Fed Ex and Ups, Air Express Industry Analysis

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FED EX and UPS Airfreight Industry Analysis 1. During the 1980s, the air express industry was a medium to attractive industry to already be a major player in, but not a very attractive industry to try and break into. The industry can be characterized by high rivalry from competitors who compete on the same services with very little differentiation, medium power from suppliers who supply the resources necessary to run the business, high buyer power because customers can basically find an equal service from any firm in the industry, low substitution threat from other means of shipping transportation, and low threat of new entrants due to the high initial capital outlay and need of management…show more content…
Thus, threat of substitutes is low because air express still dominated the shipping scene and electronic transmission was not yet perfected. Threat of entry is low because it requires large capital investments for a firm to startup and thus it can impede the entry of new firms into the industry. Lastly, it would be hard to break into the industry because the other firms already have economies to scale, are further along learning curve, and may have certain airspace leases that blocks out the new company from potential routes. Therefore this industry is a pretty good one to already be in, but would be very tough to try and break into. Since established firms do not have to worry about threat of entrants or substitution, they can focus on making their core business practices cost efficient and profitable. Although firms have to deal with high buyer and supplier power, every firm has to deal with these issues. Therefore this leaves only rivalry to compete on, which forces firms to stay sharp, observe the competition, and provide excellent service to the firm’s customers to generate profit. Industry competition intensified from 1988 to 1989 because there was a significant slowdown of the growth rate of the air express industry due to increasing geographic saturation, the acceptance of electronic transmission, and rapid consolidation of

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