UNION PACIFIC

INTRODUCTION

In any industry a company must have a Sustained Competitive Advantage (SCA), something that differentiates them from their competition. When determining what a companies SCA is, we need to consider what it is that they do that is rare, valuable, non-substitutable and costly to imitate. In evaluating Union Pacific (UP) we were able to establish that their SCA was in their operations. Since there are limited competitors railroad operations are considered rare and without a doubt one of the most if not the most valuable part of running a successful railroad. In this industry there is no substitute for having an efficient and profitable operations and the reason there is limited competition is because it is very costly to imitate. When you put it all together having well running operation in place allows you to be successful; it allows you to make timely deliveries, increase volume, lower terminal time, repairs and most importantly make a profit.

HISTORY

UP was founded in 1862 and in that same year President Abraham Lincoln signed the Pacific Railroad Act, which chose UP as one of two companies to construct the first transcontinental railroad. UP was to build westward up the Platte River Valley from Omaha, Nebraska and the Central Pacific (CP) Railroad of California was to build eastward from Sacramento, the two met in Promontory Summit, Utah and upon completion in 1869 commemorated the event by driving a silver and gold spike.

1893 UP like many other railroads ran into financial problems and after being unable to meet its expenses was broken up and sold in 1897. On November 1, 1897 E.H. Harriman and a group of investors purchased the line from Omaha to Ogden for $110 million which would later become the Union Pacific we see today.

HEROS

In UP’s history there have been a few people responsible for there growth and success, I guess you could call them companies heroes. The earliest of these heroes Greenville Dodge, Dodge was hired as chief engineer by Thomas C. Durant the Vice President and General Manager of Union Pacific in the 1860’s. Dodge was charged with building and rebuilding railroads during and after the Civil War. Brothers Dan and Jack Casement were in charge of managing the track laying crew which worked under some of the most severe circumstances. Another set of brothers Oakes and Oliver Ames business owners form Boston invested a million dollars of their money and pledged their credit almost to the limit to complete the UP project. Theodore Judah, with just a notebook and a horse mapped out a route through the Sierra Nevada Mountains.
Charles Crocker, Collis Huntington, Mark Hopkins and Leland Stanford “the big four” financed CP project. Jay Gould assumed presidency of UP during the panic of 1873 and was responsible for many consolidations including the merger with Kansas Pacific.

The most notable company hero however would have to be E.H. Harriman. After Harriman and his investors purchased the line from Omaha to Ogden, he spent the next ten years reorganizing the company and reacquiring portions of the pre liquidated Union Pacific lines. Harriman spent millions of dollars on “modern locomotives, freight and passenger cars; eliminating curves; replacing wooden bridges with steel or masonry; constructing cutoffs; reducing mileage; improving water supply; enlarging operations yards; installing heavier rail and double tracking by the hundreds of miles.” He returned the railroad to prosperity.

COMPANY OVERVIEW

Today UP employs over 51,000 people owns route miles over 32,000; over 8,000 locomotives; and 106,000 Freight Cars, with an annual payroll exceeding $4.4 billion and purchases made in the area of $5 billion. UP has 5 operation facilities: Bailey Yard in North Platte, Nebraska, which is the world’s largest rail yard; Hinkle Locomotive Service and Repair Facility in Hinkle, Oregon; J.R. Davis Yard in Roseville, California; Jenks Shop in North Little Rock, Arkansas; and Global III International Facility – Rochelle, Illinois.

UP links 23 states in the western 2/3 of the country and is the only railroad serving all six major gateways to Mexico and connects to Canada’s rail system making it North America’s premier rail franchise.

An interesting observation is UP’s stance on diversity. “Treating everyone fairly, valuing differences and maintaining a supportive environment is Union Pacific’s commitment to diversity. At UP we: Act with respect for all employees; address employees’ devolvement needs and build on their strengths through coaching and training; promote and reward managers for their leadership skills as well their technical knowledge and abilities.” What that statement says is we have a family type culture. We treat each other fairly and with respect and work hard to generate a nurturing supportive atmosphere; through which we create a sense of pride, integrity and growth from within un-parallel in the industry.

It is not realistic to imagine starting UP today, many circumstance have changed most importantly financing. To try and recreate UP at today’s prices would be an expensive endeavor few would be willing to take. UP today however is one of the largest and fastest growing transportation companies in the United Sates. It is also the oldest railroad company in continuous operation under its original name west of the Mississippi River.

REFERENCES

Union Pacific website http://wwwuprr.com
Union Pacific 2006 Annual Report http://UP.com/investors/annual/index.shtml
Yahoo Finance Union Pacific http://finance.yahoo.com/q?3=UNP