1-3 journal Company Research and Selection

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Feb 20, 2024

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UNITED PARCEL SERVICE, INC 1-3 Journal: Company Research and Selection Nick Roy MBA-540-Q1716 Organizational Strategy in Global Environment 23TW1 Professor Cedric Alford Southern New Hampshire University February 18, 2024

UNITED PARCEL SERVICE, INC Company Overview Key facts of UPS include:  2022 revenue: $100.338B  2023 market cap: $137.13B (Has been on a downward trend since 2021 but still relatively strong amongst all competitors in the courier industry.)  2023 market share: 40.89 percent (Has now overtaken FedEx for the lead in the industry)  Total number of employees: 536,000 (340,000 of those employees are unionized)  Stock price: UPS (NYSE) $160.49 (As of the closing bell on September 15, 2023) (CSIMarket.com, United Parcel Service Inc (UPS) ) Founded in 1907 as American Messenger Company in Seattle, Washington, United Parcel Service, Inc. (UPS) quickly grew to become a leading logistics provider. In 1919, it changed its name to United Parcel Service and expanded its operations to Oakland, California. With a strong foothold in the U.S. market, UPS currently holds the majority market share at 40.89 percent, surpassing its competitor FedEx at 38.33 percent, at the end of the second quarter of 2023. In 2022, UPS reported a revenue of 100.33 billion dollars with a workforce of over 536,000 employees. With the global headquarters now in Atlanta, Georgia, UPS is publicly traded on the New York Stock Exchange under the symbol UPS. The company offers comprehensive logistics services, including less-than-truckload services and supply chain management services, catering to both U.S. domestic and international customers. UPS has an established global presence operating on four continents: North America, Europe, Asia, and Latin America ( UPS Company Profile).

UNITED PARCEL SERVICE, INC Customer Base UPS is part of the supply chain that keeps the engine of commerce moving. Anything that disrupts this engine of commerce causes a ripple effect throughout the economy as what happened in 2020. When you as a customer shop online, you usually encounter shipping options so you can receive the items that you are ordering. Depending on how fast you want to receive the item, you can choose from next-day air with FedEx, two-day shipping with UPS, or standard shipping with USPS. UPS specializes in two-day shipping whereas FedEx specializes in next- day shipping which is why FedEx is the most expensive of all the courier companies in the industry. UPS customers are divided into three segments: U.S. domestic which consists of both business to business and business to consumer. Supply chain and freight is primarily a business- to-business segment that provides specialized freight transportation services, as well as end-to- end supply chain management services for businesses of all sizes. UPS has established a presence across four continents: North America, Europe, Asia, and Latin America (UPS Company Profile). They have developed a diverse customer base consisting of both business to business and business to consumer markets. On the business side, UPS works with a variety of businesses from small mom and pop companies to large multinational corporations such as Amazon. Amazon, being their largest business customer, represents 11 percent of their revenue. As of 2023, UPS has 5,397 retail locations that serve the consumer market where consumers can not only drop off their packages to be shipped, but also has several ancillary services such as mailbox rental, photocopying, and packing services.

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UNITED PARCEL SERVICE, INC Current Obstacles The first obstacle facing UPS is going to be the global freight slowdown. Companies like UPS are what keep the engines of commerce going. Anything that disrupts the operations of transportation companies such as UPS can have a ripple effect throughout the economy, both global and domestic. That is why this global freight slowdown can be a significant obstacle for UPS and all other logistics companies in the industry (Wilkins, 2023). The second obstacle facing UPS is losing Amazon as its biggest customer. As mentioned earlier in this paper, Amazon was the biggest business to business customer for UPS accounting for 11 percent of revenue. The decision by Amazon to part ways with UPS so they can further expand their Prime delivery service will be a significant obstacle for UPS to overcome as 11 percent of their revenue is a sizable chunk of revenue to lose (Garland, 2023). So large that it will cause UPS to adjust its future revenue and profitability forecasts. UPS must navigate these obstacles to ensure the smooth operation of their business and maintain their position in the market. Impact on Revenue and Market Share The labor negotiations which came close to causing a strike have already had a negative impact on UPS's revenue. The company has lost 1 million packages per day in volume as customers, anticipating a strike, have switched to competitors like FedEx and USPS. Although the loss of 1 million packages may seem relatively small compared to UPS's daily volume of 25 million packages per day, it is significant enough for the company to revise its revenue and

UNITED PARCEL SERVICE, INC profitability forecasts for 2023. Many analysts have said that this setback should not have a long- lasting impact on UPS's recovery, but adjustments will be necessary in the near term. The Biden Administration's Inflation Reduction Act could have a significant impact the transportation industry. Many smaller transportation companies have become very vocal that this could be catastrophic to the supply chain in the U.S. Under this act, all transportation companies would be required to upgrade their entire fleet of vehicles to electric, resulting in increased costs and reduced profitability. UPS has already made a commitment to sustainability by investing in electric vehicles for their fleet. Despite these challenges, UPS's strong financial position, with ample liquidity and earnings, may mitigate the potential impact. What is causing the global slowdown in freight shipping? According to eCapital (eCapital) , the decrease in demand for consumer goods, accompanied by a rising cost of living, is to blame. However, Reuters (Mutikani, 2023) has reported that consumer spending has increased by 0.8 percent, with consumers spending more, especially online, and saving less. This could change later in 2023 as student loan payments are expected to resume (Thomas, 2023) . Since 2022, U.S. imports from China have been decreasing as much as 40 percent due to escalating tensions. This decline in imports means fewer cargo ships arriving at ports and fewer goods being transported. This is aligned with the increasing trend of consumers embracing the America-First movement and only purchasing products that are made in the USA, leading to a significant drop in manufacturing orders from China. This obstacle could cause a significant decline in the volume of shipments for UPS as their revenue is directly correlated to their volume of shipments, which is around 25 million packages per day. The global freight recession as mentioned earlier could also be a significant threat to UPS's market share as the recession has led

UNITED PARCEL SERVICE, INC to a rise in competition, especially from the Asian market, where freight forwarders are offering low-cost solutions (Ashcroft, 2023) .

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UNITED PARCEL SERVICE, INC References Ashcroft, S. (2023, May 2). Asia-US sea freight price hike, as firm claw back profits. https://supplychaindigital.com/logistics/asia-us-sea-freight-price-rise-as-firm-claw-back- profits Baertlein , L., & Priyamvada, C. (2023, August 8). UPS cuts 2023 forecasts, fights to regain business lost during US labor talks . September 10, 2023, https://www.reuters.com/business/ups-cuts-revenue-view-lower-e-commerce-demand-new- labor-contract-2023-08-08/ CSIMarket.com. (n.d.). United Parcel Service Inc (UPS) . https://csimarket.com/stocks/competitionSEG2.php?code=UPS eCapital. (n.d.-a). Trucking Recession 2023? What Truckers Need to Know. https://ecapital.com/blog/is-the-trucking-recession-here-what-truckers-need-to-know/ EPA Press Office . (2023, August 16). EPA Marks One Year of Progress Under President Biden’s Inflation Reduction Act. https://www.epa.gov/newsreleases/epa-marks-one-year- progress-under-president-bidens-inflation-reduction-act#:~:text=EPA’s%20Inflation %20Reduction%20Act%20programs,by%20no%20later%20than%202050 . Marketline. (n.d.). United Parcel Service, Inc. https://advantage-marketline- com.ezproxy.snhu.edu/Company/Summary/united_parcel_service_inc .

UNITED PARCEL SERVICE, INC Mutikani, L. (2023, August 31). US consumer spending accelerates; declining savings a red flag. https://www.reuters.com/markets/us/us-consumer-spending-july-surges-weekly-jobless- claims-fall-2023-08-31/ Thomas, I. (2023, August 3). ‘Something bad is happening around the corner’: Why a consumer spending drop is likely in the fall. https://www.cnbc.com/2023/08/03/a-consumer- spending-slowdown-is-coming-in-second-half-of-year.html Tietz, K. (2023, September 7). Trucker warns Biden’s EPA regulations would be “catastrophic” for the American food supply . September 10, 2023, https://www.foxnews.com/media/trucker-warns-bidens-epa-regulations-catastrophic- american-food-supply United Parcel Service, Inc. (n.d.). UPS Company Profile. https://investors.ups.com/company- profile#:~:text=We%20operate%20one%20of%20the,over%20200%20countries%20and %20territories . Wilkins, J. (2023, July 31). The “freight recession” rocks global shipping, fueling a 75% plunge in container rates . September 10, 2023, https://www.businessinsider.com/freight- recession-rocks-global-shipping-container-rates-plunge-75-percent-2023-7

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