UPS moves to China

1
UPS moves to China

• By Bryan Hartman

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Why China?

• 2004 GDP Growth of 9.5
• 8.2 in India, 4.6 in S. Korea
• 94 Million Internet Users in China
• All potential customers
• US export to China increasing
• 1999 45,000 tons
• 2001 73,700 tons
• Increase of 28,700 tons or 57 Million Pounds

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Chinese Growth

• SME Small or Medium Enterprise
• Survey of 1,200 Asian SMEs
• Chinese SMEs
• 62 will increase employment
• 71 expect higher growth in 2005
• 86 see transport/logistics as important
• 74 see consumer goods as important
• 62 think Supply Chain Efficiency is lacking

4
Mainland China Shipping

• Partnership with Yangtze River Express
• Goal reach every address in China
• Government is building 26,000 miles of new
  highway. Every city of 200,000 will be connected
• SMEs not entering China
• 65 do not trust Chinese government

5
UPS Offers

• What Chinese employees seek
• Education
• Health Insurance
• Overtime
• Less meetings
• Brand Name SMEs can trust

6
Air and Freight Shipping

• Typical Air Shipment
• High value to weight ratio
• Short Lifespan items
• Legal, Medical documents
• Computer Disks
• Spare Production Parts
• Luxury Goods
• Shipment spends ½ of its time in warehouses

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Opportunity

• Opportunity in Chinas Emerging Economy
• Chinese Discretionary Spending Increases (luxury
  items)
• Market Reform (legal docs)
• Increased technology manufacturing
• Spare Parts and computer disks

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UPS Solution
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Population and Airports
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Mainland China
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Planes, Flights, and Hubs

• Currently 48 weekly flights
• 24 Shanghai
• 12 Beijing
• 12 Hong Kong
• The Future is now (expansion in 2005)
• International Hub in China (2007)
• 23 regular hubs
• 1,400 UPS Trucks
• 3,500 Chinese Employees

12
Competition

• Fed Ex, DHL, and China Post Office
• Fed Ex moving Asia Hub to China
• Fed Ex has been shipping in China for longer
• In 2001 China Post Airlines had only intra-China
  express delivery service. (head start)

13
Political Risk

• Chinese Government
• Legislation to make China Post Office regulatory
  body of express shipping.
• Forced by WTO to allow private express shipping
• 81 of SMEs view govt instability as reason to
  stay away from China.

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Obstacles and Answers

• Demand for UPS Services
• Market Maturing increases demand
• Chinese Infrastructure
• Govt highways
• Fierce Competition
• Establish more Hubs and faster transport
• Government Issues
• Pressure from outside