'Five Forces Analysis-US Express Mail Industry Essay\r'

'Question 1 asked to complete a five forces analysis of the US Express commit Industry. A five forces analysis is done to rate the attractiveness of an exertion. Threat of impudently entry is low because the barriers to entry atomic number 18 racy. Newcomers to the perseverance would require an enormous cadence of up effort capital to set up the distribution networks and infrastructure, such(prenominal) as establishing hubs, and acquiring aircraft and a large amount of ground transportation vehicles (vans, trucks, ect). Economies of scale are hearty and would deter new firms from entering because initial gross sales mickles would be low do to the fact that animate brands already dupe strong brand identification, and at that place are no speak to advantages to entering, like organization subsidiaries or favorable locations. There would as well as be aggressive reaction from the three main players (FedEx, UPS, Airborne) since the level of rivalry is already so toweri ng.\r\nBuyer index (customers consisting of businesses and the general public) is high mainly because the large volume of customers have no brand loyalty in the express mail attention. Customers base their selection of a carrier on reliability, bell, and convenience and in that respect is non much product differentiation in either of those areas between carriers so customers can bounce more(prenominal) or less between carriers, essentially playing the competitors against each other, forcing prices blast and demanding higher quality and services. Supplier power is high overall. The main inputs, or supplies, for the express mail manufacturing are fuel, airports, aircraft, ground transportation, and the employees. The employees are unionized and have the power to demand higher wages and benefits, they whitethorn non always get that, but and so there is the potential for strikes, like with UPS, which costs UPS $700 one million million million in revenues and hurt their repu tation. Fuel is another provider power that is high. Fuel is a key percentage and there is limited bargaining when it comes to negotiating fuel prices.\r\n other key product is the airports, there are except a few in each major city, and the carriers have to go where they have to go, hitting those hubs in major cities, thus causing there to be little bargaining power with airports. The airports and the aircraft suppliers aren’t only if relying on the express mail industry, so that also gives those suppliers more power to charge what they want (landing fees, cost of planes). Ground transportation vehicles is the only input that would brook for more bargaining power since there are numerous alternatives available, there is more room for the industry players to negotiate price. The availability of substitutes is medium mainly because there aren’t a large number of substitutes bulge there for express mail outside of the industry. well-nigh next day portrayies are b usiness documents, parcels, letters, ect, not typically cargo. So substitutes could include email and faxes, some(prenominal) are faster and cheaper than express mailing. Depending on the genius of the business, video conferencing or the old fashion retrieve could be used.\r\nIf the parcel is going somewhere local anaesthetic maybe could use bike messengers, or right hand deliver. There are also the succor tier players, like RPS, DHL and TNT, while they are unbosom in the deli really industry; they tend to specialise in areas other than express mail. With RPS, it is irregular day service at 40-50% less, and a business that does a large amount of overseas or outside(a) express shipments may want to substitute with DHL or TNT, who specialize and differentiate themselves in the international market. The military strength of rivalry is high. The domestic express mail industry only consists of three major firms, UPS, FedEx, and Airborne, and six second tier firms, such as DHL, RPS, and the U.S. Postal serve so there isn’t a high level of concentration. The big three make up 85% of the U.S. express mail market. There is brilliant competition, when one compevery lowers prices, so does another, leading to price wars. When one company improves it technology or offers more service, so do the others, leading to difficulty in differentiating products.\r\nFixed costs are high (planes, hubs, transportation) and when amend costs are high it causes companies to want to constrain prices in order to sell more and become more revenue, but the revenues have not unplowed up with falling prices and has caused the industry growth to be slow so the companies are all bit for market share. The exit barriers are also high, financially and non-financially. Financially because of the enormous amount of capital that has been invested (fleets of planes and/or trucks, set up of the distribution networks and infrastructures), and non-financially, mainly cod to social c osts. People conduct business universal and rely on urgent delivery of clipping sensitive information (documents, contracts, and perishables like medical samples) and not having the services of the express mail industry to deliver those time sensitive parcels could cripple the economy, for example when UPS when on strike for 16 days, there was a â€Å" observable disruption” to the economy as a whole.\r\nSo in conclusion, based upon this analysis, the US Express Mail Industry in terms of profitability is very unattractive and would be considered unattractive by any firms considering entering as well.\r\n'