214441837 Airborne Express

Topics: United Parcel Service, FedEx, Express mail Pages: 8 (1628 words) Published: April 22, 2015

1. How and why has the express mail industry structure evolved in recent years? How have the changes affected small competitors? Evolution of Express Mail Industry Structure
Express mail industry saw radical shift due to major carriers competing on multiple fronts for market share. Express mail industry evolved deliveries through passenger airplanes to specialized cargo flights. Federal Express (FedEx) created new market for express mail by overnight delivery. Early 1990’s saw “parcel war” between Federal Express (FedEx) & United Parcel Service (UPS). Competition within the industry was not only on price but included innovation for Speedy transport, Customer service, Brand creation. Major Players: By 1997, US Domestic express mail market consisted of three major firms namely Federal Express (FedEx), United Parcel Service (UPS) and Airborne Express, together served more than 85% of market. While there were Six Second Tier Player – BAX Global, DHL Worldwide Express, Emery Worldwide, Roadway Package (RPS), TNT Express Worldwide and U.S. Postal Service. Costumers Requirement:

1 Virtually every business & many individuals used express delivery service to ship their most urgent documents and parcels Urgency of shipment and price played dominant role in decision to ship by express mail rather than normal delivery. 2 Relative price, reliability of carrier, access to tracking and other information, customer service, the convenience of drop-off and sheer habit decided the selection of carrier. 3 In financial services and consulting express mail had become the standard means of delivering documents. 4 Perishable goods or time sensitive had increased over time which drive companies to compete on the basis of time-to-market. 5 While the business of express mail service was volume driven, low switching cost for customers, they had the more negotiating power. Discounts from price list of 50% was common. Operation of Express mail:

1 5 million packages were delivered by three dominant players with 98% of on time arrival rate. 2 Information Technology enabled carrier for tracking, documentation, segregating ease to carry business faster. 3 Each company maintained a large fleet of vans and driven.

4 Hub & Spoke model was used to deliver the packages.
5 Package were driven to airport, placed containers which further loaded in cargo planes. Containers were brought to hub. Packages were sorted according to final destination with the rate of 60 packages per minute and dispatched. 6 Packages with highest priority were delivered by 8:00 am to noon while lower priority packages were delivered second day as they followed the different route usually by road. 7 Companies even focused on customer service which handled hundreds of thousands of queries daily.

Technological advancement has created more substitutes for transferring data and reduced documentation like Fax, Email, Telex, etc. which has delivered in zero time & at zero cost. However there is no substitute for transferring physical goods. Effects on small competitors

1 Highly Consolidated (Oligopoly) market in US has dried out small competitors. 2 Huge investment in infrastructure created Barriers to Entry. 3 Technology was creating new substitutes for documentation courier service. 4 Costumers look for relative price, reliability of carrier, Brand name, access to tracking and other information, customer service, the convenience of drop-off and sheer habit decided the selection of carrier which made more difficult to survive for small competitor. 5 Postal services had monopoly in first class letters where they maintained high prices. 6 DHL & TNT focused on international Market, While BAX Global & Emery focused on heavy cargo and RPS focused on two-day delivery via ground network targeting price sensitivity customers.

2. How has Airborne survived, and recently prospered, in its industry? The key factors which contributed in the survival and prosperity of...
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