Buyer power
Buyers’ bargaining power in the industry is moderate due to switching costs and stiff competition. Though FedEx services individual users possess little bargaining power, more prominent organizations that contract with FedEx shipping drives exert a higher degree of bargaining power due to the large business amounts to insert to the company (Amsler, Cullen, and Erdmenger 2010, p.12). FedEx competes heavily with UPS since both companies generally offer similar services, and the same has to be applied to pricing.
Supplier bargaining power
Fedex’s input process relies on diverse supplier groups. The suppliers are powerful and can profoundly affect the organization through goods (materials/products) and services supply. The other organization will also need production means like FedEx in the logistic industry. Therefore, this creates a buyer-supplier relation due to the exchange of services and products. The bargaining power of buyers in the case of FedEx weighted significantly in the cases involving talent management, warehouse management, high-cost ranges in the transport networks, infrastructure development, capital expenditure, and ICT software costs. These factors have always played a pioneering role in company success. In response to these situations, FedEx investments have been ranging about US$ 1 billion on capital expenditure and I.T. advancements, for the precaution concerning the created uneven state due to suppliers (Pudasaini, n.d, p.5).
The threat of new entrants
Realistically, the threat of new market entrants is shallow as far as FedEx competition is concerned. The low entrance possibility is due to the enormous costs connected with entering the delivery market based on a wide scale. The capital expenditures needed to attain the proper vehicle and plane levels and build up the required infrastructure are mind blogging. A new firm would also face roadblocks in landing rights/ air routes and Federal Aviation Administration form. The difficult extend to which a new entrant would undergo while trying to compete in this industry is illustrated by UPS difficulty to compete with FedEx despite its dominance in the market of ground shipping, substantial capital expenditures, and its existing shipping infrastructure (Amsler, Cullen, Erdmenger, 2010, p.12). Therefore, FedEx has demonstrated its courage in financial spendings in acquiring companies in a sector or region that it desires to be present.
Threats of substitute products
In the logistic industry, the substitute product threat is very low, mainly because there are fewer alternatives to choose from. The key substitute for FedEx product/ service delivery is the presence of air delivery services provided by several other companies. FedEx has, however, maintained this force by developing high marketing aims across the globe (Adamkasi, 2019, n.p). It has created a strong brand image by offering high-quality services and marketing strategies. Additionally, the company noted that the delivery service system has increased with increased online shopping and has been grabbing this opportunity to improve quality service provision over its competitors. This way, the company has been attracting and retaining many customers based on its techniques in marketing. Moreover, these days, the emergent dynamic ITC roles, including internet, email, and fax, pose substitute threats to the traditional practice of letter delivery applied by FedEx Company (Pudasaini, n.d, p.5). Thus, the pull and push strategy factors stand always on competition, and FedEx should be cautious about the high probability of service and product substitutes.
The rivalry of existing players
Fierce competition exists between FedEx and other existing firms across all the company service lines. They are well known, especially for the intense competition with UPS. Along with DHL and others, these two firms compete most notably with smaller players and each other on price. Despite the lower prices offered for most services as a result of government subsidiaries, USPS never competes with FedEx in a similar sense as UPS does. Currently, the UPS ground shipping market’s market share in the U.S. is almost 60%, being the leader by far away. However, since the 1990s RPS Ground and Caliper system acquisitions for FedEx, the company has slowly but surely sought success through the erosion of UPS dominance in this arena (Amsler, Cullen, Erdmenger, 2010, pp.10-11). Unluckily, UPS has also moved to take FedEx’s market share in the express market delivery. Both firms have been continuously battling to retain market share in their respective expertise areas while becoming more prominent players in the rival’s arena. They both spent heavily on advertisements that often match one another in terms of even acquisitions, increase/decrease in prices, and fuel surcharges.
Bibliography
Adamkasi, 2019. Porter’s Five Forces Of FedEx|Porter Analysis. [online] Porter Analysis. Available at: <https://www.porteranalysis.com/porters-five-force-of-FedEx/> [Accessed 7 November 2020].
Amsler, M., Cullen, J., Erdmenger, JC., (2010). Strategic Report for FedEx Corporation, PP.1-29. Available at http://economics-files.pomona.edu/jlikens/SeniorSeminars/vector2010/pdf/fdx.pdf
Pudasaini, K., (n.d). STRUCTURAL TRANSFORMATION THROUGH E-BUSINESS IN THE LOGISTICS INDUSTRY: THE CASE OF FEDEX CORPORATION -KESHAB PUDASAINI, pp.1-12. Available at https://d1wqtxts1xzle7.cloudfront.net/31448097/Structural_Transformation…_By_Keshab_Pudasaini.pdf?1372160605=&response-content-disposition=inline%3B+filename%3DStructural_Transformation_By_Keshab_Puda.pdf&Expires=1604764202&Signature=YVGhh-Vo05kmtyIPMFFpGslPubio–y6e6R66S2RVhxAB8vvreWy~KV4x2oiQYaaSSINnyGw0IBiQVWgHBtP6l2YZncV32z6KxAbW2f4FL-KZteXUFN~5hTrtvkJ2h5bFBJAosYdoznPNK7bGKg8tYMRtviEpXxQU1qoYPbUjh-jORuLY-oMdNxOOGv-FMGujVrnwxn3iQn0cN2FiB5z0QH78Q6mSrKDvqYvegXUO8iH0NpGkNfm-jj0BcR2dQpIQQrmBV6H4tP-RpoUi5Bs3VAW0vurmRsE9bKfQCRQ-KYlJOG1c8E2OlSNionvepFj0LY2xq-hkSC5~YFERdltuQ__&Key-Pair-Id=APKAJLOHF5GGSLRBV4ZA
