FedEx/UPS Comparison of Information Technology-Based

FedEx/UPS Comparison

Comparison of Information Technology-Based Marketing Initiatives at Federal Express and UPS Today

Today, the "Web" is truly "World Wide" and competing in an increasingly globalized marketplace requires companies to make the most of what the Internet has to offer. Two companies that have managed to do this in a major way are FedEx and UPS, both of which compete in the Air Delivery and Freight Services industry, and both of which have capitalized on their brands to gain access to the global marketplace in recent years. A fundamental component of the success of both of these companies has also been their increased reliance on the Internet and information technology resources to help them achieve their respective marketing goals. Because many companies of all sizes can benefit from the same marketing techniques these giants used, identifying what worked best represents a timely enterprise today. To this end, this paper provides a review of the peer-reviewed, scholarly and organizational literature to determine how FedEx and UPS achieved their respective positions in their industry by using information technology resources. A summary of the research and salient findings are presented in the conclusion.

Review and Discussion.

A brief overview of each company is provided below, including a review of how FedEx and UPS have used it initiatives to achieve their respective marketing goals and achieve additional market share in the global marketplace.

FedEx. FedEx Corporation provides transportation, e-commerce, and business services through its four business segments: FedEx Express, FedEx Freight, FedEx Ground, and FedEx Kinko's (this segment also provides Web-based services) (FedEx Corporate Profile 1). FedEx Corporation was established in 1971 and has its headquarters in Memphis, Tennessee (FedEx Corporate Profile 2). According to FexEx's corporate history, though, it was originally called "FDX Corp." But changed its name to FedEx Corp. In January 1998 (FedEx Corporate History 2). This change in name was part of an overall move into the global marketplace. In this regard, the company reports that in January 2000, FedEx "unleashed the power of its global brand. In a move to further integrate the company's portfolio of services, FDX Corp. was renamed FedEx Corporation.... To centralize the sales, marketing, customer service and information technology support for FedEx Express and FedEx Ground, a new subsidiary named FedEx Corporate Services (FedEx Services) was formed and began operations in June 2000" (FedEx Corporate History 3).

According to Steinbock (2000), FedEx has always been in the vanguard on those companies embracing new information technology to help them administer its far-flung enterprises. For instance, this author emphasizes that, "As a Web pioneer in customer service, FedEx also played a significant role in helping customers move their businesses online. With its strong brand name and technological lead, FedEx was poised to take a larger share of the delivery business than competitors UPS and Airborne Freight" (Steinbock 113). Even during the late 1990s, when the Internet was still in its relative infancy, FedEx was making the most of what could be accomplished by using both private networks and a corporate Web site (Steinbock 113). According to this author, "FedEx's online retail accounts included L.L. Bean and WilliamsSonoma, but those shipments were only a fraction of its business. In 1998, the vast majority of shipments processed online remained business-to-business transactions (e.g., Cisco, Dell, and Insight Direct). FedEx processed two-thirds of its 3 million shipments each business day through electronic networks, including its private networks and website" (Steinbock 113).

UPS. Like its corporate archrival FedEx, United Parcel Service, Inc. (hereinafter "UPS" or alternatively, "the company") also provides transportation, logistics, and financial services in the United States and globally (UPS Corporate Profile 1). The company operates through three segments: U.S. Domestic Package, International Package (the International Package segment provides international deliveries to approximately 200 countries and territories), and Supply Chain and Freight (this segment provides electronic services including a variety of online solutions that support automated shipping and tracking) (UPS Corporate Profile 2). The company celebrates its 100 anniversary this year and is headquartered in Atlanta, Georgia (UPS Corporate Profile 3).

The company is the first to highlight its increasing reliance on it-based technologies to help it compete with FedEx and others. According to Brynjolfsson and Urban (2001), "Global package deliverer United Parcel Service (UPS) increased its market share, leapfrogged competitors, and extended its business model by leveraging the Internet's networking, information, and interactive capabilities. Thus it exemplifies a company's migration from the technology strategy through the service strategy to the market strategy of the B2C e-strategic grid" (132). These authors suggest that these it-based initiatives were primarily responsible for the company's ability to promote its services and grow its market share far more rapidly than its main competitor: "By focusing on building profitable market share, UPS is now able to deliver 12.4 million packages a day around the world and handle 55% of all e-commerce shipments, compared with rival FedEx's 10%. Facilitating those shipments are 2,500 distribution centers, more than 330,000 employees, and 500 airplanes. Smart use of Web technology also has enabled UPS to reinvent itself as an information-delivery company and problem solver" (emphasis added) (Brynjolfsson and Urban 132). According to UPS President Jim Kelly: "UPS does business where the virtual and physical worlds meet, where 'tires and wires' converge"; however, this was not always the case. For instance, Brynjolfsson and Urban (2001) report that the company was already trailing behind its major competitor in its use of information technology to further the company's goals. "UPS brought in Web technologies in the mid-1990s," they advise, "but at that time FedEx, with its package-tracking system, led in its use of the Web for customer service. By 1998, however, UPS was catching up in building its technology infrastructure" (132). These authors also report that in 2000, UPS invested $1 billion on marketing efforts designed to identify equivalents or close approximations for what its competitors were offering, but managed to pull its corporate feet out of the fire by using Internet-based technologies to help target its market more efficiently (Brynjolfsson and Urban 132). In this regard, Brynjolfsson and Urban suggest that, "The challenge over time is to continually differentiate the offering -- and to make it less price-sensitive -- in ways that remain attractive to the targeted market segment" (132). This is precisely what UPS has attempted to do with its it-based marketing initiatives, and the company has reaped a large return on its investments to date.

Because many of the products and services offered by UPS and FedEx are virtually fungible, the savvy marketers at UPS quickly recognized the it provided them with the ability to personalize services and deliver their message more effectively. According to Brynjolfsson and Urban, "The support dimension of an offering represents those differentiating features that help customers choose, obtain, and then use the offering. All other differentiating features belong to what is called the merchandise dimension. The support features of a car sold over the Web include availability of information, ease of purchase, the test-drive, promptness of delivery, and service arrangements. Companies can augment the support dimension through personalization" (Brynjolfsson & Urban 132).