Five Forces Analysis Of UPS

4. The Micro Environment – ???
To determine the best strategic position, it would be essential to understand the landscape of UPS is situated in. Hence, Porter’s five forces analysis is performed to comprehensively discuss the logistics industry in the European Union.
The following paragraphs will first analyze the horizontal competition that UPS is facing now, including industry rivalry, threat of new entrants and substitutes; and then the vertical competition, including bargaining power of suppliers and consumers.

4.1. Industry Rivalry
The current competitive landscape that UPS encounters would be critical to its performance. Competitors’ competency or disadvantage would significantly affect the market value of UPS in consumers’ mind.

Multinational logistics companies
The largest competitors that UPS face in its European logistics business are DHL, FedEx and TNT. In logistics industry, a critical success factor would be a company’s logistics network within the region, which normally suggests the need of a huge amount of capital to build it. A larger stream of revenue coming from the region would suggest a firm with higher capability of achieving such. An analysis on the market share of the companies in the European market (in terms of revenue share) is hence conducted.
As a subsidiary of Deutsche Post, DHL has the strongest brand and network penetration in Germany, the largest exporting country in Europe (World’s Top Exports, 2015), which provides it with a huge competitive advantage in sourcing business. Hence, it has earned a significant 19% percent share of the logistics market in Europe. (Nick Carey, 2015) UPS, as a company founded in the United States, unfortunately have less local intelligence and

Yet, with the recent proposed merger between FedEx and TNT Express, currently the third and fourth largest player, its market position may slide to the third in the market, according to the prediction of Reuters. The merger of FedEx and TNT would not only provide them with a greater client reach, but also more capacity for strategic pricing and united marketing effort in the light to make more attractive offerings and build a stronger brand. In addition, as the two have their transportation networks combined, it may prompt an improvement in their efficiency of leveraging distribution channels and hence a save in capital for further development. If that should apply, it would undoubtedly intensify the competition that UPS faces and threatens its market share.

4.2. Threat of New Entrant
New entrants in logistics industry will most likely face challenges in three aspects, customs barriers, logistics infrastructure and client reach. Although European Union has tried its best in making free trade possible, new market entrants will still encounter the necessity and difficulty in understanding extra-European Union trading policies. As well, the heavy investment required in establishing a whole new set of logistics infrastructure and hardship of earning client trust would be obstacles for new entrants in the logistics industry, and hence the threat of such