STRATEGIC PLANNING AT UNITED PARCEL SERVICE

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ABOUT THE COMPANY

The United Parcel Service (UPS) delivers more than 15 million packages a day to about 6.1 million customers in 200 countries around the world, making it the worlds largest package delivery company. UPS is headquartered in Atlanta, Georgia and operates primarily in the United States with about 428,000 employees. UPS slogan What can Brown do for you emphasizes the companys ability to provide services to almost any one in the world, at any address.

ABOUT THE COMPANY

Before the $42 billion company grew into a worldwide name, it was started as a small messenger company in 1907 by two aspiring teenagers, Jim Casey and Claude Ryan in Seattle, Washington with just $100. Top competitors of UPS include Federal Express (FedEx), DHL International and the United States Postal Service.

LOW THREAT OF NEW High capital expenditures ENTRANTS Economies of scale

Labor problems Capacity constraints Fuel costs Trade tariffs and international regulations Strong brand images

HIGH

HIGH POWER OF SUPPLIERS

Highly consolidated industry

COMPETITIVE RIVALRY

POWER OF BUYERS MODERATE

Low switching costs but customers too small to have any individual advantage

There are no real substitutes for air freight

THREAT OF SUBSTITUTES

LOW

INDUSTRY PROSPECTS AND OVERALL ATTRACTIVENESS

The alliance between air freight companies and ITES companies will bring exponential growth to the Air Freight industry. This industry should remain attractive, with concentration on competition for market share, service differentiation, and brand image.

Current Advertising has been aimed at being better than the competitor for different reasons.

SWOT ANALYSIS
STRENGTHS Global brand Strong distribution network WEAKNESSES Perception of ground delivery instead of overnight Heavy union presence

OPPORTUNITIES

THREATS

Expansion of online shopping Emergence of international middle class

Increasing fuel costs Competitive landscape FedEx) Potentially slowing economy

(DHL, global

FUNCTIONAL ANALYSIS (Marketing)

OBJECTIVE: Provide a complete logistics infrastructure to businesses of any size. UPS is targeting a global market of producers and consumers, while making a move to become the supply chain integrator of choice in e-commerce. They offer products and services that are state of the art in logistics, which include the use of bar codes and RFID, high speed package routing systems, and consulting services. UPS charges package prices that are in alignment with the industry and is willing to raise prices alongside FedEx. It has been able to charge fuel surcharges successfully.

FUNCTIONAL ANALYSIS (Marketing)

A sales force is maintained to reach business customers and producers crucial to UPS mission in expanding its role in logistics to become the supply chain integrator of choice. There are 150,000 different places to access UPS, worldwide. Customers can reach them by phone, web, retail outlets, customer service centers, distribution centers and any of the drivers will pick up packages. This level of reach to customers is necessary if UPS expects to gain market share from FedEx.

FUNCTIONAL ANALYSIS (Operations\ Tech)

OBJECTIVE: Highly integrated operations support product offerings to offer low cost delivery operations. UPS is seeking to integrate into freight with larger haul trucks and it is adding capacity in Asia and Europe with acquisitions of Sinotrans, a Chinese joint venture and Stolica, a Polish parcel and express company. UPS is the 11th largest airline world, with nearly 600 planes, 15 airport hubs worldwide and 900 airports served. Connecting these airports hubs to customers are 1,750 distribution facilities that sort packages into 90,000 trucks for deliveries to the home, office, and 72,000 retail outlets. All this requires the integration of air, ground, logistics and trade financing that UPS maintains is a key competitive strength.

FUNCTIONAL ANALYSIS (Human resource)

OBJECTIVE: A high sense of culture and esprit, stock participation plan, and promotion opportunities contributes to a low turnover rate of employees. The company is managed from a highly centralized Management Committee organized along for the most part in to functions as opposed to business units. There are business unit presidents in the Management Committee but only to the extent that the business unit is organized at a global or firm wide level.

UPS is the USs 3rd largest employer with nearly 400,000 employees worldwide.

FUNCTIONAL ANALYSIS (Finance)

OBJECTIVE: Highly liquid company has been investing at a faster rate than returning cash to investors, which are for most employees. The company is highly liquid with 1 times the cash necessary to cover current liabilities. UPS increased its dividends at 20% per year for the past five years with an even higher growth in the rate it has been buying back stock, at 47% over the same period. The firm has been paying down debt over the last five years while steadily increased Fixed Assets and Working Capital, in line with developing the infrastructure to support the latest in logistics technology and their customers push towards JIT manufacturing. Over the past five years, Working capital has increased 24% per year.

FUNCTIONAL ANALYSIS (Finance)

The firms capital structure is in line with a company that has been run by traditional long time employees. 50% of the capital structure is equity with the remaining sources of capital split between current liabilities at 20% and long term debt at 14%. The company is investing its cash in to Working Capital. The evidence there is a 28% growth rate in cash versus a 14% rate for Retained Earnings, which is experiencing a decelerating growth rate for the past five years.

CHALLENGES
To make strategic technology group from a small strategic planning process. This was basically required for finding major gap in technologies. Competition from both private companies and large government supported agencies. Execution of Scenario-planning session. To tackle the impact of axis of uncertainty. Formation of scenarios for future strategic planning.

CHALLENGES
To manage the strategy road map and implement the centennial plan. To tackle the implication for technology and infrastructure initiatives, growth strategies and options, and workforce development at both the global and region level. Since most managers in the company were focused on short term goals. It was difficult to keep the perception in mind that this was not about UPS but rather how the world affected UPS. To resolve the strategic integration responsibility.

STEPS TAKEN BY UPS TO FACE THE CHALLENGES

As opportunities arose, UPS had shifted from message delivery to package delivery. Several steps that unfolded over a period of years were involved in the implementation of the new strategic process. The senior management completed a crucial second step two years later in 1999,when they drafted the UPS charter, redefining UPSs mission and purpose and providing a detailed statement of the companys values and strategies. UPS moved from leadership in package distribution to enabler of global commerce due to the new mission and purpose.

STEPS TAKEN BY UPS TO FACE THE CHALLENGES

The centennial plan, the third step in the strategic process was formed from the outcomes of that meeting. As UPSs version of a five year strategic plan, it was designed to guide the company to its centennial anniversary by providing themes and broad, overarching direction. Strategy road map, which was the fourth step in the strategic process was developed to take the centennial plan to an executable level of detail.

STRATEGIES ADOPTED BY UPS

Investing in the core business of worldwide distribution and logistics. Building competencies in the integration of goods, funds, and information. Using technology to create new services. Attracting talented people. Studying customer behavior and anticipating their needs. Practicing innovation that leads to growth. Developing an environment that enables them to treat each customer as if he or she were the only one.

MAIN LESSONS
UPS has done a remarkable job of leveraging their core competencies for the new world of e-commerce. They have figured out how to deliver their core business services in new ways, while leveraging their tremendous infrastructure assets. They haven't forgotten where they came from. In that they have managed to preserve their company culture. It has served them very well in promoting the creative thought necessary to come up with new ways to do business and grow the company.

They were brave enough to change the vision, starting at the top, and committing themselves to it from the top all the way down through every employee of the company. They managed to do it quickly by making changes in their processes and organizational structure.

MAIN LESSONS
UPS has been aggressive in finding new revenue streams with existing and new customers. They understand not only their customers and related needs, but have also figured out ways to deliver more value. They have expanded the roles they can play in the overall value web by leveraging their infrastructure and expertise.

PREPARED BY GROUP 9: Amitanshu Srivastava Amrita Das Anamika Dey Aneema Anand Kumar

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