166
KEY TERMS
competitors 144
competitive rivalry 144
competitive behavior 144
competitive dynamics 144
competitive action 152
competitive response 152
first mover 153
fast-cycle markets 161
late mover 155
multimarket competition 144
REVIEW QUESTIONS
1. Who are competitors? How are competitive rivalry, competitive
behavior, and competitive dynamics defined in the chapter?
2. What is market commonality? What is resource similarity? In
what way are these concepts the building blocks for a compet-
itor analysis?
3. How do awareness, motivation, and ability affect the firm’s
competitive behavior?
Mini-Case
FedEx and United Parcel Service (UPS): Maintaining
Success while Competing Aggressively
Identified recently as one of the 50 greatest or most
intense competitive rivalries of all time, FedEx and UPS
are similar in many ways, including their resources, the
markets they serve, and the competitive dimensions that
they emphasize to implement similar strategies. These
similarities mean that the firms are direct competi-
tors and that they are keenly aware of each other and
have the motivation and ability to respond to the com-
petitive actions they take against each other. The two
firms are the largest global courier delivery companies in
what is a highly competitive industry on a global basis.
FedEx and UPS compete in many of the same
product markets, including next day delivery, cheaper
ground delivery, time-guaranteed delivery (both
domestically and internationally), and freight services.
However, the firms concentrate on different segments
www.ebook3000.com
Part 2: Strategic Actions: Strategy Formulation
market commonality 148
quality 156
resource similarity 148
strategic action 152
strategic response 152
second mover 154
slow-cycle markets 159
standard-cycle markets 162
tactical action 152
tactical response 152
4. What factors affect the likelihood a firm will take a competitive
action?
5. What factors affect the likelihood a firm will initiate a competi-
tive response to a competitor’s action(s)?
6. What competitive dynamics can be expected among firms
competing in slow-cycle markets? In fast-cycle markets? In
standard-cycle markets?
in attempting to create superior stakeholder value and
to avoid direct, head-to-head competition in a host of
product segments and markets. In this regard, FedEx
“intends to leverage and extend the FedEx brand and
to provide customers with seamless access to its entire
portfolio of integrated transportation services,” while
UPS “seeks to position itself as the primary coordinator
of the flow of goods, information, and funds throughout
the entire supply chain (the movement from the raw
materials and parts stage through final consumption of
the finished product).”
Thus, while these firms are similar, they also seek to
differentiate themselves in ways that enhance the pos-
sibility of being able to gain strategic competitiveness
and earn above-average returns. In broad-stroke terms,
FedEx concentrates more on transportation services and
Chapter 5: Competitive Rivalry and Competitive Dynamics 167

international markets. (Recently, FedEx was generating
48 percent of revenue internationally, while UPS was
earning 22 percent of its revenue from international mar-
kets.) Meanwhile, UPS concentrates more on the entire
value chain while competing domestically. FedEx is the
world’s largest international air shipping firm, while UPS
is the world’s largest package delivery company.
There are many actions the firms have recently taken
to sharpen their ability to outcompete their primary
competitor. In mid-2013, FedEx learned that its contract
to fly domestic mail for the U.S. Postal Service had been
selected for renewal. UPS also bid on the contract, and
thus it lost this competitive battle to its rival. To support
its strength in logistics as part of the entire supply chain,
UPS recently agreed to buy “Hungary-based pharmaceu-
tical-logistics company Cemelog Zrt for an undisclosed
amount in a deal to strengthen its health-care business
in Europe, giving it access to the increasingly import-
ant markets of Central and Eastern Europe.” UPS is also
emphasizing trans-border European Union services as a
growth engine for the foreseeable future. To enhance its
ability to compete against UPS and other rivals as well,
FedEx is restructuring some of its operations to increase
efficiency. Similarly, the firm is increasing its emphasis
on finding ways for its independent express, ground, and
freight networks to work together more synergistically.
Although the rivalry between FedEx and UPS is
intense and aggressive, it is also likely that this rivalry
makes each firm stronger and more agile because each
has to be at its best in order to outperform the other.
Thus in many ways, each of these firms is a “good com-
petitor” for the other one.
Sources: 2013, FedEx Corp., Standard & Poor’s Stock Report, www.
standardandpoors.com, May 25; 2013; United Parcel Service, Inc., Standard
& Poor’s Stock Report, www.standardandpoors.com, May 25; L. Eaton, 2013,
FedEx CEO: Truck fleets to shift to natural gas from diesel, Wall Street
Journal, www.wsj.com, March 8; V. Mock, 2013, UPS to appeal EU’s block of
TNT merger, Wall Street Journal, www.wsj.com, April 7; B. Morris &
B. Sechler, 2013, FedEx customers like slower and cheaper, Wall Street Journal,
www.wsj.com, March 20; B. Sechler, 2013, Online shopping boosts profit for
UPS, Wall Street Journal, www.wsj.com, April 25; B. Sechler, 2013, FedEx
fends off rivals for U.S. Postal, Wall Street Journal, www.wsj.com, April 23.

Case Discussion Questions

1. FedEx and UPS have many similar resources and compete 3. Based on information in the case and from your research,
across many of the same markets. How are they different? which of these firms do you predict will be the most successful
Stated differently, how do they differentiate themselves? in the future? Please explain your reasons.

2. What are some of the major and unique strategic actions taken
by each firm? Have these actions been successful?

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