Prepare a 1,400-1,750 word paper in which you describe market trends that your selected organization/industry will face. Explain your conclusions. In your paper address how each of the following will change or will not change, and why.
Impact of new companies entering the market
productivity (consider the law of diminishing marginal productivity)
Wage and benefits
Fixed and variable cost
price elasticity of demand
Supply and demand analysis
Impact of government
Chosen organization is: FedEx
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Impact of new companies entering the market:
In 2004-2005, as international carrier DHL's pushed to expand its U.S. market share, some observers feared that a parcel carrier price war would ensue, reducing profits for all. In fact, prices remained quite stable, illustrating that the U.S. parcel market is mature, not highly fragmented, and unfriendly to new entrants. (DHL's U.S. expansion was less successful than expected.)
Therefore, we can say that established players such as Fedex need not worry about compeititon from new entrants as even a large global player like DHL failed to make an impact on the market and suffered losses.
Prices: Price is one obvious point of competition. But it is rarely an issue in the mature U.S. parcel market. Carriers like FedEx are slightly more likely to compete on price in international markets, which are more fragmented than the U.S.
Yield, defined as revenue per package, is one important measure of a parcel carriers' business. FedEx's flagship company FedEx Express had an average yield of $21.72 in 2007, compared to UPS Next Day Air's $21.14. It is no surprise that FedEx yields are higher than UPS's. By definition, yield reflects only average price charged per package and FedEx has long had a reputation for being more expensive than competitors. However, yield is not a perfect measure for comparison, even price comparison. Large customers negotiate prices with carriers based on the mix of services they use and expected volumes. So individual customers may find that FedEx offers the best price for them even if it is expensive on average.
In the mature U.S. market, prices for small-package services are generally stable. The parcel shipping business has high fixed costs and therefore presents significant barriers to entry. In the U.S., the parcel market is scarcely fragmented. Without the prospect of new market entrants disrupting pricing, there is little incentive for UPS or its competitors to compete aggressively on price.
Prepare a 1,400-1,750 word paper in which you describe market trends that your selected organization/industry will face. Explain your conclusions.