1. Perform a five-forces analysis of Airborne Express’ industry. Forces| Items| Power|
Rivalry| * Big competitors are FedEx and UPS; * Smaller competitors like BAX Global, DHL, Worldwide Express, Emery Worldwide, RPS, TNT Express, Worldwide, and US Post Service| Keen competition with big competitors as they account for the lion’s share of the market| Entry barriers| * Economy of scale * CAPEX on IT, facilities, aircrafts and airports, trucks, * Brand loyalty, licensing, customer networks| High entry barrier to the industry because of large economy of scale, high CAPEX, and dominating market shares of big players| Substitutes| * Emails for letters * General post services for parcels at lower speed| General letters are almost substituted by emails as they are free and quick;Post services cannot substitute speedy parcel delivery| Buyers| * Mostly business customers * Some residential customers| Low switching cost making buyers free to choose couriers| Suppliers| * Aircraft and airport * Trucks, fuel, IT service providers, advertising agencies, box and envelop suppliers| Aircraft and airport have strong power as it’s hard to choose alternative suppliers; the others are easily replaceable|
2. Imagine you were a consultant analyzing FedEx’s competitive advantages in 1985: a. What activities does FedEx perform differently / more effectively than its competitors? FedEx virtually invented the express mail industry. It held around 45% of the domestic express mail market and was the industry leader. FedEx used a cutting-edge information and logistics technology. Its central computer system, COSMOS, coordinated vehicles, people, packages, routes, and weather information. The system increased the efficiency and speed of work and minimized human errors, which were very important in the express industry. FedEx also took efforts in quality improvements. For example, it tracked delivery performance, measured customer satisfaction with telephone services, and conducted customer surveys quarterly. In sales and marketing, FedEx carried out aggressive advertising campaigns and marketing and deployed over 1,100 sales representatives to canvas key business accounts. It also adopted money-back guarantee to boost marketing. FedEx emphasized people and culture development. Not only did it put internal promotion a priority, it invested millions of dollars in extensive training programs. It expected staff to take risks and resolve problems on their own. Staff were empowered with wide latitude to make decisions. It practiced performance-based incentive scheme and recognition programs and conducted employee satisfaction surveys to boost morale. Profit-sharing plan was also available for particular staff. Company-wide communication was also emphasized. b. Are FedEx’s competitive advantages sustainable? Why or why not? Yes, FedEx’s competitive advantages are sustainable, as the initiatives focused on increasing long term value to the company, like increasing enhancing efficiency and productivity, building team morale and brand name, and developing people and culture. The added value would be transformed to revenue in the long term. c. What does UPS’s entry into express mail say about the answer to (b)? It showed FedEx’s competitive advantages were good, as UPS tried to imitate FedEx’s initiatives. UPS made an effort to match FedEx’s information technology, spent huge money on advertising (80% more on media than FedEx did), and emphasized internal promotion. Moreover, UPS offered shares to the staff and allowed non-management staff to purchase stock. 3. Now consider the situation of Airborne Express in 1997:
a. What activities does Airborne perform differently / more effectively than its competitors? Airborne was the third largest express mail company, holding 16% of the domestic market. It was selective about the customers...