Steadfast Growth

UPS has always cranked out healthy cash flows. Annual revenues in 1962, the year Casey retired, were $141 million. Salesreached $548.5 million in 1969 (the first year UPS publicly reported its financials), touched $31 billion in 2002 and $47.50 billion last year.

UPS has been persistently global in its ambition and strategy. It started operations in Canada in 1975 and then in West Germany the following year. This heralded a global expansion that today covers more than 200 countries and territories. Mike Eskew, Chairman and CEO, under whose leadership the company has introduced new lines of business, including multimodal transport services, international trade management, supply chain consultancy and financial services, says of UPS’ international profile: “Globalization is a challenge, but it’s also a great opportunity for us. We’re challenged every day to do things we haven’t done in the past: fly to new places, deal with different governments and open trade between countries.

Over the last several years, we’ve taken our customers to places they couldn’t have gone without us. Our customers are able to find new customers in places they’ve never done business.”

It is estimated that today UPS’ international service can reach over four billion people. While the business model of the company has evolved in tandem with the changing socio economic environment, the essence of UPS has always remained the same.

However, like all pioneering enterprises, UPS has reacted swiftly to the demands of customers worldwide. The advent of globalization, and the company’s identification of the opportunity to build efficiency into its clients’ logistics systems, catalyzed UPS’ entrance into the supply chain market. In 1995, the UPS Logistics Group was established with the strategic goal of integrating supply chain services for its customers. In a short period, it became a leader in global supply chain management. Today UPS Supply Chain Solutions provides logistics, global freight, financial and mail services to augment customers’ business performance.

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Flying High

In 1929, Casey had taken the revolutionary step of utilizing the extra room in the holds of passenger airlines for hisclients’ packages, thereby providing pioneering air delivery through private airlines. Though the service was discontinued soon after (partly because of lack of volumes caused by the Great Depression), the company resumed air operations in 1953 and
by 1978 its service, UPS Blue Label Air, was available in every American state including Alaska and Hawaii.

Air operation is an area in which the company had been concentrating much of its effort over the last two decades. In 1985,

UPS introduced its Next Day Air Service and went from serving 48 U.S. states to linking America to six European nations. To ensure dependability, UPS began to assemble its own cargo fleet. When it finally received authorization from the Federal Aviation Administration to operate its own airline, UPS Airlines was launched. It is now the eighth largest airline in the U.S. with a fleet of 282 aircraft and utilizes the services of 325 chartered aircraft as well. The company has air hubs across the United States, Europe, Asia Pacific, Latin America, the Caribbean and Canada.

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Technological Thrust

Technological innovation has been, quite literally, the bedrock of the company’s success. In 1924, the first conveyor beltsystem for package handling rolled into the industry, a precursor of things to come. The handheld Delivery Information

Acquisition Device, the lifeline of every UPS driver today, is a key technological asset, instantaneously recording and uploading delivery information to the UPS network. UPSnet, a global electronic data communications network, uses more than 500,000 miles of communication lines and a dedicated satellite link to more than 1,300 UPS distribution sites in 46 countries. In 1994, UPS.com went live, giving consumers the added facility of information about packages in transit. Today, an average of 15 million online tracking requests are received daily.

The company’s embrace of technology has been unwavering. In 2004, it developed software that finds delivery routes with as many right hand turns as possible, thereby saving fuel. It is estimated that using this innovative technology UPS’ 88,000 ground vehicles saved 51,000 gallons of fuel in one year, having eliminated 464,000 miles from the drivers’ routes. The company has consistently received accolades and awards from magazines such as Computerworld, Information Week and Network World for its technological innovations.

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Big Brown Machine

In 1916, Charles Soderstrom joined the company, bringing with him automobiles, expertise and, as importantly, the colorbrown. Brown has become synonymous with UPS and is used to this day for the company’s vehicles and uniforms, earning it the nickname “Big Brown Machine.” Company folklore claims that Casey favored the color yellow but Soderstrom insisted on the
Pullman rail road car color, selling it finally to Casey for its ability to hide dirt.

By 1919, the company was ready to journey beyond Seattle’s shores to Oakland, California. The company, now rechristened United Parcel Service, reached a turning point when it acquired a company with an innovative practice common carrier service, a parcel delivery between any two addresses within the city. This was a delivery service that was quite simply smarter than the rest and included features like automatic daily collection calls, automatic return of undeliverables and streamlined documentation.

UPS had segued to the head of the nascent courier industry. By 1930 it had spread its tentacles to the East Coast where it consolidated the deliveries of several large department stores.

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Building a Culture

Though there were several delivery companies operating in Seattle at the time, Casey’s operations were different.Right fromthe start, he set out to build not just a company but a culture, one that was defined by courtesy and efficiency. His slogan, printed on cards posted near public phones, was succinct: Best service and lowest rates. It was certainly not the world’s most memorable advertising line but it was one that worked. Casey believed that since just “anybody could deliver a package”, they would have to introduce their clients to a new benchmark of professionalism and personalized attention. Soon an increasing number of restaurants and department stores began to get rid of their internal merchandise delivery system and rely solely on Casey’s team of messengers outfitted with matching caps and known for being unfailingly polite.

Years later, recounting the early days, Casey said: “Although the company was born in a basement and reared in an alley, early on we made up our minds that we didn’t want to be identified as an ‘alley company’, as most other delivery companies had been. We early adopted the policy of spic and span appearance for the few delivery cars we had. We tried to make a good impression on everybody we dealt with.”

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UPS Delivers The Goods

United Parcel Service – UPS for short – is the world’s largest logistics enterprise. With revenues of $47.5 billion, UPS has employed a canny mix of cuttingedge technology, quick silver management decision making and innovation led delivery systems to create a global powerhouse.

Deft fingers! Deft fingers wrapping thousands of bundles. Neatly tied! Neatly addressed! Stuffed with soft tissue paper! What a treat! Ah, packages!”

He was passionate about packages. And as the above quote (taken from a profile carried in a 1947 issue of the New Yorker) highlights, James E. Casey was not afraid to show it. It was a passion that would transform his company from a Seattle based neighborhood messenger service into the world’s largest package delivery company and a leading global provider of specialized transportation and logistics services.

The United Parcel Service (UPS) is a veritable business leviathan today, a full hundred years since its inception, with revenues in 2006 rising to $47.5 billion. Delivering as many as 15.6 million packages and documents each business day, UPS has a presence in 200 countries and territories and 427,700 employees worldwide. Though the company’s premier area of business is time definite delivery of packages and documents, it also offers supply chain solutions such as freight forwarding, customs brokerage, fulfillment, returns, financial transactions, repairs and less than truckload transportation services.

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Challenges

In an interview, CEO William J. Amelio, revealed Lenovo’s post IBM acquisition strategy: “To get our supply chain outside ofChina to be as effective as it is inside China, to get our transaction business ramped up as quickly as we can in markets

outside of China, especially in the high growth segments for PCs, which are notebooks, very small business and small business customers, to get our desktops as highly competitive outside China as they are inside. You can imagine we have one of the most difficult branding jobs in the world right now as we’re transitioning some brand equity from the IBM brand to the Lenovo brand.”

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New Horizons

In 2003-04, however, Lenovo was faced with a number of problems, ranging from a decrease in PC shipments to a falling stockprice. Again, Lenovo launched a series of measures which included sales via the Internet, better inventory management and a focus on corporate sales. Lenovo also decided to shift its attention from big cities to small and medium towns in China.

Almost immediately, Lenovo recorded a ten percent increase in turnover in the first quarter of 2004.

With a 25 percent share of the Asian market, Lenovo made its big bang move in 2004 when it announced its intention to acquire the PC division of IBM. Suddenly the world sat up and took notice of this still inscrutable

Chinese company that had pushed other global contenders aside to win a prestigious line of IBM hardware products.

April 2003 was a landmark month at Legend. Reflecting a more global personality, ambition and mission, the group changed its name to Lenovo.

Even as the

sale was finalized in 2005, the media went into a frenzy with over 15,000 articles being written on the IBM Lenovo deal.

While some analysts on the New York Stock Exchange h ad not even heard of Lenovo, the deal was approved when the Committee on Foreign Investment in the United States gave its go ahead. On May 3,2005, the $1.27 billion deal was finally struck with Lenovo paying IBM $655 million in cash and over $600 million in Lenovo stock. Lenovo got the coveted ThinkVision, ThinkPad, ThinkVantage, ThinkCentre, Aptiva and NetVista brands. IBM acquired a 19.9 percent stake in Lenovo and got out of the punishing hardware business where margins in the U.S. were small and falling.

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New Legend

April 2003 was a landmark month at Legend. Reflecting a more global personality, ambition and mission, the group changed itsname to Lenovo. Commenting on the change, Legend’s Yang Yuanqing, the then President and CEO, said: “In view of our rapid expansion in recent years, we need a logo that fully captures Legend’s business diversification and its goal of internationalization.

Legend’s success was largely due to its market assessing skills and innovative product features. But it also owed government policies a great debt: restrictions on foreign companies, access todistribution, quotas, tariffs, value added taxes on imports all these kept foreign competitors at bay.

On our way to become

internationalized, we need to have an English brand name that can be used unrestrictedly in markets worldwide in the first place. However, the original English brand name, ‘Legend’, has already been registered by others in many countries, making it essential to design and register a new English brand name. Although our business focus is still on China, expanding into the
international market is an inevitable path with the globalization of the IT industry and for Legend’s self development.”

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Strength to Strength

Studying its competitors’ strategies, Legend realized the acute advantage it had: an indepth understanding of the localmarket. It used this knowledge to unleash customized products, catering to local needs even while its foreign competitors were trying hard to find their feet.

In 1998, Legend enlarged its portfolio by tying up with IBM which made IBM’s software mandatory in all Legend machines sold in China. Legend also modified IBM’s software products to match local needs, adding more value to customer services. Legend’s growing reputation was underscored in 1998 when the company’s one millionth computer left its production line. By the fourth quarter of 1998, Legend PCs had gained a market share of 17.9 percent, making it by far China’s leading domestic PC maker.

Buoyed by the success, Yang Yuanqing, the then CEO and President of the Legend Group, said: “Legend’s competitive advantage lies in our marketing capabilities, our brand, our strong channel management, and our ability’ to tailor solutions to meet customer tastes and needs.”

The Chinese government at the time provided domestic enterprises with R&D resources developed by state research institutes.

To further extend its mass customer base in China, Legend conceptualized a new marketing channel: the 1 +1 Home PC Speciality

Shop. These shops demonstrated new products and services to potential customers. The timing could not have been better.

China’s population was getting increasingly enraptured by the Internet. Figures for 1999 and 2000 showed a 100 percent annual increase in Internet users. The techno social climate was changing so dramatically that people did not mind investing a year’s salary in a PC which delivered the complete Internet experience.

Always with a sensitive finger on the consumer pulse, Legend introduced the ‘Legend Conet PC in Beijing on November 24, 1999.Luring the consumer with its ‘one touch to the net’ function, the PC offered a year long China Telecom PRC roaming Internet

account which came free. Legend also developed a portal called www.fm365.com — Legend’s Frequency Modulation (FM). To spread interest in the Internet all over China, the ‘Legend’s Internet Journey in the PRC was undertaken in 300 cities.

Legend reaped the fruits of its labor and foresight. By the fourth quarter of 1999, the company had captured an astonishing

27.3 percent market share in China’s PC market. It was ranked first in the Asia Pacific region (excluding Japan) with a market share of 9.1 percent, beating IBM and Compaq. Legend relentlessly kept increasing its market portfolio with a range of networking products, and updated its models on a regular basis. By November 2000, sales volumes for Legend’s Internet PCs had reached 700,000 units, 40 percent more than the planned target.

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