Competitive business strategies and core competencies at United Parcel Service

¶ … thr Box (UPS)

Thinking outside the box -- United Parcel Service

The economic agents of the modern day society have to develop and implement more and more complex strategies in order to best respond to the emergent requirements of a growingly dynamic market place. Throughout the past recent decades, the global regions have opened their boundaries and this has created opportunities for economic agents to expand their operations and to sell their products to wider consumer markets. Nevertheless, it has also meant that they would be presented with incremental levels of competition, as the same local consumers would come to be served by more providers.

The contemporaneous business community is more challenging than ever. The customers are more and more pretentious, the pressures of the stakeholders -- customers, employees, business partners, governmental and non-governmental organizations, the public and so on -- exponentially increase. The role of the staff member has suffered functional and legal modifications.

In such a context, firms have to create strengths outside their core operations. In other words, the simple delivery of the company's product and/or service is no longer sufficient to ensure organizational competitiveness. Economic agents are as such faced with the necessity to develop other core competencies and integrate them in specific business models which best serve their own needs and which are tailored to the specifics of a situation, such as the company size, the features of the industry or the type of customers served.

In other words, it is necessary that economic agents develop customized business models and core competencies. The current endeavor strives to assess the business strategies for competitiveness as they have been developed and implemented by one of the leaning courier firms, UPS. Information on the company would initially be introduced, to be followed by an analysis of the organization, by the company and industry key success factors, the organization's driving forces and its international strategic alliances.

2. General information about the company

United Parcel Service Inc. was established in 1907 in Seattle, Washington as a local messenger company. Throughout the years, the company has metamorphosed into a leader of the international courier industry. As they themselves agree, the strategy followed was that of promoting UPS as the supporter of global trade:

"Founded in 1907 as a messenger company in the United States, UPS has grown into a multi-billion-dollar corporation by clearly focusing on the goal of enabling commerce around the globe. Today, UPS is a global company with one of the most recognized and admired brands in the world. We have become the world's largest package delivery company and a leading global provider of specialized transportation and logistics services. Every day, we manage the flow of goods, funds, and information in more than 200 countries and territories worldwide" (Website of UPS, 2011).

UPS has been recently impacted by the internationalized economic crisis and the immediate result has been represented by a decrease in its revenues from $51,486 million in 2008 to $45,297 million in 2009. The year was also marked by decreasing operational expenses from $46,104 million in the previous year to $41,496, as well as a decrease in the net income from $3,578 million in 2008 to $2,152 million in 2009. Throughout the year, the company employed an estimated 408,000 individuals, out of which 300,000 in the United States and the rest throughout the world (UPS 2009 Annual Report). The firm has nevertheless used the negative economic climate to conduct processes of internal strengthening and improvement through acquisitions, infrastructure development and new product creations.

Aside from the role it plays in supporting international trade and its global presence as a strong international delivery organization, UPS is also committed to being a socially responsible member of the communities in which it operates. In 2009 for instance, UPS:

"Continued our sustainability initiatives through community support, responding to global disaster relief needs, and efforts to reduce our impact on the environment" (UPS 2009 Annual Report).

3. Analysis of UPS

The analysis of United Parcel Services Incorporates is best conducted through the lenses of the SWOT analysis, through the presentation of the company's internal strengths and weaknesses, as well as through the observation of the external opportunities and threats, as they are revealed within the environment.

3.1. Internal strengths

a)

United Parcel Services has been present within the courier industry for over one century, during which time it has evolved from a small size local messenger into a global leader of the courier industry. Its long existence and long time expertise in the field generates high levels of customer trust, as well as loyalty.

b)

A second organizational strength is constituted by the company's brand strength. Throughout the years, UPS has focused on the development and implementation of a strong corporate brand, which has inspired customer trust.

c)

UPS has an undying commitment to innovation and research and development. It continually researches the market and the industry in order to identify and serve new needs as well as in order to identify and seize new opportunities. It strives to create new products which better serve the needs of their customers and they use technologic efficiencies in their efforts. These efforts have led to a context in which the company has identified new requirements and has adapted to them. The results were those of higher quality products, as well as a diversified product offer which better addresses the needs of the quickly changing business community.

"For almost 100 years the UPS brand has been synonymous with reliable package delivery. And our expertise has made us the world leader. But as our customers' businesses evolved to be increasingly interconnected and complex, UPS focused on targeting a bigger opportunity: to establish a deep portfolio of transportation and supply chain services that can be efficiently and seamlessly combined into service bundles based on the needs of individual customers. Today, our services range from global package delivery, service parts logistics, international air freight and customs brokerage to managing customers' entire inventory and distribution systems" (Tybout and Calkins, 2005).

d)

Another strength on which UPS can rely is constituted by the global presence in the meaning that the company operates in over 220 countries and global regions. The daily average number of customers is of 7.9 million, with an average of 22.4 million tracking requests (Website of UPS).

3.2. Internal weaknesses

a)

Despite its core competencies and strengths, UPS remains unable to overcome the competition posed by FedEx, even if the quality of their services and the volume of their sales exceed those of FedEx:

"In spite of the advantages of the status, which helped define the culture and UPS brand for decades, the ability to sell its services was being hindered by the fact that publicly held rival Federal Express (FedEx) was clearly the preeminent brand in the category. This in spite of the fact that UPS's sales volume was over double the size of its rival and many of its services matched our outshone FedEx" (Morley, 2009).

b)

Another weakness is constituted by the brand, which was initially presented as an organizational strength. The limitation is however represented by the fact that the UPS brand is commonly associated with delivery services. In today's context nevertheless, the firm is striving to become an active player by offering services complementary to delivery, but the brand makes the public continually perceive the firm as a strictly courier business.

c)

Up until the financial crisis emerged, one would have listed UPS's resources as an organizational strength. Today however, as a result of decreasing customer orders, the company registers decreasing revenues. This in turn indicates reduced powers for sustained developments and innovations.

3.3. External opportunities

a)

The internationalized financial crisis has forced economic agents to reduce their operational expenditures. Delegations were as such decreased and were replaced with more efficient solutions, such as teleconferences, telecommunications and courier services. The evidence of this trend could be revealed in the future company documents in which a change in the structure of UPS's customer base could be observed.

b)

In the incrementally dynamic business society, economic agents seek solutions to increase their operational efficiencies. In this context, UPS's integrated solution presents corporate customers with opportunities to increase the efficiency of their logistics and supply chain operations. In other words, the need for efficiency and a one stop company to sustain logistics could represent an opportunity for UPS's future development.

"The goal is to enhance our customers' supply chain so that they can focus their attention on other things that will make them more successful, rather than spending time stitching together the services they need from multiple logistics providers" (Tybout and Calkins, 2005).

c)

A third opportunity is presented by the increasing living standards in emerging countries, in which the purchasing powers and the customer demands increase. UPS could as such expand into these regions and subsequently increase its global presence and its revenue sustainability.

3.4. External threats

a)

The internationalized economic crisis has reduced the purchasing powers of both companies as well as individuals, generating as such needs to reduce costs. Courier costs were perceived as costs which could be reduced, evidence in this direction standing the decreasing revenues UPS has registered in 2009 as opposed to 2008 as a result of decreased customer demand.

b)

The second threat is represented by the incremental competitive pressures within the industry. These pressures are fueled by elements such as an increasing access to technologies or the appeal of the industry which generates billions of dollars per year.

c)

Another threat is posed by the continually changing society, in which legislations and other pressures repeatedly modify to often create more pressures for the economic agent. Since United Parcel Service operates at an international level, it is even more sensitive to these changes as it has to respect the regulations and demands imposed by all the United States, the governments of the countries in which it operates and the international community and trade associations. Also, since it operates at a global level, it is also subjected to the threats of fluctuating currency exchange rates. This indicates a necessity for the company to use hedging operations in order to protect itself. The result is that of additional risk, as well as increasingly complex financial operations.

4. Key success factors

The courier industry is one of the most dynamic and quickly evolving industries. Companies in the sector commenced by delivering packages at local levels and the most successful of them evolved into international industry leaders. The nature of the products and services offered has also suffered impressive mutations in the meaning that the once local messengers are now corporations in charge of full logistics operations.

The demand for the products and services in the courier industry is influenced by the levels of consumer spending as well as by the manufacturing output. The success of the industry players depends directly on their ability to create operational efficiencies. The large size courier organizations possess competitive advantages of an increased access to drivers, the possibility to buy bulk fuel at cost efficiencies, increased fleets and account relationships. Smaller size players on the other hand can most effectively complete on niche markets in which they would provide quick turnaround and generally by transporting large size goods. Today, UPS' major competitors are represented by FedEx, Deutsche Post Ag and the United States Postal Service (Hoovers, 2011).

At the level of the company, it could be argued that the key success factors are constituted by the internal strengths which have already been presented throughout the previous section. Nevertheless, more attention is due to the elements which ensure UPS's success. The primary of these elements is represented by the company's integrated global network. The organization believes that its system is the most integrated one in the industry as it ensures the centralization of packages in one location, and the subsequent delivery through air or ground, at international and domestic locations, for both commercial and residential customers.

UPS's integrated global system is composed from the following:

A total of 1,801 operating facilities

100,069 delivery fleet composed from all package cars, vans, tractors, motorcycles; these figures also include 1,949 vehicles fueled by alternative fuels

233 UPS jet aircrafts in total out of which 216 are currently in service

294 chartered aircrafts

936 national daily flights segments and 755 international daily served segments

388 airports served nationally and 378 airports served internationally (Website of UPS, 2011)

The company's overall key success factor can as such be represented by the adequate combination between the integrated global network and the other organizational strengths, such as the global presence, the brand strength, the efficient operations, the innovation and R&D efforts, the offer diversification and so on.

5. UPS's driving forces

The success of UPS is attributed mainly to the specific means in which the company has managed to develop a customized business plan which supports the organization in reaching its objectives, through the full satisfaction of the needs and wants of various stakeholder categories. At individual levels, the elements of the business model constitute the driving forces behind UPS' success and they can be summarized as follows:

The global presence and the integrated network

The brand strength and the commitment from the customers

The diversity of solutions and the ability to offer customers integrated solutions for various logistics and supply chain requirements

The commitment to technologic innovations

The commitment to the full satisfaction of the needs and wants of customers and the subsequent creation of a strong CRM system

The commitment to the satisfaction of the stakeholders' needs and wants in the meaning that the organization is determined to attaining its objectives while also supporting the development of the industry and the global community

A strong organizational culture

Increased resource capabilities, and finally

An aggressive acquisition strategy, combined with the development of numerous international strategic alliances

Some of these driving forces have already been discussed throughout the previous section, meaning as such that the current section would only detail those forces which have not so far been discussed.

a) CRM

UPS has yet to develop and implement a universally available CRM system -- Customer Relationship Management -- but it makes intense efforts to improve the nature of the communications between firm and clients. Additionally, the focus on customer satisfaction and the implementation of CRM policies and practices constitutes a primary driving force behind UPS's success. At the basis of the CRM approach stands the impressive customer database, which is maintained with the help of IBM. The database is constructed with the aid of customers in the meaning that 95 per cent of the information in it is directly introduced by the clients. Most of the company's success has been achieved gradually, through sustained internal improvements, and the focus on customer has embodied a central effort in UPS's strategy (Nassbaum, 2008).

b) Stakeholder commitments

UPS preserves the same organizational goal as one century ago -- the registration of financial gains and the sustained expansion of the business. What has nevertheless changed is the approach to attaining the objectives. In this order of ideas, from 1907 when the method was through package delivery and customer satisfaction, the modern method is through the satisfaction of the needs and wants of various stakeholder categories. In this order of ideas, the company strives to create a fruitful and rewarding working environment, to reduce its negative impacts upon the environment, to support the development of communities and so on.

c) Strong organizational culture

A final driving force is represented by the company's culture. In this order of ideas, UPS has created and consolidated a strong organizational culture, focused on the proper treatment of the staff members and centered on their social well-being and professional formation. This context resulted in high levels of employee morale, motivation as well as loyalty to the employer. Some other culturally defining elements at UPS are the stock options available for the employees or the sustained opportunities for internal promotion, rather than the hiring of external managers (UPS 2009 Annual Report).

Aside from these elements which drive its success, United Parcel Services has itself been acknowledged as a driving force, supporting the development of the communities in which it operated, as well as continually raising the standards within the industry:

"UPS is a driving force for change in our communities. The company and its employees continually raise the bar for United Way's Global Corporate Leaders and are among our most valued partners. Reaching a billion dollars in giving is a remarkable milestone. It not only speaks to generosity that is second-to-none, it's indicative of their tireless and unwavering commitment to strengthening communities and improving lives throughout the world" (Brian Gallagher, quoted by the United Way of Lincoln and Lancaster County.).

7. Conclusions

The contemporaneous economic agent is continually faced with incremental pressures and rising demands from various categories of stakeholders. In such a context, the simple delivery of high quality products and/or services is no longer sufficient to ensure high levels of organizational success. Companies are as such faced with the necessity to develop and implement complex and customized business models.

One example as to how an organization can succeed in today's economic society through a strong business model is represented by United Parcel Services. The company has an experience of over one century within the courier industry and it is characterized by elements such as an increased attention to employee morale, customer satisfaction, operational efficiency, offer diversity or innovation. An impressive driving force behind UPS's success is constituted by their numerous strategic alliances, but the intriguing element is that these alliances can often generate new risks. The company does nevertheless seem willing to assume these risks and its adjacent business model has so far proved triumphant.

References:

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Morley, M., 2009, the global corporate brand book, Palgrave Macmillan

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