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Financial Reporting, Financial Statement Analysis and Valuation 9th Edition

Financial Reporting, Financial Statement Analysis and Valuation (9th Edition)

Book Edition9th Edition
Chapter 1, End of Chapter, Questions and Exercises, Exercise 1.1
Page 48

Porter's Five Forces Applied to the Air Courier Industry.  


Apply Porter's five forces to the air courier industry. Industry participants include such firms as FedEx, UPS, and DHL. (Hint: Access Gale's Business & Company Resource Center, Global Business Browser, or Standard & Poor's Industry Surveys to obtain the needed information.)


The air courier industry is one of the major industries in the world and is increasing rapidly. Due to high growth in the industry, competition is also booming. 


  1. Rivalry among existing firms: Existing firms of this industry like FE, UP, and DH are competing with each other to achieve market share. The increasing level of quality, lowering costs, increasing customer satisfaction, innovation are some of the consequences seen in this industry due to throat-cut competition and endless battles among firms. 
  2. Threats of new entrants: High fixed costs associated with acquiring and maintaining infrastructure to provide good facilities keep new entrants away from this industry. Thus, barriers to entry are relatively very low.
  3. Threat of substitutes: The threat of substitutes is very low for product delivery services as physical products must be transported from one location to another to fulfill the order. Therefore, services like product delivery have no substitute. However, transportation of letters, documents, etc has been under threat from e-mail or fax. The digital transmission of letters and other documents has eradicated the need for the physical delivery of letters and documents. 
  4. Buyer power: As large corporations have large quantities of shipments to transfer, they enjoy bargaining power with air courier companies. Nowadays, air courier companies are also providing online shipment tracking and feedback facilities. It increases the buyer's power. Thus, in this industry buyers are enjoying a high degree of buyer power.
  5. Supplier power: The skills required to provide air courier services are low. Therefore, buyers can shift from one courier to another easily in search of better services and low prices. Thus, supplier power is quite low in this industry.

Verified Answer

Porter's Five forces Applied to the Air Courier Industry are:


  1. Rivalry among existing firms: Boosting quality, decreasing prices, increasing customer happiness, and innovating are just a few of the outcomes observed in this business as a result of the cutthroat rivalry.
  2. Threats of new entrants: New entrants are kept out of this business because of the high fixed costs of acquiring and maintaining infrastructure to provide adequate facilities. As a result, the entry barriers are quite low.
  3. Threat of substitutes: Substitutes pose a relatively low threat. There is no replacement for services such as product delivery.
  4. Buyer power: Air courier firms now offer online cargo monitoring and feedback. It gives the buyer more bargaining power. As a result, buyers in this business have a lot of bargaining power.
  5. Supplier power: Buyers have the ability to quickly switch from one courier to another in quest of better services and lower rates. As a result, in this business, supplier power is very limited.
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