In this article, we will see the UPS SWOT Analysis and its Competitors
Introduction
The moment you discover what UPS does, the earlier you decide to know what the company entails.
Every business has its strengths, weaknesses, opportunities, and threats. This framework influences the business and advances its operations. That doesn’t exclude United Parcel Service (UPS).
United Parcel Service (UPS) is a renowned American company for delivery and other logistics services. Founded in 1907, it has grown to become a notable firm generating billions of dollars annually. Just like every business model, UPS also utilizes these frameworks (SWOT) to influence its operations and plan strategically. Besides, some competitors also deliver similar services just like UPS. This article entails discussing some of these competitors and analyses UPS’ strengths, weaknesses, opportunities, and threats.
What is UPS?
United Parcel Service (UPS) is an American multinational firm specializing in delivering courier and logistics services across the globe. Founded by two teenagers with a $100 loan in 1907, the company has grown to be a reputable form for shipping and delivering millions of packages worldwide. Headquartered in Georgia, the firm is arguably the world’s largest courier and logistic company. Today, it operates in over 220 countries with about 540,000 employees. As of 2020, the firm generated annual revenue of 84.6 billion dollars while delivering about 24.7m packages daily. Although the firm is known for its dark brown buses, it also provides flights for its consumers. At least about 576 aircraft are used in transporting goods all over the world. In 2020, UPS recorded 2,285 daily flights to domestic and international airports. As a successful organization, the firm has many subsidiaries, including Nightline Group, Marken, UPS Mail Innovation, UPS i-parcel, UPS Logistics, and others. As of June 2020, its CEO is Carol Tome.
UPS SWOT Analysis
SWOT refers to Strengths, Weaknesses, Opportunities, and Threats. It is a popular framework used in analyzing the competitive position of a company and developing strategic plans that influence its operations. This segment analyses the strength, weaknesses, opportunities, and threats of the United Parcel Service (UPS).
Strengths of UPS
Strengths refer to the features that give the company an advantage over its competitors. Some of them include:
Large Network
UPS is arguably the largest company in the world, specializing in courier and logistics services. It is notable for its dark brown buses as it operates in over two hundred and twenty (220) countries. Thanks to their widespread network, they employ various tools to meet the demands of the consumers. Besides, it has multiple subsidiaries that enhance its daily activities. The influence and the expansion of this firm make it one of the biggest players in the supply chain industry.
Efficient Distribution Network
The company has an efficient distribution for the delivery of its packages. Its efficient distribution network makes it possible for the company to deliver packages to any corner globally. Its transportation operations are not limited to the use of vehicles. Instead, it conveys packages through various means such as air and ocean freight. It delivers a mass volume of goods per day and operates efficiently through its advanced technological system. To make things easier, UPS doesn’t stick to a distribution method. It is always revising its mode of operations to deliver through the best way for its customers.
Financial Performance
UPS is one of the key players in the supply chain industry. Since it began operations in 1907, it has witnessed tremendous growth to upscale its services. It has acquired some subsidiaries that have also become prominent in the world today. Besides, its financial records in previous years have revealed how it has performed positively. According to Statista, the generated revenue of the firm in almost a decade has soared high, establishing its prominence in the industry. For instance, UPS generated annual revenue of $45.2 billion (U.S.) in 2009. Meanwhile, it witnessed tremendous growth by 2020 as it generated about $84.6 billion (USD).
Technology and Innovation
UPS invests large amounts of money annually in technologies to improve its operations and promote growth. From information technology to plant equipment, it invests in these areas to enhance customer relationships. Besides, its investment in transport mechanisms such as vehicles, aircraft, and ships makes its logistic service efficient globally. Also, the firm utilizes different technologies such as machine learning, robotics, blockchain, and artificial intelligence to promote efficiency in all ramifications.
Competitive Prices
UPS offers high-quality services at feasible prices for its customers. This strategy is a major strength as it allows the company to stand out from its competitors. In addition, thanks to its fast shipping mechanism, customers get attracted to the company as their packages get delivered in time. Besides, this strategy also retains varying audiences and targets new ones.
Online Tracking System
UPS utilizes an advanced online tracking system to allow its customers to track their goods. This strategy also allows it to deliver a very competitive service among its rivals. As of 2020, customers were able to track about 374.2 million goods per day. Besides, UPS recorded a peak of 1.2 billion tracking requests in 2020
Customer satisfaction
UPS manages its relationship with the customers effectively. The experience many customers have had about the company shows how reliable the company is. Besides, it ensures smooth operations and efficiency as it invests time, money, and strategies to attract and retain customers. Strategies such as an online tracking system, competitive prices, fast delivery, and others target new audiences and retain old ones.
Weaknesses of UPS
Although UPS is one of the largest companies specializing in the supply chain industry, it still has some flaws. Here are some weaknesses of the firms.
Rising Operating Expenses
As the revenue of UPS continues to grow, so do its operating expenses. Over the years, the operating expenses of this country continue to grow as it leaves a notable landmark on the company’s generated revenue. Some operating expenses include workers’ compensation and benefits, high cost of purchased transportation (air, ocean, and ground freight), repairs and maintenance, depreciation and amortization, fuel, and other expenses. Data from Statista revealed that about $76.9 billion were spent on operating expenses out of the $84.6 billion generated revenue in 2020.
Reliance on the US Market
Although UPS operates in over 220 countries, its major source of income comes from the United States. This flaw alone makes the brand rely on the United States for growth and sustainability. Data revealed by the brand shows that the United States accounts for 79% of UPS’s annual revenue. Meanwhile, the revenue from the international segment is 21%. Therefore, if the United States suffers from an economic recession, the brand’s revenue will be adversely affected.
Slow Shipping during Holidays
UPS’s delivery services are not always at their peak, especially during holidays. In the holiday seasons, the shipment of goods takes a more prolonged time leaving the customers unhappy and unsatisfied. This can be a major weakness when considering the competitors’ potentials during this season.
Employees’ Treatment
Employees work under poor and unsafe conditions at the company. This undermines their productivity, affects their morale, and inhibits efficiency at the company. Reports by the New York Times show employees’ working conditions in the face of the ravaging Covid-19 Pandemic.
Opportunities
Testing Drones Deliveries
UPS has begun testing drones to enhance efficiency and smooth delivery of services. It utilizes commercial drones to speed up deliveries of items such as life-saving medical supplies and other goods. However, more efforts still need to be made by utilizing these drones to deliver goods even to residential and commercial areas within a settlement. In addition, the company still needs to employ the service of drone manufacturers to manage all drone services.
Mergers and Acquisition
UPS needs to merge and acquire smaller companies to expand into new markets.
By merging and acquiring smaller companies, it can generate more revenue from international markets. An example includes the acquisition of smaller European companies to expand into the European market.
E-Commerce Operations
UPS needs to explore and strengthen its e-commerce sector to enhance efficiency. Since it relies on logistics services, it can utilize digital technologies to carry out its operations. In addition, marketing, supply chain, customer relations, and more can utilize digital technologies to enhance the e-commerce sector.
Diversification
UPS can diversify its portfolio into other business areas to enhance the brand’s growth and development. For example, it can diversify into the B2C eCommerce retail sector by rendering services to small and medium-sized businesses. As of 2020, UPS generated revenue through three segments: U.S. Domestic (63%), International (19%), and Supply Chain Solutions (18%).
Threats
Competitive Firms
UPS is not the only company in the supply chain industry. It has varying competitors such as FedEx, Amazon, DHL, YRC, and more. Due to this, UPS has to spend more on marketing expenditure and other related services to maintain its stance. Besides, its market shares and profit margins are always under threat with the existence of these competitors.
Regulations from External Countries
UPS operates in over two hundred countries. Some of these countries have regulations that inhibit the development of international businesses. As a result, companies can encounter difficulties due to stiff regulations. In addition, the cost of complying with these regulations can affect the annual revenue in various countries.
Economic Fluctuations
Every country approaches its economic sector in different ways. While some achieve tremendous growth, others could encounter problems that slow them down. Since UPS operates in many countries, it could be subjected to economic fluctuations and even recession. Besides, the unequal gap among various currencies could have an impact on the company’s income.
Reliance on Amazon
UPS and Amazon work in the same industry. Although one slightly differs, Amazon still employs UPS’s services to deliver packages faster and enhance operations. As a result, Amazon’s partnership with UPS accounts for about 13.3% of its total revenue in 2020. According to a report, Amazon contributes a significant amount to the total revenue generated at UPS. At least more than $11 billion was generated through Amazon’s presence in the company. If Amazon decides to discontinue its partnership with UPS, it will negatively affect the company’s operations.
UPS Competitors
The United Parcel Service is not the only company operating in the supply chain industry. Other rivals are competing to optimize the best opportunities in the market. In this segment, we shall discuss four of UPS’s competitors in the supply chain industry.
FedEx
Formerly known as Federal Express Corporation, FedEx is an American multinational company specializing in shipping and delivering goods and other services. Founded in 1971 by Fredrick W. Smith, FedEx is notable for its overnight shipping process, tracking of packages while in transit, and delivery. It is headquartered in Memphis, Tennessee, and operates in over two hundred (200+) countries. As of 2020, FedEx generated annual revenue of $146.7 billion (USD) with over 650,000 employees.
Although both companies operate in the supply chain industry, there are slight differences between them. For example, FedEx is commonly recognized for its air delivery services, while UPS is notable for its ground freight (dark brown bus). Besides, FedEx often works with Apple in the e-commerce sector. Meanwhile, UPS partners with Amazon to deliver its services. However, irrespective of the differences between the companies, both share similar perspectives and continue to explore ways by which they can enhance their services.
DHL
Deutsche Post DHL is a German multinational company specializing in delivering courier and logistic services. Founded in 1969 by Dalsey, Hillblom, and Lynn, it is one of the world’s largest companies operating in the supply chain industry today. It is headquartered in Bonn, Germany, and operates in 220+ countries. In 2020, the company generated annual revenue of €66.8 billion ($78.6 billion) with over 570,000 employees.
One major difference between both companies is that DHL has a larger presence in the European and international markets. Although its activities are limited within the United States’ borders, it is more notable than UPS in the international market operating in countries such as Cuba, North Korea, Iran, Afghanistan, and many more.
DB Schenker
Created in 1872 by Gottfried Schenker in Austria, DB Schenker is another notable company specializing in delivering logistic services. Despite its creation by the Austrian gentleman, it was later acquired by a German rail company known as Deutsche Bundesbahn. Headquartered in Essen, Germany, the company handles its parent company’s logistic services by providing air, ocean, and land freight services. It also provides logistic services through contracts. It operates in more than 140 countries through 2,000 offices with about 95,000 employees. In 2020, the firm generated annual revenue of €17.7 billion. Its CEO is Jochen Thewes.
United States Postal Service (USPS)
The United States Parcel Service, also known as the U.S. Mail, is a postal agency operating independently from the U.S. government. Formed in 1971, it provides related postal services for people of the United States. Although its purpose is to the United States, it also operates internationally by delivering mails to Italy, France, Japan, Canada, Germany, Australia, and the United Kingdom. In the United States, it operates through 34,000 retail locations and serves about 161. 4 million email addresses. With over 495,000 career employees, it generated annual revenue of $73.1 billion (USD) in 2020. Statistics revealed that the company delivers about 429.9 million mail per day. Although it is a state-owned company, it still has to compete with private companies such as UPS, Amazon, and FedEx for financial resources.
Conclusion
United Parcel Service is arguably the largest courier and logistic service in the world. By analyzing the strengths, weaknesses, opportunities, and threats, UPS stands a chance to improve its services and stay ahead of its competitors.
