Airborne Express Case Study

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Question 1. How and why has the express mail industry structure evolved in recent years? How have the changes affected small competitors? The express delivery market was one of the fastest growing industries in the past two decades. In that time, almost every business and many individuals used express mail delivery services to ship their documents and parcels. In 1973, Federal Express, one of the major players of the market, invented the concept of overnight mail delivery. Soon it was followed by the other two major competitors- Airborne Express and United Postal Service (UPS) and in 1996 alone, businesses and individuals spent $17-18 billion on expedited shipments within the United States. The Express delivery market shipped over 5 million packages a day. For the past decade, the shipment volume has risen by 15-20% per year and the industry observers estimated the annual growth rate of 10% for next 5-10 years. The big three companies (first-tier players), mentioned above, together served more than 85% of the market. In this market, there were also competing 6 (second-tier players) companies.: BAX Global, DHL Worldwide Express, Emery, Roadway Package System (RPS), TNT Express Worldwide, and the U.S. Postal Service. The U.S. Postal Service served much of the rest of the market, and it had a legal monopoly in delivering first-class letters. Among the first-tier level firms, there was a fierce competition for market share, especially between Federal Express and UPS. The small companies had to intensify their product differentiation and find niche markets within the industry. Threat of new entrants In this industry, the treat of new entrants is too low, as there are many difficulties that newcomer will face entering this market. The barriers are: • high capital investments for startup, technology, and especially for operating air. For example, UPS’s

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