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10 United Parcel Service S IPO

UPS was performing strongly in the late 1990s, delivering millions of packages per day globally. Key factors driving UPS's performance were its operational excellence culture, trained workforce, and accountability. FedEx was also performing well, achieving success by targeting UPS's large customers. UPS's combination of controls and work methods helped ensure reliable low-cost service. UPS's stock value was anticipated to be very high given its strategy and sustained performance.

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0% found this document useful (0 votes)
152 views2 pages

10 United Parcel Service S IPO

UPS was performing strongly in the late 1990s, delivering millions of packages per day globally. Key factors driving UPS's performance were its operational excellence culture, trained workforce, and accountability. FedEx was also performing well, achieving success by targeting UPS's large customers. UPS's combination of controls and work methods helped ensure reliable low-cost service. UPS's stock value was anticipated to be very high given its strategy and sustained performance.

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Name: Ngo Thi Thu Hang

Student ID: z3262384 Case Study No5: United Parcel


Class: ACCT 5910 – Tues 10am-1pm Service’s IPO
Question 1 What are the key success factors & risks for UPS given its business strategy?
Answer Key success factors :

 By 1998 it was generating over $3 billion in global revenues, from and within over 200
countries.
 UPS projected that by 2003 online B2C sales in the US would surpass the $100 billion
spent annually on catalog sales.
 UPS began offering suppliers a portfolio of financial services & logistic technology
software applications designed to help them better manage their inventory and shipping
logistic.

Risks:

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 Competitive challenges from postal monopolies.
Rapidly changing environment at an unprecedented rate

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Question 2 How is UPS performing? What factors are driving this performance? Is the current

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performance likely to be sustained? Why or why not?
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Performance of UPS:
Answer
 Delivering 13 million packages each business day ( 9,000 every minute) to over 200
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countries worldwide.
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 Having daily contacting with 1,8 million customers (including every company in the
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Fortune 1000) and making deliveries to 6 million business and residential addreeses.
 In 1999, was recognized as the “World’s Most Admired Global Mail, Package and
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Freight Delivery Company” and “ Company of the Year”.


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Factors driving:
 Operational and service-excellence culture
 Carefully trained workforces.
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 Accountability and efficient execution at every level of the organization.


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 Current performance is likely to be sustained as it is believed that UPS’s


combination of “controls, rules, a detailed union contract, and carefully studied
work methods…help guarantee the customer reliable, low cost service.

Question 3 How is FedEx performing? How, if at all, do its performance and plans affect your
assessment of the sustainability of UPS’s current performance?
Answer Performance of FedEx
 A $ 17 billion global transportation and logistics enterprise.
 By the late 1990s, FedEx moved over 3 million packages each day, with the ability to
reach virtually every business address in the US and almost every country around the

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world within 24 hours.
 Achieving success by selectively targeting some of UPS’s most valuable accounts: high-
volume customers in high-density locations.
 Acquisition and rename RPS-> FedEx Ground to take advantage of its own strong brand.
 It may affect the sustainability of UPS’s current performance because of losing customers.
Question 4 Given your assessment of the company’s strategy and the sustainability of its performance,
forecast the key factors for UPS’s stock value.
Answer  UPS’s combination of “control, rules, a detailed union contract, and carefully studied
work methods… helped guarantee the customer reliable, low cost service
 Most of UPS’s equity was held by current & retired employees, founding family and
foundations
 It was anticipated that after the IPO, the current UPS shareowners would own 90% of
the firm’s equity and control about 99% of the vote.
 Value of UPS’s stock could be very high.
Question 5 What is your estimate of UPS’s value and its multiples?

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Answer Total revenue of UPS was increasing steadily during period 1995-1998 and could keep

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increase in the next few years.

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Question 6 How do you estimates of UPS’s PE & PB multiples compare with those for FedEx? How

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do they compare with those for the “best of breed” companies’ multiples?
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Answer  The company’s stock price should be valued at a premium to reflect its superior
performance over other firms in the industry => It’s PE & PB could be higher then those
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for FedEx.
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 It should be the same situation as of the “best of breed” companies’ multiples.


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