Strategic Analysis of United Parcel Service

United Parcel Service (UPS) is one of the leaders in the air cargo industry. The company provides freight services across the globe. The firm’s headquarters is in Atlanta, US, that serves more than 200 countries around the world with parcel delivery services (Badar, 2011). The company has grown from a small firm in 1907 in a basement office in Seattle into a critical industrial player with more than 200,000 drivers (Badar, 2011). The messenger enterprise has several opportunities to move forward with the aid of its competitive advantage and a strong market brand. The research paper aims at providing an in-depth analysis of the underlying opportunities available for the company, market environment, and trends likely to impact the firm’s commercial future.

Provision of online cargo services

The emergence of electronic commerce presents a growth opportunity for industrial players in the airline cargo business. With the recent technological advancement, customers prefer online shopping for goods and services to increase reliability, reduce costs, and obtain a better customer experience. The growing online marketplace provides visibility of the status of deliveries to facilitate proper planning by both the customers and the service providers (IATA, 2017). The company can introduce mobile networking apps and websites to enable online delivery of cargo services (Florido-Benítez & Martínez, 2015). The company can provide marketing services to air cargo companies through the development of mobile applications and other online platforms as consumers have developed the preference for cost-effective ways of obtaining air cargo services.

Leasing of aircrafts to new entrants

There is increased competition in the air cargo business attributed to the increase in new entrants. However, the new firms have little capacity to purchase aircraft for their operations. Therefore, there is an entrepreneurship opportunity for the existing firms to lease its aircraft and other machines such as cranes to other companies to generate more revenue. Leasing of property is becoming a norm in the industry because of the high costs of the required equipment hence UPS can increase its business portfolio by acquiring more aircrafts and cargo equipment for the purpose of leasing. There is increased growth in air traffic leading to high demand for airplanes in the market (Scholnick, Mackay & Ravinarayan, 2017). The company can enter into lease agreements with other companies since aircraft orders have created a high backlog for manufacturers and most air cargo companies are forced to wait for more time before the leading manufacturers such as Boeing make the deliveries.

Entrepreneurial opportunities

There are franchising opportunities in the air cargo market as more companies join the industry. The new companies have little knowledge of the market and low financial power thus prefer entering into agreements with the existing firms to obtain a market share. Therefore, there is an entrepreneurial opportunity for UPS to license other firms to use its developed market brand to establish themselves in the industry. The company can take advantage of the growth of air cargo across the globe to enter new markets by franchising local firms to use its trademark in exchange of royalty fees and other incomes such as the initial payment by the lessees (Boll, 2016). Therefore, franchising not only provides the company with more market opportunities in new locations but also an entrepreneurial opportunity which can increase its revenue.

The provision of big data analytics services

UPS can venture into the provision of big data analytics to firms in the air cargo industry to expand their markets across the globe. Many firms in the air cargo business are in demand of the support of big data to arrange their strategies to enhance the efficiency of their operations (Gordon et al., 2012). The big data can facilitate business intelligence leading to a proper decision-making process. The companies handle large volumes of cargo on a daily basis hence the use of big data can provide insights into the creation of new shipping routes. Therefore, the demand for big data analytics is an opportunity for UPS to venture because of the advancement in technology and increased competition.

Entrepreneurial Assessment

Provision of online cargo services is a viable opportunity for UPS as it can provide practical advantages to the firm since there is increasing demand for online cargo services such as online tracking, marketing and efficient management of orders. E-Commerce has revolutionized the air cargo service provision as the changing consumer demands call for technology-based supply chain delivery (Thamrongvoraporn, 2017). Consumers have adopted the technology and prefer making orders through online platforms provided by tech firms such as Amazon. However, most air cargo companies have not fully digitized their operations, thus are unable to serve customer demands efficiently. Therefore, the company can provide online platforms to connect cargo service providers and consumers thus enabling easy tracking of cargo.

Trends in the Industry

Changing Customer Expectations

The consumer needs and demands in the industry are changing rapidly as individuals and business organizations anticipate to obtain their inventory faster (Reinhold et al., 2013). Consumers prefer cost-effective delivery of goods as the production is increasingly becoming more customized, a situation that poses a challenge to the global air cargo industry. Customers use online platforms to make orders and track the movement of their goods unlike the traditional means thus forcing companies to digitize their operations to satisfy customer demands.

Technological Breakthroughs

Technology is changing the way air cargo companies operate as data analytics is adopted by most firms to guide proper decision making. Most businesses are automating their operations to meet market demands. Air cargo industry is experiencing technological transformation as most firms use the online platforms such as e-commerce to conduct business (Tipping & Kauschke, 2016). However, the industry is experiencing challenges in the integration of technology into cargo operations due to its complex nature.

Increase in the Number of New Entrants

The competitive environment is becoming more intense with the existence of new entrants who are taking advantage of the technological advancements (Tipping & Kauschke, 2016). The startup businesses in the air cargo industry provide support services in the value chain. For instance, provision of an interactive platform for negotiating freight charges and providing customers with information concerning companies with better prices. There is an increased competition as new entrants in the sector such as Amazon have plans to expand their market share in the air cargo industry with more than 200 flight departures per day. Leasing of aircraft is on the rise and is, mostly applied by new entrants to increase their market share.

New Collaboration Methods

Many firms in the industry are forming mergers and acquisitions, joint ventures, and strategic alliances to achieve efficient cooperation (Tipping & Kauschke, 2016). The partnership between businesses has become dynamic as traditional corporate restructuring have been replaced with new models of joint ventures aimed at increasing efficiency and ensuring standardization of the industry. Companies are using collaboration as a mechanism for expanding their markets overseas while controlling costs.

Impact of Trends on Opportunities

The change in customer demands in the market is expected to promote the company’s adoption of e-commerce as that is likely to improve customer demands. Consumers prefer online platforms to make orders and track the delivery of their goods. The industry is thus expected to initiate mechanisms of adopting the e-commerce (Tipping & Kauschke, 2016). Further, the increase in the number of new entrants is likely to intensify competition as startup firms have the advantage of using the latest technology to compete with the existing firms such as UPS.

The new collaboration initiated by the industrial players will have the effect of standardizing the services and costs leading to a proper pricing mechanism in the industry. The technological advancement in the industry is likely to have a positive impact on the use of e-commerce, and mobile apps as firms will be able to engage consumers efficiently, thus meeting their demands while reducing costs (Tipping & Kauschke, 2016). Application of data analytics will intensify business intelligence to facilitate managerial decision-making process in the industry thus promoting the demand for data analytics services. The increase in the number of new entrants will provide more franchising opportunities as new firms will seek licenses from established companies such as UPS.

Impact on Sustainability

The increased use of technology leading to automation of operations is likely to improve the sustainability of UPS. Technology will provide growth opportunities as the company is expected to increase its market share and reduce labor costs. Moreover, the ability to satisfy customer demands will be improved with the advancement of technology in the sector, thus promoting the competitive advantage of the UPS (Tipping & Kauschke, 2016). The increase in new entrants into the industry may intensify competition leading to a reduction in prices of cargo services, hence the company is likely to experience massive loss in revenue.

The new companies are also likely to initiate modern ways of conducting business because of their flexibility, thus taking a larger market share across the globe (Tipping & Kauschke, 2016). Increased competition threatens the sustainability UPS in the air cargo business as there is an imminent loss of revenue and reduction in revenue because of firms such as Amazon. The collaboration mechanisms will improve the sustainability of the company as it will gain entry into new markets smoothly by forming strategic alliances with the local firms. However, the changing consumer demands will put pressure on the company to change its established value chain process, thus disrupting business operations. The company’s assets are likely to remain idle as it focuses on the adoption of e-commerce leading to wastage.

Conclusion

The technological advancement such as big data analytics and e-commerce can be used to improve the sustainability of UPS’s operations. The company can adopt business intelligence to facilitate decision making as the e-commerce can be used to enhance customer satisfaction while reducing the cost of operations. The advancements in technology are expected to change the company’s supply chain focus towards business to consumers (B2C), hence enabling a sustainable business process.

The increased collaboration can be used to improve the company’s sustainable growth in the sector. The company can form strategic alliances with other companies to control prices in the industry. Furthermore, the partnership programs can facilitate sharing of resources and information between the players, for instance, leasing of property to reduce cost while improving growth in revenue and market share.

References

Badar, M.R. (2011). IT and competitive advantage of United Parcel Services (USA). HR mars. Retrieved from http://www.hrmars.com/admin/pics/204.pdf

Boll, R. (2016). 2016 Top Markets Report Franchising. Retrieved from https://www.trade.gov/topmarkets/pdf/Franchising_Top_Markets_Report.pdf

Florido-Benítez, L., & Martínez, B. D. A. (2015). The effects of mobile applications as a marketing tool in airport infrastructure and airlines. International Journal of Leisure and Tourism Marketing, 4(3-4), 222-240.

Gordon, J., Goyal, M., McGuire, T., & Spillecke, D. (2012, December). Big Data & advanced analytics: Success stories from the front lines. McKinsey. Retrieved from https:/www.mckinsey.com/~/media/McKinsey/Business%20Functions/Marketing%20and%20SalesOur%20Insights/EBook%20Big%20data%20analytics%20and%20the%20future%20of%20marketing%20sales/Big-Data-eBook.ashx

IATA. (2017). Air cargo serving e-commerce. IATA. Retrieved from https://www.iata.org/whatwedo/cargo/stb/Documents/StB-Cargo-White-Paper-e-commerce.pdf

Reinhold, A., Kuhlmann, A., Becker, A., & Phleps, P. (2013). Future developments regarding the air cargo market-a scenario-based analysis. Deutsche Gesellschaft für Luft-und Raumfahrt-Lilienthal-Oberth eV.

Scholnick, M., Mackay, A., & Ravinarayan, A. (2017). Why Are Airlines Leasing More Aircraft? Retrieved from https://www.icf.com/-/media/files/icf/white-paper/2018/why-are-airlines-leasing-more-aircraft-updated.pdf

Thamrongvoraporn, A. (2017, April 27). Opportunities and challenges e-commerce brings to the airfreight industry. Airfreight Logistics. Retrieved from http://airfreight-logistics.com/2017/04/27/e-commerce-brings-airfreight-opportunity/

Tipping, A., & Kauschke, P. (2016). The Future of Logistic Industry. PWC. Retrieved from https://www.pwc.com/sg/en/publications/assets/future-of-the-logistics-industry.pdf