Assignments

Perform a Five Forces analysis of the US express

delivery market/industry; identify the nature and
strength of each Force.

Threat from substitute products:

The threat from substitute products are moderate. The relevant substitute
products are emails, facsimile and electronic documents. Although these
substitutes did cut into revenue stream of these main service providers for
they did provide more convenience and efficiency to companies and
individuals demanding for over-night delivery, for major couriers like UPS,
FedEx and Airborne, the threat from substitute products are realistically
low. There are still many documents have to be delivered to their
recipients in hard copies and for these demands the express delivery
service is the only choice. Also, the online shopping actually increases the
demand in the industry. For physical parcel delivery, there are no other
choice for delivering. Customers can only switch different service company
but still remain staying in this industry.
Ease of market entry:
The ease of market entry is very low. The cost for getting into this industry
is very expensive. To acquire the basic ability to compete in this industry,
the new entry must build up its hub facility and infrastructure which
associates with huge amount of money of buying planes and vehicles,
owning own airports or paying for permission to use the airports, hiring
drivers, pilots and etc.. Another aspect in acquiring regulatory permission
is also barrier for the new entry. It will be time-consuming and difficult for
new entry to get the permission of legal and regulatory to deliver within
and between states. So in summary, the threat from new entry is
realistically low.
Bargaining power of buyers:
The buyers can be classified into two categories: individual user and
business companies. The bargaining power of the individual buyers is
moderate although for them the switching cost to another service provider
is low and the competition between those providers is fierce, but they still
have to use the delivery service and as individual they cannot bring huge
revenue to the company. However, the bargaining power of the business
companies is high since they usually have large volume to deliver and
highly frequency in demand contributing the large amount of the service
providers' revenue. And since all the main competitors in the industry
wants to serve them, the competition is fierce and their service can hardly
differentiate from each other so the only way to get them a contract is via
price.
Bargaining power of suppliers:
The power of the supplier is hard to define as there are many different
segments of suppliers.
o For suppliers providing vehicles, packing materials, ships the
bargain power are relatively low. Since there are many competitors
in their own industry and the competition is also very fierce, so for
the company in the express delivery industry, there are a lot of
choices for suppliers of vehicles, packing materials.
o But for supplies of planes, the bargain power might be higher. There
are less airplane manufacturers in the world so the market
competition in this industry is relatively low so as to make buyer

more powerful in negotiating the price.

The fuel suppliers are the most powerful supplier for the delivery
industry since the industry will be nothing without fuel. All the
deliveries are based on machine, and machine is powered by fuel.
But, the companies in the express delivery market can also contract
with fuel suppliers to help them partially offset their vulnerability.
o The people that supply services to the market like pilots, sorters,
drivers, mechanics and technologies. These people do own power to
bargain with the companies that hired them, but as this industry is
big and demanding for thousands of people and the gradually
completion of process of automation in shipping process, the
employees bargains power will continuously weaken.
o The regulatory entities do have bragging power before they issue
airspace and landing rights to the companies in the industry. After
that, they are no barriers. But the government still maintain the
bargain power since they can modify the law and policies related
with this industry.
Degree of competitive rivalry:
The competency is very fierce in this industry. The prices are low and the
switching cost is very low as well. So the industry has to continuously
improve its service and lower down the price. And there are evidences of
high competency in this industry. The UPS and FedEx had a "parcel war" in
1990s. Each company matched not only the others prices, but also the
others innovations; in short order, the companies introduced earlymorning delivery, same-day service, and an ability to track packages by
the Internet, for example. The war subsided as the industry consolidated
and the economy picked up. So in summary the companies in this industry
has to stay competitive all-time and compete against others in almost all
the aspects.
o

Perform a competitive analysis of FedEx, UPS and Airborne

in the 10 dimensions shown on the next slide.
Aspects

FedEx

UPS

Airborne

Product
focus

overnight, morning
delivery, overnight
afternoon delivery,
second day delivery

standard delivery &

express mail
overnight, morning
delivery, overnight
afternoon delivery,
second day delivery

overnight afternoon
delivery, second day
delivery

Target
customer
s

People demanding for

overnight mail
delivery and small
package delivery for
both individual and
business companies

department stores &

general parcel
delivery or both
individual and
business companies

business customer
that regularly
shipped a large
volume of urgent
items, primarily to
other business
locations

Highest price, most

competitive

Middle position in the

price, less cost

Competiti
ve
positionin
g (incl.

lowest price in the

light weight range
but middle price
position in the heavy

price &
cost)

weight delivery

Financial
performa
nce

least OI%, largest

market share

Highest OI%, second

position market share

middle position OI%,

third place market
share

Culture &
human
resource
managem
ent

Promoted from within.

No layoffs policy.
Cross-trained
employees and
cultivated a large
part-time workforce,
Extensive employeetraining programs,
Employees given
wide latitude to make
decisions on their
own. Emphasis on
communication. FXTV
broadcast daily
company news,
weather conditions,
competition info, etc.
Formal compensation
system. Hourly
workers were also
eligible for bonuses.

privately owned, with

stock issued to
company managers,
and, as of 1995, non
management
employees as well.
Promote from within.
Emphasize on
management by
consensus and an
ethic of humility. High
wages kept labormanagement
relationships good.

strait-laces, frugal,
very conservative,
Humility.

Operation
s: pickup
& delivery

Give customer
powership computer
terminal and track
shipments to do the
information input.
Using super trackers
to input package info.
Manually pickup.

Single fleet of trucks

handled pickup and
delivery of all UPS
shipments.

did not maintain

retail service centers
and owned/operated
only a portion of its
delivery vans. Ability
to delivery more
things at one drop.
Owned airport that
served a major hub.
Did not pay landing
fees and no
obstacles to tailoring
the facility to its
needs. Leased
warehouse space on
airport property.
Patented cargo
containers did not
require cargo door.
Aircraft run app.
80% full
Did not advertise in
mass media.

Operation
s: air &
hub
operation
s

facilities spanned the

globe, with eight hubs
in the United States
and five more
overseas. Owns over
600 aircraft

Hub in Louisville, KY,

with 5 regional air
hubs around the US.
Speculated that UPS
sorting and routing
facilities were highly
automated and
employed the latest
technology.

Marketing
& sales

Aggressive marketing
led to widely

No marketing
department before

recognized mottoes.
High advertising
expenditures, many
sale representatives,
providing money-back
guarantee.

1980, with little to no

advertising. 1996,
spent 80% more on
media than Fed Ex.

Targeted logistics
managers of major
shippers via sales
force. Known for low
prices.

Customer
service

customers could track

the status of a
package, schedule a
pickup, prepare
paperwork, or print a
bar-coded label for a
package.

Website much the

same as FedEx.
Having a backup site
in case a disaster hit.

providing tailored
service. allowed
customers to submit
shipping information
electronically.
customers would
speak with the same
service agent each
time they called.
Website did not offer
as many functions as
its rivals did

Informatio
n
Technolog
y

COSMOS, coordinated
vehicles, people,
packages, routes, and
weather information.
Super trackers were
used by couriers to
enter information
about each package.
A Digitally Assisted
Dispatch System
(DADS) connected
directed couriers to
pickup locations and
uploaded information
from Super trackers
to COSMOS. Give
customers Powership
Computer Terminals
and shipping software
to do paperwork.

Determined to match
Fed Exs information
collection capabilities
Ability to track
packages efficiently,
deliver electronic
proof of delivery, and
offer money-back
guarantee of on-time
delivery. Internet site
rivaled Fed Exs.

Invested selectively.
A follower but not a
leader. Let
competitors test
innovations and
introduced
themselves if clear
benefit derived.

Based on the competitive analysis, what are Airbornes

competitive strengths and weaknesses vis--vis FedEx and
UPS?

Strength:
o The fastest growing company in the industry for years.
o They are the third largest player in the industry and the bigger two just had
a strike recently.
o They are more focused on certain kind of customers than UPS and FedEx.
They target the business customer that regularly shipped a large volume
of urgent items. So they can specialize themselves to serve them well.
o Airborne owned their own airport that served as it's major hub. So no need
to pay landing fees and no obstacles in tailoring their facilities to meet its

needs.
o They owned their own warehouses and leased them to business customers
on the airport site which other two cannot.
o Their patented cargo containers fit through the passenger door of an aircraft
and therefor no need for a cargo door. Also, they managed to run their
aircraft roughly 80% full when their competitors can only attained
utilization rate of 65%-70%.
o Their customers daily concentrated in metropolitan areas and their large
volume consisted of afternoon and second-day deliveries so they can use
trucks more often than they competitors for the long-haul portion of
deliveries.
o Their relationship with RPS had created a strong appeal as a combination of
the on the ground and in the air transportation.
o They had a strong brand than other competitors for customers to customize
their needed services.
Weakness:
o They are often overlooked in the industry so they barely get attraction and
that was no good for them to extend their market.
o Their margins are anemic and suffering. Their services is high-quality while
the prices remained low.
o Their other two competitors had higher on-time delivery rate.
o They are a follower in the technology field. Their website is not as functional
as competitors'.
o They did not have much dominance in the international market as their
competitors and the ambitions for that was way more modest.
o They still did not decide to adopt distance-based pricing scheme which
might make their customers not comfortable with.
o They are easily influenced by the economic condition and fuel prices.
o They relied more on human rather than automation compared with
competitors.

How is Airbornes (whole) product differentiated?

o
o
o
o

Like Product (UPS, FedEx):

They have the lowest price compared with other two competitors.
They own a strong brand for customer tailored services.
Their business customers can rent the on-airport warehouse.
Customers can speak to the same person every time they call the call
center.
Substitute Products (Fax, emails, ordinary mail delivery):
o Fax and emails cannot delivery physical documents, they cannot do with the
original hardcopy but express mail delivery could.
o Much faster than ordinary mail delivery.

What does Airborne need to do to assure that it survives

and thrives in the future?

Opportunities:
o Airborne may be able to target the small markets not currently served by
UPS and FedEx.
o The expanding market in e-commerce.
o The growth of international market.
o Deeper relationship with RPS can help improve their on-ground delivery.
Threats:
o Fax and e-mail would eclipse part of the needs for parcel delivery services
o The rising fuel price

o Rival distance-based pricing.

o Fast technology update.
So in the future, the Airborne company needs to improve their ground service
delivery. Since right now it's falling behind competitors on ground delivery. By
focusing on shorter shipments and using trucks, the cost of delivery can decrease.
So the best way to do this is to deepen their relationship with RPS so as to build
platform more quickly to rival UPS and FedEx. Also, they need to improve their
technology. Since they are conservative and selective on technologies, their website
did not have as much functions as competitors. So to survive, they must change
their attitude towards technology and focusing on improving their website
performance to keep up with their competitors. And this will also bring benefits to
their business since technology is becoming trend. To cut into the overlooked market
by UPS and FedEx, Airborne should do more marketing campaigns. Social media, TV,
Internet are good choices. They must be more aggressive on marketing to get
attention of public. As they have own airports and foreign trade zone, they should do
more in international markets. They could establish relationship with DHL to
cooperate, using DHL's connections worldwide while proving their hubs and airports
service to DHL in domestic market. As for fax and emails, the eclipse of part of the
delivery is inevitable. so they have to throw away this services gradually and focus
on other services. They should figure a way to solve the price-based pricing problem.
If they cannot, they have to adjust their price in a more reasonable way to avoid lost.