1. The entry of competitors
Substantial barriers exist for new entrants in the overnight delivery market. FedEx has successfully differentiated its product from other offerings in the market, with advertising, technology improvements and its desire to achieve full customer satisfaction. For a new entrant to overcome these obstacles they would have to spend dearly. An example of this is the 30 million dollar ad campaign by UPS aimed at competing with FedEx in the overnight delivery market.
A second example of a barrier to entry in the overnight delivery market relates to capital requirements. To purchase even half of the airplanes flown by FedEx would require a substantial cash outlay.
2. The threat of substitutes
Communications technologies such as Email, fax, and PDF pose significant threats as substitutes to FedEx’s overnight letter delivery business. While these technologies will erode the revenues FedEx enjoys, they will not be able to displace the market entirely. The......
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