Case Study Description of United Parcel Service's IPO
Examines the valuation of United Parcel Service (UPS) at the time of its IPO in mid-1999. Offers students the opportunity to assess UPS's current performance relative to its major competitor, Federal Express (FedEx), and to judge whether that performance is sustainable. Students then make projections of UPS's future earnings performance, estimate on IPO price, and assess the reasonableness of their estimate compared to the valuation of FedEx and best-in-class leaders.
Authors :: Paul M. Healy, Brett Laschinger, Ajay Shroff
Swot Analysis of "United Parcel Service's IPO" written by Paul M. Healy, Brett Laschinger, Ajay Shroff includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ups's Parcel facing as an external strategic factors. Some of the topics covered in United Parcel Service's IPO case study are - Strategic Management Strategies, IPO and Finance & Accounting.
Some of the macro environment factors that can be used to understand the United Parcel Service's IPO casestudy better are - – cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic ,
there is increasing trade war between United States & China, increasing commodity prices, etc
Introduction to SWOT Analysis of United Parcel Service's IPO
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in United Parcel Service's IPO case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ups's Parcel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ups's Parcel operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of United Parcel Service's IPO can be done for the following purposes –
1. Strategic planning using facts provided in United Parcel Service's IPO case study
2. Improving business portfolio management of Ups's Parcel
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ups's Parcel
Strengths United Parcel Service's IPO | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ups's Parcel in United Parcel Service's IPO Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Ups's Parcel in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the United Parcel Service's IPO Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Strong track record of project management
– Ups's Parcel is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Ups's Parcel digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ups's Parcel has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Ups's Parcel is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Paul M. Healy, Brett Laschinger, Ajay Shroff can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Sustainable margins compare to other players in Finance & Accounting industry
– United Parcel Service's IPO firm has clearly differentiated products in the market place. This has enabled Ups's Parcel to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Ups's Parcel to invest into research and development (R&D) and innovation.
Learning organization
- Ups's Parcel is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Ups's Parcel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in United Parcel Service's IPO Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Ups's Parcel has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in United Parcel Service's IPO Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Cross disciplinary teams
– Horizontal connected teams at the Ups's Parcel are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High switching costs
– The high switching costs that Ups's Parcel has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Successful track record of launching new products
– Ups's Parcel has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ups's Parcel has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Low bargaining power of suppliers
– Suppliers of Ups's Parcel in the sector have low bargaining power. United Parcel Service's IPO has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ups's Parcel to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses United Parcel Service's IPO | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of United Parcel Service's IPO are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ups's Parcel is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study United Parcel Service's IPO can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study United Parcel Service's IPO, in the dynamic environment Ups's Parcel has struggled to respond to the nimble upstart competition. Ups's Parcel has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study United Parcel Service's IPO, is just above the industry average. Ups's Parcel needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Skills based hiring
– The stress on hiring functional specialists at Ups's Parcel has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the United Parcel Service's IPO HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Ups's Parcel has relatively successful track record of launching new products.
Need for greater diversity
– Ups's Parcel has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Workers concerns about automation
– As automation is fast increasing in the segment, Ups's Parcel needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to strategic competitive environment developments
– As United Parcel Service's IPO HBR case study mentions - Ups's Parcel takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High operating costs
– Compare to the competitors, firm in the HBR case study United Parcel Service's IPO has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Ups's Parcel 's lucrative customers.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Ups's Parcel supply chain. Even after few cautionary changes mentioned in the HBR case study - United Parcel Service's IPO, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ups's Parcel vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study United Parcel Service's IPO that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case United Parcel Service's IPO can leverage the sales team experience to cultivate customer relationships as Ups's Parcel is planning to shift buying processes online.
Opportunities United Parcel Service's IPO | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study United Parcel Service's IPO are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Ups's Parcel can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ups's Parcel can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Using analytics as competitive advantage
– Ups's Parcel has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study United Parcel Service's IPO - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ups's Parcel to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Ups's Parcel can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Ups's Parcel in the consumer business. Now Ups's Parcel can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ups's Parcel can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ups's Parcel can use these opportunities to build new business models that can help the communities that Ups's Parcel operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Creating value in data economy
– The success of analytics program of Ups's Parcel has opened avenues for new revenue streams for the organization in the industry. This can help Ups's Parcel to build a more holistic ecosystem as suggested in the United Parcel Service's IPO case study. Ups's Parcel can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ups's Parcel to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Ups's Parcel to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Ups's Parcel can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Ups's Parcel can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. United Parcel Service's IPO suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Developing new processes and practices
– Ups's Parcel can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Learning at scale
– Online learning technologies has now opened space for Ups's Parcel to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats United Parcel Service's IPO External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study United Parcel Service's IPO are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study United Parcel Service's IPO, Ups's Parcel may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
High dependence on third party suppliers
– Ups's Parcel high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ups's Parcel can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Ups's Parcel
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Ups's Parcel.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Ups's Parcel.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Ups's Parcel will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Regulatory challenges
– Ups's Parcel needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Stagnating economy with rate increase
– Ups's Parcel can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ups's Parcel can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study United Parcel Service's IPO .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Environmental challenges
– Ups's Parcel needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Ups's Parcel can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Technology acceleration in Forth Industrial Revolution
– Ups's Parcel has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Ups's Parcel needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Weighted SWOT Analysis of United Parcel Service's IPO Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study United Parcel Service's IPO needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study United Parcel Service's IPO is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study United Parcel Service's IPO is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of United Parcel Service's IPO is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Ups's Parcel needs to make to build a sustainable competitive advantage.