Sunday, December 8, 2019

Business and Strategic Management for UPS

Question: Discuss about theBusiness and Strategic Management for UPS. Answer: Introduction The Porters five force study is a structure for evaluating the five forces that create each industry and it assists in analysing its strong points and weaknesses. Organisations use Porter's method to ascertain their competition in particular industry. This model was founded by Michael E. Porter. Porter analyse various micro and macro environment factors to establish this model. The model is based on five principles, which are, the risk of new competition, buyers negotiation power, sellers negotiation power, the risk of alternatives and competition in an industry. This report will analyse these five principles and apply them to the business of UPS India. UPS United Parcel Service or UPS is the largest parcel distribution enterprise worldwide, founded in 1907 by James E. Casey. The company has its operations in more than 220 countries and it serves around 15 million packages each day. The firm has more than 7.9 million consumers and their profit in 2016 was US$60.906 billion. UPS started its operation in India with their deal with Jet airways in 2005. This allows the company to open their first UPS store in Mumbai. To enhance its business in India, UPS associated with AFL Private Ltd in 2008 (Laffaldano, Bodin and Sambridge 2013). Porters Five Forces Risk of New Entries According to Rothaermel (2015), a companys operations are influenced by the force of new competition in the industry. The threat of new competition depends upon lower costs and less time for an opponent to enter the same industry. A high number of competitors weaken the position of a company in the industry. In case of UPS India, the risk of new competition is low in Indian courier market. Due to the high investment cost of starting up a business and the economic scale provided to UPS, it is hard for new companies to enter the market. Organisations required a high amount of capital investment for starting their delivery company at the same scale as UPS. The economic scale of UPS is high in Indian courier market which allows them to deliver their packages at significantly low rates. The company can manage to charge lower rates because of the high number of packages they received daily; other smaller companies cannot provide the same facilities (Chesbrough 2011). Negotiation Power of Buyers A customer is a key ingredient for a successful business of an organisation. The customers ability to easily switch companies can adversely affect the companys position in the industry. For example, if it is difficult and costly for customers to change their service provider, then the service provider has a strong position in the market. In case of UPS India, the buyers ability of customers is medium. The company has many loyal customers who prefer their services, but due to globalisation, the customers have many other inexpensive choices as well. The customers can easily change the services of UPS if they find new cheap services, but the premium services provided by UPS such as overnight delivery and faster international delivery are difficult to change (Chakravarthy 2011). Negotiating Power of Suppliers The bargaining power of suppliers refers to the power that a supplier has over an organisation. The ability of the supplier to raise the prices of their products referred as their negotiation power. It depends on the uniqueness and prices of the products supplied by the sellers. According to Magretta (2011), highly priced and unique products can allow a seller to raise the prices of their products which affect the position of a company is the industry. In case of UPS India, the bargaining ability of suppliers is medium since they have some amount of control over the operation of UPS. Many of the delivery vehicles that UPS used to deliver its packages are owned by different corporations, such as Budget and Swift Transport. Therefore, these corporations have bargaining power over the company. The one-day delivery or urgent international delivery partner of UPS is The Boing Corporation. But, UPS has signed an agreement which forces them to not raise their prices. If the company decided to change its supplier, they may have to incur a huge amount of expenditure. Risk of Alternate Options The alternatives are the products and services provided by the competitors, which allow customers to change the company. For example, a company has a weak position in the industry if a competitor can easily replace its products and services. UPS India has a low risk of alternative services because there are not many companies who provided international services such as UPS. The contract between AFL Private Ltd and Jet Airways allow the company to gain competitive advantages since only some of its competitors have the same scale of investments. If customers required shipping his product internationally overnight or shipping to a rural place, a UPS employee can drive and deliver that package on time (Hemmatfar, Salehi and Bayat 2010). Competition Rivalry A high number of competitors affect the companys position in a particular industry. The competitors allow suppliers and buyers to dictate the authority of an enterprise. Suppliers and buyers can easily change companies if they find more suitable deals for them. For UPS India the competitive rivalry is medium in the industry. The paper of Marshall (2013) provided that, there are many competitors of UPS in the markets such as DHL, FedEx, and USPS, and the rivalry between them is intense. But UPS has established them as a flagship courier service in the market. Their deal with Amazon allows them to gain a competitive advantage since Amazon is Indias biggest online retailer (Crew and Kleindorfer 2012). Figure 1: Porter Five Forces (Source: UPS 2016) Conclusion The above report concluded that UPS India has gained a unique spot in Indian courier market. The company has the disadvantage of supplier and competition, but their unique services provide them with an advantage over its competitors. The company can enhance its market in India by introducing new stores in rural areas and improving their services. New acquisition can assist in companys rapid growth and sustainable future development. References Chakravarthy, B. and Coughlan, S., 2011. Emerging market strategy: innovating both products and delivery systems.Strategy Leadership,40(1), pp.27-32. Chesbrough, H.W., 2011. Bringing open innovation to services.MIT Sloan Management Review,52(2), p.85. Crew, M.A. and Kleindorfer, P.R. eds., 2012.Managing change in the postal and delivery industries(Vol. 25). Springer Science Business Media. Hemmatfar, M., Salehi, M. and Bayat, M., 2010. Competitive advantages and strategic information systems.International Journal of Business and Management,5(7), p.158. Iaffaldano, G., Bodin, T. and Sambridge, M., 2013. Slow-downs and speed-ups of IndiaEurasia convergence since: Data-noise, uncertainties and dynamic implications.Earth and Planetary Science Letters,367, pp.146-156. Magretta, J., 2011.Understanding Michael Porter: The essential guide to competition and strategy. Harvard business press. Marshall, S., 2013. Evaluating the strategic and leadership challenges of MOOCs.Journal of Online Learning and Teaching,9(2), p.216. Rothaermel, F.T., 2015.Strategic management. McGraw-Hill Education. UPS., 2016. Business Strategy. UPS Blog. Retrieved from

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.