In this case analysis I will discuss Federal Express and their position as a major player in the global air express market. I will discuss how they developed historically, focusing on the problems they have experienced. I will use Porters Five Forces framework to analyze the competitive forces in the industry environment in order to identify the opportunities and threats confronting the company. .
In 1973 the main users of airfreight at this time were to ship time sensitive, high priced goods such as computer items and medical instruments . The airfreight,at this time, was shipped on passenger airlines with the freight in the cargo section of the plane. Fred Smith Jr. founder of Federal Express saw the need for the cargo and passengers to be separated and treated differently. He felt that there was a growing need for next day airfreight of small packages. Since most passenger flights moved during daytime hours it was often difficult to achieve next-day delivery of airfreight. This would enable Federal Express to utilize its air cargo capacity efficiently.Federal Express was the first company to expand into this area. The package standard was for an upper limit of 70 pounds and a maximum length of 108 inches. .
I will now use Porters Framework and discuss its five forces: rivalry, threat of substitues, the risk of competitors, the bargaining power of suppliers, and the bargaining power of buyers to identify the companies internal strengths and weaknesses and also the external opportunities and threats.
Rivalry within the industry.
This is mainly a consolidated industry dominated by a small number of large companies. The main companies in the industry are DHL International , Federal Express, UPS, TNT. This industry is very competitive in that there were many price wars, It can be seen from this case that price competition was a major issue , in order to stay competitive each company normally followed suit by lowering prices.