United Parcel Service (UPS): A Harvard Case Study Strategy and Industry Analysis
The United Parcel Service (UPS) has withstood the test of time. The company started as a $100 dream and has grown into a global industry with brand recognition throughout the world (Garvin & Levesque, 2006). All companies have a goal of doing just this, evolving with technology and paving the way for future firms in your industry. However, the tale of UPS can do more than just aid those in the same industry, the strategy, and strengths of UPS are those to be analyzed and made applicable to any industry today.
Strategy has never been taken lightly for UPS. Monthly meetings of teams specifically formed to envision the future and assess decisions have always played a large role in UPS’s approach to low-cost management and differentiation through quality customer service (Garvin & Levesque, 2006). The combination of these approaches creates a generic business-level strategy emphasizing quality as reliability. By identifying their position on the value creation frontier, the objectives of a company can become more clearly defined (Hill & Jones, 2010). It is through such identification that has led UPS to change their mission statement, further identifying goals and purposes at the organization in their industry and market segments (Garvin & Levesque, 2006).
As a company that focuses on low cost and quality, it is important for UPS to take critical action towards each of these approaches to differentiation. These actions have transpired into tangible and non-tangible potential outcomes for the company (Garvin & Levesque, 2006). The company has created their own sets of terms and norms by allowing their company to adapt to customer needs while staying within the same parameters outlined by the company. UPS is able to stay ahead of the competition by constantly looking into the future. By knowing where they want to be in the future, the managers are able to see if each investment, functional-level strategy, business-level strategy, or technological advancement will help or hurt the company (Garvin & Levesque, 2006). UPS tries to take advantage of all potential technological advancements, staying true to the heritage of the company (Associated Press, 2010).
UPS stays prominent in their market by focusing on three major areas of need. The business operates as a United States domestic package service, an international package delivering service, and a supply chain and freight service (Associated Press, 2010). UPS takes what many companies would consider to be extremes in order to cut costs and become more efficient. UPS trucks do not take left-hand turns, for one. It has reportedly saved them 20.4 million miles by having an expert map out their routes before the delivery occurs. This simple approach has also had a more environmentally friendly effect, reducing their carbon footprint 20,000 metric tons (Shontell, 2010). Senior Vice President Ben Stoffel also informed the public on CNN Money in 2010 that it is safer and quicker to make a right-handed turn (Shontell, 2010). An employee of UPS told my management 310 class that when he worked for UPS there were expectations on how drivers would enter and exit the trucks. By having a specific foot you would step into the truck with it saved time and gave UPS another advantage in the field of low-cost strategy.
UPS has dedicated their decision process and strategy to low cost and quality through efficiency and reliability of service (Garvin & Levesque, 2006). They do so by focusing on the importance of pricing options, differentiation, finding the market demand, having a very specific cost structure, and focusing on their particular industry and market competitive structure, which are all important in a successful position at the business level (Hill & Jones, 2010). By identifying their strategy and staying fully committed to it, UPS’s actions and strategy is one of great value. This value is exponential due to the fact that UPS is in a very competitive market. The services offered by UPS are comparable to those of FedEx and DHL.
UPS has become a pioneer in the industry by staying ahead of the game technologically. The company needs to continue to find ways to ship products efficiently and cost-effectively. It is important for UPS to find new segments in the market in order to keep making a profit. UPS also needs to continue to understand the importance of international business and their role in this growing industry. Many businesses are spread across the world and rely on services from UPS and their competitors to do business in a timely, cost-effective manner. The future plans and strategy of UPS are important, but so is the past. UPS focuses a tremendous amount of time and effort into the future. Learning from mistakes and short-comings are also very advantageous. UPS is ahead in their industry, but they do need to keep a close eye on mistakes of competition as well as the successes those companies have had.
UPS had the largest initial public offering (Garvin & Levesque, 2006). The company still boasts a high stock price. According to Yahoo! Finance, the stock for UPS closed at $65:57. The company has had stock prices over $70 this year, and its low has remained about $60. The company is optimistic in this trying economy. UPS predicts that this fiscal year their returns will be $4.15 to $4.40 per stock. This is up three cents from the original predictions by the company. Their focus on efficiency and low-cost looks as though it may really pay off in the future for their investors even as oil prices stay high (Bomkamp, 2011).
Associated Press. (2010, May 26). United parcel service inc. ups:nyse, industrials/air freight & courier services. Retrieved from: http://topics.nytimes.com/top/news/business/companies/united_parcel_service_inc/index.html
Bomkamp, Samantha (2011, April 26). Ups raises outlook while eyeing economic risk. Retrieved from: http://finance.yahoo.com/news/UPS-raises-outlook-while-apf-885984253.html?x=0
Garvin, David A., Levesque, Lynne C. (2006, June 19). Strategic planning at united parcel service
Hill, Charles W.L., Jones, Gareth R. (2008). Strategic management: an integrated approach. Mason, OH: South-Western Cengage Learning
Shontell, Alyson. (2010, March 24). Why ups is so efficient “our trucks never turn left.” Retrieved from: http://www.businessinsider.com/ups-efficiency-secret-our-trucks-never-turn-left-2011-3
Yahoo!Finance (2011, October 31). HTC Corp.