A PEST analysis is a business tool used to analyze a company’s macro environment. It entails examining the political, economic, social and technological environments in the industry the company is operating in. The United Parcel Service (UPS) is a logistics company and the world’s largest parcel delivery as well as a worldwide market leader in specialized transportation and logistics services provision. The company serves more than eight million clients on a daily basis and has subsidiaries in over two hundred countries worldwide. A PEST analysis of the company shows that the political environment is affected by labor unions and deregulation laws. The economic environment is influenced by foreign exchange rates, new entrants in the market and the rising costs of upgrades to keep up with market dynamics. The social factors include the demographics of the human force and the diverse labor laws in different countries. The technological environment is defined by control systems required to run operations and the advancing technology.
The UPS Company provides a variety of services including freight forwarding, direct delivery of goods, logistics consultancy services and financial services ( Puranam & Vanneste, 2016) . They also offer mailing services, run a UPS store, less than truck load and truck load services as well as supply chain solutions. Like any other business enterprise, the running of the UPS Company is affected by the political environment in the various countries they operate in. Since the logistics industry is heavily reliant on transport infrastructure, government investments in these areas affect their operations in a major way (Kotler & Keller, 2012) . The better the infrastructural investments in their areas of operation, the more smoothly the logistics run. Political stability is also the main factor that influences the operations of all businesses. In the highly politically unstable areas, the company cannot operate since political instability is occasioned by the closure of businesses and stoppage of business activities (Stokes, 2016) . A stable political environment is therefore favorable for the operations of the UPS business activities.
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The political environment also dictates the legislations that a company operates under (Kotler & Keller, 2012) . There are established laws on labor, contract laws, anti diversion requirements, carbon footprints, standardization of goods and services which vary from one country to the next. As an international business, the UPS Company is required to adhere to the home country, and host country laws since each political power in the various countries can dictate the way they do business (Stokes, 2016) . The political environment also dictates the taxation laws which affect the profit margins of the business because of the higher the taxes, the lower the profits. A major political issue affecting the logistics industry is the deregulation which has eased the ease of entry into the transport industry and reduced prices and increased competition for shippers. Trade restrictions and tariffs are also political factors that affect the logistics industry ( Puranam & Vanneste, 2016) . They lead to variations in the pricing of international foreign firms and make local companies more competitive against the foreign firms.
Economic factors also affect the United Parcel Service Company and the logistics and transport industry in general (Stokes, 2016) . The economic growth rates affect the way the transport companies operate. The higher the economic growth, the more developed the country which translates to better infrastructures and more ease of business operations. The foreign exchange rates also affect the business operations in the various countries they operate from. In the case of the American based UPS the stronger, the American dollar against foreign currencies the higher their profits since it affects the prices of exported goods ( Puranam & Vanneste, 2016) . The inflation rates also affect the transport and logistics industry with high inflation rates being unfavorable for business. Interest rates also affect the company’s position in the market since it affects the cost of capital and accessibility to investment capital which limits or enhances their expansion rate (Stokes, 2016) . The forces of demand and supply for particular goods and services in a certain market also affect the company’s activities. The higher the demand and supply for the logistics and transport services the more the profits for the company. The cost of the factors of production also affects how businesses operate (Kotler & Keller, 2012) . In the logistics and transport industry, the cost of human capital and renting the business facilities in different countries affect the profitability and running of the businesses.
Social factors also affect a company’s readiness to compete and include the demographic composition of customers ( Puranam & Vanneste, 2016) . The UPS customer base is mainly comprised of the educated people who are conversant with the modern parcel delivery services and business people in need of consultancy services. Environmental conservation is also a social factor affecting the transport industry in general since the public and governments are keen on reducing the carbon foot print produced by the transport sector. The transport sector is considered to be among the top carbon emitters into the environment, and the reduction of the carbon foot print is one of the issues affecting the industry with laws limiting carbon emissions being enforced (Stokes, 2016) . Population growth rate also affects the business since the higher the rate the more the demand for logistics and transport services which in turn leads to higher profit margins for the companies in the industry (Kotler & Keller, 2012) . Cultural aspects also affect the investment of multinational corporations in various countries. In the case of hostile communities, companies may face local resistance when trying to set up in foreign countries. If the society's opinion is not favorable to the foreign direct investment, it negatively affects the industry and could also affect the supply of local labor force (Stokes, 2016) . A positive reception by the society is therefore advantageous to the United Parcel Service Company and the transport and logistics industry as a whole.
Technology also affects the ability of a company to compete with other companies in the same industry (Kotler & Keller, 2012) . The technological factors include the research and development activities of the company which gives it a sharp competitive edge. Since logistics and transport services are automated a company’s ability to develop a common data base system to coordinate the activities of the various subsidiaries is critical to its success. Also, the ability of a company to keep abreast with technological advancements also affects their performance (Stokes, 2016) . With technological advancement comes faster and cheaper services to customers and for a company to compete with the other players in the industry their ability to adapt to new technologies is critical. Logistic firms also require real time data management and tools like trackers, dish antennae and other software to ensure the safety of the goods they transport ( Puranam & Vanneste, 2016) . UPS has put in place technological devices to ensure that they provide fast, effective and efficient services to their clients.
From the PEST analysis, there are key political, economic, social and technological factors that can boost the success and performance of the United Parcel Services Company ( Puranam & Vanneste, 2016) . Political factors like government policies including taxes, tariffs, interest rates and trade control. For UPS to operate competitively with local logistic and transport companies in the areas they venture in, the political conditions need to be favorable. For instance, if a government implements tax holidays, reliefs and tariffs as a way of protecting their infant industries, this would negatively affect the competitiveness level of international companies like UPS (Stokes, 2016) . They would have to invest more, and the barriers to entry into the market would be lowered leading to more competition for the limited market. Deregulation and lesser government control in the transport and logistics sector would positively impact the company since the red tapes and bureaucracies would be eliminated (Kotler & Keller, 2012) . Therefore, for the success of the United Parcel Services company abroad the political factors like taxation, labor relations, and other government policies have to be favorable for them to compete with local industries.
On the economic quadrant, the state of the economy plays a significant part in determining the competitiveness in any industry (Kotler & Keller, 2012) . The inflation rate in a certain business environment affects the businesses operating in the country negatively. For the United Parcel Service which has diverse investments all over the world, a business in an inflation hit country would reduce their competitiveness and hinder their success ( Puranam & Vanneste, 2016) . Inflation leads to a rise in expenses in rent, utilities, salaries and remunerations and increases the cost of inputs. The inflation, in turn, forces businesses to hike prices which reduce the buyer's purchasing power therefore negatively affecting the business and the profit margins (Stokes, 2016) . For the UPS Company to succeed it would, therefore, have to avoid investing in countries experiencing economic downturns leading to high rates of inflation.
The social quadrant addresses the factors associated with the running of the business and the effect it has on the community it operates in ( Puranam & Vanneste, 2016) . One of the key determinants in this section is the consumer demographics which include their age, sex, education status and their religious beliefs. The demographic characteristics affect the customers’ buying habits and negative buying habits lead to reduced sales and profits while positive habits increase the sales and profit margins of the company (Kotler & Keller, 2012) . The UPS brand targets businesses and individual customers through their various diversified branches. To use some of their products like the UPS mail innovations some degree of competence in information technology is required. They also mostly deal with the millennials and slightly older age group since their mailing and freight movement services are digitized as opposed to the traditional mailing services. For the business to succeed, the demographic characteristics, therefore, have to be favorable to their business (Stokes, 2016) . The age distribution, income distribution, consumer buying habits and their social status, therefore, affect the success of the business.
The technological quadrant of the PEST analysis deals with the technical know-how and how the technology in a certain industry affects the performance of business ( Puranam & Vanneste, 2016) . The more advanced the technology, the faster and more efficient the customer service is which improves brand equity and increase customer loyalty due to timely and good services and goods delivery (Stokes, 2016) . Some of the technologies used in the transport and logistics industry include the internet of things (IoT), radio frequency identification (RFID), and Automatic identification and data capture (AIDC) technology. To ensure that the company stays ahead of their competitors and maintain their position as market leaders, they have to have updated technological infrastructure (Kotler & Keller, 2012) . Technology ensures that the goods and services are delivered promptly, are of high quality and saves the company money which assists the company to increase their market share and succeed.
The company is ready to compete in the business environment of the market domain (Kotler & Keller, 2012) . From the PEST analysis, there are certain conditions that a company has to meet to compete with other companies in the industry. The United Parcel Service Company possesses some competitive advantages that give them a competitive edge. The company’s strong brand equity as depicted by its position as a worldwide market leader in logistics influences the social factors of the market ( Puranam & Vanneste, 2016) . Strong brand equity leads to brand loyalty, improves the corporate image and identity and also increases their market share. The strong brand name ranks the company among the first choices in freight and logistics providers which make them the first pick for customers. Their strong supply chain management gives them an edge in overcoming the political and economic eventualities which as discussed in the PEST analysis lead to negative consequences on the business (Stokes, 2016) . By operating in over two hundred countries, the company diversifies risks and ensures that in the case of political or economic downturns their well-performing subsidiaries can support the poorly performing ones. Their substantial investment in research and development gives them a technical edge in the market domain since it fosters invention and invention (Kotler & Keller, 2012) . It ensures that the company maintains its competitive advantage and stays ahead of the competition technology wise.
In sum, a PEST analysis involves an examination of political, economic, social and technological factors in the macro environment. The United Parcel Service is a market leader in the transport and logistics industry and has subsidiaries in over 200 countries worldwide. The political factors include legislations and political stability while the economic factors include inflation, demand and supply forces and foreign exchange rates. The social factors include consumer demographics, environmental conservation, and the technological factors include technological advancement and research and development activities. The company is competitive in the market domain due to the high brand equity, market leadership position and strong research and development activities.
References
Kotler, P., & Keller, K. L. (2012). Marketing management . Upper Saddle River, NJ: Pearson/Prentice Hall.
Puranam, P., & Vanneste, B. (2016). Corporate strategy: tools for analysis and decision-making . Cambridge: Cambridge University Press.
Stokes, P. (2016). Organizational management: approaches and solutions . London: Kogan Page.
