Question

According to Michael E. Porter a company is faced against five forces that can affect a business’s profitability and sustainability within a given industry. The five forces are Bargaining Power of Customers, Threat of Substitute Products, Bargaining Power of Suppliers, Threat of New Entrants, and Competitive Rivalry within an industry. The five forces help a company realizes its strength and weakness. Bringing owns company’s weaknesses or potential threats is very beneficial to a company because the information help to adjust and make the necessary improvements to eliminate or minimize the weakness or threat. Apply Porter’s Five Forces analytical framework to UPS. Your answer should include critical elements supported with evidence/ justification.

Answer 1

Hello Mate

there's nothing mention regarding UPS in the question. I am talking it as United Parcel Service and proceeding further. Hope it will be helpful to you.

Talking about Porters Five Forces framework ,by evaluating the industry using his model, we can grasp a clearer picture of the overall environment of the industry. In fact, the model can also be applied to have a better understanding of the current major competitors. Identifying their strengths and weaknesses allows us to devise a better strategy to further boost our competitiveness.

We can also evaluate the potential of our business by comparing us with other competitors to see if the market has been saturated or not. On the other hand, the model tells us on what aspect we are better. Thus, we can put more effort to expand our competitive advantage in order to always stay ahead of the counterparts.

Each company has its own strategy of survival and growth in the market and remain in competition. UPS has its own way of survival when companies like FedEx already there in the race. They preferably focuses on giving the best service across the globe. They offer a comparative cheaper service than other competitors and promise to service accurate and timely deliveries.They are using new technologies to make service more reliable and faster.

Five Forces Analysis w.r.t. UPS:-

Bargaining power of customers is quite low in UPS. As its not an issue for an UPS user because they have establishment all across the globe. Also they have big bunch of customers who prefer to use its service on a regular basis.

Threats of substitute product in low in UPS.There is very few options available if you have to send a parcel in some other country. Also this service is quite expensive.UPS provides a service that many companies and individuals use daily and rely.

Bargaining power of suppliers is medium in UPS. As UPS don't have its own package delivery vehicles. So it takes help of other companies like Budget and Swift Transportation. and these companies since owns the important part of delivery so they have bargaining powers.The main supplier for airways is the boeing Company. UPS has some contract signed with Boeing so that they cannot increase their price so much.

Threat of New Entry is very low for UPS because to setup such a industry there's a need of huge investment. Also international parcel has so many government filters in between them. Also the market already has well established rivals which has occupied the entire market. Companies like FedEx ,DHL or UPS can afford to lower their price to gain attention in the industry.

Rivalry Amongst Existing competitors is moderate for UPS. The only tough competitors present in the market are FedEx, DHL. There are others also but their growth is substantially low as compare to UPS. The bigger advantage with UPS is being more reliable, accurate, timely deliveries, minimum complaints and good feedback. Also company is very old which gives customer confidence.

We've barely scratched the surface here -- but you get the idea: a company's profitability and stock price are both governed by the competitive framework of its industry. All of Porter's Five Forces interact to determine whether a specific industry is highly attractive to investors, or screams, "stay away!"

We see these five forces at work all the time. Sometimes suppliers must cave to the demands of a powerful buyer like Wal-Mart. Other times it's the buyers that must yield to the demands of the seller -- like when BHP Billiton dictates iron-ore prices to steelmakers.There is a symbiosis to any business relationship. The buyer needs the seller's wares, and the seller needs the buyer's money. But, the balance of power always favors one party over the other. If you can determine who has the upper-hand in these relationships, you'll be a step ahead of the crowd.