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United Parcel Service Sources of Competitive Advantage

UPS sources of competitive advantage.
UPS sources of competitive advantage

United Parcel Service is a leading package delivery brand in the world with its headquarters in the US. However, the company has maintained a strong global presence through its air and ground network. UPS operates one of the largest air networks in the world based on the hub and spoke model. United Parcel Service was founded in 1907 and since then it has grown to become the largest package delivery company in the world that makes deliveries to 220 countries in the world. Apart from being a package delivery company, United Parcel Service is also a provider of premier supply chain solutions. During 2019, the company delivered around 5.5 billion packages in total. Apart from operating one of the largest airlines in the world, the company also operates one of the largest fleets of alternative vehicles in the world. While the package delivery industry has seen a lot of growth in recent years, driven mainly by the growth of e-commerce, the industry is also experiencing higher competition. However, the competitive position of UPS is strong which is mainly because the company has achieved several sources of competitive advantage. Some of the main sources of competitive advantage of UPS are discussed below.

 Efficient Multimodal Network:

The integrated global air and ground network of UPS is the most extensive in the entire industry. The company provides all types of services including air, ground, domestic, international, commercial and residential through a single pickup and delivery network. Apart from that UPS has extensive air freight, ocean freight, ground freight and logistics networks which add to its capabilities in the global transportation and logistics market. Through its sophisticated engineering systems, the company optimizes its network efficiency and asset utilization.

Global Presence:

UPS is a global brand that delivers its services across 220 countries and territories. The company has established a significant presence in all the major economies of the world including the United States and China. While the United States is the leading market for UPS, Europe and the emerging markets in the Asian region apart from China are also strategically important markets for UPS. 

Technology:

Technology is a critical source of competitive advantage in the global package and parcel delivery industry. Apart from performance optimization throughout the system, technology enables efficiency, higher productivity and helps the company save time and minimize its operating costs. Technology is behind every service that UPS offers as well as every operation throughout its system. UPS is also a global leader in the area of technology development for supply chain and freight management. Technological solutions offered by UPS enable the shipping and logistics business processes to lower costs, improve service and increase efficiency. UPS offers several online options that enable its customers to integrate UPS functionality into their own businesses to send, manage and track their shipments with higher convenience. Apart from that the technological solutions offered by UPS also enable its customers to provide better information services to their customers. Thousands of customers have integrated UPS tools into their websites directly. The company provides technological infrastructure for these internet-enabled tools. In this way, technology has helped UPS serve its customers better which is critical for higher customer satisfaction. 

Broad Range of Services:

The company offers a broad range of services to the customers located throughout the world in several corners. The customers are free to select the delivery options that are the most appropriate for them. UPS also offers a large range of supply chain solutions including freight forwarding, truckload brokerage, customs brokerage, order fulfillment, and returns management. In this way, the company supports the supply chains of several large companies in the industry that use the services offered by UPS for managing their globally scattered supply chains.

Customer Relationships:

Managing stronger customer relationships can also be a strong source of competitive advantage for large and global businesses. UPS focuses on building and maintaining long term customer relationships. This helps the company retain a larger number of customers. Each day UPS serves approximately 1.6 million shipping customers and delivers packages to more than 9.9 million delivery customers. An important growth strategy that UPS has adopted to grow its sales and revenue is cross-selling across its existing customer base. The company cross-sells its small package and supply chain solutions throughout its customer base for superior growth and to manage higher profits.

Brand Equity:

In a highly competitive industry environment, brand equity is not just a differentiator but also a major source of competitive advantage. The more the customers trust your business, the stronger is your competitive position in the market and the industry. As a leading package delivery services provider, UPS has built a strong reputation in the market. The UPS brand stands for quality, reliability and service innovation. The company has created a distinctive brand image and also focused on differentiation in other aspects of its business. The UPS vehicles have a distinctive appearance and the drivers at UPS are professionally trained to be highly courteous to the customers. 

Organizational culture:

The unique organizational culture at UPS is also a distinct source of competitive advantage for the brand. Since its foundation, UPS has adopted a distinctive employee-owner concept. The result has been higher dedication from the employees. The employee stock ownership tradition at UPS dates back to 1927. UPS owners created the first employee stock ownership program in 1927 since they considered it was vital to the foundation of a successful global business.

Financial Strength:

The financial strength of UPS is also a significant source of competitive advantage for the brand which has enjoyed consistent financial growth over the last five years. In 2019, the net revenue of UPS grew to $74.1 billion from $71.9 billion in 2018. The US domestic package which is the largest business segment of UPS accounted for around 59% of the net revenue of the company in 2019. The total operating profit of the company grew to $7.8 billion in 2019 from $7 billion in 2018. Amazon is the largest customer of UPS that accounted for 11.6% of the consolidated revenues of the brand in 2019. The financial strength of UPS allows it to achieve a global scale, to invest more in its employees, technology, and infrastructure. Moreover, its financial strength also enables UPS to pursue strategic opportunities that facilitate faster growth as well as service its obligations and return financial value to the UPS shareholders.

Other sources: UPS annual report 2019.

Written by Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.

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