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Airborne Express : Case Study

1577 words - 6 pages

1.How and why has the express mail industry structure evolved in recent years? How have the changes affected small competitors?The US express mail industry is highly consolidated. 85% of the market is served by 3 service providers. There are six second tier players who serve the remaining 15%. FedEx and UPS lead the industry in services and innovation. The following trends have been observed in this Industry.Services: A host of services are provided to suit the needs to different businesses. Overnight shipping and next-morning delivery are most popular amongst other services like next-afternoon delivery and second day service. Same-day and early-next morning services are even costlier. Shipment volumes have risen over the decade however the rise in revenues has not been complimentary, due to falling prices.Customers: it is imperative for businesses to facilitate fast information dissemination. Express mails have provided a medium for establishing this. All businesses and individuals today use this service. Contrary to the traditional belief, items being shipped are high value compared to high weight. These items are time-sensitive.Customers have different criteria's to decide which service provider to use. With advancements in technology, this industry has become highly automated, there by providing better customer service with relation to parcel tracking, pick up services etc.The decision matrix generally includes brand name, reliability, price, customer service etc. Customers are generally not loyal as switching costs are negligible.Operations: Most players use the hub-and-spoke model. Major hubs act as collecting grounds for mail from all over America. The mails are then sorted and then sent off to respective destinations. Priority is given to early-next and next-morning mails. Planes land and take off all through the night. Capital expenditure related to a hub is extremely high. Both FedEx and UPS emphasize on improving the sorting capacity as well as floor space. These hubs are equipped with several conveyor belts and vans. Apart from the physical distribution network, broad infrastructure is needed to support customer service and information management. Mails for second-day delivery are generally sent off by road.Competition: The industry is governed by the rules set by UPS and FedEx. This being so because of the magnitude of their operations. There is fierce competition between the 3 big players, however the second-tier six players don't pose any threat to these companies.US Postal, one of the second-ties players has a monopoly in first class letters and charges high fee for them. However it's tracking system efficiency and on-time delivery record are much lower than the industry average. Hence its operations are limited to residential customers.DHL & TNT are international players and focus is on trans-border shipments. DHL has hubs in various parts of the world thereby giving it the capacity to ship items to hard-to-reach places....

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