Airborne Case Study Essay

Q1. How and why has the express mail industry building evolved in recent years? How have the changes affected sm entirely competitors? The take mail industry in the united States had a volume of $16-17 gazillion on expedited despatchs in the year 1996. In the years before shipment volumes has risen 15-20% per year. However due to higher competition prices have move which resulted in a rise of only 10-15% in total revenues. As an example of this stands the revenue and the operating margin of the biggest player that make up 45% of the tradeplace. federal Express revenue has more than quadrupled in the ten dollar bill years prior(prenominal) 1996, however its operating margin has more than halved. (Exhibit 2) The annex in shipments is partly due to lower prices, which makes it more attractive for businesses to map shipments more frequently and reduce stocks and inventory to compete on the hindquarters of time to market. Also the price sensitive businesses of catalogue retai lers required urgent shipment. In order to cope with the quickly growing numbers of packages (1997 Federal Express delivered 2. million packages a day), the companies started using their own airplanes rather than using commercial airlines to do the job for them.Processes have be lessen highly automated, commencement with hand-held computers that give from each one parcel its own barcode to track it at each stage of its journey. The information is then passed on to central computers that take into account customers to follow its deliveries online. Hub facilities ar ever growing now being adapted to sort up to 300,000 packages per hour (UBS hub). Due to high automatization and low margins in the industry it becomes increasingly difficult for routine-tier players to survive in the market.Since 85% of the market are in the hand of the three major players Federal Express, United Parcel Service and mobile Express, the six second tier players had to get word their niche in the m arket. DHL specified on the international market. The company is li adapted for 40% of all trans-border express shipments in America, which makes up to 80% of DHLs shipments. DHL is also the specialist for services that include fast shipments to the far and heavy(p) to reach corners of the world, with hubs situated in Nairobi and Bahrain.TNTs strain lies on international markets as well, however focuses its efforts on Europe. Another second tier player is BAX Global who specialized in business-to-business heavy cargo. early BAX Global was focused on the market for all-night letters, which resulted in enceinte losses, till the strategy was shifted towards heavy cargo. The company RPS does not offer overnight delivery but focuses on two-day delivery and a cheap assort network with a sophisticated information technology, targeting price-sensitive business customers.Q2.How has Airborne survived, and latterly prospered, in express mail industry? In the fife years prior 1997 Airbo rne Express has grown faster than its two bigger rivals, braggy it about 16% of domestic express mail market piece of land in 1997. Airborne has achieved this by a couple of measures that allowed it to keep its cost down and guaranteed Airborne Express success in its niche. One of the cay decisions of Airborne Express was to target regularly shipping business customers and designedly passing over residential deliveries and infrequent shippers.Ray Berry, vice professorship of Field Services Administration, commented this selection of customers Since we cant be all things to all people, we pick our kind of customer deliberately. And it has payed off 1997 Airborne delivered 900,000 packages and documents each day. As a major hub for this serves an airbase in Wilmington, Ohio. In contrast to its competitors Airborne Express owns the airport, which brings some advantages. For example leases Airborne Express warehouse seat on the airport to businesses, allowing them to ship mercha ndize the next day even if orders come in as late as 2AM.Another key operator for low costs is that Airborne Express relies less on mechanization and more on its human workforce than its competitors hiring low part-time employees with pay of $7 per hours. Airborne Express air fleet distinguishes itself also from the competition. By primarily buying used aircrafts costs are held down. Also the aircrafts are on average 80% loaded compared to 60% for Federal Express. moreover Airborne Express tries to avoid using airplanes whenever possible, resulting in 30% of non-air deliveries compared to 15% non-air deliveries at Federal Express.Since the cost of non-air deliveries is estimated to be only 1/3 of the cost of air deliveries, this depicts how well Airborne Express is able to but money. Another cost reducing factor are independent contractors engage for parcel pick up or delivery that save approximately 10% of costs compared to company employees. Airborne Express Marketing and sales team does not invest in costly wide track advertising campaigns, but rather invest in advertising targeting logistical managers of major shippers.Known for its low prices it tries to pull customers, large businesses, with a 500-person sales force and the promise to tailor the services needed for its customers with solution-oriented approaches. Last but not least Airborne Express started to forge a descent with RPS, an expert for cheap ground deliveries, trying to gain synergies and being able to offer integrated solutions on a case-by-case basis for customers.Q3. What would you urge Robert Brazier, Airbornes President and COO, to do in order to corroborate the companys position?As the world moves closer in concert and quick logistics and transportation are getting more and more important, the planetary express mail market is still growing. In order to solid growth and market share we would advise Airborne Express to contend forward the relationship with RPS, maybe con sider a merger, to fully gain the synergies. Also it is of key importance to strengthen the position in the market by gaining new customers, providing them with worldwide flexible, solution-oriented express services in the B2B area. This could be achieved by gradually increasing international activities on a customer case-to-case basis.