UPS Success Depends on Ending Customs/China Post Axis
Somewhere on Second Ring Road
East
Kudos to UPS for making the decision to buy out
Sinotrans' share of their joint venture. Sinotrans is living proof that you
can't have multiple, competitive joint ventures with the same local partner and
expect all of them to be equally successful. DHL was first into China and first
in with Sinotrans, and as a result got the best people and most attention. Add
that to DHL's tightly focused and very aggressive push into the market, and you
get a formula for success.
Just as an
aside, TNT is another company in UPS' position. They too have a Sinotrans JV
that has been going nowhere. TNT needs to swap out of its partnership as well if
it plans to be competitive.
None of
this suggests that UPS' troubles are over in the market. Now they will have
Sinotrans as an enemy rather than a lead weight, which might redound to DHL's
favor. The other problem is the one they all face: China Post is allegedly in
cahoots with the Customs Service to delay clearance of all non-document express
parcels coming into China using anything but Express Mail in a fairly brazen
attempt to damage the prospects of UPS, DHL, TNT, and FedEx. Until they can get
over this workaround, UPS will be unable to compete effectively in China.
Without a strong local partner, UPS needs to build a powerful constituency in
China and ally themselves with their rivals to end the customs nonsense, or they
will find their business in the PRC unsustainable. Remember where you heard it
first.
Posted: Mon - December
6, 2004 at 10:45 AM