Introduction:
United Parcel Service or UPS is the world’s largest parcel delivery company. Although bulk of its sales come from the United States of America’s domestic market, the company has large presence around the world. The company had a humble beginning, and it was started as brainchild of few teenagers. However, the company continued to grow, and it is now the world’s largest parcel delivery company.
The previous fiscal year (2012) was a tough year for the company where its revenue fell by a large percentage. However, the overall position of the company is still positive, and it aims to grow further. The company’s previous growth strategy has been acquisition of companies around the world. It has bought companies in Europe, Turkey, and Italy in order to fuel its growth. The company is also looking to acquire companies in Asia, Middle East, and Africa to further increase its growth rate.
The company should also look to target the new segments because the margins in the current businesses on the company are falling. By entering the new market, and new segments, the company will extend its product and business life cycle. There are several strategies that the company can use such as product development, related diversification, and integrating with companies around the world. This will counter the two declining trends of the company such as declining margins, and declining business.
The closest rival to United Parcel Service (UPS) is FedEx. FedEx has also adopted an aggressive policy, and it is also on a prowl for acquiring new company around the world to fuel its growth. The company is also trying to expand its business in the US market as well, and it is trying very hard to provide tough competition to UPS in its own territory. There is declining revenues for the company in US Domestic Parcel Service, and growing competition in the international market as the number of countries is increasing. There is also a unique opportunity for the company as the export business is increase, and global trade is also increasing at a very fast rate.
Looking at these events, it can be predicted that the fight for more market share, and even retaining the current market share won’t be easy. UPS needs to act proactively, and should try to develop a strategy that will make sure that it continues to grow at a fast rate, and at the same time it can defeat aggressive competitors like DHL and FedEx. The fight is hard, but if United Parcel Service sticks to its basic principles, it can easily defeat FedEx and DHL.
Recommendations:
The case study clearly tells us that integration and acquisition is what the companies in this industry are practicing. It is an ideal way to gain access to new markets, and to get hold of new technology. For example, in the past UPS also acquired several companies in Italy, Turkey, and the UK to fuel its growth. It even acquired a pharmaceutical company to gain access to the medicine logistics. This strategy should be continued. The company should try to gain access to the rich markets of Middle East, South Asia, and Africa by acquiring or merging with the companies in this region. The ideal approach for UPS would be to horizontally integrate with these companies. It will help the company to easily enter into the new market, and it will not have to obtain the license and go into the legal complications from the scratch. DHL and FedEx are also doing the same thing. Therefore, timing in acquiring and merging the company is key. UPS should act proactively, and should select its partners in these regions quickly so that the competitors do not enter these unexplored markets before UPS. Another good option for the company would be open up its offices in the unexplored markets. It will give UPS the first mover advantage before DHL and FedEx, and it would also help the company to grab the market share before the competitors even get a sniff.
The company should also embark on another strategy. This strategy involves a little diversification, and since the company already has the best logistics it can beat the competition. The recent trends show that the consumers are massively inclined towards only purchasing or e-commerce. Later these products are delivered to the customers using UPS, DHL, FedEx and other logistics companies. Since, UPS (United Parcel Service) already has a large logistic network, it can establish an online store or e-commerce itself. The market is growing rapidly around the world, and the number of consumers making online purchases is increasing with each passing day. The case also tells us that UPS heavily relies on the ecommerce services, and it has become a major chunk of the company’s business. Therefore, the company should take advantage of its large logistic network, and good brand reputation to enter into the online retailing industry. This will increase the company’s fledgling revenues, and will convert the company’s profitable chunk into a new business opportunity. This will involve the company to pursue product development and related diversification policy.
Another for the company is market penetration in the new segment. It should beat the competitors in the online retailing industry by offering the lowest possible rates. United Parcel Service (UPS) will have to sell the products at the low margins. This strategy will initially increase the investment of the company, and it will reduce return on assets, and profit margins. However, in the long run it will be more profitable, and will decrease the company’s dependence on other segments.
The company cannot retrench or reduce any segments which have falling margins. The company is only in the sectors which are generating good revenue for the company. The company needs to adopt just the policies as suggested in the paragraphs above. It will ensure that the company continues to perform well in the long run, and it will improve the financial health of the company.
It can be concluded from the discussion that the companies with plummeting growth and margin should look for new markets, businesses, and products. Good companies proactively introduce new products, and search for new markets to continue to grow. UPS should do the same to sustain its position of market leadership, and to make sure that it does not fall behind its competitors DHL and FedEx.
References
Daft, R., & Lane, P. (2011). The leadership experience. Australia: Cengage Learning.
David, F. (2013). Strategic management concepts. Boston: Pearson.
Linton, I. (2014). Product Diversification Strategy. Small Business - Chron.com. Retrieved 6 December 2014, from http://smallbusiness.chron.com/product-diversification-strategy-40375.html
