mgmt

1

Sandoval

United Parcel Service (UPS)

Michael Sandoval

MGMT 490

Anna Phillips

June 3rd, 2019

Table of Contents

Executive Summary 3

Introduction 4

UPS Structural Framework (image) 5

Company’s External Environment 6

Company’s Resources, Capabilities, and Competitiveness 8

Corporate Strategies 10

Generic Competitive Strategies 11

Corporate Ethics, Social Responsibility, and Environmental Sustainability 12

Company’s Corporate Culture, and Leadership 13

Concluding Statement 15

References 16

Executive Summary

The objective of my Integrated Case Analysis of UPS is to review all of the strategic management components in place and make a recommendation of whether or not to continue expansion in international markets. I understand that UPS is an established and successful domestic shipping and logistics provider. I also understand that UPS has already seen international growth with an opportunity for more.

Therefore, I will first evaluate the company’s external environmental factors pertaining to the political, technological, and economic conditions. Then I will review the company’s resources at hand, capabilities in the market, and competitive factors that may influence the reason for expansion. Next, I will discuss how UPS’s corporate and generic competitive strategies that are currently in place align with the goal of expansion into international markets. I will then analyze UPS’s excellent corporate ethics, social responsibility, and environmental sustainability that will also be beneficial in an international market. Finally, I will review UPS’s efficient corporate leadership and cultural practices in place that will assist in international growth. To conclude, I will provide key recommendations that assist your decision to continue the company’s expansion into an international market.

Introduction

The organization I decided to use for my integrated case analysis project is United Parcel Service Inc. more popularly known as UPS. The organization focuses on logistics and supply chain management for millions of companies across the world. UPS was founded in 1907 as a private message and delivery service in Seattle, Washington. They now domestically serve more than 9 million customers a day and deliver about 17 million shipments per day.

UPS is considered a global leader of logistics because of their ability to design customizable supply chain and strategic methods for company logistics through ground, air, and ocean global network. UPS focuses on deploying technology-enabled operations, offering unique and industry-specific customer solutions, expanding their global network and serving the needs of end consumers around the world to sustain a company growth. As mentioned, UPS offers a variety of services such as UPS Freight, Distribution Services, U.S. Domestic Package Reporting Services, and many more to provide quality options for a wide-range of customers. UPS stands out from its competitors by sustaining a strong financial position in the market that also helps provide leading technology, better processing, and overall customer satisfaction.

Although UPS is an established global logistics company, they still face major issues in the industry in regards to expansion. For instance, UPS must keep up with technological advances in the industry in order to still be competitive. They must also be able to overcome any external factors they come across whether it be political or economic. Although I do not have a role in the organization, I will simply provide suggestions for the company to see continued success

The following page provides a simple structural framework that UPS uses for their organization.

UPS Structural Framework:

Company’s External Environment

An external environment is considered to be general environmental context in which the company’s strategic components have no direct control. To evaluate the company’s external factors, I will choose three of the six PESTEL Analysis factors that significantly impact UPS in today’s age. Those three consist of Political factors, Economic Conditions, and Technological factors.

Since UPS is a global logistics company, politics typically have a higher impact on the company as a whole. The most relevant political factor has been the tariff wars between the United States and China started by the Trump administration. Trump’s administration is suggesting to increase the 10% tax on trade to 25% by the end of the year, and if China plans to retaliate, Trump also threatened to place tariffs on about $270 billion dollars of additional imports. This will clearly impact UPS as shipping and logistic services are established in China’s high distribution areas. The tariffs may also impact the overall trade policies between the United States and other countries, therefore UPS has suggested that fair and free trade is the preferred method of trade. According to The Street online article source, you stated, “We certainly agree that trade needs to be balanced and needs to be fair, but we also think that the globalization in trade really improves society as a whole. The government is going to set trade policy; we can advocate and certainly try to influence [it], but when you can't shape the [trade] rules, [we] use our technology and flexibility to operate within those rules.” You also noted that while you worry about the Tariffs, the impact may only be minimal as only 3% of the company’s total revenue comes from China. This is clearly a political factor that UPS cannot control, but only adapt to through technological and improved flexible operations.

The second external factor that can significantly impact UPS are economic conditions. Economic Conditions vary from country to country and that is important for UPS as they are a globally established company. Of course, the United States economic condition will have the most significant impact due to its relations and business with the top fortune 500 companies. This is important because if the economy goes through another crisis, shipping and logistics come to a halt as the countries market begins to produce. For example, if individuals are unable to shop online due to lower income, that would have a trickle effect on UPS because the demand for their services would decrease as well. Their logistic services may also see a decrease in profits as manufacturing and distribution for companies will be slower and overall production may take a hit. Fortunately, the United States has been able to fight through economic slips through history, and therefore they may only be seen as momentary hiccups. As long as UPS is able to sustain their business through the hard times, the fluctuating factors of economic conditions may never break the company.

The last external environment factor that may significantly impact UPS as a company is technology. If UPS is unable to keep up with technological trends they may be seen on the backburner of the top fortune 500 companies. For instance, according to CNBC in September of 2018 the largest e-commerce business in the world, Amazon, purchased over 20,000 delivery vans. The CNBC report also states that, “Amazon will lease these to third-party partners, who will operate them for last-mile delivery — basically, getting packages from a shipping hub to your house. Amazon also is allowing people to use their personal vehicles for delivery in some cities.” This may significantly impact UPS as this is an example of Amazon taking advantage of the technological software of third-party companies to possibly establish their own delivery services. If this becomes a successful and profitable service for Amazon, then companies such as Walmart and Target may also get in on it which would ultimately diminish the need for UPS’s delivery services for those companies.

Company’s Resources, Capabilities, and Competitiveness

Resources are considered to the company’s competitive assets that are owned and controlled. Some of the key competitive resources that UPS owns or controls are its employees, retail access, and freight and facility access. Employees are the largest resource in any company because they not only contribute to the overall profits of the company but also the volume and production your company is able to provide. For UPS, they have over 480,000 global employees and about 400,000 of them are in the United States. To have this experience and capacity of employees sets UPS far apart from its competitors. Of course, there is always an opportunity to grow and possibly expand the number of total employees, more specifically in other countries. I would consider this to be an opportunity for UPS to grow globally and establish themselves as the top leader logistics and shipping services. The second competitive resource they have is their retail access for customers. According to their website, UPS has over 5,100 storefronts, 1,000 customer centers, 8,200 authorized outlets, over 37,000 drop boxes, and more than 28,00 access point locations. These are impactful resources as they all contribute to the company’s overall business, whether it is customer relations for setting up a new client or the simple service of dropping off a package at a drop box. The last key resource UPS owns is their freight and facility access which includes over 500 global facilities, 5,900 vehicles, 249 jets, 123,000 package cars, and 22,000 trailers. These are considered to be key because this how the transportation and overall logistic services are delivered to their customers. This amount of infrastructure makes it possible for UPS to reach the global market and expand their services wherever is most profitable.

Their capabilities co-relate with their resources directly because without the assets they would be incapable of delivering services. Three key capabilities that UPS contains are their volume, global services, and expansion possibilities. UPS delivers on average more than 20.7 million packages per day and 5.2 billion packages annually. This is a big factor as to why the company had $58 billion dollars in revenue. Their second capability is the establishment of global services in which they serve over 220 countries and territories, and every address in Europe. This relates to their capability of expansion as they already have establishments in a whole other county, and territories spread throughout the world. The ultimate goal for UPS is to serve every large economic country with the ability to deliver at every address in that country.

In relation to the company’s resources and capabilities, they establish a competitive asset over its competitors. The primary competitors of UPS are considered to be FedEx and United States Postal Service (USPS). Currently UPS is behind FedEx by a small margin but ahead of USPS. Since UPS has an established a global market, it makes it easier for expansion, the only limitation that can hold them back is their lack of employees in other countries and opportunity in the technological side to increase and improve the quality of services they provide. UPS is ahead of USPS in large part due to the ability to ship and serve internationally. This ability also helps UPS established higher level clients that import and distribute products in other counties.

Overall, UPS is in a comfortable position in their industry but must continue to grow in all aspects of the company in order to surpass companies like FedEx and keep competitors like USPS behind them. Note that the above statistical information was pulled from the UPS Fact Sheet on their corporate website.

Corporate Strategies

Corporate Strategies is key in any business because it identifies barriers to achieve company objectives and develops an appropriate approach to overcome these obstacles and achieve substantial growth. According to their Values, Mission, and Strategies webpage, UPS strategizes to create value, transform, and invest to grow.

The first strategy that UPS plans to create is value. They will create value by demonstrating how the power of logistics can increase the competitive advantage of their clients, while also offering products and services that can expand the customers global markets. They also create value for their customers by offering industry-leading technology that improves the customers overall business and opportunity.

The second strategy is to transform the company continuously to strengthen the leadership position. They plane to achieve this strategy by delivering quality customer service, applying top tier marketing and sales strategies, and enhance the company’s overall performance through quality, efficiency, and technology. This is a common strategy seen throughout business because as more opportunity for business arise, the company should have a strategy in place to capitalize on this.

The last strategy UPS implements is to invest in key markets and new opportunities. They plan to execute this strategy by leveraging their global network and scale since they are established and serve in over 200 countries. They also see opportunity is building infrastructure in growing markets whether internationally or in the United States, and the possibility of expanding their service of integrated logistics solutions.

Generic Competitive Strategies

Generic Competitive strategies are aligned with the company’s overall strategies but are considered the simple strategic goals of the company. I believe UPS focuses on providing focused differentiation, and finding a balance between being a low-cost and best-cost provider.

I believe UPS focuses on providing a narrow buyer segment by meeting their customers specific needs in the delivery and logistic setting. This is because instead of providing a broad differentiation of services like their competitors at FedEx, they focus on improving and implementing technological and logistical advances to their customers. They also try to apply this focused strategy internationally because they see opportunity and growth in applying their services to larger international companies. The last example of how they implement their focused differentiation strategy, according to Investopedia, is by managing all their businesses (air, ground, domestic, etc.) through a single pickup and delivery network which maximizes network efficiency and asset utilization, and ultimately gains a competitive advantage in the market.

The second and third generic strategies I believe UPS tries to implement is being a low-cost and best-cost provider for its customers. Although it may be contradicting, UPS prides itself for offering higher employment wages and lower costs for delivery services. It is well known that UPS offers great compensation to its employees with belief that employee satisfaction improves the overall services of their company. An example of how this is seen to be true is by their high volume and specialized market in domestic delivering services. Because their employees work efficiently, they are able to increase the volume of production while also lowering the cost for its services. Another example of these strategies is by their implementation of technology within their business because although the technology may have higher costs, they are able to expand their logistics services to a wider range of customers for large and small businesses. The last example of these implemented strategies is how they are able to keep up with high delivery demands from large e-commerce clients by running overnight processes and delivering 6 days out of the week. This service obviously costs a lot more to run their facilities but in return they are able to provide additional delivery times for its customers such as Amazon.

Corporate Ethics, Social Responsibility, and Environmental Sustainability

Corporate ethics are judged business actions in the context of society’s standards of right and wrong. UPS has been recognized as the world’s most ethical company for ten straight years by the Ethisphere Institute. According to Stephan Sante from WordPress, this honor was achieved by UPS creating a Code of Business Conduct in 2004 in which all employees must comply to. The code of conduct reiterates the ethical responsibility of each employee from the top down. Sante also suggests these ethical standards are achieved through a number of policies and providing its employees with an open-door policy, anonymous hotline, and communication within the business about any updates to the code of ethics. Another example of their corporate ethics is by following all international and domestic laws and being in compliance with the necessary regulations in regards to all aspects of the business.

UPS also has multiple social responsibilities because of the reliance of domestic and international services. An example of their social responsibility is by following all labor laws within the United States and other countries to provide good working conditions. Another example of their social responsibility is by providing job opportunities to the United States and other countries which ultimately improves the quality of life within those communities and offers great benefits for its employees. The last example of their social responsibility as mentioned above in their corporate ethics, is that UPS complies with all laws and regulations because they understand that communities, customers, and thousands of businesses rely on their services and therefore cannot afford to be shut down for any discrepancies.

Lastly, UPS has an obligation to deliver on environmental sustainability. According to their Sustainability Report, an example of how they achieve environmental sustainability is by providing unique packaging from service called The Loop. This service provides customers with recycled reusable totes to eliminate wastes from disposable packages and carboard boxes. Another example from UPS’s Sustainability Report is their joint venture with a company called GreenBiz which researches the opportunity to create fuel efficient (electric) fleet vehicles that reduce the harmful gases released into the atmosphere. The last example of their environmental sustainability is by the efforts of working with large crowded urban cities to develop more sustainable logistic processes which would lower the fuel consumption and reduce the use of natural resources.

Company’s Corporate Culture, and Leadership

The corporate culture of a company is the corroborative efforts of shared values, beliefs, and business principles that influence business, positivity, and better work atmosphere. An example of UPS’s positive corporate culture is their vision to advance diversity and inclusion within their business. They plan to achieve this through advocacy, community investment, and best business practice. Another example of their corporate culture that they embrace dynamics of different backgrounds, cultures, race, sexual orientation and many more. They believe inclusion occurs when all of these aspects are accepted and everyone has a fair chance to participate in internal growth and company success. The last example of how UPS builds corporate culture is through creating Business Resource Groups (BRG). BRG programs are in place to help each unique employee by providing advisors and sponsors that will help them grow and provide various types of support. In all, these examples of UPS’s corporate culture help promote success and improve the moral of the company and create a positive corporate culture for all employees.

UPS also takes pride in their leadership opportunity to achieve superior strategic execution. According to their knowledge center article, The Power of Trust, Teri McClure, Chief Legal, Communications, and Compliance Officer states that the active involvement of board members with senior management and other employees helps the company see how strategic execution is being accomplished in the frontlines of the organization. Another example of UPS’s corporate leadership is their implantation of manager profiles which demonstrate the responsibilities and priorities at the senior and middle manager level. These profiles help create consistency and fairness throughout the company while also achieving strategic execution. According to UPS’s Longitude article, Lead Differently for a Different Workforce, UPS also executes corporate leadership through a process called the 3 E-principles of fair process. The three E’s stand for Engagement, Explanation, and Expectation clarity. Below is a diagram of how this process works:

These are just a few examples of how UPS’s utilizes their corporate culture and leadership to achieve strategic execution and overall company satisfaction inside and out of the company.

Conclusion

After an in-depth analysis of UPS’s strategic management, I would recommend that David Abney, CEO, should continue the expansion of services into a profitable international market. One key point for the expansion is the fact that UPS has already established itself in over 200 countries and can find an opportunity to take its competitors clientele in a large domestic country such as Canada and parts of Mexico. Another reason I recommend the expansion is because UPS has established infrastructure and enough resources to take on an increase in volume and the risk of expansion. The final reason why I would approve of the market expansion is because of the excellent company culture and leadership in place to take on more responsibilities and tasks in order to continue the growth of the company.

References

The Street:

https://www.thestreet.com/markets/as-trump-slaps-more-tariffs-on-chinese-goods-shipping-giants-want-free-trade-14715714

CNBC:

https://www.cnbc.com/2018/09/18/should-ups-be-concerned-about-amazons-order-of-20000-vans.html

UPS Fact Sheet: https://pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=FactSheFac&id=1426321563187-193

UPS Vision, Mission, and Strategies: https://pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=FactSheFac&id=1426321650156-161

Investopedia:

https://www.investopedia.com/articles/markets/120115/ups-vs-fedex-comparing-business-models-and-strategies.asp

References

Wordpress:

https://stephansante.wordpress.com/2017/04/19/ups-exemplar-of-ethics-and-social-responsibility/

UPS Sustainability:

https://sustainability.ups.com

UPS, The Power of Trust:

https://www.ups.com/us/en/services/knowledge-center/article.page?kid=d7239bc4

UPS Longitudes:

https://longitudes.ups.com/lead-differently-for-a-different-workforce/