FedEx, UPS Look For E-Commerce to Deliver Growth, Research Paper Example

Introduction

The United Parcel Service (UPS) is one of the most successful and longest operating mail courier businesses in the world. The company was established in 1907 and started out as just a messenger business in the United States of America. UPS is head-quartered in Atlanta, Georgia where the company employs about 408 thousand workers. Ever since their modest beginnings, UPS has expanded from a small sized messenger service to a $36 billion dollar publically traded corporation. (Reuters, 2015)

UPS is a multi-national business and stand as one of the most recognized and reliable brands in the postal industry around the world. UPS is also one of the largest chain of package delivery services in the world and the primary competitor of other companies in the postal industry such as FedEx and DHL in both the industry and in operations of supply chain management. Every day, UPS manages the flow of funds, goods, and information in over 200 countries and relevant territories around the world. (Reuters, 2015)

Company Analysis

UPS, holding the title of the world’s greatest package delivery service and the global head in supply chain management in its respective industry, realizes that optimizing their efficiency of business is imperative for their company to deal with the constantly increasing pressures of management. This attributes to the company’s global plans to offer their customers’ beneficial methods of streamlining their supply chain management system as well as further improving their profound business performance. (Sullivan, 2005)

The corporate culture of the UPS Company is based on its affluent history. This is mainly because the UPS Company for decades had been trialing and testing their strategies to solidify their courier system on which they are built on in order to administer to their customers the satisfaction and quality should exist in the postal industry. The corporate culture of the UPS Company is constantly coping to the flows of ever changing times in order to ensure that their business models and strategies do not go obsolete or get rendered ineffective. (Sullivan, 2005)

It became very important for UPS to realize that their corporate culture is an arrangement of proportioned ethical values and beliefs that have an impact on the customers, business system, and structure of the company itself. It is a well-developed belief system that shapes the way operations are executed, a logical sense of how to work, as well as where to establish priorities in achieving company goals. (Francisco, 2013)

Management

The business module strategy currently being utilized by UPS’s management is the called the Total Quality Management (TQM) approaches. They apply this strategy throughout every aspect of their business module. The reason surrounding the selected strategy of this approach which was integrated into UPS in 1994 presented by their previous CEO was primarily due to the fact that they wanted to ensure that the quality of UPS services were the most favored in their industry. The induction of this type of business module was executed in order to better their efficiency, productivity, and overall quality. (Daily, 2013)

One of the main benefits of integrating this business strategy is that puts emphasis on the continuous desire for improvement. It operates as a cross functional and management headed philosophy that results in bettering customer satisfaction. The reason that UPS is so effective in using this business model is due to the fact that they possess all of the basic requirements for the integrating of this company philosophy. Their head of management actively enforces this business model and ensures that every department within the organization integrates it as well. The other reason behind this is mainly due to the idea that this business model runs conjointly within UPS managements. UPS believes in being highly capable of adaption in order to enhance their services. TQM helps to focus on consistent improvements. (Sullivan, 2005)

UPS makes sure all of the dimensions ranging from skill set variety, task identity, task significance, autonomy, and feedback are addressed by their employees. As a result, the UPS employees are more self-efficient. UPS is aware that in order to successfully integrate this business strategy their employee body should have benefits which would compel them to strive towards the improvement of the company. Therefore, UPS management provides their employees with a network system of support and benefits in the structure of career development. (Reuters, 2015) (Sullivan, 2005)

Macroeconomic Analysis

One of the primary business elements that UPS should bring more attention to is their business exposure. Although they currently have operation throughout Asia, Africa, Europe and the Middle East, they focus mainly on their domestic markets established within the US. An example of this is when UPS appeared benefited from substantial revenues for the fiscal year 2009, but nearly 75 percent of that was generated through their domestic markets. This is financial element can be compared to their competitors such as FedEx, DHL and TNT, all whom have operations in various Asian and European countries like Australia, China, The Netherlands, Brazil, Italy, Germany, India, among many others. (Francisco, 2013) (Reuters, 2015)

UPS relies too much on a single region in where they operate in their domestic markets. This exposes the business to much negative influence. For example, the recession of 2008 in the US had a major impairment on UPS. This is due to the fact that they are excessively exposed to the risks of down turns in the US’s macro-economic environment and this increases its business and financial risk.

Even though UPS tends to rely too much on their domestic market in the US and is having continued debts, the company is showing significant improvements in regards to their performance. The UPS Company currently has more than 300 thousand workers employed and their assets are continuing to increase. The company currently delivers over 13 million parcels per day and their annual revenue stands at an average of more than $25 billion USD. Given that they operate in more than 200 countries around the world and that they are presently investing significant amounts of money into technology, the UPS Company will definitely increase their market share because they have been consistent in being driven forward through excellence in the business factor of quality and pricing. (Reuters, 2015) (Finance, 2015)

Litigation

Government regulation has an impact on the business strategies of UPS because they are subject to various other laws and regulations in relation with their non-package services, including customs regulation, Food and Drug Administration (FDA) regulation of the transportation of drugs and pharmaceuticals, as well as state and federal financial regulations. These applicable laws and regulations impact the UPS Company’s operations on their customer sites and in some case, bring added costs on the company’s finances. Any violations of such laws and regulations might result in the incursion of fines and penalty fees or even the discontinuation of the company’s existing contracts. Such regulations might also put pressures on the company management and have an effect their cost structure. (Daily, 2013)

In regards to work stoppages, the UPS Company might lose some of their customers permanently, if they are unable to provide the expected uninterrupted services. This might adversely affect the company’s business module, financial standing, and the results from operations. The factors of futuristic collective bargain agreements also might impact the company’s competitive positions and quality of operations. Labor problems may disrupt the company’s business operations, resulting in decreased revenue and loss of credibility from their stakeholders. (Reuters, 2015) (Francisco, 2013)

The intensified competition in the postal industry is continuing to consolidate. Competition remains solid. As a result of such consolidation, the UPS Company’s competitors such as FedEx or DHL, might increase their market shares and better their financial capacity. This might even intensify their competitive positions within the postal industry. Business combinations might also result in such competitors establishing a more broadened variety of similar products and services at competitive prices, which could adversely have an impact on UPS’s financial performances. (Francisco, 2013) (Daily, 2013)

Financial Analysis

Fiscal year 2012 presents when UPS carried the greatest amount of liquid assets. For the past four years, USP has had more total assets in their accounts than total liabilities. However, 2014 shows how close their assets are against their liabilities with just a little over a $2 million difference. Their current share sells at about $98 which is down 0.12 percent, but their financial standing still remains competitive within the postal industry as their services are still primarily used among the majority of postal customers. The majority of their revenue is driven by the domestic market, but as long as UPS continues to expand, they will remain strong among competitors in the postal industry. (Finance, 2015)

UPS dividends yield is currently 2.8% which is 1% above the industry average, 1.8%. Their current ratio increased from 2012 to 2013 but then declined substantially from 2013 to 2014, where it currently stands at 1.37 calculated by current assets divided by current liabilities; (11,808 – 0) / 8639=1.37%. Long-term debt to total assets valuation is computed by long-term debt divided by total assets; 9864/35471=0.28 which is the ratio in UPS’s case. The methodology of sales and growth of eps is very important. Companies must show both revenues as well as net income increases of at least 25% as compared to the previous year. These growth rates present the dynamic companies that investors are looking for. The rates for UPS (-89.15% for EPS-71.33% for Sales) are not adequate enough. (Finance, 2015) It can be suggested that UPS put more focus on their international markets. With so much focus on their domestic markets, they are experiences an unfavorable profit margin of 5.21% which could be favored if they contribute more towards the international markets.

References

Daily, B. (2013, November 22). FedEx, UPS Look For E-Commerce To Deliver Growth. Retrieved from Nasdaq: http://www.nasdaq.com/article/fedex-ups-look-for-ecommerce-to-deliver-growth-cm305061

Finance, N. (2015). UPS Company Financiala. Retrieved from Nasdaq Finance: http://www.nasdaq.com/symbol/ups/financials?query=balance-sheet

Francisco, U. o. (2013, August 20). UPS Logistics a Masterpiece of Streamlined Supply Chain Management. Retrieved from Supply Chain 24/7: http://www.supplychain247.com/article/ups_logistics_a_masterpiece_of_streamlined_supply_chain_management/green

Reuters. (2015). UPS Background. Retrieved from Reuters: http://www.reuters.com/finance/stocks/companyProfile?symbol=UPS.N

Sullivan, M. (2005). UPS Supply Chain White Paper. Retrieved from UPS: https://www.ups-scs.com/solutions/white_papers/wp_six_sigma_RFID.pdf