Airborne Express
-
Upload
jeeshan-mahfooz -
Category
Education
-
view
109 -
download
1
Transcript of Airborne Express
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