Case Study HBS
This paper reviews UPS against Feeder on financial statements, business strategy, performance and sustainability with revived figures and PIP article published in Harvard Business School Case Study 9-103-015. United Parcel Service Key Success Factors Main key success factors for UPS given its business strategy are developed technological infrastructure, integrated ground and air operation, economies of scale, market leader, diversified strategy (delivery solutions and supply chain management), human resource management – low turnover rate and high working culture (promotion from within), operational efficiency from rigid operational guidelines (developed by Industrial engineers, rooted In time-motion strudels strong financial reference (AAA rating), and 70 years of reputation.
United Parcel Service Key Risk Factors Main risk factors for UPS given its business strategy are that their competitiveness drives margins lower, human error – late deliveries, damaged or lost packages, worker strikes, tariffs and political barriers from expanding to International markets, losing market share In each segment- although ups Is currently the leader In ground service (1-6 days) but UPS is losing market share each year (1990: 87%, 1 999: 79%) (Healy, 2005). United Parcel Service Performance Overview Based off the Information provided in the case study, It Is safe to conclude that UPS Is presenting solid performance.
Between 1994 and 1998 net Income has generally risen from $943 to $1 ,741, and represents a CARR of 16. 6% (Healy 2005). Ups also reported average net profit margins of 6. 5% and ROE of 25. 2%, compared to its nearest competitor, Feeder, which reported 2.
8% and 10. 6% respectively (Healy 2005). Factors Driving United Parcel Service Performance and Sustainability UPS exhibits three trends: globalization, e-commerce and supply-chain management: a. N 1970. UPS has acted on this trend by expanding to other networks to match customers’ geographic locations and building capacity in non-U.
S. Markets such as Europe, Asia and Latin America (Healy 2005). B. E-commerce – As E-commerce sales are forecasted to increase, UPS has strengthened its position in this new market by becoming preferred shipper for online commerce through offering UPS functionality, pursuing partnerships with larger e-commerce players such as Ebay, and developing a returns model that allows customers to track and return products with ease (Healy 005). C.
Supply-Chain Management – Different offering compared to other parcel delivery companies.
In a competitive market it is important to distinguish yourself from others. Performance has been strong however is likely to wane in the future. The figures provided in the Case Study (Figure 3, Healy 2005) shows that overnight, deferred and ground market growth rates are forecasted to decrease in 2000-2005. However decrease in market growth will be “mitigated” by the fact that UPS is pursuing alternatives to traditional brick and mortar parcel delivery, in example implementing global delivery, e-commerce delivery and supply-chain management (logistics).
Industry relies heavily on oil but prices will continue to increase in the future. Margins will decrease and an increase in digitization will reduce the demand for sending mail, but not parcels. Feeder Performance Overview 1998 UPS Financial Analysts: 1998 Feeder Financial Analysis: Current Ratio 1. 46 1. 03 Average Collection Period 39.
95 44. 69 Fixed Asset Turnover 2. 18 18. 23 Total Asset Turnover 1 . 45 1.
64 Debt Ratio 0. 43 Interest Coverage Ratio 13. 78 8. 23 EBITDA coverage Ratio 7. 45 14.
98 Profit Margin 0. 7 0. 03 ROAR 0. 10 0. 52 ROE 0. 24 1.
27 Historically, Feeder concentrated on overnight air-express delivery whereas UPS focused on multimedia ground delivery (Healy 2005). Over time the business models have converged, and now Feeder is also looking at international delivery business as a key source of growth. Based on the financial statements provided in the case study, Feeder’s operating margins are still lower than UPS, the company is planning on using contracting drivers and trucks which are significantly cheaper.
Factors Driving Feeder Performance and Sustainability Performance wise, net income has increased from $307,777 to $631 ,333 from 1996 to 1999. This has represented a CARR of 19.
68%, which is greater than UPS. Based on provided information and current trends, Feeder is likely to take market share from UPS. United Parcel Service Performance Assessment Given this assessment of United Parcel Service’s strategy and the sustainability of its business strategy, company culture, historical financial performance, market outlook, industry outlook, and most importantly, competitors’ business strategy.