Competing with Contrasting Strategies in China MKTG069 – Sample Questions and Answers This case was written by Vivek Gupta, ICFAI Center for Management Research (ICMR). It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. For use by students of Icfai Flexible Learning programs. Not to be reproduced or distributed in any form or by any means. 2003, ICFAI Center for Management Research. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any fomn or by any means- electronic or mechanical. without permission. To order copies. call 0091-40·2343·0462163 or write to ICFAI Center for Management Research, Plot # 49, Naga~una Hills, Hyderabad 500 082, India or email [email protected] org. Website: www. icmrindia. org ICFAI Cuter for Management Research MKTG/069 FedEx vs.
UPS: Competing with Contrasting Strategies in China Sample Questions and Answers Question I. FedEx entered into China in 1984 through a joint venture, while UPS entered China in 1988 through an agent partnership relationship. Critically examine the contrasting strategies adopted by both the companies, while entering and expanding their services network in China. L Legal regulations in China stipulate that a foreign logistics management company can enter into a pmtnership or joint venture with a Chinese company, but not enter on its own, to do business in China.
Foreign companies are also disallowed from handling cargo business within Chinese cities, but they can operate in the international express cargo business. ADS Fedex’s Strategy FedEx entered China in 1984 by acquiring Gelco Express International, a UK-based courier company, whose operations spread across Europe and the Asia Pacific. During the first decade of its Chinese operations, FedEx focused on building the necessary infrastructure and distribution network to deliver express freight and documentation services. FedEx followed a focused approach.
It targeted Chinese entrepreneurs and its existing customers (in the US and other countries), who had operations in China. In 1989, FedEx acquired Flying Tiger Line Inc. for a sum of$880 million and gained access to high traffic routes between Japan and China. FedEx began its freight operations in 1995 by hiring BAS International Transportation Ltd (EAS) as an international Chinese service participant for transpOlting goods and packages within China. EAS had a wide network spread over 34 major cities, serving nearly half the Chinese population.
In mid-1995, FedEx acquired Evergreen International Airlines, the only cargo carrier with flying rights in China, for $67. 5 million. This helped it gain access to all cargo routes in China. By 1996, FedEx became the only all-cargo carrier approved by the Civil Aviation Administration of China, with aviation rights to China, With a view to expand its operations to all parts of Asia, FedEx introduced the ‘hub-and-spoke’ system. China served as the hub and other major Asian cities as the spokes.
The system enabled the company to introduce the FedEx AsiaOne network, which linked 13 top commercial cities in Asia. This network enabled FedEx to supply any goods within these cities in just 24 hours. UPS’s Strategy UPS entered China in 1988 through an agent-partner relationship with China’s largest freight forwarder, China National Foreign Trade Transportation Group. This group was popularly known as Sinotrans. UPS followed a contrasting strategy to that of FedEx. Initially, UPS offered only express delivery of small packages and documents.
It adopted a ‘low investment strategy’ by leasing aircraft instead of buying them. During the first decade of its operations in China, UPS collaborated with Hong Kong Dragon Airlines Limited and China Eastern Airlines Corporation to deliver packages to China. It started operating own flights to China in 1995 through its two hubs, located in Hong Kong and Singapore. The collaboration with Sinotrans enabled UPS to spread its network to 21 cities by late 1995. For use by students of Iclai Flexible Learning programs. Not to be reproduced or distributed in any form or by any means