UPS: United Parcel Service

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UPS United Parcel Service
What can Brown do for you?
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Capital Goods

• Total Capital Expenditures
• Capital Expenditures for the quarter ending
  December 05 totaled 2,187,000
• Investment expenditures for the quarter ending
  December 05 totaled 2,847,000
• Other cash flows from Investing Activities for
  the quarter ending December 05 totaled 1,635,000

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Capital Goods

• Actual Capital Investments
• Automobiles and vans
• Light and heavy duty trucks
• Warehouse Vehicles
• Work Vehicles
• Plants and Equipment

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Resource Ownership

• US Economy
• Since UPS is a United States based company, it
  operates in a system know as capitalism
• Capitalism is a type of economic system in which
  most resources are owned privately

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Resource Ownership

• UPS Ownership
• Even though UPS is a private company, the stocks
  are still traded publicly in the stock market
• Publicly traded companies allow individuals and
  corporations to purchase a percentage of a
  company in the hopes that the company will make a
  profit

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Corporate Stock Holders
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Market Competition

• Since, in theory, perfect competition does not
  exist, UPS operates in an imperfectly competitive
  market
• This is a market in which individual buyers or
  sellers can influence the price of a product
• Since there are few competitors, companies engage
  in price leadership
• Usually, other firms will follow the price
  decrease but choose not to follow a price increase

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Market Competition

• The shipping industry has many barriers to entry
  so there are very few large competitors for UPS
• Main competition for UPS is the United States
  Postal Service, Fed Ex, and DHL
• UPS is the largest package shipping company in
  the United States except for the USPS which also
  incorporates letters

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Market Competition

• UPS totals 42.581 billion in revenue each year
• Fed Ex totals 32.294 billion in revenue each
  year
• DHL totals 33.52 billion in revenue each year
• The USPS generates 69 billion in revenue each
  year but some economists and critics assert that
  the USPS is an unfair monopoly set up by the
  government

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Oligopoly

• Few number of firms
• UPS, FedEx, DHL, USPS
• Output of Different Firms
• Identical (shipping/delivery)
• View of Pricing
• Price setter
• Barriers to Entry or Exit
• Large monetary barrier to entry
• Strategicly interdependent

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Human Capital

• General Human Capital
• Makes you productive at many firms
• Specific Human Capital
• Of value at specific firm
• Many different jobs within UPS
• Each job has its own general and specific human
  capital

• Jobs at UPS
• Administrative
• Air operations
• Business management
• Engineering
• Finance and accounting
• Human resources
• Package delivery driver
• Package handler
• Public affairs
• Sales and marketing
• Security
• Warehouse management

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Human Capital

• Accounting
• General human capital
• Laws (ex. FASB)
• Accounts Receivable
• Accounts Payable
• Specific human capital
• UPS account receivables
• UPS account payables

• Package Delivery Driver
• General human capital
• Geography and directions
• Truck driving license
• Specific human capital
• UPS delivering area
• UPS trucks

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Ceteris Paribus Factors for Supply

• Input prices
• Prices of alternative goods
• Technology
• Number of suppliers in the market
• Expectations of sellers

Price
S3
So
S1
Quantity
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United Parcel Service

• Plans to spend about 42 million to upgrade
  technical package tracking and sorting
  capabilities at its 41 locations in Pennsylvania
• Leading-edge technology gives UPS the ability to
  completely tie the whole network together with
  the 15 million packages they handle daily in the
  United States
• Will help in package flow and with new delivery
  acquisition devices for their delivery drivers

Increase in Supply
S0
S1
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Substitution Effect

• Definition
• Change in price of a good moves quantity demanded
  in the opposite direction to the price change
• When price decreases, increase quantity demanded
• When price increases, decrease quantity demanded

• Substitutes
• FedEx
• United States Postal Service
• DHL

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Business Firms

• Business firm an organization, owned and
  operated by private individuals, that specializes
  in production
• 3 Types of Business Firms
• Sole proprietorship
• Partnership
• Corporation

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United Parcel Service

• UPS is a corporation
• 1999- began publicly trading for the first time
• Is traded on the New York Stock Exchange
• Closed at 77.31 per share on December 1st

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Profit Maximization

• Profits are a reward for innovation and risk
  taking
• Largest delivery service to more than 200
  countries

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Profit Maximization

• Two definitions of Profit
• 1. Accounting Profit Total Revenue Accounting
  Cost
• a. Total Revenue for the period ending December
  31, 2005 was 11,954,000
• b. Accounting Cost for the period ending
  December 31, 2005 was 1,167,000
• c. Accounting profit for the period ending
  December 31, 2005 was 10,787,000 (11,954,000
  - 12,167,000)
•  

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Profit Maximization

• Economic Profit Total revenue all cost of
  production
• Total revenue (explicit cost implicit
  costs)
• Implicit costs include Rent foregone, Salary
  foregone, Investment income foregone, and other
  things their money can have been used
• In 1907, Jim Casey borrowed 100 dollars from a
  friend and founded the American Messenger Company

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Profit Maximization

• With the initial investment of 100 and an
  interest rate of 10 the Future Value of the
  investment would have been 1,252,782.94 dollars.

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Discrimination and Wages

• 2005 cases against UPS for discrimination
• A Rastafarian man was told to shave his beard or
  only apply for an inside, lower paying job
• Six African American and Hispanic employees sue
  for discrimination. The case charges that the
  minority workers were reprimanded without reason
  or for inconsequential infractions while white
  employees who commit more serious violations were
  not disciplined.

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Discrimination and Wages

• With over 400,000 employees worldwide and
  approximately 350,000 in the US alone, equal
  treatment and opportunity for employees becomes a
  problem.
• With these cases arising against UPS the amount
  paid gets high with just one lawsuit costing the
  multiple millions of dollars

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Discrimination and Wages

• The Descrimination at UPS would raise wages by
  shifting the Labor supply curve to the left.
• This would also have an effect on other companies
  who dont discriminate. Their wages would lower
  do to the shift in the Labor supply curve do to
  workers leaving from UPS.

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Employer Discrimination and Wage Rates
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