Summary Of The Business Of The Competitor And The Strategy It Is Pursuing:
UPS (UNITED PARCEL SERVICE) (“UPS’s Values, Mission, And Strategy”) is a global logistics company, an American multinational package delivery company, and a provider of supply chain management solutions. Its strategies are action-oriented. The following are some of its strategies.
Creating value for customers using our superior portfolio of logistics capabilities (“UPS’s Values, Mission, And Strategy”). This strategy looks at how the company can demonstrate how the power of logistics can create a competitive advantage for its customers. Here, the company works on ways in which it can stay ahead of other competitors so as to remain relevant to the market. Also, UPS offers accelerated growth by leveraging its international system and scale. This means that the company works to ensure that it serves people from all parts of the world equally. In addition, UPS organizes its comprehensive portfolio of solutions for targeted industries. This means that UPS aims to close the gaps that it has already identified in the market. Lastly, UPS offers industry-leading technology that makes things simpler and advances its clients’ business practices. This is done to ensure that each and every member of the market can easily access and use the app through which the business operates online.
The second strategy is to continually transform to strengthen its leadership position (“UPS’s Values, Mission, And Strategy”). Here, UPS looks at delivering an exceptional customer experience, which in return encourages clients to keep doing business with the company. Also, it applies marketing and sales excellence to drive profitable growth. Sales increase when marketing is at its best. Hence, this ensures that there will be maximum profits. In addition, UPS enhances its performance through efficiency, quality, and technology. Ensuring that merit is what will be rated shows that it is dedicated to offering high-quality services.
The third strategy is making investments with the aim of triggering growth in markets and opportunities (“UPS’s Values, Mission, And Strategy”). In this, UPS triggers growth by leveraging international networks. This shows that UPS is considerate and even cares for development in all parts of the world. Also, UPS aims to build infrastructure in emerging markets. By building structures, UPS will not only create employment but also play a part in the development of the location. Lastly, UPS aims to expand its offerings of integrated logistics solutions.
Assess the company strategy using the tools discussed in the lecture notes and in the reading, and present your findings. Compare and contrast your findings to those for the company evaluated in Assignment 1. Which company has the better strategy? Why?
The first question to consider is whether the business is going to increase capacity. In this regard, we see that UPS increases its capacity, as its strategy aims to continually strengthen the business by improving the customer experience and enhancing business performance through quality, efficiency, and technology. On the other hand, FedEx Company focuses exclusively on the market sectors in which it has the most expertise and which can be independently enhanced and managed to provide outstanding service to its customers. It also has a huge appetite for growth.
Do the strategies increase the frequency of shipments? FedEx’s strategies do not work toward improving the frequency of shipping goods to other markets worldwide, while UPS has strategies that aim to increase its rate of transporting and shipping. One of its strategies is to accelerate growth by leveraging its universal network and scale, which means that it plans to expand its methods of transportation to those that can manage huge loads.
Is the strategy going to increase the volume of shipments and deliveries? Both companies aim to increase the volume of their shipments, as UPS offers accelerated growth by leveraging its universal system and scale, which means that the company aims to deliver many goods regardless of the origin or destination. On the other hand, FedEx’s strategy has been to ship to more and wider markets but with less emphasis on volume.
Will the strategy increase the value and, hence, the price of the company’s contribution? The strategy must also look at the value of its end result in terms of returns and its contribution to society. In both cases, we see that all the strategies are aimed at bringing more returns, as both strive to expand their scope in the market. On the other hand, both companies, by reaching out to a larger market, have an impact on society as they make goods accessible to the market.
Is the company going to advance new relationships within the existing market or sell existing products?
The two companies are ready to collaborate with many firms, as they rely on goods produced by other firms for shipping and delivery. Hence, by expanding their market, they also expand their collaboration with other companies.
In conclusion, I think that UPS is the company with the better strategy, as it caters to all dimensions of growth. UPS’s strategy aims to provide the best customer experience and also makes interaction with customers easy, as it aims to simplify their use of technology.
Identify, describe in reasonable detail, and evaluate the key strategic risks that this company is facing or is likely to face as it pursues its strategy. Into what SRM category do these risks fall? Emphasis should be given to the strategic risks we have covered in class thus far. Compare and contrast these risks with the risks identified for the company evaluated in Assignment 1 (20 points).
Any business is likely to face risks while implementing its strategies. From this, we also expect UPS to face risks in the process of implementation. The risks being taken are:
Risk Due To Economic Uncertainty
The start of a financial collapse may necessitate altering an implementation plan. Demand for the UPS Company’s goods and services may turn out to be lower than assumed. This would make UPS face the negative side of the economy. The company could make the decision to scale back its marketing plan in order to reduce expenses.
Competitive Factors Risks
Competitive forces in the world are constantly changing. New contenders enter the market every day. Also, prevailing competitors have been launching new services in the market, and they are sometimes aggressive, cutting prices to a level that UPS cannot manage. This may become a challenge, as there is a need to adjust strategies and implementation phases to withstand actions taken by competitors.
Higher Implementation Cost Than Forecast Risks
During planning, a marketing budget is prepared that shows the cost of executing the chosen strategies. UPS’s strategies may be underestimated in terms of cost, as there are many factors in the market that affect the prices of services that the company may require. During the launch of the strategy, costs that are higher than forecast may require attention, which may include reducing costs to enable the company to return to profitability.
Loss Of Key Supplier Or Distributor Risks
Keeping in mind that UPS depends mostly on products from companies that it does not control, there might come a time when demand surpasses supply; hence, this means that the company will not be shipping as much as it had planned to.
Government Regulation
Some government regulations in some countries are also risks, as they may affect the business’s entry into that market. Governments can make it difficult for a business to implement its strategies. For example, a government may pass a restrictive zoning policy that prevents the business from opening the additional branch it had planned.
Discuss each of these risks, providing a summary of the potential impact on the company and the potential downside implications. Quantify the probability that the risk will occur. (I understand that you do not have full information for this task, so an estimate based on your understanding will suffice for this memo.) Quantify the impact that the risk will have on the company if it occurs.
The probability of a risk occurring is measured on a scale of 1-10.
Economic Uncertainty- The start of a financial collapse may necessitate altering an implementation plan. Demand for the UPS Company’s goods and services may turn out to be lower than assumed. This would make UPS face the negative side of the economy. The company could make the decision to scale back its marketing plan in order to reduce expenses.
The probability of this risk occurring is rated at 5. This is because it is difficult to tell, as economic fluctuations are hard to detect.
This risk would cause a big loss to the company, as it may end up spending more than it makes in shipping when the market is low.
Competitive Factors- Competitive forces in the world are constantly changing. New contenders enter the market every day. Also, prevailing competitors have been launching new services in the market, and they are sometimes aggressive, cutting prices to a level that UPS cannot manage. This may become a challenge, as there is a need to adjust strategies and implementation phases to withstand actions taken by competitors.
This risk is very common, as many companies are always competing to attract a larger market than others. This risk is rated at 7.
This is a great risk, as UPS may end up suffering a great deal because if competitors’ prices are very low, it will be unable to match them. Hence, it may end up getting very low returns or none at all.
Higher Implementation Cost than Forecast Risks- During planning, a marketing budget is prepared that shows the cost of executing the chosen strategies. UPS’s strategies may be underestimated in terms of cost, as there are many factors in the market that affect the prices of services that the company may require. During the launch of the strategy, costs that are higher than forecast may require attention, which may include reducing costs to enable the company to return to profitability.
This is also a very common risk; hence, I will rate it at 6.
The reason why I think that this risk is a very dangerous one for the firm is that if it spends a lot of money that cannot be regained, the business will be operating at a loss.
Loss of Key Supplier or Distributor Risks- Keeping in mind that UPS depends mostly on products from companies that it does not control, there might come a time when demand surpasses supply; hence, this means that the company will not be shipping as much as it had planned to.
This risk is rated at 9.
This is a very common risk, as when the market increases abruptly, the production of goods will have to be increased tremendously. This increase may lead to the company being unable to fully cater to its market, something that may make it lose clients.
Government Regulation- Some government regulations in some countries are also risks, as they may affect the business’s entry into that market. Governments can make it difficult for a business to implement its strategies. For example, a government may pass a restrictive zoning policy that prevents the business from opening the additional branch it had planned.
This risk is rated at 3/10.
This is because government policies are negotiable, as every country aims to improve trade between countries. These risks occur, but at a lower rate. When they occur, they may hinder the business from venturing into the country; hence, the business is unable to reach its required market.
In my opinion, FedEx is the one that faces the most significant risks. The fact that it is focusing on the global market rather than the domestic market exposes it to many risks. Any new domestic or international government laws and regulations may impact FedEx’s businesses. A currency war or trade war that leads to an unhealthy global economy and lowers the growth rate of global trade will, therefore, affect the profits of FedEx.
Categorize the risks as either avoid, mitigate, transfer, or accept and justify your categorization. (15 points) (“Risks That May Affect Implementation Of Business Strategies”).
Avoidance risks are risks that demand a change of plans to avoid the risk; mitigation risks are risks whose impact can be reduced by intermediate measures; accepted risks are risks for which the possibility of a negative effect is accepted, while transferred risks are risks that are shared by taking, for example, an insurance cover.
Economic Uncertainty- This is a mitigated risk.
This is because this risk can be reduced by first studying the market before one starts to serve it.
Competitive Factors Risks- This is a mitigated risk.
This risk can be reduced by making one’s services affordable and of high quality. The services offered should be better than those of competitors.
Higher Implementation Cost than Forecast Risks- This is an avoidable risk.
This is because this risk can be avoided by changing the budget, as one can adjust it to a level that does not hurt the business.
Loss of Key Supplier or Distributor Risks- This is a mitigated risk.
This is because this risk can be reduced by making sure the company has many suppliers or one that can serve its growing market.
Government Regulation Risk- This is an accepted risk.
This is an accepted risk, as its chances of happening are minimal because governments hinder new investments at very low rates.
For the three most impactful risks that require mitigation, please describe in reasonable detail how the company will reasonably mitigate those risks..
Economic Uncertainty Risk
This risk can be mitigated by conducting a study of the market. If a certain market has not embraced the technology involved in this process, for example, the company may decide to step in and advertise its importance to the general public. By doing this, the company will raise the market’s interest; hence, when it is introduced, it will get a good audience.
By doing this, the risk will be reduced by about 70% as the public will know its importance.
Competitive Factors Risks
This risk is one of the most common risks. This risk is caused by rising investments in the world today. This risk, however, can be lowered by ensuring the company remains relevant and competitive enough. Every firm aims to be the best in the market, hence creating competition. To mitigate this risk, UPS will ensure that it improves its customer relations. This will make it popular, as many clients will prefer a company where they are treated well. In addition, UPS will make sure that its quality of service is at its best, which will also give it a competitive position in the market.
This will reduce the risk by at least 90%. Good services and quality goods are key to every business’s success.
Loss Of Key Supplier Or Distributor Risks
This is a risk associated with trying to match demand to supply and also with the link between the product and the client. When demand is higher than supply, the business will be said to be failing the market; hence, these two factors should strive to remain balanced. UPS Company, therefore, will need to make sure that it has enough suppliers to meet demand. By doing so, the business can expand its market as far as it is able to handle. Also, the business should make sure that transportation methods are provided so that goods can reach the client without any problems.
This Mitigation Is Likely To Reduce The Risk By 80%.
In my opinion, the mitigation in UPS is more effective than that in FedEx. This is because mitigation measures in UPS focus directly on solving the problem, while those in FedEx are not necessarily direct approaches to reducing the risk.
What controls would you put in place to help manage the risks and the effectiveness of the mitigation? Please explain why these controls will produce results.. (20 points)
Controls are important aspects of risk mitigation (“Risk Management Plan”). When a company has controls in place, it means that risks will be reduced significantly. The following are the risk mitigation controls I will put in place.
Business Impact Analysis- This is a very important risk control. This analysis provides information to the business. This information is then used to make decisions on the way forward, hence avoiding risky loopholes.
Make a Recovery Strategy- This is a control method in which the data obtained in the Business Impact Analysis are put into practice. This determines the time required to salvage the business from the risk.
Formulate a Recovery Plan- Here, the mission is to write a plan that systematically lays down the actions to be taken in the recovery process.
Recovery Exercises- Here, the strategies are put to the test to ensure that they are useful. Having these exercises in place will enable the business to act in times of need.
Have Third-party Suppliers- Not relying on only one supply chain will help the business a great deal, as it will not be paralyzed when the major chain is affected.
These controls are important, as they enable the business to always be in a position to rise above a risk whenever it occurs. These controls show preparedness, and we know that when one is well prepared, half the battle is already won.
Given the identified risks, express your opinion as to whether or not the company’s strategy can be executed successfully. Is the strategy fundamentally sound? Why or why not?
Risks are a central point in every venture. But the more prepared one is to handle the risks in case they occur, the more successful the person will be. UPS Company is faced with risks that can be controlled and others that cannot be controlled. I am convinced that some risks, such as distribution and supply, are very important to this business and hence should be given the time and attention that they demand.
In my opinion, the strategy applied by UPS is one of the most legitimate strategies there is. Creating value for customers using UPS’s superior portfolio of logistics is one strategy that illustrates the strength of this strategy, as it is customer-oriented. Its capability to continually transform to strengthen its leadership position shows that the company is dedicated to giving its best. Lastly, investing to hasten growth in key markets and new opportunities shows that the company also supports the growth of society.
Having said that, I think that the risks illustrated in this piece are serious and can lead to the collapse of this business. But I also think that this strategy can be applied successfully, though with many challenges that I am positive the company will addres.
This strategy is fundamentally sound, as it focuses not only on the growth of UPS but also on the betterment of communities. This is because if a business focuses too much on itself, it loses the aspect of caring for the very market that supports its existence.
Should the Surrey Group complete the acquisition of the company assessed in Assignment 1, the company assessed in this assignment, both, or neither? Why?
I think that the Surrey Group should consider UPS Company for acquisition, as its risks are quite manageable. This private equity fund has a strong focus on (1) proactively managing the strategic risk associated with companies in its portfolio and (2) understanding the strategic risk posture of any potential acquisition. This is because all the risks in this company can be addressed when the right strategies are put in place.
In the FedEx case, I think that it should also be acquired by the Surrey Group. This is because the wide range of strategies of FedEx is. “compete collectively, operate independently, and manage collaboratively.” I think this strategy is very fruitful. It includes all aspects of strategy from a manager’s perspective: competition strategy, operational strategy, and management strategy. It covers the key points of successful competitive services and products, strong executive power, and an excellent management system. The FedEx 2017 Annual Report points out three areas of focus in its detailed strategies: investments, integration, and innovation. Investments boost financial performance, including improvements in capacity and automation, reduced costs and emissions, and systems and safety improvements. This, together with manageable risks, shows that the company is fit for acquisition.
Reference
“UPS’s Values, Mission, And Strategy.” UPS Pressroom. N.p., 2018. Web. 9 Apr. 2018.
“Risks That May Affect Implementation Of Business Strategies.” Smallbusiness.chron.com. N.p., 2018. Web. 9 Apr. 2018.
“Risk Management Plan.” En.wikipedia.org. N.p., 2018. Web. 9 Apr. 2018.
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