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The business-level strategy of a company is one that it follows to position itself against its rivals, anticipating the changes in technology and business environment and changing according to them, and identifying the generic strategy of the organization. In the case of UPS, the company had been one of the leading companies with a market share of 18 percent in the US after FedEx and 19 percent in Europe after DHL. The company has had a strategy using its unique Supply Chain Solution (SCS) to move any form of freight or package anywhere in the world. This system enabled the company to provide business solutions like overseeing “global freight shipments, filled orders, performed technical repair, deployed critical parts, and managed customs brokerage.” (Dess, Lumpkin, & Eisner, 2008, p. 25). For this UPS undertook vertical integration and they differentiated their product offering through their services. For vertical integration, UPS acquired companies like Menlo Worldwide Forwarding and Overnite. Further, the company gained further competitive advantage by establishing more than 3000 retail outlets all over the US, which gave them direct access to the customers.
The business segments of UPS are US domestic package services, International package operations, and supply chain and freight. In comparison, FedEx, UPS’s biggest competitor has business segments like Express, Ground, Freight, and Kinkos. UPS differentiates itself from FedEx in its product and services offering. FedEx is a purely Express Freight transporter while UPS provides customer services for companies, which provide both costs saving to the companies as well as convenience to customers. One such example is UPS’s tie-up with laptop companies like Toshiba. They repair and return laptop computers within 24 hours through the UPS store retail network. This enabled UPS to gain a competitive advantage over its competitor FedEx. UPS has gained ground as a leading 3PL (third-party logistics company) company in the US.
The revenue of UPS’s business segment from 2001 through 2006 has increased. It has increased from $30321 in 2001 to $47547 in 2006. In 2006 the US domestic packages segment gained in revenue by 6.5 percent, International packaging service by 14 percent, and Supply chain freight services by 33 percent. The overall growth rate in 2006 was 11.7 percent. Therefore, the growth rate has been maximum in the Supply chain and freight segment of UPS’s business. In terms of profit, UPS has experienced a decline in overall profit in 2006 from 23 percent in 2005 to 8 percent in 2006. The decline in profit has been due to the decline of 98 percent. Therefore, the growth percentage of the overall company has gone down. In the case of FedEx, the overall revenue has been increasing from 2002 through 2005; however, there had been a decline in growth percentage in 2006. The profit growth rate has declined in 2006 from 2005. There has been a slump in profit in that of Kinkos. This indicates that in both the companies the decline in profit has been through their retail outlets.
The main aim of both the companies is different even though they are in the same business. Based on the current analysis, it can be deduced that UPS should concentrate more on its supply chain solutions and try to gain more alliances with corporate in order to gain an upper hand in solutions business utilizing its widest range of retail outlets. On the other hand, FedEx must try to gain a competitive advantage in the overnight delivery system both in the US and worldwide. This will help both the companies gain a competitive advantage through the differentiation of their product offering and utilizing their core competencies.
References
Dess, G. G., Lumpkin, G., & Eisner, A. B. (2008). UPS and FedEx in the Express Package Delivery Industry. In G. G. Dess, G. Lumpkin, & A. B. Eisner, Strategic Management: Creating Competitive Advantages (4th Eds) (pp. 21-31). Boston: McGraw-Hill Irwin.
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