In the freight forwarding industry there are three major corporations which make up 85% of the total market; United Parcel Service (UPS), Federal Express, and Airborne Express. Combined, these “Big Three” ship more than 5 million packages a day with over 98% of which arriving on time. The impact that the express mail industry has made on the U. S. economy in terms of technology, logistics support for small business, and the overall movement of goods has far exceeded the expectations of many since its origination in the 1970’s.
The case at hand dives truly dives into, not necessarily the phenomenon of express mail, but who were these competitors and how they competed with each other. Each one of these major players in the express mail industry maintained a specific strategy geared towards gaining a competitive edge over the other two competitors. Federal Express (Fed Ex), which held around 45% of the marketplace and was the first mover of the industry, used a differentiation strategy to gain its advantages over UPS and Airborne Express.
This strategy, which is generically focused on producing a differentiated product and charging sufficiently higher prices to more than off-set the added costs of differentiation, clearly worked for Fed Ex for many years. They developed highly technological operational systems so that customers could easily place, and track orders, as well as develop quality programs to insure each customer was 100% satisfied. The result of such major capital expenditures and high-quality service (along with massive marketing campaigns) was a price increase to reflect the added value the organization had on the express mail industry.
On the opposite end of the spectrum, United Parcel Service and Airborne Express produced a relatively equivalent service that Fed Ex produced, but at a lower cost. This strategy, known as low-cost leadership, focuses on decreasing costs in what Chapter 5 of our book outlines into 5 distinct economic drivers of strategic positioning; economies of scale, learning curve, economies of scope, production technology, product design, and location.
In each of these categories, the author displays how an organization with a low-cost differentiation strategy can use the related advantage to achieve a competitive edge. And, although both UPS and Airborne Express had a low-cost leadership strategy, Airborne Express implemented many more successful strategic position policies. Outlined Below is some comparisons of strategies between Airborne Express and Fed Ex. Learning Curve Fed Ex developed and tested advanced technology systems to integrate each aspect of their operations including the development of COSMOS, DADS, and Powership. Although many great systems have been integrated into Fed Ex’s operations, it also came with the expense of many failed attempts.
* Airborne Express invested selectively in technology, allowing Fed Ex to test technologies and implementing the technologies that were full proof. Location Fed Ex’s goal was to be able to ship to any location overnight, being able to create the notion of “fed exing” as a synonym to ship over night. Their span was endless and by using airport hubs across the nation, their access was robust * Airborne Express centralized their shipping to 50 major metropolitan cities, focusing their efforts on the greatest amount of people. At the time of the case, they were contemplating a joint venture with RPS to help increase their access with little capital