Strategic Management

Introduction

The global express delivery industry is intensely competitive. With express delivery fast becoming a commodity in society, so the opportunities for success are great. Although the majority of the global market share is held by a hand full of firms (FedEx, UPS,DHL and TNT), a report on the industry by Data Monitor(2008) predicts the European market will be valued at $59.3 billion from the $51.1 billion in 2008. But with high barriers of entry it will be difficult for a new firm to enter the industry and capitalise on this market grown.

Porter’s 5 force framework

Threats of entry

The threats of entry in the express delivery industry are low since it is an intensely competitive industry comprising many firms offering a similar service. Moreover the fixed costs associated with establishing a transport network are high and these cost become considerably higher when it comes to establishing an international transport network to compete with the likes of Fedex and DHL. Finally, because of their large volumes of operations, larger companies have the added cost advantage of economies of scale. As described by DHL, such economies of scale occur when a company can lower costs by increasing the amount of service. In such a situation, the cost per unit fall the more a company produces.

Threats of substitutes

The threats of substitute are low: the express delivery industry provides a service that is hard to get elsewhere. The industry is fast becoming a commodity in our society, in the sense that it is not easily replaced with another service not even a similar one. For example a commodity such as the postal service and more specifically the royal mail (UK) which has enjoyed a monopoly that dates back to the 19th century, has recently lost its hold on the market. Business post (an express parcels company) got approval in 2004 from the British government to compete with the royal mail.

Power of buyers

In the express delivery industry, the buyers...