In-depth Capability Analysis of United Parcel Services - Case Study Example

In-depth Capability (Internal) Analysis of United Parcel Services (UPS) Introduction This essay is based on an in-depth analysis of the internal capabilities and resources of United Parcel Services (UPS), one of the leading global parcel delivery companies. The analysis is based on the Resource Based Theory of the firm. Three issues are presented in the essay. First, a brief description of UPS and its operations is presented. This is followed by a detailed analysis of the internal resources and capabilities that the company has managed to develop over the course of time. The identified resources and capabilities of the company are then analysed using the VRIO framework. This is based on the extent to which the capabilities of the company add value to customers, are rare, cannot be imitated easily and are imbedded in the values of the organisation. UPS: A Brief Introduction UPS is a package delivery and general logistics company. Although founded in the United States as a small parcel delivery company 108 years ago, currently, the company maintains a wide range of logistics-related resources in all regions of the world (UPS, 2016). For practical purposes, the company reports its operations based on two geographic regions: the domestic region, which is the United States and the international category, which comprises all the other parts in the world in which the company operates. UPS offers its customers three main types of services: the traditional delivery of packages within the United States market, the delivery of packages at the international level and the management of supply chain and freight operations for companies (UPS, 2015, p. 3). It is based on these three segments that the company reports its financial results. Importantly, the financial performance of the company has been relatively good over the recent past (UPS, 2015, p. 2). This has been reflected in the rate of growth of revenue, profitability and the speed at which the company is growing its services in the different regions in which it operates. UPS: Resources and Capabilities The resources and capabilities of UPS can be analysed using the Resource Based Theory of the firm. The essence of this theory is that every firm has a number of different types of resources and capabilities which, when well identified and used, can help the firm to gain and maintain a competitive advantage over its competition (Hubbard, Rice & Galvin, 2014, p. 107). Under this theory, resources of a firm are defined as the intangible and tangible assets that are owned and controlled by the organisation (Gottschalk, 2005, p. 53). On one hand, tangible assets are mainly the physical assets that a company owns and which can be easily accounted for. On the other hand, the intangible assets of a firm comprise processes and values of the organisation which add value to the manner in which the organisation operates (Hubbard, et al., 2014, p. 107). It has been noted that in many cases, intangible assets are more valuable and useful for organisations than tangible assets (Bridoux, 2010, p. 8). This implies that it is easier to explain the performance of companies by focusing on their access to intangible resources as compared to the intangible ones. The capabilities of a company can be defined as the unique manner in which the company carries out its processes and activities which help the company to deliver value to its clients (Newbert, 2007, p. 123). It is noted that in practice, organisations are likely to develop processes and approaches that prove to be effective in helping them to deliver more value to their clients as compared to their competitors (Nothnagel, 2008, p. 19). Hence, the capabilities of an organisation can be used create and maintain a competitive advantage for the organisation over its competitors. In the case of UPS, the company has a number of resources and capabilities. However, three of these are the most important. They are as follows: one, a long heritage and well developed organisational culture; two, the technical capacity of the organisation which is based on its well-developed IT infrastructure; and three, the level of commitment and competence exhibited by the company’s human resources. The resources and capabilities of an organisation can be categorised under the following three classes: physical resources, human resources and organisational resources (Pringle & Kroll, 1997, p. 74). This approach is applicable to the resources and capabilities of UPS. First, the technological capability of the company is an example of the physical resources and capabilities that the firm has. Baker, Dudley, Holt, Stockton and Vukota (2008, p. 37) note that the company has managed to access and control infrastructure and cutting edge e-commerce software and uses these resources to add value to its services. Therefore, access to leading IT can be regarded as one of the most important physical resources of UPS. The heritage and culture of the organisation is an example of organisational resources. It is observed that one of the most important aspects of UPS that help it to perform better is a strong emphasis on the need to be flexible, learn and continuously innovate (Wood, 2011, p. 2). These approach is traced down to the work of the founder of the company back on 1907 and it is also identified as one of the reasons as to why UPS has managed to grow and perform relatively better than its competitors (Wood, 2011, p. 1). Lastly, UPS has managed to develop an exceptional human resource function as a vital organisational resource. Essentially, the company has continuously invested in hiring and maintaining the best talent that is available in the market (UPS, 2015, p. 11). This has enabled it to build a team of highly devoted and committed employees. Furthermore, the company has been continuously investing in employee training and development activities (UPS, 2011, p. 11). The importance of this is seen in the effectiveness with which UPS employees are able to operate flawlessly when managing highly complex operations of the company at different locations in the world (Wood, 2011, p. 1). UPS Resources and Capabilities: Analysis Using the VRIO Framework For the resources and capabilities of a firm to be useful in helping the firm to create a sustainable competitive advantage, the resources must have four essential attributes that form the VRIO framework (Hubbard et al., 2014, p. 110). Under this framework, the resources and capabilities of a company should be valuable, rare, without a substitute and difficult to imitate (Pringle & Kroll, 1997, p. 74). The technical capability of UPS has all the essential attributes of a useful resource under this framework. For example, the extent to which the company has access to new technologies and proprietary software applications that are used in the logistics industry directly adds value to the services that the company offers to its clients. It has been pointed out that access to high-tech technological applications is the basis for the approach that the company uses which entails developing highly innovative solutions that are effective at addressing the needs of the market (UPS, 2015, p. 5). Similarly, the technical capacity of UPS is rare. The rarity of the company’s technical capacity arises from the fact that the company uses proprietary software that cannot be easily accessed by its competitors. As well, this resource is inimitable and integrated in the operations of the company. The nature of the software and the manner in which UPS is able to develop new technological capabilities over time makes it difficult for the company’s competitors to copy its approach. The second resource of UPS is its heritage and strong corporate culture. The culture of the organisation is traced to the values that the founder of the company managed to infuse in its employees during the company’s nascent days (UPS, 2016). Hence, the culture of the organisation is defined by values such as the need for continuous innovation, a sense of loyalty among the workforce and the need to achieve outstanding results through continuous learning (Wood, 2011, p. 2). The heritage and culture of UPS is valuable to the organisation. This is because the organisation is able to use its heritage and culture to inspire its employees to perform well. Additionally, this resource is rare in that not very many companies can claim to share the long history of UPS in logistics. Moreover, the resource is inimitable since it is not possible for another company to lay claim to the heritage of UPS and attempt to duplicate the cultural values that characterise the corporate culture of UPS. The third resource of UPS is its highly effective and committed employees. Throughout its history, the company has devoted a considerable amount of resources into developing a highly effective human resource pool (UPS, 2015, p. 11). This has been done in the form of seeking the most suitable candidates for the positions that arise within the company and developing the individuals through clear-cut employee development programmes that are run within the organisation (UPS, 2015, p. 11). It is based on the performance and commitment of the employees that the company is able to deliver its highly complex services in diverse areas in the world. Although it is possible for any organisation to develop a highly effective and committed workforce, this may not be easily imitated since it requires a heavy investment of resources over a long period of time for this to be achieved. Conclusion UPS has three key resources: its human resource capabilities, its technological capacity and its heritage and strong corporate culture. These resources and capabilities meet all the four key attributes of organisational strategic resources and capabilities under the VRIO framework. It can be seen that it is by effectively using these resources and frameworks that the company has been able to perform relatively well throughout its history in the logistics industry. References Baker, R., Dudley, B. W., Holt, S., Stockton, C., & Vukota, V. (2008). United Parcel Services’ IT infrastructure: A case analysis. Review of Business Information Systems, 12(3), 37-44. Bridoux, F. (2010). A resource-based approach to performance and competition: An overview of connections between resources and competition. Retrieved fromhttps://www.uclouvain.be/cps/ucl/doc/iag/documents/WP_110_Bridoux.pdf Gottschalk, P. (2005). Strategic knowledge management technology. Hershey, PA: Idea Group Publishing. Hubbard, G., Rice, J., & Galvin, P. (2014). Strategic Management (5th ed.). Pearson, London. Newbert, S. L. (2007). Empirical research on the resource-based view of the firm: An assessment and suggestions for future research. Strategic Management Journal, 28, 121-146. Nothnagel, K. (2008). Empirical research within resource-based theory: A meta-analysis of the central propositions, Springer, Hamburg. Pringle, C. D., & Kroll, M. J. (1997). Why Trafalgar was won before it was fought: Lessons from resource-based theory. Academy of Management Executive, 11(4), 73-89. UPS. (2015). Navigate tomorrow: 2015 annual report. Retrieved from http://nasdaqomx.mobular.net/nasdaqomx/7/3491/4988/ UPS. (2016). Company history. Retrieved from https://www.ups.com/content/cn/en/about/history/index.html Wood, D. (2011, September). UPS case study: Inside out.’ BP Trends, 1-9. Retrieved from http://www.bptrends.com/publicationfiles/09-06-2011%20CS-UPS%20Case%20Study-Dawson%20Wood.pdf Read More