Management _ Airborne Case - By Amal Ghishan
It's vital to analyze the industry environment(competitors, customers, suppliers) in addition to analyzing Airborne internally to be able to understand Airborne's situation.
Threats of New Entrants: The existing companies in this industry have saturated it enough. Furthermore, any new entrant has to raise enough capital to be able to acquire the necessary resources(software, hardware, GPS systemsÃ¢ÂÂ¦etc.) required in this industry. Economies of Scales utilized by existing players are also barriers to someone thinking of joining. For example, UPS and Fedex have an important leverage in negotiating contracts with their suppliers. Further, this industry is heavily regulated by the government, especially after the 9/11 events. But perhaps the most important entry barrier is retaliation from established firms. [1: Porter, M.E. "The five competitive forces that shape strategy". Harvard Business Review, Jan 2008]
Threat Supplier Power:Unions are significant sources of supplier power.
Labor is very much unionized in this industry, hence, decreasing profits. Fuel, spare parts, delivery trucks are provided by large independent entities that air carriers have very little influence over. The little influence is perhaps negotiating volume discounts and/or exclusivity preferences.
Rivalry among firms:This particular industry is saturated; i.e., two companies control 70% of the market share. Airborne comes in at third place with 16%. Other companies have emphasized deliveries overseas rather than within the US. The Post office handles the left over in the US market. Keeping in mind elasticity of demand, competition is fierce to lower prices. With a strike by USPS employees, consumer recognized the risk in this industry if you limit yourself to one or a few carrier services. Thus, Airborne was able to increase its market share. [2: Airborne Express, HBS Case # 9-798-070 (study.net)]
Buyer Power: More than one supplier, volume...