UNION PACIFIC CORPORATION Brooke Beasley Audrea Gandy Joshua

UNION PACIFIC CORPORATION Brooke Beasley, Audrea Gandy, Joshua Mc. Cree, & Deona Tucker

Agenda Background & History Internal Analysis External Analysis SWOT Analysis Business Level Strategy Corporate Strategy Effectiveness Problems

BACKGROUND & HISTORY

Union Pacific History 1862: President Abraham Lincoln signs the Pacific Railroad Act 1865: Broke ground for Transcontinental Railroad 1869: Golden Spike driven connecting railroads 1969: Union Pacific incorporated 1996: Southern Pacific and Union Pacific merge 2012: 150 th anniversary of Union Pacific 2012: John J. Koraleski named President and Chief Executive Officer

Current Summary Established in 1862 Headquarters located in Omaha, Nebraska Employees 45, 928 Operates 31, 868 miles of track Maintains 8, 391 locomotives Provides rail service to 23 states in the Midwest

Current Summary Graphs q New techniques & technologies have increased volume, revenue, and profit 2009 2010 2011 2012 2013 Company Revenue Trend Industry Revenue Trend Figure 1. 1 UP vs Industry Revenue Trend Source: Morning. Star q Figure 1. 2 UP Stock Price Source: Morning. Star Average growth rate of 8. 9% over the last 14 quarters

INTERNAL ANALYSIS

Mission Statement The Men and Women of Union Pacific are dedicated to serve. Union Pacific works for the good of our customers, our shareholders, and one another. Our commitment defines us and drives the economic strength of our company and our country.

Values & Ethics Union Pacific’s value are: 1. Focus on Performance: Our concentration and determination will drive our safety, customer satisfaction, and quality results. 2. Ensure High Ethical Standards: Our reputation will always be source pride for our employees and a bond with our customers, shareholders, and community partners. 3. Work as a Team: We are all part of the same team, and working together to reach our common goals is one of our strengths. Communication and respect are the foundation of great teamwork.

Social Responsibility Fortune Magazine’s “World’s Most Admired Companies” Environmental Developing clean locomotives Reducing greenhouse emissions Philanthropic $7 million in 2013 Community-Based Grant Program Human Rights Safety Unfair practices

Financial Performance Ultimate goal is to increase shareholder’s value Drivers include profitability and profit growth 2009 2010 2011 Company ROIC Trend 2012 2013 Industry ROIC Trend Figure 2. 1 ROIC Trend Analysis Source: Morning. Star 2009 2010 2011 Company WACC Trend 2012 2013 Company ROIC Trend Figure 2. 2 ROIC vs. WACC Trend Analysis Source: Morning. Star ROIC > WACC = creating value ROIC < WACC = destroying value

Economic Moat Analysis Figure 2. 3 Economic Moat Process Source: (Hill, Jones, & Schilling, 2015)

Building Blocks Analysis Innovation Alternative fuels (R&D) Reducing greenhouse emissions (R&D) Types of transportation services On-time (Production) Damage free delivery (Production) Quality as Excellence Quality as Reliability (Production) Customer Responsiveness Specialized marketing & sales teams (Marketing & Sales) Track Network (Production) Safety (Production) Customer service call centers (Customer Service)

Strengths & Weaknesses Strengths High Switching Costs Low Cost Production Brand Reputation Innovation Efficiency Quality as Reliability Quality as Excellence Customer Responsiveness Weaknesses Mission Statement Human Rights Safety

Competitive Advantage Broad Differentiator Innovation Quality as Excellence Efficiency Quality as Reliability Customer 2009 2010 2011 Company ROIC Trend 2012 Industry ROIC Trend Figure 2. 4 ROIC Trend Analysis Source: Morning. Star 2013

EXTERNAL ANALYSIS

Macroeconomic Forces Macroeconomic Automobile Natural gas Coal and crude oil sales Weather and climate changes Global Population growth Overall health of the global economy Technological Increase fuel efficiency and safety standards

Macroeconomic Forces Cont. Demographic Shortage of skilled workers Political & Legal Regulatory agency Social Environmental Safety awareness issues Veteran employment

Opportunities & Threats Opportunities Threats Growing automobile industry Growing natural gas demand Population growth Environmental awareness Weather & climate changes Veteran employment Declining global economy Retiring Baby Boomers Safety concerns Regulations Decline of coal & crude oil demand

Life-Cycle Analysis Embryon ic Growth Shakeou t Mature Decline • 1830 s- First Steam Locomotive • 1840 s-1870 s- Major Boom, Civil War, & Reconstruction • Today- Forecasted to grow at an annual rate of 5. 2% from 2009 to 2019 • 1870 s- Consolidation Began • 1900 s • Late 1940 s- Post WWII • 1980 s- 2000 s- Consolidation Continues

Industry Attractiveness An unattractive industry for investors because they are not gaining any value from their investments 2009 2010 2011 Company ROIC Trend 2012 2009 2013 2011 Company WACC Trend Industry ROIC Trend 2012 2013 Company ROIC Trend Figure 3. 2 ROIC vs. WACC Trend Analysis Source: Morning. Star Figure 3. 1 ROIC Trend Analysis Source: Morning. Star 2010

SWOT ANALYSIS

SWOT Analysis Strengths Weaknesses • Executive Incentives • Innovation • Efficiency • Safety • Mission Statement • Declining Commodity Segments Opportunities Threats • Growing Auto Industry • Global Population Growth • Veteran Employment • Weather & Climate Changes • Industry Attractiveness • Declining Global Economy

BUSINESS LEVEL STRATEGY

Business Level Strategy Cost Leader Differentiator Broad Differentiator Capabilities, resources, & distinctive competencies Building blocks support Union Pacific’s strengths Figure 5. 1 Value Chain Frontier Source: Hill, Jones, & Schilling, 2015

CORPORATE LEVEL STRATEGY

Union Pacific Strategies Single Industry Transnational Mexico

STRATEGY EFFECTIVENESS

Strategy Effectiveness 2009 2010 2011 2012 2013 2009 2010 2011 2012 Company ROIC Trend Company WACC Trend Industry ROIC Trend Company ROIC Trend Figure 7. 1 ROIC Trend Analysis Source: Morning. Star 2013 Figure 7. 2 ROIC vs. WACC Trend Analysis Source: Morning. Star 2009 2010 2011 2012 2013 Company Revenue Trend Industry Operating Expense Trend Industry Revenue Trend Company Operating Expense Trend Figure 7. 3 Revenue Trend Analysis Source: Morning. Star Figure 7. 4 Operating Expenses Trend Analysis Source: Morning. Star

UNION PACIFIC PROBLEMS

Problems Mission Statement Human Rights Public Safety Coal Segment Agriculture Segment

Questions?