Werner Enterprise Case Study
BADM 481
By: Jerry Smith
11/25/2014

Werner Enterprises is a superior long haul trucking and logistics company that was founded in 1956, by Clarence Warner and is headquartered in Omaha, NE. It was started as a company with a single truck and has since grown into the 4th largest trucking company in the United States with 7,300 tractors and 24,000 trailers servicing North America, Asia, Europe, South America, Africa and Europe (http://www.werner.com/content/about/) Werner Enterprises offered their initial public offering in 1986 with only an inventory of 630 trucks. In the 1990s, Werner Enterprises had increasingly moved into specialty trucking, including dedicated fleet services. Innovations such as the company's paperless log system have helped put Werner at the forefront of growth in the trucking industry (http://www.company-histories.com/Werner-Enterprises-Inc-Company-History.html) In mid-1990 they had a little over 100,000 stocks outstanding with a stock price of $3.00 as of November 21, 2014 they had just over 500,000 stocks outstanding with a stock price of $29.08. Werner enterprises has grown to become one of the trucking industry’s leaders by using late model equipment, being a leader and innovator in technology, along with their vast worldwide carriers and providers. Though Werner Enterprises is one of the main leaders in the trucking business they are not without tough competitors. Below is a chart that shows the stock prices of Werner and its two major competitors JB Hunt Transport Services and Swift Transportation Company.
If you look at Werner and its two major competitors through profitability ratios, efficiency ratios, and liquidity ratios you can glean a better insight into Werner and its competitors. Looking at the table below you will be able to see that the gross profit margin of Werner increased from 62.2% to 64.4% in the from 2011 to 2013. It shows that trading efficiency of the company is improved in last three years compared to its competitors. At the same time, the ratio analysis also shows that both operating and net profit margins of Werner declined in the same period, while JB Hunt and Swift Transportation experienced positive growth in these profit margins (James, 2002) Over the last three years the operating profit margin of Werner decreased by almost two percent from 8.7% to 6.9% and net profit margin from 5.1% to 4.3% over that period of time. The table also shows that return on equity of Werner also declined from 14.2% to 11.2% from 2011 to 2013. Though both JB Hunt and Swift Transportation also saw a decrease in return on equity you can plainly see that Werner’s profitability has decreased more in comparison to its competitors.
By looking at the liquidity ratios you can see that Werner is more capable than these two firms to meet its short-term financial obligations timely fashion. Werner increased from 1.72 to 2.08 while JB Hunt and Swift Transportation from 1.17 to 0.95 and 2.11 to 1.91 respectively.
The efficiency ratio shows us how Werner is at utilizing inventory and assets as well as managing cash over a certain period of time. From the ratio analysis, it is determined that inventory turnover of Werner increased from 25.09 to 45.88 in last three years, which indicate better liquidity and excess of goods for shipments. The inventory turnover of both its competitors also increased in this period that is also an indicator of improvement in their logistic business (Ward, 2013). The table also shows that all three companies had an increase in their respective collection periods.

(Source: Google Finance, 2014)
The above chart shows all the competitors and their stock performance over a five year period. We can see that Werner had a slight fluctuation with minimal increase, while Swift and JB Hunt having a significant level of fluctuation over the five year time span. Even though Werner’s increase was not as high as the other two competitors they had the most steady increase without all the major fluctuations.
The tables below provide strengths, weaknesses, opportunities and threats for Werner and its top competitor JB Hunt. Strength: * Consistent stock performance * Increasing liquidity and long-term solvency * Increasing managerial efficiency to utilize organizational resources * Professional and experienced members * Large network of trucks and alliance carriers * Use of green technology | Weaknesses: * Declining profit margin * Lower stock performance in the comparison of competitors * Lack of ability to grab industry opportunities * Higher cost of operations * Dependency on small number of customers | Opportunities: * Growth in market and industry may facilitate growth for the firm * Expansion in Asian countries due to increasing demand of quality logistic services * Technology advancement may also facilitate opportunities for the firm to reduce operation cost and to enhance services | Threats: * Shortage of drivers * Unstable economic conditions * Shortage of fuels and increase in fuel prices * Increasing regulations related to road safety * Increasing competition due to availability of thousands of trucking and non-asset based companies |
(Source: Werner Enterprises, 2013)

Strength: * Sound financial position * Increasing stock performance over the time * High long-term solvency * Highly relevant management experience * Diversified customer base and long-term partnership with customers * Technology initiatives | Weaknesses: * Decline in short-term liquidity * Increasing cost of operations due to increase in fuel prices * Some seasonal business segments and associated costs * Dependency on third party for operations * Increasing insurance and claim expenses | Opportunities: * Technology advancement may also facilitate opportunities for the firm due to its significance in adopting new technology * Increasing demand in Asian countries | Threats: * Excess capacity in trucking industry * Weather conditions and terrorist attacks * Fuel prices and taxes * Environmental laws and regulations |
(Source: JB Hunt Transport Service, 2013)
We will now evaluate Werner Enterprises by using the Porter 5 forces model. With the trucking industry being over a $1 billion industry Werner enterprises needs to careful about the highly intense competition from their competitors. It can influence the market capitalization and share of Werner negatively due to increased competition (Trucking Industry Overview Complete Version, 13 February 2014)
Threat of substitute products: Though it is hard to substitute many items within the trucking industry one item that can be easily substituted is the use of new tires. While Werner uses top of the line equipment and tires their competitors can use retreads instead. Retreads are not as safe as new tires, but are significantly lower in price so Werner should make use of all of their tires wisely.
Bargaining power of buyers: Bargaining power of buyers is high due to the fact that there are many other trucking companies in the industry. There are many that do not provide the same type of excellent service that Werner does, but they charge a great deal less.
Bargaining power of Suppliers: Bargaining power of supplier is weak due to the fact that there are many companies that make tires, fabricate parts, service trucks or sell trucks. With their being so many sellers the suppliers will do what it takes to get Werner to become one of their customers.
Threat of new entrants: Threat of new entrants in the trucking industry is very low due to lots of barriers of entry due to the rules and regulation of federal government in terms of hours of service rules and being a very cash heavy industry. Werner should always be developing new technology by investing into the R&D side of the business this way always creating high entry barriers for potential competitors.
Competitive Rivalry: With there being so many great to mediocre trucking companies in the industry competition is high. Werner needs to be able to relay why they are the best and why people should pay for their business as opposed to finding some other cheaper company.
As you can see the trucking company is a highly investible industry. With the price of gas decreasing and the fact that it is cheaper to buy trucks than it is to buy airplanes. Werner needs to stay ahead of all of its competitors by continuing to offer quality service with highly differentiated products.
Werner is following what is called a differentiation strategy. This is a strategy where a firm aims to develop and market unique products for different customer segments. By using this generic strategy Werner has been able to develop their strategic plan by using late model equipment, paperless logging technology, and productive, professional drivers who are safety conscious and deliver on time (http://www.werner.com/content/about/).
This has made Werner a leading competitor in the industry and also a leader with one of the lowest driver out of service rates. With this industry being so competitive Werner enterprises needs to make sure that they are following their strategic plan and continuing being innovators and leaders in technology. While doing so that will help them to sustain their current position in the industry and may even move them ahead of some of their competitors.

Works Cited:
James, V.H. (2002) Financial Management & Policy (12th ed).
Ward, K. (2013) Financial Aspects of Marketing.
About Werner (n.d). Retrieved from: http://www.werner.com/content/about/
Google Finance. (2014). Retrieved from: http://www.google.com/finance?cid=612752 JB Hunt Transport Service. (2013). Annual Report. Retrieved from: https://ww2.jbhunt.com/INET/webcontent.nsf/0/E06EE8553B70215686257C9A00736386/$File/2013AnnualReport.pdf
Swift Transportation. (2013). Annual Report. Retrieved from: http://investor.swifttrans.com/sites/swifttrans.investorhq.businesswire.com/files/doc_library/file/SwiftTransportation_20140228_10K_20131231.pdf
Werner Enterprises. (2013). Annual Report. Retrieved from: http://investor.werner.com/phoenix.zhtml?c=99642&p=irol-reportsAnnual
Trucking Industry Overview Complete Version (13 February 2014). Retrieved from http://www.irs.gov/Businesses/Trucking-Industry-Overview---Complete-Version