A five force analysis consists of five parts being threat of substitutes, ease of entry and exit, bargaining power of buyers, bargaining power of suppliers, and degree of rivalry. The threat of substitutes for Airborne, in the domestic express mail market, came from two other large firms Federal Express and the United Postal Service. FedEx, UPS, and Airborne together held an 85% market share. Fedex held roughly 45% of the domestic mail market and was considered the industry leader, however disputed. Their name was synonymous with sending something overnight. Almost like when at a restaurant we order a “coke”, no matter what the exact brand is the waitress will understand what we want. The United Parcel Service, UPS, was the largest package delivery company in the world and held a 25% market share of the domestic expedited mail service. Airborne was under the constant threat of substitutes, which were significant. The ease of entry and exit into the expedited mail delivery market is very difficult. Planes, trucks, personal, facilities, equipment all need to be in place before even one package is successfully delivered. Buyers had much bargaining power in that the three largest domestic expedited mail carriers each offered similar products, next morning delivery for time sensitive items. Price, reliability, access to tracking, customer service, and convince of drop-off locations were all things that the customer many times would consider before choosing their carrier. The bargaining power of suppliers was also strong. The physical delivery of the package was only a part of the services offered to customers. The major companies also made it possible to track packages en route, guarantee on time service, and even provide logistical consulting services. The degree of rivalry was very intense between these companies, in the early 1990’s industry observers called the competition between FedEx and Ups the “parcel war.” Each company would not only match each other’s prices but also their technology and services
Factor| Airborne| UPS| Fedex|
Products Offered| 1| 2| 1|
Target Customers| 1| 2| 2|
Competitive Positioning| 3| 2| 1|
Financial Performance| 1| 1| 1|
Culture| 2| 1| 3|
Land Ops| 2| 1| 1|
Air Ops| 2| 1| 1|
Marketing and Sales| 2| 1| 1|
Customer Service| 1| 2| 2|
IT| 3| 2| 1|
Totals| 18| 14| 14|
Airborne is strong in its products offered in always seeming to be on the forefront and targeting customers efficiently.
Unlike FedEx and UPS, Airborne owned the airport that served as its major hub in Wilmington, Ohio. As a result Airborne did not have to pay fees to the airport and could fix any obstacles that they came across at their own facility without having to consult with any outside parties. Airborne also differentiated by not having its own retail service centers and owning only a portion of their delivery vans. These were both cost saving differentiators, hiring independent contractors to pickup and delivery was 10% less expensive. Airborne did not market to the mass media instead they targeted the personal within companies who were in charge of logistics in order to obtain larger more profitable accounts. Providing flexible, custom solutions for their customers was also a difference in business plans that Airborne however FedEx and UPS also began to claim this. Ensure that Airborne survives and thrives in the future, the company would need to remain competitive with UPS and Fedex. Airborne’s relationship with RPS was beneficial because RPS had connections to the heart of UPS’s customer base in the form of large volume business customers. The physical distribution of Airborne and RPS were completely separate. To survive, I would suggest that Airborne form a stronger relationship not just sharing of marketing and shipping information.
How and why has the express mail industry structure evolved in recent years? How have the...