This paper presents a comprehensive strategic analysis of United Parcel Service (UPS), the world's largest package delivery company. Beginning with a company overview and vision statement, the paper conducts a detailed SWOT analysis that examines UPS's internal strengths — including its brand, fleet, financial performance, and service diversification — alongside weaknesses such as organizational rigidity and union pressures. External opportunities related to technology, environmental initiatives, and international expansion are weighed against threats from economic downturn, fuel price volatility, and intensifying competition from FedEx and Deutsche Post. The paper then evaluates both current strategies — including diversification, sponsorship, investment, growth, and environmental initiatives — and four alternative strategic courses of action, ultimately recommending a combined expansionist and diversification approach centered on UPS Capital financial services and deeper penetration of high-potential markets such as China.
In this era of rapid technological change, the business community has undergone numerous transformations. Some of the most important changes include a growing focus on human resources, intensified marketing efforts to overcome increasingly fierce competition, and sustained efforts in support of territorial expansion. Aside from technological advancements, however, the underlying driver of all these modifications has been the forces of globalization and market liberalization, which have allowed organizations to transcend national boundaries, benefit from the comparative advantages of various global regions, and register international revenues. A negative effect was nonetheless evident in the globalization of risks and losses, the most relevant example being the contemporaneous economic crisis, which emerged within the United States but soon affected the rest of the international community. The aim of this paper is to assess the strategic status of package delivery company UPS during these times of financial difficulty.
United Parcel Service was founded in 1907 and, throughout its century of existence, has become the largest package delivery company in the world. UPS transports an estimated 16 million packages on any given business day. In addition to domestic service across the United States, the organization also operates in more than 200 countries across the globe. Its operations are carried out through a fleet of 107,000 motor vehicles and an estimated 570 aircraft. Beyond delivery — including the centralization of packages from smaller service organizations into a single truck load — UPS also offers additional services such as logistics, freight forwarding, and financial services including loans and insurance. In 2008, the company employed a total of 426,000 individuals and closed the year with revenues of $52,486 million (Hoovers, 2009).
UPS's vision statement is that of synchronizing the "world of commerce, managing the complexities of our customers' supply chain needs. Our goal is to develop business solutions that create value and competitive advantages for all size customers through product differentiation, market penetration, better customer service and improved cash flow" (UPS Website, 2009).
The SWOT analysis is a pivotal component of any strategic analysis, as it helps the managerial team identify organizational core competencies and limitations alongside environmental opportunities and threats, in order to develop the most suitable strategic courses of action.
UPS is the largest package delivery organization at both the national and international levels and reaps the benefits of its strong brand and extensive distribution network. With its fleet of 107,000 motor vehicles and 570 aircraft, UPS can reach multiple global locations rapidly and efficiently, allowing it to satisfy the growing needs of its customer base while also attracting new clients. The company has chosen to diversify its service offering, leading to increased brand recognition and revenues; this diversification strategy has also allowed it to maximize gains and minimize losses. UPS further offers a wide array of services — including overnight shipping — with prices set based on individual order characteristics such as the weight of the parcel or its destination (Stroman, Wilson, and Wauson, 2008).
In addition to the strengths described above, the company enjoys considerable financial stability, as revealed by a number of its financial ratios (financial information retrieved from Reuters; explanations from Investopedia):
The large organizational size of UPS implies resistance to change and a reduced ability to adapt quickly. While motorized services are available in various regions, aircraft-supported delivery systems remain limited. Additionally, the company has continually focused on employee job satisfaction — since it is the staff members who deliver products and interact with customers — in an effort to generate sustained sales and revenues. In attempting to maximize employee satisfaction, the company allowed numerous unions to form, resulting in increased pressure and financial obligations.
Several financial ratios also point to weaknesses. The company's sales grew at a negative rate of 13.70%; while this represents a decline relative to past performance, it is understandable in the context of the financial crisis and is even laudable when compared to the industry's sales decrease of 20.96%. UPS's quick ratio is also below the industry average (1.29 vs. 1.67), meaning its ability to meet short-term debts through readily accessible liquidity is reduced.
The company can leverage its multinational customer base to further improve its operations and widen its reach. There is a growing focus on environmental considerations — while this can be perceived as a threat insofar as it requires additional financial resources, it also constitutes an opportunity to enhance brand recognition, gain community approval, and expand operations. This could be achieved through investments in biofuels or other alternative energy sources, as well as the continued purchase of hybrid vehicles. Numerous technological advancements also allow UPS to function at superior levels of operational efficiency; an important additional opportunity lies in the emphasis on online services through which customers can place orders digitally.
The internationalized financial crisis could continue to negatively impact sales growth in a context where both the general public and the business community are striving to save money and reduce auxiliary expenditures. Rising fuel prices not only generate increased costs but also create operational instability. Competition in the industry is intensifying, with growing threats posed by Deutsche Post, FedEx, and the U.S. Postal Service (Hoovers).
Diversification: A main business strategy has been the diversification of operations. Examples include overnight shipments, the centralization of packages from smaller parcel service entities for shipment in a single cargo, and the move toward financial and logistics services. All of these have helped consolidate the UPS brand and market position and allowed the company to expand into other sectors, culminating in significantly increased revenues.
Sponsorship: Over the years, UPS has become involved in various sponsorship initiatives, supporting projects related to renewable energy and other social endeavors. UPS became a declared supporter of the Olympic Games and, to demonstrate this commitment, allocated increased funding to sponsor the 2008 Olympic Games in Beijing. This move was not only socially responsible but also strategically beneficial, as it further increased brand recognition in China and strengthened the company's position in that large market. As noted in the UPS 2008 Annual Report: "We also invested in other opportunities that will drive growth through enhanced customer relationships and increased exposure of our brand. This included our sponsorship of the UPSers handling 19 million items. It was hugely successful and accomplished a great deal for the UPS brand in China. We also became the official logistics and express sponsor of which will enhance brand recognition there and generate new business opportunities."
Investment strategy: The managerial team at UPS has consistently focused on identifying new ways to increase the benefits generated by organizational assets. The core of the investment strategy has been strict compliance with legislative requirements. The company has also focused on the long-term benefits of its investments, which are expected to generate sustainable revenues in the years ahead. Risk management has been a key factor, as the company maintains a low tolerance for risk; most investments have therefore been conservative, yielding lower financial gains but also carrying lower degrees of risk.
Growth strategy: UPS has always placed considerable emphasis on expanding its operations to new regions, with the ultimate aim of increasing revenues by addressing wider markets. The core of its growth strategy has been attracting new customers and converting them into loyal clients, while also offering existing loyal customers a broader array of services. As stated in the UPS 2008 Annual Report: "Our growth strategy is to increase the number of customers benefiting from repeatable supply chain solutions, particularly in the healthcare, high tech and retail sectors, and to increase the amount of small package transportation from these customers. We intend to leverage our small package and freight customers through cross-selling the full complement of UPS services."
Focus on environmentally friendly operations: UPS has declared itself a supporter of environmentally friendly operations and has already purchased 200 hybrid electric and 300 compressed natural gas vehicles. This move not only expanded its fleet to become the largest private fleet in the industry but also made a strong public statement. UPS has further invested in hydraulic hybrid automobiles, a technology that promises to reduce both emissions and fuel consumption (UPS 2008 Annual Report).
"Four alternative strategies evaluated"
"Combined growth and diversification strategy recommended"
Based on the analysis in the table above, it becomes clear that the strategies best able to achieve the established goals are continued diversification of the services offered — primarily the financial and insurance services offered through the UPS Capital subsidiary — and an aggressive growth strategy through which the company will be able to address new markets and generate more revenues.
The first move to be made is to assess the current performance of the financial subsidiary and identify new means of improving it. Internal strategies will be developed and implemented to enhance the capabilities of UPS Capital. For instance, new financial specialists will be hired to develop additional products — crucially, these products need not be entirely novel, but they must be capable of satisfying the needs of a population affected by economic recession. Examples of relevant products and services include loans, savings promotions, and insurance. Once the financial services are developed, marketing specialists would be engaged to create campaigns aimed at familiarizing the public with UPS Capital and attracting clients. The marketing campaign would promote UPS Capital as a subsidiary of UPS in order to benefit from the latter's successful history and international presence, while also introducing distinguishing elements to establish UPS Capital as a specialist in high-quality financial services. All of these efforts would proceed without disrupting the core delivery services of UPS.
Implementation of the growth strategy would begin with an assessment of the international markets in which United Parcel Service currently operates. Analyses would focus on performance relative to market size, customers served, revenues registered, and marginal profitability. Further investments would be made in regions with high potential, such as China. UPS entered the Chinese market as part of an expansionist strategy, driven by the country's large size and significant number of potential customers. However, results in the region have been limited. Possible improvements could include reducing retail prices to address a wider customer base or introducing aircraft services to China — currently, UPS delivers packages in China only by vehicle, which weakens its position relative to competitor FedEx, which has a stronger presence in the Asian market (Dickerson and Massott).
Given the present situation and the objectives of the managerial team at United Parcel Service, it is advisable that the company implement a combination of expansionist and diversification strategies. Each of these courses of action will further support organizational sustainability by enabling UPS to enter new markets, address new customers, offer new services, and register increased revenues.
Dickerson, B., Massott. FedEx and UPS in China — Competing with Contrasting Strategies. Drexel University.
Stroman, J., Wilson, K., Wauson, J. (2008). Administrative Assistant's and Secretary's Handbook (3rd ed.). AMACOM Div American Mgmt Assn. ISBN 081440913X.
Hoovers. (2009). United Parcel Service Inc.
Reuters. (2009). United Parcel Service, Inc. — Financial Ratios.
Investopedia. (2009).
UPS Website. (2009). Retrieved from
UPS 2008 Annual Report. Retrieved from
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