United Parcel Services or UPS is a logistic company founded in 1907 as the messenger company. UPS has grown itself into one of a profitable company by focusing on objectives and goals. The company wants to enable the commerce across the world. Presently, UPS is one of a global messenger company and has been admired and recognized bands across the globe. UPS has become the world’s biggest package and parcel delivery company. It is leading the industry by providing specialized logistic and transportation services. The company is growing and managing goods flow, packages, and information in over 200 countries and different territories worldwide (UPS, 2019).
The company is having a remarkable position in the industry. Thus, the company need to have an industrial analysis in order to compete in the fragmented industry. Porter five forces model help the company in decision making by analyzing the competition level in the industry. The five forces help the company with the analysis of external factors. Here is the detailed Porter five forces analysis of United Parcel Service;
Bargaining Power of Buyers
The bargaining power of the buyers is low in case of United Parcel Services. Consumers influences the company to great extent. This low bargaining power is because the company is successful in maintaining the huge customer base. The company has loyal customer base. Moreover, very few companies are present in the industry, which provide handful services to the customers. Furthermore, the consumers are involved in global business. Thus, UPS provide the access of its services to worldwide, as there are few areas where company has no access. Company is successful in maintaining the brand image and fulfil the objective in reasonable prices (Atom, 2016).
Bargaining Power of Suppliers
Bargaining power of the suppliers is medium in the United Parcel service. This is mainly because of the suppliers of UPS have power in some aspects of the operations. The company does not own ass the vehicles for delivery and trailers. Thus, the companies like Budget and Swift transportation have the power when UPS contact them for renting vehicles. Moreover, for urgent delivery, the company has to use airplanes. The Boeing company is the main airplane supplier for UPS. Both the companies have signed contract which restrict the Boeing to increase the prices. this has limited the power of the company. However, the UPS has maintained good relationship with the suppliers (Atom, 2016).
Threats of New Entrants
Threat of the new entrant is low in the logistic and shipping industry. This is mainly because of the requirement of high capitalization, as company has to arrange vehicles, airplanes, ships, vessels etc. This require strict rules and policies to be followed by the firms. Moreover, new entrants have to build distribution and network channels in order to run the operations smoothly. It is very difficult for the new entrants to expand, as chances for this is very low. There are many big companies like DHL, FedEx, or UPS etc are present in the market, that has captured the major market share (Kumar, 2017).
Threats from the Substitute Products
As the UPS is operating in the messenger or logistic industry, it has very low substitutes and less threats. If any consumers need any product, they have to ship it from different location. No other substitute is available. The alternate could be, they have to wait for someone who can travel to the place and bring their product. However, UPS is engaged in a service industry which has no such alternative available in the industry (Atom, 2016).
Rivalry of Existing Players:
There are few companies like DHL, TCS, FedEx, UPS, etc are operating in the market. The companies are giving tough competition to each other, by providing fast and reliable services to the consumers. Moreover, every country is having its own postal and logistic companies who charge less prices. hence, consumers prefer good quality services in reasonable prices. This makes the industry more competitive. However, UPS has expanded itself in different areas of the world and successfully maintaining the market share (Kumar, 2017).
References
Atom, 2016. UPS business strategy. [Online], Available at: http://ups-teamtres.blogspot.com/p/introduction_9939.html, [Accessed on: 5th December, 2019].
Kumar, N. 2017. Porter’s Five Forces Analysis for the Shipping Industry. [Online], Available at: https://www.linkedin.com/pulse/porters-five-forces-analysis-shipping-industry-naveen-kumar, [Accessed on: 5th December, 2019.
UPS, 2019. UPS company history. [Online], Available at: https://www.ups.com/bh/en/about.page?, [Accessed on: 5th December, 2019].