Airborne Express
1. How and why has the express mail industry structure evolved in recent years? How have the changes affected small competitors?
In 1990’s the express mailing was an emerging industry with total revenue of $16-17 billion and average growth rate of 15-20%. The structure of the express mail industry can be analyzed using Porter’s five forces method.
Threat of new entrants: Threat of entry was low, as the company, entering the market needed large investments. For instance, the cost of constructing the UPS hub was $860 million. Another serious obstacle was gaining government approval for operating an air fleet.
Buyers’ bargaining power: Bargaining power was high, as buyers faced low to zero switching costs for changing the service …show more content…
Three giants, FedEx, UPS and Airborne, controlled more than 85% of the express mail market. Services offered were similar, and switching costs were very low. Thus, they had to compete intensively to gain and retain customers.
Threat of Substitutes: The level of the threat of substitutes was medium. Customers could use email for sending documents instantly and using email was free. On the other hand, Delivering medical samples or electronic components using regular mail took longer than via express mail. Thus, if the delivery were urgent, regular mail service would be useless.
Bargaining power of suppliers: Suppliers had a relatively high bargaining power. Switching costs were high. If a company decided to change its hub airport, it had to spend a large amount of money. Airports did not depend heavily on the express mail industry, as it was not their main source of income.
The advancement of information technology (IT) had a considerable influence on the market. FedEx used its COSMOS system for controlling logistics and people, as well as providing employees with weather information. Deliverymen used portable computers and scanners to enter information about each package into the system. IT advancement added efficiency and reliability to the delivery …show more content…
It gave an opportunity for other companies to gain customers who UPS was losing during the strike. The Postal Service was among those who were planning to do intensive marketing for that purpose. The strike could be a good opportunity for Airborne to gain market share as well. The company could implement a strategy similar to The Postal Service’s one. An intensive marketing strategy that could emphasize on Airborne’s low pricing.
Other than implementing an intensive marketing strategy for profiting from the UPS strike, Airborne needs to invest more in advertising its services to public in general. The company should focus on both advertising via mass media and targeting logistics managers and major shippers.
While 97% of deliveries by Airborne were on time, FedEx and UPS had rates of 99% or higher. As the major reason for using express mail for people and businesses was the need of urgent delivery, 3% rate of parcels being delivered late can be still considered high. Airborne will need to improve reliability of its services by investing more in automatization of its operations.
Airborne’s website lacked several functions compared to the ones of its rivals. Although Airborne’s website could be used for tracking a shipment, customers could not create papers needed for shipping or schedule pickups. The company should consider adding the mentioned services to its
1. How and why has the express mail industry structure evolved in recent years? How have the changes affected small competitors?
In 1990’s the express mailing was an emerging industry with total revenue of $16-17 billion and average growth rate of 15-20%. The structure of the express mail industry can be analyzed using Porter’s five forces method.
Threat of new entrants: Threat of entry was low, as the company, entering the market needed large investments. For instance, the cost of constructing the UPS hub was $860 million. Another serious obstacle was gaining government approval for operating an air fleet.
Buyers’ bargaining power: Bargaining power was high, as buyers faced low to zero switching costs for changing the service …show more content…
Three giants, FedEx, UPS and Airborne, controlled more than 85% of the express mail market. Services offered were similar, and switching costs were very low. Thus, they had to compete intensively to gain and retain customers.
Threat of Substitutes: The level of the threat of substitutes was medium. Customers could use email for sending documents instantly and using email was free. On the other hand, Delivering medical samples or electronic components using regular mail took longer than via express mail. Thus, if the delivery were urgent, regular mail service would be useless.
Bargaining power of suppliers: Suppliers had a relatively high bargaining power. Switching costs were high. If a company decided to change its hub airport, it had to spend a large amount of money. Airports did not depend heavily on the express mail industry, as it was not their main source of income.
The advancement of information technology (IT) had a considerable influence on the market. FedEx used its COSMOS system for controlling logistics and people, as well as providing employees with weather information. Deliverymen used portable computers and scanners to enter information about each package into the system. IT advancement added efficiency and reliability to the delivery …show more content…
It gave an opportunity for other companies to gain customers who UPS was losing during the strike. The Postal Service was among those who were planning to do intensive marketing for that purpose. The strike could be a good opportunity for Airborne to gain market share as well. The company could implement a strategy similar to The Postal Service’s one. An intensive marketing strategy that could emphasize on Airborne’s low pricing.
Other than implementing an intensive marketing strategy for profiting from the UPS strike, Airborne needs to invest more in advertising its services to public in general. The company should focus on both advertising via mass media and targeting logistics managers and major shippers.
While 97% of deliveries by Airborne were on time, FedEx and UPS had rates of 99% or higher. As the major reason for using express mail for people and businesses was the need of urgent delivery, 3% rate of parcels being delivered late can be still considered high. Airborne will need to improve reliability of its services by investing more in automatization of its operations.
Airborne’s website lacked several functions compared to the ones of its rivals. Although Airborne’s website could be used for tracking a shipment, customers could not create papers needed for shipping or schedule pickups. The company should consider adding the mentioned services to its