Case study on United Parcel Service - Essay Example

Case study on United Parcel Service 1] Identify and assess the strategic challenges arising from UPS's desire to blend in with local cultures while integrating e-commerce throughout its global operations. Use your findings to suggest ways in which Alan Amling could further improve his performance as Director of E-Commerce at UPS. Introduction on UPS United Parcel Service Inc (UPS for short), America’s major parcel service, is the world's largest package delivery company. It was the brainchild of Jim Casey, an American teenager, who founded the American Messenger Company in Seattle, Washington in 1907, with the sum of $100 borrowed from a friend. After achieving success with this venture, Jim Casey merged with Evert McCabe’s Motorcycle Messengers. Then as a step towards creating a unique brand, in 1919, the company expanded beyond Seattle and changed their name to United Parcel Service, and then onwards it has been an upward progress. “From its humble beginnings, UPS has grown into a global giant” (Deresky, 2006, 342) According to the Insiders as well as the industrial circles, UPS’s corporate culture is always on the fast edge with the hard working culture to compliment it. Even though, the job at UPS involves routine tasks, out of the ordinary things tend to happen and the corporate culture of UPS has inbuilt mechanisms to encourage decision-making and feedbacks to solve those things. UPS's e-commerce initiative has developed into a full pledged one with specific a web site (www.ec.ups.com) for operations. It features a fully functional online store with UPS’s e-business tools to guide potential customers. The other initiatives of UPS in e-commerce sector are USPnet, eVentures etc. Brief introduction of e-commerce Electronic Commerce or e-commerce is the term given to denote the virtual marketplace where buying, selling and transactions involving goods, services etc takes place with Internet as the base. Most major corporations have got themselves involved in this sector as the potential of e-commerce is growing every day with the ever-expanding Internet and information technology. The advantage are, it provides an easy and secured way for customers to effect transactions. It shrinks the physical distances and gives a wider choice to make about products and services. It also gives the feature of fast transactions, where every business can be done in seconds. Strategic challenges in blending with local cultures when integrating e-commerce UPS like the other majors joined the bandwagon of e-commerce, patronizing it fully. That is, with the spread of Internet in the decade of 90’s, UPS saw the prospects and created a separate department for it in 1996. “In 1996, UPS created its e-commerce team to develop ways to use the internet to conduct business. The company realized that any way companies buy, sell, and do business would affect UPS” (Deresky, 2006, 346). Also, with the financial condition of UPS in great condition they wanted to expand their business further. That is, UPS had gone for an Initial public offering (IPO) in 1999, which raised $5.47 billion, leaving the company cash-rich and paved the way to pursue strategic acquisitions and mergers. Since then, the company has put the focus on expansion around the world consistent with its new mission to become an enabler of global e-commerce. UPS's broad vision of e-commerce will not also have a smooth sailing with some inbuilt challenges, which need to be addressed. The challenge, UPS could face when integrating e-commerce with world countries will be the difficulty in blending with local cultures. The first of the challenge could be the positioning of its service in the new market, where there would be existing players offering the same service. So, UPS should built a strategy to position its services which is within the reach of customer, based on the concept of competitive price. Along with this challenge of positioning in an existing market, UPS could be tagged as an outsider. This challenge will be an important one to surmount; otherwise, they can’t root themselves in the new culture and the market. Even with the spread of English and its usage in Internet, they have to approach and entice the local people with messages in all mediums in a local flavour, in the aspect of language and culture. “E-commerce companies have to think ahead of how they manage these different customers' needs and how they easily target the "local" customer with a "local" message.” (Amling cited in Wan, 2002, 452). That is, if the ‘communication’ is in the foreign language, English in the case of UPS, any tool of its approach mainly websites will not be accessed by the local customers. That is, the challenge will be to design Websites, which are the main vehicle behind e-commerce, on a bilingual basis. The same will be the case of catalogues, but both options may cause excess expenditure for UPS. The other challenge is to study the market to find which service of UPS is perfectly feasible to the local market. Recommendation for Alan’s performance for UPS’s e-commerce The recommendations that can boost Alan’s performance of UPS’s e-commerce should cater to all the aspects of local market and local culture. About the positioning for the UPS’s e-commerce, it should be promoted in market, which are Internet literate and ready for a new entrant. In addition, UPS can promote its service mainly on its motto of "Best Service, Lowest Rates”. This tactic, which worked successfully in USA, can also succeed in its global operations. Now, to the important challenge of reaching out to the customers of the local market in their language, taste, culture etc. For this aspect to be covered, UPS has take the bilingual route with the local language being given major importance when marketing about its e-commerce’s features. This tactic, which is already followed, by UPS and it is success should be further developed in the all new local markets. “ We continue to roll out additional local language sites and have seen an increase in usage. In the latest Asian sites, we have seen preliminary numbers indicating an increase of 22-143%.Visitors chose the local language version 84-96% of the time.” (Amling cited in Wan, 453-454) 2. Explore the issues arising from UPS's decision to grow by acquisition and by forming alliances with strong partners. What are the potential risks of this stra tegy and how may they be managed effectively? UPS’s acquisition and alliances In the past two decades, the acquisition and alliance spree of the UPS is on fast lanes. It had acquired or allied with a wide range of companies to compliment its diverse business. One of the major acquisition happened in 2005 when UPS announced that it had completed its acquisition of Overnite Transportation for US$1.25 billion. Then, it acquired a US based forwarding company Menlo Worldwide Forwarding Inc. Its is a strategic acquisition because all the freight handling business of Menlo and its parent company CNF Inc will come under UPS control. Then, UPS had a longstanding alliance with Teamsters, a well-known and considerable union of workers. Their relationships with Teamsters with all the ups and downs have been continuing from 1977. It has a strategic alliance with another US major Bellsouth, leader in electronics and communication, which plays a crucial role in the delivery of UPS’s products. Also in 2000, the motor vehicle giant, The Ford Motor Company and UPS formed an alliance to cut the time required to deliver vehicles from Ford plants to dealers and customers in North America while using UPS. Issues or problems on such strategic alliance for UPS UPS had gone for the major acquisitions and strategic alliances to compliment its plan of attaining worldwide expansion. But, all the acquisitions and alliances did not provided the desired results with relationships with some companies turning sour. Many issues rocked the relationship; sometimes ending with termination other times patch up was done. UPS had a troubled relationship mainly with two alliances. Firstly, the Teamsters Union relationship with UPS became a problematic one due to the action of Teamsters in the form strike for the cause of Part time workers in UPS. That is, part timers constituted a major portion of the work force at UPS, but for a longer period, they were not elevated to the permanent status on full time basis. So, teamsters took their cause and declared strike against the UPS with the full backing of the workers. This shut the operations of UPS resulting in problems for the alliance. UPS’s strategic alliances with BellSouth, also got involved in quagmire because of UPS’s violation of law. Actually, UPS did not violate any law directly but as a strategic partner of BellSouth is cognizant of their violations, so, they also have to assume liability. So, BellSouth violation of law that blocked the customers an opportunity to use other delivery services, became the breaking point of the two major corporation’s relationship. Strategic alliance and its limitation In this fast changing and moving world, Companies need to be competitive to survive, and so to compete they must cooperate. That is, companies including UPS have looked cooperation has a mode to overcome the limitations of coping alone. That is, they need a support to survive in this world. The world, where markets are globalizing, technologies are changing rapidly, huge investment funds are needed, and the economic scene is being modified by various factors from politics to weather. But, the irony is, the resultant strategic alliance has some inbuilt limitations. The limitations or risks include control in equity holding, decisions of joint venture boards are far from consensual, same goal distortions of hierarchies, risk of leakage of proprietary knowledge etc. Potential risks and the way to manage it The risks that is visible in strategic alliances borders mainly on the management side. That is, when the management of alliance partners gets together for the formalization of the alliance, due to oversight some important factors will be missed. That missed factors will come to light in the actual managing of the alliance, when the potential risks could also creep up. Managing these risks could consume the person-hours and financial resources of both the partners. Firstly, the potential risk could rise when the cooperation do not involve the creation of equity, and the legal rights which accompany it, and in that case majority equity share is not an available option. This puts lot of strain on the partners and can be only managed when all the formalities are legalized with no further loopholes. The other potential risk in strategic alliance will rise when the boards of directors were at loggerheads with no consensus. In those business environments, even before the formalization of the alliance, the dominant partner and its representative should be made the presiding and the final authority in those meetings. Normally in strategic alliances, each partner is agreement bound, to share whatever information concerning both the organizations. But this will lead to the risk of leakage of proprietary knowledge and it can be controlled only by set rules. 3. UPS encourages its employees 'to do something for the community' (case p347). In what ways could the organisation's Corporate Social Responsibility policy influence its competitive advantage? Suggest a range of options for consolidating and protecting and benefits gained. Introduce and explain Any organization including UPS could not exist like there are in an island without any one around. They have to be in the midst of something, changing the lives of many people in the positive direction. But, the sentence ‘changing the lives of people’ could be restricted to only their employees by some companies, but some companies like UPS apart from changing the lives of its employes, also encourages its employees “to do something for the community”. This should be the motto for all the corporate because with corpus of capital, exceeding in the high ranges in their ‘treasury’ or in bank accounts, it would be feasible and importantly nice to do nice things for the community. UPS looks at this community or social responsibility in the positive way and is contributing a lot in that direction through the employees. Influencing that competitive advantage by CSR policy Public normally believe in what they see and hear, and if an organization want to make the people believe in them, they have to reach the minds of the people, through their genuine activities. This is where the activity of public relations with the social responsibility as the main vehicle comes into the picture. That is, any organization including UPS most times cannot allow people into their work place to make a good impression about them. So, to make a good impression UPS, apart from showing their growth in terms of profits should also allow its employers to participate in socially responsible activities. Through this way, the organization can make the people believe in them positively. Also, it will create a good, satisfying image in the mind of the common people, without spending large amounts of money on advertisement. This registration of positive, good and satisfying image will surely help UPS to attract many businesses including ones from governments of countries, which always trust socially responsible organization. Also, the awarding of prestigious honors for UPS’s social responsibility have heightened the image of UPS in the mind of the people particularly their customers, including the newly arriving ones. “FORTUNE Magazine’s, America’s Most Admired and World's Most Admired Company survey named UPS the most socially responsible company in America. UPS has been ranked #1 in its industry, both for social responsibility for the last four years.” (ups.com). So, this honor and image because of social responsibility will surely give UPS the competitive edge and a good platform to elicit further good response. Consolidating and protecting benefits incurred due to CSR Once this process of Corporate Social Responsibility is started by UPS, it should not be stopped at whatever costs. Because, it will derail, the developed positive image from the minds of the people including the customers. So, it should be a continuing process, and extra efforts should be put to consolidate and protect the benefits that have been incurred. For that process, the roles of UPS’s employees are very crucial and they have been doing activities, which will compliment this process. That is, the same activities, which they are undertaking now, should be optimized to further consolidate and protect the benefits. So, the optimization of the options will be key. As the first step of optimization, The UPS Foundation, the charitable arm of the United Parcel Service should function with vigor. Through that foundation, the employees as a first step, toward foolproof Corporate Social Responsibility, should live and work in the communities they serve. Because, they can learn and understand, where help is needed, in first hand. The other steps should be in the form of voluntary work, community grants etc. UPS management on their part could provide the maximum backing to the employee’s efforts, and this expectation of UPS can be easily and willingly fulfilled by them. This is because; they have a vision and mission to do so. “UPS is involved in communities where our employees live and work. We have made a personal commitment to make a difference through hands-on community service” (ups.com). As part of the UPS Foundation, UPS has contributed more than $20 million in support of hunger minimization among world population. They were able do it, by distributing the surplus food donated by food producers and food servers such as restaurants, to nonprofit organizations feeding the hungry. Along with the hunger initiative, The UPS Foundation is also putting lot of efforts to promote literacy in USA and throughout the world. UPS Foundation focused mainly on adult literacy but subsequently concentrated on workplace literacy and children’s literacy "If you are not a socially responsible company, you are not truly a customer-focused company...let alone a shareholder-focused company." (Eskew). This words from the UPS Chairman sums up the Corporate Social Responsibility of United Parcel Service. ‘ Reference Deresky, H. (2006) International Management: Managing Across Borders and Cultures. Pearson Prentice Hall, Upper Saddle River, New Jersey. Eskew, Mike. Social Responsibility. Accessed on May 9, 2007 http://pressroom.ups.com/mediakits/socialresponsibility/0,2512,,00.html Ups.com. 2007. UPS foundation. Accessed on May 9, 2007. http://pressroom.ups.com/mediakits/landing/0,2307,50,00.html?mkit_name socialresponsibility Wan W.P. (2002) Interview: United Parcel Services's Director of Electronic Commerce. Thunderbird International Business Review, 44(4) pp445-454. Read More