Union PACIFIC CORPORATION

1. Union PACIFIC CORPORATION Brooke Beasley, Audrea Gandy, Joshua McCree, & Deona Tucker

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

3. Background & History

4. 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: 150th anniversary of Union Pacific • 2012: John J. Koraleski named President and Chief Executive Officer

5. 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

6. Figure 1.2 UP Stock Price Source: MorningStar Current Summary Graphs • New techniques & technologies have increased volume, revenue, and profit Figure 1.1 UP vs Industry Revenue Trend Source: MorningStar • Average growth rate of 8.9% over the last 14 quarters

7. Internal Analysis

8. 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.

9. Values & Ethics • Union Pacific’s value are: • Focus on Performance: Our concentration and determination will drive our safety, customer satisfaction, and quality results. • Ensure High Ethical Standards: Our reputation will always be source pride for our employees and a bond with our customers, shareholders, and community partners. • 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.

10. 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

11. Financial Performance • ROIC > WACC = creating value • ROIC < WACC = destroying value • Ultimate goal is to increase shareholder’s value • Drivers include profitability and profit growth Figure 2.1 ROIC Trend Analysis Source: MorningStar Figure 2.2 ROIC vs. WACC Trend Analysis Source: MorningStar

12. Figure 2.3 Economic Moat Process Source: (Hill, Jones, & Schilling, 2015) Economic Moat Analysis

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

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

15. Competitive Advantage • Broad Differentiator • Innovation • Quality as Excellence • Efficiency • Quality as Reliability • Customer Responsiveness Figure 2.4 ROIC Trend Analysis Source: MorningStar

16. external Analysis

17. 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

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

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

20. Life-Cycle Analysis

21. Industry Attractiveness • An unattractive industry for investors because they are not gaining any value from their investments Figure 3.1 ROIC Trend Analysis Source: MorningStar Figure 3.2 ROIC vs. WACC Trend Analysis Source: MorningStar

22. SWOT analysis

23. SWOT Analysis

24. Business Level Strategy

25. 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

26. Corporate Level Strategy

27. Union Pacific Strategies • Single Industry • Transnational • Mexico

28. Strategy effectiveness

29. Strategy Effectiveness Figure 7.3 Revenue Trend Analysis Source: MorningStar Figure 7.4 Operating Expenses Trend Analysis Source: MorningStar Figure 7.1 ROIC Trend Analysis Source: MorningStar Figure 7.2 ROIC vs. WACC Trend Analysis Source: MorningStar

30. Union Pacific Problems

31. Problems • Mission Statement • Human Rights • Public Safety • Coal Segment • Agriculture Segment

32. Questions?