12/02/2004

UPS to pay 100 million dollars for China Deal

On Thursday the United Parcel Service announced that it would acquire operations of a large Chinese firm, SinoTrans. This deal would bring the famous brown clad deliverymen to over 200 cities throughout what could soon be the largest cargo market in the world. Rocketing trade in the recently booming economy is what is driving the need for increased cargo business. UPS said it plans to establish a air hub at Shanghai International by 2007. With parcel traffic out of the company increasing 130%, UPS' increasing presence comes without a moment to spare.

United Parcel, as many other U.S. firms, has seen that as China's Iron Curtain becomes more transparent the need to be a first mover in the world's most populous nation is paramount. For UPS they may be little late as industry leader FedEx has had an established presence in China for some time, and UPS faces an uphill battle in that nation. Nevertheless UPS' move will no doubt prove a positive move for UPS shareholders.

This article was found at: http://money.cnn.com/2004/12/02/news/fortune500/ups_china.reut/index.htm

9 comments:

Bruce Banner said...

As China becomes more open to the open market, any one that can get in right now will do well. There is a lot of people for business opportunity. China is a great place to expand into the international or global market.

Student 01 said...

UPS has always faced an uphill battle, but maybe this is just what they need to overcome the problem of always coming in second place to FedEx. Even though FedEx was in china first, UPS may have purchased a big enough share of the market to make up for that. This will be interesting to see how it plays out in the next decade.

John West said...

Brown will certainly increase their market share in China with this deal. I don't think that it matters that FedEx was in there first. The market is so big and growing that right now is a perfect time to enter it.

Jake said...

Bruce makes a good point that China is so big and though FedEx has already established itself in China, UPS should not have a problem establishing itself in China. With this American presence, hopefully we will begin to see other American companies realizing the opportunity China offers and slowly expand to China.

Anonymous said...

Being the first mover in a place like China will probably have little effect on the competition. U.S. has a number of delivery services and they all seem to be doing quite well. With China being much larger. That is so much more room for both of them to grow.

miles said...

UPS may have an upward battle for a marketing position in China, but I agree with "anonymous." China has a growing demand for parcel transportation. UPS will most likely be more worried about keeping up with the demand than trying to get customers from FedEx.

Biancca said...

I would think new competitors will keep entering the market until it is no longer profitable to do so. Since UPS is moving in, it seems there are still profits to be made.

Kova said...

I agree with Bianca. We've been learning all semester about how companies enter the market when it is profitable to do so. FedEx does not have the resources to obtain a monopoly on the parcel market in China. China is too large.

Dr. Tufte said...

-1 for a misspelling in Pramahaphil's post.

I'm proud - I'm sitting here thinking that the group has covered all of the angles.

Here's a cute new one: who do you think they paid the $100M to? My guess would be to the Chinese government. Do you think they were engaging in monopoly pricing for this right? Do you think that they may have taken money from FedEx to boost the price for UPS? If so, I wonder if UPS can recover these costs.