United Parcel Service was founded in 1907 as a small company delivering messages in the city of Seattle, Washington. It has grown into a $37 billion corporation. Over 98 years, it has transformed itself into a prepackaged delivery company, an international air transportation company, and in the late 90’s, into a logistics company. In 1992 UPS went public. By 2005, it was the world’s largest packaged-delivery company, and the leading international provider of specialized transportation in logistics services. By 2005, UPS Airlines was one of the 10 largest in the United States. UPS acquired Mailboxes etc., thereby adding over 3,500 retail locations in the Unites States. In 2005, UPS had a workforce of 384,000 employees, exceeded only by Walmart and McDonalds. (See Exhibit 1)
In the early 1990’s, UPS’s position was threatened by increasing competition from both private companies, like Federal Express, and large government supported agencies such as Deutche Post. Senior management become concerned that UPS’s execution mentality was hindering management’s ability to foresee changes in their business environment in the future. To address these concerns, senior management decided to establish a Strategic Advisory Group and a Corporate Strategy Group to develop strategic processes for planning for the future. Management viewed the challenge at UPS as being able to come up with creative ideas about what to do in the future. Senior management’s major issue or concern was developing a process that would get the company management to think about how UPS should position themselves for future developments and competition in the marketplace, regionally and globally. In response to these concerns, the Corporate Strategy Group and senior management decided to design its own strategic process activities which included (1) scenario planning (2) strategic planning, and (3) support for strategic decision making and strategy implementations. This case was written to discuss and evaluate the effectiveness of the planning scenarios, strategic planning and its implementation at UPS during the late 1990s and through 2005, and assist management in determining whether these efforts were a worthwhile exercise and investment for UPS.(See Exhibit 3)
What are the strengths and weaknesses of scenario planning?
The strengths of scenario planning can be identified as follows:
It forces a company to focus on key issues impacting the company’s future.
It forces a company to develop possible future business environment scenarios to prepare the company for possible opportunities, changes and competition in each scenario.
The participants are forced to outline specific characteristics of each scenario, position the company and its competition in each environment, and identify implications and possible strategies in each scenario.
It helps the company revise its mission statement.
It helps the company and senior management identify key themes and insights.
It creates a platform for management discussions and foundation for strategic planning.
It creates a mindset forcing management to think about the future and possible shifts in the environment and how to respond to them.
It provides a common vocabulary for management.
It helps the company identify possible future forks in the road and to decide which fork in the road to take.
The weaknesses of scenario planning can be identified as follows:
It lacks realism and most operationally minded managers find it too abstract.
The assumptions in the developed scenarios could be incorrect, and a company could focus on the most attractive scenario, even though it is unrealistic and flawed.
Management may find scenarios too difficult to apply in the everyday world.
The impact on a company’s overall organization is unclear and the development of the scenarios are costly and time consuming.
Question 2: What is your evaluation of UPS’s 1997 scenario