Sesugh Ubwa

Professor Snyder
Airborne Express Case
October 5, 2015

VALUE CHAIN for Express Mail Industry

Airborne Express FedEx UPS

Product line Mail, and express Mail, and express Mail, and express
mail delivery mail delivery mail delivery service
service service
Target customer Business customer Segment sending Delivery arm of
segment segment. ignored small mail. major department
stores.
Summary of First in the market First in the market Second in the market
product-market with 16% market with 45% market with 25% market
positioning share. share. share.
Pickup & delivery Pickup – customers Pickup- FedEx Pickup- customers
(inbound & send packaged in, started a pickup dropped off
outbound logistics) and they’re flown service of packages, packages; pickup did
into the hub. and took them to not start until later.
Delivery: 60 – 70% truck sites or hubs. Delivery: packages
packages handled Delivery: packages were flown from hub
by contractors are were flown from sites or transported
shipped fro the hub hub sites or by road by trucks to
to final destination. transported by road final destination.
by trucks
Air & hub Owned their air Memphis, Hub in Louisville,
operations hub, making for Tennessee airport. Kentucky.
better operations.

Marketing & sales No mass marketing 138 million in 80-100 million on

or sales. advertising and advertising and
deployment of 2,700 account
1,100 sales reps executive.
Customer service Express delivery of Express delivery of Express delivery of
packages. packages. packages.
Customer service Customer service Customer service
agents. lines. Surveys. lines.
Information FOCUS – freight COSMOS, DADS, Over 3 billion spent
Technology online control and UNIX to match FedEx
update system. technology.
Firm infrastructure Air command base, 1,400 retail sites Technologically
& HR mgt Wilmington Ohio. and 32,000 drop-off advanced Automated
boxes overseen in facilities. Hub in
general by Kentucky.
 managers
Procurement

Internal operations 13,500 employees 129,000 employees 336,000 employees

13,300 vans 38,000 vehicles 160,000 trucks
175 aircraft 600 aircraft 500 aircraft
900,000 packages 1,200,000 packages 1,600,000 packages
delivered each day. delivered each day delivered each day.

Item FedEx Airborne

Cost/unit cost/unit FedEx and Airborne cost structure
Pickup per unit
Labor $1.09 $0.87
Fuel $0.07 $0.06
Maintenance
& Depreciation $0.21 $0.19
Subtotal $1.37 $1.12

Long-haul transport
Flight-&
trucking-
related $2.44 $2.07
Hub labor $0.30 $0.26
Hub
depreciation $0.25 $0.21
Subtotal $2.99 $2.54
Delivery
Labor $1.64 $1.48
Fuel $0.10 $0.09
Maintenance &
Depreciation $0.31 $0.28
Subtotal $2.05 $1.85
Advertising $0.22 $0.00
Sales $0.21 $0.18
Info technology $0.54 $0.00
Customer service $0.20 $0.01
Corporate overhead $0.97 $0.88
Total Cost $8.55 $6.59
Margin $0.45 $4.36
Price $9.00* $10.95

Effect of Porters Five Forces

Threat of new entrants: LOW
Threat of buyer power: HIGH
Threat of substitutes: HIGH
Intensity of Rivalry: MODERATE
Threat of supplier power: MODERATE
Analysis of cost
Analyzing the cost structure of Airborne, they have been able to maintain a low
cost structure and high profits but the have still not been able to stand against the 2
Gorillas (FedEx and UPS). In the cost per unit in total for pick-up, long haul
transportation and delivery Airborne have been able to have lower costs than FedEx, but
in the total cost the have charged higher than FedEx, which have helped them to have
lower costs and higher profits. This affects the customer’s willingness to pay without a
doubt. As seen from the porter’s five forces the buyer power is high so if Airborne can
position itself stronger and offer superior value then they will capture more of the market
share. They definitely need to do a couple of things to improve their positioning in the
market, and these are:
 In order for Airborne Express to strengthen their position in the industry, they
need to obtain an acquisition or merge with another company in some way. This
could very much be a merger with RPS. Since RPS already have an existing
relationship with UPS and have deep inroads into their customer base, if Airborne
merge with RPS then they can tap into the customer base of UPS and by this
strengthen their position in the industry. Apart from this, the merger would be a
mutually beneficial relationship. This will be so because, Airborne becoming
stronger in the market will automatically spillover to RPS and make them more
known and stronger too. Furthermore Airborne will get access to RPS’s
information and tracking capabilities. This information could very well be about
some areas of their competition (UPS) which will help them position themselves
better in the face of competition and react better to competitive situations and
make the best decisions.

 Furthermore in order for Airborne to become stronger they have to improve their
ground transportation. FedEx and UPS are really scraping up the profits from
ground transportation, so what airborne need to do is reduce the expensive
transportation by flights and utilize road transportation and also capitalize on the
high profits that can be received from this mode of transportation.
  From the value chain above we can see that they do not spend on marketing and
mass sales. This is definitely an opportunity for them to capitalize on and make
some more profits by making themselves more and better known. The two
gorillas spend a cumulative of 230 million n advertising. They would not be
spending this much if there was no positive ROI (return on investment).

 While Airborne does have international presence, the other two gorillas have way
more presence in more countries and bigger and wider operations. If Airborne
expand to more countries and make their operations wider internationally, they
will be able to strengthen their position in the industry and make more profits.

As a CEO in a Firm of a competitive industry

As a Christian and a CEO in a very competitive industry, I would view my
competitors as positive influences to make my company better and avenues for great and
better development. This depends however, on whether these firms competing against me
are practicing healthy competition or unhealthy competition. For example, my dad runs a
transport company back in Nigeria and his competitors practice unhealthy competition by
engaging in illegal activities to drive my dad out of business. For example three other
transport companies all come together an decided to set a lower price than my dad’s firm
and actually take a loss for a year just so my da could be run out of business. It is hard to
view companies positively in a competitive environment when they do things such as
this, but regardless as a Christian CEO, I should make decisions and view these
competitors in a positive light.
As a CEO my obligation to shareholders, stakeholders and employees of the firm is
to make the best and legal decisions that will raise the company to greater heights and
bring good returns to the creditors/investors. I will also have the responsibility to make
sure that there is faithful representation while preparing financials and making ethical
decisions. Also giving employees a good benefit system would be ideal. Employees need
to have incentive to stay at a company, so if there are good pensions, life insurance,
disability income, and bonuses it will beneficial to my employees.
Depending on the industry that I am in, my objective will come from my mission
and vision for the company. But the main objective would be to provide the best goods
and services that that industry provides, by making the right decisions procuring the best
of results and profits.
 Work Cited
Airborne Express. “About us, Responsibilities”. Accessed October 3, 2015.
https://www.abxair.com/about/airborne-history.cfm

Rivkin W. Jan. “Airborne Express”. Harvard Business School. Harvard Business School
Publishing. 1998.

Dor Shaish. “Airborne Express”. Accessed October 3, 2015.

https://prezi.com/43d5ywkf4qxp/airborne-express/