The global supply chain and logistics industry is fiercely competitive and ever evolving due to the rise of new technologies and regulatory changes. In order to maintain it's position, FedEx must continuously evaluate its competitive environment. We will use Porter's Five Forces Model of Industry Competition to take a look at FedEx' competitive landscape.
Threat of New Entrants.
The risk of new entrants into the global logistics market is relatively low, as there are significant barriers to entry for companies hoping to compete with FedEx. The capital investments required to operate a fleet of airplanes, delivery vans, sorting hubs and IT systems are incredibly high.
Bargaining Power of Buyers.
At a high-level, FedEx' buyers consist of three segments;
Corporate Customers
Small Businesses & Individual Customers
Third-Party Logistics Companies.
The small business and individual customer segment has relatively low bargaining power due to low average shipping volumes. However, the Corporate and 3PL segments have high bargaining powers. Both segments continuously monitor shipping and freight costs, as well as on-time delivery performance and service reliability. If FedEx does not maintain competitive pricing or high on-time performance metrics, their customers may shift volume to UPS, DHL or other carriers.
Bargaining Power of Suppliers.
FedEx' critical suppliers consist of airplane manufacturers such as Boeing and Airbus, vehicle manufacturers such as Ford and Freightliner, and various oil companies that supply fuel for their airplanes, trucks and delivery vans.
At roughly 1,000 airplanes and 82,000 trucks and vans, FedEx operates a large fleet of vehicles and has significant bargaining power over its suppliers. As fuel prices are subject to global markets, their bargaining power is limited, but so is that of its competition.
Threat of Substitute Products/Services.
The threat of alternative solutions or substitute services in the global logistics industry is low for the delivery of physical goods from A to B. That said, large retailers and e-commerce companies may develop their own delivery solutions, such as Amazon, or offer in-store pick-up services, in an attempt to attract customers to their brick-and-mortar stores and benefit from additional sales.
Intensity of Rivalry Among Existing Competitors.
As mentioned, the global logistics industry is highly competitive and FedEx has to compete for market share with the likes of UPS and DHL on a global scale. On a regional level, FedEx competes with national mail carriers (such as USPS) and smaller last-mile delivery companies.
All global and local players compete on price, reliability and speed of delivery, which has intensified with the rapid expansion of e-commerce in recent years.