H McKee Stewart Jr

Musings on Business, Finance, and Economcs.

Archive for May 2011

Swatting the SWOT.

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I was scanning my Google alerts the other day, and up popped an item on UPS : “United Parcel Service, Inc. (NYSE: UPS) SWOT Analysis” on the site “freeswotanalysis.com”. For those who have experienced the luxury of not being trapped in business school, SWOT stands for “Strengths – Weaknesses – Opportunities – Threats”. It’s a handy way to organize qualitative information about a business. As in so many things in life, you tend to get out of it what you put into it.

And what “Adam” at Free SWOT Analysis put into this post isn’t much. Two items immediately jump out: a) the poor quality of the writing, and the utter banality of his comments.

I don’t want to dwell too much on the quality of the writing, since it reads like English is either Adam’s third language, or the post was originally written in some other language, and then run through something like Google Translator. Those are the best case scenarios, and if either are true, my apologies. If somebody gave me an assignment, and then said, “Oh, by the way, I need it in Hindi” I’d be as dead as vaudeville. Unfortunately, there’s a non-trivial probability that he’s a product of American public schools, and was further incarcerated into a business school.  Here are two examples, chosen from the weaknesses section:

“• Strong presence in Union limits the company expansion options.

• It charges high from its customers for the services.”

I don’t know about you, but I’ve had a high school English teacher who was prone to strangling students with a dangling participle for turning out those kind of sentences.

As far as the analysis goes, most of Adam’s points seem to be cribbed off of purely cursory glance at the first couple of pages of UPS’ annual report. The others are items that even Dr. Obvious would be ashamed to own.

Taking an example from the strengths section, it may or may not be a strength that UPS, like Gaul, be into three parts divided, or that they have 400,000 plus employees. Is it really a strength that ‘Supply Chain’ and ‘Freight’ are grouped together? It would seem that ‘Supply Chain’ would be tasked with integrating both the domestic, international, and freight operations, so this grouping (assuming that it’s real, and not a convenience for management reporting), may not be a strength.  Likewise, the 400k plus employees may be 100k too many….

To page Dr. Obvious, one UPS strength that is completely overlooked in this piece is the high barriers to entry, both in terms of technology (tracking, tracing, regulatory compliance, billing, etc.), as well as the high capital costs (trucks, facilities, planes, etc.) that serve to limit competitive entry.

Just to take another whack at the piñata, Here’s the analysis of competitive position in the weakness section:

“• UPS has been facing strong competition from national and international players in the industry include DHL, USPS, Canada Post, FCML WORLDWIDE, LDH Express, Deutsche Post (and its subsidiary DHL), Royal Mail, Japan Post and India Post.”

Let’s see, DHL listed twice. Hmmm. USPS? Really? They’re headed to bailout city. FCML Worldwide? A northern India forwarder? Those guys might have a great business, be really innovative, and be making money like it’s coming off a printing press, but they’ve got a ways to go before being considered on the same stage as UPS. LDH Express is another Indian company; the ‘about’ page on their website shows that they are a single proprietorship founded in 2009, with less than 10 employees. Someday, maybe they’ll be slugging it out with Big Brown for world domination of the freight business, but they’ve got a ways to go before there’s a line in Vegas over that contest.

And who’s missing from this list? As Dr. Obvious would hint, there’s purple involved.

Moral of the story? Relying on “free” may turn out to be a really expensive decision.


Written by hmstewartjr

30 May 2011 at 8:02 PM

Posted in Uncategorized

Food and Diesel Prices

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There’s been a lot of talk lately about increases in food prices. As the USDA notes, Beef prices are up 10.4% year over year in April, Dairy 6.3%, and fresh vegetables 4.5%. Fresh fruit is reasonably stable,  only showing a 1.6% Y/Y increase. Given the weather impacts, diversion of corn from a food stock to a fuel stock, and increasing demand, prices are going to go up.

But there’s an additional factor at work, the price of diesel fuel. Increased energy costs impact more than how much it costs  you to fill your tank to get to work. Given that just about every item sold in your grocery is moved by truck at some point, this 53 week trend line on the price of diesel should be disconcerting:


Of course it’s worse if you’re in California or in New England:


Now, a lot of this trend in fuel prices can also be attributed to increased demand, uncertainty surrounding the political environment in the middle east, the BP disaster and subsequent ‘permitorium‘, the overall long term trend in fuel prices is impacted by environmental concerns – the government seems much more focused on ruling out exploration and drilling than encouraging it.

Update: Here’s the DOE source for the diesel prices.

Written by hmstewartjr

25 May 2011 at 2:13 PM

Posted in Uncategorized

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