United Parcel Service Company’s Strategic Management

Case Abstract

The current paper aims at discussing the peculiar features and working details of one of the well-known American package delivery companies, United Parcel Service (UPS). UPS has been defined as a corporation with an A+ status with clearly defined goals, mission statements, and conditions under which employees have to work, and consumers have to receive their services. This paper introduces the company’s analysis on the basis of such models like Porter’s Five Force analysis, SWOT, EFE and IFE matrixes, its historical background, the evaluation of mission statements and values, the examination of the company’s strategies, and several recommendations given on the basis of research conducted.

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The offered case study is a unique opportunity to learn better the way to the UPS success and the abilities used by its developers to underline the main techniques necessary for the development of a successful business. With its headquarter in Atlanta, Georgia, UPS is known around the whole globe and provides more than 200 countries with its delivery and logistics services. The chosen less-than-truckload industry turns out to be a beneficial solution for the company and the possibility to introduce itself as one of the best logistics companies.

About 400,000 people work in the company, and more than 416,000 packages are processed per hour. The results achieved by the company are impressive indeed, and the business relations developed by UPS prove its leaders high leading skills and management abilities. UPS is not only the example of how to combine the needs of ordinary people with the possibilities of the professional companies. This company helps to believe that every huge massive achievement started from a small attempt to make this world better. The UPS’s global strategies become one of the easiest and the most effective ways to improve its business performance and offer more captivating ideas on how to work with customers around the whole globe.

UPS History

The history of the company is not too complicated still it teaches how ordinary people with their intentions to earn and help people were able to create something massive. In 1907, two teenagers, Claude Ryan and Jim Casey, borrowed $100 from their friend and decided to use an opportunity of the telephone and automobile options to carry someone’s notes, promote home deliveries, and run different errands at affordable prices. The goal was not to create a rich enterprise; the goal was to provide people with the services that could be paid. Still, the name of UPS was not known to people. It was the American Messenger Company, lately changed to the Merchant’s Parcel Delivery.

With time, the company was focused on the delivery of different goods from drugstores and grocery stores to people’s homes in one particular region. Then, several regions were chosen. In the 1920s, air services were used to perform delivery from different parts of the country. In 1975, the company’s headquartered in New York and known as UPS. It began cooperating with Canada; in 1976, Germany was a new cooperating country; in 1989, the UK citizens were provided with a possibility to use UPS services (David 2).

The abilities to develop its business through different countries made UPS known globally and able to earn huge money within a short period of time. The numbers of incomes were impressive, and UPS was recognized as a serious competitor on the sphere of delivery of different goods around the whole world. The UPS’s history shows that personal intentions and the desire to take a first step and develop the services day by day are beneficial indeed. Claude and Jim could not even imagine that their simple idea could be turned into a solid business opportunity.

Vision and Mission Statements

Vision and mission can be better understood in case more attention is paid to the period when the chosen business was developed. In the beginning, UPS was the company with several ideas combined together. It was a certain set of beliefs, dreams, and intentions that have been developed with time.

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In the case study under consideration, it is clearly stated that the UPS’s vision is to coordinate the existing world of commerce and accompanying services with the help of specially developed business solutions, the ability to create values and promote the advantages available to the company’s customers (David 2). In addition to the vision offered by the leaders of the company, there are several mission statements based on one serious and definite phrase that describes the company’s mission like the ability to achieve a number of things and perform all actions on the required level (David 2).

The statements offered by the company are as follows: the development of global business meeting the logistics needs of consumers, maintenance of the established financial status, inspiration of people to do their best, and promotion of responsibility, care, and variety that attract the attention of many people globally. Every mission statement is the goal the company strives to achieve day by day. It is not enough for the leaders to define the goals. It is more important for every worker to understand that their company is a successful combination of their skills, knowledge, and desire to work in order to please their consumers, offer the best service, and set attractive prices.

Values Statement and Code of Business Ethics

UPS pays much attention to a proper definition of value statements and the code of business ethics that can be applied to the company. For a long period of time, the company was gaining the reputation of an honest and qualified organization that aims at integrating services on a high level. Every purchase or any other operation undergoes the standards defined by the Code developed within the company (David 3). The violation of the rules and the requirements is punished according to the issues discussed in the Code.

There are many points discussed in the Code that has to be followed by each member of the team. The leaders believe that dedication of every individual in the company is one of the keys to the success in future. The Code is the collection of the standards that help to understand ethical and legal responsibilities of the company and each worker in particular. Though there are no definite explanations for all possible situations, there is a clear guidance on how to make correct solutions and be sure of the quality of the work done. Trust, honesty, and quality are the main components of the company that help to have only loyal consumers and the best people in a staff. With the help of clearly defined ethical issues, it turns out to be ready to enter a new business world and succeed in global marketing.

Organization Chart

Any organizational chart is an attempt to create a clear and informative picture of how the duties are defined between different company’s workers, who should lead the company, who should be responsible for different aspects of the work, etc. The way of how the chart looks like predetermines the way of how the strategies are understood by the company. It is necessary to construct the chart in a proper way and underline the duties of the main figures in the company’s organization.

Organization Chart
Organization Chart

There is also a significant board of directors, who make serious decisions and control the actions and the decisions of other workers of the company. The peculiar feature of the UPS’s team is the possibility to combine personal and professional needs. The UPS people do not make some professional needs or expectations influence their own lives. They are able to divide two lives and be devoted to both of them in the best possible way. It can be observed that there are two women on the board and one African American. It proves that the company is not prejudiced with some gender or racial controversies. It does not matter whether a person is white or not, a male or a female, UPS is a place for work but not for the discussions of the inequalities. In general, UPS and its organizational divisional-by-geographic region chart show the order according to which each employee is able to understand his/her duties and perform each task at the necessary level (David 3).

Porter Five Force Analysis

Porter five forces analysis is one of the frameworks according to which it is possible to analyze several important aspects of the chosen company and understand its readiness for competitions and challenges that may take place. There are four main issues for consideration (bargaining power of suppliers and buyers and threats of new entrants and substitutes) the evaluation of which lead to the identification of the level of rivalry in the chosen marketing sphere.

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It is necessary for the company to consider the possible threat of new entrants to be ready to take some actions and demonstrate its abilities. UPS has several serious competitors like FedEx, USPS, and DHL International (David 10). FedEx offers its services in such countries like the USA, Canada, and Mexico and is going to enter some new countries like China or Poland. USPS undergoes considerable changes and suffers from financial losses. DHL remains to be a leading worldwide company in the sphere of delivery and creates a solid competition to UPS. However, till the name of UPS is known to people, it is able to compete with the companies on different levels.

The threat of substitute products is not high because UPS has already gained a good reputation among consumers around the whole globe. The economic advantage of the company is an issue that cannot be argued. It is hard to define some other services that can replace the services offered by UPS because the company makes use of all possible means to deliver goods around the globe. Only when it can be possible to deliver something right through the web, such kind of technological progress can substitute the services offered by UPS. Suppliers are all those companies and people responsible for different boxes and other containers within which deliveries are possible. UPS searches for some cheap suppliers to set affordable prices for services. Finally, UPS can attract the attention of buyers by offering delivery services and cheaper rates. Some companies can get discounts for deliveries in case they are regular, or a significant amount of goods should be delivered at the same time.

Rivarly level is high
Rivarly level is high

Taking into consideration all these factors and possibilities of UPS, it is possible to admit that the company level of rivalry is high indeed. If the company is able to compete with such giant like DHL and impress its consumers with high quality and fairness.

External Audit

The information offered in this section helps to identify the main external threats and benefits and understand what can be done by the company to achieve more benefits. All events and issues mentioned in this part are beyond the control of UPS; however, they influence the way of the company can work and cooperate with other companies and consumers. Several matrixes and evaluations are offered.

Competitive Profile Matrix (CPM)

The external environment is not always easy to understand in the sphere of marketing and management. The creation of a competitive profile matrix is one of the steps that should be done while analyzing any company. With the help of this matrix, the main competitors and several success factors are taken into consideration to underline the strengths and weaknesses of all representatives. It was defined above that the main UPS’s competitors are FedEx, DHL, and USPS.

Success Factors UPS FedEx DHL USPS
Weight Rating Score Rating Score Rating Score Rating Score
Organizational structure 0.15 3 0.45 2 0.30 3 0.45 2 0.30
Customer satisfaction 0.20 4 0.80 3 0.60 4 0.80 1 0.20
Employee
Satisfaction
0.10 3 0.30 2 0.20 2 0.20 2 0.20
Financial position 0.15 2 0.30 4 0.60 4 0.60 1 0.15
Market share 0.10 1 0.10 2 0.20 3 0.30 1 0.10
Service quality 0.15 3 0.45 2 0.30 4 0.60 1 0.15
Price competitiveness 0.15 3 0.45 2 0.30 3 0.45 2 0.30
Total 2.85 2.5 3.4 1.4

Total score of each companies is the result of the evaluation of the companies’ values (from 1 (the lowest) to 4 (the highest)) and the required weight identified. The results show the level of their competitiveness: DHL is an evident leader, and UPS follows right after DHL demonstrating its readiness to compete.

External Factor Evaluation (EFE) Matrix

The EFE matrix is a good means to evaluate the current business conditions under which UPS has to work. The external factors are divided into threats and opportunities. As soon as they are identified, it is necessary to combine the assigned weights to the ratings and get the total score that described the external conditions.

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OPPORTUNITIES: WEIGHT RATING
from 1 (poor) to 4 (superior)
WEIGHTED SCORE
Global Expansion 0.10 3 0.30
Online services 0.10 3 0.30
Ratification of cooperation with local transportation companies 0.05 1 0.05
Customer base growth 0.10 3 0.30
Services Expansion 0.10 2 0.20
THREATS:
Economic decline 0.05 3 0.15
Political disagreements 0.05 3 0.15
Fuel price changes 0.10 3 0.30
Customer behavior 0.06 2 0.12
Competitors 0.14 3 0.42
Climate changes 0.15 3 0.45
TOTAL 1.00 2.74

According to the independently-developed matrix, it is seen that UPS is strong enough to respond to the external threats and make use of the opportunities available.

Internal Audit

The evaluation of the internal factors of the company is a significant step that should be taken in any company’s analysis. UPS has its strengths and weaknesses, and it is necessary to identify them properly and compare with the external factors in order to introduce effective strategies and goals for the company to be achieved. Several analyses should be done within the company.

Financial Ratio Analysis

Financial ratio analysis is a strategic management tool with the help of which the level and complexity of relations between different business areas of the company is identified. As financial ratios may be of different types, their key factors are organized in the table below to present clear information on the point.

Ratio Type Calculations for 2012
Liquidity ratios
Current ratio 1.86
Quick ratio 1.81
Leverage ratios
Debt-to-total assets ratio 0.33
Debt-to-equity ratio 2.76
Long-term debt-to-equity ratio 2.38
Times-interest-earned ratio
Activity ratios
Inventory turnover 137.72
Fixed assets turnover 28.86
Total assets turnover 1.39
Accounts receivable turnover 8.86
Average collection period 41
Profitability ratios
Gross profit margin 74.92%
Operating profit margin 2.48%
Net profit margin 1.49 %
Return on total assets 2.08%
Return on stockholders’ equity 17.34%
Earnings per share 0.83
Price-earnings ratio 97.65
Growth ratios
Sales 54.127
Net income 804
Earnings per share 0.83
Dividends per share 2.28

All these calculations made for 2012 prove that there was certain stability in this year. However, the company underwent certain challenges and problems because, in comparison to other years, 2012 was not as successful as it was expected. The company wanted to earn more using the offered variety of services, still, consumer return was not too high; therefore, some challenges and losses took place in 2012.

Net Worth Analysis

Net worth is the difference between total assets of the company earned in a particular year and total liabilities defined in the same year. According to the data offered about UPS, net worth calculated is 46.53. This difference is not negative; it means that 2012 was a profitable year for the company. Still, other years have different results; it fact proves UPS’s ability to define its weaknesses, decrease the number of costs, and achieve benefits.

Internal Factor Evaluation (IFE) Matrix

Internal factor evaluation matrix (IFE matrix) is another effective strategic management means with the help of which the evaluation of strong and weak aspects of the company can be organized. The total score should if the company is above or beyond the required average. The information from the case study is used to calculate individually every factor identified.

STRENGTHS: WEIGHT RATING* WEIGHTED SCORE
Place on the global market 0.15 3 0.45
Consumer satisfaction 0.15 3 0.45
Brand image 0.15 4 0.60
Service variety 0.15 3 0.45
Global reach 0.15 3 0.45
WEAKNESSES:
Poor operating efficiency 0.10 2 0.20
Low employee productivity 0.10 2 0.20
Doubtful alliances 0.05 1 0.05
TOTAL 1.00 2.85

*1 is minor weakness, 2 is major weakness, 3 is minor strength, 4 is major strength

The results introduced in the independent IFE matrix show that UPS is the company gains a considerably above-the-required-average internal position and is characterized by a number of strong points that makes it recognizable in the world.

SWOT Strategies

SWOT analysis is the evaluation of four main factors that tell a lot about the company and its effectiveness regarding internal and external issues. These are the company’s strengths, weaknesses, opportunities, and threats. The recognition of strong and weak points and the identification of opportunities and threats help to understand better what can be done within a company and what activities should be avoided.

UPS has a good reputation worldwide, still, the presence of such companies like DHL prevent UPS from taking the leading positions. The following table is the basis of UPS SWOT analysis:

Strengths
  1. UPS is one of the largest delivery companies in the world
  2. Consumers are satisfied with the possibility to rely on express delivery and ground packages
  3. Brand image plays an important role in the company
  4. A variety of services like logistics services and financial offerings attract more customers
  5. UPS offers services to more than 200 countries and hires more than 4,000,000 people worldwide
Opportunities
  1. Increase its market share in Europe (global expansion)
  2. Develop more online services
  3. Enlarge customer base considerably
  4. Cooperate with some local transportation companies
  5. Improve the quality of services and offer new ideas on how to deliver goods and what particular goods can be delivered
Weaknesses
  1. Poor operating efficiency is not evident still present
  2. Low employees’ productivity influences the further quality of the work or the general image of the company
  3. Alliance with such company like USPS may cause some doubts among the consumers because USPS is not the best provider of delivery services, and it can be more beneficial for UPS to buy USPS
Threats
  1. Economic conditions may be changed
  2. Political relations may influence the delivery conditions
  3. Customer behavior is unpredictable, e.g. people prefer overnight delivery services to save their time
  4. Competitors (FedEx or DHL) may offer some new ideas to attract more customers
  5. Climate changes are hard to predict, but they define the delivery peculiarities

Every issue identified in SWOT analysis has its reason and impact on the overall company’s work. There are certain challenges to be identified as a good stimulus to work better and to be overcome and a number of benefits with the help of which UPS is recognized among other representatives of the same sphere of business.

In this report, four main SWOT strategies can be identified:

  1. Strength-opportunity strategy: UPS as the company that serves more than 200 countries (S) is able to enlarge its market share and offer its service to more European countries (O);
  2. Strength-threat strategy: UPS may compete with FedEx and DHL (T) on a high level relying on the possibility to offer a variety of services (S);
  3. Weakness-opportunity strategy: UPS can improve the level of employee productivity (W) and make its workers be more involved in the company’s life by elaborating new ideas and developing new delivery methods (O);
  4. Weakness-threat strategy: UPS can develop more doubtful alliances like the one with USPS (W) and use its customer base to have higher ratings than those of DHL or FedEx (T).

Strategy Implementation

Taking into consideration the internal and external factors of UPS, the process of strategy implementation can be offered and described. As a rule, strategy implementation is about the establishing several goals, motivating employees, and defining the sources with the help of which the chosen goals can be achieved. It is very important to create a particular strategy-supportive culture and discuss the steps that should be taken.

In this report, one of the strategies identified will be described, implemented, and evaluated. It is a strength-weakness strategy that is about the possibility to use the existing variety of services and opportunities of the company to become a more serious competitor for FedEx or DHL. The following steps should be taken:

  • Improve the advertising campaigns like FedEx did allowing it company being used in movie making (Cast Away starring Tom Hanks);
  • Identify all services and set definite prices that become available to all people;
  • Make sure the quality corresponds to the prices set.
  1. Evaluate the already offered delivery methods and think about the innovations that can be used in the chosen sphere of business.
  2. Define the goals to be achieved by the company
  3. Develop overnight delivery services to make sure the consumers choose UPS.
  4. Do not make evident notes comparing its own services with the services of other companies so that consumers do not have access to the services of other companies but focus on the variety offered by UPS only.
  5. Think about more benefits that can be available to consumers in case they are going to use several services at the same time (people pay more attention to the companies that offer Sales or Discounts).

The implementation of such strategy does not require a too high budget; just certain people’s efforts and imagination should be used to make UPS known. People should be eager to try UPS delivery and be satisfied with the choices they make.

Strategy Evaluation

Strategy evaluation is one of the final stages that should be taken in any management process. UPS has already gained fame, developed a number of services, and proved that it could compete with different companies. It is high time to evaluate the strategy and prove the correctness of the choice.

The offered strength-weakness strategy is successful because of several reasons:

  1. It is consistent because the necessity to act is based on the challenge UPS faces today and developed according to the possibilities available.
  2. It is consonant because each step is possible only after the previous one is successful.
  3. It is feasible because it depends not on the financial aspect but on personal initiative, knowledge, and willingness.
  4. Finally, it is advantageous because it focuses on achieving benefits using the strength of the company and helps to consider the threat and overcome it with the available means.

Recommendations

Regarding all information found about UPS, its structure, strategies, strengths, weaknesses, threats, and opportunities, it is possible to give the following recommendations:

  1. UPS should be more active in its attempts to promote its services in different countries.
  2. UPS has all chances to attract more consumers and prove that its services are of high quality, various, and available.
  3. UPS should not concentrate on its price policy but develop new ideas and suggestions for people regarding their social statuses, incomes, and abilities.
  4. Finally, UPS should focus on Europe, pay more attention to small countries with poorly-developed delivery services, and create appropriate entry barriers so that not many companies can pass through them.

Conclusion

In general, the growth of UPS is evident indeed. The company introduces itself as a powerful competitor and developer. Its services are available to people from different parts of the world. It supply chain management is one of the examples that should be followed by other representatives in the sphere of delivery services. There is always a burning need for cargo transportation, freight forwarding, or even logistics services. UPS is able to be the best in all these aspects. Though the presence of such competitors like DHL and FedEx with their abilities to advertise their work and expand their services globally cannot be ignored, UPS has all changes to be better and have a bigger consumer base.

The strategies offered in the report, the strength and opportunities defined prove that UPS has a good strong basis for work. The net incomes, revenues, and financial assets introduce a good picture. UPS has already done much work to be recognized globally. Now, it is time to work on the challenges and threats. This kind of work should become a stimulus for the UPS’s workers around the whole globe. Employees themselves should be eager to implement some innovations and enjoy the benefits they create. Though delivery services cannot be changed or replaced, it is always possible to improve the already offered ideas and differ from other delivery companies. It is just necessary to understand what may attract consumers the most, consider the threats, and evaluate the benefits that can be achieved.

Work Cited

David, Fred. “Case Study 3: United Parcel Service.” Strategic Management: Concepts and Cases, Global Edition. Upper Saddle River, NJ: Pearson Higher Education, 2014. Print.

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