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Strategic Plan for the United States Postal Service

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Strategic Plan for

The United States Postal Service

Mail and Package Delivery Industry

The United States Postal Service (USPS) falls within the Mail and Package Delivery Industry. However, there are three major subsets of this industry; non-urgent mail, express mail, and the non-urgent package delivery. While each deal with delivery and share some of the same characteristics, the structure, trends, competition, and threats within each subset are quite different.

Non-urgent Mail Delivery

The industry structure of the non-urgent mail delivery subset is a monopoly. The USPS has the legal right and responsibility to deliver all non-urgent mail to every registered address in the U.S. Therefore because competitors are not legally allowed in this segment of the industry there are no threats of entry into the market. Finally, due to the lack of competition, customers have no other alternatives but to pay the rising price of a stamp for mailing a non-urgent letter.

However, non-urgent mail delivery has been faced with substitutes. In general, the Internet has played a major role by enabling additional alternatives. E-mail has replaced the old-fashioned letter as the main way to stay in touch with people aside from using a telephone. In addition, on-line account management and bill pay have made it possible for customers to pay their bills and do personal administrative tasks over the Internet. With the projected increase in the use of e-mail and on-line bill pay, the profits available in this subsection of the industry will continue to decline. These substitutes give customers a moderate level of bargaining power; however, since there are no competitors, customers have a marginal bargaining power.

Express Mail

The express mail subset, however, is quiet different than the non-urgent mail delivery subset. The segment is competitive many firms each vying for the same market. This environment creates high competitive rivalry. Due to the mature industry nature of this segment, a firm operating in this industry can only grow by capturing market share from competitors. Therefore, it is not uncommon to see changes in price and technology advancement by one carrier to be replicated by all competing firms within a relatively short period of time.

Additionally, the highly competitive environment prevents new entrants from entering the market. The barriers a new firm would have to climb in order to obtain a profitable portion of the market are very high. Since carriers are always changing their approaches to technology, customer service and price, there is very little room for innovation.

Just as in the non-urgent mail delivery subset, the Internet has proven to be a substitute for urgent mail delivery subset as well. Documents that previously were shipped overnight can now be attached to an e-mail and sent instantly. In addition to the Internet and e-mail, the use of fax machines has also proven to be a substitute for express mail delivery.

Finally, because of the increased competition and availability of substitutes, customers have high bargaining power. Since there is little differentiation among the carriers, customers can easily switch from one carrier to another. Customer loyalty, even with business contracts, is a rarity within the express mail delivery industry.

Non-urgent Package Delivery

The non-urgent package delivery subset of the industry has the same structure as the urgent mail delivery subset with many firms creating an extremely competitive environment. Each firm is competing for their share of the pie by trying to increase customer service and operating technology. However, when one firm makes a technological advancement or a price change, their competition follows. This helps to keep the barriers of entry high and the threat of new entrants low.

The non-urgent package deliver subset is faced with the same high level of customer bargaining power as the urgent mail delivery subset because of the extremely competitive environment. However, there is a lack of substitutes in this subset. There are no alternatives to send large packages other than to actually ship them. While the Internet has proven to be a substitute for the other delivery subsets of the industry, it has caused a large upswing in the demand for non-urgent package delivery with the growth of on-line shopping. With no end to the on-line shopping craze in site, non-urgent package delivery should benefit for years to come.

One of the major features that all three subsets face is high supplier bargaining power. The industry's reliability on fuel to operate delivery planes and vehicles gives fuel suppliers power to demand whatever price they want. With the price of fuel increasing over the last couple of years, this dependency has proven to be a costly operational burden for all parties involved.

Competitive Analysis

United Parcel Services

United Parcel Services (UPS) is one of the world's largest commercial and residential package delivery companies and is a leading global provider of specialized transportation and supply chain management services. The company is ranked among the top 150 of the Fortune 500 and commands 50% of the domestic ground package market in the U.S. UPS has a work force of about 384,000 employees and transports more than 13 million packages and documents dailly throughout the U.S. and to more than 200 countries and territories. It uses a fleet of more than 88,000 motor vehicles and 600 new jet aircraft

to serve about 1.8 million shipping customers per business day. Managers, employees, retirees, and the founders' families own 90% of UPS and control 99% of the voting power.

The company's standard ground service is available in 48 states of the US and offers same day pickup of air and ground packages. UPS' Next Day Air offers guaranteed next business day delivery to 75% of the US population. Its Supply Chain Solutions includes logistics and distribution; international trade management; transportation and freight forwarding and consulting services. UPS also has franchises of UPS Stores that are located in shopping and commercial centers. The company currently has 3,800 stores in the US mainly focused on servicing residential



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