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= FedEx and UPS Goals  =

 FedEx and UPS although competitive and both aggressively targeting the Chinese market approached the challenge with slightly different goals. These goals which coincide with the differing corporate images of the two giants shaped the way in which each company planned their expansion into China. As we will see, these strategies not only affected their approach to expansion but may also ultimately determine the winner in China. Who’s goal is more aligned with the Chinese culture and how that may affect the future for these two shipping titans is discussed in the following sections.

FedEx goal: Superior Financial Returns
 · Looking at the stock prices in 2004, it seems FedEx achieved their goal at least in a superficial way. A cursory glance at the stock price trends show that FedEx’s stock price reached a high in 2004 well above the S & P 500. In fact, Fed Ex’s stock price rose 13.9% during a five month period that year in which UPS only saw a 3.1% increase. Fed Ex’s stock price during this time was increasing at a rate almost five times that of UPS (Bruner). · China receives a fairly high uncertainty avoidance ranking from their cultural dimension analysis. This supports the belief that they value conservatism and long term viability. They do not favor the unstable or the uncertain. These characteristics may lead them to be weary of the aggressive approaches taken by FedEx in their business and expansions (Hofstede). · Fed Ex had emulated the JIT supply programs of the Japanese which created demand for their services (Bruner). Unfortunately, UPS took the action a step further by creating a better tracking system for international shipping which eliminated much uncertainty in the shipping process, not just inventory management. The Chinese were fond of Fed Ex’s approach to put them more in control of their inventory but fell short of establishing that security UPS extended to the shipping realm. UPS more successfully combated the Chinese dislike of uncertainty (Hofstede) even though FedEx introduced the concept first.

UPS Goal: A Long Term Competitive Return
· Goal is more in line with the Chinese culture. According to Geert Hofstede the Chinese score highest in the area of long term orientation (Hofstede). · UPS has been establishing the infrastructure necessary to achieve a long term presence in China. They have more hubs than their counter-part FedEx--Shanghai and Shenzhen (FedEX AR 2009). UPS only recently opened a hub in Guangzhou. · UPS is also more conservative than FedEx, which plays into the desire to achieve returns in the long run rather than maximizing the present returns. UPS has been meeting this goal by practicing the conservative ideals they established even in an aggressive expansion campaign into China. They have preserved large amounts of cash, invested heavily in infrastructure, and maintained large amounts in their retained earnings account. Their conservative approach helped earn them their AAA bond rating (Bruner). This proven record of conservatism is likely to be well received by the Chinese population who favor to the consistent long term viability of a company over present returns. Although FedEx reached a higher stock price than UPS, UPS has less volatility. According to exhibit 1, FedEx not only saw the record high, but also achieved the record low among the two companies (Bruner). This trend continues as we observe from the recent releases. FedEx’s more aggressive focus on maximizing returns yielded a 50% change in price during the last year. Comparatively, UPS only saw a 25% change in their stock price during the previous 12 month period (MSN). //· //China ranks extremely low in individualism. They are known for a collectivist culture which emphasizes relationships and extreme loyalty (Hofstede). It is possible that this ingrained trait may better adapt itself to UPS and their goals. UPS’s goal of long term returns requires them to make the capital expenditures necessary to plan for the future and build the infrastructure needed to continue successful operations in China. In doing so, they are becoming am invested member of the Chinese society. They are not merely moving in to make profits, but instead investing in the future of China and their economy as a whole. As mentioned previously, it is likely that the Chinese people will better relate to the long term orientation of the UPS model. As China continues to grow and require an increased need for international shipping, it would not be surprising if they choose to align themselves with UPS because they felt more comfortable with its conservative nature and orientation which is more similar to their own that that of the aggressive FedEx. Additionally, they may feel as though UPS is acting more as a citizen of China than FedEx do to their willingness to assist in creating the infrastructure China is currently lacking. If these assumptions are correct, it is not outrageous to leap once more and assume the loyalty and collectivist nature found within China will play into UPS’s favor as well. The high emphasis on relationships and loyalty can be found in Chinese business relationships as well as their personal relationships. In China, there is a strict etiquette to building business relationships. The art is called // guanxi. // // According to Chinese customs, it is necessary to build a more personal relationship with your business clients. Doing so may be time consuming and expensive but the reward is worthwhile. Due to the high level of loyalty the relationship becomes key. It is not necessarily what business you are doing but who you are doing business with. A kind of trust and friendship must be established prior to conducting business. Once they trust their business associate, only then it is acceptable to discuss and conduct business. The payoff is that loyalty will keep business associates from needlessly shopping new partners or associates. Unlike in the States where it is common to shop around for the best price and switch when it is advantageous, the Chinese business relationship is more stable and based on a mutual trust and loyalty rather than money. For UPS, this opportunity could seal the deal and put FedEx on the defensive. UPS is already better aligned with the ideals of the Chinese culture (long term oriented and conservative). This bodes well for UPS but the collectivist culture makes the threat to FedEx even more serious. If UPS does gain the trust of the Chinese business community, they essentially secure the relationship just out of FedEx’s reach. This loyalty among business associates could be the nail in the coffin of FedEx’s Chinese expansion efforts (Loyalka). [] // · UPS seems to be recognizing the importance of becoming a member of the Chinese community. In addition to investing in infrastructure, they also recently sponsored the Beijing Olympics. In 2008, UPS received the honor of becoming the “ Official Logistics and Express Delivery Sponsor of the Beijing 2008 Olympic Games.”  “In light of the rapid growth and continuous expansion of the Chinese sports market, we believe the sponsorship from UPS for the Beijing 2008 Olympic Games will allow for even greater contributions to the Olympic Movement and to China’s sports. The partnership also will create larger room for UPS’s development and additional prospects for the company,” said Wang Wei, BOCOG Executive Vice-President and Secretary General. “We are looking forward to friendly and reciprocal co-operation with UPS,” Wang added.   Hosting the Olympics was a major ordeal and accomplishment for the country of China, as it is for every host of the Olympics. During the Olympics the spotlight is on that country. It took a great deal of trust, as evidenced by the secretary general’s statement, for China to select UPS as their partner in hosting the Olympic Games. The secretary general’s statement really echoes the mentality of the country and foreshadows the future success of UPS there. A collectivist sentiment is found in his reference to the greater good the games will bring to China and their sports. The art of guanxi is seen in his reference to the friendly relationship they anticipate with UPS while conducting business. But maybe most importantly for UPS, the loyalty from establishing such a relationship is hinted at in his reference to new opportunities this relationship will bring UPS for development and prospects in China (the key to long term success there). Bottom line, the exciting news for UPS is they seem to have established that all important relationship—a major feat and a giant step toward achieving their goal of long term competitive returns in China. []

A More Appropriate Goal
<span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 200%;">It can be argued that both companies met their goal. FedEx surpassed UPS to set the record high, they maximized their share price at certain times and hence probably did provide superior financial returns to some investors. Unfortunately, they have not sustained their high price. With record highs, they have achieved record lows. UPS on the other hand seems to choose a goal which coincided well with the Chinese culture. Unlike the American focus on price and returns, the Chinese appreciate the relationships and sustainability that can make a company great. Hence, the goal UPS set forth in part propelled them to success. It seems they have undoubtedly met their goal by setting themselves up for a long term relationship with China by following their customs and aligning their goals with those of the Chinese people. While the returns may not always surpass the returns others enjoy, UPS seems to be enjoying the benefits of a loyal client base. Their approach to investing in the country and developing themselves as a productive and responsible member of the Chinese society is likely to ensure their continued success.