External Industry Analysis

1
External (Industry) Analysis
2
Five Forces Model
3
Weak Forces

• New Entrants
• High entry costs
• Brand identity
• Learning Curve
• Supplier Power
• Supplier Concentration
• Importance of Volume
• Complementors
• FedEx Kinko's

4
Strong Forces

• Buyer Power
• Threat of Substitutes
• Rivalry

5
Buyer Power

• High Buyer Power due to
• Numerous choices
• Low degree of differentiation between products
• Customer tracking
• Customized accounts
• Customers not known for fidelity

Customers dont have any loyalty when a contract
comes up.
6
Substitutes

• Emergence of electronic data transfer
• Electronic substitutes
• Essentially free
• Instant transfer (as opposed to next day)
• Absolute reliability

7
Rivalry

• Industry shows very high degree of rivalry
• Price wars
• High fixed costs
• Low switching costs
• Lack of differentiation
• Equal size and power (excluding AE)
• Industry Lifecycle

8
Results of Price War

• FedEx and UPS can now only compete on price
• Ultimately driving each other into Airbornes
  traditional niche
• Influx of the Major Players into Airbornes low
  cost arena

9
Operating Margins

• Trend towards decrease in operating margins
• UPS and FedEx entering Airbornes niche

10
Industry Lifecycle

• Industry entering Mature Stage
• Industry consolidation
• Major players globalizing
• Utilization of Economies of Scale

11
Scale of Operations

• Airborne Express much smaller player in the
  industry
• Can not utilize Economies of Scale as well as
  FedEx or UPS

12
Implications

• Industry is changing as it enters Mature stage
• Competitors are starting to compete with price
  alone
• Price Wars are driving FedEx and UPS into
  Airbornes niche
• Airbornes niche is disappearing