can ups sustain or increase the level of growth it has experienced over the past 5 years? ma...

UPS Growth and Sustainability © Anthony William Mitchell 2008

Contents Table

Contents Page

Title Page i

Abstract ii

Acknowledgements iii

Contents

1.1 Introduction 4

1.2 Overview 4

1.3 UPS Facts & Statistical Overview 5

1.4 United Parcel Service: History and Growth 6

1.5 The History of the United Parcel Service 7

1.6 UPS Timeline 7

1.7 The Early Expansion of UPS 10

1.8 UPS’s Initial Attempt to Go Global 12

1.9 Technological Developments at UPS 12

1.10 Growth of UPS in the 1990s 13

1. 11 UPS’s Growth in the Past Five Years 14

Figure 1.1 Past and Present UPS Logos 14

1.12 UPS System Design 16

Figure 1.2 An Illustration of the UPS Hub and Spoke Model 16

1.13 Benefits of the Hub and Spoke Model 17

1.14 UPS Human Resource Management 20

1.15 UPS Competitors 20

1.16 Summary 22

2.1 Literature Review 23

2.2 Introduction 23

2.3 Literature Review Main Body 23

2.5 Defining Sustainability 24

2.6 Marketing and Advertising 26

2.7 Supply Chain Management 27

2.8 Project Management (Sustainability) 32

2.9 Sustainability and Project Management Approaches 35

2.10 Sustainable Accounting 38

2.11 Sustainability and Risk Management 40

2.12 Risk Management, Residual Risk and Business Continuity 42

2.13 Business Sustainability and Financial Risk Management 43

2.14 Sustainability and Operations Management 46

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2.16 Business Sustainability and Operations Management Planning Criteria 48

2.17 Regression Analysis 49

2.18 Performance Management and Customer Retention 51

2.19 Definition of Performance Appraisal Management 51

2.20 The Purpose of Performance Appraisal Management Systems and Customer Retention

53

2.21 Challenges of Performance Management Systems and Customer Retention 56

2.22 Leadership at UPS 58

2.23 The Forces Driving the Changes in Leadership 59

2.24 Leadership versus Management 60

2.25 Limitations of the Literature Review 64

3.1 Research Methodology 65

3.2 Introduction 65

3.3 Research Objectives 65

Figure 3.1 Research Design - A Theoretical Framework 67

3.4 Research Design 68

3.5 Research Methodology 69

3.6 Quantitative Analysis versus Qualitative Analysis 72

Figure 3.2 Quantitative Analysis versus Qualitative Analysis 72

3.7 Primary Data Collection and Research 74

3.8 Secondary Data Collection and Research 76

3.9 Scaling Method (Sample Targets) 77

3.10 Online Survey 78

3.11 Ethical Considerations 78

3.12 Threats to Research 79

3.13 Summary 81

4.1 Data Presentation and Analysis 82

4.2 Primary and Secondary Data Introduction 82

4.3 Quantitative Data Analysis 83

4.4 Regression Analysis 83

4.5 Multi-factored Regression Analysis 83

4.6 Regression Analysis Formulas 83

4.7 Proportion of Variance (R2) 84

4.8 F test / F value/ Prob (F) 85

4.9 Regression Formulae Rationale 86

4.10 Statistical Analysis Graphs and Tables 87

4.11 UPS Financial Record 87

Figure 4.1 UPS Total Annual Revenue created from UPS Financial Records 89

4.12 A Regression Analysis of UPS total revenue growth: 2003 -2007 90

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Figure 4.2 A Linear Trend with Sine Component 90

Figure 4.3 Linear Equation 91

Figure 4.4 Descriptive Statistics for Variables 92

Figure 4.5 Calculated Parameter Values 92

Figure 4.6 Normal Probability of Plot Residues93

4.13 Regression Analysis Outcomes and UPS Growth Forecasting94

Figure 4.7 UPS growth Financial Record and Forecasts95

Figure 4.8 Earnings Growth Ratios95

4.14 Organizational Aspects and Sustainability: A Qualitative Analysis96

4.15 UPS Bureaucratic Management and Overall Leadership Approach97

4.16 UPS Leadership Style and Sustainability100

4.17 Weaknesses in UPS’s Management104

4.18 Direct and Relationship Marketing105

4.19 UPS’s Future Plans and Potential Strategies for Growth110

4.20 UPS – Facing the Challenges of Economic Uncertainty114

4.21 UPS Financial Management and Sustainability118

4.22 Financial Services at UPS and Brand Stretching119

4.23 Technological Advancement and UPS’s Sustainability120

4.24 UPS Equal Opportunities123

4.25 Cross-Cultural Variances and UPS’s Global Growth126

4.26 UPS Competitor Analysis130

4.27 The Impact of Structural Developmental Models on UPS129

4.28 The Logistics Value Chain131

4.29 Comparing Value Chains131

4.30 Competing Strategic Plans136

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5.1 Conclusions and Recommendations132

6.1 References and Bibliography145

Appendix A – Research Questionnairei

Appendix B – Interviews ii

Appendix C – Original Excel Filesiii

1.1 Introduction

1.2 Overview

This dissertation is a study and analysis of United Parcel Service (UPS), utilising its

growth over the last five years and to forecast its future prospects as to whether UPS

can sustain and increase this level of growth. The dissertation also focuses on the end

customer needs and accordingly, changes to be considered in the global market by

UPS, if any. In this ever changing business environment of logistics and freight and

air cargo transportation, it is essential to keep one step ahead of the competitors, in

terms of technology, strategy and product or service specifications. A detailed

analysis on the current operations and suggestions for improved to products and

services will also be explored.

The primary research thrust will be conducted in the domains of knowledge

applicable to the company in focus have spurred the execution of this study aimed at

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establishing the firm’s sustainability taking a cue from its past strides. Core study

objective include establishing the hallmarks of the company’s remarkable growth and

success through conducting a review of the company’s track record in various

dimensions of its organisational leadership and management strata. The objectives

also entail determining the probable company’s growth and sustainability five years

into the future.

1.3 UPS Facts & Statistical Overview

• “Founded: August 28, 1907, in Seattle, Wash., USA

• World Headquarters: Sandy Springs, Ga., USA

• 2007 Revenue: $49.7 billion

• Employees: 425,300 Worldwide (358,000 U.S.; 67,300 International)

• Package Operations 2007 Revenue: $41.3 billion

• 2007 Delivery Volume: 4.0 billion packages and documents

• Daily Delivery Volume: 15.8 million packages and documents

• Daily U.S. Air Volume: 2.3 million packages and documents

• Daily International Volume: 1.9 million packages and documents

• Service Area: 200+ countries and territories; every address in North America and

Europe

• Customers: 7.9 million daily (1.8 million pick-up, 6.1 million delivery)

• UPS.com: Average 18.5 million daily on-line tracking requests

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• Retail Access: The UPS Store®, 4,647; Mail Boxes Etc.®, 1,306; UPS Customer

Centers, 1,000; Authorized outlets, 17,000; UPS Drop Boxes, 40,000

• Operating Facilities: 1,801

• Delivery Fleet: 93,637 package cars, vans, tractors, motorcycles

• UPS Jet Aircraft Fleet: 268; 9th largest airline in the world

• Chartered Aircraft: 311

• Daily Flight Segments: Domestic - 1,130; International - 796

• Airports Served: Domestic - 424; International - 389

• Air Hubs: United States: Louisville, Ky. (Main US Air Hub); Philadelphia, Pa.;

Dallas, Texas; Ontario, Calif.; Rockford, Ill.; Columbia, S.C.; Hartford, Conn. In

Europe: Cologne/Bonn, Germany. In Asia Pacific: Taipei, Taiwan; Pampanga,

Philippines; Hong Kong; Singapore. In Latin America and Caribbean: Miami, Fla.,

USA. In Canada: Hamilton, Ontario.

• Supply Chain and Freight 2007 Revenue: $8.4 billion

• Facilities: 1,033 facilities in more than 120 countries; 38 million sq. ft.

• UPS Freight Key services: Leading provider of less-than-truckload services coast-

to-coast.

• Delivery fleet: 6,353 tractors; 21,818 trailers

• Facilities: 215+ service centers”

Reference.com (2008)

1.4 United Parcel Service: History and Growth

This chapter will provide the background research for this dissertation, the history of

UPS is discussed in detail its foundation until the present. Special attention has been

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given to the last five year, as UPS has experienced a tremendous growth rate within

this period. A SWOT analysis of UPS will provide addition insight into the current

performance and the overall sustainability of the company at present. This chapter

provides the background information about the company on the whole and also sets

the stage for the larger issues to be discussed during the dissertation in order to

ascertain whether UPS will be able to sustain and increase its growth level.

1.5 The History of the United Parcel Service

1.6 UPS Timeline

•“August 28th 1907: 19-year-old Jim Casey and 18-year-old Claude Ryan founded the

American Messenger Company in Seattle, Washington, capitalized with $100 in debt.

• 1913: The first delivery car appeared, a Model T Ford. Merged with a competitor,

Evert McCabe, and formed Merchants Parcel Delivery. Consolidated delivery was

also introduced, combining packages addressed to a certain neighborhood onto one

delivery vehicle.

• 1918: A new member was recruited, Charles W. Soderstrom, who helped manage

their ever-growing fleet of delivery vehicles.

• 1919: Service turned into Oakland, California. The name United Parcel Service was

adopted.

•1930: A consolidated service began in New York, and soon after began operations in

other major cities in the east and midwest. First mechanical system for package

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sorting. Accountant George D. Smith joined the company. The name United Parcel

Service was adopted all over the country. All UPS vehicles were then painted the

familiar Pullman brown, chosen because it was considered neat, dignified, and

professional. Headquarters moved to New York City.

•1940–1959: Services were expanded by acquiring "common carrier" rights to deliver

packages between all addresses, any customer, private and commercial.

• 1952: Blue Label Air

• 1975: UPS began servicing all of the 48 contiguous states of the USA. UPS also

established Canadian operations in 1975. On Feb. 28, UPS Ltd. (later changed to UPS

Canada Ltd.) began operations in Toronto, Ontario with a single delivery vehicle.

UPS Canada's head office is located in Mississauga, Ontario.

• 1976: UPS established itself in Europe with a domestic operation in West Germany.

Blue Label Air.

• 1982: UPS Next-Day Air Service is offered in the US and Blue Label Air becomes

UPS 2nd Day Air Service.

• 1988: UPS Airlines is launched.

• November 10, 1999: UPS became a public company

• In March 2003, UPS unveiled a new logo, replacing the iconic package and shield

originally designed in 1961 by Paul Rand.

• In 2004, UPS entered the heavy freight business with the December 20

announcement of the purchase of Menlo Worldwide Forwarding, a former subsidiary

of Menlo Worldwide. UPS rebranded it as UPS Supply Chain Solutions. The purchase

price was US$150 million and the assumption of US$110 million in long-term debt.

Menlo Worldwide was the successor of Emery Worldwide. Emery was grounded on

August 13, 2001 after a DC-8-71F crashed in Northern California.

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• In 2005, UPS was among 53 entities that contributed the maximum of $250,000 to

the second inauguration of President George W. Bush.

•On August 5, 2005 UPS announced that it had completed its acquisition of less-than-

truckload (LTL) trucking company Overnite Transportation for US$1.25 billion. This

was approved by the FTC and Overnite shareholders on August 4, 2005. On April 28,

2006, Overnite officially became UPS Freight.

• On October 3, 2005, UPS completed the purchase of LYNX Express Ltd, one of the

largest independent parcel carriers in the United Kingdom, for £55.5 million (US

$97.1 million) after receiving approval for the transaction from the European

Commission. The first joint package car centre operation, in Dartford, Kent, was

opened during mid-2006.

• As of December 31, 2005, UPS's Political Action Committee has been the most

generous corporate giver to federal candidates for every U.S. election since 1992,

donating a total of $14 million, according to FEC records.

• August 28th 2007: United Parcel Service celebrated its 100th anniversary.”


The United Parcel Service was established in 1907, when a nineteen-year-old James

E. Casey, started a messenger service. He began by establishing the American

Messenger Service in Seattle, with a sum of $100 borrowed from friends. The

operations were very simple and the headquarters worked out of a basement. The

orders were received over a telephone, and messengers went out to deliver the goods

on foot and sometimes by bicycle.

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Mr Casey had very strict policies regarding customer courtesy, competitive low rates,

reliability and round the clock service. These policies are the founding and

fundamental principles of UPS. (Reichheld et al: 1990) The company operated as

such until 1913, with the processing deliveries, and including some packaging

services for retailers.

1.7 The Early Expansion of UPS

1913 was to be a turning point for the American Messenger Service. The name was

changed to the Merchants Parcel Services after a merger with Evert McCabe. By now

the company had bought its first car for deliveries and the company gaining a

reputation for the excellent service. In 1919 the company changed to its current name

the United Parcel Service (UPS), expanding their business to Oakland, California.


By 1922, the company brought in the practice known as ‘common carrier’ service

acquiring a small company in Los Angeles. Sherden (1992) noted that this acted as a

differentiating feature and also included services such as accepting cheques as a mode

of payment, undelivered goods returned automatically, etc., and all at low rates when

compared to most competitors. UPS also introduced the use of conveyer belts for

handling packages. Reference.com (2008)

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Between the years of 1930 – 1952, UPS saw enormous growth, as they extended their

business to the East Coast of the USA. Parcels were then delivered to New York City,

Newark and New Jersey. By the 1950’s UPS had realized that the retail store

contracts were limited, and hence they were now looking for newer opportunities

leaving the core business of retail deliveries. Reference.com (2008)

UPS began to focus on expanding to places where it would not require the authority

of Interstate Commerce commission and the state commission. In 1953, they started

providing a common carrier services in California as well. Over the years UPS

continued to look for greater levels of growth and improvement, with UPS becoming

the first parcel delivery company to provide air service through a privately owned

airline. Reference.com (2008)

However UPS’s first attempt was unsuccessful and due to the low volumes of parcels

the service was discontinued within the first year of start up. In 1953, this service was

reinstated and UPS flew parcels to both the east and west coast. Reference.com

(2008)

Until 1975 the free movement of parcels between the US states was restricted,

however in 1975 this barrier was finally removed. UPS gained the approval from the

Interstate Commerce Commission to freely deliver parcels in 48 states, making them

the only delivery service to cater to all 48 continental states within the USA. This

gained UPS the nickname of the ‘Golden Link’ and was a successful first mover

advantage. By 1978 this service had grown significantly, with the company providing

service throughout the including Alaska and Hawaii. Sherden (1992)

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The 1980s brought about higher demands for air parcel delivery. UPS was adapting to

the modern demands of the consumer and started overnight air services and next day

delivery in all the continental 48 US states. The increase in demand for air parcel

service’s opened up new opportunities for UPS.

Sherden (1992) notes that they had started their own jet cargo fleet and by 1988 they

had received authorization to use their own aircrafts, thereby they started their own jet

craft airline. UPS airlines grew to be one of the ten largest airlines of US and were

early adopters of advanced technology such as computers and bar-coding in their

distribution systems; which was aptly named the Computerized Operational

Monitoring, Planning and Scheduling System (COMPASS).

1.8 UPS’s Initial Attempt to Go Global

UPS was now growing at a sustained rat, and their developments and improvements

made them the most trusted in the industry. By the 1980’s they had completely

captured the US markets and were entering the international shipping market.

Rackham (1988); highlights that, “They got established in many countries and

territories of America, Europe, Middle East, Africa and the Pacific Rim”. He further

notes that by 1985 they had started an international air service to six European

countries, and by 1989 they had started domestic air network in Germany. Now UPS

has spread its wings over almost 185 countries worldwide.

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1.9 Technological Developments at UPS

By 1993 UPS had seen tremendous growth, delivering almost 11.5 million packages

and documents. At this point UPS decided to upgrade the technology behind their

delivery system, spending almost US $1.5 billion in a year and with further plans to

spend US $ 3.2 billion over the next five years. “UPS had all the technologies that

would be required for the business. The technology available varied from small

handheld devices to global computers and communications systems.”(Rackham 1988)

In addition UPS introduced tracking services for their customers, UPS provided

delivery drivers with Delivery Information Acquisition Device’s (DIAD), which

allowed them to keep track of what was delivered, and what was still pending;

allowing the customers to have real time information on their shipments.

Sherden (1992) further notes “They were the first in the market to set up a website for

their customers to track their orders and ensure that the customer was aware of the

status of the package.” UPS’s market entry online was hugely successful and the

demand for the online package tracking grew beyond all expectations.

1.10 Growth of UPS in the 1990s

By the 1990’s UPS had grown significantly, but UPS was not content and whilst their

core business remained the distribution of goods, the company was looking for ways

to diversify in to different markets. They started acquiring other companies to further

their growth inorganically, utilizing these companies to serve their customers in newer

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or better ways. In 1995 UPS acquired Sonic Air, using their fleet to be the first

company to introduce ‘same day next flight out’ delivery.

By 1998, UPS had branched out into the financial sector, and had started UPS Capital,

to provide businesses with financial products and services in order to grow their

businesses. UPS went public on the 10th November 1999 and offered its first-ever

initial public offering (IPO). This was a very bold move, and enabled the company to

make strategic acquisitions in important markets around the world, marking a

significant turning point for UPS.

1. 11 UPS’s Growth in the Past Five Years

As part of re-branding process UPS introduced a new logo In March 2003, UPS

which replaced the iconic package and shield originally designed in 1961 by Paul

Rand. In 2004, UPS entered the heavy freight business and on 20th December of that

year announced the purchase of Menlo Worldwide Forwarding (MWF), a former

subsidiary of Menlo Worldwide; UPS re-branded it as UPS Supply Chain Solutions.

UPS Logo 1961-2003 UPS Current Logo

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Figure 1.1 UPS.com (2008)

The purchase price of MWF was US $150 million with the assumption of US $110

million in long-term debt. In 2005, UPS also made political contributions and was

among the 53 entities that contributed the maximum of $250,000 to the second

inauguration of President George W. Bush On August 5, 2005 UPS announced that it

had completed its acquisition of less-than-truckload (LTL) trucking company

Overnite Transportation for US$1.25 billion.

This was approved by the FTC and Overnite shareholders on 4th August,2005. On 28th

April 2006, Overnite officially became UPS Freight. On October 3, 2005, UPS

completed the purchase of LYNX Express Ltd, one of the largest independent parcel

carriers in the United Kingdom, for £55.5 million (US$97.1 million) after receiving

approval for the transaction from the European Commission.

The first joint package car centre operation, in Dartford, Kent, was opened in 2006.

As of 31st December 2005, UPS's Political Action Committee has been the most

generous corporate giver to federal candidates for every U.S. election since 1992,

donating a total of $14 million, according to FEC records. On August 28, 2007 the

United Parcel Service celebrated its 100th anniversary.

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Today UPS is headquartered in Sandy Springs, Georgia, USA (since 1991), and is

now one of the world's largest package delivery companies. UPS delivers an average

of more than 15 million packages a day to 6.1 million customers in more than 200

countries and territories around the world.

UPS has become a global company with one of the most recognized and admired

brands in the world. Every day the company manages the flow of goods, funds, and

information in more than 200 countries and territories worldwide. (Rackham 1988)

1.12 UPS System Design

UPS's Parcel Network is based on a hub and spoke model. The hub and spoke

distribution paradigm (or model or network) is a system of connections arranged like

a chariot wheel, in which all traffic moves along spokes connected to the hub at the

centre. The model is commonly used in industry, in particular in transport,

telecommunications and freight, as well as in distributed computing. See a typical

hub-and-Spoke model in Fig.1 below.

Fig.1.2 An Illustration of the UPS Hub and Spoke Model

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1.13 Benefits of the Hub and Spoke Model

According to Babcock et al (2002) the model has following benefits:

Babcock presents that for a set-up of n nodes, only n - 1 routes are necessary

to connect all nodes; that is, the upper bound is n - 1, and the complexity is O

(n). This compares favourably to the (n (n - 1))/2 routes, or O (n2) that would

be required to connect each node to every other node in a point-to-point

network.

According to scholar the small number of routes generally leads to more

efficient use of transportation resources. “For example, aircraft are more likely

to fly at full capacity, and can often fly routes more than once a day.”

In the scholar’s terms complicated operations, such as package sorting and

accounting, can be carried out at the hub, rather than at every node whilst on

the other end spokes are simple and new ones can be created easily.

“Customers may find the network more intuitive. Scheduling is convenient for

them since there are few routes, with frequent service.” Adds Babcock.

On the other hand Lawrence (2004) presents the following as the drawbacks of the

hub and spoke model:

Lawrence states that because model is centralised; day-to-day operations may

be relatively inflexible. “Changes at the hub, or even in a single route, could

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have unexpected consequences throughout the network. It may be difficult or

impossible to handle occasional periods of high demand between two spokes”.

He further adds that route scheduling is complicated for the network operator.

Scarce resources must be used carefully to avoid starving the hub while stating

that careful traffic analysis and precise timing are required to keep the hub

operating efficiently.

“The hub constitutes a bottleneck in the network. Total cargo capacity of the

network is limited by the hub's capacity. Delays at the hub (caused, for

example, by bad weather conditions) can result in delays throughout the

network. Delays at a spoke (from mechanical problems with an airplane, for

example) can also affect the network.” adds Lawrence.

He also mentions that cargo must pass through the hub before reaching its

destination, requiring longer journeys than direct point-to-point trips. “This is

often desirable for freight, which can benefit from sorting and consolidating

operations at the hub, but not for time-critical cargo and passengers.”

Lawrence (2004)

Analysis conducted on UPS’s operations show that the company operates centres

which feed parcels to hubs where parcels are sorted and forwarded to their

destinations.

“Centers typically are the point of entry for parcels and send the parcels to one or

more hubs. A hub is a location where many centers send packages to be sorted and

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sent back out to other centers or hubs. For example, a parcel being shipped from

Wilmington, North Carolina to San Francisco, California is picked up by a driver and

taken to the 23rd Street center in Wilmington, where it is loaded on a trailer and

driven to Raleigh, North Carolina.” Notes Babcock.

The source further indicates that at Raleigh, the package would join packages from all

over North Carolina and be forwarded to the Chicago Area Consolidated Hub in

Hodgkins, Illinois. “After arriving there, it would be loaded onto a trailer and sent by

rail (trailer on flat car in most cases) to the North Bay, California hub in Richmond,

California where it would then be forwarded to the delivery center, loaded onto the

delivery vehicle, and transported to its final destination.” (Op. Cit)

The authors own observations also note that UPS's air network runs similarly to the

ground network through a hub-and-spoke system, though air hubs are typically

located at airports so packages and planes can quickly be unloaded, sorted, and loaded

again. “Centers feed packages to facilities at airports (called gateways), which in turn

send them to an air hub to be sorted and put on another plane to a final destination

gateway, and then from there to a center.”

For instance, a package travelling from Seattle, WA to Atlanta, GA, would be loaded

onto an air container at Boeing Field (generally referred to as "Biffy" for BFI) just

south of Seattle and flown to the UPS Air Hub at Chicago Rockford International

Airport in Rockford, IL.” Markusen (1996) observes.

In addition Markusen (1996) further notes that from there it would be sorted to a

container heading to Atlanta to Hartsfield-Jackson International Airport, and taken by

truck from the airport to the delivery centre.

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The company has created multiple business diversification schemes and global growth

by forming formidable business networks the world over. UPS move goods,

information, and funds between individuals and companies. “Their operations provide

delivery by land and by air and offering services at customer shipping centres, as well

as online through UPS.com” (Rackham 1988).

He further notes that the company operates in more than 200 countries worldwide,

does business in 15 different languages and dialects, and deliver an average of 13.2

million packages per day. This presents an ideal opportunity for considering the

feasibility of implementing strategies of multi-dimensionalism in the company’s

global networks.

1.14 UPS Human Resource Management

The Company profiles published on UPS show that UPS employs approximately

407,200 staff, with 348,400 in the U.S. and 58,800 internationally. In the United

States, UPS requires drug testing for tractor trailer drivers per Department of

Transport (DOT) regulations. Approximately 215,000 UPS employees are represented

by the International Brotherhood of Teamsters. The company has had only one

nationwide strike in its history, which occurred in 1997, and lasted 16 days.

1.15 UPS Competitors

A closer examination of the messenger and parcel services industry shows that major

domestic (United States) competitors include the United States Postal Service

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(USPS), FedEx, TNT and DHL. Profiles published on UPS indicate that in addition to

these domestic carriers, UPS competes with a variety of international operators,

including Canada Post, TNT N.V., Deutsche Post (owner of DHL), Royal Mail, Japan

Post, India Post and many other regional carriers, national postal services and air

cargo handlers. Niemann (2007) & Brewster et al (2007)

According to Babcock (Op. Cit.) historically, the bulk of UPS' competition came from

inexpensive ground-based delivery services, such as Parcel Post (USPS). However

Babcock (Op. Cit.) states that in 1998 FedEx expanded into the ground parcel

delivery market by acquiring RPS (originally Roadway Package System) and re-

branding it as FedEx Ground in 2000. In 2003 DHL expanded its US operations by

acquiring Airborne Express, significantly increasing its presence in the United States,

and adding more competition in the ground delivery market.

In response to this, UPS partnered with the US Postal Service to offer UPS Mail

Innovations, a program that allows UPS to pick up mail and transfer it to a USPS

centre, or destination delivery unit (DDU), for final distribution. This process is also

known as zone skipping, as is a tactic often used by Parcel Consolidators. Niemann

(2007) & Brewster et al (2007)

Babcock indicates that more recently, the continued growth of online shopping,

combined with increasing awareness of the rôle transportation (including package

delivery) has on the environment, this contributed to the rise of emerging competition

from niche carriers or re-branded incumbents.

For instance, the US Postal Service claims "greener delivery" of parcels on the

assumption that the USPS delivers to each US address, six days a week, and therefore

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offer the industry's lowest fuel consumption per delivery. He observes that other

carriers, such as ParcelPool.com, which specializes in residential package delivery to

APO-FPO addresses, Hawaii, Alaska, Puerto Rico and other US Territories, arose in

response to increased demand from catalogue retailers and online e-retailers for low-

cost residential delivery services closely matching service standards normally

associated with more expensive expedited parcel delivery.

1.15 Summary

UPS has a great track record of success having reached its centenary in 2007. The

company’s capacity and prowess to weather various previous financial turmoil

including the great depression, shows that historically its business operations are

secure and thus likely to be able to adapt and survive another difficult recession. The

environment provides an impetus for continual development and strategy of self

reflection and change within the company whilst maintaining its sustainability over

the longer term.

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2.1 Literature Review

2.2 Introduction

The author realizes that research exercise is not being conducted in a vacuum. The

research exercise fits into a broad body of knowledge which has had numerous

contributions from various scholars, researchers, professionals and students who have

carried similar or related research exercises. Additionally, the scope and objectives of

this research endeavour occurs within related and implied theoretical, ideological and

philosophical frameworks; which largely influence the various disciplines of business.

As such the author is spurred to consider the multiple contributions relevant and

related to this research endeavour. The author will present a literature review in order

to broaden the confines of the knowledge needed and acquired for this dissertation.

2.3 Literature Review Main Body

2.4 Understanding a SWOT Analysis

Hill et al (1997) takes a deeper thrust in to enunciating the dynamics and dimensions

of the SWOT (Strengths, Weaknesses Opportunities and Threats) analysis. The source

has shaped the researcher’s understanding of the SWOT concept in assessing a

company’s success and position vis-a-vis it’s the probable growth prospects, in

particular in relation to internal and external influences.

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2.5 Defining Sustainability

Smukowski (2006) present a catalogue of valuable definitions and perspectives on the

subject of sustainability. Smukowski (2006) further defines sustainability as a pro-

active approach to ensure the long-term viability and integrity of the business by

optimizing resource needs, reducing environmental, energy or social impacts, and

managing resources whilst not compromising on profitability.

According to the source business sustainability is the increase in productivity and/or

reduction of consumed resources without compromising product or service quality,

competitiveness, or profitability. The author gives following examples.

Facility efficiencies (HVAC, water, raw materials, etc.), material and process

improvements, supply chain efficiencies, products or services that are more efficient

(i.e. hybrid cars, renewable fuels, etc.), recycling, telecommuting, optimization of any

resource use.

In answering the question, ‘what is sustainability?’ Smukowski (2006) presents the

following perspective of “Meeting the needs of the present without compromising the

ability of future generations to meet their own needs." Smukowski (2006) central

perspective is on the far reaching concept of sustainability. In his work ‘From

Sustainability to Stakeholders’ he outlines that all those with an ability to impact the

business are stakeholders and that anyone impacted by any business is a stakeholder.

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He also believes that a company is stakeholder in other processes. “Focusing upon

stakeholder needs is a route to new markets, innovation, reduced business risk, and

operational freedom.” The resource review has been particularly valuable in

presenting the broader context in which a company’s sustainability strategy and goals

are established and leveraged.

The author further outlines the following as future fundamental business rôles:

Economic profitability and opportunity.

The economic growth engine.

Innovations in global trade.

Corporate social responsibility and opportunity.

Livelihood and benefits participation within the business.

Resource responsibility and opportunity, for both consumer and polluter of

shared natural resources.

Innovative and economic capacity to restore, and save natural resources as

well as creativity of capitalism to create the path to sustainability.

The source also explores how businesses can lead society’s highest aspirations for

sustainability by exclusively focusing on the sustainability of the business

organisation, although the author found this a little altruistic.

UPS Corporate Sustainability Report (2006) has provided valuable information

regarding UPS, particularly on its corporate sustainability strategies. The report

outlines the Company Profile, Financial Information, Governance, and Key

Performance Indicators (KPI’s). The outlines have helped in deciphering the

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company’s management objective as well perceiving feasible and probable

approaches into the future.

2.6 Marketing and Advertising

On marketing science Barone et al (2000) present an eye opening perspective and

findings on various forms of reference for UPS’s impact on the consumer decision

making processes. The resource particularly zeroes in on the aspect of attitude as a

key aspect in the influence of consumers.

The journal on the Effects of Absurdity in Advertising (2000) by Arias-Bolzmann et

al explores various models of advertising in relation and cognizance to various

references to strategies of penetrating global markets. The resource also focuses on

consumer attitudes on certain products, draws comparisons and presents statistical

analysis of findings obtained through various research modals.

The Journal of Marketing Research by Bradlow et al (2001) captures consumer

responses and attitude to particular brands. The resource also explores the effect of

pricing and its attributing elements relating to the marketing strategies. Managerial

implications of the statistically presented findings are also explored by the authors.

The Evolution of Brand Preferences and Choice Behaviours of Consumers to a

Market in the Journal of Marketing Research by Heilman et al (2003), presents the

crucial aspects of the Log it-mixture model with time-varying parameters, Consumer

panel data, Stages (information collection, extended to lesser-known brands,

- 26 -


information consolidation). Incorporating such topics as impact, and product

experience as well as statistical analysis.

In offering various other valuable perspectives Park et al (1999) explore aspects of

option framing, psychological reactions, regret anticipation and product category

commitment. These have presented valuable insights in the framing and enhancing the

relevance of this research exercise.

2.7 Supply Chain Management

According to Haag et al (2006) Supply Chain Management includes the planning and

management of all activities involved in sourcing, procurement, conversion, and

logistics management activities. The scholars state that the management model also

includes coordination and collaboration with channel partners, which can be suppliers,

intermediaries, third-party service providers, and customers.

“In essence, Supply Chain Management integrates supply and demand

management within and across companies. More recently, the loosely coupled,

self-organizing network of businesses that cooperates to provide product and

service offerings has been called the Extended Enterprise.” (Op.Cit.)

The resource has furnished the scope of this sustainability study with valuable

perspectives on supply chain management in relation to various organisational

management components for national and multinational companies.

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David Simchi-Levi et al (2003) asserts:

“Supply chain management is a set of approaches utilized to efficiently integrate

suppliers, manufacturers, warehouses, and stores, so that merchandise is produced

and distributed at the right quantities, to the right locations, at the right time, in

order to minimize system wide costs while satisfying service level requirement.”

Simchi-Levi has deepened the understanding of supply chain management (SCM)

aspects in the way UPS has coordinated the SCM variables towards sustainability. In

addition to that the study Christopher (2005) states that the:

“Supply chain management is the management of UPS stream and

downstream relationships with suppliers and customers to deliver superior

customer value at less cost to the supply chain as a whole.”

Christopher (2005)

Hult et al (2006) present various additional theories on how Supply Chain

Management can be deciphered as software. The resource presents that in such a case

SCM comprises tolls or modules used in executing supply chain transactions,

managing supplier relationships and controlling business processes.

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Bechtel et al (2001) specifically explore some fundamental concepts and perspectives

on SCM the resource has been remarkably valuable for its insights and focuses on

Dynamic of Supply chain event management (SCEM). According to the authors

SCEM is a consideration of all possible occurring events and factors that can cause a

disruption in a supply chain. With SCEM possible scenarios can be created and

solutions can be planned.

There is presently a ‘knowledge gap’ in terms of the literature available in the area of

supply chain management studies, on providing theoretical support for explaining the

existence and boundaries of supply chain management.

The minority authors such as Halldorsson, et al. (2003), Hult et al (2006) and

Lavassani, et al. (2008) have attempted to supply theoretical basis for dissimilar areas

associated to supply chain with employing organisational theories. These theories

include:

Resource-based view (RBV)

Transaction Cost Analysis (TCA)

Knowledge-based view (KBV)

Strategic Choice Theory (SCT)

Agency theory (AT)

Institutional theory (INT)

Systems Theory (ST)

Network Perspective (NP)

Mainstream SCM conceptualisation holds that the SCM mechanisms are the third

element of the four-square circulation structure. The level of assimilation and

management of a business process link is a function of the number and level, ranging

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from low to high, of components added to the link. Cooper et al (1990) & Houlihan

(1985)

Consequently, adding more management components or increasing the level of each

component can increase the level of integration of the business process link. The

writing on commerce development reengineering the buyer-supplier relationships and

SCM implies various possible apparatus that must receive managerial attention when

managing supply relationships.

Lambert et al (2000) identified the following components which are:

“Planning and control

Work structure

Organization structure

Product flow facility structure

Information flow facility structure

Management methods

Power and leadership structure

Risk and reward structure

Culture and attitude”

Simchi-Levi et al (2004) presents helpful insight on the supply chain components

Based on this study, Simchi-levi et al (2004) suggests the following supply chain

components:

“Supply chain management is a set of approaches utilized to efficiently integrate

suppliers, manufacturers, warehouses, and stores, so that merchandise is produced

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and distributed at the right quantities, to the right locations, at the right time, in

order to minimize system wide costs while satisfying service level requirement.”

The above thoughts taken from the resource cited above have deepened the

understanding of supply chain management (SCM) aspects in relation to how UPS

as major player in this business dimensions has coordinated the SCM variables

towards sustainability. In addition to that the study has also made use of Martin

Christopher . Logistics and Supply Chain Management resource in which he states

that,

“Supply chain management is the management of upstream and downstream

relationships with suppliers and customers to deliver superior customer value

at less cost to the supply chain as a whole.”

Hult et al (2007) insights have been valuable in shedding light on the other important

dimension of SCM. In this resource the authors present nuances on how Supply Chain

Management can be deciphered as software. The resource presents that in such a case

SCM comprises tolls or modules used in executing supply chain transactions,

managing supplier relationships and controlling business processes.

Bechtel et al (2001) specifically explore some fundamental concepts and perspectives

on SCM the resource has been remarkably valuable for its insights and focuses on

Dynamic of Supply chain event management (SCEM). According to the authors

SCEM is a consideration of all possible occurring events and factors that can cause a

disruption in a supply chain. With SCEM possible scenarios can be created and

solutions can be planned.

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2.8 Project Management (Sustainability)

A significant number of literature forms published on subject of sustainability and

project management have been consulted in the bid to understand the subject matter

sufficiently.

Bent (2006) outlines that a project is a finite endeavour, which has a specific start and

completion date, undertaken to create a unique product or service; thus resulting in

beneficial change or added value. “This finite characteristic of projects stands in sharp

contrast to processes, or operations, which are permanent or semi-permanent

functional work to repetitively produce the same product or service. In practice, the

management of these two systems is often found to be quite different, and as such

requires the development of distinct technical skills and the adoption of separate

management philosophy, which is the subject of this article.” Bent (2006)

Below is a list and outline of perspectives on project management and focus on

sustainability and project management:

PMBOK (Project Management -- Body of Knowledge as defined by the

Project Management Institute — PMI):"Project management is the application

of knowledge, skills, tools and techniques to project activities to meet project

requirements."

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PRINCE2 project management methodology: "The planning, monitoring and

control of all aspects of the project and the motivation of all those involved in

it to achieve the project objectives on time and to the specified cost, quality

and performance.”

PROJECT: A temporary endeavour with a finite completion date undertaken

to create a unique product or service. Projects bring form or function to ideas

or needs.

DIN 69901 (Deutsches Institut für Normung - German Organization for

Standardization): "Project management is the complete set of tasks,

techniques, tools applied during project execution"

Bent (2006)

Heerkens (2001) views project management as the discipline of defining and

achieving targets while optimizing the use of resources (time, money, people,

materials, energy, space, etc) in the attempt to achieve long term success and

sustainability.

Whilst Harold’s (2003) terms project management is quite often the province and

responsibility of an individual project manager. According to Harold the individual

seldom participates directly in the activities that produce the end result, but rather

strives to maintain the progress and productive mutual interaction of various parties in

such a way that overall risk of failure is reduced. The author also explores the

planning, scheduling and controlling aspects of project management in relation to the

goals and demands of sustainability.

Harold (2003) believes that typical projects include the engineering and construction

of various objects or consumer products, including buildings, vehicles, or electronic

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devices. The duration of a project is the time from its start to its completion, which

can take days, weeks, months or even years.

The review of the pieces of literature outlined above has brought up significant and

noteworthy aspects on the divergence of perspectives regarding the issue of

Sustainability. According to the Project Management Institute PMBOK Guide (2004),

“A project is a temporary endeavor undertaken to create a unique product, service, or

result (Projects are temporary because they have a definite beginning and a definite

end. They are unique because the product or service they create is different in some

distinguishing way from similar products or services.”

The research endeavour has also led to the consultation of literature themed on the

project management life cycle linked to the core theme of sustainability. The exercise

has explored through the previously identified literature, the dynamics of a project life

span as well initiation, planning and successful execution aspects of project planning.

The study has also involved the visiting of the PMHub.net Interviews a web site

dedicated to assisting management studies for the Project Management Institute's

PMP or CAPM exams, which contain some probing personal questions.

The Empty Carousel by Scott T. Mueller (1993) outlines ten steps to comprehensive

project portfolio management .The resource maps out feasible strategies that mangers

have to adopt in order to align business operational strategies to the models of the

long term goals based on an organisation’s sustainability.

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2.9 Sustainability and Project Management Approaches

Further research has also shed the significance light on several approaches that can be

taken to sustainable project management, including phased, incremental, and iterative

approaches. According to Baars et al (2006) the "traditional" approach identifies a

sequence of steps to be completed. According to the scholars this contrasts with the

agile software development approach in which the project is seen as relatively small

tasks rather than a complete process. “The objective of this approach is to impose as

little overhead as possible in the form of rationale, justification, documentation,

reporting, meetings, and permission.”

This approach may also be called the "spiral" approach, since completion of one of

the small tasks leads to the beginning of the next. Baars et al (2006) has an advanced

approached to agile project management, applicable not only to software development

but to any area, utilizing the principles of human interaction management to deal with

the complexities of human collaboration.

Brooks et al (1995) present aspects of the traditional approach.

The resource outlines that in the traditional approach, we can distinguish 5

components of a project (four stages plus control) in the development of a project

namely;

1) Project initiation (Kick-off)

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2) Project planning

3) Project production or execution

4) Project monitoring or controlling

5) Project completion

According to the source however not all projects will visit every stage as projects can

be terminated before they reach completion. Some projects might not have the

planning and/or the monitoring, and some will go through steps 2, 3 and 4 multiple

times.

Allen (1993) does not believe that the definition of sustainable development given by

the Brundtland Commission although the most frequently quoted, it is not universally

accepted and has undergone various interpretations. The text has shed light on the

difficulty in defining sustainability and partly stem from the fact that it encompasses

the entire domain of human activity.

“It is a very general concept like ‘liberty’ or ‘justice’ which is accepted as important,

but a ‘dialogue of values’ that defies consensual definition. It is also a call to action

and therefore is open to political interpretation concerning the nature of the current

situation and the most appropriate way forward.” Allen (1993)

The Brundtland Report plea to protect the environment for future generations is less

controversial than the implied negotiation between environmental, social and

economic interests recommended by the 2005 World Summit.” (Op. Cit) The resource

provides a list of fundamental principles of sustainability. The nuances of which have

shaped the foundational approach in the writing of this paper.

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“A further practical difficulty with a universal definition is that the strategies needed

to address "sustainability” vary according to the level of sustainability governance

under consideration.” the author further indicates.

According to Atkinson (1999), “Environmentalist disenchantment with some aspects

of the global sustainability agenda can be attributed to the view that the

environmental, social, and economic pillars cannot, strictly, be treated as equal.”

Atkinson (1999) provides an interesting and valuable dimension to the subject of

sustainability, stating that the notion of sustainable development is sometimes resisted

because many regard it as an oxymoron, with development inevitably carried out at

the expense of the environment.

Bartlett (1998) has provided insight into highlighting aspects of sustainability that

relate to population growth and how company sustainability endeavours relate must

relate to various external environmental conservation efforts.

Blackburn (2007) presents a historical background of the business sustainability

theories as well related philosophical frameworks within which strategies of business

longevity can be formulated, implemented and managed. The resource has been

particularly helpful in guiding this study towards exploring the concept of

sustainability within the broader bodies of knowledge that relate to the discipline.

Blewitt (2008) writing about Sustainable Development outlines approaches to

analysis and assessing a business entity’s development. The resource is handy for its

description of sustainable development which is conceptually and contextually akin to

the very core of the scope and objectives of this study.

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2.10 Sustainable Accounting

To enrich the perspectives body of the study, the researcher has also conducted a

literature review under the sub themes of sustainability accounting. This has been

done in the understanding that business success can only be achieved through synergy,

when all the organs of a business body function harmoniously towards the

accomplishment of common goals. As such, the accounting facility of a company

plays a vital role in the entire company sustainability stratagem.

Sustainability accounting also sometimes called sustainability metrics or sustainable

development indicators is a general term for the variety of measurements used as a

quantitative basis for the informed management of environmental, social and

economic sustainability.

Schaltegger et al (2003) On sustainability accounting assert that once sustainability

accounting has established approximate boundaries for sustainability at a global level

then, in principle, the adjustments needed for the human system to become self-

sustaining will be known. “Of course biological and physical resources are spread

unevenly over the planet and this, as well as the multilevel nature of sustainability

governance, means that obtaining such an overview presents a formidable challenge.”

(Op. cit.)

Lamberton (2005) on Sustainability Accounting brings up useful information on the

historical development of Sustainability accounting as well as how the disciple has

evolved in past years. Stanners et al (2007) focus on sustainability science in a way to

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find out what is sustainable requires measuring and monitoring. The authors posit

that with quantitative information it is then possible to simplify complicated data,

establish benchmarks, set management goals, assess trends, anticipate problems, and

measure progress. “Because this form of calculation is very similar to the careful way

we manage our financial lives it has been referred to as sustainability accounting.

Sustainability accounting can be carried out at all levels and contexts of sustainability

governance. Major areas of assessment include measures of consumption, resource

use, and ecosystem change across a wide range of social, environmental, temporal,

and spatial scales.” (Op. Cit.)

This resource has been relevant in broadening perceptions and perspectives on the

dynamics and dimensions of the broad concept of sustainability.

The report by the United Nations Department of Economic and Social Affairs (2007)

has been particularly useful in highlighting elements such as sustainability indicators

and how these can provide information on any aspect of the interplay between the

environment and socio-economic activities.

The writers state that one popular general framework used by The European

Environment Agency uses a slight modification of the Organisation for Economic

Cooperation and Development or the DPSIR system. “This breaks up environmental

impact into five stages. Social and economic developments (consumption and

production) (D)rive or initiate environmental (P)ressures which, in turn, produces a

change in the (S)tate of the environment which leads to (I)mpacts of various kinds.

Societal (R)esponses (policy guided by sustainability indicators) can be introduced at

- 39 -


any stage of this sequence of events. Building strategic indicator sets generally deals

with just a few simple questions: what is happening? (Descriptive indicators), does it

matter and are we reaching targets? (Performance indicators), are we improving?

(Efficiency indicators), are measures working? (Policy effectiveness indicators), and

are we generally better off? (Total welfare indicators).”

2.11 Sustainability and Risk Management

Using mainstream knowledge resources, consulted risk management is mainly

perceived as a structured approach to managing uncertainty related to a threat, with a

sequence of human activities including: risk assessment, strategies development to

manage it, and mitigation of risk using managerial resources.

Alberts et al (2008) suggests that the strategies in risk management include

transferring the risk to another party, avoiding the risk, reducing the negative effect of

the risk, and accepting some or all of the consequences of a particular risk.

Sheedy (2005) outlines the factors that may cause risk, or the factors that might

amount to a business risk. “Some traditional risk managements are focused on risks

stemming from physical or legal causes (e.g. natural disasters or fires, accidents, death

and lawsuits)”

Sheedy (2005) also believes that financial risk management is also important, and

focuses on risks that can be managed using traded financial instruments.

Borodzicz (2005) asserts that the objectives of risk management are among other

things the reduction of risks which are related to a pre-selected domain to a level

accepted by society. Borodzicz (2005) states that risks may refer to numerous types of

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threats caused by environment, technology, humans, organizations and politics

countering that “it involves all means available for humans, or in particular, for a risk

management entity (person, staff, and organization).”

Gorrod et al (2004) explore the concept of applying risk management activities to

project management. According to their research in project management, risk

management includes the following activities:

Planning how risk management will be held in the particular project. Plan

should include risk management tasks, responsibilities, activities and budget.

Assigning a risk officer - a team member other than a project manager who is

responsible for foreseeing potential project problems. The typical

characteristic of risk officer is a healthy scepticism.

Maintaining a live project risk database - Each risk should have the following

attributes: opening date, title, short description, probability and importance.

Optionally a risk may have an assigned person responsible for its resolution

and a date by which the risk must be resolved.

Creating an anonymous risk reporting channel. Each team member should

have the ability to report risks that he/she foresees in s project.

Preparing a ‘mitigation plans’ for risks that can be mitigated. The purpose of

which is to describe how this particular risk will be handled – what, when, by

who and how will it be done to avoid it or minimize consequences if it

becomes a liability.

Summarizing planned and faced risks, the effectiveness of mitigation

activities, and the effort spent on the risk management planning.

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2.12 Risk Management, Residual Risk and Business Continuity

The author understands from his research that risk management is a practice of

systematically selecting cost effective approaches for minimising the effect of threat

realisation to the organisation. The concepts explored from different scholars concur

that all risks can never be fully avoided or mitigated simply because of financial and

practical limitations and that therefore all organizations have to accept some level of

residual risks.

Gary et al (2002) holds that whereas risk management tends to be pre-emptive,

business continuity planning (BCP) was devised to deal with the consequences of

realised residual risks. “The necessity to have BCP in place arises because even very

unlikely events will occur if given enough time. Risk management and BCP are often

mistakenly seen as rivals or overlapping practices. In fact these processes are so

tightly tied together that such separation seems artificial. For example, the risk

management process creates important inputs for the BCP (assets, impact

assessments, cost estimates etc).”

In addition Gary et al (2002) outlines that resource risk management is perceived as

also proposing applicable controls for the observed risks, therefore covering several

areas that are vital for the BCP process, whilst acknowledging that the BCP process

goes beyond risk management's pre-emptive approach and moves on from the

assumption that the disaster will realize at some point.

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2.13 Business Sustainability and Financial Risk Management

Van Deventer et al (2004) perceives risk management to be the practice of creating

economic value in a firm by using financial instruments to manage exposure to risk,

particularly Credit risk and market risk which include:

“Other types include Foreign exchange, Shape, Volatility, Sector, Liquidity,

Inflation risks, etc. Similar to general risk management, financial risk

management requires identifying its sources, measuring it, and plans to

address them. As a specialization of risk management, financial risk

management focuses on when and how to hedge using financial instruments to

manage costly exposures to risk.”

Van Deventer et al (2004)

Hirsch (2005) outlines the elements of the impact of the oil price crisis as an

unprecedented risk management problem highlighting that “As peaking is

approached, liquid fuel prices and price volatility will increase dramatically, and,

without timely mitigation, the economic, social, and political costs will be

unprecedented. Viable mitigation options exist on both the supply and demand sides,

but to have substantial impact, they must be initiated more than a decade in advance

of peaking. Mitigating the peaking of world conventional oil production presents a

classic risk management problem.”

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The source includes a few points which present germane to the focus concepts of this

research exercise, as do the bullet arrows below:

Mitigation initiated earlier than required may turn out to be premature, if

peaking is long delayed.

If peaking is imminent, failure to initiate timely mitigation could be extremely

damaging.

Prudent risk management requires the planning and implementation of

mitigation well before peaking

Early mitigation will almost certainly be less expensive than delayed

mitigation

The author’s research determines a continuing theme in articles from journals and

newspapers which focus on oil prices, with the underlying problem is that it is

impossible to time the peak of the current rise in oil prices because of inadequate,

conflicting and potentially biased data on oil reserves and demand. Furthermore, the

onset of peak may be obscured by the volatile nature of oil prices. Since the potential

economic impact of peaking is immense and the uncertainties this causes which

actually cyclically affect the market, the author believes a detailed quantitative studies

to address the uncertainties and to explore mitigation strategies are a critically need.

Hirsch (2005) explores the problem of the peaking of world conventional oil

production and concludes that it is unlike any yet faced by modern industrial society.

“The challenges and uncertainties need to be much better understood. Technologies

exist to mitigate the problem. Timely, aggressive risk management will be essential.”

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Thore (2008) presents valuable analyses on movements between the prices of crude

oil and major refined products during 1992-1998. The analytical focus entails an

exploration of the existence of long-run equilibrium price relationships, and an

assessment to determine whether deviations from estimated equilibrium can be

utilized for predictions of short-term price changes and for risk management.

“The econometric evidence strongly supports the hypothesis that crude and product

prices are co-integrated. Past deviations from long-term equilibrium are significant in

an error correction specification of short-term product price changes. The results

represent valuable information for hedging, particularly in integrated oil companies

for which price risk is related to margin variations.” Thore (2008)

The paper also investigates crude oil and products price dynamics, and presenting a

comparison among ten prices series of crude oils and fourteen price series of

petroleum products, considered in four distinct market areas (Mediterranean, North

Western Europe, Latin America and North America) over the period 1994-2002. The

researcher’s states:

“We provide first a complete analysis of crude oil and product price dynamics

using co-integration and error correction models. Subsequently we use the

error correction specification to predict crude oil prices over the horizon

January 2002-June 2002.”

Thore (2008)

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This resource has enabled a deeper understanding on the concepts of risk management

in and of the various management models and challenges shaped by the oil price crisis

dogging the oil industry. These will be significant to the scope of this study which

will explore the global oil prices threat to UPS and its fight against soaring

operational costs.

2.14 Sustainability and Operations Management

Naughton (2002) presents definitions of the operations management concepts as:

• “The efficient and effective implementation of the policies and tasks necessary to

satisfy a firm's customers, employees, and management (and stockholders, if a

publicly owned company)

• The management of systems or processes that create goods and/or provide services.

•The ongoing activities of designing, reviewing and using the operating system, to

achieve service outputs as determined by the organization for customers.

• The Management of main business activity: the organizing and controlling of the

fundamental business activity of providing goods and services to customers.”

Wright (1999)

- 46 -


The source also presented the following the examples of operations management:

•Manufacturing Products

•Providing Insurance Cover

•Providing Healthcare

•Government/Political

•Armed Forces – Peace Keeping

• NGO’s OXFAM – bringing relief

The APICS Dictionary, 12th edition defines the yet another dimension of operations

management which is marketing operations marketing. The dictionary defines

marketing operations management (MOM) as “a vision of end to end marketing

optimization, from planning and budgeting, through marketing content management,

to global marketing execution and analysis.” Blackstone (2008)

According to the source MOM is characterized by an attempt to achieve measurable

and traceable Return on Marketing Investment (ROMI), and, as a means of achieving

that, creating a marketing dashboard, leading to improved marketing effectiveness.

“The concept of the marketing dashboard is that a marketing executive, or indeed any

employee of an organization, can log in to a system which shows the status of all

ongoing marketing activities - showing 'fuel consumption' (spending), 'speed' (sales)

and various other metrics in the automotive analogy. The Marketing Resource

Management (MRM) industry provides software vendors with integrated solutions

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who provide the software infrastructure to assist organizations with their Marketing

Operations Management.

This forms the technology backbone to the essential alignment of people, process and

technology that is critical to an effective Marketing Operations Management

strategy.”

Wilson (1995) defines operations management as an area of business that is

concerned with the production of goods and services, and involves the responsibility

of ensuring that business operations are efficient and effective. It is the management

of resources, the distribution of goods and services to customers, and the analysis of

queue systems.

APICS The Association for Operations Management also defines operations

management as "the field of study that focuses on the effectively planning,

scheduling, use, and control of a manufacturing or service organization through the

study of concepts from design engineering, industrial engineering, management

information systems, quality management, production management, inventory

management, accounting, and other functions as they affect the organization"

Aquilano et al (2001) holds that operations management also refers to the production

of goods and services; the set of value-added activities that transform inputs into

many outputs. Fundamentally, these value-adding creative activities should be aligned

with market opportunity for optimal enterprise performance. This resource has thus

been helpful in assessing the effectiveness and growth as well as sustainability

strategies impact of the business entity in focus, UPS.

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2.16 Business Sustainability and Operations Management Planning Criteria

The author’s research on the concept of operations management has led to the

understanding of production and operations management, and can be defined as

management of the efforts and activities of people, capital, and equipment resources

into changing raw materials into finished goods and services. Vidal (2005)

Vidal (2005) explores the challenges exerted on various companies in the public and

private sector in their use of operations management and in relation to the goals and

strategies of sustainability. The writer focuses on the pervasiveness of the impact of

the volatile oil prices and how they pose stern operations management challenges to

various organisations the world over. The resource has been particularly useful to the

scope and objectives of the study and its link with oil prices affecting sustainability.

The discord caused by the volatile oil prices which have hit record price recently may

affect UPS negatively. According to Vidal (2005) this will likely affect risk

management, operations management, and Supply Chain Management and Project

Management departments within a company such as UPS. This study endeavours to

contribute to the body of knowledge which relates to the impact of the oil price crisis

to the oil industry.

Please note that the author in this study endeavour does not necessarily agree nor

disagree with the perspectives and ideas solicited and presented here but the ideas and

perspectives presented have been valuable in shaping the scope and the study

objectives accomplishment.

- 49 -


2.17 Regression Analysis Literature Review

In attempting to provide answers to the question on whether the growth of UPS of the

past five years can be sustained, the study will employ regression analysis as the

primary statistical evaluation model which is useful for conducting statistical

forecasting and devising useful and scientific inferences from evaluated data.

The regression will assist in establishing from the trends and deviations on the

evaluated company financial data as to whether or not the growth experienced by UPS

in past five years can be sustained five year into the from UPS’s financial records.

Doucouliagos (2006) explores meta-regression analysis (MRA) indicating that the

concept provides an empirical framework through which disparate economic research

results can be integrated. Doucouliagos (2006) asserts that the analytical concept can

be used to filter out likely publication selection bias, as well as explain the wide

variation using socio-economic and econometric explanatory variables:

“MRA can empirically model and test socio-economic theories about

economics research. Here, we make two strong claims: socio-economic

MRAs, broadly conceived, explain much of the excess variation routinely

found in empirical economics research; whereas, any other type of literature

review (or summary) is biased.” (Op. cit.)

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Berk (2004) presents a critique of the regression analysis concept as an evaluatory and

forecasting conceptual framework. Berk (2004) defines regression analysis as a

technique used for the modelling and analysis of numerical data consisting of values

of a dependent variable (response variable) and of one or more independent variables

(explanatory variables). According to the explanations given in the source, “The

dependent variable in the regression equation is modelled as a function of the

independent variables, corresponding parameters ("constants"), and an error term. The

error term is treated as a random variable. It represents unexplained variation in the

dependent variable”. (Op. cit.)

This assists the author in expounding and understanding the conceptual tenets of

regression analysis.

David (2005) provides introduces valuable concepts of the regression analysis model

and its primary use in forecasting. The resource state that regression can be used for

prediction, inference, and hypothesis testing as well as modelling of casual

relationships. The writer outlines that uses of regression rely heavily on the

underlying assumptions being satisfied, “Regression analysis has been criticized as

being misused for these purposes in many cases where the appropriate assumptions

cannot be verified to hold. One factor contributing to the misuse of regression is that it

can take considerably more skill to critique a model than to fit a model.” (Op. Cit.)

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2.18 Performance Management and Customer Retention

Some forms of performance management and its precursor performance appraisal,

have been in existence since the days of Frederick Taylor at the beginning of the

century. Roithmayr (2003). 'It has been a staple of Human Resources research and

practice for more than half a century, and the bane of HR professionals for roughly

the same period." Roithmayr (2003).

Despite this longevity, many agree there is widespread dissatisfaction by both

managers and employees alike with the processes and outcomes of many existing

performance appraisal systems. (Clevand 2008)

2.19 Definition of Performance Appraisal Management

UPS systems design indicates the application of performance appraisal management

and hence this section presents literature reviewed on that subject. Performance

appraisal has been viewed by many as a single event controlled by the supervisor. The

evolving concept of performance management has taken on a systematic approach

with more input from the individual employee.

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Performance appraisals have often been defined as the procedure for collecting and

interpreting data about the performance of individuals over time." Blair et al (1993)

define performance management as "A process by which employee performance

within an organization is planned, managed, and evaluated." They also emphasize that

the traditional approach is based on supervisor to subordinate communication that

includes supervisory leadership, supervisory oversight, supervisory monitoring and

supervisory judgments.

More recently Stephen and Roithmayr (Op. Cit.) define performance management as

a "... set of practices through which work is defined, reviewed and rewarded, and

employee capabilities are developed" .They also advocate for a high degree of

involvement and personal employee responsibility. This more recent definition adds

employee development to the performance management framework.

These have significant contribution to means that can be adopted to align HRM

performance towards customer satisfaction orientation and hence satisfaction.

Bevan and Thompson's literature review indicated a 'textbook' performance

management system (PMS) which includes the following; the organization has a

shared vision of its objectives, or a mission statement, which it communicates to all its

employees. The organization sets individual performance management targets which

are related both to operating unit and wider organizational objectives.

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The company conducts a regular, formal review of progress towards these targets, and

uses the review process to identify training, development and reward outcomes. The

company then evaluates the effectiveness of the whole process and its contribution to

overall organizational performance to allow changes and improvement to be made,

especially to improve the provision of service. This is perceived to enhance customer

satisfaction and thus yield meaningful customer retention levels.

2.20 The Purpose of Performance Appraisal Management Systems and

Customer Retention

Douglas McGregor believes that performance appraisal programs are designed to

meet three needs. “First, they provide a mechanism for decisions about salaries,

promotions, transfers, demotions and terminations. Secondly, they are a mechanism

for informing an employee as to how he is doing in relation to the behaviour, attitude,

skills and knowledge that are needed for the job. Thirdly, they are used as a

mechanism for watching and counselling an employee.” (McGregor 1999)

Cleveland et al (2005) agree that performance appraisal is largely used for

administrative decisions such as salary management, promotion, and staff retention

and dismissal. With the advent of ‘management by objectives’ in the 1950's and

1960's, organizational planning was added to the list of rational for performance

appraisals. In recent years, performance appraisal and management systems are also

being used to safeguard organizations against discriminatory practices and for

customer feedback and development of employees. Cleveland & Murphy state:

“… organizational uses of performance appraisal can be grouped into: between-

person uses, including salary administration, promotion, retention, termination,

recognition of individual performance, layoffs, and identification of poor

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performance. within-person uses, including identification of individual training needs,

performance feedback, determining transfers and assignments, and identifying

individual strengths and weaknesses, and systems maintenance uses, including use of

appraisal for manpower planning, determining organizational training needs,

evaluating goal achievement, assisting in goal identification, evaluating HRM system,

reinforcing authority structure and developing organizational development needs.”

(Op. Cit.)

The Bevan and Thompson study also found objective setting and formal appraisal

were at the centre of a cycle that:

“Atypically results in two broad human resources outcomes affecting individual -

what could be termed 'assessment' and 'coaching' activities’ Assessment' concerns

itself with aspects such as compensation, succession planning and disciplinary

measures, whereas 'coaching' identifies means of improving performance through

training and development or discussions about career potential and promotion

opportunities.”

(Op. Cit.)

While the literature proposes there are many purposes for performance appraisals, it

also clearly states "… when several uses are incompatible, or in conflict, attempts to

use performance appraisal as an all-purpose tool may fail." Cleveland et al (2005)

Terziovski (2004) also agrees that performance management systems with too many

purposes increase the potential for failure of the whole system. Within the literature

authors debate whether there are any measurable data to link the rôle of performance

management with organizational effectiveness. Numerous authors discuss the

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importance of performance management to the success of customer retention and yet

there are still some unanswered questions.

For example, performance management processes have been linked to financial

performance. In a 1994 study, Hewitt Associates Ltd. found "Sales per employee were

a third higher at companies with performance management processes than at

companies without them. Operating income as a percentage of total assets was 45%

greater at companies with performance management processes." Roithmayr (Op. Cit.)

In contrast, a UK study found no evidence to suggest that improved organizational

performance in the private sector is associated with the operation of a formal

performance management system." Bevan & Thompson (Op. Cit.)

Bevan and Thompson do acknowledge the findings may be a result of young

performance management systems and or the pre-tax profit growth is an inappropriate

measure. They state organizational effectiveness is affected by such a wide range of

factors that trying to measure the effects of just one of them will never yield

conclusive results." (Op. Cit.) They recommend further research studies on the impact

of performance management systems effect on organizational effectiveness.

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Bartol et al (1990) discuss the reasons for this increase in significance of performance

reviews in relation to litigation. The advent of human rights legislation and the

downsizing of organizations have motivated employees to seek recourse from

discharge decisions and the lack of promotional opportunities.

They state "… employers generally have been able to mount more convincing

arguments regarding the legitimacy of their actions when they are able to provide a

series of performance appraisals that document the performance issues related to the

case." The performance appraisals, if done right, will also document areas where the

employee was given feedback about improving their performance and what strategies

were put in place to help the employee improve. Bartol et al (1990)

2.21 Challenges of Performance Management Systems and Customer Retention

Stephen and Roithmayr (Op. Cit.) found that the reasons for lack of success with

traditional performance management in financial institutions were not because of the

theory and good intentions, but because of execution problems. These execution

problems included the following:

1. The employee's objectives were set in a vacuum and not linked to the larger

business context for the department, division or company;

2. Employee's objectives were not representative of the whole job;

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3. Objectives were often kept a secret and not shared between individuals and teams

to give HRM a better understanding of relationships, hand-offs, and overlaps;

4. Feedback, to the extent provided, was usually one way only, from manager to

subordinate;

5. The key components of the process were not aligned to operate interdependently

as a whole system; and

6. Development planning was at best secondary, and often forgotten.

7. Bevan and Thompson caution the general application of performance management

systems from organization to organization. They state “There is almost an implicit

assumption that the model can fit all situations. However, there are differences

between highly centralized and decentralized organizations that are unionized and

those that are not."

Roithmayr et al (Op. Cit.)

Martinez (2007) research found 'Public sector union representation was significantly

and negatively related to grievances involving performance evaluation, when

compared to non-public sector unions." The research further indicated that

unionization leads to a more formal management practices specifically related to

performance management and HRM customer retention performance.

The resources reviewed have captured important dynamics on the concepts of

management in the premise of various management models and challenges shaped by

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the need to foster pro-business substantiality in management which will translate into

increase customer satisfaction and thus customer retention.

2.22 Leadership at UPS

A fundamental question that needs to be addressed in parcel delivery industry is what

style of leadership will facilitate the development of a culture that will engage all

stakeholders in a performance management system, which should encourage customer

satisfaction, and hence long term customer allegiance. This function of leadership can

be supported by and executed through a well-designed performance management

system. Yukl (1998) writes:

"Leadership is a subject that has long excited interest among people. The term

connotes images of powerful, dynamic individuals who command victorious

armies, direct corporate empires from atop gleaming skyscrapers, or shape the

course of nations."

The definition of leadership is dependent on the context given and can be arbitrary

and difficult to define. Morrison, Jones and Fuller define leadership as "...the ability

to influence a group toward the achievement of its goals." A more complex definition

of leadership is "the pivotal force behind successful organizations and that to create

vital and viable organizations leadership is necessary to help organizations develop a

new vision of what they can be then mobilize the organizational change toward the

new vision." (Bennis & Nanus ) Lippitt adds a different perspective on the definition

of leadership they state that "Leadership can be defined as getting HRM moving in a

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direction making a decision and supporting paths they typically wouldn't have

selected."

In Lippitt's definition, leadership is not just equated with positional power in an

organization, but advocates the responsibility of leadership at all levels of the

organization. In support of Lippitt's approach, Yukl (Op. Cit.) defines leadership as:

“…the process wherein an individual member of a group or organization

influences the interpretation of events, the choice of objectives and strategies,

the organization of work activities, the motivation of HRM achieve the

objectives, the maintenance of cooperative relationships, the development of

skills and confidence by members, and the enlistment of support and

cooperation from individuals outside the group or organization.”

2.23 The Forces Driving the Changes in Leadership

There are a number of social and economic forces driving changes in leadership.

Pettinger (2004) states that class "…. a much sought after, much maligned social

entity, which is vanishing like a species that has outlived its evolutionary time"

Secondly; demographic changes have created a more diverse society. Mead (2002)

comments that, 'Workers in an environment receptive to diversity are empowered to

use their full capacity. As a result, they, their work, and the organization as a whole

benefit from this."

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The third significant change is a shift from what was referred to as the baby-boomer

generation to the gold collar worker. When demand for talent so outstrips supply,

startling salaries, bonuses, and mimosas are just the beginning. - Work is not about

paying the rent; it's about self-fulfilment (Munk). Stuller states, the need to cultivate

and aggressively use those brains is evolving into a business religion."

This will become increasingly difficult as there is a growing shortage of skilled labour

and it will require strong leadership skills to attract the best individuals to an

organization (Lee). Once attracted to an organization it will also mean creating a

culture where creativity, co-operation and resiliency are the operative words.

In summary, the forces driving change in leadership: job changes, diversity issues,

increased demand for skilled labour, demographic changes and lack of strong

leadership skills are significant and need to be addressed.

The author finds it difficult to define what is meant by leadership because the context

is constantly changing and demanding new ways. An effective performance

management system recognizes these changes and provides a framework for meeting

the leadership challenges of a changing workforce and customer needs.

2.24 Leadership versus Management

The differences and similarities between leadership and management continue to be

debated in the literature which raises the question: Is performance management a

leadership or managerial function? Yukl (1998) finds that the limitations of looking at

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leadership and management as mutually exclusive, would be provide an incomplete

picture, and that there is no purpose to be gained by doing so, and that in doing so it

would create simplistic stereotypes, such a labelling Police as managers or leaders

when both are needed to be successful.

Covey believes that "…management and leadership are not mutually exclusive; in

fact, it might be said that leadership is the highest component of management” He

also relates leadership to right brain thinking and management to left brain’ thinking.

The left brain deals with logic, words, parts and specifics, analysis, sequential

thinking, and is time-bound. The right brain works more with emotions, pictures,

relationships, synthesis, simultaneous and holistic thinking and is time free.

Whether leadership and management are distinctly different or exists as different

points on a continuum of management and leadership, it is often difficult work world

to say where one begins and the other ends. Peter Drucker states:

“And as for separating management from leadership, that is nonsense, as much

nonsense as separating management from entrepreneurship. Those are part and

parcel of the same job. They are different to be sure, but only as different as

the right hand from the left or the nose from the mouth. They belong to the

same body.”(Cited in Galagan,)

The concept of management and leadership, whether distinct or on a continuum, both

have their place in determining the success of a performance management system.

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Grote identifies six responsibilities in performance management. The responsibilities

for observing and documenting performance, updating and revising objectives and

performance standards could be thought of as at the managerial end of the continuum.

Motivating, coaching, providing developmental experiences and reinforcing

behaviour could be thought of as at the leadership end of that continuum. It would be

difficult to be definitive about where one starts and the other ends. However, from the

foregoing, it would be reasonable to conclude that effective performance management

requires that managers can move comfortably throughout the continuum of

managerial and leadership behaviours with equal ease.

Covey's 'PIPC principle', balancing production with production capability, is similar

in to situational leadership theory, as they both share a triad of a leader, direct

report(s) and the task or production. To ensure organizational effectiveness, leaders in

organizations need to influence the impact of intervening variables to help employees

balance production with the production capability.

Effective performance management systems provide a framework for the ongoing

dialogue, planning and priority setting that are necessary if this production capability

balance is to be achieved in the day to day activities of the organization.

Empowerment explains the groundwork needed to balance the issues of task and

relationship to create a culture that supports the individual employee to become self-

determined and accountable. The rôle of a leader is to create a culture that supports

the individual employee to become self-determined and accountable within a

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performance management system. It is also very clear from the literature that the

Alignment of an organization's culture with its business strategy, work processes and

rôles, and its human resources strategies, is critical to organizational success today.

The organization's performance management system can be a powerful tool for

achieving this alignment. Vestal et al

Transformational leadership appears to have a powerful influence on job satisfaction

both directly and indirectly through its influence on a person's intrinsic task

motivation (empowerment).

Transactional leadership, on the other hand, has no effect on empowerment; although

it does have a direct effect on job satisfaction Bass's suggestion that transformational

leadership augments the effects of transactional leadership is also resoundingly clear.

Passive management by exception is negatively related to job satisfaction and

empowerment.

There is no one leadership theory that will provide all the answers to designing,

implementing and engaging Police employees in a performance management system.

However theories about appropriate emphasis on task and relationship, flexible

leadership behaviours, productivity and capability, empowerment and trust provide

insight to what makes a leader successful.

Yukl states, "A more promising alternative is to view leadership in terms of several

distinct but interrelated influence processes at the dyadic, group and organizational

level”.

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While a diversity of views exists, it can be concluded that the forces for change from

outside and within organizations are creating impacts. Workforces are changing in

both diversity and in the expectations that are brought to the workplace, thus

managers need to be able to move comfortably between transformational and

transactional focuses. The culture and the performance management system selected

as a result of this project will need to support these concepts.

2.25 Limitations of the Literature Review

The research exercise has endeavoured to solicit as much detail as possible under the

scope and objectives defined and implied in the thesis statement. Nonetheless the

research exercise can not possible account for all that is required for this dissertation

and the author herein acknowledges the limitations of the research exercise owing to

the inevitable changes in market conditions, the company and the additional research

that will become apparent during the course of writing the dissertation . The focus of

the research, and as such the literature review, is thus limited to the time-frame,

conceptual scope and objectives defined and implied in the thesis statement.

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3.1 Research Methodology

3.2 Introduction

The purpose of doing research is to add new knowledge to an existing body of

knowledge in an area of interest. This study will undertake a multifaceted fact finding

stratagem in the quest of obtaining relevant data that can be used in various

evaluations that will attempt to establish whether or not UPS growth can be sustained

in the next five years.

3.3 Research Objectives

To answer the question of whether UPS can sustain or increase the growth it has

experience over the previous give years, the author has chosen six research aims that

will guide and focus the dissertation in the author’s quest for knowledge; in the

pursuit of answering the primary research question.

The six research objectives are as follows:

1) To ascertain how UPS’s growth has been sustained over the past five

years. This will enable the author to more accurately understand the

fundamentals of UPS’s past growth which enable the research to

product future growth

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2) What are the findings of the regression analysis? By analysing this data

the author will be able to ascertain the relative likelihood of UPS

increasing or sustaining its growth statically.

3) What is UPS’s strategy and key performance indicators for future

growth? From this the author will be able to determine UPS’s own

plans for the future and then discuss whether they are viable.

4) What are the findings of the interviews conducted (primary research)?

By analysing this data the author will be able to compare this with

secondary research findings and further understand the relative

likelihood of UPS increasing or sustaining its growth.

5) How will UPS react to the current changes given the current

difficulties it its market and the world economy? By assessing these

externalities the author hopes to determine if problems such as the

credit crunch and a global recession will affect UPS’s growth.

6) Will UPS’s competitors inhibit or restrict the future growth of UPS?

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Figure 3.1 – Research Design - A Theoretical Framework

Mitchell (2008)

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3.4 Research Design

Utilising figure 1.1 (see previous page) as a guide to the writing of the dissertation,

the research drive will entail primary and secondary research methods. The Primary

research approach will include conducting in-depth interviews with marketing

professionals and marketing authors. Interviews will also be conducted to collect data

and insights from UPS management especially in the human resources management,

marketing, corporate Sustainability, international business and financial management

departments areas of expertise.

UPS employees will also be reached through a UPS survey aimed at giving specific

information on aspects such as motivation and satisfaction. The research exercise is

designed to be extensive and as far reaching as possible given the scope and

objectives of the dissertation.

Secondary research will entail the analyses and assessment of crucial UPS

documentation of the past years. The documents that will be accessed and used

include the company’s financial reports and forecasts. The Financial reports and

forecasts will assist in the tracing of the company’s financial progress and track

record for a specific period in its business life span. The reports will also be used to

check the extent to which forecasts have been met or not. This has significant bearing

on the ultimate objective of the dissertation which is to establish if UPS growth will

be sustainable for the next five years.

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The research drive will also make use of the company’s management and marketing

model documents. These are expected to provide useful information on which will

highlight the impact UPS marketing and management strategies have had on the

overall company’s success. The research drive will also make use of the UPS

employees’ surveys online.

In the study the author will present and analyse their findings, on the basis of both

primary and secondary research findings, regards the sustainability of UPS’s growth

for the five years into the future. The drive will also collect data and from company

document that will shed light on UPS’s human resources and corporate sustainability.

In this the study the author will determine how such management and sustainability

fronts have impacted on the company’s growth and also explore the bearing of these

factors and variables on the company’s further growth and sustainability prospects.

3.5 Research Methodology

To meaningfully determine the ideological, theoretical and conceptual platform for

the research into the sustainability of UPS growth into the future, it is imperative to

consider the employ various research models that will enable the researcher to bring a

plethora of research into a meaningful analysis.

The research drive will adopt the two salient research theoretical frameworks, the

positivist and non-positivist research paradigms.

“The positivist paradigm encompasses the economic, behavioural, cognitive,

motivational/trait/attitudinal, and situational perspectives; these perspectives

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are referred to as the traditional perspectives as they pre-date the development

of the non-positivist paradigm.” Barker (2003)

According to the quoted Baker (Op. Cit.) the positivist paradigm, “emphasizes the

supremacy of human reason and that there is a single, objective truth that can be

discovered by science. This paradigm regards the world as a cogent and structured

place with a clearly definite past, present, and future. The assumption of rationalism is

therefore fundamental to this traditional perspective”.

The opposing, non-positivist paradigm, envelops the interpretive and postmodern

perspectives, which have emerged more recently during the period post-1980 to the

present. The proponents of this perspective argue that positivism overemphasizes the

rational view and the ideology of a homogenous social culture and thereby denies the

complex social and cultural world in which humans live.

This paradigm stresses the importance of symbolic and subjective experience and the

idea that consumers construct meanings based on unique and shared cultural

experiences, and thus there can be no single unified world view. Leveraging on the

theoretical and principal tenets of largely, the non-positivist research theory, should

provide new perspectives, findings and insights that will assist in the exploration of

the dynamics that have a direct or indirect bearing in the establishment of whether the

growth that UPS has sustained it the past years can be carried over into the future.

Baker (Op. Cit.)

The research exercise will be employed using quantitative and qualitative research

methods to gather and collate data germane to research matter and subjects under

probe.

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Quantitative research is widely perceived as the systematic scientific investigation of

quantitative properties and phenomena and their relationships. Thomas Kuhn (1961)

asserts, “The objective of quantitative research is to develop and employ

mathematical models, theories and/or hypotheses pertaining to natural phenomena.

The process of measurement is central to quantitative research because it provides the

fundamental connection between empirical observation and mathematical expression

of quantitative relationships.”

Owing to its merits and scientific thrust in treating quantitative aspects of phenomena

quantitative research is widely used in both the natural sciences and social sciences.

The employment of the research paradigm spans various disciplines such as physics

and biology to sociology and journalism. “It is also used as a way to research different

aspects of education. The term quantitative research is most often used in the social

sciences in contrast to qualitative research.” Kuhn (Op. Cit.)

Below is an overview of quantitative research presented by Wikipedia (2008) on

Quantitative Research. According to the source quantitative research is generally

approached using scientific methods, which include:

The generation of models, theories and hypotheses

The development of instruments and methods for measurement

Experimental control and manipulation of variables

Collection of empirical data

Modelling and analysis of data

Evaluation of results

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The resource states that quantitative research is often an iterative process whereby

evidence is evaluated, theories and hypotheses are refined, technical advances are

made, and so on. “Virtually all research in physics is quantitative whereas research in

other scientific disciplines, such as taxonomy and anatomy, may involve a

combination of quantitative and other analytic approaches and methods” (Op. cit.)

3.6 Quantitative Analysis versus Qualitative Analysis

Below is a table contrasting of the two research paradigms according to James Neil (2007):

Qualitative Quantitative

"All research ultimately has a qualitative grounding"

- Donald Campbell

"There's no such thing as qualitative data.

Everything is either 1 or 0"- Fred Kerlinger

The aim is a complete, detailed description.

The aim is to classify features, count them, and construct statistical models in an attempt to explain what is observed.

Researcher may only know roughly in advance what he/she is looking for.

Researcher knows clearly in advance what he/she is looking for.

Recommended during earlier phases of research projects.

Recommended during latter phases of research projects.

The design emerges as the study unfolds.

All aspects of the study are carefully designed before data is collected.

Researcher is the data gathering instrument.

Researcher uses tools, such as questionnaires or equipment to collect numerical data.

Data is in the form of words, pictures or objects.

Data is in the form of numbers and statistics.

Subjective - individuals interpretation of events is important ,e.g., uses participant observation, in-depth interviews

Objective seeks precise measurement & analysis of target concepts, e.g., uses surveys, questionnaires etc.

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etc.

Qualitative data is more 'rich', time consuming, and less able to be generalized.

Quantitative data is more efficient, able to test hypotheses, but may miss contextual detail.

Researcher tends to become subjectively immersed in the subject matter.

Researcher tends to remain objectively separated from the subject matter.

Figure 3.2 Quantitative Analysis versus Qualitative Analysis

James Neil (Op. Cit.) outlines, “Qualitative research entails the analysis of data such

words, pictures or objects gathered in the research drive. The gathered elements are

evaluated in subjective and relative manner toward the making of conclusion and

recommendations in tandem with research scope and objectives. On the other end

quantitative research involves a scientific evaluation of numerical data.”

The research objectives of this study have prompted the incorporation of scientific

research paradigm model, quantitative research which will enable the researcher to

evaluate research data scientifically and objectively by making calculations and

arriving at statistically substantiated positions.

Nonetheless optimality i fulfilling the scope and objectives of the research exercise

will involve the utilisation of both qualitative and quantitative research. The research

exercise will also augment the quantitative research thrust by qualitative inferences on

presented data and analysis to broaden the scope of the research around growth and

sustainability forecast prospects and other related predictive elements.

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3.7 Primary Data Collection and Research

The primary research component of this study has involved various fact finding

strategies aimed at obtaining requisite information from relevant sources. The study

involves conducting an in-depth interview with a company’s management

representative, 50 interviews have been sent to UPS offices in the hope of soliciting a

response from as many different UPS managers as possible, of these fifty regrettably

on one responded however that was sufficient for the primary research if not ideal as

the author will be unable to compare the closed interviews with different UPS

representatives or different departments.

The interview with the company’s management representative has provided valuable

insights on the company’s marketing strategy in relation to how this aspect has

contributed to the success of UPS in local and international markets. The interviews

have also presented useful information relating to how the organisation has modelled

its short, medium, and long term stratagems in line with the company’s overall

sustainability plans.

The interview also provided information in regards to how the organisation has

marshalled its financial resources in coordinating operations, and HRM remuneration.

More so the interview provided valuable data on how the company’ financial plan and

system has championed the feats of growth and diversity leveraging on its formidable

financial muscle. The UPS representative has presented further insight into how the

organisations has ensure satisfaction as well as reduce staff turnover in line with the

organisation’s long term sustainability policy. Information has also been obtained

about the company’s corporate sustainability management. All the gathered data has

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been valuable in the determination of the whether the company’s current growth can

be sustained in the next five years.

The questionnaire survey given to the UPS employee provided useful information on

the issues of human resource management, employee satisfaction and the implications

of the company’s micromanagement style at various levels of the organisation’s

structure.

A qualitative questionnaire survey model has been used to obtain useful information

from various scholars and professionals in the fields related to the scope and

objectives of the study. The questionnaire survey has been conducted for the

marketing, accounting, financial management authors and various professionals in the

various business management and economics domains.

The questionnaire survey has helped get varying perspectives and insights on how the

success and failures of UPS are viewed from external view points. The survey has

also helped in the placing various business management aspects of UPS in appropriate

theoretical and philosophical contexts in the marketing, human resources

management, corporate responsibility and various related business and economic

bodies of knowledge.

The questionnaire for both the UPS staff and the various experts consulted was in a

closed-interview format, this was chosen for ease of comparison between those being

interviewed and to avoid irrelevant or erroneous data collection.

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However the author was aware that it was sometimes necessary to prompt or as the

interviewee to expand an point or tangent in the conversation for the wider benefit of

the dissertation and in one case abandon the original questionnaire and enter into an

open interview as the author realised that the interviewee was not the responding well

to close ended questioning. Fortunately this approach was successful and provided a

wealth of information that proved useful in the course of writing the dissertation.

The interview questions were also structured to obtain facts on how the company

coordinates control measures within set employee satisfaction frameworks, the entire

questionnaire and responses can be found in the appendix (see contents page for page

number).

3.8 Secondary Data Collection and Research

The research endeavour will also augment and enhance the primary data gathering

and evaluations by conducting a secondary data gathering and evaluation exercise.

Secondary data gathering draws much from published literature on the subject directly

under the concept and scope focus of the research endeavour.

According to Stewart and Kamins (1993), the use of secondary data is advantageous

for a researcher since one can already evaluate the suitability of a data as it is already

in existence, thus, much time can be saved. Before delving into secondary sources of

data, an evaluation of potential secondary data is essential as a way of screening

resources to establish the relevant sources of information which will provide data

germane to fulfilling research scope and objectives.

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This study will particularly make use of published literature on UPS. The secondary

data evaluation will identify relevant literature with details on the aspect of UPS

sustainability strategies, financial management, marketing management, financial

records, human resources management and as well literature on various aspects of

UPS which will provide useful data and nuances towards the answering of the key

research question(s).

3.9 Scaling Method (Sample Targets)

Ideally some method of sampling should be used and the author would have liked to

have been able to temper the survey with demographics, the ability to question one or

preferable more members of the UPS staff in each department and more than one

expert it each field of expertise.

However time constraints, lack of access and an inability for one person to collect,

collate, and analyse such a large quantity of data into useful information means that

the author will have a limited resources in which to conduct the survey. This will

affect the validity of the results as the sample size is smaller than for a professionally

conducted survey which could have 100 or more respondents.

Whilst there is also the issues of possible bias due to the interviewer leading the

interviewee, making transcription errors or collecting information that is not relevant

or inaccurate because of an inability to properly conduct the interview; the author

believes this should be minimised as the author is a trained market researcher with

over 5 years of experience.

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3.10 Online Survey

This research exercise has made use of an existing UPS online survey. The surveys

data has provided important information especially with regards to the impact of the

company’s management styles to the UPS workforce and how the system bears on the

workers’ morale and satisfaction aspects, hence the implications of these on the

company’s growth and sustainability goals. The survey data has also been used to

examine trends and dynamics of the UPS staff turnover particularly in relation to how

this impacts on the company’s growth, success and sustainability. The survey

provides useful opinions on the part of how employees view the organisations.

3.11 Ethical Considerations

Data gathered in this research will be used exclusively to explore the prospects of

UPS maintaining its growth and sustainability into the future. The research exercise is

being carried out within the precincts and confines of regulations of the governing

institutions (Anglia Ruskin University) as well as to scholastic and professional ideals

of conduct. As such the research drive is being conducted according to the guidelines

and rules and regulations of the university.

Details and information solicited from targeted and contacted research respondents

will be used in the strictest of confidence and will not be availed to any other party

unless where all requisite requirement have been made and fulfilled in the interest of

the research respondents and all other parties concerned. The researcher also hereby

declares categorically the factor of absolute independence from organisations of or

bodies of knowledge or interest that may be perceived to be connected to this study.

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The four stages of ethics in doing research are followed by the way of a good design,

modes of data collection, analysis of data and for proper dissemination.

Confidentiality and anonymity will be maintained on the part of the research

participants and all other respondents contacted in premise and for the objectives of

this research. Respondents will also be requested to participate out of their free will

and conscience without any instrumentation of forces of coercion or impulsion by the

researcher whatsoever.

A copy of the dissertation will be provided to all contributing parties for their person

benefit and approval.

3.12 Threats to Research

A fundamental concern in any research study is to incorporate appropriate

mechanisms that assure the researcher and reader of the quality of the research, its

process, and its findings. The assumptions and characteristics of qualitative

naturalistic inquiry as a research paradigm suggest a 3–24 set of criteria for

establishing quality. The author uses Guba et al (1985) guidelines, and conforms to

their criteria on best research practices which as outlined below:

“Credibility: Assuring the truth value of the findings and accommodating the

need to understand, in a holistic manner, a complex phenomenon,

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Transferability: Addressing the applicability of the findings but

acknowledging that the research focus is the idiographic (i.e., the particulars of

the case) rather than the nomothetic (i.e., law like generalizations),

Dependability: Assuring the methods and methodological choices of the

emergent research design are documented for external inspection,

Conformability: Assuring the neutrality of the researcher to establish the

degree to which the findings of an inquiry are a function solely of the

respondents and conditions of the inquiry and not of the biases, motivations,

interests, perspectives, and so on of the inquirer.” Guba et al (1985)

Whilst the research is being conducted in commitment to the ideals of objectivity and

authenticity, the concepts and ideas used and developed in the course of the study are

by no means exhaustive nor are they sacrosanct in any way as the author is limited in

both time and resources, and whilst the author will take all steps possible to be as

accurate and current as possible perfect knowledge is impossible for any researcher to

achieve, and this project will be written over several months where circumstances

may change.

The research is also prone to suffering to logic leaps which can be largely attributed to

the approach towards fulfilling the scope and objectives of the study as well as

answering the hypothetical research questions. In addition the ideas presented in this

study must be construed and used in the full cognisance of the tacit and underlying

assumptions that UPS intends to maintain its growth into the future.

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The author has previously discussed difficulties relating to the primary research

however there are also threats to the secondary research.

The secondary research is by its very nature collected by a third party and is therefore

subject to the bias, various agenda and inaccuracies. Examples of which could include

a political motivation, a desire to sensationalise to increase sales or simply out of date

information respectively.

This can occur as the author does not control the data. However the author will

attempt to minimise the aforementioned threats by using the most reliable and

dependable sources possible, checking with multiple sources for corroboration where

appropriate and using reason and logic to discover obviously false or inaccurate data.

3.13 Summary

The success of this study will be attributed to the both primary and secondary research

methods that have been devised and administered to obtain authentic data from

identified sources. The data processing and analysis which is preceded by this study

component will be conducted for the analysis; synthesizing and extrapolation of the

gathered data obtained through both the primary and secondary research methods to

further the answer to the primary question. The ultimate objective of the study is to

establish whether or not UPS growth is sustainable five years into the future.

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3.1 Data Presentation and Analysis

4.2 Primary and Secondary Data Introduction

This component of the study is in essence a collation and evaluation of research data

which has been gathered through primary and secondary research drives. The study

will entail a qualitative and quantitative evaluation of the presented data. The

qualitative thrusts will employ evaluation of opinions and details given on various

aspects of the UPS organisation.

The data will come from the research interviews that have been conducted as way of

exploring the multi-dimensional growth and sustainability strategy of UPS which

incorporates various components such as marketing, information technology, financial

management and performance management etcetera.

The qualitative analysis of data endeavours to establish the approaches used by UPS

in the entirety of its organisational leadership, management and various other

organisational components key to the growth, sustainability and competitiveness of

the company. The quantitative thrust will make use of financial statistical data to draw

mathematical inferences out of forecasting outcomes to be arrived through the

employment of regression analysis. Regression analysis will be used as a way of

forecasting the growth of UPS into the next five years deriving from the statistical

implications of growth trends recorded in the immediate past years.

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4.3 Quantitative Data Analysis

This study will present statistical evaluations of financial data on UPS derived from

the company literature, and has previously been discussed in detail.

4.4 Regression Analysis

4.5 Multi-factored Regression Analysis

The field of micro-econometrics has diverse methods and formulas designed to

interpret scenarios and give the best picture of variables and factors in focus.

Linear regression analyzes the relationship between two variables, X and Y.

For each subject or experimental unit the values for X and that of why are known and

Regression analysis provides a way of fitting straight line of best fit through the

presented X and Y data. The slope or intercept observed from the regression graphics

has scientific inferences. In forecasting methodologies the linear regression line

applied to as a standard curve to find new values for the X and Y variables. In this

study a multi-factored Regression analysis will be carried out to better illustrate the

relationship of various growth indicators like total revenue for UPS.

4.6 Regression Analysis Formulas

The econometrics concepts of regression analysis provides various useful formulas

and methods of calculating certain econometric scenarios, the study will however

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make the most use of the linear regression analysis. This method will pit forecast data

against actual date to establish salient relationships germane to arriving at valid

statistical insinuations and positions.

4.7 Proportion of Variance (R2)

In regression analysis the "Proportion of variance explained (R2)'' indicates how

much better the function predicts the dependent variable than just using the mean

value of the dependent variable.

According to the NLREG software application designers this is also known as the

"coefficient of multiple determinations. The following outline by regression analysis

application designers illustrates how the proportion of variance is computed.

“Suppose that we did not fit an equation to the data and ignored all information about

the independent variables in each observation. Then, the best prediction for the

dependent variable value for any observation would be the mean value of the

dependent variable over all observations.” According to architects the "variance'' is

the sum of the squared differences between the mean value and the value of the

dependent variable for each observation:

“Now, if we use our fitted function to predict the value of the dependent

variable, rather than using the mean value, a second kind of variance can be

computed by taking the sum of the squared difference between the value of the

dependent variable predicted by the function and the actual value. Hopefully,

the variance computed by using the values predicted by the function is better

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(i.e., a smaller value) than the variance computed using the mean value. The

"Proportion of variance explained'' is computed as 1 -- (variance using

predicted value / variance using mean). If the function perfectly predicts the

observed data, the value of this statistic will be 1.00 (100%). If the function

does no better a job of predicting the dependent variable than using the mean,

the value will be 0.00.” NLREG (2008)

The proportion of variance is valuable in carrying out predictive methodologies and

will be used in interpreting the relational aspects of UPS financial records in a way

that can draw inferences from the past growth trends on the company’s growth

sustainability into the future.

4.8 F test / F value/ Prob (F)

The NLREG applicators have given the following explanation the F Test model.

The NLREG applicators illustrate that the "F value'', and "Prob (F)'', statistics test the

overall significance of the regression model. “Specifically, they test the null

hypothesis that all of the regression coefficients are equal to zero.

This tests the full model against a model with no variables and with the estimate of

the dependent variable being the mean of the values of the dependent variable.” (Op.

Cit.)

The source also states that the F value is the ratio of the mean regression sum of

squares divided by the mean error sum of squares. “Its value will range from zero to

an arbitrarily large number.” (Op. cit.)

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Additionally, the regression model the value of Prob (F) is presented as the

probability that the null hypothesis for the full model is true. “(i.e., that all of the

regression coefficients are zero) for instance, if Prob (F) has a value of 0.01000 then

there is 1 chance in 100 that all of the regression parameters are zero.” The source

also outline that the low value would imply that at least some of the regression

parameters are nonzero and that the regression equation does have some validity in

fitting the data “…(i.e., the independent variables are not purely random with respect

to the dependent variable).”

The regression analysis tools and components utilised above will be used to

extrapolate data on UPS growth over the past years to establish if the given growth

levels can be sustained by UPS five years into the future. This quantitative research is

part of the primary and secondary data evaluation exercise to answer the key

hypothetical questions which cannot be based solely on the outcomes of the

regression analysis.

4.9 Regression Formulae Rationale

The multi-factored regression analysis presented herein will are for the calculations of

UPS financial data for the sole purpose of making authentic inferences and forecasts

in relation to the company growth and sustainability prospects five years into the

future.

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4.10 Statistical Analysis Graphs and Tables

4.11 UPS Financial Record

Moneycentral.com (2007)

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UPS Total Annual Revenue created from UPS Financial Records

Figure 4.1

Source data from Moneycentral.com (2008)

The charts present the total revenue trend for UPS from the year 2003 up to 2007. The

graph indicates a steady growth pattern of total revenue recordings. The chart shows

that in 2003 the company registered total revenue amount of US $36,582 million

dollars this increases to US $49,692 million. The pattern implies that UPS may

continue to experience the growth that it has experienced and sustained for the past

five years.

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To determine with valid statistical forecasts the study will employ a regression

analysis for the data to establish the relationship between forecasts conducted for the

year up to 2007. Regression analysis is useful for its facility that indicates by a way of

straight line between forecast figures and actual figures. Thus the regression model

will be used to extrapolate form given figures in relation to the standard deviations

recorded for past forecasts, the likelihood of UPS maintaining its growth into the

future.

4.12 A Regression Analysis of UPS total revenue growth: 2003 -2007

Figure 4.2


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Figure 4.3


Linear trend with sine component

Number of observations = 5

Maximum allowed number of iterations = 500

Convergence tolerance factor = 1.000000E-010

Number of iterations performed = 18

Final sum of squared deviations = 1.0855198E-020

Final sum of deviations = 1.7763568E-010

Average deviation = 3.85967E-011

Maximum deviation for any observation = 7.48059E-011

Proportion of variance explained (R^2) = 1.0000 (100.00%)

Adjusted coefficient of multiple determination (Ra^2) = 0.0000 (0.00%)

Durbin-Watson test for autocorrelation = 0.171

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Descriptive Statistics for Variables

Variable Minimum value Maximum value Mean value Standard dev.

------------------ -------------- -------------- -------------- --------------

X 33 49 41.4 6.8775

Y 485 882 645.4 151.1929

Figure 4.4

Calculated Parameter Values

Parameter Initial guess Final estimate

------------------ ------------- ----------------

p0 1 1399.16822

p1 1 -28.7105696

Amplitude 1 705.18661

Period 2.3 1.83117554

Phase 0 0.968187415

Figure 4.5

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Figure 4.6


Source DF Sum of Squares

---------- ---- --------------

Regression 4 91437.2

Error 0 1.08552E-020

Total 4 91437.2

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4.13 Regression Analysis Outcomes and UPS Growth Forecasting

This section contains an application of the regression analyses towards establishing if

UPS’s growth can be maintained five years into the future.

The Linear regression formula has been used in this approach to establish the

relationship between forecasting and UPS’s growth for the past five years. By way of

observing the final sum of deviations this formula will help establish the likelihood of

UPS meeting growth forecasts five years into the future. According to NLREG

applicators a final sum of deviations from analysed data relationship indicated a close

and health relationship between forecast figures and actual figures.

The formula has shown that UPS forecasts and actual growth have been tied closely

by a final sum of deviations of 1.7763568E-010. In addition the average deviations

which is markedly below the 5 figure mark at 3.85967E-011 indicating that there is a

close and positive relationship that has been established between the company’s

growth’s forecast and actual growth. The maximum deviation for all observations

which entails five iterations for the five years (2003-2007) also shows a significant

randomness proportion within the statistical relationship analysed here. Maximum

deviation for any observation is 7.48059E-011 which points to the fact that UPS

growth has been unpredictable at some times.

The analysis can be deciphered well in relations to the stats offered on UPS financial

performance and forecasts give below.

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UPS growth Financial Record and Forecasts

Earnings Growth Rates

Last 5 Years

FY 2008

FY 2009

Next 5 Years

08 P/E

UPS +13.10% -14.10%+13.00

%+11.80% 17.80

Industry +7.80% -9.90%+11.60

%+13.70% 20.20

S&P 500+11.80% +8.40% +6.60% NA 13.00

Figure 4.7


Figure 4.8


The Table data (figure 3.6) indicate that UPS has enjoyed a growth 13.1% over the

past five years against the 7.8% growth of the parcel delivery services industry.

Forecast presented in table indicate that UPS will post growth records of over 11%

against the 13% growth of the industry, which suggests that although UPS has been

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beating the market in terms of growth over the past five years that it may not be able

to sustain this growth into the next five years.

The substance of quantitative analysis (Page 88) proves that UPS has a Proportion of

variance of (R^2) of 1.0000 (100.00%). This is despite the fact that UPS has

experienced possible growth lapses at some point indicated by the maximum

deviation for any observation pegged at 7.48059E-011 for past growth forecast (Page

91).

Nonetheless the regression analysis outcome closely reflected those of the UPS

growth forecast presented by Microsoft Network Money website (MSN) that place

UPS growth for the next five years (Page 92) at + 11.80% against the + 13.10% value

of the last five years. The statistics further indicate that UPS will continue to grow but

what is clear from the stats is that the past five year’s growth of 13% is unlikely to be

sustained.

4.14 Organizational Aspects and Sustainability: A Qualitative Analysis

UPS has arrayed a plethora of strategic approaches in various operational sections

such as marketing, management, leadership and human resource management and

financial management etc to ensure growth and sustainability. This study will present

an exploration and analysis of the means that UPS has adopted in a way of

establishing how these approaches have ensured UPS growth and determine if and

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how these will suffice for the maintaining the growth that UPS has achieved into the

future. This component presents a qualitative analysis and postulation around

obtained data on UPS organisational aspects with regards to the direct and indirect

bearing that these have for UPS growth sustainability prospects.

The author realises the human element of a company which comprises the

management and its employees whilst statistical analysis is a scientific, useful and

relatively reliable tool the management of the company itself and how it copes with

changing market conditions is a vital component of whether UPS can sustain or

increase its growth over the next five years.

4.15 UPS Bureaucratic Management and Overall Leadership Approach

The analysis of various operational models that UPS has adopted and implemented

indicates that the company has adopted a bureaucratic management and leadership

style. Management entails uses it as a core means of the attainment of organizational

goals in an effective and efficient manner through planning, organizing, leading, and

controlling organizational resources. Throughout its operations UPS has continually

fine-tuned its work and management effort to become an efficient giant in the package

delivery industry. UPS has taken significant steps to transform itself into a market

driven company with a distinct customer focus.

No one management style can be thought to suffice in the execution of a company’s

long term and short term plans. In an interview with the Lisa Bradshaw (2008) UPS

centre Manager for Feltham concurs with the foregoing, “… I cannot give specific

information on our corporate strategy but we do use common textbook theories such

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as Bases of Social Power, The Explanation of Core Competence, Implementation

Management, and Smart Management etc.”

Having mentioned the strategies used, it can be argued and possibly inferred that UPS

has embraced a bureaucratic management style especially with its operational

management.

The bureaucratic approach of the company management system with taut rules and

regulations, and a well-defined division of labour in each plant from ‘top to bottom’ is

key to the company’s success. Below are a few operational elements and regulations

that illustrate the company’s bureaucratic management styles.

The company has daily worksheet to specify goals and the work output. The daily

employee quotas and achievements are reported on a weekly and monthly basis. The

United Parcel Service has taken steps to restructure itself from an operations-oriented

company into a market driven industry. Recent findings suggested the need to achieve

better external customer satisfaction. The steps taken were to improve the overall of

all customers that utilize the services at UPS.

The main priority at UPS is to deliver a package on time. They provide an alternative

to the perceived monopoly of the United States Postal Service (USPS). Its main

competitive advantage is its operational efficiency compared to the incumbent USPS.

Throughout the years the company has continually fine-tuned its work and

management effort to become an efficient market leading company in the package

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delivery industry. UPS has taken significant steps to transform itself into a market

driven company with a distinct customer focus. They concentrate on maintaining and

building long-term customer relationships.

One way of continually improving customer service for the 1.8 million people, who

use their services each business day, is to run market research studies to constantly

monitor UPS’s customer service.

UPS has also made use of some operational and performance management models

such as quality assurance to improve and maintain optimum service in an effort to

satisfy and boast the subsequent retention of the company’s clientele base.

The new more structured system on quality assurance enables business development

to operate more closely with the sales people to resolve customer problems. In this

performance management model the staff have a refined sense of purpose. When

employees are set up to the link between their work and the results their morale is

boosted and this has tremendous results from an organisation’s efficiency and

effectiveness as well as employee and customer satisfaction prospects.

In addition the United Parcel Service launched a new career development system to

assist manager’s remodel their career visions. The purpose of which is to ensure a

promising future for the shipping company and its employees.

However this career development system is only for managers and the autocratic

approach of is management must affect staff retention as this can lead to feelings of

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front line and low level staff feeling undervalued and unappreciated while

management enjoys ‘perks’ and benefits they do not possibly creating resentment

although UPS is highly protective of staff retention and employee satisfaction levels.

4.16 UPS Leadership Style and Sustainability

United Parcel Service has taken steps to restructure itself from an operations-oriented

company into a market driven industry. Recent findings suggest the need to achieve

better external customer satisfaction. The steps taken were to improve the overall of

all customers that utilize the services at UPS.

Senior Vice President John A. J Duffy asserts that “Corporate Strategy is Industry

leadership and growth are contingent upon anticipating customer needs and market

dynamics long before they occur; and then aligning our organization accordingly”.

This has been the launch pad for the company’s new embrace of transformational

leadership which is comparatively pro-change compared to that of structural and

transactional leadership models it has previously adopted. Brewster et al (2007)

Transformational leadership has a powerful influence on job satisfaction both directly

and indirectly through its influence on a person's intrinsic task motivation

(empowerment). Transformational leadership tenets that emphasise the essence of

flexibility are deemed feasible for the prospects of adopting and implementing

customer oriented organisational culture as well as masterminding complimentary

staff development programmes. Pawar (2004)

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Unlike transactional leadership, which has no effect on empowerment;

transformational leadership model is likely to have been adopted by UPS for the

implementation of a paradigmatic shift process that enable the company to reorient its

thrust towards customer satisfactions above operation. The shift should have enabled

UPS HRM to move off traditional and typically product-pushing approaches to

customer satisfaction inclined approaches. Pawar (Op. Cit.)

This new focus has been largely leveraged on the heavy reliance on the prospect of

manipulating technological faculties to improve service. UPS Vice Chairman and

Executive Vice President Michael L. Eskew aptly outline, “The satisfaction of our

customers is the number one priority at work. Communication with loyal customers is

conducted on a rotating basis. Telephone interviews are a direct route to evaluating

market fluctuations.” Brewster et al (2007)

The mission statement expresses the dedication to customer care is not just in the

delivery business but to develop technology that will allow UPS to continue

introducing new services, to provide customers with comprehensive information

about shipping and provide training to all employees.” Brewster et al (2007)

Although transactional leadership does have a direct effect on job satisfaction

transformational leadership augments the effects of transactional leadership in

remarkable ways. Passive management by exception is negatively related to job

satisfaction and empowerment. UPS’s service delivery optimisation has been done in

cognisance of attested relationship between service quality and customer satisfaction

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hence retention, as well as the links between HRM communication and behavioural

skills and customer satisfaction. Niemann (2007)

Bradshaw (2008) has highlighted some ways adopted by the company’s HRM organs

to retain staff and minimise the impact of staff turnover:

“Our employees feel appreciated because of the way we treat them and thus

they feel motivated and loyal to the company. We offer a range of employee

benefits including medical insurance (healthcare, dental etc) which also helps

to reduce staff sickness, and other schemes such as flexible works, university

scholarships and of course our employee shares plan that allows them to buy

shares at a reduced priced which in turn gives them an interested in the

company and how it performs.”

Bradshaw (2008)

In addition to the foregoing the company has made use of meaningful ways of

emboldening workers’ sense of belonging. Dessler (1999) notes, “The expansive

melting pot of cultures has lead to many accolades in the package service. The

employees are the company most valuable assets. They share a sense our ownership

because they are offered stock options.

The United Parcel Service has recently been awarded one of Fortune magazine

Diversity Elite 50 Best Companies for African American, Asians, and Hispanics. In

addition, Fortune also recognized United Parcel Service as the World Most Admired

Global Mail, Package, and Freight Delivery Company. These accomplishments have

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led to better customer satisfaction, employee fulfilment, and overall success.”

UPS.com (2004)

The author notes that much of the reinforcement of company’s sustainability and

competitiveness long term strategy that UPS has adopted through various staff

development programmes are aimed at equipping workers for the evolving parcel

service and are largely focused on increasing reliability rather than necessarily staff

welfare although regardless of motive they are likely to be prized especially in the US

were company provisions such as healthcare are sparse and expensive. Niemann

(2007)

Sustainability requires business management and leadership to be able to anticipate

future complications and formulating feasible pre-emptive ways of surmounting them.

As competition heats within the parcel delivery industry, UPS has strived to ensure

employees would have the skills, knowledge, and the experience needed to function

well in increasingly complex work environments.

This attests to the pro-change and predictive merits of the transformational leadership

style embraced by UPS. IT can be noted that UPS leadership style together with other

factors and variables has championed the fruition of the company’s growth and

sustainability strategies. Brewster et al (2007)

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4.17 Weaknesses in UPS’s Management

“One salient weakness notable in the UPS Employee Workplace Surveys is that of

employee satisfaction. The organization’s micro management style has ‘gaps’ that

have resulted in detrimentally low levels of satisfaction on the part of the employees.

One employee responded, “UPS allows and encourages its center managers to push,

degrade, humiliate, find fault in all of the employees.” The concern highlights the

pitfalls within the micro management style which has resulted in significantly

dissatisfaction for low level employees. Vault.com (2008)

Another weakness that UPS suffers from is the failure to coordinate and harmonize

the demands of the work entailed with the remuneration variables (in essence low

pay). One such disparity is the case where some workers have suffered career-ending

disabilities and have not had been compensated by the company. Vault.com (2008)

Despite the fact that the company has instilled measures aimed at addressing the

disparities the company there remains a need to make strides towards meeting specific

employee needs owing largely to its management style. Employees have also

commented on the lack of feasible safety working measures for high risk air freight

distribution, in face of contemporary challenges such as terrorism. Brewster et al

(2007) & Niemann (2007)

Whilst the book from Niemann (2007) is exceptionally complementary regarding UPS

it does mention that “…. being a UPS employee” is not for everyone” and that UPS

employees must be willing to work long hours and follow strict guidelines that UPS

employee. Regrettably it is difficult to get further impartial information regarding

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UPS, however the author can attest to the various blogs (unofficial internet discussion

webpage’s) that there is definitely discord and dissatisfaction among some current and

previous employees which suggests that their autocratic management style is not

universally well received.

4.18 Direct and Relationship Marketing

In an interview with the researcher Principal Lecturer of International Strategy at

Anglia Ruskin University and published author Jonathan Knowles (2008) comments

on aspects that UPS success and growth can be attributed to. He asserts, “I believe it

is due to marketing because their business is about creating and keeping customers

and that’s what they seem to be singularly successful at.

Their success is related to their relationship marketing, as they offer a relatively

homogenous product with a plethora of competitors both on a national and

international level. The contemporary view is that you don’t create portfolio’s of

products and services, rather you create portfolio’s of customer groups, and thus

through relationship marketing they may have become successful.”

The aforementioned closely tallies with the known marketing outcomes that UPS

benefits from. It is clear UPS uses various strategies for customer retention and

customer satisfaction which belong to the theoretical and conceptual frameworks of

direct and relationship marketing. UPS has continued to focus on maintaining and

building long-term customer relationships; in a rare insight into the operational tools

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and theories used by UPS Bradshaw (2008) explains that“…. some of our theories are

of course trade secrets but we do use many of the same theories you would find in a

standard marketing textbook such as PESTLE, SWOT, Porter’s Models a modified

version of Bowman’s Clock, Benchmarking, and Organisational Configuration the list

is almost endless!”

It appears UPS uses many of standard business theories; it is lamentable that the

interviewee would not expand on this point but it is clear that UPS uses various

theoretical frameworks in its business planning.

This is corroborated by literature from UPS which highlights that it is continually

improving customer service for the 1.8 million customers, who use their services each

business day; the business conducts market researches to keep an eye on customer

service as a way of ensuring operational excellence.

The designs of relationship marketing that distinguish it from other forms of

marketing are based on a marketing products more suited to them by analysing past

marketing data to target them based on their interests or predicted needs which is

contrary to direct or intrusion marketing which focuses on obtaining new clients by

targeting bigger market communities basing On potential client listings.

Data obtained on UPS’s marketing operations demonstrates that although the

company is more biased towards the objectives of retaining its clientele bases, there is

overwhelming evidence on the company’s incessant endeavours to break new grounds

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in global and native markets, to obtain new customers and expand the existing

clientele base.

UPS has obviously realised the merits of integrating relationship marketing

approaches into retention planning to accomplish its significant growth rate and

sustainability. These can also be interpreted as elements indicative of the company’s

future likelihood to be able to maintain its multilateral growth into the future, as

relationship marketing is known to become more accurate and attuned to the customer

as more information about the consumer is acquired and analysed.

The relationship marketing model holds that service providers can capitalise on

offering a broad range of services and products. This can be in from using various

persuasive instruments, leveraged on personalised customer products and services to

meet needs anticipated or yet to be realised, especially with a well known and trusted

brands such as UPS thus utilising brand stretching.

The application of relationship marketing in various services and product provision

domains has to be characterised by the development and use of various customer

relationship management schemes that allow the observation and assessment of each

customer's preferences and dislikes. UPS has made us of its sustained customer

feedback system to come up with their core service delivery options.

The company has derived the means of empowering customers the world over to ship

and track parcels and more importantly the company has given customers the capacity

to manage their accounts at all the stages of the parcel delivery process. This way

UPS has enhanced the prospects of customer satisfaction which have translated well

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into the merits of customer retention which links to the company’s growth and

sustainability endeavours.

UPS has developed and broadened the customers’ satisfaction assessment scope

within its long term profitability, growth and sustainability strategy. UPS has to

employed means of soliciting information from clients on their specific needs the

company can supply upon the range of the products and services they are already

offering. Companies can apply a company tracking service to schedules and contact

customers directly on product or service recalls. UPS has capitalised this and is a

direct result of the maturity of its customer satisfaction and retention stratagem.

Whilst other companies in the parcel delivery sector have yet to use personalized

marketing, UPS is utilising this innovative marketing method. This entails building

customer shopping or service purchasing profiles. Information obtained and compiled

on customer shopping trends preferences and dislikes, etc, is used to compute and

deduce the likelihood of the customer interest and/or preferences in other

product/service categories.

The likely preferences are conveyed to the clients through various communication

channels that a company has in place for contacting its clients. This is typically an

internet tailored relationship marketing model, and UPS has manipulated the facilities

of e-commerce to design a system that assembles user profiles while also empowering

users to manage their accounts and UPS purchase activities online.

This has evidently raised levels of customer satisfaction, effective and efficiency,

variables indispensable to any company’s prospects and strategies for growth and

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sustainability as it will further enhance the sale of existing and future products

through ‘smart’ marketing which is concept of working smarter and not harder.

In the interview cited earlier Lisa Bradshaw (2008) believes that UPS’s “…. growth

has also been fuelled by strong global sales which have been linked to the growth in

e-commerce and greater public awareness of our products and guaranteed services.

This combined with our international expansion operations and deals with our

partner’s companies such as DHL have given us greater strength and flexibility.” This

underscores the essential manner in which UPS has tapped technological

advancement to consolidate its position in the competitive market as well as achieve

its growth and sustainably goals.

Contemporary relationship marketing forms have been largely shaped by

reengineering dispensation. The reengineering theory holds that an organization

should be structured by completing tasks holistically and through processes rather

than operating as autonomous entities and functions. “That is, cross-functional teams

should be responsible for a whole process, from beginning to end, rather than having

the work go from one functional department to another.”

Traditional marketing is said to use the functional department approach. This can be

seen in the traditional four P's of the marketing mix. Pricing, product management,

promotion, and placement are claimed to be functional silos that must be accessed by

the marketer if he/she going to perform their task:

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“The marketing mix approach is too limited to provide a usable framework for

assessing and developing customer relationships in many industries and

should be replaced by an alternative model where the focus is on customers

and relationships rather than markets and products.” (Gordon 1999)

In relationship marketing customer loyalty is categorised into what has been called the

relationship ladder of customer loyalty. In this criteria customers are grouped

according to the levels of loyalty with the ladders first rung comprising ‘prospects’,

potential customers with currently no purchase history but highly likely to purchase in

the immediate or distant futures. The first rung is followed by the successive rungs of

"customer", "client", "supporter", "advocate", and "partner". Through this model

relationship marketers strive to apply feasible means of elevating customers up the

relationship ladder. The provision of more personalised service and delivering beyond

expectations are mainly used in this strategy. UPS has to a greater extent employed

this model among other methods to enhance customer satisfaction by obtaining and

meeting specific customer needs.

4.19 UPS’s Future Plans and Potential Strategies for Growth

Information published on the company’s official website holds that owing to the

significant advances in technology, globalization and consumerism over the past

several years it have ushered in a new age of commerce the supply chain that has

generally been managed in a linear fashion, where the movement of goods,

information and funds are at best loosely connected.

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“The emerging practice of "synchronizing commerce" is part of a vast marketplace in

which goods, information and funds flow with speed, precision, security and

efficiency.” This has provided the basis and is the impetus for the company’s future

plans. Gunjan (2002)

UPS has positioned itself as an integral player in the world of synchronized

commerce. The company helps customers streamline their operations and integrate

their supply chains to better serve their customers, drive efficiencies, eliminate waste

and create a more sustainable business models. Brewster et al (2007)

The company also has worked with customers to help them design and facilitate their

own recycling needs. UPS has also invested billions of dollars to create an

unparalleled worldwide infrastructure of physical assets, technology and people that

positions UPS to capitalize on the opportunities that synchronized global commerce

presents. UPS.com (2008)

UPS’s believes its own key operational strengths lie in its:

“Unparalleled Worldwide Network: UPS services 2000 counties around the

globe, and on a daily basis the company delivers 14.8 million packages. The

company also has an unmatched global network that includes the world’s 8th

largest airline. UPS has the capacity to channel small and large shipments by

land and by sea.

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Efficient Technological interfaces: UPS offers a broad range of proprietary

technology modelled to assist clients (individuals and companies) such as

website embedded tools for managing online orders. The company also offers

tailored software for helping businesses at every step of the shipping process.

The company achieves this with the use of up-to-the-minute information about

goods that are being shipped.”

UPS.com (2008)

UPS believes that it will be successful in its future expansion however, in the spirit of

‘constructive dissatisfaction’ that has driven UPS for nearly a century, UPS

recognizes that it cannot become complacent, the UPS approach balances the

economic, environmental and social aspects of its business. The author is would like

to note that UPS’s plans for future growth looks remarkably like part of a PESTLE

analysis when condensed and collated and includes the following:

Economic

Maintaining a profitable company that provides competitive returns to

shareholders.

Growing business by bringing added value to customers through a wide array

of solutions to meet their needs.

Improving business efficiency.

Supporting and stimulating the removal of barriers that inhibit the flow of

commerce among trading partners and nations.

Being a catalyst for economic development in the places where UPS operates.

Social

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Extending our equal opportunity practices to more countries.

Seeking solutions that provide UPS share ownership opportunities for

employees worldwide.

Investing in more training and development opportunities for people around

the world, giving them the tools to sustain safe, productive and meaningful

careers.

Developing and implementing a comprehensive strategy and protocols for

philanthropy, community involvement and volunteerism wherever UPS

operates in the world.

Environmental

Researching, testing and using new technologies and fuels that reduce

consumption and emissions.

Deploying new operational procedures and technologies that optimize network

and reduce waste.

Implementing environmental initiatives on a global basis.

UPS.com (2008)

UPS realises that its future performance and accountability are more important than

past accomplishments. The company has indicated that it endorses responsible ethical

growth and believes in accountability for achieving such growth as an essential

element of operating a successful business. Brewster et al (2007) & Niemann (2007)

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4.20 UPS – Facing the Challenges of Economic Uncertainty

UPS faces one troubling threat from the escalating oil prices; especially Jet-A/

paraffin (airline fuel), diesel and unleaded petrol, which are used in the transportation

of packages. The setback has hampered the company’s efforts to reduce its operating

costs especially as it is a US dollar denominated company which is currently at an

historical low. UPS (2002)

Additionally, the company is exposed to an increase in the prices of other energy

products, such as natural gas and electricity. UPS utilizes a combination of options,

swaps and futures contracts to provide protection from the rise in fuel and energy

costs. These derivative instruments generally cover forecasted fuel and energy

consumption periods up to one year. UPS (2002)

The U.S economy is currently undergoing a recession and this poses an adverse

impact on the prospects of conducting profitable operations with businesses and

individuals in the local market. “The company can however strive on its international

operations but the local economic climate is threatening the sustainability of UPS.”

(Rackham 1988).

UPS faces threats of consumer downturn in its global operations networks. As the

credit crisis deepens and with consumer confidence in decline it will have a direct

impact on the number of packages being ordered and shipped by the customers and its

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clients and a possible move to inferior goods, products and services which are less

likely to use a premium carrier such as UPS; although this will similarly affect UPS’s

competitors as well. UPS (2002)

The above-mentioned risks can all have an impact on the cash flow of the company. If

interest rates rise or the cost of refined fuel rises, the cost of doing business for UPS

will also rise.

With the vast business network the UPS has accumulated through organic growth,

partnerships and acquisitions recently, the company faces difficult challenges in

improving its efficiency further especially on its service delivery interfaces as it

integrates formerly rival business and organizations and in dealing with new partners

in emerging markets such as India and the Philippines. Niemann (2007)

John Watts (2008) a lecturer at ARU concurs and believes that a business cannot

continually cut costs believing that UPS’s infrastructure one its best strengths in its

ability for fast delivery; is also one its biggest weaknesses:

“….If you promise to deliver something next day from say the UK to the US

even using agents you need a reliable infrastructure and that costs money”. “The

infrastructure is the root cause of the problem is cost cutting for a delivery service you

can’t close down one distribution centre without it affecting all the others because

they are integrated.” John Watts (2008)

Watts (Op. Cit.) thus highlights the difficulties of UPS scaling back its operations or

withdrawing from a current area of operation, further substantiated by Watts (Op.

Cit.) commenting that “there are so many big players in the market, because there is a

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lack of flexibility you can’t move locations and resources and much of your (UPS’s)

fixed costs are illiquid.”

Lloyd-Reason (2008) is further concerned that:

“In recessionary times it is highly unlikely that UPS or indeed any

multinational organisation involved in parcel delivery could continue a growth

strategy, and that any existing growth strategies would be futile.”

There appears to be discourse as to whether UPS can succeed with conflicting

information from the statistical data provided predicting a growth rate of 7% and the

experience and opinions of varying experts who believe that UPS will struggle to

continue any growth and in fact suggest a defensive operating position in readiness

for a looming recession.

As financial analyst are quick to warn ‘past performance is no guarantee to future

returns’ whilst this is usually used a warning for financial investments it is clear that

the economic fundaments that sustained UPS in the previous five years are unlikely to

continue and that statistical data based on the previous five years may not take into

account such changes.

Similarly the opinions of experts differ on the possible growth UPS Lloyd Reason

(Op. Cit.) believes affirms that:

“In recessionary periods UPS must protect its margins and above all build and

maintain its cash flow. In my opinion UPS must seek to be defensive and not

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try and grow during a recessionary period, and instead seeks to ensure its

survival.

The current economic climate has a different set of variable from the last

recessionary period for economists and businesses alike it is a whole new

economic climate, thus the financial strategy should be similar to its

competitors.” With Knowles (Op. Cit.) going a stage further suggesting that

“As UPS can't grow it must protect its margins by reducing costs and to make

efforts retain its customers.”

Whilst Watts (2008) agrees that UPS will face challenges in a recession he believes

that it “It’s very difficult in any objective way to identify if any form of parcel

delivery service to be able to keep and maintain a long term plan or growth strategy

with and believe that it will be successful,” and thus long term planning becomes

exceptionally difficult due to the changing dynamics of the current market.

It is clear that UPS' costs will grow due to increases in fuel costs and materials quite

substantially over the coming five years; it is the main reason why businesses fail

during a recession because their costs increase and their margins decrease, so that it is

no longer profitable to operate.”

The company’s capacity and prowess to weather various previous financial turmoil

including the great depression, shows that historically its business operations are

secure and thus likely to be able to adapt and survive another difficult recession. It can

be argued that the changing environment that UPS operates within provides an

impetus for continual development and strategy of self reflection and change within

the company, whilst taking steps maintain its sustainability over the longer term.

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4.21 UPS Financial Management and Sustainability

UPS has Stream lined its logistics for More Efficient Delivery. This move together

with the feasibility of consolidating international shipments has enabled UPS to save

time and money which seems to be the crux of the UPS operational, marketing and

financial strategies. This can be deduced from the way it has been adopted by the

company in its direct and relationship marketing drives as well as innovative

operations that are tailored to ensure that the company operates and functions in a cost

effective way.

UPS has a designed a service package that enables businesses and individuals to send

multiple shipments of virtually any size and to as many destinations as the company

can reach economically and efficiently. This model of consolidated shipment allows

goods shipped to be delivered quickly through customs and this in turn has reduced

the overall processing time, this method also minimising operational costs in the

warehousing, shipping and other operational aspects such as inventory management.

Niemann (2007)

During an interview with the researcher Centre Manager for UPS Feltham Lisa

Bradshaw (Op.Cit.) agreed, “…. I know that UPS is always looking at reducing costs

and wastage that exists within the business without sacrificing the product quality and

service that we provide. The finance department is also looking at new ways to

finance growth and apportion budgets correctly so that UPS uses its resources as

effectively as possible.”

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It is clear from that Lisa Bradshaw is highlighting the cost cutting measures which

UPS employees and demonstrates that this ethos is reflected in the lower levels of

management and thus the author conjectures that this is likely to be pervasive

throughout the company at all levels. Brewster et al (2007)

UPS has focused more on the employ of direct and relationship marketing other than

that of other marketing modes designed to lure new customers. The merits of direct

and relationship marketing have enabled UPS to cut significantly on costs which is

one salient strength and emphasis on the company’s’ Financial policy. Direct and

relationship marketing models are by far more cost effective by other intrusive

marketing approaches. By extension of the focus scope of the company’s cost cutting

measures, the adopted marketing models attest to the company’s taut financial policy

both of which are likely to fare UPS well into the next five years in spite of any

financial or economic turmoil due to rising oil prices or the ‘credit crunch.’ Niemann

(2007)

4.22 Financial Services at UPS and Brand Stretching

UPS has a vast array of Small business resources tailored to assist Small, Medium and

Micro Enterprises (SMME’s) to assist and insure in an SMME’s expansion efforts

through its UPS Capital subsidiary by providing a vast array of financial services such

as loans, lines of credit and payment processes that help speed up payment and

alleviate the risk associated with dealing with new customers.

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Such value added services are crucial to UPS as it is in a maturing market it will need

to look for new ways in which to increase and sustain its growth. However brand

stretching does have risks associated with it, if a good or service being provided by

UPS that is perceived as substandard, inferior or lacking in customer service this can

affect the whole brand. Niemann (2007) agrees that UPS must consistently maintain

its committed level of customer service throughout the whole of its product and

service range in order to see the levels of growth sustained or increased over the five

years.

4.23 Technological Advancement and UPS’s Sustainability

One of the declared goals of UPS in the recent dispensations is that of the company’s

aims is to be an e-commerce enabler. Owing to that, UPS has intensified its

investment of using technological advancements to enhance its operations, cut costs

and enable customers to manage their shipments as well as trace them anywhere and

anytime in the world. The company’s “My UPS” is a cyber facility that enables the

customers to manage their shipment purchases. The company website has a

description of the “MY UPS” facility:

“My UPS is your point of entry to the services offered within UPS.com, giving

you access to more online content and functionality. When you register, you can

take advantage of these time-saving features:

Among other things the facility offers the customers the following:

Ship and track packages all in the same place.

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Void shipments and store international shipping documents.

Save tracking numbers and addresses online.

Create and print UPS shipping labels from your computer.

Pay for shipping by credit card, or charge to a UPS shipping account.

Access saved shipping and tracking information for up to 90 days.

Save shipping preferences, such as origin address, payment method, and more.

Request tracking notifications by e-mail, wireless phone, or PDA

UPS.com (2008)

Data obtained from the published company literature on UPS operations designs

indicated that the company cashes in on the aspect of providing Information

Businesses Need: UPS presents Small Medium and Micro Enterprises (SMMEs) with

the information they need in their attempts to keep ahead in their global expansion

strategies. Brewster et al (2007)

By using the technological interfaces that UPS has set up UPS customers can trace the

location of their purchased orders. The facilities also enable customers, both

businesses and individuals to research international markets and business costs, as

well as to calculate total shipping costs. By extension the services provided also

include the enabling of customers to calculate duties and taxes as well as

transportation charges.

The customers have the ability to do this well ahead of their chosen shipment date.

Such a service rendering is indisputably pro-customer that will results in customer

retention. Customer retention is indispensable to any strategies of long term growth

and sustainability. Niemann (2007)

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In an interview with the researcher Centre Manager for US Feltham has implied that

the company will continue on the same pathway which has resulted in sustained

growth and sustainability in the past years. She outlines, “If I were the company’s

marketing manager I would continue to devise new ways of selling our products and

providing our customers with more information, the internet provided us with an

instant means of communication with our customers and allows them to track their

products virtually anywhere at any time, I do not believe we have seen the last of

what the internet and other new technology has to offer UPS and our customers. It

will be the UPS marketing department job to tell the world the merits of our services

and continue to create and reinforce our prized corporate image.”

Dessler (2008) concurs with the foregoing, “This Company is making a smooth

transition to the future. Many goals were set for the new millennium. One goal set by

the development department was to identify and apply new technology that would

improve existing operations and develop new business.”

According to Dessler (2008) UPS has succeeded because of the dramatic advances

communication. “The customer is ultimately satisfied with the reliability of UPS to

deliver on time. This is the marketing factor that sets UPS a step above the

competition All decisions were made in the respect that the company would continue

to bring the customer more than they expected. In turn United Parcel Service is an

extremely profitable corporation. The environment provided by UPS keeps customers,

employees, and managers working hard to keep up the high standards set by today’s

customers.

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UPS has technological capabilities have run with technology advances. One UPS

company representative asserts, “Low costs are another reason that their customers

keep coming back. The growth strategy chosen by management is working. It is

designed to take advantage of their competitive strengths while maintain the focus on

meeting or exceeding customer requirements… Upper management is impressed with

the progress.” Niemann (2007)

This has been achieved by the putting together of variety of online services that assist

customers to trace their purchased packages easily. The company expenditure of 1

billion dollars annually on technology testifies to UPS decisiveness on the endeavours

to tap technological merits and capacities to enhance efficiency, competence,

competitiveness and more importantly, sustainability. By the foregoing, the author

postulated that the management of UPS believe that they will sustain its growth five

years into the future.

4.24 UPS and Equal Opportunities

UPS has a history of innovation and the early adoption of new technologies which

was spurred the company’s archrival, FedEx; and has seen the company dominate the

domestic market for private parcel delivery. UPS’s financial clout has enabled the

company to extend economic benefits to various stakeholders, employee

compensation and benefits. This consolidates the positioning of the company and

contributes significantly to its sustainability. One of UPS main vantage points is in its

commitment to diversity.

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UPS upholds that equal opportunity is part of the social fabric. The company’s

ideology up holds that diversity on their part reflects a mindset of inclusiveness,

respect and cooperation which are the core values that drive the company’s

relationship with employees, customers, suppliers and communities. The company

diversity initiatives are driven by the UPS Diversity Steering Council. Below are

statistics on diversity obtained from the company’s sustainability report of 2007:

“Women as a percentage of officers and Mangers………………………………...29%

Minorities as a percentage of officers and managers………………………………32%

Asian……………………………………………………………………………….04%

Black……………………………………………………………………………….17%

Hispanic…………………………………………………………………………....10%

Native American/Other…………………………………………………………….01%

2006 Year-End Diversity among UPS Board of Directors

Women on the Board of Directors - 17%

Minorities on the Board of Directors - 17%”

4.25 Cross-Cultural Variances and UPS’s Global Growth

The study has also aimed to establish means employed by UPS to ensure global

markets are penetrated successfully. In an interview with the researcher and Principal

Lecturer of International Strategy at Anglia Ruskin University and published author

Jonathan Knowles (2008) envisages that UPS faces few cultural barriers owing to its

nature of service, he notes:

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“It depends on how culturally sensitive a product or service, some companies

transcend cultural easily barriers others don’t. Leisure activities for example

such as eating out would have cultural barriers to their free and unlimited

movement although of course cultural barriers do affect the types of products

that might be shipped within a country. However I think UPS is a company

with very few cultural barriers. In others words a parcel service is the same in

China as it is in Argentina.” Knowles (2008)

In contrast Udayan Raut-Roy (2008) holds that any company operating on a global

market in bound to encounter cultural hindrances in one way or another:

He asserts, “Yes because they need to contextualise their operational to what the

locals demand, in India for example they have many more local collection points

which operate on a commission basis but that model does not exist in the UK as the

country is smaller and has a different culture. So they have to recognise local needs

to provide a truly global service. I believe that UPS is and can continue to be

successful at this.”

This is an illumination of the flexibility and dynamism wielded by UPS in

implementing its global growth and expansion stratagem. Cultural variances have

resulted in failure in many countries attempting global expansion. UPS operating on

185 countries testifies to the company’s success in weathering cultural challenges.

Thomas (2004)

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Thus the author believes that cross-cultural variances whilst challenging are being

handled well by UPS management, this will encourage future growth into these

markets as they are able to utilise their vast resources and expertise and apply it to a

plethora of countries whilst attracting local customers, and at the very least cross-

cultural complications are unlikely to be a large factor in hindering UPS’s future

growth in new or existing markets. Thomas (Op. Cit.)

4.26 UPS Competitor Analyses

Whilst UPS’s competitors have been mentioned at other points in the dissertation as

they directly affect the market share and potential future growth of UPS the author

will now examine their potential threat in greater detail. As is well known, although

both DHL and TNT have a presence in the US market, ground and air superiority are

held by UPS and FedEx respectively. Although both companies provide similar

services, they have diametrically opposed corporate philosophies.

All four companies have been vying for global domination of the Logistics Market,

but over the last 10 years this struggle has intensified with a systematic stream of

acquisitions. Deutsche Post World Net (DPWN), DHL’s parent company, has bought

more than 50 companies, mostly in Europe. UPS ever since it went Public has been

acquiring companies and aircraft to enhance its AirExpress capabilities; FedEx

mirrored this move by acquiring ground transportation brands. The current speed of

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expansion and determination to service the entire supply chain along the most

important trade lanes shows little sign of deadening.

There are some interesting commonalities between FedEx and UPS, and between

DHL & TNT that directly impacted on how these companies became behemoths of

the global logistics industry.

UPS & FedEx, vigorous market rivals are highly competitive and track one another’s

movements in the market. Their investment in competitive market research is high,

systematic and constant. They are both centralized organizations with annual business

planning processes that are initiated, led and summarized by their respective

Headquarters.

DHL and TNT started with a highly decentralized model. TNT became vulnerable

after making disastrous operational decisions in its European markets, with heavy

financial impacts, and was in its turn acquired by the Dutch Post postal service.

Although FedEx and UPS also faced difficulty in their European incursions they were

ultimately successful and are now highly profitable.

UPS had the funds and the fortitude, in the face of enormous internal shareholder

pressures, to struggle through years of losses measuring hundreds of millions of US

dollars. Whilst FedEx shut down the largest part of its European business, and

focused solely on intercontinental express service continuing to serve the market

through an alliance with TNT.

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Whilst the downsizing for FedEx was painful and required a $254 million

restructuring charge, they did carve out a solid niche with a truly unique product

solution under the slogan “FedEx is the fastest way to more of the USA”.

UPS’s maintaining its own distribution system is a clear strategic advantage as they

are able to process and delivery their own parcels retaining control, which has benefits

for its corporate image, marketing and commitment to customer service which FedEx

its largest rival cannot.

On balance this could also be a disadvantage leading into a global recession, and the

recent falls in consumer confidence are likely to have an effect on UPS’s customer

usage, if this were to happen then UPS’s distribution system could become a costly

financial burden stifling growth, while its major rival FedEx would be better suited to

scaling back back its European operations because of its alliance with TNT.

DHL’s decentralized nature ultimately put it at a disadvantage against the centralized

systems of UPS & FedEx, who could spread their costs across their entire network,

and whose large corporate headquarters could access greater funds. The

decentralization that was so valuable to the quality of the localized service thus

became an obstacle to a culture of long term strategic planning. Its more centralised

rivals began product and geographical encircling moves that began to eat away at

DHL’s market share.

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As these encircling moves became more successful so DHL began to lose market

share, across its product offerings and operational regions. Decentralization hindered

a corporate wide realization of the long term significance of these encircling moves,

and handicapped a sustained corporate wide coordinated reaction to the advance of its

competitors in multiple market and product segments. Eventually this made DHL,

vulnerable to ownership dilution, and finally acquisition by Deutsche Post World Net.

Deutsche Post, has set about improving and enhancing DHL ever since.

Corporate cultures, created over the course of decades, are still present, and DHL is

now operating with its old decentralized structure, and a new highly centralized

structure imposed from its German owner DPWN. The splicing of these two

conflicted cultures is made more complex by a process, driven by Deutsche Post‘s

desire to become a free-standing global logistics powerhouse, large enough to rival

UPS (100 years old) and FedEx (35 years old), in 15 years of systematic and serial

acquisitions.

Such difficulties have meant that DHL has lacked focused and whilst its acquisitions

and DPWN’s influence and financial clout are substantial its overseas operations

outside of Germany have yet to rival UPS or FedEx which are still the industry

leaders. However DPWN is a former monopoly provider holds the largest market

share in Germany, and has the resources to be able to become a larger threat to UPS in

the future.

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4.27 The Impact of Structural Developmental Models on UPS

By observing the differences in the centralization / decentralization variable we see

how fundamental differences in corporate cultures developed over decades, ultimately

determine the future competitive and market positioning of these four integrators.

FedEx and UPS adopted a strongly centralized command and control structure from

the beginning. TNT and DHL both developed from decentralized and entrepreneurial

companies, with a less strategic but more tactical personalized customer service.

The most significant implication of these developmental paths is that FedEx’s and

UPS’ high degree of centralization from the early days enabled them to embrace a

discipline of strategic planning, which simplified the implementation of long term

plans over a period measured in decades.

Although DHL and TNT started with the decentralized model, they have been

experiencing a process of increasing centralization since their acquisitions by the

European postal authorities. This increasing centralization though is coming up

against the bulwark of a decentralized corporate culture developed over the course of

decades. The effect is to create constant tensions between headquarters and the

periphery.

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4.28 The Logistics Value Chain

The primary activities in any companies’ Value Chain are in-bound logistics,

operations, out-bound logistics, marketing and sales, and customer service. These are

facilitated by the firm’s infrastructure, HR management, Technology R&D

investment, and procurement. All these departments work together to produce the

company’s profit. Although you would expect these logistics companies to have

world class in-bound and out-outbound logistics, this is not where they excel.

4.29 Comparing Value Chains

As previously discussed UPS’s management structure is command based could be

described as prescriptive and militaristic in its organisational structure. DHL has

historically been known for its outstanding customer service at a local level. FedEx

has world class marketing talent and because it is still run by its founder, with a

nimble ability to quickly mobilise their strategies. TNT was always known to have the

most flexible service within the business.

UPS and FedEx’s centralized structures have always required, and facilitated billion

dollar investments in IT. This became an advantage that they used to undermine one

of DHL’s greatest strengths, localized customer service. With a globally connected IT

network, FedEx and UPS were able to leverage their IT advantage to service their

corporate accounts on a global basis, rather than on a country by country basis. Latin

American Logistics (2008)

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“FedEx has the best HR system in the business. It also has had an active

strategic procurement optimization initiative that has been adopted by the rest

of the industry, producing savings in excess of millions of dollars, straight to

the bottom line.” Latin American Logistics (2008)

The most important part of the value chain is found in the senior management of these

companies. UPS and FedEx have had stable, strong teams running the critical

components of the value chain and the associated departments. Alan Graf has been the

FedEx CFO since January 1998. Fred Smith has been the CEO of FedEx since he

founded the company 35 years ago.

Mike Glenn has been FedEx’s CMO for the last 8 years and has been a senior sales

and marketing executive with the company for many more. UPS’ CEO started as an

industrial engineering manager, and worked his way up for 34 years to his present

position. These teams have overseen steady and profitable growth for both companies

over the period of the last 40 years. Latin American Logistics (2008)

TNT’s CEO in the USA has changed at least twice in the last 10 years. DHL USA has

had four different CEOs within the last 4 years. It is a fair assumption that new CEOs

bring in their own new teams, which implies that the high CEO turnover ripples

through various levels of executives. Success in any company often has an inverse

relationship with the rate of internal turnover in the firm’s primary activities.

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Managing change across large global multi-layered and matrix like enterprises is

complex. Implementation of critical initiatives may take many years. Stability in

policy is most often associated with stability in critical personnel. This Personnel

stability is an important predictor of the successful implementation of these policies.

Lately theses companies have filled out their supply chain capacities through

acquisition. The critical management function at the moment is efficiency in

integration. As Dick Metzler is fond of saying, “Integration is like watching

porcupines mate. They ultimately consummate the act, but it is pretty painful for both

parties”. This activity is also dependent on the quality of the corporations’

management.

Dick is presently the Chief Commercial Officer for Greatwide Logistics, and was the

former Executive Vice President of Marketing with DHL Americas, former CEO of

APL Logistics, Senior Marketing executive at Federal Express, and the Head of

Global marketing for TNT. In his previous position Dick Metzler put DHL on the

awareness map in the USA. Latin American Logistics (2008)

Considering the waves of continuing acquisitions whichever company can best

integrate their different acquisitions, will better serve their customers. Full integration

of acquisitions for these large companies can take anything from three to seven years,

and which is another critical activity that is facilitated by a stable and experienced

team of managers.

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Once these acquisitions have been ingested and stabilized to extract the back office

and market share benefits that drove them in the first place, then the race will be to

optimize the best management teams within each corporate level, in critical markets

around the globe.

Since a company’s success is based on its management’s capabilities to direct the

organization in a complex and dynamic market environment, whoever can develop

and stabilize the best management team first, wins the value chain game. Such

resources, just like the best in class companies that are presently being acquired are

not limitless, and the next race amongst the integrators may well be for the best

management talent, across the globe.

Another differentiating discipline is long term strategic planning. Effectively

implementing change across large global multi-layered and matrices corporations can

take many years. The appropriate long term direction has to be set and implemented

with the correct tracking metrics. In many organizations this is usually developed and

driven by the strategic planning department. Latin American Logistics (2008)

Companies also have to deal with market dynamics over which they have little

control. In these days of transportation companies becoming Public, there is a

temptation to manage the company not for the long term for the customers, who pay

the bills, but for the short term benefit of the investment community that supply the

companies with capital infusions, and the appropriate market valuation.

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In the race for global domination, the components of this value chain have to be

optimized on a worldwide scale, at all levels of the corporation – Global

Headquarters, Regional Headquarters, and country level, as well as within the critical

product portfolios, regions, and countries that the companies operate in.

Companies with long term strategic planning departments are less likely to succumb

to these distractions than companies that are driven by tactical rather than strategic

imperatives. UPS, with its strong internal share ownership philosophy, and FedEx

with the passionate service attitude of its founder, have always tried to resist such

temptations.

The early adopters of the centralized model (UPS and FedEx) have maintained their

independence, while the two that started (TNT and with the decentralized model have

suffered vulnerabilities that resulted in their takeover by Government Postal

Monopolies. This suggest that UPS has a more successful and profitable basis on

which it bases its company and this is reflected in the larger market share that UPS

and FedEx have, as such UPS is in a better condition to further its growth over the

next five years, than its competitors bar FedEx which has a similar distribution

network. Latin American Logistics (2008)

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4.30 Competing Strategic Plans

However centralisation is not a benefit in and of itself, but it does enable the practice

of strategic planning. Strategic planning can be applied to both a centralized and a

decentralized model, but is easier to apply strategic planning to a centralized model,

and it’s more difficult to apply strategic planning to a decentralized corporate culture.

Strategic Planning in turn enables a long term view and a vision for the overall

business. It allows for economies-of-scale on a worldwide basis, the benefits of which

can be applied to every component of the value chain. This is another clear

competitive advantage for UPS, but yet again for FedEx as well. Latin American

Logistics (2008)

Strategic Planning enables a long term view of the business, which in turn protects the

company from the short term trends which have little significance over the long term

health of the business. This long term focus on the significant drivers of the business

allows the corporation to communicate the importance of these drivers over the long

term, to form a core message of shared objectives and values which can be followed

by the entire organization.

The entire organization can follow the same corporate objectives, rather than be

subject to the short term vagaries of constantly changing market philosophies, short

term investment community influences, short term financial goals, company politics

or executive demagoguery.

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Thus regardless of whether UPS can sustain or improve its growth over the next five

years may be less important than the growth of UPS’s over the longer term, and

moreover how much profit UPS can generate within its maturing markets.

Strategic Planning paves the way for stability in management across all critical

components of the value chain. Stability in management, especially executive

management, in turn allows for implementation of the long term vision. A ‘virtuous

cycle’ is created that compounds the competitive advantages of the corporations that

follow the management model enabled by strategic planning.

The corporations that do not follow such a model are more likely to be subject to

‘vicious cycles’ that exacerbate their weaknesses across the value chain, creating

vulnerabilities that drive them to bankruptcy or involuntary takeovers.

In a competitive environment strategic planning, whether decentralised or not; are a

critical component of a company’s growth and survival in the long term. Companies

without strategic planning may survive for five, ten, or with even fifteen years, but in

the the company will at best be a candidate for involuntary acquisition by those

competitors that succeeded in implement strategic planning, or at worst looming

bankruptcy.

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5.1 Conclusions and Recommendations

In attempting to answer the core research and hypothetical question presented in this

study, it will be noted that there can be no authentic and accurate position that can be

arrived at, to establish the prospect of UPS growth into the future. From a collation of

primary and secondary data as well as the outcomes of qualitative and quantitative

analysis it can well be argued that UPS will continue to grow although there can be no

consensus to the rate at which this growth will be achieved owing to the complexity

of the framework variables and factors that determine a company’s growth and

sustainability levels.

Lisa Bradshaw contends, “I think that UPS’s growth can be sustained in the next five

years given the right conditions for it to do so, it depends on so many different factors

such as product demand, an ability to arrange partnerships and acquisitions in new

and existing markets and also for organic growth that needs the support of local and

national governments.” She further outlines that UPS strives for excellence and works

hard to build relationships with its customers and business partners that are long

lasting, as such she believes that UPS can strengthen these further in the coming years

and indeed acquire new customers not only from new markets but from our

competitors and those who have never used UPS’s independent parcel service before.

Bradshaw thus highlights difficulty in trying to establish whether or not UPS growth

can be sustained for the next five years. Bradshaw has stated aptly that the growth

achieved can only be sustained if the conditions that have enabled its attainment

remain conducive. She adds, “I have confidence in UPS’s staff to be able to meet the

- 138 -


ever changing market in which we operate and respond to threats from both the

economy and our competitors as we have done for over a century, UPS will continue

to grow whether it will be at the rate it has for the past five years I cannot say, but in

the long run it will grow and continue to build on the successes and accomplishments

it has already attained.”

The financial statistical evaluations and forecasts have painted a bright future on the

prospects of UPS growth five years into the future. It must be noted that financial

calculation present variables in a black and white and technical way which is

exclusive and independent of the influence of other inalienable and critical factors that

have pervasive bearing on the company’s growth sustainability prospects.

It can be stated that, conditions remaining the same UPS will continue to grow at

unpredictable levels though.

Financial data presented and calculated in the regression analysis indicates that UPS

has enjoyed growth of plus 13% over the past five years against the 7% percentage

growth of the parcel delivery services industry. Projections presented in table indicate

that UPS will post growth records of over 11% against the plus 13 % growth of the

industry. This is less than the growth UPS has experienced but is nonetheless

indicative of a forecast for successful and positive growth.

The substance of quantitative analysis proves that UPS has a Proportion of variance

explained (R^2) of 1.0000 (100.00%).This is despite the fact that the companies has

had growth lapses at some indicated by the Maximum deviation for any observation

pegged 7.48059E-011 for past growth forecast. Nonetheless the regression outcomes

- 139 -


reflect well in accordance with the UPS growth forecast presented by Microsoft

Network (MSN) Money that place UPS growth for the next five years at +11.80%

against the +13.10% value of the last five years. The stats indicate that UPS will

continue to grow but what is clear from the stats is that the past five years growth of

13, 10% will not be sustained.

In summation, the researcher believes that the Growth of UPS is sustainable five years

into the future. Nonetheless the outlook remains volatile and unpredictable and thus

researcher cannot establish that past growth rate by UPS cab be maintained. Growth

will be sustained but it is not at the rates scored in preceding years.

The conditions needed for the future growth of UPS growth are unlikely to remain the

same. On a macro scale the recessionary trends in the US economy, the global oil

prices crisis among other factors compound the difficulty in predicting UPS growth

five years into the future. The following component offers perceived feasible

suggestions that can be adopted by the company in the regards to its growth and

sustainability endeavours and strategies.

In an Interview with the researcher Professor of International Enterprise Strategy and

Director of the Centre for International Business Research and Development at the

Ashcroft International Business School Lester Lloyd-Reason (2008) holds that the

current recessionary trends in the US economy will have direct negative effects on the

profitability of UPS and any services provision company.

- 140 -


He asserts, “…given that profits are probably going to fall people are probably going

to find ways to reduce expenditure, I believe it is inevitable that there will be a knock

on effect. As a shipping company UPS is tasked with delivering goods and services to

people if there is a sudden drop in consumer confidence it affects sales and thus

commercial shipping.”

This implies that UPS may have to consider a paradigmatic shift from expansion

strategy to growth and sustainability as consolidation approaches. A recessionary

economic climate presents a plethora of business operation and business growth

hindrances which may result in unmitigated failure for business attempting to survive

against the extenuating economic crises which appears to be developing. Reason

(2008) positions is that the current recessionary forces in the US economy and

markets will certainly have a knock on effect on economic uptake and thus UPS’s

growth.

Reason (Op. Cit.) has offers a possible business strategy for success in such a

recessionary period. Reason outlines, “From a financial aspect it is always straight

forward, in recessionary periods UPS must protect its margins and above all build and

maintain its cash flow. In my opinion UPS must seek to be defensive and not try and

grow during a recessionary period, and instead seeks to ensure its survival. The

current economic climate has a different set of variables from the last recessionary

period for economists and businesses alike it is a whole new economic climate, thus

the financial strategy should be similar to its competitors”

- 141 -


One critical variable to consider in the predictions of UPS growth prospects is factor

of global oil prices. This variable has pervasive bearing on UPS operational costs

which heavily rely on transportation. The transportation industry is under the

crippling siege of soaring and volatile oil prices. The combinations of this factor and

the recessionary economic and market forces paints a grim picture for any company’s

growth prospects.

Reason (2008) aptly advises, “In recessionary times it is highly unlikely that UPS or

indeed any multinational organisation involved in parcel delivery could continue a

growth strategy, and that any existing growth strategies would be futile. As UPS can't

grow it must protect its margins by reducing costs and to make efforts retain its

customers. It is clear that UPS' costs will grow due to increases in fuel costs and

materials quite substantially over the coming five years; it is the main reason why

businesses fail during a recession because their costs increase and their margins

decrease, so that it is no longer profitable to operate.”

Reason (Op. Cit.) further indicates that normally in a recession interest rates rise and

banks are willing to lend, but with banks part of the current recessionary problem and

a liquidity shortage readily apparent, there is a real potential for even seasoned

businesses to fail. In the current economic climate a large multi-national such as UPS

posses assets which would normally protect them from such difficulties enabling them

to obtain financing, but in the current market situation banks are still unwilling to

lend.

- 142 -


On the aspect of the perceived impact of US economic difficulties on UPS growth

Jonathan Knowles concurs, “I think that movement of freight and anything to do with

e-commerce will reflect the economic health of the country in operates within.

Logically if sales of goods and services are down the need to freight goods would also

be in decline as well”. Knowles adds that since UPS have a large share of their

business is in America the current turmoil in the US economy is bound to have an

effect on their profitability.

It is clearly imperative that any growth or sustainability strategy to be crafted and

implemented by UPS must entail feasible and adequate growth consolidation

measures. The next five years seem unpredictable given the volatility of the global oil

prices, the unpredictability of the US economy, and a possible global recession among

other mitigating factors. UPS has an impressive growth and sustainability record over

the past years which it must consolidate prior to considering further growth strategies.

Perhaps ultimately the issue of whether UPS can sustain of increase its growth of the

next five years is less important than whether UPS will be able to achieve long term

success. UPS and FedEx are both large companies operating in maturing and new

markets simultaneously, both have a strong domestic revenue base, which they have

used to subsidize their global expansions; and both have a patient long term strategic

approach to the market.

- 143 -


Thus it seems likely that both companies will continue to be profitable and maintain

their relative position for both market share and long term growth, as they have an

established market presence, keen marketing and an efficient and fast distribution

network.

- 144 -


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