UPS (United Parcel Service) Porter's Five Forces SWOT

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UPS (United Parcel Service)

Porter's five forces

Rivalry: there is intense competition within the courier industry. The stiff competition stems from the low number of firms in the industry. The major two competitors control almost sixty percent of the market share with the remaining minor competitors controlling the remaining percentage.

Buyer power: the bargaining power of consumers in this industry is low. Producers have a tendency of threatening companies through forward integration. Producers might take their own retailing and distribution. The industry has many buyers and no single buyer controls the price of products (Khanna & Bullock, 2010).

Threat of new entrants: the courier business is challenging to enter. Entry barriers in the industry are steady and low. Companies operating in this industry rely on skilled personnel. Employees in the delivery department must have a commercial driver's license while delivery systems require high-level capital investment to confirm deliveries and track packages. Such mechanisms are crucial for enhancing productivity and efficiency. From the IBIS world report, the threat of new entrants can be rated as moderate (Lussier, 2012).

Threat of substitute products: within this industry, there is a high threat of substitute products. This has been precipitated with the increase of online services substituting the need for paper documents, which are shipped traditionally. In addition, competition from substitutes exerts an adverse influence in every sector. The rising popularity of e-commerce has greatly affected this industry. Alternative methods like fax and email have likewise continued to increase the speed of business transactions (Khanna & Bullock, 2010).

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As a result, this has boosted the demand for services produced in this industry. More people are buying items through online sites, hence, a great need for delivery services from retailers to customers.

The bargaining power of suppliers: in the courier industry, there is a moderate power of suppliers. The bargaining power of suppliers refers to raw materials utilized by companies in the industry. This creates supplier-buyer relationships between the industry and the companies providing the raw materials. Suppliers may influence the industry by selling raw materials at relatively high prices to guarantee satisfactory profits. If the supplier-buyer relationships are weak, it could lead to companies losing customers to rivals and increasing their prices (Khanna & Bullock, 2010). Therefore, the bargaining power of suppliers is a moderate risk depends on the relationship between suppliers and buyers.

SWOT analysis

Strengths

Provides both ground and air services

Controls 52% market share of revenue

It is the market leader in the ground segment

It has a consistent financial success

It has an AAA credited rating

It has integrated sorting centers

Weaknesses

It holds the second position after USPS in the deferred market

It holds the second position after FedEx in the overnight express segment

Opportunities

Increasing international delivery through globalization

Developments in e-commerce hence internet shopping

Growth of resources for expansion

Growing GDP

Threats

Issues of rising fuel costs

Competition within the new ground segment

Competition within the industry

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