FED EX and UPS
Airfreight Industry Analysis

1. During the 1980s, the air express industry was a medium to attractive industry to already be a major player in, but not a very attractive industry to try and break into. The industry can be characterized by high rivalry from competitors who compete on the same services with very little differentiation, medium power from suppliers who supply the resources necessary to run the business, high buyer power because customers can basically find an equal service from any firm in the industry, low substitution threat from other means of shipping transportation, and low threat of new entrants due to the high initial capital outlay and need of management experience. In this analysis, we will delve deeper into each of the dynamics within Porter’s 5 Forces to form an opinion of why the industry is attractive to be in and then discuss how competition greatly increased during 1988-1989. In the air express industry, where customers can ship their packages over long distances via airplane, there is high rivalry because the firms competing in the industry all do the same service. Since there is little differentiation between firms, each firm must battle for customers by either providing better or new services, integrating new competencies into their business processes, or doing business at a low price to create bigger economies to scale which will then cut down operating costs. Firms who want to compete provide aggressive products like next day delivery; integrate new business practices like owning and operating a fleet of jets with company employees; or undercut the competition in viscous price wars. Thus, rivalry with the industry is high. Supplier power is medium to high in the air express industry because firms in the air express industry require precious resources and rely on the