Sim 336
Question 1
a)
[pic]
Figure 1: Porter’s Five Forces
Applying the Porter’s Five Forces model to the industry is not an easy task provided that FedEx Corporation provides various shipping services. In FedEx, these two sectors are represented by FedEx Express and FedEx Ground. FedEx Express is the world’s largest express transportation company. FedEx Ground, on the other hand, is the North America’s second largest provider of small-package ground delivery service, following the lead of United Parcel Service (UPS).
1. Risk of new entry by potential competitors
The barriers to entry are very high. One of the reasons there is a high entry barriers is the high fixed cost associated with the establishing the international transportation network. This includes hubs, ground transportation vehicles, air fleet, etc. Additionally, existing companies can take advantage of the absolute cost advantage achieved by large volume of shipment and economies of scale.
2. Extent of rivalry between established firms
Established players in shipping service industry complete rigorously for a market share, as demonstrated by the constant battle between FedEx and UPS, the company who responses first to the constantly changing environment wins. Established companies have to strive continuous improvement in quality, lowering price, and innovation. There is very low switching cost for consumers in this industry making rivalry even more intense. In addition, intense rivalry is also due to the fact that maintaining; the infrastructure of an express delivery company presents an exit barrier due to high fixed costs.
3. Bargaining power of buyers
The bargaining power of large buyers in shipping service industry is high. Cost associated with switching from one shipping service to another is very low. Therefore, buyers can turn to a shipping provider that offer faster service, lower price, or service innovation with ease. This is especially true for large
a)
[pic]
Figure 1: Porter’s Five Forces
Applying the Porter’s Five Forces model to the industry is not an easy task provided that FedEx Corporation provides various shipping services. In FedEx, these two sectors are represented by FedEx Express and FedEx Ground. FedEx Express is the world’s largest express transportation company. FedEx Ground, on the other hand, is the North America’s second largest provider of small-package ground delivery service, following the lead of United Parcel Service (UPS).
1. Risk of new entry by potential competitors
The barriers to entry are very high. One of the reasons there is a high entry barriers is the high fixed cost associated with the establishing the international transportation network. This includes hubs, ground transportation vehicles, air fleet, etc. Additionally, existing companies can take advantage of the absolute cost advantage achieved by large volume of shipment and economies of scale.
2. Extent of rivalry between established firms
Established players in shipping service industry complete rigorously for a market share, as demonstrated by the constant battle between FedEx and UPS, the company who responses first to the constantly changing environment wins. Established companies have to strive continuous improvement in quality, lowering price, and innovation. There is very low switching cost for consumers in this industry making rivalry even more intense. In addition, intense rivalry is also due to the fact that maintaining; the infrastructure of an express delivery company presents an exit barrier due to high fixed costs.
3. Bargaining power of buyers
The bargaining power of large buyers in shipping service industry is high. Cost associated with switching from one shipping service to another is very low. Therefore, buyers can turn to a shipping provider that offer faster service, lower price, or service innovation with ease. This is especially true for large
References: 1. Garten, 1998. 2. Bruner, R.F and Bulkley, D., “The Battle for Value: Federal Express Corporation versus United Parcel Service of America, Inc. (Abridged)”, University Darden School Foundation, 1995. 3. Whittington, R. (2000) What is Strategy and does it matter? Thompson Learning. 4. Stacey, R.D (1996) Strategic Management and Organizational Dynamics, Second edition, Pitman, London. Words Counted: 3000 words. ----------------------- 1