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Airborne Express Case Study Essay

Essay 1

Is the express mail business appealing to the industry incumbents? How has Airborne managed to survive and thrive in its market, and recently prosper? Is its success due to its skills, position, or industry attractiveness? The express mail business may be readily regarded as an inherently difficult one to operate in, given the numerous variables that must be considered, such as trade unions, government rules, technological progress costs, and international boundaries.

Despite this, the sector may be viewed as providing possibilities that may be seized by gaining clients based on the quality of the service provided. Alternatively, they could be routed to hubs, where they would be sorted overnight and then sent on their way to their ultimate destination, allowing for overnight shipping.

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In the express mail industry, being a pioneer has its advantages. Since the turn of the century, UPS has provided delivery services. They had just depended on their ground network and did not have their own fleet of aircraft until shortly before RPS shook up their world and showed how quickly FedEx’s business was expanding. Being a first-mover allowed him to start small and expand the firm as demand increased.

Because he was the originator of the express mail airfreight industry, FedEx did not have to catch up to an established market leader. It would have necessitated a considerably larger investment and made it more difficult for him to break into an existing market if not.

UPS entered the market later, but they were already a well-established firm with the means to invest heavily in this new service. It’s also reasonable to assume that being an early entrant made it somewhat simpler for UPS to establish their own fleet than it would be for anybody today, not omitting the fact that they had considerable expertise in transport services at that time.


Essay 2

Risk of entry by potential competitors

The expense of aircraft and personnel prohibits newcomers from entering the air delivery business. The company employed about 115,300 full-time workers and 7,200 part-time employees in 2002. In order to enter the sector, it is necessary to have knowledge and expertise.

Rivalry among established firms

The level of animosity in the sector is tremendous. Despite employing high-budget broadcast advertising, Airborne Express was unable to expand its market share. There are three large firms and a few smaller firms. Many rivals have emerged as a result of industry expansion, as well as pricing competition.

Bargaining power of suppliers

Many suppliers have weakened their negotiating position. Airborne Express has a huge variety of aircraft, including all-cargo planes and passenger planes, that may transport packages on its behalf. Airborne is able to coordinate international shipments using a variety of foreign representatives.

Bargaining power of buyers

High-volume consumers are vital for the business since they can negotiate better discounts. Frequent customers who spend more than $20,000 each month on deliveries are examples of this. Corporates account for about 80% of the company’s income. To obtain a three-year agreement with IBM, Airborne had to cut its price by 84%.

The threat of substitute products

Customers might utilize their own cars to make deliveries rather than utilize the air express services or ground service, posing a challenge of substitutes. It’s not easily replaceable since it offers the lowest price.

The special role of compliments

It is possible that deliveries may be complemented by passenger planes, for example. Because finding room for luggage is not difficult in the international express business, Airborne does not feel the need to utilize its own aircraft.

Macro-environmental factors

Exchange rates have an impact on international business. Because 70% of Airborne’s worldwide operations are outbound and 30% inbound shipments, a minor percentage is influenced. This indicates that local payments account for 70 percent of the total expenditure. Information technology has been beneficial to Airborne in developing distinct items and lowering labor costs. The company has benefitted from the LIBRA II system, FOCUS, and EDI in providing better customer service by allowing it to offer unique goods. The C-container patent has aided the company in enhancing its competitiveness.

The latest trend in globalization has an impact on the air express business. Many firms want to operate across national boundaries, necessitating the use of local agents in foreign countries for Airborne Express. Rather than depending on a large number of corporate consumers, Airborne Express is unaffected by demographics.

The deregulation of the airline industry in 1977, which let Airborne Express own Wilmington Airport as a hub, was one of the political and legal factors that helped it gain a competitive advantage. In the global context, one issue that affects Airborne’s corporate strategy is the large number of businesses expanding into foreign markets. To have a worldwide delivery network, firms must have delivery providers.

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Competitive advantages

Airborne has lower prices than FedEx, its biggest competitor. Competitive pricing is advantageous for Airborne. Customers’ products are delivered at a lower cost by third parties as opposed to Airborne. The C-container patent prevents copycat businesses from opening up. By lowering inventory holding costs for clients, the Foreign Trade Zone (FTZ) enhances competitiveness.


Fuel costs are a serious problem, therefore airborne should acquire fuel-efficient planes.


Essay 3

The essay on the Airborne Express Case focuses on its issues, giving a concise yet comprehensive treatment of essential information and arguments. Scroll down to read the essay.

To: Robert Brazier, the Airborne Express Senior Management Team, and Strategic Analyst I’m writing to express my concerns about recent situations in Airborne Express. Executive Summary: Many alternatives are available for long-term success and growth in the future years for Airborne Express. There are options to consider following the 29% revenue climb in the fourth quarter that may enhance this growth over the next year.

This firm should embrace the “industry trend” of distance-based pricing. This will result in greater revenue, and provide Airborne Express a larger sum of money with which to combine with the Roadway Package System in order to develop a more technologically advanced tracking system. This will not only improve income, but it will also allow for increased client service by providing a new service.

Express delivery is a competitive market that requires constant attention. Despite the fact that express-delivery services are difficult to differentiate, Airborne Express must stay ahead of Federal Express and United Parcel Service in order to maintain a competitive edge. UPS has been on strike for an extended period of time, so Airborne Express should take advantage of distance-based pricing and attract customers away from UPS who saw RPS as a premium service.

The mission of Airborne Express is to provide national, international, and inter-regional mail services. After the recent UPS strike, Airborne Express has seen remarkable financial gains with a revenue increase of 29% over the previous year. The main issue for Airborne Express now is to determine how firmly entrenched they are in the market. There are many methods to evaluate a company’s success, but I’ve found Porter’s Five Forces Model to be the most efficient.

Airborne Express Porter’s Five Forces Model

I’ve concentrated on whether or not Airborne Express should follow in the footsteps of its major rivals, UPS and Federal Express, and convert to distance-based pricing. In addition, with a variable-cost approach, the way Airborne Express conducts business in the global market must be considered. The Roadway Package System (RPS) collaboration should be investigated further and possibly developed into a more formal operation. Employee happiness, marketing, and technological innovation all need to be factored in when assessing this firm’s long-term success.

It will lead to a clear approach to maintaining the competitive advantage of Airborne Express if you concentrate on distance-based pricing, follow a variable-cost approach in international operations, and build a more established relationship with RPS. The rivalry in this sector is between three major firms: Airborne Express, Federal Express, and UPS. These businesses compete fiercely due on differences in their pricing.

Each firm’s earnings growth has been volatile owing to the need to compete against rivals in order to reach the top of the market. In this sector, progress is minimal, and they are quickly imitated by other players in the industry. This makes distinguishing from others extremely difficult, especially for Airborne Express. It will be nearly impossible to ever surpass its key competitors because it uses them as guinea pigs by adopting a high-volume sales approach. Because goods in this business are inexpensive, generating revenue solely relies on a large number of sales.

From 1990, when UPS and Federal Express began “price wars,” the attractiveness of this sector has steadily decreased. Supplier Power: Lower industry attractiveness has also been a result of the major suppliers in this business, the workers. The present strike at UPS was prompted by employees demanding higher wages and benefits. Airports are the next most important supplier in this sector, followed by gasoline. Both of these things have little to no influence on this market.

Technology and other equipment contribute significantly to the express mail industry, and these elements may be negotiated. Substitute Threat: In this market, there are few alternatives. People will continue to demand fast delivery from this sector. E-mailing might have a minor influence on this business, but it is not an option for most deliverable items or legal documents due to their importance. A little threat exists in regular mailing systems based on the urgency of a package being delivered.

The cost savings are obvious, but express delivery services can’t compare. The buyer’s power is most apparent in this business; the main consumers are almost anyone who wishes to send a package or letter to someone quickly or with the greatest convenience. It appears that businesses use this sector the most since delivering and receiving products and other essentials to keep a firm up and running is so important. Because there isn’t much difference in this sector, customers may easily shop around for the lowest prices.

This raises price sensitivity and gives consumers more power. Barriers to Entry: The presence of new entrants in this market is comparable to the threat of substitutes. There are only a few major players in the mix, suggesting that if a new company were to exist, it would have to be able to service a large number of cities across the United States. In order for a main convenient business center as well as aircraft and numerous vehicles demands significant financial investment.

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This may be tough for any new entrants to manage and would take years of effort and perseverance to achieve scale in this sector. Strategy Development: As a result of the environmental scan, I believe that starting with UPS and Federal Express with a distance-based pricing strategy is most efficient. Unfortunately, prices will go up, but they can be compensated for by reducing costs to the business by strengthening ties with Roadway Package System. Airborne Express has the authority to set price levels such that their margins improve.

RPS can be a long-term business partner for Airborne Express in order to reduce costs. By joining forces with this firm, Airborne Express may build a far more user-friendly tracking system for its consumers. RPS might assist Airborne Express to gain a competitive edge by allowing them to establish more cost-effective pricing strategies.

I believe that Airborne Express should continue the variable-cost strategy for international shipments, and I agree with senior executives who wrote in their report, “There are no compelling service advantages that would merit the operation of [our] own aircraft on international routes.” Updating the Internet site might be an opportunity for growth for Airborne Express.

It doesn’t yet have as many capabilities as UPS or Federal Express, and I believe that the use of the internet to schedule pickups and/or generate shipping paperwork will be popular in the future with advancing technology. Given that Airborne employees referred to the firm as “straight-laced,” “economical,” and “ultra-conservative,” it would be prudent to ensure that middle-management is paid fairly so that employee turnover may be increased in the future.

Implementation Procedure: Following the distance-based pricing approach would entail raising prices for longer distances and lowering them for shorter ones, which will provide Airborne Express with a significant competitive advantage.

Consumers perceive this new style of pricing as a normal industry practice. Federal Express and UPS have both succeeded with this approach, and there isn’t much difference between these rivals. Even with this technique, Airborne Express can still maintain the lowest costs in their market. Some margin growth will occur as a result of increasing prices at one end more than lowering prices at another.

Airborne Express is a “low-cost approach” firm that simply charges lower costs, yet they have not built a low-cost structure since their margins are extremely tiny. Although they have a reputation for providing cheaper prices than their rivals, the distance-based pricing strategy may result in greater earnings that Airborne Express appears to be losing out on.

The firm may realize a greater return on investment from longer-distance delivery. I feel that Airborne Express will be able to provide its customers with better information and tracking systems if they engage with RPS more directly. If they intend to increase prices, give incentives of some sort, or show their “willingness to pay,” then it’s vital to offer clients something in return. If a partnership is formed with RPS, revenues are likely to go up since superior service will be provided. This might result in UPS losing market share.

RPS’s ability to attract more customers and increase margins for the firm in years to come is due to the large number of ground shipments made by Airborne Express. Because Airborne Express will be unable to stand out in this business, I believe that the company’s only alternative would be to keep up with its rivals as much as possible. They should start by re-organizing the firm’s website and upgrading it so that consumers can perform similar tasks as those on UPS and FedEx’s websites.

In the future, technology will only get better, and people will begin demanding these sorts of advancements. It’s also important to consider mass-media advertising in the near future. Although Airborne Express was the first firm in the sector to offer early deliveries, each of its rivals is now capable of delivering packages every day beginning at 8 A. M

The key to successfully implementing a referral bonus strategy is establishing a more concrete relationship with RPS. In order to operate the computers and new technology, middle management will have to be properly trained using the new tracking system. Middle management that is not affiliated with a union should receive higher compensation in order for Airborne to have a better reputation among its staff and feel adequately compensated for their added responsibilities. Evaluation and Control:

Airborne Express should join the industry with distance-based pricing for the fourth quarter, resulting in increased revenues over those of the third quarter. The graph below is based on revenue per shipment of $8. 25 recorded in 2006. Without this present flat-rate pricing system, revenues appear to be less than $8. 25 if the distance is less than 150 miles; however, I have demonstrated that they will be about $2. 00 lower at distances less than 150 miles (see Figure 2).

The company isn’t losing money, since the revenue increases significantly once the distance exceeds 150 miles. The modest decrease in shipments of shorter distances will be easily made up for, and revenues will almost double when shipments are sent over longer distances. I also discovered that it would be worthwhile to set an additional charge for “Remote Places.” These areas could be chosen by Airborne, and they might include specific locations with high shipping costs. A tiny town without a major freight station may be considered a Remote Place, for example.

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The cost of each address can range from $20 to $30. This charge will clearly increase revenue, and customers will have the benefit of delivering their package to any place in the nation. This would appeal to customers since they would still use Airborne Express for local shipments but save money in the end by not using FedEx. Building a stronger relationship with RPS will allow Airborne Express to develop a more user-friendly tracking system for its clients. The company’s future is tied to its partnership with RPS.

The costs of developing a tracking system are low, and they will only consume a tiny percentage of the additional income generated by the new distance-based pricing method and “Remote Location” rate. This new procedure will allow Airborne Express to take advantage of their current main concern, which I believe is a tracking system. Having extra cash with which to merge with RPS would place Airborne Express in a stronger technological position. It will be necessary to hire individuals that can use these technologies to operate the new tracking system properly.

It’s possible that there will be higher pay rates for middle management. These compensation rates will also be reflected in the implementation of the distance-based pricing system revenues. In the end, giving greater recompense would result in a company’s long-term success. Airborne Express should have no trouble keeping up with the “900-pound gorillas” in the industry and maintaining sustainable growth in the future thanks to these recommendations and plans.


Essay 4

How has the express mail industry structure evolved in recent years, and why? What impact has the changes had on smaller rivals? The express mailing was a developing sector with revenue of $16-17 billion and a 15-20% annual growth rate in the 1990s. The Porter five forces analysis may be used to assess the structure of the express mailing business.

Entry risk was low since the firm entering the industry needed significant funding. The cost of constructing the UPS hub, for example, was $860 million. Obtaining regulatory approval to operate an air fleet was another important barrier. Buyers’ bargaining power: Bargaining power was strong because buyers had little to no switching costs when it came to changing services.

FedEx, UPS, and Airborne controlled over 85% of the express mail industry. Services were comparable, and switching costs were low. As a result, they had to compete fiercely to gain and retain clients.

Substitutes: Substitute goods are a concern. Customers may instantly send documents using email and it is free to do so. Electronic components, on the other hand, had to be delivered via regular mail because delivering medical samples or digital components by express mail took longer. As a result, if the delivery were urgent, ordinary mail service would be irrelevant.

Suppliers had strong bargaining power. Switching costs were significant. If a firm wanted to alter its hub airport, it would have to invest a significant amount of money. Airports were not reliant on the express mail industry because it was not their primary source of income.

The marketing industry has changed considerably owing to the use of information technology (IT). FedEx utilized its COSMOS system to manage logistics and people, as well as provide employees with weather updates. Deliverymen used portable computers and scanners to input data about each package into the system. The delivery was made easier thanks to IT advancement.

UPS’s decision to end the strike provided other firms an opening to acquire new consumers. The Postal Service was among those who planned to do considerable marketing for that purpose. Airborne may benefit from the strike by increasing its market share. An approach similar to The Postal Service’s is feasible. An aggressive marketing campaign emphasizing Airborne’s low pricing would be effective.

Airborne has yet to demonstrate that it understands the difficulties of the UPS strike. Aside from putting in place a strong marketing campaign for profiting from the UPS lockout, Airborne must increase its investment in publicizing its services. The firm should concentrate on both mass-media advertising and targeting logistics managers and major shippers when advertising its solutions.

FedEx and UPS had delivery rates of 99 percent or higher, while Airborne’s fulfillment time was 97 percent. Parcels were delayed 3% of the time according to a 3% rate of packages being delivered late, which can still be considered high given that express mail is mostly used for urgent deliveries. Airborne will need to enhance the dependability of its services by investing more in automation.

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