Business Wars

It’s the early 1970s, and 27-year-old Fred Smith has an idea for a new kind of package delivery service, one that uses its own planes to deliver packages in under 24 hours. Skeptics tell him the start-up costs are too high and the demand too low, but Smith thinks he’s found a way to make it work. He invests millions of his own money to get the new company started. But when one thing after another goes wrong, it looks like Smith might have made a big mistake. And that’s before he’s even had a chance to challenge one of the most respected companies in America: UPS.

After a disastrous start, FedEx needs to change its sales pitch or it will run out of money before it even has a chance to take off. Smith resorts to surprising means to raise the money to keep his fledgling company going. UPS is convinced FedEx will be out of business in a matter of months. But it has its own problems to attend to, as drivers are feeling dissatisfied and start to organize for better working conditions.

Finally financially stable, FedEx takes on the US government to overturn regulations that limit the size of the planes they can fly. Convinced the regulations are limiting its growth, FedEx launches a multi-pronged strategy to persuade Congress to change the rules. And UPS realizes it needs to compete directly with FedEx and finally buys its own planes to offer next-day air service.

UPS decides it’s time to expand its market outside North America and makes a big push into Western Europe. But it’s harder than expected to integrate its corporate culture with European norms. FedEx CEO Fred Smith eschews European expansion and goes all-in on a risky new service called ZapMail, much to his executive team’s dismay.

With UPS expanding aggressively into Europe and other continents, FedEx decides to bet big on China. But it’s a risky strategy that initially looks like it’s going to fall short. Meanwhile, UPS tries to maintain its competitive advantage by pushing for more productivity from its workers. But the drivers have had enough and UPS soon has a major labor relations problem on its hands. UPS’s troubles give FedEx an opening to peel away some of its business.

Both FedEx and UPS are doing a lot of business with e-commerce companies, especially Amazon. But after one disastrous Christmas season when both companies have difficulty delivering in time for Christmas, Amazon decides it’s time to bring shipping in-house. Going forward, UPS and FedEx’s biggest rival may not be each other, but the company that was once their best customer.

In our last episode, Amazon had once again taken a financial hit to get ahead in the shipping game, cutting out its need for FedEx and UPS, and turning them into the competition. But there’s one more link in the shipping chain that FedEx, UPS and even Amazon hasn’t cut loose: The United States Postal Service. Private shipping companies also sometimes hire the Post Office to take care of last-mile deliveries. But that might be changing as FedEx becomes more self-sufficient, and may plan to cut some of its ties with the USPS. Does that mean UPS will follow? And if so, will your shipping rates rise as the Post Office faces cutbacks later this year? To learn more, David chats with Sucharita Kodali, a digital business strategy and e-commerce expert at Forrester Research.