CASE 4

The Battle for Value, 2004: FedEx Corp. vs. UPS, Inc.

Listed below are the questions for you to answer:

1. Describe the competition in the overnight package delivery industry, and the strategies by which those two firms are meeting the competition. What are the enabling and inhibiting factors facing the two firms as they pursue their goals? Do you think that either firm can attain a sustainable competitive advantage in this business?

2. Why did FedExs stock price outstrip UPSs during the initiation of talks over liberalized air cargo routes between the U.S. and China? Assuming a perfectly efficient stock market, how might one interpret a 14% increase in FedExs market value of equity?

3. How have FedEx and UPS performed since the early 1990s? Which firm is doing better? Discuss the insights you derived from the two firmsfinancial statements, financial ratios, stock-price performance, and economic profit (economic value added or EVA). Also, describe how EVA is estimated, and its strengths and weaknesses as a measure of performance.

4. If you had to identify one of those companies as excellent, which company would you choose? On what basis did you make your decision? More generally, what is excellence in business?

Book: Case Studies in Finance

Edition: 7

ISBN: 978-0-07-786171-1