Ratio Analysis (Ups vs Fdx)

The following financial report provides an analysis of the financial ratios of David Jones with its close competitor in the retail sector, Myer. The financial ratios analyzed include profitability ratios, leverage ratios, efficiency ratios and market ratios for the two companies. The analysis utilizes individual company time-series analysis as well as industry cross-sectional analysis with the aim of determining the competitiveness of David Jones relative to its close competitor Myer.

The Express mail industry in the United States had a volume of $16-17 billion on expedited shipments in the year 1996. In the years before shipment volumes has risen 15-20% per year. However due to higher competition prices have fallen which resulted in a rise of only 10-15% in total revenues. As an example of this stands the revenue and the operating margin of the biggest player that make up 45% of the market. Federal Express’ revenue has more than quadrupled in the ten years prior 1996, however its operating margin has more than halved. (Exhibit 2) The

United Parcel Service, a logistics company has established itself through its strong corporate culture, continuous ability to innovate, and its far-reaching global network. The company has maintained a competitive advantage over the years by implementing continuous growth strategies—the first was geographic expansion, next the early adaptation of electronic tracking technologies, and then came a series of acquisitions. Although UPS is financially strong and is able to maintain its role in the courier and delivery industry—it is vital that UPS continue to act strategically as to strive for long-term success. UPS is heavily dependent on the U.S. economy and it is important that it find greater and more profitable ventures

During the 1980s, the air express industry was a medium to attractive industry to already be a major player in, but not a very attractive industry to try and break into. The industry can be characterized by high rivalry from competitors who compete on the same services with very little differentiation, medium power from suppliers who supply the resources necessary to run the business, high buyer power because customers can basically find an equal service from any firm in the industry, low substitution threat from other means of shipping transportation, and low threat of new entrants due to the high initial capital outlay and need of management

As the world’s largest package delivery company and a leading global provider of specialized transportation and logistics services, UPS, continues to develop the frontiers of logistics, supply chain management and e-commerce combing the flow of goods, information and funds. This past October UPS Logistics Solutions was voted #1 logistics provider by Logistics Solutions. When conducting an industry analysis, it is important to explain the competitive forces model (CFM) of UPS. The first component of competitive forces model are the customers. Their customers consist of business organizations, and the general public. The second CFM component is competition. UPS have a lot of competition in its field, but the most competitive company is FedEx. Since FedEx provides the same services as UPS; both are neck to neck in competition, but UPS has an established history, and because of that, they have more loyal customers, and they are worldly known. They have established them-selves as the elite, with their commercial on television. Showing how they can deliver from one place to another with same day delivery and

a) Economies of scale—the top three carriers (Federal Express, UPS, and Airborne Express) serve slightly more than 85% of the domestic express mail market. All three carriers deliver a high volume of packages, and thus, are able to spread fixed costs over more units. Also, each carrier has integrated technological systems that improved operational efficiency. In addition, intensive training programs of employees increase service and delivery efficiency.

The main factors inhibiting both companies are each other, both companies have attained a market dominance that is hard to overcome by any of them. In FedEx case, their financials have been their weakest spot. FedEx poor financial performance has been a big problem for the company, proof of this is the downgrade FedEx bonds have had in past years. In UPS, I would say one of their inhibiting factors is their lack of innovation. UPS has not been able to innovate and work with the technological improvements. Part of this is due of being first in the market, UPS was founded in 1907, FedEx in 1971, FedEx has gained a reputation of the leader in innovation and modernization, UPS as the follower. Also, UPS workers union have represented a huge problem for them, workers union strikes have had a huge hit in the company finances.

FedEx has two major customers who consist of businesses and individual customers. These business customers have accounts with FedEx to arrive at their location to pick up packages daily or weekly. Two-thirds of FedEx’s business comes from these customers so FedEx curves their operations to satisfy this clientele. Since FedEx’s competition is trying to acquire some of this clientele they have begun to operate and market to this clientele more effectively. Individual customers are also in FedEx’s internal environment. These customers represent one-third of their business. With increased competition from competitors FedEx has marketed to this market substantially. They have created boxes that are prepaid for shipment as long as the contents fit into the box. This has effectively increased business amongst individual customers for FedEx.

Studying FedEx, UPS and their competitive relationship in the decade from mid - 80's to mid - 90's gives a good insight for the companies' and industry's future. The two companies have different strategic goals and are operating in the same industry but in different main markets: FedEx is working on "producing outstanding financial returns" and focuses on the overnight air market while UPS is looking for "earning reasonable profit" and its core business is the two-day ground delivery. However, by 1981, the two companies started to have a strong sense

Operation leaders are tasked to identify the critical success factors and core competencies of their business functions and objectives in order to generate sustainable long-term growth. Critical success factors are actions essential for a business to reach its objectives. (Heizer & Render, p. 42, 2009). UPS’s key success factors are its efficiencies in scheduling, integrating the stream of goods, its ability to provide multiple solutions such as “harmonizing the flow of goods, information and funds across customer supply chains” while enabling consumers to “evolve in new and necessary ways” (Lewis, Forquer & Quinter, pg. 2, 2007). UPS’s environmental factors include their supply chain design and planning, competitors in logistics such as FedEx, distribution services, diversification in the global environment and focusing on differentiation. UPS is also an expert in its industry because the strategy is globally focused and is centered on diversification of its systems (See Appendix1.1)

The US express mail industry is highly consolidated. 85% of the market is served by 3 service providers. There are six second tier players who serve the remaining 15%. FedEx and UPS lead the industry in services and innovation. The following trends have been observed in this Industry.

Market structure can be defined as patterns of behaviour by enterprises in an effort to adjust to the markets in which they operate (buy or sell). Pricing strategies and collusive behaviour mergers are a few dimensions of market conduct. It is the industry norm for a legacy carrier to offer service to most popular destinations; Delta reducing routes to a similar schedule as the low-cost airlines is not an option in the multi-billion dollar industry. In order to gain market share from low-cost airlines, Delta must create a value proposition that differentiates itself from its competitors. Many customers will pay a premium if the level of service provided is higher than the low-cost, no-frills

In any organization, financial analysis is one of the most basic parts of evaluation of a company operation in any business environment. As businesses operate, it is very important that the managers know the real environment for which a firm carries out its activities. The competitions evident in the market are substantial to the decision making process of a firm. Also, firms need to give much attention to the market forces of a particular industry to make sure that they are able to make these forces turn to their advantage. This paper will indicate the UPS 's bussiness enviroment, porter’s five forces, trends in the package delivery industry ,factors for success in the UPS 's industry, UPS 's relative strengths, the appropriate benchmark companies for valuation purposes, and the UPS 's accounting policies and methods,.

Several financial ratios can be considered when looking at a company’s economic performance. However, given all the possibilities it is important to focus on a few key areas that are functionally related. Therefore, for the purpose of analyzing Halliburton’s financial position as well as its competitors, some common ratios can be used such as current ratio, debt-to-total assets, inventory turnover, average collection period, net profit margin, and return on total assets (ROA).

Ratio analysis is the fundamental indicator of company’s performances for so many years; it is also can be seen as the very first step to measure a company’s performance along with its financial position. Moreover, ratio analysis has been researched and developed for many years, Bliss had presented the first coherent system of ratios, and he also stated that ratios are “indicator of the status of fundamental relationship within the business” Horrigan (1968). However there are some arguments on whether the ratio analysis is useful or not since to conduct these analyses will be costly to the company, also there are several limitations on how these ratios work. Therefore, the usefulness and the limitation of ratio analysis will be discussed further in this essay, with the use of easyJet’s annual report as examples.