Ups Case

Industry External Analysis

Considerations of Macro Environment

Market Demographics: The target market is everyone in the world who needs to ship an item. Christmas time is a particularly busy time for shipping items across the world, whereas people need a company like UPS to do the delivering for them.

Economic: Gasoline prices, along with rising energy prices are the major concern. Jet fuel prices are at $2.80/gallon! However, many people would rather have items shipped rather than spend money on gas to go and buy the item.

Legal: International express services can be delayed by government policies and restrictions that can include anticompetitive practices of government-owned or authorized monopolies, licensing requirements, customs procedures, restrictions on access to aviation markets, restrictions on access to ground transportation systems, and restrictions on foreign investment.

Socio-Culture: The economy is really bad right now, so many people don’t have extra money to make a lot of online purchases and businesses are not selling as much, therefore not needing to ship as much.

Global: Worldwide packaging shipping volume is increasing as a result of global exchange, e-commerce, and changes in supply-chain management.

Technological: The internet has expanded the reach of direct marketing.

Industry Analysis:

Dominate Characteristics: With globalization, shipping is now a major priority for businesses and many individuals, especially those that use the internet to do a lot of shopping.

Driving Forces: Globalization and the internet, along with Christmas.

The Competitive Forces are: The biggest competitor is Fed Ex, and they cannot compare. UPS did 2.5 times the volume through its sophisticated delivery machine.

Rivalry in the Industry (Porter’s Five Forces):

Real Threat of New Entrants: Fed Ex, DHL, and TNT have capabilities in certain regions on par with UPS, but new entrants are unlikely to build such a globe-spanning infrastructure, then incur the expense of trying to steal share from these established networks.

Real Threat of Substitute Products or Services: High customer satisfaction earned through conscientious drivers, high reliability, and Internet-based tools has kept UPS at the top. UPS has created an economic advantage by assembling a dense integrated global shipping network that is unlikely to be matched by any but a few global players.

Bargaining Power of Suppliers: The suppliers who provide the boxes and envelopes most likely sale the products in bulk, this is economies of scale and allows UPS to sale them at a cheaper price.

Bargaining Power of Buyers: Businesses can buy in bulk and get a cheaper rate.

Intensity of Rivalry among Competitors in Industry: Faced with rational competitors, UPS continues to enjoy pricing power for most of its service offerings. New entrants are unlikely to build such a globe-spanning infrastructure, then incur the expense of trying to steal share from this established network.

Implications of Competitive Forces and Rivalry: A critical aspect of UPS’ competitive forces lies within the use of its resources to transport urgent packages. World wide shipping volume is increasing as a result of global exchange, e-commerce, and changes in supply-chain management.

Position of Rival Companies with similar products in industry: UPS’ outperforms its closest rival, FedEx, by more than 2.5 times FedEx’s average daily parcels. The efficiency of UPS’ bundling single system also outperforms FedEx in the aspect of delivering express packages.

Which companies are the Weakest and Strongest: The strongest competitor is Fed Ex. Weaker ones are DHL and TNT.

Strategic moves by competitors: In comparison, FedEx uses duplicate networks of drivers, trucks, sorting facilities, and information systems to separately handle ground and express shipping.

Industry Key Success Factors: Utilization of globalization and the internet.

Over-all Industry Attractiveness: With globalization and the internet, more businesses and people are in need of parcel shipping services. The entire industry has an above average risk for both long and short term investors, due to high gas and oil prices.

Company (Internal) Analysis

What is the Company’s present Strategy: Efficient and customer-friendly drivers, motivated by equity ownership of the firm, are a vital link in UPS strategy. The firm invests in new businesses, like less-that-truckload and retail operations, and in international assets. Growing in China is a critical component of international expansion. To this end, the UPS Shanghai hub is currently being developed. The firm spends heavily on technology ($1 billion per year for more than two decades) to benefit internal productivity and enhance the customer experience.