Business-Level and Corporate-Level Strategies: UPS
United Parcel Service, Inc. (UPS) is an American company that is involved in the sphere of express delivery and logistics. Nowadays, it is one of the most successful players in both American and international market of delivery services. Every day, the company delivers approximately 17 million units of cargo of 9.4 million clients. The main activity of the company is an express delivery of various cargos. However, UPS also has a unit responsible for the management of supply chains. The company has its own airline, UPS Airlines, with its fleet of more than 230 jets, which is one of the largest among the delivery companies of the world, serving more than 210 countries worldwide (UPS, n.d.). Thus, it is clear that UPS has a significant competitive advantage on the market of delivery services. However, it should be noted that such success would not have been possible without the thorough strategic planning both at corporate and business levels of the company. Therefore, the following research is dedicated to the definition of the core business and corporate-level strategies of UPS, which has ensured its success, as well as the comparative analysis of those of the company’s primary competitor.
The corporate-level strategies define the breadth of coverage of the economy’s sectors and markets the company operates and competes in. Corporate strategic decisions often relate to the investment in the diversification of the company’s activities, acquisition and creation of new enterprises, the distribution of resources among the various activities of the company and the divestment (Hitt, Ireland, & Hoskisson, 2009). For UPS, in particular, these strategies involve the continuous transformation of the enterprise to strengthen its position in the market of delivery services, as well as the investment to ensure the company’s growth and include:
- Delivering a unique experience for the clients;
- Improving the processes of marketing and sales;
- Enhancing the overall performance in terms of efficiency and quality;
- Accelerating the company’s growth by improving its global structure
- Investing in the building of the company’s infrastructure and presence in the major markets (UPS, n.d.).
The enhancement of the company’s performance is the most important for its success in the long-term perspective. This statement can be justified by the fact that it is a critical component for the implementation of the other listed strategies. In particular, the improvement of the company’s performance in terms of efficiency and quality will allow the enterprise to adapt to the needs of its clients in a more flexible way, thus providing an exceptional customer experience and justifying its current slogan, United Problem Solvers (UPS: Pressroom, n.d.). Moreover, the high-quality performance will also improve the efficiency of marketing as high-quality goods and services are much easier to promote and advertise. Finally, they sell better, providing the company with the financial resources required for its growth, expansion, and diversification (Hitt et al., 2009). Therefore, the focus on this strategy is justified.
Business-level strategies define the way the firm competes in a particular industry or market. In case the firm is thriving in the industry, it must gain a competitive advantage over its rivals. Therefore, business-level strategies are often called the competitive strategies (Hitt et al., 2009). In case of UPS, they are focused on the creation of value for customers that use the company’s portfolio of logistics capabilities (UPS, n.d.):
- The creation of a competitive advantage via the implementation of supply chain strategy;
- The proposition of products and services that expand the client’s access to international markets;
- The diversification of logistic solutions for targeted industries;
- The simplification and improvement of the customers’ business processes.
The supply chain strategy is the most important for the success of the company in the long-term perspective. This statement can be justified by the fact that it is the paramount element of the company as a whole, the development of which has a direct effect on all its activities. In particular, a well-developed supply chain of the company provides the opportunities for diversification of its activities (the same logistic channel may be used for the different purposes). In addition, its modernization may allow refusing from several of its elements, thus shortening the entire supply chain, lowering the transportation costs, and, as a result, the simplification of the company’s logistic processes, making it more attractive for the customers (both the one-timers and those seeking a long-term partnership in the sphere of logistics) (Hitt et al., 2009). In turn, the overall competitiveness of the company will increase, complementing its primary strategic goals, and, therefore, justifying the selection of the supply chain strategy as a core one.
By taking into account that UPS operates both in the American and international market of delivery services, it is clear that it has a wide range of competitors on the local and global scale. However, the most significant of them are the organizations that cover the same area and operate on the same scale, which allows narrowing the search to the several larger delivery companies. In particular, UPS competes with FedEx and the United States Postal Service as well as the other international companies, such as DHL Express (UPS, n.d.). Out of these enterprises, FedEx is the most significant competitor of UPS primarily due to its strategy. From the first sight, the strategies of UPS and FedEx are quite similar as they both are focused on the performance improvement and differentiation of the activities in order to operate efficiently on the global scale. However, there are certain differences between them which define the competitiveness of these two companies. Both of the companies aim to transform themselves at the corporate level to suit the requirements of their business environment. However, UPS aims for the transformation at the global level while FedEx goes for the domestic one. Moreover, UPS is focused on investing in the new activities to increase its presence in the global market while FedEx primarily aims for the modernization of the existing processes. In addition, such transformation is closely linked with the performance improvement, the meaning of which is different for the two companies. As it was mentioned before, UPS strives for improving the quality, efficiency, and technology of its services to provide a unique customer experience. At the same time, FedEx is primarily focused on improving its own financial performance, and include the achievement of the operating margin of 10%, the improvement of cash flows, and an increase in returns to the company’s shareholders (“FedEx: Company overview,” n.d.). Such corporate-level strategies show that FedEx experiences difficulties in maintaining its finances. On the other hand, the willingness and ability of UPS management to invest in the further growth and development of the company are signs of a superior financial performance.
As for the business-level strategies, it should be noted that both of the companies aim to improve their business processes. However, UPS is focused on flexibility and efficiency of its supply chain (United Problem Solvers) while FedEx prioritizes the speed and timeliness of delivery (The World on Time) via the improvement of flight and crew scheduling, aircraft maintenance processes, and hedging its fuel expenditures through various financial products (“FedEx: Company overview,” n.d.).
In general, the strategies of UPS are more efficient, providing for the superior financial stability of the enterprise. As a result, it is clear that the company will be more competitive in the long-term perspective, especially by operating in a slow-cycle market, where the customers prioritize the quality and flexibility of services and are more prone to establish a long-term relationship with the company. On the other hand, with its focus on speedy delivery and therefore, the minimization of the order processing time, FedEx may be more successful in the fast-cycle market as its devotion to the precise scheduling will allow the company to serve more customers in a fixed period of time. In turn, not only the profitability of the enterprise will grow, but also the consumers’ awareness of it (the wide range of various customers spread the information of the firm much faster than the limited number of large ones).
Thus, the business- and corporate-level strategies define the success of the company in any sphere of activity as well as its competitiveness. However, as can be seen from the example of UPS, their significance for the firm may differ, i.e. some of them can be considered the primary (core) ones which ensure the successful implementation of the other (secondary) strategies. As a result, a thorough analysis of the company’s internal and external environment is necessary to define the most significant paths of its development and prioritize them during the process of strategic planning. Moreover, as can be seen from the examples of UPS and FedEx, even a simple analysis of the company’s strategy may provide information on its financial state, problems, strong and weak sides, and the overall direction of its development. Therefore, it is possible to conclude that strategic planning is the core component of the life cycle of any enterprise.