Company Analysis between FedEx and US Postal Service

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Table of Contents

Overview of the USPS and FedEx
Overview of US Postal Service
Overview of FedEx Corporation
Competiveness between US Postal Service and FedEx
Competitive strategies
References

Overview of the USPS and FedEx

The contemporary economy provides both opportunities and challenges for the logistics companies in the United States and the entire world. Most companies are, therefore, coming up with competitive strategies that are meant to help them withstand the challenges, thus enhancing their competitiveness in the logistics sector.

FedEx and the United States Postal Service (USPS) and FedEx are examples of companies that operate in the larger US logistics sector. The last two decades have witnessed a significant rise in cross border trade. This has been enabled by an increase in the number of shipments of goods from one region of the world to the other. Also, the volumes of trade within countries keep swelling, thus enhancing the significance of the companies that deal in delivery of goods to customers.

Overview of US Postal Service

The USPS is a logistics company that deals in the provision postal services across the United States. The US Postal Service is a government owned agency that has dealt in the provision of postal services for over two centuries. The most unique feature between the US Postal Service and FedEx is the size of US Postal Service. The US Postal Service is the largest postal service company in the world. It should be noted that though it is government owned, the agency operates independently. With over a half a million employees and over a quarter a million fleet of vehicles, the company supplies and delivers mails across the entire United States.

Being the main government owned agency in the logistics sector in the United States, the main competitors for the company are private companies like FedEx. In order to enhance its capacity to deliver services, the US Postal Service contracts most of its activities to other companies. Contracting eases the competitive scale for the company, besides increasing efficiency in the discharge of services, particularly in business areas like overseas freighting in which the company is disadvantaged (Team, 2012).

Overview of FedEx Corporation

FedEx Corporation is a United States based global courier that delivers services across the United States. FedEx began its operations in the year 1971. However, the real stature of the company today is based on the developments in the company from the 1980s up to today, where the company made a series of acquisitions in order to gain the status it has today.

FedEx is organized into diverse units, which makes it easy for the company to attend to diverse business operations. FedEx operates as an international carrier, unlike the US Postal Services that largely operates in the United States and contracts most of its foreign shipment services to other companies. At the beginning of this year, the company was listed in the Fortune Magazine as the most attractive companies for employees (Rushton & Walker, 2007).

This is a milestone for the company, considering the fact that in the past three years most companies have been implementing policies that entailed cutting the earnings of employees in order to factor the economic pressure in the production process and profitability of companies. The voluntary buyout that was opted for by the company amidst the challenging economic times was cited as one of the reasons why the FedEx came out as an outstanding company (Rushton & Walker, 2007).

Competiveness between US Postal Service and FedEx

As mentioned above, the current environment in the logistics sector is increasingly competitive, which implies that companies that are operating in the industry need to be vigilant and monitor the actions of other companies. Most analysts in the sector have been analyzing the trends in the sector and drawing analytical comparison between companies in the sector.

The timing of delivery and the prices that are charged on service delivery are the main areas in which there is a difference in operation between companies that operate in the US logistics sector (Rushton & Walker, 2007).

Competitive strategies

The nature of service offering by the US Postal Service and FedEx makes the two companies compete for the same customers. However, the clientele is quite large and diverse, which eases the scale of competition between the two companies. The customers for both companies are both individuals and corporate organizations.

FedEx derives its business from the US Postal Service. Therefore, there is a complex relationship between the two companies since they both exert competitive pressure on each other, and at the same time partner in business.

Due to the rise in competition in the industry, the level of corporate partnership between US Postal Service and FedEx has in the recent times become fragile. This comes from the fact that FedEx has been losing a lot of contracts with US Postal Service in the recent times to the upcoming competitors in the industry. Recent financial reports indicate that the US Postal Services has been seeking for new competitive bids for most of its contracts, including most of the contracts that are nearing expiry (Team, 2012).

Since the year 2000, FedEx has been cited as the main contractor of US Postal Services. For the last ten years, FedEx has offered express mail delivery, first class mail delivery and priority mail service delivery.

The contemporary competition in the offer of the contracts for delivery of the services has presented a competitive threat to FedEx, which is forced to shift its attention to other business initiatives in order to mitigate the corporate effects of these changes. About 60% of the domestic revenue for FedEx now comes from the airfreight service delivery, showcasing the importance of the mail freighting service contracts it has had with US Postal Service (Rohrlich, 2012).

Lamb, Hair and McDaniel (2009) observed that one main difference between the two companies is that the US Postal Service has operated in the sector for a longer period of time than FedEx, which is considered as a company that is still coming up in as far as longevity of operation in the industry is concerned.

However, this does not seem to bring about a lot of competitive difference between the two companies. Most people argue that this is a portrayal of the modern competition, which is mostly reflected in the application of short and long-term strategies by companies in a substantial number of industries.

Since the two companies offer almost the same services, differentiation in the nature of service offering is the main competitive tactic that is utilized by the companies. As at the end of last year, the company came out as the lowest cost service provider in the industry. The US Postal Service does not charge extra fees on the services that are delivered on Saturdays.

This is a significant difference in competition with FedEx since customers take advantage of this service, especially with the rising cost of living that was necessitated by the economic turmoil that was witnessed at the end of the last decade. While the US Postal Service is seen as a reserved company, FedEx is considered as a more sophisticated company. This is characterized by the quality of services that are offered by FedEx (Roggio, 2011).

Team (2012) observed that FedEx has come up with a substantial number of initiatives to help it adjust to the recent competitive trends in the industry. The contemporary trend in the industry denotes that most of the companies in the US logistics sector are focusing on the low-cost delivery services.

This is a reflection of the trends in customer needs and demands in the sector. FedEx developed restructuring and cost cutting strategies. These strategies are aimed at helping the company enhance its capacity to serve its customers (Team, 2012). During the year 2012, the company cancelled the order kit it had made for four Boeing 777 planes with the order for smaller Boeing 767 planes. This move was aimed at cutting down the consumption of fuel, thereby raising the profitability of the company.

Utilization of the large planes compounds the financial burden for the company during times when the demand for delivery services goes down. FedEx has a diversified supply chain and has kept diversifying its supply chain as a strategy of increasing its capability to offer services across the wider market (Rushton & Walker, 2007). FedEx has also been noted to consider adoption of e-commerce practices. This has been another source of the competitive strength of the company (Mukerjee, 2007).

References

Lamb, C. W., Hair, J. F., & McDaniel, C. D. (2009). Marketing. Mason, OH: South-Western Cengage Learning.

Mukerjee, K. (2007). Customer relationship management: A strategic approach to marketing. New Delhi: Prentice-Hall of India Pte. Ltd.

Roggio, A. (2011). Comparing UPS, FedEx, and USPS: Which is best now? Web.

Rohrlich, J. (2012). Why FedEx and UPS want the postal service to survive. Web.

Rushton, A., & Walker, S. (2007). International logistics supply chain outsourcing: From local to global. London: Kogan Page.

Team, T. (2012). FedEx Risks losing $1 Billion USPS contract to UPS. Web.

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