Air Express Industry Case Study

Great Essays
Team Case Study
Rebecca Sweet, Raven Wilson,
Brittany Williams, Selena Cox
Fayetteville State University

Air Express Industry
Bargaining Power of Buyer
The bargaining power of buyer’s states that the capability of buyers lowering the prices that are charged by companies and demanding prices be increased so, they can afford to make new and better quality products. Looking at the bargaining power of suppliers, air freight companies are powerful when it comes to dealing with distributors because they can easily forward integrated.
The two largest buyers between 1978 and 1981 were Emery Air Freight and Airborne Express. They were created to keep the competitive advantage in overnight shipping.
However, around 1980, customers
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Looking at the early years of the Federal Express Company they were the new entrant into the industry but soon became a rival that could not be ignored. Federal Express brought new innovative ways of shipping cargo, no longer was small packages mainly shipped by truck or for extraordinary amounts of money. No longer was shipping small packages at the discretion of the passenger airlines routes and timetables. This cause issues with getting packages from one location to another quickly
Fred Smith had a plan that would get packages to their destination quickly, however because the industry was so regulated it made this change hard for the shipping companies to enter the market. In 1977, the deregulation of the US Air Cargo Industry allowed a plethora of rivals into the market, thus creating the competitive rivalry to gain a larger portion of the market-shares. With the entry of UPS, Airborne Express, and the US Postal system into the small package delivery industry the rivalry began form causing a competitive struggle between companies thus building a strong threat to profitability of the companies. FedEx’s assumptions of creating hub exchanges and dedicated small planes that were carrying small packages was a success and
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The acquisition of Midwest Charter Express by Airborne Express in 1980 started a trend of merger and acquisition. In 1980, volume discounts were given to customers, which increased competition. Acquisition of Airborne Freight by DHL in 2003 gave DHL a presence in the United States but due to consecutive years of losses exited the market in 2009. Currently the US small package industry is a duopoly of FedEx and which gives the industry an oligopoly market structure. Differentiation of service in the air cargo industry is difficult and can only go to an extent of next day deliveries like what FedEx had. This means the more standard services intensify competition. A growing trend to reduce the risks of intense competition has been bundling which includes offering a variety of products like air delivery, ground package and services on logistics. This aims at cost leadership where the bundle of product is offered to the customer at a lower

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