UPS Optimistic About Shipping Its Strategy Worldwide
United Parcel Service Inc. is delivering on plans to make its brown trucks and planes as familiar worldwide as at home.
Since beginning a global expansion in 1988, UPS’ presence overseas has grown from six countries to 182 countries and territories.
“The overall strategy is for us to be the leading provider of package distribution services worldwide. As a matter of fact, it’s part of our company’s mission statement,” Donald W. Layden, international operations manager for Atlanta-based UPS, said in a recent interview.
Layden said UPS expects one-third of its revenue to come from its international business by the end of the decade, with most concentrated in Europe. The company’s 1991 revenue totaled $15 billion.
“We are not profitable (in Europe) at this point, but we do expect to be profitable toward the end of 1994,” he said. “Fortunately, we’re a private company, and we have the commitment of our board and our shareholders to go ahead and invest the money we’re investing right now in international business.”
UPS’ limited success in the risky international market is explained largely by its conservative approach, said Paul Page, who covers the package delivery industry for Traffic World magazine.
“The things that make it (package delivery) work in the United States, where it was basically born, can be hard to translate abroad,” Page said. “UPS does it very well because they have a lot of discipline. They’re a very methodical, disciplined company.”
UPS’ sunny forecast contrasts with the notable flop of one of its main competitors, Federal Express Corp.
The Memphis, Tenn.-based company announced recently it was sharply curtailing its European business and reducing the work force there by 6,600. The company set aside $254 million for the restructuring, a move that contributed to a $193 million loss in its third fiscal quarter ended Feb. 29.
“They were late coming in, and there wasn’t enough growth in the short term,” said David P. Campbell, an air freight industry analyst at Scott & Stringfellow Investment Corp. in Richmond, Va.
But he said, “It’s not a mature market. There’s a great deal of potential in Europe.”
Layden said the dismantling of trade barriers in Europe by 1993 will create a bigger market and make it easier to deliver across national borders. But he said the company was still grappling with precisely how it will respond to the changes.
While Layden sees Europe brimming with opportunity, he’s not blind to the fierce competition already there.
“On the express product side, that is the rest of the world into Europe and Europe to the rest of the world, there’s Federal Express, DHL (Worldwide Express), TNT and United Parcel Service,” he said.
“Within the countries themselves, several of the European countries have very, very fine well-organized, well-managed, well-run postal services and they’re also major competitors for the domestic intra-country product.”
The missing link in UPS’ expansion is the United Kingdom, where the company has been negotiating for months to acquire a major domestic carrier. Layden wouldn’t identify the company, but said he expects the deal to be completed soon.
“Acquiring a company in the UK for us is the last major piece of the puzzle,” he said. “It’s been difficult for the fact that there haven’t been that many opportunities to acquire something in the UK.”
UPS, whose stock is held primarily by the company’s managers and supervisors, began operating outside the United States in 1975 in Ontario, Canada.
The company also has established a considerable presence in Asia and Mexico. It is anxiously watching the progress of the North American Free Trade Agreement Talks, which could allow a rapid expansion in Mexico.
UPS, which moved its headquarters from Greenwich, Conn., to Atlanta last year, has accelerated the pace of its international growth in the past four years largely by acquiring overseas carriers.
Acquiring companies, rather than simply starting UPS operations, helps the company cut down on foreign red tape. The 1990 acquisition of the Belgian company Seabourne European Express Parcels, for example, gave UPS a firm that already had a cross-border license.
Just a year ago, it bought its 12th European parcel delivery company, spending $50 million on Prost Transport of France, one of its largest acquisitions.
“Our strategy includes keeping all the local management and employees and letting them assimilate into the UPS culture at their own pace,” Layden said.
“It’s very difficult to impose UPS’ strong culture on newly acquired companies,” he said. “I think when people see that they’re not being forced to do things that they haven’t done before, they really want to become part of the UPS family.”
Page said UPS typically keeps a low profile when it begins operating in a new area. “Over time, they’ll repaint the trucks brown, then the uniforms become brown, then they put on the UPS name. Three years later . . . it’s UPS.”
