1. What happened to the two company’s stock price in 2004? Why did it rise? Did one company outpace another and if so why do you think that happened? How should we interpret any increases?Mid-year 2004, China and the United States attained a revolutionary air-transportation covenant that increased the number of commercial cargo trips between the two nations four-fold. In addition, the agreement encompassed the permission for air-cargo hubs to be created in China and also sanctioned the right for commercial airlines to land at any accessible airport. Taking into consideration that United Parcel Service, Inc, together with FedEx Corporation were the sole all-cargo carriers at the time, it implied that they could expand their operations to the Chinese market. This major market prospect led to an increase in the stock price for the companies. However, it is imperative to note that one company did outperform another. In particular, the share price of FedEx increased at a rate of just about five time quicker as compared to UPS.
The main reason why FedEx has a better performance and therefore greater increase in share price is because it had a competitive advantage over UPS. To begin with, the corporation had the biggest international presence in China as compared to UPS. Having a bigger market share implied that it could increase its operations and therefore increase the revenues and profits generated. Notably, FedEx was able to have 11 flights transport cargo to China on a weekly basis, a number that was double the number of flights operated by UPS. It is also important to point out that FedEx was able to provide its carrier services to 220 cities in China and had direct flight to major cities, for instance Shanghai, Beijing, and Shenzhen. In the one financial year between 2003 and 2004, FedEx experienced a significant growth with its volumes in China increasing by more than 50 percent.
Any increases should be interpreted as growth and development in the market and also gaining competitive advantage over industry rivals. For instance, the significant increase in stock performance for FedEx Corporation as compared to that of UPS not only implied major growth in the overseas market and having a competitive advantage, but also meant that it generated greater revenues and profits compared to its main market competitor.
2. Why didn’t UPS create an overnight delivery service and how did Fedex successfully enter this market?
The main reason why UPS did not generate a service for overnight delivery is because the company is conservative from a financial standpoint and focuses of diminishing its costs. Notably, overnight delivery services lead to an increase in the costs incurred by the company, an aspect that contradicts the mission of UPS. In contrast, FedEx managed to successfully pull off entering the market. This is largely for the reason that the company made major investments in a fleet of aircrafts prior to market entry. In addition, when UPS entered the market later on, establishing such overnight delivery services was substantially costly.
3. What’s going on...
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