Airborne Express Case Study Analysis
Airborne Express
Tigran Hakobyan
To answer the questions of this case let’s first of all understand the overall industry where the company is operating.
In general, we can state that there is a strong competition between firms in this industry. Firms provide similar services and also the degree of substitutability is high. Profit margins are relatively low. The threat of new entrants is low because market for express deliveries is difficult to access, capital requirements are high and also the market is saturated with already established and well branded companies. The main suppliers for this industry are pickup and delivery service companies and they are in high competition which brings to low bargaining power. So the supplier power is low for this industry. On the other hand, buyer power is high because there are many suppliers, product differentiation and switching costs are low, and also many customers are price sensitive. As already mentioned, the threat of substitute products is also high. For example, if there is no contract with the firm than the switching cost is very low. The product quality and prices are pretty much the same. There are also substitute products like e-mail. Rivalry among the firms in this industry is also high. There are 3 big players and 6 second players. The market is very saturated, and what differentiates the firms is usually price and image of the company. Competitive advantage can be achieved through innovation.
Q1. How and why has the express mail industry structure evolved in recent years? How have the changes affected small competitors?
The industry has expanded exponentially in recent years. Three top firms have 85% of the market. In 1996 alone, individuals and organizations paid $16-$17 billion dollars for expedited shipments within the United States alone. The main goal in this service was to fulfill the promise of overnight shipping accompanied with next-morning delivery. But later there were companies that
Tigran Hakobyan
To answer the questions of this case let’s first of all understand the overall industry where the company is operating.
In general, we can state that there is a strong competition between firms in this industry. Firms provide similar services and also the degree of substitutability is high. Profit margins are relatively low. The threat of new entrants is low because market for express deliveries is difficult to access, capital requirements are high and also the market is saturated with already established and well branded companies. The main suppliers for this industry are pickup and delivery service companies and they are in high competition which brings to low bargaining power. So the supplier power is low for this industry. On the other hand, buyer power is high because there are many suppliers, product differentiation and switching costs are low, and also many customers are price sensitive. As already mentioned, the threat of substitute products is also high. For example, if there is no contract with the firm than the switching cost is very low. The product quality and prices are pretty much the same. There are also substitute products like e-mail. Rivalry among the firms in this industry is also high. There are 3 big players and 6 second players. The market is very saturated, and what differentiates the firms is usually price and image of the company. Competitive advantage can be achieved through innovation.
Q1. How and why has the express mail industry structure evolved in recent years? How have the changes affected small competitors?
The industry has expanded exponentially in recent years. Three top firms have 85% of the market. In 1996 alone, individuals and organizations paid $16-$17 billion dollars for expedited shipments within the United States alone. The main goal in this service was to fulfill the promise of overnight shipping accompanied with next-morning delivery. But later there were companies that