External and Internal Environment essay

United Parcel Services: Introduction

The United Parcel Services is an American courier company offering supply chain management services both to the domestic and international markets. Its headquarter is located in Sandy Springs, Georgia. The company offers services to more than 220 territories around the world.

In this paper the assessment of the internal and the external environment of a corporation is conducted and covers following issues; the strengths, weaknesses, opportunities and threats of the organization; the implications of mentioned strengths and weaknesses; the insight into tackling the threats and minimizing the weaknesses.

 

Segments of the General Environment

The UPS Corporation operates in three major segments which include US domestic package, international package and the supply chain and freight. The segments that would rank highest in the influence on the corporation are the US domestic market and the international package. The UPS controls the largest share of the US domestic market as compared to its major competitors. This control is attributed to the company’s ability to deliver excellent services to the customers. The domestic market forms the largest customer base for the company hence it strives to insulate it from penetrations of other players in the industry.

There are other major international courier companies such as the Japan Postal and Canada Postal Services. These international players compete for market share. It has affected the UPS’s ability to penetrate the markets and have a greater share. There are emerging markets such as China. Every international courier service company wants to establish a strong presence in this country. The stiff competition in the global market has made the international package segment of this corporation not have a great market share. However strong measures are being taken so as to remain relevant through technological advancement and increased geographical coverage.

The Five Forces of Competition

The five forces of competition include:

  • Threat of new entrants to the industry;
  • Bargaining power of buyers;
  • Bargaining power of suppliers;
  • Threat of substitute products or services;
  • Rivalry among existing competitors.

In this context two forces will be discussed to understand how they affect or affected the corporation.

Rivalry Among Existing Competitors

The major competitors of the United Parcel Service corporation are both domestic and international companies. The domestic competition arises from the United States Postal Service (USPS) and FedEx. The major international competitors include Canada Post, DHL express, Royal Mail, Japan Post as well as national postal services and air cargo handlers.

Courier business is quite competitive. However, the company has improved its technological expertise in recent past that has enabled the customers to conduct their shipping and logistic business activities at a considerably lower cost receiving excellent service and improved efficiency. The online service platform is an example of the technological advancement that makes the UPS Company achieve a competitive edge.

Threat of New Entrants to the Market

There are emerging courier services in the global market. Their appearance leads to limited market shares of the existing corporations. The national postal services in the individual countries pose a great threat to the operations of the UPS.

To combat this, UPS has strengthened its presence in the other counties in recent past through better service delivery and technological advancement. Being a renowned brand with vast asset base, the threat of new entrants has been neutralized.

How to Address the Two Forces in the Near Future

The company can tackle the rivalry among the existing competitors in the near future by streamlining its operations to always be at par with the government regulations in every country. This will eliminate the penalty and contract terminations thereby reducing firm’s debts and increasing the asset base.

Technology is revolutionizing every aspect of the courier business hence the UPS corporation should ensure continuous innovations and technological advancement in service delivery in the near future. This will give it a competitive advantage and neutralize the pressure of new entrants in the market.

External Threats and Opportunities Affecting the Company

Threats

These are threats that stem from the external environment in which the corporation operates. These include;

  • State of the economy. Due to the recent global economic recession, various world economies suffered a significant decline in economic growth over the years. The United States economy was not exclusion. This economic meltdown led to decline in the purchasing power of the population. The United Parcel Service chain recorded a decline in profit over that period.
  • Volatile oil prices. Fluctuation in oil prices is a major threat to the operations of this courier service. The corporation depends on oil to be able to deliver its services to the customers, both domestic and international, by use of its airplanes and trucks. Rise in oil prices results in increased cost of operations hence pressures on the profit margins.
  • Government regulations. The corporation must always comply with the existing government regulations in the countries it operates. This includes laws regarding the non-package business, food and drug restrictions on the transport of pharmaceuticals in addition to state and federal lending regulations. These laws often impose added costs to the operations. If the laws are not followed the fines and penalties or even termination of the corporation’s contracts can arise. Overall cost structure of the company can be affected in the long run.

Opportunities

There exists various opportunities for the company to explore. They include:

  • The greatest opportunity available for the Corporation is the geographical expansion. It gives a great chance for the company to expand its existence and to cover strategic areas and enjoy a significant market share.
  • The expansive Chinese markets. The Chinese population is over 1 billion people. This expansive market is a good opportunity to explore.
  • Online shopping. Advance in technological competence of the corporation in the online shopping platform can result in increased sales. The company should therefore exploit it to increase the margin of profits.

The greatest threat is the government regulation and various legislations. The company should put into consideration all the relevant documents and ensure that they are assembled and are at par with the regulations before venturing into new international markets. This will minimize the risks of fines and termination of contracts.

 The greatest opportunity is the expansive Chinese market. The company should take this advantage by properly exploring this ready market. Assuming that a big Chinese population has access to the Internet and relevant technological knowledge the company can use the online shopping mechanism to reach such population. This will increase sales and the profit margin of the corporation.

Corporation’s Greatest Strength and Significant Weakness

This corporation’s greatest strength is the strong market position. This differentiates it from both the domestic and international competitors. Its returns are quite superior.

The strategy the company can employ to take advantage of this strength is diversification of its supply and advancement in technology. Being a trusted brand, the corporations will be easily sold when it ventures into new markets. This will act as a deterrent if any new company enters the industry.

The most significant weakness is the geographical concentration. The company is excessively dependent on the US market hence it does not have a large market share in expansive markets such as Chinese.

The strategy the company can use is to employ its resource capabilities to venture into other international markets, such as China, so as to insulate the US based market. Increasing the geographical coverage will result in increased international market share hence increased sales.

Companies Resources, Capabilities and Core Competencies

The resources can be divided into:

  1. Physical resources which include the plane fleet, truck fleets, warehouses among others;
  2. Human resources which are the company’s workforce;
  3. Intangible resources.

The capabilities include the inbound logistic, sales and marketing, outbound logistics, operation management and service delivery.

The core competency which is aimed at increasing customer value includes; product variety and up to date technology that enhances service delivery.

The Value Chain

This depicts how a customer value is derived along a series of activities that lead to creation of a final product or service. A corporation’s value chain is a reflection of its history, its strategic plans and choices and the economic implications of the activities. The UPS corporation value chain can be divided into:

  • Operations – packaging and transportation;
  • Outbound logistic – processing of customers’ orders and distribution;
  • Service – delivery of the cargo;
  • Inbound logistic – warehousing for storage and handling of the materials;
  • Marketing – direct customer communication and management of the channel operations.

Among the value chain listed, the company needs to use its resources, capabilities and competencies much more to improve the service delivery. This can be done through improved technology and speed. Improved service delivery creates customer satisfaction thereby increasing the customer loyalty.

Conclusion

The UPS company is one of the world’s leading courier service providers and the largest in the US. Analysis of its external and internal environment has shown that the corporation is in a position to compete both domestically and internationally. However, it is also evident that the corporation needs to use more resources to penetrate the international markets, such as China, so as to increase its sales and position in the global market.

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External and Internal Environment essay

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