Porter five forces xpo logistics analysis

Each of the forces discussed in this paper influence the competitive position of XPO in different ways. This paper seeks to use the five Porter’s framework to evaluate the logistics industry with emphasis on XPO Logistics. Logistics is a broad industry that comprises of various interlinked activities such as courier shipping, warehousing, rail, road, and air cargo. Logistics has three key sectors namely – supply chain, distribution and product management (Chen, 2004). Majority of the transport activities that take place from production station to final consumer fall under logistics. Threat of New Entrants All fields of business are susceptible to threats that come from new players joining the market. The barriers of entry into the logistics industry are low, which means new market players are easily able to join and carve out a market share.

Technology has provided a platform that new business models can use to launch or kick start their businesses. Shared business models allow customers and company suppliers to become new entrants to the logistics industry (Grundy, 2006). Technology has also allowed new companies and startups to provide customers with a unique opportunity to benchmark the rates of existing shipping and air companies. Organizations in the industry enjoy differentiated prices due to the existence of numerous suppliers (Soh, Wong, and Chong, 2015). Suppliers in dominant positions are highly capable of joining the market. Such players are able to use their influence to get favorable pricing from organizations in the logistics industry. A downside to high bargaining power gained by powerful suppliers is it may lower the profitability of minor players in the logistics industry (Chen, 2006).

XPO can employ various techniques to deal with the bargaining power of suppliers such as establishing efficient and effective supply chains with different suppliers. Timely introduction of good quality products is also likely to reduce the chances of loss of customers to XPO’s competitors. Threat of Substitute Products and Services Regardless of the industry, the entrance of a new service or product that satisfies customer needs in a unique and different manner may have an impact on the profitability of existing market players. According to Bischoff (2016), the threat of a substitute commodity increases when the value proposition of the substitute is significantly different from what current market players are offering. There are various ways XPO Logistics can maneuver the threat of substitute products and services.

A viable technique is ensuring their businesses are both product oriented and service oriented. Competition in logistics is mainly based on the quality and price of the service. Low switching costs mean customers are easily able to move from one firm to the other. XPO can tackle competition between existing players through developing sustainable differentiation. This allows the firm to offer a distinct and diverse range of services across their platform ensuring XPO has numerous avenues for revenue generation. XPO may also consider collaborations with competitors to ensure they reach a bigger market. Studying the successful models that have been used by other global market players such as FedEx, UPC, DHL, and Aramex can also provide insight to XPO on areas they need to improve to reach the peak of global logistics business.