SYNDICATE 5

Scenario Planning Stages

STAGE 1. ORIENTATION

Focal issue defined

STAGE 2. EXPLORATION

Driving forces defined

STAGE 3. SCENARIOS CREATION

Strategies, actions & changes defined

STAGE 4. OPTIONS CONSIDERATON

Strategies, actions, and changes defined

STAGE 5. INTEGRATION

Early warning signal developed

Introduction
This paper provides an analysis and case solution to a Harvard
Business School case study on United Parcel Service (UPS). As it
celebrated its eightieth anniversary in 1987, small package
delivery king UPS faced a rapidly changing external environment
which challenged the companys long-established human
resources management policies and threatened to disrupt the
organizational culture that many believe is key to UPSs success.
The analysis:
Identifies and discusses the key issues and problems related to
the fit between UPSs current business strategy and its HR
strategic plan and practices.
Formulates an HR strategic plan to resolve these key issues and
discusses how the proposed plan will support the current
business strategy; and 3) elaborates on the staffing
components of the proposed HR strategy.

Stage 1
History
It was formed in 1907, by 19-year-old Jim Casey.

Originally, focused on delivering messages in

Seattle . Over the 98 years since its founding, it
had transformed itself several times.
Several Transformations:
From messages to package delivery
To international air transport company
Finally, in the 1990s, to a logistics company

Background
About the company
The United Parcel Service (UPS) delivers more than 15 million packages a
day to about 6.1 million customers in 200 countries around the world,
making it the worlds largest package delivery company
UPS is headquartered in Atlanta, Georgia and operates primarily in the
United States with about 428,000 employees
UPS slogan What can Brown do for you emphasizes the companys
ability to provide services to almost any one in the world, at any address
Before the $42 billion company grew into a worldwide name, it was
started as a small messenger company in 1907 by two aspiring teenagers,
Jim Casey and Claude Ryan in Seattle, Washington with just $100
Top competitors of UPS include Federal Express (FedEx), DHL
International and the United States Postal Service

 Background of the Company

In 2006, it was a $37 Billion corporation. It is worlds largest package-delivery

company. The company was leader in specialized transportation and logistics
and it Serves 200 countries. It had a 3,500 retail locations via purchase of
Mail Boxes, etc. and employs 384,000. The company operates one of the 10
largest airlines
Organization
CEO is Mike Eskew
The organization is centralized, hierarchal with traditional structure at the top
Senior management and staff set direction, priorities, budgets, and

initiatives
Tactical at the regional level and is strategic at the corporate level
Low levels of autonomy at the regional level is also observed

 Competitors

Private postal companies

Federal Express
Large government-supported agencies
USPS
Deutsche Post
Until 1994, UPS had so heavily concentrated on continuously improving its

operations that it had compromised on quality and customer service. Many

analysts commented that UPS did not pay attention to customer needs and
customer satisfaction. In 1994, due to increasing competition, UPS realized
the need to be more customer responsive and embarked on a major
corporate transformation initiative. This case gives a detailed overview of the
various human resources initiatives that UPS

 Culture

Consensus building and was focused on efficiency and execution. It

believed in continuous improvement of company. Strong values: service

excellence, employee ownership, commitment to stability Low employee
turnover, loyal workforce
The Logistic Business Prospect
The alliance between air freight companies and ITES companies will

bring exponential growth to the Air Freight industry. This industry should
remain attractive, with concentration on competition for market share,
service differentiation, and brand image. Current Advertising has been
aimed at being better than the competitor for different reasons.

Value & Mission

Financial Performance

Timeline

Interview

 Key Focal Issue

- The future of UPSs global business in an ever changing

competitve environment
- The future(s) of UPSs world market and major regional
markets in 2017

Stage 2
Marketing
Operation
Human Resouces
Finance

SWOT ANALYSIS
STRENGTHS

Global brand
Strong
network

WEAKNESSES

distribution

OPPORTUNITIES

Expansion
of
online

shopping
Emergence of international

middle class

Perception of ground
delivery instead of
overnight
Heavy union presence

THREATS
Increasing fuel costs
Competitive
landscape
(DHL, FedEx)
Potentially slowing global
economy

FUNCTIONAL ANALYSIS (Marketing)

OBJECTIVE: Provide a complete logistics infrastructure to

businesses of any size.
UPS is targeting a global market of producers and
consumers, while making a move to become the supply
chain integrator of choice in e-commerce.
They offer products and services that are state of the art in

logistics, which include the use of bar codes and RFID, high
speed package routing systems, and consulting services.
UPS charges package prices that are in alignment with the

industry and is willing to raise prices alongside FedEx. It

has been able to charge fuel surcharges successfully.

FUNCTIONAL ANALYSIS (Marketing)

A sales force is maintained to reach business customers

and
producers crucial to UPS mission in expanding
its role in logistics to become the supply chain integrator
of choice.
There are 150,000 different places to access UPS,

worldwide.
Customers can reach them by phone,
web, retail outlets, customer service centers, distribution
centers and any of the drivers will
pick up packages.
This level of reach to customers is necessary if UPS
expects to gain market share from FedEx.

FUNCTIONAL ANALYSIS (Operations\ Tech)

OBJECTIVE: Highly integrated operations support product offerings to
offer low cost delivery operations.
UPS is seeking to integrate into freight with larger haul trucks

and

it is adding capacity in Asia and Europe with acquisitions of

Sinotrans, a Chinese joint venture and Stolica, a Polish parcel and
express company.
UPS is the 11th largest airline world, with nearly 600 planes, 15

airport hubs worldwide and 900 airports served. Connecting these

airports hubs to customers are 1,750 distribution facilities that sort
packages into 90,000 trucks for deliveries to the home, office, and
72,000 retail outlets. All this requires the integration of air,
ground, logistics and trade financing that UPS maintains is a key
competitive strength.

FUNCTIONAL ANALYSIS (Human resource)

OBJECTIVE: A high sense of culture and esprit, stock
participation
plan, and promotion opportunities contributes
to a low turnover rate of employees.
The company is managed from a highly centralized

Management Committee organized along for the most part in

to functions as opposed to business units. There are
business unit presidents in the Management Committee but
only to the extent that the
business unit is organized
at a global or firm wide level.
UPS is the USs 3rd largest employer with nearly 400,000

employees worldwide.

FUNCTIONAL ANALYSIS (Finance)

OBJECTIVE: Highly liquid company has been investing at a faster
rate than returning cash to investors, which are for most employees.
The company is highly liquid with 1 times the cash necessary to

cover current liabilities. UPS increased its dividends at 20% per

year for the past five years with an even higher growth in the rate it
has been buying back stock, at 47% over the same period.
The firm has been paying down debt over the last five years while

steadily increased Fixed Assets and Working Capital, in line with

developing the infrastructure to support the latest in logistics
technology and their customers push towards JIT manufacturing.
Over the past five years, Working capital has increased 24% per
year.

FUNCTIONAL ANALYSIS (Finance)

The firms capital structure is in line with a company that has

been run by traditional long time employees. 50% of the

capital structure is equity with the remaining sources of
capital split between current liabilities at 20% and long term
debt at 14%.
The company is investing its cash in to Working Capital.

The
evidence there is a 28% growth rate in cash
versus a 14% rate for
Retained Earnings, which is
experiencing a decelerating growth rate for the past five
years.

Stage 3

Stage 4
Strategic Plans:

Four Strategic Imperatives:

1.Winning Team: attracting and developing a highly skilled,
diverse, and aligned global workforce
2.Value-Added Solutions: providing customers with valueadded services combining movement of goods,
information, and funds
3.Customer Focus: building customer loyalty and expanding
UPSs services worldwide
4.Enterprise Excellence: creating an environment of highquality service and value

The Four Scenarios

Tangled Paths
1. Highly competitive business environment
2. Strong regional and national regulations
3. Desire for more variation in products
Regressive World
4. Strong regional and national regulations
5. More traditional supply chain, competitive landscape, and set of consumers
Global Scare Prevails
6. Slow adoption of new technology due to stable demand
7. More traditional consumers and industry consolidation
Brave New World
8. Deregulated globalized marketplace
9. Mass customization of goods and services to proactive consumers
10. New forms of competition and virtual organizationsalliances and business webs

CHALLENGES
To make strategic technology group from a small strategic

planning process. This was basically required for finding

major gap in
technologies.
Competition from both private companies and large
government supported agencies.
Execution of Scenario-planning session.
To tackle the impact of axis of uncertainty.
Formation of scenarios for future strategic planning.

CHALLENGES
To manage the strategy road map and implement the

centennial plan.
To tackle the implication for technology and infrastructure
initiatives, growth strategies and options, and
workforce
development at both the global and
region level.
Since most managers in the company were focused on
short term goals. It was difficult to keep the perception in
mind that this was not about UPS but rather how the
world affected UPS.
To resolve the strategic integration responsibility.

STEPS TAKEN BY UPS TO FACE THE CHALLENGES

As opportunities arose, UPS had shifted from message delivery

to package delivery.
Several steps that unfolded over a period of years were involved
in the implementation of the new strategic process. The senior
management completed a crucial second step two years later
in 1999,when they drafted the UPS charter, redefining UPSs
mission and purpose and providing a detailed statement of the
companys values and strategies.
UPS moved from leadership in package distribution to
enabler of global commerce due to the new mission and
purpose.

STEPS TAKEN BY UPS TO FACE THE CHALLENGES

The centennial plan, the third step in the strategic process

was formed from the outcomes of that meeting. As UPSs

version of a five year strategic plan, it was designed to
guide the company to its centennial anniversary by
providing themes and broad, overarching direction.
Strategy road map, which was the fourth step in the

strategic process was developed to take the centennial

plan to an
executable level of detail.

UPS Strategy Plan Action

Create the future through one company. One Vision. One

Brand
1. Continue to expand our distribution and supply chain
solutions to syncronize the world of commerce the
flow of goods, information and funds
2. Expand our position as a trusted broker between buyers
and sellers wordwide
3. Harness the approriate technology to create new
services and to strengthen our operations and networks
4. Attract and develop the most talented people whose
initiative, good judgement and loyalty will help realize
our companys mission

5. Continually study customers behaviour, anticipate their

needs and design our product and services to exceed their
expectations
6. Create a practice of innovation that leads to sustainable
growth
7. Maintain an environment that enables us to treat every
customer as if they are our only one
8. We will leverage the UPS brand to maximize brand
loyalty among constituencies

Stage
Scenario Planning (1997): to address distinctive UPS challenges

they brought in consultants from Global Business Network to

facilitate a set of scenario planning workshops. These workshops
were preceded by series of interviews inside and outside UPS that
led to the definition of key focal issues facing UPS. Four different
scenarios were developed by using combination of two axes
(horizontal axis- Market Environment and vertical axis- Demand
Characteristics). The four scenarios were namely: Tangled Paths,
Regressive World, Global Scare Prevails and Brave New World.
The session produced both tangible and intangible outcomes. The
scenario planning results in change of companys mission
statement, definition of corporate charter, identification key themes
and insights, creation of platform for management discussion and
mind set shift for top management.

 Strategic Planning (1999): Senior management

completed a crucial second step after two years. They

drafted the UPS charter and moved UPS mission
statement from leadership in package distribution to
enabler of global commerce. The second step in the
planning process also involved charting out the goals for
the future. Planning for the coordinated working of the
functional projects was also discussed. During this period
company released its IPO.

 Centennial Planning (2002): The third step of Strategic

planning process involves centennial planning as the

company was about to celebrate its 100th anniversary. The
CEO Mike Eskew convened a management committee
meeting whose purpose was to focus the group on kind
of the company we are going to be in 2007 on our 100th
anniversary. The plan includes three components. The
first was qualitative set of Goals and characteristics for
2007. Second was sense of corporate direction, with the
goal of creating a global, unified company with one vision
and one brand. Third component was identification of set
of strategic imperatives.

 Strategy Road Map: Strategy Road Map, was

developed to take centennial plan into executable level of

detail. To ensure the implementation of the plans four
strategic imperatives,(i.e.; Winning Team, Value added
solutions, Customer focus, Enterprise excellence)
individual Management Committee members selected
from various functional areas were assigned responsible
for each of them.

 The strategic planning process was well executed by

UPS. It has changed the company to what it is today. The

process gave a complete face lift to company with new
charter, vision and mission. The success of this strategic
plan can be seen throughout the organization and UPSs
functions. As UPS is no longer seen as US based
package delivering company and it has clearly emerged
into global enabler of commerce.