1. What customer needs is this industry is satisfying? What assets do small package express operators need to satisfy these needs? 2. Why, despite rapid growth, was the air express industry characterized by low returns during much of the 1980s? 3. Why did competitive intensity moderate and prices rise during the late 1980s and much of the 1990s? 4. What form do you think the competitive structure of the global small package express industry will take? 5. How the nature of the industry s offering start to change during the late 1990s and 2000s? How has this impacted the intensity of competition in the industry? This case describes the evolution of competition in the air express industry, from the industry s creation by Federal Express in 1973 through to the present day. The case begins by describing how Federal Express essentially created the industry by a major innovation in the way small packages were transported by air (the hub and spoke system). This innovation enabled Federal Express to offer next-day delivery for small packages at a time when other companies took two to three days to make a delivery. The case then moves on to look at how the industry grew in the aftermath of deregulation in 1977. The story in the early 1980s was one of rapid growth and new entry by a number of companies including, most significantly, UPS and Airborne Express. Due to this new entry and the commodity nature of the product, significant price competition developed in the indu