Case 9 FedEx vs. UPS—Competing with Contrasting Strategies in China
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Introduction
FedEx and UPS are two U.S based logistics corporations which entered into China in the 1980s. However, both two companies adopted contrasting entry approaches. As for expanding strategies, FedEx adopted a forceful approach while UPS followed a conservative strategy till the late 1990s. With the improved business prospects in the Chinese logistics industry, the intensified rivalry between FedEx and UPS reached its peak gradually. Following Chinese entry into the World Trade Organization (WTO), FedEx and UPS continuously implemented various new services and agreements to grab Chinese logistics market. Obviously, these strategies helped both companies increase their revenues significantly so both companies expected to gain more market share in the future.

Entering and Expanding Services Network
At first, FedEx commenced its operation in China in 1984 by means of joint venture while UPS entered into China through an agent partnership relationship. FedEx partnered with multinational companies in China to build service network thus FedEx focused on building infrastructure and distribution centers in the first decade of its operations in China. Though joint venture provided FedEx with greater opportunities that are inaccessible through other strategies, it brought much higher investments and risks. On the contrary, an agent partnership relationship saved UPS from high risks. Unlike FedEx, UPS followed a low investment approach through cooperation with Sinotrans. Besides less risk, this strategy also contributes to establishing the image of local company for UPS.
Secondly, both FedEx and UPS started to expand its presence in China after entering Chinese logistics market. FedEx launched its air services and distribution centers continuously since 1996 and these enabled customers to receive better service from FedEx. With its own service network, FedEx confronted foreign companies directly through a western way. Similarly, UPS increased its investments in establishing infrastructure and facilities in China to cover its previous shortage in service network. Nevertheless, instead of building service network by itself, UPS preferred to cooperate with local companies to improve its brand identity.

Contrasting Elements in Expanding Strategies
FedEx and UPS adopted contrasting approaches while expanding in China till the late years in the last century.
Firstly, advertising and promotion strategy of both companies varied significantly. FedEx followed an aggressive advertising campaign emphasizing on its efficient service and these aggressive advertisements left Chinese customers a modern impression of FedEx. Although UPS used less advertising strategy than FedEx, it gained more popularity in China. Through an advertisement including Chinese elements and sponsorships related to Chinese events, UPS successfully projected an image of a local company.
Secondly, as for targeting customers, the personalized strategy of UPS suited Chinese market better than FedEx. Aiming at customers who needed a highly controlled distribution system and timely shipments status, FedEx provided them with standard logistics services which involve solutions to diverse logistics problems. Its innovative service enhanced Chinese customers’ efficiency considerably thus this service benefited FedEx’s growth in shipments. However, without an appropriate personal relationship, FedEx failed to win more traditional Chinese customers. In contrast to FedEx, UPS targeted local logistics market, building relationships on Chinese terms. Hence, UPS earned a good reputation by its warmly service and a stable rapport with Chinese customers. On the other hand, a disadvantage of this approach lies in it hindered UPS from enlarging market share.
At last, there are huge differences between investments made by both companies. FedEx adopted a forceful, high investment strategy while UPS chose a discreet, low investment approach. FedEx kept its aggressive style so it invested heavily on establishing service network. Even though FedEx was in a dilemma in 1998 due to its extensive air service investment in Asia, advantages of this investment can not be denied. High investment approach not only entitled FedEx to gain more market share, but also created long-term payoff for FedEx. Conversely, UPS invested according to the Chinese market conditions thus it was the flexible investment strategy that prevented UPS from major losses. Nevertheless, UPS was exposed to dangers of less market share than FedEx. Additionally, UPS was less logistically versatile than FedEx owing to the incomplete service network.

Moves and Countermoves in the New Millennium
After entering into WTO, Chinese government agreed to improve regulations related foreign companies. Furthermore, enormous potential existed in Chinese logistics industry encouraged competition between FedEx and UPS.
Air rights soon became the first focus of rivalry between both companies after the U.S Department of Transportation granted UPS direct flights from the U.S to China. Responding to the action of UPS, FedEx launched more aircrafts and promotion activities. In addition to this, in the mid-2001, UPS started an advertising campaign to build a special brand image for itself. To compete with UPS effectively, FedEx also sponsored popular TV programs, showing its speed as well as accuracy. Following the advertising campaign, FedEx adopted new services which is beneficial to cost saving. Likewise, UPS upgraded its service system to counter FedEx’s move. Ultimately, their competition reached the peak in 2003. Both FedEx and UPS launched more offices and agreements in China.
Recommendations on strategies should both companies adopt are different. At first, FedEx ought to find values of local Chinese market as well, namely, building a favorable relationship. Therefore, cooperating with Chinese companies and sending representatives of FedEx would be helpful to expand its market share in China. Moreover, FedEx is able to gain support from Chinese customers by adding sponsorships to Chinese events. Secondly, if FedEx chose a proper amount of investment, it would avoid unnecessary economic loss. As for UPS, it should concentrate on traditional customers and new Chinese customers simultaneously. To satisfy customers with new demands, UPS must adopt more new services and logistics systems. Additionally, more investment in building its own service network is advantageous for the future competition with FedEx.

Conclusion
This report examines different strategies adopted by FedEx and UPS in Chinese logistics market. FedEx implemented an aggressive investment strategy while UPS adopted an approach which is low-risky and discreet. Benefits and drawbacks in overall strategies of both companies are also examined in the report. With better logistics system and air services, FedEx gained more market share in China. However, FedEx’s weakness lies in lack of an interpersonal relationship and higher economic risk. According to approaches of UPS, it benefited from friendly relationship with customers. Though UPS had less risk than FedEx, it lost market because of low investment. In the end, recommendations focus on specific strategies which both companies should adopt. FedEx should pay more attention to interpersonal relationships while UPS ought to make more investment.