executives that report to the Chief Executive Officer of the company. These companies are have very high employment numbers with UPS having just over 400,000 employees and FedEx having about 425,000 employees. It is difficult to find a good breakdown of how the employees are spread out through the company. The United Parcel Service practices promoting from within; this means that everyone in the company has been a driver at some point in their career. UPS prides itself on this practice and promoting purely on merit and not on promises or favoritism. FedEx does not as clearly define its hiring and promoting practices as UPS does. Both of these companies have a wide array of services that they offer customers. They have the ability to send packages by both air and ground, both of which require an extensive amount of people to run both of those operations. UPS also has the “UPS Store” where they have a need for additional employment. UPS also has a much greater marketing campaign than FedEx does which means that one can reasonably conclude that they also have an extensive marketing department, while it is hard to find information on the breakdown of the companies’ structures and exact employment numbers. Regardless, both companies are in the Forbes top 20 largest companies with UPS in the number three slot behind Wal-Mart and International Business Machines. FedEx is in the number 17 spot. Both companies obviously have an extensive company structure in order to function and manage companies of that size, otherwise their companies would fail miserably and be in complete disarray.
http://www.sustainability.ups.com/Diversity/Diversity+Policies
http://www.fedex.com/hr/about/corporatestructure.html
http://money.cnn.com/magazines/fortune/fortune500/2011/performers/companies/biggest/employees.html
Ken sternad, president of the UPS foundation, plays an important role in its company’s successful history. Under his suggestion of global philanthropic initiatives, Ups earned more than $100 million in 2008 and kept its improvement in recent years. He focuses on the UPS’s financial, intellectual and physical assets to support organizations and programs. At first, he used to be the vice president of Public Relations for UPS, directing all media relations, reputation management, financial communications and making public relations activities for the company worldwide.
William G. (Bill) Margaritis, senior vice president, oversees global reputation management, investor relations, public relations, employee communications and social responsibility programs for FedEx and its subsidiaries. During his tenure FedEx has been consistently ranked as one of the most admired companies in the world and recognized as a “best place to work.” The principles of the Page Society, which include honesty, customer focus and managing for tomorrow, are increasingly important in this era of instant, but not always accurate, communication,” Margaritis said.
Now, let’s talk about the structure of the FedEx. In the beginning, FedEx worked with the launch of 14 small aircraft from Memphis International Airport. On that night, Federal Express delivered 186 packages to 25 U.S. cities from Rochester, NY, to Miami, Fla. (The headquarters located in Memphis, Tennessee.) Today, Fed-Ex has the world’s largest all-cargo air fleet, including McDonnell-Douglass MD-11s, Airbus A-300s and A-310s. The planes have a total daily lift capacity approximately 26.5 million pounds. In a day period, the fleet travels 500,000 miles while its couriers log 2.5 million miles a day the equivalent of 100 trips around the earth. FedEx handles about 3.2 million packages and documents every business day. Federal Express has a very organized and defined corporate structure. This allows FedEx to coordinate sales, marketing and technology to support the global FedEx brand.FedEx works on the basis that people are first, to maintain nice environment the company has an excellent benefits package, including: healthcare programs (dental, medical, and vision and prescription drugs), life insurance, accidental and death dismemberment, business travel accident insurance, and employee stock purchase plan, education assistance, paid time off, vacation, holidays.
Transportation, Xin Yin
Knowing that UPS has established itself as the number one courier service within the United States is no current event, due to a variety of reasons including the right people running the company, a reliable business model that seeks to generously reward all stakeholders involved along with an impressive relationship to different markets around the world. The courier industry is very much based on global connections and mixed economies that allow different companies to interact and compete for the title, which so far has been claimed by UPS.
On March 21st UPS officially declared that the company would proceed to purchase TNT express for an amount of 5.2 billion Euros (6.8 million dollars), which will place UPS as the number one courier in the world. This acquisition will make UPS the European market leader and will ultimately help the company tap into a new market which would be the markets of Asia and Latin America. This acquisition is one of the biggest in UPS history, which will put UPS on the same pedestal in Europe as DHL, which is a European based company. UPS has opened 45 new offices including strategic locations such as Ankara Turkey and Bologna, Italy, which shows that UPS is currently successful in their global expansion program which has changed the current atmosphere within the industry forcing other companies to follow suite in order to survive,since the beginning UPS has set the trend by looking beyond Europe’s current economic troubles and is seeing a great opportunity. This transaction is recognized by both boards of UPS and TNT but will not be finalized until September. This has effects on the world by showing that UPS has nearly dominated the market both locally and internationally and will be expanding with what looks to be a healthy future. Purchasing the smallest of the 4 largest global package shippers is a strategic move for UPS in the long run by going off on new tangents in other markets to equal their large American local presence. We are slowly seeing the market being dominated by UPS. This company is now the most reliable and profitable, why would people turn to local couriers or other international couriers while knowing that UPS has a certification and guarantee to do the job properly.
http://www.marketwatch.com/story/ups-to-buy-tnt-express-for-516-billion-2012-03-19
http://seekingalpha.com/article/363231-ups-worth-the-premium
http://finance.yahoo.com/q/h?s=ups
First of all, according to the financial report of UPS, we could see its total revenue indicated a positive trend from 2009 to 2011 (from 45297$ to 53105$). And the operating profit of UPS in recent years increased by 10% every year. Moreover, its net income kept growing at a full speed recently, especially from 2009 to 2010- from 1978$ to 3338$. What is more, its stock price has almost doubled from 2010 to 2011.
http://thomson.mobular.net/thomson/7/3275/4584/document_0/UPS_2011_AnnualReport.pdf
Another company who also shares the good news in its financial report is very FedEx. From its balance sheets, asset obviously grew a lot from 2010 to 2011, which increased from 24902$ to 27385$. For the revenue, the company kept growing the revenue at a steady speed (the percent change of revenue of 2011/2010, 2010/2009 are respectively 14% and 11%). And one more factor which could indicate the good statement of the companies’ finance is the average daily package. From the financial sheets, we may find the number kept increasing from 3376 to 3479, and then to 3607.
All the financial indicators for both UPS and FedEx are encouraging for investors. Unfortunately another one of their competitors, TNT Express, is does not have as in-depth information as the competitors. UPS and FedEx are both clearly recovering from the recession and are increasing their revenue and profits. TNT is struggling with their business in the US which could change if a merger with UPS occurs in the near future. Across the board UPS’s numbers are greater than FedEx’s. In 2011 UPS had a revenue of $53,105 million and a gross profit of $12,966 million, FedEx however had a revenue of $39,304 million and a gross profit of $9,762. UPS has a total amount of assets at $34,701 million but total liabilities of $27,666 in the fourth quarter of 2011. FedEx had total assets of $27,835 million and total liabilities of $12,165 million. These numbers also shed a lot of light on these two companies. UPS has a lot of assets but a tremendous amount of liabilities which could be a reason for their stock price, FedEx has significantly fewer assets and liabilities which could play a major role in their stock price being so high. The stock price for FedEx is actually higher than UPS. FedEx’s stock price is currently $95.82 whereas UPS’s stock price is $80.51. This is surprising to me because I figured with UPS’s larger service area, CSR reputation, and higher net income that they would have a more expensive stock price. That however is not the case. The potential UPS merger with TNT Express could dramatically the stock price and potentially cut out large portions of the FedEx market, so we will have to keep a watchful eye on that. There actually have not been any loses of key industry players due to the recession or for any other reasons which is good and is more than likely due to the necessity of delivery for consumers.
http://investing.money.msn.com/investments/stock-balance-sheet/?stmtView=Qtr&symbol=FDX
http://investing.money.msn.com/investments/stock-income-statement/?symbol=ups
http://group.tnt.com/annualreports/annualreport09/financial-statements/index.html
The Great Recession of 2008 ruined the courier industry. The courier industry is so heavily dependent on consumer purchasing power. Since the purpose of the industry is to deliver goods from point A to point B, if consumer purchasing power is low then people won’t have the money to spend on consumer goods thus meaning there is less items that need to be shipped. According to IBIS, “The economic turmoil in 2009 caused the number of courier companies to fall. The majority of this decline is expected to be in smaller establishments who have had profit margins squeezed by high fuel prices before the recession. At the top end of the industry, large firms are expected to consolidate operations. This may result in an increase in merger and acquisition activity”. http://clients.ibisworld.com/globalindustry/performance.aspx?indid=1660 Looking at the balance sheets from UPS and Fedex, both of their sales increased from the year 2010 to 2011. During 2010 the recession was still at a high, but as of 2011 we have slowly been pulling out of the recession.
Fedex has seen a jump in total assets from $24,244,000 to $27,385,000 from 2009 to 2011. http://finance.yahoo.com/q/bs?s=FDX+Balance+Sheet&annualLikewise, UPS saw a major increase in total assets from $31,883,000 to $34,700,000 from 2009 to 2011. http://finance.yahoo.com/q/bs?s=UPS+Balance+Sheet&annual As for DHL it suffered major loss during the years of the recession saw growth from 2010 to 2011 again proving the painful damage of the recession on the industry. DHL saw revenue increase from 2010 to 2011 as did TNT. http://www.dp-dhl.com/en/investors/financial_reports/annual_reports.html So, it is clear that the recession took its toll on the industry. One major and obvious factor as to why the industry was so hard hit was not only because of the lower consumer purchasing, but because of the high fuel prices. Fuel is a basic necessity for the industry to operate so when the costs soar for fuel, the industry inevitably loses. What’s more is not only did the Great Recession impact the United States, but because of the U.S’s economies sheer size and might, the entire world economy slowed down with ours. Therefore, demand for shipping and delivery of goods slowed down across the world as the international economy suffered.
DHL, the German courier industry giant, lost tremendous profit during the years of 2007 and 2008. TNT followed DHL on this downward spiral, and is now being hunted by UPS to be bought out. So, following the height of the recession UPS and FEDEX saw growth, while TNT and DHL saw decline. Therefore in true economic Darwinism only the strongest survive. Yes, the recession proved to be more relentless than competitors anticipated, yet only the superior companies survived. At least, the companies that were still able to appeal to consumer preferences in delivery and shipping providing fast and safe delivery of goods. UPS and Fedex were those two winners.
Once upon a time, the global industries extremely suffered the Great Depression from the end of 2007, which resulted the slumping of global shipping volumes across the world, particularly in China, and several countries in Africa, to contract sharply, and demand for shipping. According to research, the year 2009 will go down as one of the worst part of period in the global courier shipping industries. Only the shipping companies in China had to afford at least 1 million dollars losses in 2009. Struggling to survive, shipping industries had to raise the price from 2008. During the 2008-2012, especially the recent years like 2012, the average annual growth rate for the price hovered around 13%, significantly above the previous decades. Let us see two graphs of specific field of couriers:
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Now moving to another market of courier, Africa, the market has been tough globally due to a reduction in the volume of goods being delivered, because customers have been selling less. This in turn has put pressure on prices due to fierce competition. The average price of the courier in Africa- according to the data from some 5 of the top 100 of the total 2000 players in this market, says Time, Steel, MD for South Africa at TNT express.
As a point from my mind, I think the increase of price will keep going up before the new type of shipping operation on-stream.
Transportation. Xin Yin
Customer trends in the industry see constant change due to the continuing opening up of markets across the developing world and the changing consumer preferences in goods and services. According to Fedex online shopping has boosted the need for courier services. Frederick W. Smith, FedEx Chief executive positively stated, “that healthy growth in online shopping during the holiday season was increasing demand for residential delivery services” ( http://www.nytimes.com/2011/12/16/business/fedex-profit-climbs-76.html?ref=fedexcorporation).
On top of online shopping benefitting the industry, consumers have been utilizing express shipping. Fedex Express a subsidies of Fedex Corporation has skyrocketed off the ground becoming Fedex’s most profitable subsidies. In the IBIS World report Fedex Express grew 4% over the past five years. At the end of the day the most competent players in the courier industry will be the ones that can deliver goods to consumers in a safe and quick manor.
Moreover, the increased of use of internet and technology has led to an increase in non-package delivery. Paper documents have become a major product that requires transportation among the B2B market. In addition, another result of increased internet and technology is the boom in e-commerce. E-commerce has become a major player in the B2C market and has caused a jump in volume of small individual shipments. http://clients.ibisworld.com/globalindustry/marketcharacteristics.aspx?indid=1660
Competition is a critical element of capitalism. In the courier industry the competitive landscape takes the form of an oligopoly. There are only a few companies that make up nearly the entire industry. These companies include UPS, Fedex, DHL, and TNT. UPS and Fedex alone compose half the industry holding approximately 25% of the industry each.
Market Share
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Interestingly, mergers are in progress all across the industry. UPS most recently has been in the news for trying to merge with TNT one of the few major players in the industry. However, TNT has rejected the proposal by UPS to buy it out, however talks remain on the table. http://dealbook.nytimes.com/2012/02/17/tnt-express-rejects-bid-by-u-p-s/?ref=unitedparcelserviceinc.
The reason for such talks a clear result of the most recent industry trends. UPS and Fedex continue to extend their already extensive networks and provide faster and newer services for consumers thus resulting in increased profits for these giants. UPS third quarter profits for 2011 exceeded their forecast, and Fedex reported a 76% increase in quarterly profits in the second quarter of 2011. However, DHL and TNT have continued to see their profits fall and have been sought out by the giants for merges. http://www.nytimes.com/2011/12/16/business/fedex-profit-climbs-76.html?ref=fedexcorporation.
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