The Union Pacific Railroad is the freight-hauling railroad. It operates in around 8300 locomotives and over 32200 miles of routes in twenty-three states in US. It is known to be the second biggest Railroad system in US, first is BNSF. Union Pacific Railroad is principal company of operation of Union Pacific Corporation. The company is headquartered in Omaha. The company is specialized in shipping anything like forest items, food, agricultural products, automobiles etc. The transportation of the company is not limited to rail only but over the road also and provide door to door service. The company offers the good transportation solutions to its customers (UP, 2019).
The article is about Porter five forces analysis of Union pacific. The model helps the company in identifying the strategic position of the company by analyzing the external factors. It will help in determining the opportunities and threats of the company for future growth. The model has five forces explained in detail below along with analysis.
Bargaining Power of Buyers
Union Pacific Railroad is facing medium or limited bargaining power of the consumers. The main reason for this, is the competition of the rail with trucks and other transportation modes. Railroad operations require diversified consumer base to mitigate the risk if any industry underperforms. This strategy of Union Pacific is very effective and brought success for the company. The company is dealing with all sorts of product transportation like chemical, automobile, intermodal etc. Moreover, Union Pacific has huge customer base because it provides road transportation too and door to door services. The company should expand itself across the whole America (Acas, 2019).
Bargaining Power of Suppliers
Bargaining power of the suppliers is high in case of Union Pacific. This is due to the fact that only few suppliers are able to provide the materials and equipment for the trains. The engineering trains service providers are few in the market. Moreover, the strict approval process increases their bargaining power as the approval is required before the item becomes infrastructure part. However, the company maintains good relationship with its suppliers and maintain it for long term. (Farshchi, Wang and Xiong, 2014).
Threats of New Entrants
Threats from the new entrants are low because of the high capital-intensive industry. This is the main fact which does not attract many new firms to enter in the industry. Moreover, the regulations and policies are strict to follow. It is not every new entrants’ cup of tea to operate in highly regularised industry. Moreover, new entrants have to compete with two big players in the industry. It is difficult for them to enjoy the economies of scale and grab the market share of them. However, threats from the new entrants in other modes of transportation is equally moderate for Union pacific (Farshchi, Wang and Xiong, 2014).
Threats from the Substitute Products
Threats of the substitute products or services in Union Pacific case is medium to high. It is important for the company to compete with the trucking industry. The increase and decrease in fuel prices become the opportunity and challenge for the company. The trucking sector is the easy substitute of the rail industry. Because of the logistically versatility and easy accessibility. Moreover, free-wheeling trucking sector does not face the strict regulations which rail industry faces. Railway system is little complicated as compare to trucks. Thus, it is important for the Union Pacific to subsidize its networks in establishing different territories (Acas, 2019).
Rivalry of Existing Players
Mainly the competition is high for the Union pacific. The competition is from other modes of transportation service providers and also from railroad service providers. Primarily, the companies compete on terminal dwell, safety and speed. Railroad companies usually mark their territories as adding new routes are little complex. This is why, the Union Pacific is enjoying monopoly or duopoly in the Western states of America along with BNSF. The company is the second biggest service provider, first is BNSF. The company enjoys the competitive edge in being railroads operator. It connects the two largest railroads- Kansas City and Ferromex (Rennie, Webster, and Kim, 2014).
References
Acas, 2019. Part 2 industry Porter five forces analysis. [Online], Available at: https://www.coursehero.com/file/p4osh8k/PART-2-INDUSTRY-PORTERS-FIVE-FORCES-Analysis-of-Porters-five-forces-reveal-that/, [Accessed on: 2nd January, 2020].
Farshchi. K, Wang. Z and Xiong. X, 2014. Union Pacific Corporation. [Online], Available at:Â https://www.business.illinois.edu/finance/rcmp/research/UNP2014-12.pptx [Accessed on: 2nd January, 2020].
Rennie. A, Webster. D, and Kim. T, 2014. Supply chain and transportation strategy blog. [Online], Available at: https://scmmsublogs.wordpress.com/transportation-strategies/union-pacific-2/, [Accessed on: 2nd January, 2020].
UP, 2019. About us. [Online], Available at: https://www.up.com/aboutup/index.htm, [Accessed on: 2nd January, 2020].