Porter's Five Forces Analysis of UPS India: A Strategic Overview

This report presents a comprehensive analysis of UPS India's business and strategic management, utilizing Michael Porter's Five Forces framework. It examines the competitive dynamics within the Indian courier market, evaluating the risk of new entrants, the bargaining power of buyers and suppliers, the threat of substitute services, and the intensity of competitive rivalry. The report highlights UPS India's strengths, such as its established brand and global network, while also acknowledging challenges related to supplier power and competition. Through this analysis, the report provides insights into UPS India's strategic positioning and potential areas for growth and improvement within the Indian market, including expansion into rural areas and enhancements to service offerings. The report also includes a conclusion summarizing the key findings and references to relevant academic sources.

Running head: BUSINESS AND STRATEGIC MANAGEMENT 0
Business and Strategic Management

BUSINESS AND STRATEGIC MANAGEMENT 1
Table of Contents
Introduction................................................................................................................................2
UPS............................................................................................................................................3
Porter’s Five Forces...................................................................................................................3
Risk of New Entries...............................................................................................................3
Negotiation Power of Buyers.................................................................................................3
Negotiating Power of Suppliers.............................................................................................4
Risk of Alternate Options.......................................................................................................4
Competition Rivalry...............................................................................................................4
Conclusion..................................................................................................................................6
References..................................................................................................................................7
List of Figures
Figure 1: Porter Five Forces.......................................................................................................5

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Introduction
The Porter’s five force study is a structure for evaluating the five forces that create each
industry and it assists in analysing its strong points and weaknesses. Organisations use
Porter's method to ascertain their competition in particular industry. This model was founded
by Michael E. Porter. Porter analyse various micro and macro environment factors to
establish this model. The model is based on five principles, which are, the risk of new
competition, buyer’s negotiation power, seller’s negotiation power, the risk of alternatives
and competition in an industry. This report will analyse these five principles and apply them
to the business of UPS India.

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UPS
United Parcel Service or UPS is the largest parcel distribution enterprise worldwide, founded
in 1907 by James E. Casey. The company has its operations in more than 220 countries and it
serves around 15 million packages each day. The firm has more than 7.9 million consumers
and their profit in 2016 was US$60.906 billion. UPS started its operation in India with their
deal with Jet airways in 2005. This allows the company to open their first UPS store in
Mumbai. To enhance its business in India, UPS associated with AFL Private Ltd in 2008
(Laffaldano, Bodin and Sambridge 2013).
Porter’s Five Forces
Risk of New Entries
According to Rothaermel (2015), a company’s operations are influenced by the force of new
competition in the industry. The threat of new competition depends upon lower costs and less
time for an opponent to enter the same industry. A high number of competitors weaken the
position of a company in the industry.
In case of UPS India, the risk of new competition is low in Indian courier market. Due to the
high investment cost of starting up a business and the economic scale provided to UPS, it is
hard for new companies to enter the market. Organisations required a high amount of capital
investment for starting their delivery company at the same scale as UPS. The economic scale
of UPS is high in Indian courier market which allows them to deliver their packages at
significantly low rates. The company can manage to charge lower rates because of the high
number of packages they received daily; other smaller companies cannot provide the same
facilities (Chesbrough 2011).
Negotiation Power of Buyers
A customer is a key ingredient for a successful business of an organisation. The customer’s
ability to easily switch companies can adversely affect the company’s position in the
industry. For example, if it is difficult and costly for customers to change their service
provider, then the service provider has a strong position in the market.
In case of UPS India, the buyer’s ability of customers is medium. The company has many
loyal customers who prefer their services, but due to globalisation, the customers have many

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other inexpensive choices as well. The customers can easily change the services of UPS if
they find new cheap services, but the premium services provided by UPS such as overnight
delivery and faster international delivery are difficult to change (Chakravarthy 2011).
Negotiating Power of Suppliers
The bargaining power of suppliers refers to the power that a supplier has over an
organisation. The ability of the supplier to raise the prices of their products referred as their
negotiation power. It depends on the uniqueness and prices of the products supplied by the
sellers. According to Magretta (2011), highly priced and unique products can allow a seller to
raise the prices of their products which affect the position of a company is the industry.
In case of UPS India, the bargaining ability of suppliers is medium since they have some
amount of control over the operation of UPS. Many of the delivery vehicles that UPS used to
deliver its packages are owned by different corporations, such as Budget and Swift Transport.
Therefore, these corporations have bargaining power over the company. The one-day
delivery or urgent international delivery partner of UPS is ‘The Boing Corporation’. But,
UPS has signed an agreement which forces them to not raise their prices. If the company
decided to change its supplier, they may have to incur a huge amount of expenditure.
Risk of Alternate Options
The alternatives are the products and services provided by the competitors, which allow
customers to change the company. For example, a company has a weak position in the
industry if a competitor can easily replace its products and services.
UPS India has a low risk of alternative services because there are not many companies who
provided international services such as UPS. The contract between AFL Private Ltd and Jet
Airways allow the company to gain competitive advantages since only some of its
competitors have the same scale of investments. If customers required shipping his product
internationally overnight or shipping to a rural place, a UPS employee can drive and deliver
that package on time (Hemmatfar, Salehi and Bayat 2010).
Competition Rivalry
A high number of competitors affect the company’s position in a particular industry. The
competitors allow suppliers and buyers to dictate the authority of an enterprise. Suppliers and
buyers can easily change companies if they find more suitable deals for them.

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For UPS India the competitive rivalry is medium in the industry. The paper of Marshall
(2013) provided that, there are many competitors of UPS in the markets such as DHL, FedEx,
and USPS, and the rivalry between them is intense. But UPS has established them as a
flagship courier service in the market. Their deal with Amazon allows them to gain a
competitive advantage since Amazon is India’s biggest online retailer (Crew and Kleindorfer
2012).
Figure 1: Porter Five Forces
(Source: UPS 2016)

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Conclusion
The above report concluded that UPS India has gained a unique spot in Indian courier market.
The company has the disadvantage of supplier and competition, but their unique services
provide them with an advantage over its competitors. The company can enhance its market in
India by introducing new stores in rural areas and improving their services. New acquisition
can assist in company’s rapid growth and sustainable future development.

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References
Chakravarthy, B. and Coughlan, S., 2011. Emerging market strategy: innovating both
products and delivery systems. Strategy & Leadership, 40(1), pp.27-32.
Chesbrough, H.W., 2011. Bringing open innovation to services. MIT Sloan Management
Review, 52(2), p.85.
Crew, M.A. and Kleindorfer, P.R. eds., 2012. Managing change in the postal and delivery
industries (Vol. 25). Springer Science & Business Media.
Hemmatfar, M., Salehi, M. and Bayat, M., 2010. Competitive advantages and strategic
information systems. International Journal of Business and Management, 5(7), p.158.
Iaffaldano, G., Bodin, T. and Sambridge, M., 2013. Slow-downs and speed-ups of India–
Eurasia convergence since: Data-noise, uncertainties and dynamic implications. Earth and
Planetary Science Letters, 367, pp.146-156.
Magretta, J., 2011. Understanding Michael Porter: The essential guide to competition and
strategy. Harvard business press.
Marshall, S., 2013. Evaluating the strategic and leadership challenges of MOOCs. Journal of
Online Learning and Teaching, 9(2), p.216.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
UPS., 2016. Business Strategy. UPS Blog. Retrieved from <
http://ups-teamtres.blogspot.in/p/introduction_9939.html >