Case analysis of Airborne express

Presented by:Jeeshan mahfooz (16pgpm12)

Jyoti Rani (16pgpm13)Karan Singh (16pgpm14)

Kaushik Dutta (16pgpm15)

INTRODUCTION Cargo Airline, express delivery postal company Type of Industry: Logistics Foundation year: 1946 Headquarter: Seattle, Washington, USA Website: www.airborne.com (At present, none) Defunct: 2003 Acquisition by: DHL Operations: 12700 full time & 8000 part time, 13300 vans and fleet of 175 aircraft. delivery of 9,00,000 packages & documents per day.

Porter’s 5 Forces Analysis

Rivalry among firms3 big competitors and 6

second playersSimilar type of services and low differentiation

players operate mostly in all segments (UPS)

Threat of new entrantsHigh capital requirements

Oligopoly(consolidated industry)

Low product differentiation

Buyer PowerMany suppliers

Low switching costVolume based discount

Low product differentiationPrice sensitive

Threat of substitutesNew technologies such as

email, fax etcNo substitute for goods or

package delivery(Xerox)

Supplier powerPick up and drop

facilityVertical integration

Q1.Evaluate the change in the industry structure of the express mail industry over the years? How has it impacted the attractiveness of

the industry

Increased efficiency – Inventory management and CRM Going online, service differentiation Electronic mail is the shark in the tank Online shopping has compensated the loss due to e-

mails Hub & spoke model (combination of reducing cost and

increasing upfront cost) Low cost strategies High customization for niche customers

Q2. Analyze Airborne’s strategy to compete in the express mail industry

• Differentiating itself from competitors

1. Focus on corporate clients rather than retail customers

2. Lower offerings.3. Concentrate in major

metropolitan areas.

•Choosing a complementary set of activities1. Private airport reducing costs and

giving the ability to give clients on site warehousing for quicker turnarounds.

2. Fleet is primarily used aircraft to reduce cost.

3. Higher utilization of space as compared to competitors•Making Tradeoffs

1. Part time wages instead of automation.2. Selective Investment in technology.3. Limited Advertising.

Quantification of Airborne competitive AdvantageItem Federal Express Airborne ExpressPickup Labor $1.09 $0.87 Fuel $0.07 $0.07 Maintenance and depreciation $0.21 $0.23 Subtotal $1.37 $1.17Long-haul transport Flight- and trucking-related expense $2.44

$1.68 Hub labor $0.30 $0.21 Hub depreciation $0.25 $0.18 Subtotal $2.99 $2.07Delivery Labor $1.64 $1.48 Fuel $0.10 $0.10 Maintenance and depreciation $0.31 $0.34 Subtotal $2.05 $1.92Advertising $0.22 0Sales $0.21 $0.30Information technology $0.54 $0.36Customer service $0.20 $0.10Corporate overhead $0.97 $0.48Total cost $8.55 $6.40Margin $0.45 $0.20Price* $9.00 $6.60

Notes

20 % Less than Fedex

Assumed as equal to fedex

Relative to fleet size

In proportion of Cost of Income statement

70 % of Fedex

Ratio from income statement on depreciation

10% less than Fedex

Assumed as equal to Fedex

Relative to fleet size

Assumed that Nothing is spend on Advertising

Relative to sales force size

Assumed 40% customers used it

Relative to overall workforce size

Relative to overall workforce size

% on cost - 3.18 %

Quantification of Airborne competitive Advantage

• Labour Cost is lowered by 20% for pickup and and 10% for delivery as compared to FedEx.

• Overall cost per letter of is 2.4 Dollar lesser than FedEx

Not Sustainable Because• More reliable on Labours.• Inefficient use of airport.• Lack of Timely delivery.

Q4. Should Airborne follow the distance-based pricing

adopted by its main rivals at the time of the case?• In 1996 UPS changed its prices to reflect the distance of the

parcel.

• In 1997, FedEx made the same changes – charging more for packages that travel farther

• Will it work for Airborne?

• Customers are expecting this change simply as an industry trend, so YES.

Q5. What should be your approach, as the President and COO of Airborne, to strengthen the company's

position?

• Adopting distance- based pricing.• Investing in International operations.• RPS Alliance• Focus on SMEs as business clients.• Continued targeting of a customer segment

with lighter packages.

THANK YOU