Friday, 6 July 2012

UPS: Competitive strategy approach



This small essay focuses on United Parcel Service (UPS). UPS is a known by being a worldwide delivery company and a global leading provider of specialised transportation and logistics services (UPS, 2011).
The purpose of this paper is to contribute with an evaluation on what sort of competitive strategy approach is being used while using two distinct frameworks Miles and Snow’s framework and Porter’s framework.



Competitive Strategy

Founded in 1907 UPS is identified with the business of delivery of packages, having in 2010 revenues of more than $49.6 billion and a delivery volume of 3.94 billion packages and documents (UPS, 2011). Currently with more than 190 service centers globally (UPS, 2011) UPS is considered as the world's largest package-delivery company (Levitz, 2010).
Over the years UPS always attempted to invest heavily on uniformity and efficiency (Coulter, 2009):
  • substantial training programs (Levitz, 2010), where drivers were trained to make deliveries in a more efficient manner;
  • investments on technology, electronic scanning (NationalGeographic, 2008) and tracking systems (Coulter, 2009). The innovative scanning system allowed the detection of packages with problems with their barcodes and their new Delivery Information Acquisition Device tracking system linked UPS customers (through the Internet) with UPS drivers (using PDA) and UPS warehouse (Datacentre).

These innovations allowed an increase of speed on their processes, quicker information sharing, customer satisfaction but more importantly efficiency gains over time.

Seeing these characteristics it seems that UPS is using a Prospector Strategy. According to Coulter (2009, p164) a Prospector strategy makes the organisations to seek innovation while being a leader in continuously developing new services and market opportunities due to the competitive environment. Nevertheless, due to the nature of this industry environment UPS could also be consider a Defender, since UPS although well-established in the market needs as well to protect its current market share. The focus on the customer service and satisfaction while trying to reduce the overall company costs by IT investment can be seen as an emphasising protection strategy on its main core competences. Reactor and Analyser strategies should not be seen as good examples to describe UPS since they both strategies involve a certain imitation and/or reaction and while UPS has been described as one of the most innovative companies (Alghalith, 2005).

Consequently when using Porter Competitive Strategies framework it is also possible to assume that the company has a cost leadership. Doing some investigation through the websites of the biggest players of this industry UPS http://www.ups.com/ and Fedex https://www.fedex.com/ (UPS, 2011 and Fedex, 2011) it is possible to determine that UPS is generally cheaper than FedEx while guaranteeing deliveries and tracking, Fedex although it also started to provide a tracking system sometime after UPS it seems that their package delivery division does not perform so well (Alghalith, 2005). The prices however have not been constant and one of the reasons might because in this industry customers are price sensitive, i.e. choosing the company that can provide the cheapest cost (Alghalith, 2005).


Conclusion

With its Prospector and Analyser Strategy according to Miles and Snow’s framework and its Cost Leadership Strategy according to Porter’s framework seems to be giving UPS a sort of competitive advantage within the market. However this advantage is doubtfully sustainable without and constant investment in their capabilities, since due to the technological nature of the industry the efficiency processes can always be improved by other competitors and substitutes can always provide more aggressive strategies.


See also: https://sites.google.com/site/apariciofernandesresearch/


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Blog Editor and Owner: Luis Aparicio Fernandes (or Mikey) is a Business Expert and a Traveler based in Sydney, Australia. He is a member of The International Honor Society Beta Gamma Sigma due to his achievements in business. You can follow Luis on Google+, and LinkedIn.