Solved: 1 What customer needs is this industry is

satisfying What

1. What customer needs is this industry is satisfying? What assets do small package express
operators need to satisfy these needs?

2. Why, despite rapid growth, was the air express industry characterized by low returns during
much of the 1980s?

3. Why did competitive intensity moderate and prices rise during the late 1980s and much of the
1990s?

4. What form do you think the competitive structure of the global small package express industry
will take?

5. How the nature of the industry's offering start to change during the late 1990s and 2000s?
How has this impacted the intensity of competition in the industry?

This case describes the evolution of competition in the air express industry, from the industry's
creation by Federal Express in 1973 through to the present day. The case begins by describing
how Federal Express essentially created the industry by a major innovation in the way small
packages were transported by air (the hub and spoke system). This innovation enabled Federal
Express to offer next-day delivery for small packages at a time when other companies took two
to three days to make a delivery.

The case then moves on to look at how the industry grew in the aftermath of deregulation in
1977. The story in the early 1980s was one of rapid growth and new entry by a number of
companies including, most significantly, UPS and Airborne Express. Due to this new entry and
the commodity nature of the product, significant price competition developed in the industry
during this period. The case then moves on to describe the consolidation of the industry
between 1987 and 1990 and the resulting reduction in the intensity of price competition. This is
followed by a detailed discussion of the continuing industry evolution through until 2010.
Particularly important trends during this period include the globalization of the industry, and the
move by incumbents into related product areas such as logistics.

ANSWER
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