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Question 1
The market for parcels in the US can best be described using the perfect competition
market structure. There are dominant players in the market, such as UPS and FedEx, but other
Question 2
a. Cost Structures: The cost structure in a firm is best understood from fixed and variable
costs incurred (Gunarathne & Samudrage,2018). FedEx and UPS have increased in size,
which in theory is supposed to lead to a lesser price per unit. However, the opposite is
right as the companies still have had to deal with more management complications that
have increased the cost structure again. The rivalry hasn’t helped in this regard either, as
b. Switching costs: The rivalry has affected switching costs. With each company striving to
outdo the other, services have been made more personal to suit the consumer’s individual
needs. The high level of personalization means that consumers incur a higher cost to
move.
c. Learning effect: The competitive pressure between the two companies has contributed to
a high level of learning. Both companies are currently offering high-quality services with
Question 3
a. Airborne’s cost structure is different from FedEx and UPS mainly because it is lower.
Airborne may struggle to keep its customers happy with a lower cost structure in the long
term as the company grows in size. The figure below shows the contrast in the cost
b. Airborne Express goes after price-sensitive consumers. The company tries to keep its cost
Question 4
As Airborne increases in size, the cost of management will increase. This will make it
untenable for the company to continue offering services at a low price. Any future effort to
increase the price to factor in the added costs may result in a backlash from consumers.
Question 5
Technological developments marked the 1990s in the US. The packaging industry,
therefore, faced a severe threat of being obsolete (Montreuil et al., 2018). The other danger is the
Question 6
To survive, Airborne should consider operating on a lean structure. This would include
opting against moves that complicate the firm’s management further. Purchasing RPS would
only increase Airborne’s cost structure, and there it is a decision I would not make.
ECN 5210 Peter Liedman
References
Gunarathne, N., & Samudrage, D. (2018). Analysis of the cost structure: perspectives from the
Journal, 13(3), 197-223.
Montreuil, B., Buckley, S., Faugere, L., Khir, R., & Derhami, S. (2018). Urban parcel logistics