AIRBORNE EXPRESS: THE UNDERDOG
CASE STUDY QUESTIONS
1. Analyze the United States small package express delivery industry in the 1990’s using the Porter’s Five Force Model. Rate each of the five forces as either weak, moderate, strong or fierce. Justify your rating by using two factors under each force and describing how these factors affect the strength of the force.
The Bargaining Power of Buyers
The bargaining power of the buyer was somewhat moderate-to-slightly strong due to the fact that certain corporations were so high ranked that, they could manipulate their prices to their advantage. On top of that substitutions existed with the other mailing companies which gave the “buyer” choices. Low prices were taken advantage of by consumers, for if they were too expensive, they’d switch their services over to another company who would provide the same shipping, delivery and transportation system, at a more reasonable price. High-volume corporate customers have a great deal with more bargaining power than customers who don’t buy from them frequent enough. This meant that they could allow and demand substantial discounts. IBM made a 3-year contract with Airborne Express to pay them to carry their products that were 150 pounds or less. The only downfall about that was that Airborne Express had to offer rates 84% below Federal Express’s list prices. Approx. 80% of Airborne’s revenue came from corporate accounts such as IBM. High-volume corporate companies such as IBM have the bargaining power over Airborne Express.
The Bargaining Power of Suppliers
The bargaining power of the suppliers, at the time, was fairly strong. When it came down to the delivering and shipping of packages in the world, there were only a few companies who operated globally. This is one bargaining power that Airborne (the supplier gained). . Data Product Corp.; a producer of computer printers, contracted out Airborne to take care of their arrangements and shipments of their...
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