What is the porter 5 force in UPS comoany?

Answer 1

The shipping industry can be thoroughly analyzed using Porter's Five Forces Model.

A. New Market Entrants: the threat of new entrants into the industry is relatively low. Logistically, it would be nearly impossible for a company to enter the shipping industry and meet the type of demand that large players in the game (such as FedEx, UPS, and USPS) meet on a daily basis. The shipping industry is highly capital intensive and requires an extensive logistics and communication system. UPS (as well as FedEx and USPS) are highly vertically integrated organizations, with large fleets of vehicles, airplanes, warehouses, etc. A start-up organization would never be able to meet demand or have enough capital to make a dent on UPS's market share. The main threat for UPS would be if a logistics rich company or vertically integrated company such as Wal-Mart decided to enter into the shipping industry.

B. Competitive Rivalry: competitive rivalry is intense in the shipping/logistics management industry. The industry's customer base is able to choose whichever company they choose and because of this, the major organizations in the industry are constantly having to play keep up with one another. All organizations are attempting to become an all encompassing solution for their customers in attempts to keep them from switching to the competition.

C. Supplier Power: supplier power in this industry is low to moderate. UPS in particular is a vertically integrated company and has done its best to mitigate the power that suppliers could have over their profit margins. They have done this by having one of the largest fleet of vehicles, planes, and hubs in the industry. By vertically integrating, UPS has been able to internalize supplier issues and control those outside forces that typically abound when organizations rely on outside entities to bring their products or services to market.

D. Buyer Power: Buyer or customer power is extremely high in this industry. UPS has made gains in the B2B market, however, all organizations in this industry are always struggling to keep the customers they have. Switching costs are extremely low in shipping. The main product is the transportation of goods across local, state, and international lines and this product can be done efficiently by all three of the major shipping organizations. Therefore UPS will need to strive to differentiate their products based on several factors mainly that of their logistics and technology expertise.

E. Threat of Substitutes: Threat of substitutes is extremely low in the shipping industry. Packages, letters, and information will always need to be transported physically, electronically or, in the future, by other means. UPS will always have a customer base, they simply need to sustain their dominance in the marketplace and find other avenues in which to venture to see continued business growth.