Logan Murphy MANA 4101 Dr.

June-Young Kim April 2, 2013 Airborne Express Airborne Express margins were beginning to weaken. UPS and Federal Express began to launch a bunch of new services and pricing schemes. Industry analysts were saying that they were trying to sweep the corners of the market and could put the squeeze on Airborne Express. Airborne Express needs to figure out had to strengthen their margins and gain some market share on UPS and Federal Express. They also have to decide whether or not to implement a distancebased pricing plan. Looking at the case and the questions proposed, I used Porters Five Forces Model, a SWOT analysis, and a Resource and Capabilities analysis to get an idea of what to do. 1. Porters Five Forces Model of Attractiveness a. The threat of new entrants and barriers into the industry The cost of entering and becoming established in the industry is large enough to discourage potential firms from entering. Costs like technology, startup costs, and other costs that are incurred to be competitive in the industry. Also competitors lock suppliers up with more favorable contracts. Another barrier is the fact that this industry is heavily regulated. Profits can be hindered by long waits for approvals, inspections, increased security regulation, etc. Firms might be discouraged from entering the market because of fear of a price war or acts of aggression from the heavy hitters in the industry. b. Bargaining power of buyers - Most of Airbornes customers are business who they try to lock down to contracts. But these corporate accounts are constantly looking for the lowest prices, which forces the firms to offer

lower prices to stay competitive. c. Bargaining power of suppliers - Airborne relies on labor and labor unions, which could lower their profitability. They also rely on raw materials like fuel and vehicles like trucks and planes. The large companies that provide these things do not have that much power over Airborne. They do try to lock them down to exclusivity contracts. Airborne can also charge higher prices to infrequent users. d. Nature of rivalry within the Industry - The industry is highly concentrated. Price was the main form of competition. Airborne Express had a flexible price structure, way more than the two leaders, Federal Express and UPS. This was possible because of things like buying used aircrafts, reduced property taxes, nonunionized labor, etc. They passed the lower costs onto their customers. But after the UPS strike, customers realized it could be risky to rely on only one carrier, which will increase the industrys competitiveness. e. Threat of substitutes - The emergence of e-mails poses a threat to air-express transportation companies because it is way cheaper to e-mail documents than ship them. The case also states that customers were not loyal and just look for the best price. 2. SWOT Analysis Strengths They have their own cheap aircrafts. They reduce maintenance costs by handling their own repairs. Constantly improving customer service Strategic alliances with foreign agents to serve international market Advertising isnt as good as competitors

Weaknesses

 Threats

Dependent on other carriers for international delivery

Opportunities The acquisitions of better Boeings could lead to better operating efficiencies There is an increased demand in the international market Airborne Express cant compete with 10:30 am guaranteed delivery E-mail Fuel prices could increase costs greatly

3. Resources and Capability Analysis Airborne has its own airport, which is a tangible resource. They have a strong culture that is founded on frugality and functionality. This culture is preached from the top to the bottom and is ingrained into the employees. This helps the company because the employees are constantly trying to save time and money. An example is having the managers do their own clerical tasks. Airborne Express competitive advantage is their flexible cost structure. It is valuable because this industry has an elastic demand. It is also rare because other competitors are bogged down by bureaucracy, unionized labor, and most costs associated with flights. It is hard to imitate because UPS and Federal Express are too big to restructure their cost structure. It is exploitable because they know that customers are looking for the lowest prices and they can offer what the two top dogs cannot. Conclusion While Airbornes competitive advantage is their flexible cost structure, they cannot compete forever with low prices. They need to go after the international market harder, maybe start a joint venture to help with the costs. This will increase prices in the sort run but also increase customer service.