United States Postal Service is an efficient organization. However, its operational efficiency is not enough for survival in the contemporary competitive marketplace thereby making it hard for the organization to be successful. USPS has been affected by a considerable shift in the market with internet becoming a good choice for most customers. Apparently, mobile devices give access to social media and texting, an aspect that has changed the need for physical letters (Palepu & Peek, 2007). Few persons write letters and pay bills through physical letters (Kamel, 2003). While the post office did nothing wrong, its management failed in embracing change that would have allowed it to match the changing market needs.
The USPS prospects could be enhanced through offering effective services to government storage and delivery services as well as the under-served users who include the elderly and low-income earners. Nevertheless, the mandate of the organization fails to encompass such services given that the expansion into the market needed a shift in charter. With its continuation of the conventional services, the organization failed to recognized the needs of the changing market thereby making its services irrelevant (Crew & Kleindorfer, 2011). In this regard, embracing change has been the foundational problem for the issues of the USPS. The organization might be going bankrupt because it failed to recognize the change besides meeting the valuable and changing needs of the customers.
USPS Management Dilemma
It is found out that web migration and recession is compelling USPS to lose business. Consumers are weary of persistent raise in postage costs thereby making them shift to electronic bill payment. This aspect besides check payments, which are not mailed, leads the company into great loss of revenue. Loss in direct mail offers and solicitations that are increasingly delivered through e-mail, which is considered less expensive, contributes to loss of revenue in USPS (Herr, 2010). To recover and manage the increased losses, the management is faced with the dilemma of increasing revenue through higher cost of services. While this action will help in compensating the reduced revenue, it will lure way customers perhaps leading the closure of the business. On the other hand, the management can choose to reduce the operating cost but this is quite difficult and unachievable. More so, reducing operating cost will reduce the status quo of the company (Herr, 2011). Moreover, USPS can reduce service delivery by 1 day but this aspect will create room for future service reductions.
The management can also choose to lay down its large workforce but doing so is prohibited by organized labor. However, in order to remain practicable in the business environment with reduced mail volume reduced chances for increased volumes in the future, the United States Postal Service must dramatically, quickly lower costs, and enhance efficiency. Given that, there is no miracle mailing application that will appear magically to restore billions of money in lost mail revenue and volume, USPS must get smaller to help it recuperate financial viability or continue to fight back its constant losses (Herr, 2010). Apparently, the USPS is faced with historic losses thereby making shrinkage as the only viable option for the company. Cutting the postal services cost will lead to increased losses in revenue than savings.
The problems and dilemmas facing USPS leads us to the Question: What can the USPS management do to avoid going bankrupt and remain competitive?
The UPS and FedEx have actually changed their business operations along with the shifts in the market. Evidently, UPS and FedEx offer much more services than just delivering packages (Coyle & Novack, 2006). Particularly, FedEx introduced Kinko's as well as offer certain packages such, "office away from the office" around the world. Besides, FedEx provides business solutions to small business owners thus expanding its market share. On the other hand, UPS provides a wide assortment of corporate logistics and transportation services besides e-commerce solution to all types of businesses (Kamel, 2003). UPS has been able to shift with market needs and meeting the emerging requirements of the customers. The ability of the FedEx and UPS to meet the needs of the changing markets has assisted the two companies in justifying their increased prices, which has helped them earn considerable profitability.
With respect to USPS, the company focuses extensively on efficiency without realizing that being operationally effective and offering services at reduced cost is not sufficient to allow the company to succeed in the drastically changing markets where clients hold changing and ever-growing needs (Coyle & Novack, 2006). Particularly, leadership at USPS has failed to realize market changes besides investing growth prospects that would allow the company to remain feasible in the shifting markets.
Besides UPS and FedEx, the United States Postal Services have been bypassed by internet usage. Being a global interconnection of networks operated by industry, academia, private parties and government, internet has enhanced life through offering great services to their users. Particularly, mobile technology and social web have changed the manner in which businesses are operated. In fact, using internet allows a quick way of communication as well as an enhanced delivery of goods and services. It must be noted that internet usage has been enhanced through mobile technology. People order, purchase, send and deliver services through online internet services (Harrell, 2008). For instance, FedEx has developed a network-based employee self-service application. This network is focused on automating basic business operations among them purchasing, benefits management and expense reporting (Harrell, 2008). More so, UPS uses effective internet marketing tools and shipping services. UPS offers internet shipping that permits one to prepare international and domestic labels that enhances service delivery, efficiency and profitability.
Notwithstanding the modernization of its amenities besides automation of operations of mail processing, USPS faces difficulties in off-putting increases in its operating costs. This has made postal clients to shift to delivery services of private sector and up-and-coming electronic technologies that offers new, nonpostal techniques of spreading information. Private carriers which have dominated the expedited and parcel post mail markets such as FedEx and UPS, regulatory limits, quality service and price prevents USPS competitiveness. It is found that PRC (Postal Rate Commission) rejected USPS proposed pricing strategy that would have allowed the company to provide volume discounts to make its services more competitive (Herr, 2009). Despite being a monopoly, USPS is facing stiff indirect and direct competition from FedEx, UPS besides other nonpostal techniques
USPS Pricing Strategy
Shipping costs are considered a constant challenge facing ecommerce merchants. In this regard, ecommerce merchants want to gain competitive advantage in their area of business through competing pricing strategies. The shipping rate among other rates becomes vital for USPS, UPS and FedEx. With respect to shipping costs, the three companies tries every thing possible to reduce their shipping costs (See Figure 1 below)
Figure Comparative Analysis of Shipping Rates: USPS, FedEx, UPS