DARDEN BUSINESS PUBLISHING UNIVERSITY VIRGINIA THE BATTLE FOR VALUE, 2004: FEDEX CORP. VS. UNITED PARCEL SERVICE, INC. UV0095 Version 2.3 FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business, and related information services through focused operating companies competing collectively, and managed collaboratively, under the respected FedEx brand. -FedEx mission statement (excerpt) We serve the evolving distribution, logistics, and commerce needs of our customers worldwide, offering excellence and value in all we do. We sustain a financially strong company, with broad employee ownership, that provides a long-term competitive return to our shareowners. -UPS mission statement (excerpt) On June 18, 2004, the United States and China reached a landmark air-transportation agreement that quintupled the number of commercial cargo flights between the two countries. The agreement also allowed for the establishment of air-cargo hubs in China and landing rights for commercial airlines at any available airport. The pact represented the most dramatic liberalization of air traffic in the history of the two nations, and FedEx Corporation and United Parcel Service, Inc. (UPS), the only U.S. all-cargo carriers then permitted to serve the vast Chinese market,' were certain to be the primary beneficiaries of this opportunity. News of the transportation agreement did not come as a major surprise to most observers as U.S. and Chinese negotiators had been in talks since at least February. The stock prices of both companies had been rising steadily since those talks began, but FedEx's share price had rocketed at a rate nearly five times faster than UPS's. Exhibit 1 presents an illustration of recent stock-price patterns for the two firms relative to the S&P 500 Index. FedEx had the largest