United States Postal Service

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MGT 485-0903B-03
AUGUST 30, 2009
The most concerning threat USPS faces is the rise in operating expenses, particularly the increase in energy prices and health insurance premiums. Energy prices are at all time highs. With USPS' dependency in both, air and ground transportation, energy prices will play a major role in the company's budget. USPS is part of the Federal Employee Health Benefit program and premiums for these benefits have steadily increased over the last couple of years. For example, premiums increased in 2003 by 11.1%. Health benefit payments increased 14% in 2003 from 2002, and by 15.8% in 2004 from 2003 levels. Similar to energy prices, the price trend of health premiums and benefit payments will is expected to increase for the foreseeable future. The other major threat USPS must deal with is decline in volume, particularly in the express mail category. Technology advancements in business communications, particularly e-mail and fax machines, are the main reasons for this decline. However, the weak economy over the last couple of years has also contributed to this decline. Finally, the extremely competitive environment of express mail has an effect on USPS' volume. As standard mail becomes obsolete and the electronic revolution takes over, the United States Postal Service needs to develop a new strategic action plan in order to adapt and sustain profitability in this dynamic environment. There are a number or short and long term problems that need to be addressed. Short-term problems include rigid business hours, minimal marketing in the package delivery segment, and alliances with other companies. Extending business hours would allow more flexibility for consumers. Increased marketing in the non-urgent package delivery system would improve business in that segment. An alliance with one or more internet-based companies would help...
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