The environment of the express mail industry has experienced drastic changes over the past decade, let alone since its inception in the 1900’s. As a result of changing tastes amongst consumers, the industry has adopted practices that have allowed it to perform more efficiently in terms of geographic scaling, product assortment of goods being transported, meeting customers varying needs, as well as enhancing the range of service options that carriers offer. Prior to 1997, the concept of “express delivery” was a new phenomenon to the marketplace and served as a small and marginally profitable business venture.
Traditionally, a small proportion of mail and packages were collected, consolidated, shipped, and finally delivered to their destinations as freight within the holds of passenger airplanes. This system was ineffective and lacked fluidity in terms of shipper requirements, carrier costs, pricing policies, and regulatory constraints. Innovation & Competition Within the Marketplace It wasn’t until the inception of Federal Express in the 1960’s that helped to challenge both industry officials and consumers alike to envision a more efficient, effective and reliable system of transporting mail.
The invention of systems such as “hub-and-spoke routing,” where packages from across the nation were lifted to a single airport and sent to their respective destinations, changed the way that express mail was perceived. As a result, almost every business began to use express delivery services, exponentially increasing overall consumer demand. With increased consumer demand came new entrants into the marketplace including industry players such as UPS and Airborne Express.
The Essay on Five Forces Analysis-US Express Mail Industry
Question 1 asked to complete a five forces analysis of the US Express Mail Industry. A five forces analysis is done to rate the attractiveness of an industry. Threat of new entry is low because the barriers to entry are high. Newcomers to the industry would require an enormous amount of up front capital to set up the distribution networks and infrastructure, such as establishing hubs, and ...
This new competitive landscape challenged corporations within the mail industry to look beyond the simple delivery of a package. It forced firms to not only look at differentiating themselves on price and features, but to explore advanced logistics technology as a way to focus on quality improvement and customer service. This mix of heightened consumer demand, technological innovation, and increased competition served as a catalyst towards enhancing the profitability and expansion of the express mail industry. However, these innovations severely impacted second-tier players within the market such as BAX Global, DHL Worldwide Express, and the U. S. Postal Service.
Smaller competitors were forced to heavily market their product differentiation and become more appealing to niche consumers in order to attain profitiability. It also required smaller companies to look into technology based customer service information systems as a way to streamline their services and enhance customer support. Porter’s Five Forces Analysis Threat of New Entrants – The threat of new entrants within the express mail industry was low due to the fact that the marketplace is currently saturated with three major firms, also known as “The Big Three,” and six second-tier players.
This saturation makes it difficult for competing companies to enter into the market and attain industry shares due to initial high capital requirements and economies of scale. Determinants of supplier power – Overall supplier power within the express mail industry was low. Companies such as UPS and Federal Express have little dependency on suppliers and remain profitable by owning their own airline fleets and delivery vans. Rivalry Amongst Firms – The rivalry among firms within the express mail industry was very high.
The Essay on Information Technology Products Services
A key strategic use of Internet technologies is to build an E-business, which develops its business value by making customer value its strategic focus. An E-business enterprise uses Internet, intranet, and extra net E-commerce websites and services to keep track of their customers preferences; supply products, services, and information anytime, anywhere; and provide services tailored to the ...
With three major firms – Federal Express, UPS, and Airborne Express – and six second-tier players – BAX Global, SHL Worldwide Express, Emery Worldwide, Roadway Package Systems, TNT Express Worldwide, and the U. S. Postal Service, it becomes increasingly difficult to compete on prices, products, technological innovation and customer support (reference Exhibit 8).
Determinants of Buyer Power – Buyer power was extremely high within the express mail industry due to the fact that there are a variety of different carriers that offer an array of services, catered towards meeting the needs of specific customers.
Similarly, there is little to no product differentiation in terms of what services each company offers as well as low switching costs (reference Exhibit 1).
Threat of Substitute Products – The threat of substitute products within the express mail industry was extremely high. With similar product quality and general pricing across the board, it makes it easy for customers to switch to another brand or carrier that is more competitive in terms of its product line or features.
