it has to be a paragraph and you have to choose the best and why

Compare FedEx and UPS in the period covered by this case. Which company do you feel had the best value maximization performance and why? 24 Part One Setting Some Themes very rival UPS, whics by European Union regulator UPS bad plenty of $14 Abi in both wisdom rting to see VS TO with its conte The approval came as a bitter blow to American package-delivery had tried to buy TNT in 2013, only to be blocked by European Unio viewed the potential merger as obstructing healthy competition. Still I be ulators celebrate. The company had just announced record first-quarter sales of up 3.2% over the same quarter the previous year, driven by growth in bo and international small-package segments. The company was starting investments in technology and productivity improvements pay off, with package falling 1.9% for the same period. This was impressive for a ce return on equity the previous year was a whopping 210%. Against this backdrop, industry observers wondered how the titanic tween FedEx and UPS would develop, particularly for investors in the two the performance of the companies in recent years predictive of the future? Inte reach and extensive logistics services were widely seen as the litmus test for survival of delivery companies in the new millennium. Which company was positioned to attract the capital necessary to win this competitive battle? e for a company whore the titanic struggle be in the two firms. Was re? International vus test for corporate company was better United Parcel Service, Inc. Founded in 1907, UPS was the largest package-delivery company in the world.com solidated parcel delivery, both on the ground and through the air, was the primary busi ness of the company, although increasingly the company offered more specialized transportation and logistics services. Known in the industry as "Big Brown," UPS had its roots in Seattle, Washington where 19-year-old Jim Casey started a bicycle-messenger service called American Messenger Company. After merging with a rival firm, Motorcycle Delivery Company the company focused on department store deliveries, and that remained true until the 1940s. Renamed United Parcel Service of America, UPS started an air-delivery service in 1929 by putting packages on commercial passenger planes. The company entered its strongest period of growth during the post-World War II economic boom and, by 1975, UPS had reached a milestone when it promised package deliv- ery to every address in the continental United States. That same year the company expanded outside the country with its first delivery to Ontario, Canada. The follow- ing year, UPS began service in West Germany with 120 of its trademark brown delivery vans. The key to the success of UPS, later headquartered in Atlanta, Georgia, was effi- ciency. According to Business Week, "Every route is timed down to the traffic light. Each vehicle was engineered to exacting specifications. And the drivers ... endure a daily routine calibrated down to the minute." But this demand for machinelike precision met with resistance by UPS's heavily unionized labor force. For most of the company's history, UPS stock was owned solely by UPS's manag- ers, their families, former employees, or charitable foundations owned by UPS. The company acted as the market maker with its own shares, buying or selling shares at a fair Todd Vogeland Chuck Hawkins, "Can UPS Deliver the Goods in a New World Business Week, June 4, 1990, Case 2 The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. 25 market value determined by the board of directors each quarter. By the end of the millennium, company executives determined that UPS needed the added flexibility of publicly traded stock in order to pursue a more aggressive acquisition strategy. In November 1999, UPS became a public company through a public equity offering and corporate reorganization. Before this reorganization, the financially and operation- ally conservative company had been perceived as slow and plodding. Although much larger than FedEx, UPS had been unable to effectively compete directly in the over- night delivery market, largely because of the enormous cost of building an air fleet. But after going public, UPS initiated an aggressive series of acquisitions, beginning with a Miami-based freight carrier operating in Latin America and a franchise-based chain of stores providing packing, shipping, and mail services called Mail Boxes Etc. (later re- named The UPS Store) with more than 4,300 domestic and international locations. More assertive than ever before, the UPS of the new millennium was the product of extensive reengineering efforts and a revitalized business focus. Whereas the company had traditionally been the industry's low-cost provider, UPS now began investing heav- ily in a full range of highly specialized business services. As a sign of this shift, the company revamped its logo for the first time since 1961, emphasizing its activities in the wider supply-chain industry. The expansive "What can brown do for you?" cam- paign was also launched around this time to promote UPS's business-facing logistics and supply-chain services. Another example was UPS's extensive push into more complex industries like health care. Health care logistic services (which were bucketed into the company's supply-chain and freight segments) allowed pharmaceutical and medical device compa- nies to outsource their logistics to UPS pharmacists, who were able to fulfill, pack, and ship customers' orders from UPS's worldwide health care warehouses, even when med ications included temperature specifications or required cross-border transport. By 2015, this segment had experienced huge growth and saw no signs of slowing in the face of the world's aging population that increasingly wanted home delivery of health care products. Alongside its health care offerings, UPS also looked to emerging markets for growth. In 2014, CEO David Abney claimed that "growing internationally and diversi- fying our customer base" across regions was a top priority for UPS. By 2015, interna- tional package operations accounted for 21% of revenues. Exhibit 2.1 presents segment (ground and express) and geographic (international and U.S. domestic) revenue data for both FedEx and UPS. The company also invested in information technology to improve 2 te hace the hand oncidad e Part Selling JUU T U e oute-optimization more personal plete in 2017. its profitability. In 2013. for example, UPS launched cutting-edge rom software for its drivers that was intended to ended to set the stage for even more service offerings and efficient deliveries when its rollout was complete i By 2015, UPS offered package-delivery services in more than 220 ritories (with every address in the United States and Europe covered) and we than 18 million packages and documents through its network every day. It umes in the higher-margin ground segment and aligned assets that served be express shipments gave it a margin advantage compared to FedEx. UPS em people and had 104,926 vehicles and 650 jet aircraft. UPS reported revenue and net profit of nearly $5 billion. Exhibit 2.2 provides recent operating results 20 countries wider od was mogen w. Its immense vole ed both ground umes in the higher-mar margin advantage. to FedEx. UPS employed 440). U PS reported revenues of $58 bill people and had ing results for UPS le University the planes that it s used the cargo space FedEx Corporation FedEx first took form as Fred Smith's undergraduate term paper for a Yale Uni economics class. Smith's strategy dictated that FedEx would purchase the planes required to transport packages, whereas all other competitors used the care available on passenger airlines. In addition to using his own planes, Smith's key in tion was a hub-and-spoke distribution pattern, which permitted cheaper and faster vice to more locations than his competitors could offer. In 1971, Smith invested $4 million inheritance and raised $91 million in venture capital to launch the firmthe largest venture capital start-up at the time. In 1973, on the first night of continuous operation, 389 FedEx employees delivered 186 packages overnight to 25 U.S. cities. In those early years, FedEx, then known as Federal Express Corporation, experienced severe losses, and Smith was nearly ousted from his chair position. By 1976, FedEx finally saw a modest profit of $3.6 million on an average daily volume of 19,000 packages. Through the rest of the 1970s, FedEx continued to grow by expanding services, acquiring more trucks and aircraft, and rais- ing capital. The formula was successful. In 1981, FedEx generated more revenue than any other U.S. air-delivery company. By 1981, competition in the industry had started to rise. Emery Air Freight began to imitate FedEx's hub system and to acquire airplanes, and UPS began to move into the overnight air market. The United States Postal Service (USPS) positioned its overnight letter at half the price of FedEx's, but quality problems and FedEx's "absolutely poste tively overnight" ad campaign quelled that potential threat. In 1983, FedEx reachicu $1 billion in revenues and seemed poised to own the market for express delivery. During the 1990s, FedEx proved itself as an operational leader, even receiving the prestigious Malcolm Baldrige National Quality Award from the president of the Un States, FedEx was the first company ever to win in the service category. Part om success could be attributed to deregulation and to operational strategy, but credit co also be given to FedEx's philosophy of "People-Service-Profit," which reflected emphasis on customer focus, total quality management, and employee participan Extensive attitude surveying, a promote-from-within policy, effective grievance pro dures that sometimes resulted in a chat with Fred Smith himself, and an emphasis "UPS Form 10-K. Case 2 The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. 27 S rsonal responsibility and initiative not only earned FedEx a reputation as a great place to work, but also helped to keep the firm largely free of unions. FedEx's growth occurred within the context of fundamental change in the business environment. Deregulation of the domestic airline industry after 1977 permitted larger planes to replace smaller ones, thereby permitting FedEx to purchase several Boeing 727s starting in 1978, which helped reduce its unit costs. Deregulation of the trucking industry also permitted FedEx to establish an integrated regional trucking system that lowered its unit costs on short-haul trips, enabling the company to compete more effec- tively with UPS. Rising inflation and global competitiveness compelled manufacturers to manage inventories more closely and to emulate the just-in-time supply programs of the Japanese, creating a heightened demand for FedEx's rapid and carefully monitored move- ment of packages. And, finally, technological innovations enabled FedEx to achieve im- portant advances in customer ordering, package tracking, and process monitoring. Despite making its name as the pioneer of the overnight delivery market, FedEx continued to expand beyond its lower-margin express offerings throughout the first de- c ade of the 2000s. In addition to purchasing Kinko's 1,200 retail stores and eventually rebranding them as FedEx Office (a full-service print-and-ship retail chain), in 2012, FedEx started to move its capex focus from its crown-jewel express segment (where capital expenditures from 2013 to 2015 were mainly used to modernize its outdated fleet) to higher-margin ground services in order to increase capacity in its U.S. ground network. By 2015, these efforts had paid off: FedEx Ground's revenues had grown significantly over the past five years, and the company was providing faster deliveries ovato more U.S locations than its competition, in large part due to its industry-leading automation-optimized efficiency. The ground segment's independent operation of drivers and trucks as separate from its parallel express-network assets, however, gave rival UPS and its integrated asset system the margin advantage. By the end of 2015, FedEx had net income of over $1 billion on revenues of about $48 billion. Exhibit 2.3 provides recent operating results for FedEx. FedEx Express's aircraft fleet consisted of 647 aircraft, FedEx Ground had about 95,000 ground vehicles and trailers, and FedEx Freight operated approximately 65,000 vehicles and trailers. The company operated with more than 325,000 team members and handled more than 11 million packages daily across its ground and express services. The U.S. Delivery Market-Changing Shape Barclays estimated the 2015 U.S. package delivery market to be $90 billion. The market was commonly segmented along three dimensions: weight, mode of transit, and timeli- ness of service. The weight categories consisted of letters (weighing 0-2.0 pounds). Allison Landry, Daniel Schuster, and Kenneth Ryan, "FedEx Corporation Ground is the New Black." Credit Suisse, February 27, 2015. Case 2 The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. 29 FIGURE 2.1 I U.S. package market revenue share (%) by segment-2015. Ground Revenue Express Revenue USPS USPS UPS FedEx FedEx Data source: Brandon Oglenski, Eric Morgan, and Van Kegel. "North American Transportation and Shipping Equity Research, Barclays, May 2, 2016: 31. office, after which USPS handled the last-mile drop-off. FedEx referred to this partner ship with USPS, which launched in 2009, as SmartPost, while UPS's version, launched in 2011, was offered as SurePost, and the service allowed the shipping companies to offer customers even cheaper pricing without wasting van and driver resources. This similarity of execution on these partnered ground operations reflected the long-standing competition between FedEx and UPS and their frequently parallel strate- gies, Exhibit 2.4 provides a detailed summary of the major events marking the com- petitive rivalry between FedEx and UPS. Significant dimensions of this rivalry included the following: Customer focus. Both companies emphasized their focus on the customer. This meant listening carefully to the customer's needs, providing customized solutions rather than standardized products, and committing to service relationships. Pricing. The shipping rivals always moved in lockstep on parcel-pricing fees. In the face of e-commerce retailers adopting the frequent use of large packages for lightweight products, however, the shippers who priced parcels by weight alone started to take a margin hit when those poorly priced packages took up valuable space in delivery trucks. In order to maximize the profitability of e-commerce deliveries, in May 2014, FedEx announced that it would start using dimensional weight to calculate the billable price for all ground packages, effective at the start of 2015. UPS quickly followed with the same announcement the following month. Operational reengineering. Given the intense price competition, the reduction of unit costs became a priority. Cost reduction was achieved through the exploi- tation of economies of scale, investment in technology, and business process reengineering, which sought to squeeze unnecessary steps and costs out of the service process. Part One Setting Some Themes al to the opera Information technology. Information m hnology, Information management became central to ions of both UPS and FedEx. Every package handled by FedEx loceed into COSMOS (Customer, Operations, Service, Master Onli which transmitted data from package movements, customer pickung deliveries to a central database at the Memphis, Tennessee, headquart lied on DIADs (Delivery Information Acquisition Devices), which w units that drivers used to scan package barcodes and record customers Service expansion. FedEx and UPS increasingly pecked at each other offerings. In 2011, for example, UPS launched MyChoice, which allowed to control the time of their deliveries online. FedEx quickly followed suit Jaunching Delivery Manager, which allowed customers to schedule dates and locations of deliveries from their phones. FedEx even launched a repair for devices like iPhones and Nooks in 2012, capitalizing on its retail space and existing shipping capabilities. Ex, for instance, was ter Online System). pickups, invoices, and eadquarters, UPS re- which were handheld d customer signatures, each other's service allowed customers Jlowed suit in 2013. dule dates, times. Logistics services. The largest shipping innovations entailed offering integrated logistics services to large corporate clients. These services were aimed at provid. ing total inventory control to customers, including purchase orders, receipt of goods, order entry and warehousing, inventory accounting, shipping, and accounts receivable. While this service line was initially developed as a model wherein the shippers stored, tracked, and shipped across client's brick-and-mortar stores, these services eventually expanded to include shipping directly to consumers, as in the health care segment. The impact of the fierce one-upmanship between FedEx and UPS was clearly reflected in their respective investment expenditures. From 2010 to 2015, capital expenditures for FedEx and UPS increased by 54% and 71%, respectively. During this period, FedEx's aggressive growth strategy, evident in its acquisitions and its investment in the relatively outdated Express aircraft fleet, nearly doubled those of "Big Brown," which benefited from its more modern fleet. International Package-Delivery Market In 2015, the global parcel-shipping market was dominated by UPS, FedEx, and DHL, with international services representing 22% and 28% of revenues for UPS and FedEx that year, respectively. FedEx made significant investments in developing European delivery capabilities in the 1980s before eventually relinquishing its European hub in 1992, causing it to rely on local partners to deliver to Europe for the ensuing decade. In 1995, FedEx expanded its routes in Latin Amenca and the Caribbean, and later Intro duced FedEx AsiaOne, a next-business-day service between Asian countries and the United States via a hub in Subic Bay, Philippines UPS broke into the European market in earnest in 1988. with the acquisition 10 European courier services. To enhance its internati ated a system that coded and tracked packages and mational delivery systems, UPS cre- customs duties and taxes. In 2012, UPS expanded its E and automatically billed customers for s European offerings by purchasing Kiala, a European company that gave customers delivery options at nearby shop Pons at nearby shops and gas stations close to their homes, before replicating the service for UK customers the following year. By 2015, the company planned to double its investment in Europe to nearly $2 billion over five years. Much like the U.S. domestic market, the international package-delivery market of the first decade of the 2000s was given its greatest boost by the explosion of e-commerce. Compared to same-country online shopping, cross-border shipping was only a fraction of global e-commerce spending in 2015, but it was the piece that was growing most quickly, at an annual rate of over 25%. Websites like Amazon Market- place and Etsy allowed shoppers to purchase goods from sellers all over the world, while expecting an ease of shipping similar to that provided by domestic retailers. As a result of this growing segment of online sales, FedEx, UPS, and others were quickly adapting their service offerings to make cross-border shopping as smooth as possible. FedEx, for example, purchased Bongo in 2014, later rebranded as FedEx Cross Border, which aimed to help retailers face cross-border selling issues, including regulatory com- pliance and credit card-fraud protection, while connecting them to global consumers. DO no bod o o Performance Assessment qui s o nt OSTS Virtually all interested observers-customers, suppliers, investors, and employees- watched the competitive struggle between UPS and FedEx for hints about the next stage of the drama. The conventional wisdom was that if a firm were operationally excellent, strong financial performance would follow. Indeed, FedEx had set a goal of producing "superior financial returns," while UPS targeted "a long-term competitive return."15 Had the two firms achieved their goals? Moreover, did the trends in financial perfor- mance suggest whether strong performance could be achieved in the future? In pursuit of answers to those questions, the following exhibits afford several possible avenues of analysis. Financial Success The success of the two companies could be evaluated based on a number of financial and market performance measures. Exhibit 2.5 presents the share prices, earnings per share (EPS), and price-earnings ratios for the two firms. Also included are the annual total return from holding each share (percentage gain in share price plus dividend yield) and the economic value add, reflecting the value created or destroyed each year by de- ducting a charge for capital from the firm's net operating profit after taxes. Exhibits 2.2 and 2.3 present a variety of analytical ratios computed from the financial statements of each firm. Part One Setting Some Themes 2015 s for FedEx and UPS by Business and Geography Segment (Millions) EXHIBIT 2.1.1 Revenues for FedEx and UPS by Business and Geoaran 2010 2011 2011 2012 2013 2014 FedEx Geography U.S. Domestic Revenue 24.852 27,4610 International Revenue 9,882 11,843 4,321 29,837 br 30,9482 32,259 34,216 13,339 13.308 13,237 12,843 100 Business 24,581 27,171 26,515 27,121 21,555 27,239 FedEx Express 8,485 9,573 10,578 11,617 7,439 12,984 FedEx Ground 4,911 5,282 5,401 5,757 6,191 FedEx Freight FedEx Services 1,419 1,32791,310 to 1,137 to 1,072 1,039 UPS 2010 2011 2012 2013 2014 2015 Geography U.S. Domestic Revenue 36,795 39,347 40,42841,7729543,840 45,309 International Revenue 12,750 13,758 13,699 13,666 1 4,392 13,054 Business U.S. Domestic Package Next-Day Air 5,835 6,229 Deferred 6,412 6,443 2,975 6,581 6,570 3,299 Ground 3,392 3,437 3,672 20,932 3,903 International Package 22,189 23,052 24,194 11,133 25,598 Supply Chain & Freight 12,249 26,274 12,124 12,429 8,670 12,988 9,139 9,147 12,149 8,935 9.393 * Services provides back office support to FedEx's three transportation segments and printing and retail support to customers 9,467 through FedEx Office. Data source: Company SEC filings. Case 2 The Battle for Value, 2016: Pediix Corp, verses United Purcel Service, Inc. 36 EXHIBIT 22 I Operating Results for UPS Inc. (period ending Dec. 31, In millions) 2010 2011 2012 2013 2014 2015 Revenue 49,545 53,105 54,127 55,438 58.232 58.363 Operating Income (EBIT) 5,641 6,080 1,343 7.034 4.968 7,668 Interest Expense 354 348 393 380 353 341 Net Income 3,338 3,804 807 4,372 3,032 4,844 Capital Expenditures 1,389 2,005 2,153 2,065 2,328 2.379 Cash and Marketable Securities 4,081 4,275 7,924 5.245 3.283 4.726 Accounts Receivable 6,117 6.246 6,111 6.502 6,661 7,134 Total Current Assets 11,569 12.284 15,591 13,387 11.218 13.208 Net Prop. Plant, and Equip 17,387 17,621 17,894 17,961 18,281 18,352 Total Assets 33,597 34.077 38,818 35,553 35,44038.311 Current Liabilises 5,902 6,514 8,390 7,1318,621 10,696 Total Debt 10,846 11.128 12,870 10,872 10.779 14,334 Total Stockholders' Equity 8,047 7,108 4,733 6,488 2,158 2.491 2010 2011 2012 2013 2014 2015 7.2% 1.4% 7.8% 14.0% 1.9% 13.9% -77.9% -78.8% 2.4% -8,4% 423.8% 441.8% 5.0% -0.3% -29.4% -30.6% 0.2% 8.1 % 54.3% 59.8% CAGR ('10-'15) 17.8% 14.0% 35.9% 45.1% 8.7 2.8 2.8% 1.5 9.2 3.0 3.8% 1.6 7.5 3.0 4.0% 1.4 8. 9 3.1 3.7% 1.6 2 24 3.2 4.0% 1.6 23.2 3.2 4.1% 1.5 Revenue/C. Assets - C. Llab.) Revenue/PPE Capital Exp./Revenue Revenue/Total Assets Revenue Growth Total Asset Growth Operating Income Growth Net Income Growth Asset Efficiency Ratios Working Capital Tumover PPE Turnover Capital Expenditure % Total Asset Turnover Liquidity and Leverage Ratios Current Ratio Cash Ratio Total Deb/Equity Ratio Times Interest Eamed Profitability Ratios Operating Margin Net Profit Margin Return on Assets Return on Equity Economic Proft (millons" 2.0 0.7 1.3 15.9 1.9 0.7 1.6 17.5 1.9 0.9 2.7 1.9 0.7 1.7 o 1.3 0.4 5.0 14.1 1.2 0.4 5.8 22.5 C. Assets/C. Llab. Cash & Mkt. Sec/Curr. Llab. Total Debt/Total St. E. Op. Income Interest Exp. 18.5 11% 7% 11% 41% $1.873 11% 7% 12% 54% $2.189 2% 1% 3% 17% -$602 13% 8% 13% 67% $2,832 9% 5% 10% 141% $1.946 13% 8% 14% 194% $3.255 EBIT/Revenue Net Income Revenue N. Inc. Int Exp VT Assets Net Income/Tot. St. Es "Economic Proft (EVA) is calculated as EBIT "11 - 1) - Cofcx (T. Debt + T. St Eq, where t Data source: Capital 10. Momingstar, company annual reports. 40% and Cofc8% 37 Case 2 The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. EXHIBIT 2.4 | Timeline of Selective Competitive Developments United Parcel Service, Inc. . Establishes next day air service FedEx Corp. Offers 10:30 a.m. delivery . Acquires Gelco Express and launches operations in Asia-Pacific . Establishes European hub in Brussels 1982 1984 1985 . Begins Intercontinental air service between United States and Europe 1986 Introduces handheld barcode scanner to capture detailed package Information . Offers warehouse services for IBM, National Semiconductor, Laura Ashley 1987 1988 . Establishes UPS's first air fleet Offers automated customs service . Expands international air service to 180 countries 1989 Acquires Tiger International to expand its International presence . Wins Malcolm Baldrige National Quality Award 1990 1991 . Offers two-day delivery 1992 1993 . Introduces 10:30 am guarantee for next day air . Begins Saturday delivery . Offers electronic signature tracking Expands delivery to over 200 countries . Provides supply chain solutions through UPS Logistics Group Launches website for package tracking . Offers guaranteed 8 a.m. overnight delivery 1994 1995 1999 Makes UPS stock available through a public offering Acquires all-cargo air service in Latin America 2000 Launches website for package tracking Acquires air routes serving China Establishes Latin American division Creates new hub at Roissy-Charles de Gaulle Airport in France Launches business-to-consumer home-delivery Service Carries U.S. Postal Service packages Acquires American Freightways Corp. Expands home delivery to cover 100% of the U.S. population Acquires Kinko's retail franchise Establishes Chinese headquarters Acquires Parcel Direct, leading parcel consolidator 2001 . Acquires Mall Boxes Etc. retail franchise Begins direct flights to China . Offers guaranteed next-day home delivery 2002 2003 2004 2005 Reduces domestic ground-delivery time . Purchases Menlo Worldwide Forwarding, adding heavy-air-freight shipment capability Launches around-the-world flights Develops new Asia-Pacific hub in Ghangzhou. China Acquires UK domestic express company ANC and Flying-Cargo Hungary Acquires Prakash Alr Freight in India 2006 Acquires Overite, expanding ground-freight services in North America Launches first nonstop dellvery service between the U.S. and Guangzhou, China (continued) 38 Part One Setting Some Themes EXHIBIT 2.4 | Timeline of Selective Competitive Developments (continued) United Parcel Service, Inc. FedEx Corp. Launches Health Care Services 2007 2008 . Launches FedEx Freight AM, a flat-rate service with a money back guarantee delivery by 10:30 am 2009 2010 2011 Launches Health Care Solutions, offering shipping and supply-chain management for health companies Launches new brand platform to promote expanded logistics and supply-chain manage ol ment abilities Launches TechConnect, repair shop for con Launches UPS My Choice, allowing consumers to sumer electronics control package deliveries online Launches FedEx Delivery Manager, giving U.S. 2012 customers flexible options to schedule delivery Acquires GENCO, third-party logistics providers 2013 Acquires kiala, a European company allowing In North America, expanding ground service retailers to deliver goods to shoppers' chosen retail location Acquires Bongo International, a cross-border en- 2014 - Launches ORION, proprietary route-optimization ablement technology software for drivers, and UPS Access Point, a convenient local-store alternative to home delivery 2016 Acquires i-parcel, allowing foreign shoppers to 000 easily purchase goods on a retailer's site Acquires trucker broker, Coyote Logistics, expanding freight logistics Data source: Compiled by author from company documents and news outlets. Case 2 The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. 39 EXHIBIT 2.5 T Financial and Market Performance 2015 2014 173.66 FedEx Stock Price, Dec. 31 Close Dividends Declared in $ Per Share Basic EPS (period ending May 31) Common Shares Outstanding (Mill Price/Earnings Annual Return Cumul. Annual Return 2012 91.72 0.52 6.44 317.0 14.7 0.6 8 2013 143.77 0.56 .61 318.0 27.8 57.4% 57.4% 7.56 287.0 22.0 21.2% 78.6% 148.99 0.8 3.7 282.4 37.9 -13.7% 64.8% 2015 UPS Stock Price, Dec. 31 Close Dividends Declared in $ Per Share Basic EPS Common Shares Outstanding (Mill) Price/Earnings Annual Return Cumul. Annual Return 2012 73.73 2.28 0.84 953.0 88.5 2013 105.08 2.48 4.65 924.0 67.1 45.9% 45.9% 2014 111.17 2.68 3.31 905.0 96.23 2.92 5.38 886.0 22.0 -10.8% 43.4% 27.6 8.3% 54.2% Standard & Poor's 500 Index Index Level, Dec. 31 Close Annual Return Cumul. Annual Return 2012 2013 1,426.191,848.36 29.6% 29.6% 2014 2,058.90 11.4% 41.0% 2015 2,043.94 -0.7% 40.3% Data source: Google Finance, Morningstar, Value Line, and Capital IQ. Compare FedEx and UPS in the period covered by this case. Which company do you feel had the best value maximization performance and why? 24 Part One Setting Some Themes very rival UPS, whics by European Union regulator UPS bad plenty of $14 Abi in both wisdom rting to see VS TO with its conte The approval came as a bitter blow to American package-delivery had tried to buy TNT in 2013, only to be blocked by European Unio viewed the potential merger as obstructing healthy competition. Still I be ulators celebrate. The company had just announced record first-quarter sales of up 3.2% over the same quarter the previous year, driven by growth in bo and international small-package segments. The company was starting investments in technology and productivity improvements pay off, with package falling 1.9% for the same period. This was impressive for a ce return on equity the previous year was a whopping 210%. Against this backdrop, industry observers wondered how the titanic tween FedEx and UPS would develop, particularly for investors in the two the performance of the companies in recent years predictive of the future? Inte reach and extensive logistics services were widely seen as the litmus test for survival of delivery companies in the new millennium. Which company was positioned to attract the capital necessary to win this competitive battle? e for a company whore the titanic struggle be in the two firms. Was re? International vus test for corporate company was better United Parcel Service, Inc. Founded in 1907, UPS was the largest package-delivery company in the world.com solidated parcel delivery, both on the ground and through the air, was the primary busi ness of the company, although increasingly the company offered more specialized transportation and logistics services. Known in the industry as "Big Brown," UPS had its roots in Seattle, Washington where 19-year-old Jim Casey started a bicycle-messenger service called American Messenger Company. After merging with a rival firm, Motorcycle Delivery Company the company focused on department store deliveries, and that remained true until the 1940s. Renamed United Parcel Service of America, UPS started an air-delivery service in 1929 by putting packages on commercial passenger planes. The company entered its strongest period of growth during the post-World War II economic boom and, by 1975, UPS had reached a milestone when it promised package deliv- ery to every address in the continental United States. That same year the company expanded outside the country with its first delivery to Ontario, Canada. The follow- ing year, UPS began service in West Germany with 120 of its trademark brown delivery vans. The key to the success of UPS, later headquartered in Atlanta, Georgia, was effi- ciency. According to Business Week, "Every route is timed down to the traffic light. Each vehicle was engineered to exacting specifications. And the drivers ... endure a daily routine calibrated down to the minute." But this demand for machinelike precision met with resistance by UPS's heavily unionized labor force. For most of the company's history, UPS stock was owned solely by UPS's manag- ers, their families, former employees, or charitable foundations owned by UPS. The company acted as the market maker with its own shares, buying or selling shares at a fair Todd Vogeland Chuck Hawkins, "Can UPS Deliver the Goods in a New World Business Week, June 4, 1990, Case 2 The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. 25 market value determined by the board of directors each quarter. By the end of the millennium, company executives determined that UPS needed the added flexibility of publicly traded stock in order to pursue a more aggressive acquisition strategy. In November 1999, UPS became a public company through a public equity offering and corporate reorganization. Before this reorganization, the financially and operation- ally conservative company had been perceived as slow and plodding. Although much larger than FedEx, UPS had been unable to effectively compete directly in the over- night delivery market, largely because of the enormous cost of building an air fleet. But after going public, UPS initiated an aggressive series of acquisitions, beginning with a Miami-based freight carrier operating in Latin America and a franchise-based chain of stores providing packing, shipping, and mail services called Mail Boxes Etc. (later re- named The UPS Store) with more than 4,300 domestic and international locations. More assertive than ever before, the UPS of the new millennium was the product of extensive reengineering efforts and a revitalized business focus. Whereas the company had traditionally been the industry's low-cost provider, UPS now began investing heav- ily in a full range of highly specialized business services. As a sign of this shift, the company revamped its logo for the first time since 1961, emphasizing its activities in the wider supply-chain industry. The expansive "What can brown do for you?" cam- paign was also launched around this time to promote UPS's business-facing logistics and supply-chain services. Another example was UPS's extensive push into more complex industries like health care. Health care logistic services (which were bucketed into the company's supply-chain and freight segments) allowed pharmaceutical and medical device compa- nies to outsource their logistics to UPS pharmacists, who were able to fulfill, pack, and ship customers' orders from UPS's worldwide health care warehouses, even when med ications included temperature specifications or required cross-border transport. By 2015, this segment had experienced huge growth and saw no signs of slowing in the face of the world's aging population that increasingly wanted home delivery of health care products. Alongside its health care offerings, UPS also looked to emerging markets for growth. In 2014, CEO David Abney claimed that "growing internationally and diversi- fying our customer base" across regions was a top priority for UPS. By 2015, interna- tional package operations accounted for 21% of revenues. Exhibit 2.1 presents segment (ground and express) and geographic (international and U.S. domestic) revenue data for both FedEx and UPS. The company also invested in information technology to improve 2 te hace the hand oncidad e Part Selling JUU T U e oute-optimization more personal plete in 2017. its profitability. In 2013. for example, UPS launched cutting-edge rom software for its drivers that was intended to ended to set the stage for even more service offerings and efficient deliveries when its rollout was complete i By 2015, UPS offered package-delivery services in more than 220 ritories (with every address in the United States and Europe covered) and we than 18 million packages and documents through its network every day. It umes in the higher-margin ground segment and aligned assets that served be express shipments gave it a margin advantage compared to FedEx. UPS em people and had 104,926 vehicles and 650 jet aircraft. UPS reported revenue and net profit of nearly $5 billion. Exhibit 2.2 provides recent operating results 20 countries wider od was mogen w. Its immense vole ed both ground umes in the higher-mar margin advantage. to FedEx. UPS employed 440). U PS reported revenues of $58 bill people and had ing results for UPS le University the planes that it s used the cargo space FedEx Corporation FedEx first took form as Fred Smith's undergraduate term paper for a Yale Uni economics class. Smith's strategy dictated that FedEx would purchase the planes required to transport packages, whereas all other competitors used the care available on passenger airlines. In addition to using his own planes, Smith's key in tion was a hub-and-spoke distribution pattern, which permitted cheaper and faster vice to more locations than his competitors could offer. In 1971, Smith invested $4 million inheritance and raised $91 million in venture capital to launch the firmthe largest venture capital start-up at the time. In 1973, on the first night of continuous operation, 389 FedEx employees delivered 186 packages overnight to 25 U.S. cities. In those early years, FedEx, then known as Federal Express Corporation, experienced severe losses, and Smith was nearly ousted from his chair position. By 1976, FedEx finally saw a modest profit of $3.6 million on an average daily volume of 19,000 packages. Through the rest of the 1970s, FedEx continued to grow by expanding services, acquiring more trucks and aircraft, and rais- ing capital. The formula was successful. In 1981, FedEx generated more revenue than any other U.S. air-delivery company. By 1981, competition in the industry had started to rise. Emery Air Freight began to imitate FedEx's hub system and to acquire airplanes, and UPS began to move into the overnight air market. The United States Postal Service (USPS) positioned its overnight letter at half the price of FedEx's, but quality problems and FedEx's "absolutely poste tively overnight" ad campaign quelled that potential threat. In 1983, FedEx reachicu $1 billion in revenues and seemed poised to own the market for express delivery. During the 1990s, FedEx proved itself as an operational leader, even receiving the prestigious Malcolm Baldrige National Quality Award from the president of the Un States, FedEx was the first company ever to win in the service category. Part om success could be attributed to deregulation and to operational strategy, but credit co also be given to FedEx's philosophy of "People-Service-Profit," which reflected emphasis on customer focus, total quality management, and employee participan Extensive attitude surveying, a promote-from-within policy, effective grievance pro dures that sometimes resulted in a chat with Fred Smith himself, and an emphasis "UPS Form 10-K. Case 2 The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. 27 S rsonal responsibility and initiative not only earned FedEx a reputation as a great place to work, but also helped to keep the firm largely free of unions. FedEx's growth occurred within the context of fundamental change in the business environment. Deregulation of the domestic airline industry after 1977 permitted larger planes to replace smaller ones, thereby permitting FedEx to purchase several Boeing 727s starting in 1978, which helped reduce its unit costs. Deregulation of the trucking industry also permitted FedEx to establish an integrated regional trucking system that lowered its unit costs on short-haul trips, enabling the company to compete more effec- tively with UPS. Rising inflation and global competitiveness compelled manufacturers to manage inventories more closely and to emulate the just-in-time supply programs of the Japanese, creating a heightened demand for FedEx's rapid and carefully monitored move- ment of packages. And, finally, technological innovations enabled FedEx to achieve im- portant advances in customer ordering, package tracking, and process monitoring. Despite making its name as the pioneer of the overnight delivery market, FedEx continued to expand beyond its lower-margin express offerings throughout the first de- c ade of the 2000s. In addition to purchasing Kinko's 1,200 retail stores and eventually rebranding them as FedEx Office (a full-service print-and-ship retail chain), in 2012, FedEx started to move its capex focus from its crown-jewel express segment (where capital expenditures from 2013 to 2015 were mainly used to modernize its outdated fleet) to higher-margin ground services in order to increase capacity in its U.S. ground network. By 2015, these efforts had paid off: FedEx Ground's revenues had grown significantly over the past five years, and the company was providing faster deliveries ovato more U.S locations than its competition, in large part due to its industry-leading automation-optimized efficiency. The ground segment's independent operation of drivers and trucks as separate from its parallel express-network assets, however, gave rival UPS and its integrated asset system the margin advantage. By the end of 2015, FedEx had net income of over $1 billion on revenues of about $48 billion. Exhibit 2.3 provides recent operating results for FedEx. FedEx Express's aircraft fleet consisted of 647 aircraft, FedEx Ground had about 95,000 ground vehicles and trailers, and FedEx Freight operated approximately 65,000 vehicles and trailers. The company operated with more than 325,000 team members and handled more than 11 million packages daily across its ground and express services. The U.S. Delivery Market-Changing Shape Barclays estimated the 2015 U.S. package delivery market to be $90 billion. The market was commonly segmented along three dimensions: weight, mode of transit, and timeli- ness of service. The weight categories consisted of letters (weighing 0-2.0 pounds). Allison Landry, Daniel Schuster, and Kenneth Ryan, "FedEx Corporation Ground is the New Black." Credit Suisse, February 27, 2015. Case 2 The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. 29 FIGURE 2.1 I U.S. package market revenue share (%) by segment-2015. Ground Revenue Express Revenue USPS USPS UPS FedEx FedEx Data source: Brandon Oglenski, Eric Morgan, and Van Kegel. "North American Transportation and Shipping Equity Research, Barclays, May 2, 2016: 31. office, after which USPS handled the last-mile drop-off. FedEx referred to this partner ship with USPS, which launched in 2009, as SmartPost, while UPS's version, launched in 2011, was offered as SurePost, and the service allowed the shipping companies to offer customers even cheaper pricing without wasting van and driver resources. This similarity of execution on these partnered ground operations reflected the long-standing competition between FedEx and UPS and their frequently parallel strate- gies, Exhibit 2.4 provides a detailed summary of the major events marking the com- petitive rivalry between FedEx and UPS. Significant dimensions of this rivalry included the following: Customer focus. Both companies emphasized their focus on the customer. This meant listening carefully to the customer's needs, providing customized solutions rather than standardized products, and committing to service relationships. Pricing. The shipping rivals always moved in lockstep on parcel-pricing fees. In the face of e-commerce retailers adopting the frequent use of large packages for lightweight products, however, the shippers who priced parcels by weight alone started to take a margin hit when those poorly priced packages took up valuable space in delivery trucks. In order to maximize the profitability of e-commerce deliveries, in May 2014, FedEx announced that it would start using dimensional weight to calculate the billable price for all ground packages, effective at the start of 2015. UPS quickly followed with the same announcement the following month. Operational reengineering. Given the intense price competition, the reduction of unit costs became a priority. Cost reduction was achieved through the exploi- tation of economies of scale, investment in technology, and business process reengineering, which sought to squeeze unnecessary steps and costs out of the service process. Part One Setting Some Themes al to the opera Information technology. Information m hnology, Information management became central to ions of both UPS and FedEx. Every package handled by FedEx loceed into COSMOS (Customer, Operations, Service, Master Onli which transmitted data from package movements, customer pickung deliveries to a central database at the Memphis, Tennessee, headquart lied on DIADs (Delivery Information Acquisition Devices), which w units that drivers used to scan package barcodes and record customers Service expansion. FedEx and UPS increasingly pecked at each other offerings. In 2011, for example, UPS launched MyChoice, which allowed to control the time of their deliveries online. FedEx quickly followed suit Jaunching Delivery Manager, which allowed customers to schedule dates and locations of deliveries from their phones. FedEx even launched a repair for devices like iPhones and Nooks in 2012, capitalizing on its retail space and existing shipping capabilities. Ex, for instance, was ter Online System). pickups, invoices, and eadquarters, UPS re- which were handheld d customer signatures, each other's service allowed customers Jlowed suit in 2013. dule dates, times. Logistics services. The largest shipping innovations entailed offering integrated logistics services to large corporate clients. These services were aimed at provid. ing total inventory control to customers, including purchase orders, receipt of goods, order entry and warehousing, inventory accounting, shipping, and accounts receivable. While this service line was initially developed as a model wherein the shippers stored, tracked, and shipped across client's brick-and-mortar stores, these services eventually expanded to include shipping directly to consumers, as in the health care segment. The impact of the fierce one-upmanship between FedEx and UPS was clearly reflected in their respective investment expenditures. From 2010 to 2015, capital expenditures for FedEx and UPS increased by 54% and 71%, respectively. During this period, FedEx's aggressive growth strategy, evident in its acquisitions and its investment in the relatively outdated Express aircraft fleet, nearly doubled those of "Big Brown," which benefited from its more modern fleet. International Package-Delivery Market In 2015, the global parcel-shipping market was dominated by UPS, FedEx, and DHL, with international services representing 22% and 28% of revenues for UPS and FedEx that year, respectively. FedEx made significant investments in developing European delivery capabilities in the 1980s before eventually relinquishing its European hub in 1992, causing it to rely on local partners to deliver to Europe for the ensuing decade. In 1995, FedEx expanded its routes in Latin Amenca and the Caribbean, and later Intro duced FedEx AsiaOne, a next-business-day service between Asian countries and the United States via a hub in Subic Bay, Philippines UPS broke into the European market in earnest in 1988. with the acquisition 10 European courier services. To enhance its internati ated a system that coded and tracked packages and mational delivery systems, UPS cre- customs duties and taxes. In 2012, UPS expanded its E and automatically billed customers for s European offerings by purchasing Kiala, a European company that gave customers delivery options at nearby shop Pons at nearby shops and gas stations close to their homes, before replicating the service for UK customers the following year. By 2015, the company planned to double its investment in Europe to nearly $2 billion over five years. Much like the U.S. domestic market, the international package-delivery market of the first decade of the 2000s was given its greatest boost by the explosion of e-commerce. Compared to same-country online shopping, cross-border shipping was only a fraction of global e-commerce spending in 2015, but it was the piece that was growing most quickly, at an annual rate of over 25%. Websites like Amazon Market- place and Etsy allowed shoppers to purchase goods from sellers all over the world, while expecting an ease of shipping similar to that provided by domestic retailers. As a result of this growing segment of online sales, FedEx, UPS, and others were quickly adapting their service offerings to make cross-border shopping as smooth as possible. FedEx, for example, purchased Bongo in 2014, later rebranded as FedEx Cross Border, which aimed to help retailers face cross-border selling issues, including regulatory com- pliance and credit card-fraud protection, while connecting them to global consumers. DO no bod o o Performance Assessment qui s o nt OSTS Virtually all interested observers-customers, suppliers, investors, and employees- watched the competitive struggle between UPS and FedEx for hints about the next stage of the drama. The conventional wisdom was that if a firm were operationally excellent, strong financial performance would follow. Indeed, FedEx had set a goal of producing "superior financial returns," while UPS targeted "a long-term competitive return."15 Had the two firms achieved their goals? Moreover, did the trends in financial perfor- mance suggest whether strong performance could be achieved in the future? In pursuit of answers to those questions, the following exhibits afford several possible avenues of analysis. Financial Success The success of the two companies could be evaluated based on a number of financial and market performance measures. Exhibit 2.5 presents the share prices, earnings per share (EPS), and price-earnings ratios for the two firms. Also included are the annual total return from holding each share (percentage gain in share price plus dividend yield) and the economic value add, reflecting the value created or destroyed each year by de- ducting a charge for capital from the firm's net operating profit after taxes. Exhibits 2.2 and 2.3 present a variety of analytical ratios computed from the financial statements of each firm. Part One Setting Some Themes 2015 s for FedEx and UPS by Business and Geography Segment (Millions) EXHIBIT 2.1.1 Revenues for FedEx and UPS by Business and Geoaran 2010 2011 2011 2012 2013 2014 FedEx Geography U.S. Domestic Revenue 24.852 27,4610 International Revenue 9,882 11,843 4,321 29,837 br 30,9482 32,259 34,216 13,339 13.308 13,237 12,843 100 Business 24,581 27,171 26,515 27,121 21,555 27,239 FedEx Express 8,485 9,573 10,578 11,617 7,439 12,984 FedEx Ground 4,911 5,282 5,401 5,757 6,191 FedEx Freight FedEx Services 1,419 1,32791,310 to 1,137 to 1,072 1,039 UPS 2010 2011 2012 2013 2014 2015 Geography U.S. Domestic Revenue 36,795 39,347 40,42841,7729543,840 45,309 International Revenue 12,750 13,758 13,699 13,666 1 4,392 13,054 Business U.S. Domestic Package Next-Day Air 5,835 6,229 Deferred 6,412 6,443 2,975 6,581 6,570 3,299 Ground 3,392 3,437 3,672 20,932 3,903 International Package 22,189 23,052 24,194 11,133 25,598 Supply Chain & Freight 12,249 26,274 12,124 12,429 8,670 12,988 9,139 9,147 12,149 8,935 9.393 * Services provides back office support to FedEx's three transportation segments and printing and retail support to customers 9,467 through FedEx Office. Data source: Company SEC filings. Case 2 The Battle for Value, 2016: Pediix Corp, verses United Purcel Service, Inc. 36 EXHIBIT 22 I Operating Results for UPS Inc. (period ending Dec. 31, In millions) 2010 2011 2012 2013 2014 2015 Revenue 49,545 53,105 54,127 55,438 58.232 58.363 Operating Income (EBIT) 5,641 6,080 1,343 7.034 4.968 7,668 Interest Expense 354 348 393 380 353 341 Net Income 3,338 3,804 807 4,372 3,032 4,844 Capital Expenditures 1,389 2,005 2,153 2,065 2,328 2.379 Cash and Marketable Securities 4,081 4,275 7,924 5.245 3.283 4.726 Accounts Receivable 6,117 6.246 6,111 6.502 6,661 7,134 Total Current Assets 11,569 12.284 15,591 13,387 11.218 13.208 Net Prop. Plant, and Equip 17,387 17,621 17,894 17,961 18,281 18,352 Total Assets 33,597 34.077 38,818 35,553 35,44038.311 Current Liabilises 5,902 6,514 8,390 7,1318,621 10,696 Total Debt 10,846 11.128 12,870 10,872 10.779 14,334 Total Stockholders' Equity 8,047 7,108 4,733 6,488 2,158 2.491 2010 2011 2012 2013 2014 2015 7.2% 1.4% 7.8% 14.0% 1.9% 13.9% -77.9% -78.8% 2.4% -8,4% 423.8% 441.8% 5.0% -0.3% -29.4% -30.6% 0.2% 8.1 % 54.3% 59.8% CAGR ('10-'15) 17.8% 14.0% 35.9% 45.1% 8.7 2.8 2.8% 1.5 9.2 3.0 3.8% 1.6 7.5 3.0 4.0% 1.4 8. 9 3.1 3.7% 1.6 2 24 3.2 4.0% 1.6 23.2 3.2 4.1% 1.5 Revenue/C. Assets - C. Llab.) Revenue/PPE Capital Exp./Revenue Revenue/Total Assets Revenue Growth Total Asset Growth Operating Income Growth Net Income Growth Asset Efficiency Ratios Working Capital Tumover PPE Turnover Capital Expenditure % Total Asset Turnover Liquidity and Leverage Ratios Current Ratio Cash Ratio Total Deb/Equity Ratio Times Interest Eamed Profitability Ratios Operating Margin Net Profit Margin Return on Assets Return on Equity Economic Proft (millons" 2.0 0.7 1.3 15.9 1.9 0.7 1.6 17.5 1.9 0.9 2.7 1.9 0.7 1.7 o 1.3 0.4 5.0 14.1 1.2 0.4 5.8 22.5 C. Assets/C. Llab. Cash & Mkt. Sec/Curr. Llab. Total Debt/Total St. E. Op. Income Interest Exp. 18.5 11% 7% 11% 41% $1.873 11% 7% 12% 54% $2.189 2% 1% 3% 17% -$602 13% 8% 13% 67% $2,832 9% 5% 10% 141% $1.946 13% 8% 14% 194% $3.255 EBIT/Revenue Net Income Revenue N. Inc. Int Exp VT Assets Net Income/Tot. St. Es "Economic Proft (EVA) is calculated as EBIT "11 - 1) - Cofcx (T. Debt + T. St Eq, where t Data source: Capital 10. Momingstar, company annual reports. 40% and Cofc8% 37 Case 2 The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. EXHIBIT 2.4 | Timeline of Selective Competitive Developments United Parcel Service, Inc. . Establishes next day air service FedEx Corp. Offers 10:30 a.m. delivery . Acquires Gelco Express and launches operations in Asia-Pacific . Establishes European hub in Brussels 1982 1984 1985 . Begins Intercontinental air service between United States and Europe 1986 Introduces handheld barcode scanner to capture detailed package Information . Offers warehouse services for IBM, National Semiconductor, Laura Ashley 1987 1988 . Establishes UPS's first air fleet Offers automated customs service . Expands international air service to 180 countries 1989 Acquires Tiger International to expand its International presence . Wins Malcolm Baldrige National Quality Award 1990 1991 . Offers two-day delivery 1992 1993 . Introduces 10:30 am guarantee for next day air . Begins Saturday delivery . Offers electronic signature tracking Expands delivery to over 200 countries . Provides supply chain solutions through UPS Logistics Group Launches website for package tracking . Offers guaranteed 8 a.m. overnight delivery 1994 1995 1999 Makes UPS stock available through a public offering Acquires all-cargo air service in Latin America 2000 Launches website for package tracking Acquires air routes serving China Establishes Latin American division Creates new hub at Roissy-Charles de Gaulle Airport in France Launches business-to-consumer home-delivery Service Carries U.S. Postal Service packages Acquires American Freightways Corp. Expands home delivery to cover 100% of the U.S. population Acquires Kinko's retail franchise Establishes Chinese headquarters Acquires Parcel Direct, leading parcel consolidator 2001 . Acquires Mall Boxes Etc. retail franchise Begins direct flights to China . Offers guaranteed next-day home delivery 2002 2003 2004 2005 Reduces domestic ground-delivery time . Purchases Menlo Worldwide Forwarding, adding heavy-air-freight shipment capability Launches around-the-world flights Develops new Asia-Pacific hub in Ghangzhou. China Acquires UK domestic express company ANC and Flying-Cargo Hungary Acquires Prakash Alr Freight in India 2006 Acquires Overite, expanding ground-freight services in North America Launches first nonstop dellvery service between the U.S. and Guangzhou, China (continued) 38 Part One Setting Some Themes EXHIBIT 2.4 | Timeline of Selective Competitive Developments (continued) United Parcel Service, Inc. FedEx Corp. Launches Health Care Services 2007 2008 . Launches FedEx Freight AM, a flat-rate service with a money back guarantee delivery by 10:30 am 2009 2010 2011 Launches Health Care Solutions, offering shipping and supply-chain management for health companies Launches new brand platform to promote expanded logistics and supply-chain manage ol ment abilities Launches TechConnect, repair shop for con Launches UPS My Choice, allowing consumers to sumer electronics control package deliveries online Launches FedEx Delivery Manager, giving U.S. 2012 customers flexible options to schedule delivery Acquires GENCO, third-party logistics providers 2013 Acquires kiala, a European company allowing In North America, expanding ground service retailers to deliver goods to shoppers' chosen retail location Acquires Bongo International, a cross-border en- 2014 - Launches ORION, proprietary route-optimization ablement technology software for drivers, and UPS Access Point, a convenient local-store alternative to home delivery 2016 Acquires i-parcel, allowing foreign shoppers to 000 easily purchase goods on a retailer's site Acquires trucker broker, Coyote Logistics, expanding freight logistics Data source: Compiled by author from company documents and news outlets. Case 2 The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. 39 EXHIBIT 2.5 T Financial and Market Performance 2015 2014 173.66 FedEx Stock Price, Dec. 31 Close Dividends Declared in $ Per Share Basic EPS (period ending May 31) Common Shares Outstanding (Mill Price/Earnings Annual Return Cumul. Annual Return 2012 91.72 0.52 6.44 317.0 14.7 0.6 8 2013 143.77 0.56 .61 318.0 27.8 57.4% 57.4% 7.56 287.0 22.0 21.2% 78.6% 148.99 0.8 3.7 282.4 37.9 -13.7% 64.8% 2015 UPS Stock Price, Dec. 31 Close Dividends Declared in $ Per Share Basic EPS Common Shares Outstanding (Mill) Price/Earnings Annual Return Cumul. Annual Return 2012 73.73 2.28 0.84 953.0 88.5 2013 105.08 2.48 4.65 924.0 67.1 45.9% 45.9% 2014 111.17 2.68 3.31 905.0 96.23 2.92 5.38 886.0 22.0 -10.8% 43.4% 27.6 8.3% 54.2% Standard & Poor's 500 Index Index Level, Dec. 31 Close Annual Return Cumul. Annual Return 2012 2013 1,426.191,848.36 29.6% 29.6% 2014 2,058.90 11.4% 41.0% 2015 2,043.94 -0.7% 40.3% Data source: Google Finance, Morningstar, Value Line, and Capital