The current global business characterized by complexities in the conduct of business and increased competitiveness, strategic management has taken the centre stage for majority of the global organizations. Organizations have realized the need for achievement of a competitive advantage in the global market as the only survival tactic in the competitive global business environment. Strategic management has been identified as the most appropriate means through which organizations can achieve competitive advantage. United Parcel Service (UPS) is a multinational corporation providing logistics services, through delivery of products to more than 200 countries in the globe. It has been approximated that the organization oversees delivery of more than 15 million packages in a day serving more than 6 million customers. The organization is driven by the urge to serve and provide services to all customers all around the globe.
The global business environment surrounding UPS is competitive with various global competing players such as FedEx, DHL International and United States Postal Services among others. Therefore the organization requires strategic management to facilitate achievement of a competitive advantage in the competitive business environment. Strategic management requires strategic planning, through analysis of the organization ability to analyze both the internal and external environment. The organizations need to constantly review its corporate strategies to facilitate the transformation of the organization and keep up with the pace of development in the global business environment. The strategic planning process of the organization has evolved overtime, where the organization has continued to lay emphasis on scenario planning techniques. In addition, the organization recognizes the other critical elements in the strategic planning process.
Strategic Implementation
The success of the organization in achievement of the objectives in strategic management has been attached to the ability of the organization to develop a company’s charter, through use of strategic planning and decision making. Strategic planning and decision making also requires strategic implementation of the various strategies developed through incorporation of various players in the organization. Strategic management requires effective systems and operations management in the organization, which is essential for the organization achievement of competitive advantage. For example, it facilitates analysis of the internal environment through analysis of the success factors as well as the threats facing the organization.
Strategic implementation of the organization strategies has been supported by various success factors in the internal environment as well as weaknesses and threats. For example, the current global business environment has been faced with the challenge of high and increasing operating costs. For example, the fuel prices that have been rising continuously have been a major challenge for the organization operations. This is due to the fact that the organization uses fuel primarily for various different operations in the process of delivery of the products. The global business regulatory authority has been changing tremendously affecting the operation of the business and implementation of the business corporate strategies. This has led to changes in trade tariffs and requirements, which act as a hindrance for the organization operations.
However, the organization operates on large scale enabling it to achieve economies of scale through mass movement and business. The organization has also been able to establish a strong brand in the global market, which makes it easier for the business to conduct business in the global market. The organization has also been able to establish alliance with air freight and ITES, which has been proposed to bring exponential growth of the organization. The implementation of the organization strategies also requires differentiation of the services provided by the organization to ensure competitiveness.
Functional Analysis
The objective of the organization lies in the urge of providing complete logistics infrastructure to various businesses irrespective of their sizes. This has led to the wide approach of the organization towards the global market, where the organization is targeting producers and consumers in the global market. The organization has an extensive and expansive distribution network, which will enable the organization to expand its operations in the global market. The organization aims at integrating the supply chain activities, providing supply chain solutions to the business and consumers.
The organization has adopted the latest technologies in logistics management and in the supply chain to ensure efficiency of the operations and provision of the quality and timely services. For example, the organization has employed the use of bar codes and high speed package routing systems, which are supported by efficient consulting services. The organization prices for the logistics services provided are in alignment with the industry prices to ensure the organization competitiveness in the industry. The price of the product has been maintained to ensure attraction of new customers, as well as attraction of new customers through other competitive strategies of marketing.
The organization also operates a strong sales and marketing force, which enables the organization to reach different customer in the globe, who are critical for its growth. The ability of the organization to integrate different functions in supply chain management has enabled to organization venture into different markets throughout the globe. The wide and expansive distribution network established by the organization has also been essential for the organization expansion strategies in the global market. The expansive distribution network established by the organization will enable the organization to achieve a competitive advantage, in the market and there are expectations that the organization will expand its market share.
The organization has also been engaged in various acquisition and joint venture with various organizations around the globe. This will facilitate the integration of the organization freight services and ground parcel services, increasing the capacity of the organization. For example, the organization has recognized that potential of growth in the current global business environment lies in the emerging economies. For example, in Asia the organization has ventured into a joint venture with and acquisition of the Chinese firm Sinotrans. The organization operates one of the largest airlines across the globe with approximately six hundred planes, with more than 15 airport hubs serving more than 900 airports around the globe.
The airline hubs established by the organization are supported by more than 1750 distribution network facilities, where the packages are sorted. The distribution facilities of the organization are supported by a large fleet of trucks, which deliver to different destinations such as homes, offices, retail outlets and companies. The integration of the organization’s freight services with the ground logistics services has enabled the organization to achieve a competitive advantage in the global market. This has also enabled the organization to integrate the supply chain, facilitating achievement of a competitive advantage.
The success of the business is also dependent of the ability of the business to manage the human resource operating in the business. There is need to maintain a highly competitive and competent staff to ensure the success of the business. Through the organization culture the organization has developed a comprehensive plan of ensuring maintenance of a highly motivated human resource. For example, the organization operates employee ownership schemes and fair promotional opportunities for all employees, which has been essential in ensuring low rate of employees’ turnover. The organization operates a highly centralized management, with various business units organized at both global and firm level. The organization is among the largest employers in the United States and around the globe, with more than 400,000 employees around the globe.
The organization has adopted financial management practices that facilitate the firm investments at a faster rate through ensuring liquidity in the organization. Rather than returning cash to investors, where majority of the investors are the employees of the organization, the firm ensure maintenance of liquidity to facilitate investment at a faster rate. To maintain high liquidity and prevent the investors from taking their investments the organization offers high dividends growing at a high rate, as well as promoting buying back options. This has enabled the organization to maintain high liquidity facilitating payment of debts as well ensuring maintenance of a high working capital.
UPS Key Success Factors
The current business environment requires innovativeness in management of business though analysis of the internal and the external environment facing the business. This enables identification of the key success factors of the business in the internal environment and the external environment. Management of the United Parcel Services recognizes the importance of competitive advantage in the global market, through formulation of strategies that ensure achievement of a competitive advantage.
The organization has adopted integration of modern technology in the organization overall business, which facilitates creation of functional benefits that are essential for achievement of sustainable advantage. The organization uses customized, which is essential for the creation of value to the customers creating competitive barriers to the organization’s competitors. There are other factors in the external environment such as deregulation in the airline industry, which has enabled the organization to expand their operations in wide areas of operations. Previously before deregulation, the legal environment created barriers to expansion of the airline activities hence creating barriers for the expansion of the airline operations.
The focus on the customer is another key success factor that has been adopted by the organization. Customer relations management has become the most prevalent business strategy in the current business environment. Majority of the organizations in the global market have changed their focus of strategies to customer focused strategies. The firm has embarked on providing effective solutions to their customers improving customer satisfaction, hence building customer loyalty and branding. This has led to the consistent and continuous growth of the organization in the global market.
Budget and Forecasted Financials of UPS
United Parcel Services financial performance has been stable and growing steadily in the recent past. For example, in the year 2009, the organization had a net income of 1968 million dollars, 3338 in 2010 and 3804 in 2011. This shows that the firm has had an upward trend in revenue generation showing that the organization competitive strategies are still relevant in the competitive global market. The forecasts shows that the organization expects to improve its profitability with increased expansions in the global market. The expansive distribution centres have also enabled the organization to have an edge over its competitors hence increasing its profitability overtime.
UPS Breakeven Chart
Sales revenue
Break even point
Total cost
Fixed costs
The fixed cost does not change irrespective of the services provided by the organization. The variable cost varies with the services provided by the organization for example an increase in the volume of business increases the variable costs in the organization. For example, fuel costs increases with the increase in the volume of business the business handles.
Risk management at UPS
The current global business environment has been coupled with myriad of risks, and organizations must ensure management of these risks in ensuring success of the business. For example, United Parcel Services (UPS) operations are faced with various risks since majority of their activities are risky. For example, provision of logistics and supply chain management involves various business risks that the organization must ensure are managed efficiently. There are various risks facing the logistics and supply chain management organizations, which include risks associated with disruptions of the supply, changing demand, financial risks, legal and security risks and risks associated with corporate brand and reputation.
Risks cannot be completely avoided, but they can be managed. Some of the risks if poorly managed have the capacity of crippling the operations of the business, such as consistent, continuous and extensive disruptions of in supply. According to an Accenture study, three out four supply chain organizations have experienced disruptions, accounting for the last five years. There are various causes of these disruptions such as natural disasters, failure of the infrastructure leading to congestions, labor unrests and failure of suppliers from distant places to fulfill their commitments.
The recent global financial crisis has led to increased unpredictability of the demand for various products. This has led to increased risk in the business environment where efficient forecasting and prediction of the business environment is imperative in ensuring success of the business. In supply chain management strategies, risk management is an imperative building block. To facilitate management of these risks the organization has standardized majority of its processes to mitigate the rising risks in operations. The organization also conducts extensive research to gather more knowledge and understanding of the effective ways of managing risks. The adoption of the latest technologies by the organization has also been imperative in ensuring management of risks in the organization.
Contingency planning has also been essential in the business management of risks, which has enabled the business to identify and determine the various risks facing the business and develop a strategic plan of dealing with the risks. Although it is difficult to plan for all possible emergencies, the business is able to identify the most prominent risks facing the business. Contingency planning at UPS involves forecasting of the risks facing the business, enabling the evaluation of the risks in terms of magnitude and financial requirement. Risk managers in the organization play an imperative role of developing detailed plans, which enable the organization management of the risks that may harm the operations of the business extensively.
References
Chang, C. M. (2010). Service Systems Management and Engineering: Creating Strategic Differentiation and Operational Excellence. New Jersy: John Wiley & Sons.
IBM. (2012). The Smarter Supply Chain of The Future. Retrieved February 3, 2013, from The Supply Chain of the Future: https://docs.google.com/viewer?a=v&q=cache:EUane40CEU4J:www.ibm.com/vrm/tela/servlet/Asset/297861/CSCO%2520Study%252010_21_09.PDF+
Levy, M. (2001, March 2). Case Study: United Parcel Service, Inc. (UPS). Retrieved February 3, 2013, from Peachpit: http://www.peachpit.com/articles/article.aspx?p=20881
Redman, B. (2012). Risk Assessment & Contingency Planning. Retrieved February 3, 2013, from http://smallbusiness.chron.com/risk-assessment-contingency-planning-20948.html
Saralesh, S., Mukherjee, S., Das, S., & Daga, N. (2012). Strategic Planning at UPS. Retrieved February 3, 2013, from http://www.scribd.com/doc/29869566/Strategic-Planning-at-UPS
