Airborne Express Case Study

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Airborne Express:
Analysis of HBS Case Study

Q1) 1. Threat of New Entry
For the US Express Mail industry, the overall threat of new entry is very low. The following list and explanation captures the difficulty an entrepreneur might face in trying to penetrate the express mail market: * High capital requirements: In order to establish an express mail operation, the start-up capital required is too big for an individual to obtain. For example, Federal Express’ Superhub in Memphis has 2.4 million square feet of floor space and can hold 147 planes. UPS’s new hub will cost approximately $860 million. In addition, a cargo plane sells for $90 million. * Economies of scale: newly established postal service will have tough time
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3. Buyer Power
In the US Express Mail industry, the buyers fit into two segments: businesses and individuals. Express Mail has become the industry standard in some industries such as banking, consulting and financial services since the items inside the package had a high ratio of value to weight. Businesses needed to be able to track the packages and be assured that it arrives on time. That being said, businesses were often high-volume buyers since the shipping managers identified which firm to deal with and concentrate the high-volume of shipments to that firm for a particular project or for the time being. Sales representatives from the firms had to negotiate with stingy shipping managers who sometimes demanded the upwards of 50% or more discounts. The existence of many large volume buyers meant that the buyer power is high. Similarly, individuals also held high buyer power since the Big Three and other second-tier postal services offered largely undifferentiated services.
On the other hand, the heavy discounts granted for businesses means that the express service saves the buyer the money. And the quality of service is important to the buyers since the mail contains valuable information or items. These two factors result in low buyer power.

4. Intensity of Rivalry
The express companies delivered tremendous amount of packages. The big three players, Federal Express, UPS, and Airborne Express, collectively delivered more than five million

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