United Parcel Service, Inc.

BUAD 6900:001

Strategic Management Capstone

Spring 2024

Final Case Analysis

Team: Digby

Team Members:

Gokul Babu Hariharan Chandiran

Viknesvaran Coimbatore Kadhirvel
Vijayaraj Kadaieswarar Ramasamy
Vetrivel Kumar
Jabadurai Martin
Logisa Nithyanandam
Nandhika Sampathkumar
Tharunkumar Saravanamoorthy
Ramapriya Srinivasan
Adharsh Surendran
EXTERNAL ANALYSIS:
Political
Trade:
The U.S.-Mexico-Canada Agreement (USMCA) replaced NAFTA on
July 1, 2020. UPS stands in support of policies promoting free and open trade,
which benefit its global operations and customer network. Balancing efficient
customs clearance with strong security measures is vital for timely deliveries
and avoiding disruptions in cross-border trade. UPS also advocates for raising
de minimis thresholds, which determine duty-free import values, as these
impacts e-commerce shipments and fosters fair competition.

Regulation:
UPS aims for fair taxation, striving for equitable corporate tax treatment
compared to competitors and avoiding undue tax burdens. Additionally, UPS
supports regulations that strike a balance between safety, worker welfare, and
environmental considerations, ensuring they remain commercially reasonable
without imposing excessive costs. Labor and employment regulations, such as
minimum wage standards, overtime rules, and worker classification,
significantly affect operational expenses and workforce management, prompting
UPS to closely monitor and engage in relevant discussions.
Economic
Fuel Costs:
UPS faces challenges related to volatile fuel prices, which directly impact
transportation costs and profitability, necessitating fuel hedging strategies.
Geopolitical instability, particularly in oil-producing regions, poses additional
risks by disrupting fuel supply chains and exacerbating price fluctuations.
Furthermore, the transition to alternative fuels presents complexities and
expenses for UPS, as investments in alternative fuel vehicles are costly, and the
infrastructure and cost-effectiveness of these fuels are still evolving,
underscoring the need for strategic planning and investment.
Labor Market:
UPS contends with challenges related to skilled labor shortages, as
finding, and retaining qualified personnel such as drivers and mechanics
becomes increasingly difficult amid competition and demographic shifts.
Additionally, rising labor costs driven by factors such as increasing minimum
wages and benefits, as well as intensified competition for workers, can directly
impact UPS's profitability. Moreover, unionization efforts among employees
present potential risks, as they may result in higher labor costs and could affect
the company's operational flexibility, highlighting the need for strategic
workforce management practices.

Sociocultural
Workplace Diversity and Inclusion:
UPS prioritizes ensuring equal opportunities and representation, striving
for gender, racial, ethnic, and LGBTQ+ inclusivity across all organizational
levels. Efforts are directed towards addressing unconscious bias and
discrimination to foster a fair and inclusive workplace environment for all
employees. Additionally, UPS focuses on bridging the digital divide by
providing access to technology and training opportunities to all employees,
regardless of their backgrounds, ensuring everyone has the tools and resources
needed for success.
Work-Life Balance and Employee Well-being:
UPS recognizes the challenges faced by frontline workers, such as
delivery drivers, who contend with demanding schedules and long working
hours to meet tight deadlines, potentially impacting their work-life balance and
overall well-being. Addressing concerns about job security and fair
compensation is crucial to maintaining employee morale and engagement. UPS
also prioritizes mental health and stress management, offering resources and
support to help employees cope with the pressures of their roles and maintain
positive mental well-being.

Technological
Network Optimization and Automation:
UPS faces the challenge of balancing scalability and efficiency in
managing its extensive network of hubs, sorting facilities, and vehicles,
necessitating continual optimization to meet fluctuating demands effectively.
The adoption of automation at different network points offers potential
efficiency improvements but demands substantial investment and careful
consideration of its impact on the workforce. Additionally, UPS emphasizes the
importance of real-time data integration and analysis, leveraging data from
diverse sources such as vehicles, sensors, and customer interactions to optimize
routes, forecast demand, and enhance decision-making processes.
Cybersecurity Threats:
UPS prioritizes protecting sensitive data by implementing robust
cybersecurity measures to safeguard customer information, delivery routes, and
financial data, aiming to prevent breaches and data leaks. Ensuring the security
of its IT infrastructure remains paramount, with UPS continuously updating and
fortifying its systems against evolving cyber threats and vulnerabilities.
Moreover, as UPS adopts increasingly sophisticated technology and connects
more devices, the company is attentive to managing the expanding attack
surface for cybercriminals, emphasizing proactive measures to mitigate
potential risks.

Emerging Technologies and Integration:

UPS is leveraging AI and machine learning technologies to optimize
routes, detect fraud, and predict maintenance needs, enhancing efficiency and
decision-making across its operations. Additionally, UPS is exploring the
potential of blockchain technology for secure and transparent tracking of
shipments and supply chains, aiming to improve transparency and reliability.
Furthermore, UPS is considering the integration of autonomous delivery
vehicles such as drones and ground robots into its network to potentially
enhance reach and efficiency, although this advancement raises regulatory and
safety considerations that require careful management.

Environmental
Climate Change and Carbon Emissions:
UPS acknowledges its substantial contribution to greenhouse gas
emissions as a major logistics company with a vast fleet of vehicles and aircraft,
which impacts climate change. To mitigate this impact, UPS is actively pursuing
strategies to reduce emissions, including improving fuel efficiency, investing in
alternative fuels and electric vehicles, and optimizing delivery routes.
Additionally, UPS has set ambitious carbon neutrality goals, aiming to achieve
carbon neutrality across its operations by 2050, demonstrating its commitment
to environmental sustainability and emission reduction efforts.

Air Quality and Noise Pollution:

UPS recognizes the environmental impact of delivery vehicle emissions,
particularly in congested urban areas, where they contribute to air pollution and
noise, affecting public health and the environment. To address this issue, UPS is
prioritizing sustainable fuel choices, such as electric vehicles and biofuels,
which offer significant reductions in air and noise pollution. Furthermore, UPS
is exploring innovative urban delivery strategies, including the use of cargo
bikes and micro-hubs, to further minimize emissions and noise pollution in
urban areas, demonstrating its commitment to environmental sustainability and
public health.
Legal
Employment Law:
UPS faces various compliance challenges, including navigating complex wage
and hour laws such as minimum wage requirements, overtime pay, and meal
break regulations across different regions. Additionally, UPS is committed to
preventing and addressing allegations of discrimination or harassment based on
protected characteristics such as race, gender, disability, or age, promoting a
safe and inclusive work environment for all employees. Furthermore, UPS must
ensure proper worker classification to comply with labor laws and avoid
misclassification lawsuits, distinguishing between employees and independent
contractors according to legal guidelines.

Data Privacy and Security:

UPS faces challenges in complying with data privacy regulations such as
GDPR and CCPA, which govern data collection, storage, and usage,
necessitating adherence to strict standards. Additionally, UPS prioritizes
safeguarding customer data from breaches and cyberattacks to mitigate potential
legal consequences and uphold trust. Moreover, UPS emphasizes transparency
and user consent, ensuring compliance with regulations by obtaining and
managing user consent for data collection and usage, demonstrating its
commitment to protecting customer privacy and maintaining regulatory
compliance.
Analysis using Porter's Five Forces model:
Threat of New Entrants:
Low Threat: The logistics and package delivery industry has high barriers
to entry, primarily due to significant capital requirements. Establishing a
global network, acquiring fleets of vehicles and aircraft, and investing in
advanced technology are substantial barriers for new entrants. UPS's
extensive infrastructure, brand recognition, and economies of scale further
discourage inexperienced players from entering the market easily.

Bargaining Power of Buyers:

Moderate to High Power: Buyers, which include businesses and
consumers, have moderate to high bargaining power. While individual
consumers may have limited bargaining power, large businesses that require
substantial shipping services can negotiate prices and service terms.
With multiple logistics providers available, buyers can switch between
companies easily, providing them with some leverage.

Competitive Rivalry:
High Rivalry: The logistics industry is highly competitive, with major
players like FedEx, DHL, and regional carriers intensifying competition.
Price wars and service innovations are common in this space. UPS faces
 constant pressure to differentiate itself through technology, service quality,
and global coverage to maintain its market share. The industry's maturity
contributes to intense rivalry as companies vie for the same pool of
customers.

Bargaining Power of Suppliers:

Moderate Power: Suppliers in the logistics industry, such as aircraft
manufacturers, vehicle suppliers, and fuel providers, hold moderate power.
While there are multiple suppliers available, certain specialized components
may have limited alternatives. Fluctuations in fuel prices can impact UPS's
operational costs, and negotiations with suppliers are essential to maintaining
cost efficiency.
Threat of Substitutes:
Low Threat: The threat of substitutes for traditional package delivery
services is low. While alternative transportation modes exist, such as in-
house logistics or self-delivery for businesses, the specialized and global
nature of UPS's services makes it challenging for substitutes to match the
scale, efficiency, and reach of dedicated logistics providers. Additionally, the
 rise of e-commerce has increased the reliance on third-party logistics
services.

Opportunities
 E-commerce growth: UPS has a great chance to increase its services and
market share as e-commerce continues to rise. With more people making
purchases online, there will be a greater need for trustworthy and
effective package delivery services.
 Emerging markets: Growing operations in these regions, especially in
Latin America, Africa, and Asia, can provide fresh revenue streams and
diversity. These markets have a fast-expanding e-commerce sector, a
burgeoning middle class, and rising internet usage.
 Expansion of logistics and supply chain services: To serve a wider range
of clients and sectors, UPS can expand its supply chain and logistics
management services. This can entail providing specialized services for
sectors like healthcare, technology, and the automobile industry—all of
which depend heavily on effective logistics management.
 Strategic partnerships and acquisitions: UPS can broaden its service
portfolio, boost its global presence, and diversify its company by forming
strategic alliances or purchasing businesses in related industries.
Additionally, this may improve UPS's ability to compete in the market.

Threats
 Intense competition: UPS is up against national postal services like USPS
as well as other international logistics firms like FedEx and DHL. In
addition, UPS faces further competitive pressure from the emergence of
e-commerce behemoths like Amazon, who have built their own delivery
 networks. Price wars, a loss of market share, and the requirement for
ongoing innovation might result from this competition.
 Regulatory changes: Several international, national, and municipal rules
apply to the logistics and package delivery sector. Modifications to these
rules, especially those pertaining to labour, environmental, and
transportation laws, may have a substantial effect on UPS's operations,
raise expenses, and provide compliance issues.
 Labor issues: Being a major employer with a sizable, unionized staff,
UPS is vulnerable to possible labour disputes, strikes, and higher labour
expenses. The company's reputation may be damaged, operations may be
disrupted, and customer satisfaction may be impacted.
 Pandemics and natural disasters: Hurricanes, earthquakes, floods, and
other natural calamities pose a risk to UPS's operations, as does the
COVID-19 pandemic. These occurrences may cause operational
disruptions, have an impact on the company's supply chain, raise
expenses, and lower customer satisfaction.

References:
 https://www.ups.com/us/en/support/shipping-support/legal-terms-

conditions/us-mexico-canada-trade-agreement.page

 https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?

n=pet&s=emm_epm0_pte_nus_dpg&f=m
 https://www.statista.com/statistics/940072/market-share-of-couriers-

local-delivery-providers-united-states/

 https://thestrategystory.com/blog/ups-pestel-analysis/

 https://thestrategystory.com/blog/ups-swot-analysis/

 https://dcf.fm/blogs/blog/ups-pestel-analysis

 https://dcf.fm/blogs/blog/ups-swot-analysis

 https://cheshnotes.com/ups-pestel-analysis/

 http://fernfortuniversity.com/term-papers/pestel/nyse4/3235-united-

parcel-service--inc-.php

 https://www.ipl.org/essay/PESTEL-Analysis-Pestel-Analysis-Of-UPS-

FJSEZQ3RG

 https://www.247caseanalysis.com/essay/UPS-12655-Pestel-Analysis

 https://pestleanalysis.com/ups-swot-analysis/

 https://www.essaypandas.com/essay/UPS-12655-Pestel-Analysis

 https://www.coursesidekick.com/business/217259