What factors are driving this company's high performance?
The following are the factors that drive the high performance of the company:
Innovation. Innovation is key to the high performance of the company. The company has from its inception be fully committed to innovation. As early as the year 1920, the company had invented its first ever conveyor built system and mechanical sorter. One of the most significant innovation made by the company was spending of amounts up to $10 billion USD to upgrade its infrastructure. This infrastructure enabled the company to precisely deliver packages, ensure management of shipments online and ensure availing of electronic proof of delivery (Crew, & Kleindorfer, 2013).
Integration of ground and air operations. This ensured that the company optimized utilization of its assets, and reduced its costs while at the same time ensuring that the requirements of the customers were met.
AAA credit rating.
Good financial management policy
Do these factors create a continuing sustainable advantage for UPS? If so, why?
The above factors create a continuing sustainable advantage for UPS. It is through such factors as the innovation that the company can always be ahead of the rest regarding ensuring that the innovations serve the needs of the customers as well as the objectives of the business. Good financial management policy that the company has ensures that it can meet its targets regarding growth and profitability.
3. What are threats to the sustainability of UPS's performance?
The following are some of the threats to sustainability of the performance of UPS:
United States Postal Service (USPS). This is the major threat to UPS's sustainability. This is owing to the fact that USPS is owned and operated by the government. The lawmakers and policy makers in the U.S. could one day decide to make it a law that certain mailings and packages should wholly be supported by USPS.
Increasing levels of competition especially from such firms as FedEx, DHL, and USPS.
Changing fuel prices. At times, the fuel prices are so high, and this becomes a challenge for UPS
Bad weather conditions which could hamper efficiency and quality of delivery.
4. Does it make sense for UPS to carry out an IPO?
At this moment, it makes a lot of sense for United Parcel Services to carry out an IPO. Some of the main reasons why it should carry on with the IPO include:
An IPO will ensure that the management gets the funds it needs for growth of the three emerging trends of e-commerce, globalization and supply-chain management.
Only 10 percent of the company's shares are initially offered to the public. This will result in minimal dilution of the company's ownership.
The growth stage of UPS is high. This necessitates the firm's issuance of equity.
Making the company's stock publicly traded will ensure that UPS's financial position as a company rated AAA is consolidated.
An IPO will ensure that there is the currency to be used for exchange in acquisitions.
5. Use financial analysis tools to compare UPS to FedEx
The financial ratios that I calculated are tabulated below:
It is clear that the FedEx is having a higher sales growth than UPS. In NOPAT Margin, FedEx does well than UPS. The working capital to sales ratio of UPS is higher than that of FedEx. The Net long-term assets to sales ratio for UPS is higher than that of FedEx. Finally, the leverage for UPS is higher than that of FedEx (Kenney, Patton, & Ritter, (2012).
References
Crew, M. A., & Kleindorfer, P. R. (Eds.). (2013). Postal and Delivery Services: pricing, productivity, regulation and strategy (Vol. 41). Springer Science & Business Media.
Kenney, M., Patton, D., & Ritter, J. R. (2012). Post-IPO Employment and Revenue Growth for US IPOs, June 1996-2010. Available at SSRN 2063829.
