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The force in this market is low. Each existed company in the market have a strong brand images, leaving a hard way for other new companies to enter. This is because there are high expenditures to start an express transportation company like FedEx, and the companies are currently achieving economies of scale by going global. Any new companies that try to enter to this market will not be able to achieve these position in short period and unable compete by prices. Another factor threatening entrants is trade tariffs and regulations. Major of companies existed in the market have already established relations with foreign countries. New companies will have to take time to gain confidence from foreign companies, suppliers, and customers.
Rivalry competition between existed firms
The force of competition in this market is high. This is because current firms in shipping service market gain major of the market share. For a classic example, the competition between FedEx and UPS. Companies in the market that able to response first to the constantly changing environment will usually leading or win. Companies have to strive for continuous improvement in quality of goods and services, lowering price, and innovation.
Bargaining power of buyers
The bargaining power of buyers in shipping service market is high too. Cost of switching from one shipping service to another is very low. Therefore, people can decide to choose any delivery firms that able to offer faster service, lower price, or service innovation with ease. This is especially true for large corporations, like IBM, which ships in large volumes and can bargain quantity discounts. For example, the delivery of parcel service by FedEx is more efficient than UPS, people usually will choose to consume FedEx service rather than consume on UPS as they could receive their parcel in shorter time.
Bargaining power of suppliers
The supplier power within this market is low. This is because those large shipping service firms can affect the materials prices of supplies. For instance, like packaging materials. This is because they buy in large quantities and so firms can turn to different suppliers easily. Suppliers that are involved in this market are: vehicle manufacturers, airplane manufacturers, fuel suppliers, labor, airports, and shipping materials manufacturers.
Threat of substitute products
The force of threat of substitute is low as there are not many substitutes to shipping. Nowadays many businesses have strong online tools and a small physical presence. It might be difficult to find out any substitute in delivering their product. Shipping services are very much common to a commodity, so that it is quite hard to replace with another service or even a similar service. So we assume that substitute products will be difference of firms people choose to consume. For a classic example, we can assume that the substitute services of FedEx are DHL, Pos Laju, UPS.
Customers Orientation strategy.
By using this strategy, we can more understand about our customers and focus on customersâ€™ satisfaction. For instance, we can allow customers check their parcel location through internet. Besides, certain outdoor events also allow us to locking on current customers and attract more new market and new consumers.
Alliance defined as establish linkages and alliances with customers, suppliers, competitors, consultants, and other companies includes mergers, acquisitions, joint ventures, virtual companies. By utilize of this strategy, FedEx may cooperate with competitor, UPS based on air transportation agreement. By making certain contract between FedEx and UPS, UPS may share access to the FedEx national air transportation network. This will be the competitive advantages of both companies and may results these two companies outstanding from other competitors in the market.
In the competitive market, FedEx must have different service with other competitors, like Pos Laju. FedEx using the GPS system will different with other competitors, for example it use GPS to deliver goods on times. It will affect many customers take order with FedEx, and loyalty with it, because using GPS can easy and faster achieve the destination. Besides that, FedEx also gain the trust from customers and build the reputation. On the other hand, using the GPS, FedEx can deliver goods to global places, it can help FedEx to extend the market.
We could use innovation strategy to overcome the problems of substitute products. Innovation defined as introduce new products and services, add new features to existing products and services or develop new ways to produce them. For example, FedEx may create introduce new delivery service or making new products into the market. FedEx could also conducting promotion on certain festivals. During Chinese New Year, FedEx could provide discounts on delivery. They might also escort free T-shirt with FedEx logo so that customers may feel like they are one of the members of company. FedEx can also provide online tracking of parcel. This allows customers to get latest information about the location and duration to get their parcels.
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