978-1259913747 UPS In India A Package Deal Case Part 2

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Teaching Note —UPS in India—A Package Deal?

firms are likely to have complementary competencies that create private synergy when combined with

UPS’s global expertise.

Acquisitions, on the other hand, have higher investment costs but provide a significantly higher level

of control. They are especially effective in blocking out other firms in highly competitive industries.

acquiring firm does not carry out the integration process in a culturally sensitive manner. Should the

acquisition fail (as most do), the foreign MNE also incurs the full extent of the losses.

Greenfield ventures, or building a wholly owned subsidiary “from scratch,” require the highest

In the course of class discussion, it may be helpful to point out that UPS has utilized alliances (Jet Air

and AFL) successfully in the past and is likely to continue to do so in the future. Interestingly, UPS has

also experienced the downsides of an alliance firsthand. As mentioned in the Recent Updates section at

the end of this teaching note, FedEx acquired AFL Private Limited in February 2011, effectively ending

one of UPS’s two key strategic partnerships in India. (See Exhibit TN-4.)

One action that UPS might consider in response is to establish its own alliance or acquisition of GATI

a 49 percent stake in its core logistics business.

Dyer, J.H., Kale, P., & Singh, H. 2004. When to ally and when to acquire. Harvard Business Review,

6. Which lessons from UPS’s past history might be helpful in entering the Indian market? Which ones

might not be transferable?

This question serves as an excellent forum for discussing the integration-responsiveness continuum

and the associated approaches to international strategy. Namely, while there seems to be some conver-

gence of consumer trends across the globe, important national differences still remain due to distinct

histories, institutions and cultures. MNEs therefore experience pressure for local responsiveness—the

need to tailor product and service offerings to fit local consumer preferences and host country require-

Teaching Note — UPS in India—A Package Deal?

ments. One of the main issues that UPS must address is how much it can utilize its standard operating

procedures and existing technologies in the Indian context and how much India presents unique chal-

lenges that are going to require novel adaptations.

UPS would adopt a multidomestic approach to India would be that it views the country’s culture and

infrastructure as unique constraints that are going to require it to re-engineer its logistics and delivery

services. There is merit in this approach as well, in that India is a large and idiosyncratic market with a

unique culture, significant land mass, and an inadequately developed public infrastructure.

The truth most likely lies somewhere in the middle of these two extremes. In other words, UPS

would do well to adopt a transnational strategy where it both standardizes where possible and adapts

when necessary. For example, it would make sense to utilize the same information systems to man-

NB. Students will tend to read this case and automatically assume that UPS should (or should

not) pursue local customer delivery services in India, which is where the most severe challenges lie.

Teaching Note —UPS in India—A Package Deal?

Recent Updates

FedEx acquires AFL. On February 22, 2011, FedEx completed its acquisition of the warehousing,

transportation, and express delivery services of AFL Private Limited. The full text of the press release is

provided as an Additional Exhibit at the end of this teaching note. (See Exhibit TN-4.)

New retail regulations. In November 2011, India’s national government voted to allow foreign

multibrand retailers to own 51% of joint ventures. Previously, retailers like Walmart could only open

wholesale joint ventures, and were not permitted to sell goods directly to consumers. The new rules

also increases the ownership rights of single brand retailers (such as Nike), who can now own up to

100% (previously limited to 51%) of their Indian businesses. These changes effectively open the $470

billion Indian retail market to foreign competition, and are expected to dramatically affect the retail

landscape as well as facilitate infrastructure development. Retailing is currently dominated by local

mom-and-pop stores and lacks modern supply chain management. Thus, this change in the Indian

political-legal environment represents a significant opportunity for firms like UPS to provide supply

chain services to foreign retailers seeking to take advantage of the new rules and establish a stronger

presence in India.

Bahree, M. India unlocks door for global retailers. The Wall Street Journal. November 25, 2011. http://

online.wsj.com/article/SB10001424052970204630904577058131832465876.html.

Additional Resources

1. UPS publishes fact sheets detailing its operations worldwide. For the UPS India and Asia Pacific fact

2. KPMG has published a three-paper series on “Logistics in India”:

Part 1 (November 26, 2010): “This publication provides and overview of the Indian logistics industry

and what makes it attractive from an investment perspective.” http://www.kpmg.com/global/en/

issuesandinsights/articlespublications/pages/logistics-in-india-part-1.aspx

3. Datamonitor published an industry profile on “Logistics in Asia Pacific” (reference code: 0200-0143)

in August 2009. The report includes information on market size, share and segmentation data as well

as competitor intelligence.

Teaching Note — UPS in India—A Package Deal?

4. https://www.mckinseyquarterly.com/Video/Preparing_for_the_next_Asia_2452 (9:55). “Preparing

for the Next Asia.” October 2009. This is a McKinsey Quarterly video interview with Stephen Roach,

5. http://video.nytimes.com/video/2011/06/08/world/asia/100000000828070/india-rising-off-the-

grid-.html?scp=3&sq=india&st=cse (5:32). “India Rising, Off the Grid,” June 8, 2011. This documen-

6. http://video.nytimes.com/video/2010/06/15/business/1247468002957/riding-the-indian-rail–

ways.html (3:12). “Riding the Indian Railways,” June 15, 2010. This is a New York Times video discuss-

Teaching Note —UPS in India—A Package Deal?

EXHIBIT TN-1 Hofstede’s Five Cultural Dimensions

Source: Hofstede, G. 2001. Cultures Consequences: Comparing Values, Behaviors, Institutions, and Organizations Across Nations. 2nd

ed. Thousand Oaks, CA: Sage Publications.

United States India

Index Rank Index Rank

EXHIBIT TN-2 Advantages of Local Competitors and Foreign Multinationals

Local Competitors Foreign multinationals

Better access to local information Infrastructure

Strategic flexibility

Teaching Note — UPS in India—A Package Deal?

EXHIBIT TN-3 Five Factors to Consider for Nonequity Alliance, Equity Alliance, and Acquisition

Nonequity Alliance Equity Alliance Acquisition

Teaching Note —UPS in India—A Package Deal?

EXHIBIT TN-4 FedEx Press Release on Acquisition of AFL

Published on FedEx Global Newsroom (http://news.van.fedex.com)

FedEx Express Completes Acquisition of AFL Pvt. Ltd. Businesses

February 23, 2011



Memphis — February 23, 2011— FedEx Corp. (NYSE:FDX) announced today that its FedEx

Express business unit has completed the acquisition of the logistics, distribution and express

businesses of AFL Pvt. Ltd. (AFL) and its affiliate, Unifreight India Pvt. Ltd. (UFL). The

acquisition further enhances FedEx Express international and India business offerings and

continues a long-term commitment by FedEx to the growing Indian market.

“The addition of the AFL and UFL businesses to the FedEx Express network will provide

customers with more comprehensive international and India domestic service options, such

as air express, domestic ground, and value added-services, including warehousing, logistics

Teaching Note — UPS in India—A Package Deal?

of McGraw-Hill Education.

Source: http://news.van.fedex.com/node/17151

• Three gateways into and out of India, located in Mumbai, Delhi and Bengaluru

providing increased connectivity.

the company offers integrated business applications through operating companies competing

collectively and managed collaboratively, under the respected FedEx brand. Consistently

ranked among the world’s most admired and trusted employers, FedEx inspires its more than

285,000 team members to remain “absolutely, positively” focused on safety, the highest ethical

and professional standards and the needs of their customers and communities. For more

information, visit news.fedex.com.

