Thesis on "Strategic Management Case Analysis"

Thesis 10 pages (2690 words) Sources: 7 Style: APA

[EXCERPT] . . . .

Strategic Management (Case Analysis)

Business

Strategic Business Analysis of United Parcel Service

In this era of rapid technological change, the business community has undergone numerous mutations. Some of the most important changes refer to a growing focus on the human resources, intensified marketing efforts to overcome a competition that is fiercer than ever or sustained efforts in support of territorial expansion. Aside technological advancements however, the underlying element of all modifications has been constituted by the forces of globalization and market liberalization which allowed organizations to transcend boundaries, benefit from the comparative advantages of various global regions and register international revenues. But aside these gains however, a negative effect was obvious in the globalization of risks and losses, the most relevant example in this instance being the contemporaneous economic crisis, which emerged within the United States but soon affected the rest of the international players. The aim of this paper is to assess the strategic status of package delivery company UPS in these times of financial difficulties.

United Parcel Service was founded in 1907 and throughout its century of existence, it has become the largest package delivery company in the word. UPS transports an estimated 16 million packages during any business day. Aside transports to any corner of the United States, the organization also operates in another 200 countries across the globe. Their operations are carried out through the usage of 107,000 motor vehicles and an estimated 570 aircrafts. Aside delivery, including the centralization of packages from smaller service organizations and the creation of a single truck load, UPS also offers additional services such as logistics, freight forwarding or financial services such as loans and insurance. In 2008, the company was employing a total of 426,000 individuals and had closed the year with revenues of $52,486 million (Hoovers, 2009).

UPs' 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).

2. SWOT Analysis

The SWOT analysis is a pivotal component of any strategic analysis as it helps the managerial team identify the organizational core competencies and limitations, alongside with the environmental opportunities and threats in order to develop the most suitable strategic courses of action.

Internal Strengths

UPS is the largest package delivery organization at both national as well as international levels and it reaps the benefits of its strong brand and those of its strong distribution network

With its fleet of 107,000 motor vehicles and 570 aircrafts, UPS can reach multiple global locations in a rapid and efficient manner that allows them to satisfy the growing needs of their customer base, while also managing to attract new clients

The company has chosen to diversify its service offering, leading to a situation of increased recognition as well as revenues; additionally, the diversification strategy has allowed it to maximize gains and minimize losses

Wide array of services, including overnight shipping, and prices set based on characteristics of individual order, such as weight of the parcel or its destination (Stroman, Wilson and Wauson, 2008)

Aside the strengths previously mentioned, the company also enjoys an increased financial stability, revealed by numerous of its financial ratios. In this order of ideas (financial information retrieved from Reuters and explanation from Investopedia):

The valuation ratio Price to Sales is of 1.05 for UPS as compared to only 0.30 the industry average; this means that the UPS stock performance is significantly superior

The UPS divided yield is of 3.42 relative to only 0.80 the industry average, meaning as such that the company creates more value to its stockholders

Gross margin is of 25.80 relative to only 10.92 the industry's average, meaning as such that UPS is significantly more profitable than its competitors; this finding is supported by other profitability ratios such as the operating margin (9.26 to 2.51) or the net profit margin (5.02 to 1.33)

Superior levels of managerial effectiveness supported by return on assets (7.01 to 2.13), return on equity (27.19 to 6.68) and return on investment (9.34 to 2.80)

Internal Weaknesses

Large organizational size which implies a resistance to change and a reduced ability to be easily and rapidly adaptable

While motorized services are available in various regions, the aircraft supported delivery systems are limited

The company has continually focused on employee on the job satisfaction as it is the staff members who deliver the products and interact with the customer, to generate sustained sales and revenues; in an attempt to maximize employee satisfaction, the company allowed numerous unions to form -- this means increased pressure and financial efforts

Just as in the case of the strengths, the financial ratios of the United Parcel Service Inc. are assessed as a different category of weaknesses. In this order of ideas:

The company's sales grew at a negative 13.70; this represents a weakness relative to past performances, but is understandable in the context of the financial crisis and even laudable when the industry's sales decreased by 20.96%

UPs' quick ratio is also inferior to the industry average (1.29 relative to 1.67), meaning as such that its ability to pay its short-term debts through easily accessible liquidities is reduced

External Opportunities

The company can benefit from its multinational customer base to further improve its operations and widen its customer base

There is a growing focus on environmental considerations -- while these can be perceived as a threat as they require increased financial resources, focus on environmental issues can also constitute an opportunity to enhance brand recognition, get community approval and further expand operations -- this could be achieved through investments in biofuels or other sources of alternative energy, as well as the continued purchase of hybrid vehicles

Numerous technological advancements have been made and while these do impose the need for additional expenditure, they also allow UPS to function at superior levels of operational efficiency; additionally, an important opportunity could rely on the emphasis on online services throughout which customers could place online orders

External Threats

The internationalized financial crisis could continue to negatively impact sales growth ratios in a context in which the populations and the business communities strive to save as much as possible and reduce auxiliary expenditures

The growing prices of fuels which not only generate increased costs, but also create instability

The competition in the industry is intensifying, with more and more threats being posed by Deutsche Post, FedEx and U.S. Postal Services (Hoovers).

3. Used and Available Strategies

3.1. Currently Used Strategies

Diversification: As previously mentioned, a main business strategy has been that of diversifying the operations run. Examples in support of this diversification strategy include the night shipments, the centralization of packages from other smaller parcel service entities and the shipment in a single cargo or the move toward financial and logistic services. All these helped consolidate the UPS brand and market position and allowed it to expand to other sectors, all to culminate in significantly increased revenues.

Sponsorship: Over the years, the package delivery company has become involved in various projects of sponsorship, supporting numerous projects, such as renewable sources of energy or other social endeavors. UPS became a declared supporter of Olympic Games and to prove their commitment, they allocated increased amounts of funds to sponsor the 2008 Olympic Games at Beijing. The move was not only responsible in terms of community and social commitment, but also beneficial from a business standpoint as it further increased brand recognition in China and strengthened the company's position in this large, but troubled market. "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" (UPS 2008 Annual Report).

Investment strategy: the managerial team at UPS has constantly focused on identifying new means of increasing the benefits sprung by their organizational assets. The core of the investment strategy was that of subjecting to legislative stipulations at all times. Additionally, the company has focused on the long-term benefits of their investments as these were expected to generate sustainable revenues for the years to come. Furthermore, the risk was an important factor as the company has a low tolerance for it -- as such, most investments were safe ones, with lower levels of financial gains but also with lower degrees of risk.

Growth strategy: UPS has always placed an increased emphasis on territorially expanding its operations to new regions, with the ultimate aim of increasing the registered revenues by addressing its services to wider markets. The core element of their growth strategy has been that of attracting new customers and then turning them into loyal clients. Additionally,… READ MORE

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