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Airborne Express Case Solution

Solution Id Length Case Author Case Publisher
1212 900 Words (3 Pages) Jan W. Rivkin Harvard Business School : 798070
This solution includes: A Word File A Word File

In recent years, the express mail industry has evolved because of costs, increased efficiency, and increasing competition from substitute products. In recent years, the global trend has been to increase system efficiency. This has increased the volume of express shipments because of highly efficient delivery systems. It has also impacted the customer’s expectations of time taken in delivery and developed a perception of reduced costs. The reduced costs meant that the cost-based strategy was damaging the profitability of the express market. Therefore, the focus shifted to a differentiation strategy. This included tracking the parcel online and online ordering. However, these differentiated tactics turned into minimum levels of expectations and did not count as differentiation. Furthermore, the increase in the usage of emails and scanning techniques has adversely affected the document market. However, online ordering systems have increased the opportunities for the express mail industry.

Following questions are answered in this case study solution:

  1. How and why has the express mail industry structure evolved in recent years? How have the changes affected small competitors?

  2. How has Airborne survived and, recently, prospered in the industry?

  3. Quantify Air bones sources of advantage?

  4. What must Robert Brazier, Air bones President and COO, do in order to strengthen the company’s position?

Case Study Questions Answers

The overall strategy in the express mail industry is cost reduction even though express mail companies tried to include differentiation strategies. The bigger market shareholders such as UPS and FedEx enjoy a greater profit margin. The bulk delivery because of the number of delivery orders received has reduced the costs for these companies significantly. However, smaller competitors offer delivery service to niche markets. They have also included low-cost strategies to remain viable in the market. This has enabled smaller players such as RPS and BAX to sustain in the competition.

How has Airborne survived and, recently, prospered in the industry?

Similar to the smaller players in the market, RPS, and BAX, Airborne has developed a focused strategy targeting a niche segment. It has catered to businesses in need of delivering large volumes urgently. In order to ensure that this strategy is implemented, Airborne also refused to take orders that were below the stated limit or were inconsistent. This strategy is cost-efficient and has allowed Airborne to offer low prices to its target segment. It purchased low-cost airplanes that required minimal alterations to convert it to cargo containers. Airborne also targeted urban areas with its second-day delivery services – services booked in the afternoon. It allowed it to make efficient its truck system. Airborne also contracted vans to allow greater delivery flexibility. They adjusted their costs to the revenue earned by improving their negotiations and relationships with the private contractors. They also followed up on technology rapidly adding value quickly. By this follower strategy, Airborne also decreased the wastage in investment. Another implementation that allowed Airborne to prosper in the industry is the inclusion of personalized services. This included offering space in its airport warehouse. This also included developing relationships at a personalized level with logistics managers. This offering was attractive for the target customers because of the connectivity with the company.

Quantify Air bones sources of advantage?

The sources of advantage are based on their ability to offer low prices. The strategic decisions of a high niche market based on their strengths shows that these sources serve as a great advantage for Airborne.

  • Purchasing a used aircraft for $24 million as opposed to a new aircraft costing $90 million. FedEx’s average cost of an aircraft is 50 million

  • It utilized its aircraft to 80% capacity as opposed to the industrial utilization of 65-70%

  • It specifically targeted metropolitan cities that accounted for 80-85% of its deliveries making operations more efficient. However, compared to UPS and FedEx, their shipments to metropolitan areas were 65-70%, lower than Airborne placing it at a competitive cost advantage. This advantage can be quantified by the reduction of 20% in labor costs and a 10% cost reduction in delivery.

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