The industry comprises of warehousing, courier, shipping, road, rail and air cargo. (Chhilwar, 2015) It is collaboration of supply chain, product management and distribution. It is a combination of tasks that takes place from the point of origin to the point of consumption. These tasks include material handling, packaging, transportation, inventory, security and warehousing. There are numerous applications of logistics industry like media, entertainment, banking, retail, information technology and manufacturing sector. (Leonetti, 2016) The logistics industry is a fast-growing industry which is worth more than $4 trillion dollars, which makes 10% of total GDP. North America and Europe are the leads in the logistics industry. But China and India are rapidly gaining influence on the global logistics industry. (Chhilwar, 2015)
Competition in the Industry
The internal competition in the industry is extremely high. Due to low differentiation, the companies are competing with their prices and quality of services. The intense rivalry makes it hard for the competitors to increase their market share.
The competition is high in Logistics and Supply chain due to the presence of internationally renowned players like FedEx, GAC, ARAMEX and DHL etc. The low barriers to entry increase the rivalry within the industry. Competition is mainly based on price and quality of service. It is very easy for people to switch for more reasonable prices. This forces the companies to cut their prices. (Logistics Industry Analysis, n.d.)
Potential of New Entrants into the Industry
The entry barriers are low, giving the new comers a wide berth to play in the field. In the Logistics Industry, the technology has provided a platform to new business models. Due to these sharing business models, the company’s suppliers and customers end up being the new entrants to the industry. These asset light new start-ups are utilizing the latest technology to offer interactive benchmarking of the rates of the existing air and shipping companies and match them in their available capacity with delivery needs. For instance, Uber which is the largest crowd-sharing station is looking forward to step into Logistics industry. It has already initiated a program in Hong Kong called UberCARGO. (Andrew Tipping, 2016)
Power of Suppliers
The suppliers have very low bargaining power over the Logistics industry. The suppliers who provide for the companies are the automobiles industry which offers from light weight vehicles, forklift to trucks and cranes. Since these suppliers are found in abundance in the market, they are chosen on their differentiated prices. (Logistics Industry Analysis, n.d.)
However, suppliers may themselves enter into the market to become the competitors and provide services according to their own capacity. (Andrew Tipping, 2016)
Power of Buyers
Minimum differentiation and low switching costs gives a lot of bargaining power to the buyers. Nowadays the consumers expect to receive their shipments faster, with more flexibility and with more transparency at a lower price. The manufacturing is becoming more and more customized which attracts the consumers but complicates things for the Logistics industry. Since buyers are the immediate customers of the company, they are not necessarily the end customers. They have the power to switch because of the availability of large number of providers and low costs. But since they are not accumulated, their power is reduced to medium. (Logistcis Industry Analysis, n.d.)
Threat of Substitute Products
The threat of the substitutes is low. The Logistics industry is a fast growing one and offers variety of services at different price ranges. Logistics range from warehousing, supply chain to transportation. The only substitutes are offered for transportation but they have extra costs attached to them. Hence the customers don’t have much alternate options for the services provided by the Logistics industry. (Logistcis Industry Analysis, n.d.)
Conclusion
Globalization and reduction of trade barriers have really boosted up the growth of Logistics industry. In addition to that, the advancement of technology in transaction, communication and product development has been beneficial for the market. The use of e-commerce and GPS has helped the companies to improve upon their outreach. (Leonetti, 2016)
However, the companies should be weary of the regulations of the state in which they are operating. These policies are led by the government to protect the domestic businesses which might be an obstruction in the growth of the international market. (Leonetti, 2016)
Bibliography
• Andrew Tipping, P. K. (2016). Shifting PatternS, The Future of Logistics Industry. PwC.
• Chhilwar, A. (2015, October 20). Logistics sector 2015. Retrieved from SlideShare: https://www.slideshare.net/beabhishek/logistics-sector-2015
• Leonetti, A. (2016, September 20). Logistics Market 2016 Industry Analysis, Trends, Segment & Forecast up to 2021. Retrieved from telcoprofessionals: http://www.telcoprofessionals.com/pressreleases/5783/logistics-market-2016-industry-analysis-trends-segment-forec
• Logistcis Industry Analysis. (n.d.). Retrieved from Collegelisted: https://collegelisted.com/blogs/sample-essays/logistics-industry-analysis