2 Pages 624 Words
The two main elements of Porter’s Five Forces Model that Airborne Express should be most concerned with are the level of competition within the industry and the power of the buyers. The competitiveness in the industry is very intense. It is lead by two giants, Federal Express and the United Parcel Service (UPS), which account for 35 and 24 percent of the market share respectively. Airborne Express holds only 9 percent of the market. Competing with these two industrial juggernauts is very difficult due to their large financial advantage and their overall size. Airborne Express also has to deal with the above average bargaining power of their high-volume corporate customers. They chose to focus on this segment of the market in the mid 1980s and, even though this strategy has greatly helped them to succeed, these buyers often have the power to demand substantial discounts that they often receive. There is one area of buying power that could be seen as an advantage for Airborne Express. They control the only privately certified Foreign Trade Zone (FTZ) in the U.S. In an FTZ merchandise is tax free and customs duties are only paid on items when they leave. This allows foreign companies to store inventories in the U.S. with Airborne Express without paying customs duties on them until the need arises, which is something they can’t do anywhere else and greatly limits their buying power in this respect. Airborne Express doesn’t have any significant issues of supplier power or availability of substitutes to worry about. Barriers to entry include the sheer size of both Federal Express and the United Parcel Service and a very mature industry.
Airborne Express has many strengths. They are fairly technologically sound with their three main information systems: FOCUS, LIBRA II, and Customer Linkage. These programs significantly improve customer service and reduce costs. They are fortunate to have the only FT...
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