Ups Case Study

Topics: United Parcel Service, Strategic management, Vertical integration Pages: 13 (4366 words) Published: November 19, 2012

UNITED PARCEL SERVICE OF AMERICA, INC. United Parcel Service of America, Inc. (UPS) had grown spectacularly from its humble beginning in 1907, when 19-year-old Jim Casey borrowed $100 to start a messenger and homedelivery service for Seattle department stores. By 2007, UPS had become a global public company, with a market cap of $74 billion, more than 428,000 employees, $47 billion in revenue, and operations in more than 200 countries. A recognized leader among packagedelivery companies, its growth had been above industry averages and had historically been through geographical expansion. In 1998, UPS changed its business model to Synchronized Commerce and adopted a new growth strategy it called the Four Quadrant model. UPS had hoped to expand its market space from $90 billion to $3.2 trillion by transforming itself into a logistics-solutions company. But eight years after these changes, UPS was generating only 17% of its revenue from its nonpackage deliveries, with only $2 million of its operating profit coming from the new businesses. In the company’s 2006 Annual Report, UPS Chairman and CEO Mike Eskew acknowledged the disappointing results and realized that these results required a response to the public market. Growth History Store locations One can look at the growth of UPS over the past 100 years as an iterative geographical expansion. UPS began as an intracity business in Seattle in 1907, and had expanded to Oakland, California, by 1919. Over the next 58 years, UPS established stores across the United States, opening its first one in New York City in 1930. In this manner, UPS extended its service through its new locations just like any expanding retailer and, in the process, became an intercity package deliverer.

This case was prepared by Edward D. Hess, Professor and Batten Executive-in-Residence. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. It was adapted from Professor Hess’s chapter on UPS in The Search for Organic Growth, ed. Hess and Kazanjian (New York: Cambridge University Press, 2006). Copyright © 2007 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation.

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The company’s geographical expansion went international in 1975, when UPS opened a store in Ontario, Canada. European expansion began in 1976, with a new store in Düsseldorf, Germany. UPS then expanded continually throughout the world: the Asia-Pacific region in 1988, and Latin America in 1989. By 1995, the company had entered China, its last untapped market. Customer evolution From its beginning, in 1907, UPS operated for 46 years as an intracity delivery business, transporting packages from large department stores to customers’ homes. Then the company expanded, providing residential deliveries for other types of businesses and later for business deliveries. Changes in the American lifestyle and shopping patterns that emerged with the creation of suburbs, regional malls, and an interstate highway system forced the company to go in a new direction. UPS responded to the changes in demographics, transportation, and customer needs by transforming itself, first, into a national delivery company and, ultimately, in the 1990s, into a global delivery company. The company broadened its customer base further by delivering more than 50% of the packages that customers bought over the Internet. By 2007, the company’s customer base included all types and sizes of businesses, from Dell...
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