Analysis of USPs Business Model - Case Study Example

Analysis of USPS Business Model Introduction United s Postal Services (USPS) is an independent company in the United s providing postal services to the country (Architect, 2012). It is a government agency which is directly authorized by the constitution (United States Constitution). It is currently employing more than 574,000 workers. It is legally permitted to render service to all the Americans without considering their geographical location. The company is well known for its quality services along with the uniform price. The agency has an access to the letterboxes which are marked as the ‘US Mail’ and also to the personal letterboxes in the country. Services Offered The United States Postal Services offer a wide range of services. It has bulk mail procedures available which provide discounts to the customers. It provides personal mails to the customers. The company also provides inter-departmental details regarding the UALR mails. It provides the services of campus delivery of the mails and state courier services. It provides media mail services to the customers as well. There are some other facilities provided to the customers like the business rely mails, postal money order services etc. Current Position of the Company United States Postal Services is responsible for providing employment to a large number of people in the United States. After the federal government and Walmart, United States Postal Services is the third largest company in respect of providing employment (Bovard, 1985). It operates the largest number of vehicles in the whole world and is known as the largest vehicle fleet. The Department of Defence jointly operates with the United States Postal Services to provide services to the Army and Air Forces (the Army Postal Services) and the Navy (the Fleet Post Services). The two big competitors of USPS are UPS and FedEx. They compete with the company in providing postage delivery services, making urgent deliveries in the domestic land. DHL express was the third largest competitor of USPS until it stopped its operations in the United States in the year 2009. The National Postal Forum held in 2007 revealed that the Postal Service has highlighted and undertaken a large number of initiatives to improve the services and gain a remarkable position in the United States parcel industry. The low price offerings made by USPS is making it easily affordable by the customers. The company generates annual revenue of $73 billion whereas UPS and FedEx have annual revenue of $48 billion and $32 billion. Thus it is in a leading position in the market. Domestic and International Services The United States Postal Services provide domestic as well as international services in the United States. Domestic Services- Domestic services include weekday’s delivery of postal services to any particular customer’s address or Post Office Box or any delivery in the Army and the Military in the United States. It provides express mails which guarantee overnight deliveries to most locations. It is one of the fastest postage services offered by the USPS. There are several other facilities provided to the customers like first class mails, bulk mails, media mails etc. International Services- The United States Postal Services provides various facilities to the customers in order to meet their international shipping needs. The Global Express Guaranteed Service (GEGS) guarantees delivery within three days in more than 190 countries all over the world by FedEx. The First Class Mail Service is the best suitable international service for most of the customers. However, the delivery time in this service depends upon the destination of the delivery. The Express Mail International provides a combination of quick services and affordable prices in almost 185 countries. The delivery time lies within three to five business days. Challenges faced by the Company The delay in the delivery of services was one of the problems faced by the customers. This problem was arising frequently. The company conducted an analysis in order to find a solution to this problem. Cost control was the initiative that was taken by the company. It was paying most of its attention in cutting the costs. But the quality of the services was not providing satisfaction to the customers. The payrolls of the company accounted for 85 percent of the Company’s budget. In order to bring a control, the number of employees was reduced. It was reduced from 6000 to 4000. The management of the company expected that lesser number of employees will work with more efficiency and latest mechanization. It was expected that the new technologies adapted for the mail sorting and routing would require less human efforts. But the problem occurred when things were not going in the same direction as they were expected. There was a delay in the delivery of the new equipments. Moreover, the new system that was adapted did not function properly. The reduction in the number of employees and introduction of new machineries and latest technologies could not reduce the problems and had a negative impact on the profitability of the company. The management now decided to change the business strategies completely. The priority was given to the delivery of the services on time. The number of workers was increased and more mechanization was introduced in order to increase the delivery standards and satisfy the customers. The routing systems were made more efficient in order to improve the working conditions. This increased the customer satisfaction to some extent. The managers decided to increase the postal rates by providing a partial subsidy. According to them, if the company wanted to maintain its position in the market and compete with the other businesses then the increase in the postal rates was a necessary step to be taken. The top executives believed that financial self sufficiency is the most important thing and it can be achieved by increasing the postal rates. The charges of mails were increased. This had a greater impact on the businesses rather than that of the individual users as the mails were mainly business mails. The company was expecting improved service along with the stable cost structure through some kind of miracle in the management. However, the introduction of a rational rate making procedure by the Postal Reorganization Act empowered the company to raise the capital funds by issuing bonds or implementing collective bargaining process. The efficiency of the services increased to a great extent. Suggested Business Model The Business Model Canvas is being used to suggest a suitable business model which will help United States Postal Services to improve the business strategies and achieve a competitive advantage over its competitors. Customer Segments- A company must first identify the customers to whom it will serve in order to select an effective business model. The customers can be chosen and segmented based on their needs. This will help the company to ensure that the implementation of the business strategy has been successful to meet the needs of the selected segment of customers. The segmentation can also be made based on the delivery priorities. The use of coloured tags help in determining the time of the mail to be delivered. This was an initiative taken to reach to the objective of ‘delivery on time’. The implementation of this technique increased the efficiency of the employees. Value Proposition- It is the service that is provided to the customers to meet their needs. It is the value proposition of a particular company which differentiates it from the existing competitors (Pigneur, Osterwalder, 2013). It provides value to the targeted customer segments by mix of various elements. This can be done by increasing the performance, implanting a new design, cost reduction, customization, risk reduction etc. The company should implement new strategies in order to improve the services. It should focus on the customer preferences. The pattern of delivery should be based on the customer choices. This will increase the customer satisfaction. Communication Channels- A company can use various delivery channels to deliver the valuable propositions to the targeted customers. Introduction of various distribution channels help the company to improve the quality and the efficiency of services (Carneiro et al., 2013). It also makes the entire process of delivering the service cost effective. A company can reach its targeted customers through own channels or partner channels and can also use a combination of both the channels. United States Postal Services can introduce its own channels in order to provide quick services to the customers. It can deliver the products through distribution channels or retailers. This will also help to expand the services into the new markets. It can also introduce partner channels. The introduction of partner channels will help the company to strengthen its position in the market. It will also help to develop new technologies to improve the mailing services and the routing system. Customer Relationship- A company can achieve competitive advantage over its competitors by maintaining a customer relationship. This gives an added value to the services (Rogers and Peppers, 2010). A customer relationship helps in retaining the existing customers for a long period of time. In order to maintain a customer relationship, it is very important to provide customer satisfaction. The quality of the product and services provided by the company helps in maintaining the customer relationship. USPS should try to provide the service on time. The company can create a community available on the internet which will help them to interact with the customers directly. The cause of dissatisfaction of the customers can be identified in a proper manner through direct interaction and steps must be taken accordingly to improve the service condition. Key Activities- A company should focus on the most important activities for the execution of its value proposition (TEACHING and LEARNING for CREATIVITY INNOVATION and ENTREPRENERSHIP, n. d.). United States Postal Services should introduce distribution channels in order to improve the service condition and maintain the exact delivery time of the parcels. Key Resources- Key resources are the resources that are required by a company for the delivery of the services and products to their customers. These are the assets of a company that helps it to sustain its business and achieve competitive advantage over the competitors. The tangible resources, the intangible resources and the capabilities of a company play an important role in its success. Here, the company should maintain sufficient amount of capital so that it can continue its operations efficiently. The company requires a systematic framework for the management of the services. Proper management of the services will help the company to achieve customer satisfaction and earn a good reputation in the market. This will help the company to increase the goodwill which is an important intangible resource. The company should also focus on the human resources in order to provide the best services to the customers. Key Partnership- A company can optimize its operations and reduce the business risk by forming strategic alliances with reputed companies holding strong position in the market. This can be done by making joint ventures with big companies. United States Postal Services can form strategic alliance with its competitors like UPS, FedEx and strengthen the position in the market. It should maintain a good relationship with the suppliers which will help to provide quality services. Cost Structure- The cost structure represents the financial consequences while implementing various business models. It is a combination of the utilisation of own resources and the cost involved in the outsourcing activities by the partners (Nesi and Santucci, 2012). USPS should make the business model cost effective in order to maintain financial stability. It should focus on cost minimization and profit maximization. Revenue Streams - A company generates the revenue by delivering quality services to the targeted customer segments (Hesselbach, 2011). USPS can maximise the revenue by the successful delivery of the parcels to the customers. The company should charge prices which are easily affordable by the customers. This will bring in new customers as well and increase the revenue of the company. Conclusion The recommended business model will help the company to overcome its problems and increase the quality and the efficiency of the services. USPS should focus on cost minimization as well. Increase in the cost structure may result in financial instability which will lead to the poor performance of the company. It should hire more employees and use the human resources in an efficient manner to provide high quality service. Human resource will support the company in situations when the implemented technologies are not favourable. References Architect, M. P., 2012. "If I Was President... My Blueprint for America". Indiana: AuthorHouse. Bovard, J., 1985. The Last Dinosaur: The U.S. Postal Service. [online] Available at: [Accessed 7 March 2013]. Carneiro, L. M. et al., 2013. Intelligent Non-hierarchical Manufacturing Networks. New Jersey: John Wiley & Sons. Hesselbach, 2011. Functional Thinking for Value Creation. New York: Springer. Nesi, P. and Santucci, R., 2012. ECLAP 2012 Conference on Information Technologies for Performing Arts, Media Access and Entertainment. Firenze: Firenze University Press. Pigneur, Y. and Osterwalder, A., 2013. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. New Jersey: John Wiley & Sons. Rogers, M. and Peppers, D., 2010. Managing Customer Relationships: A Strategic Framework. New Jersey: John Wiley & Sons. TEACHING and LEARNING for CREATIVITY INNOVATION and ENTREPRENERSHIP, no date. ENTR - Business Model Canvas. [online] Available at: < http://resources.talcie.org/topics-and-activities/business-model-canvas> [Accessed 7 March 2013]. Read More