Airborne Express Group Presentation by: The Braves Spring 2008 Agenda History & Background: Jennifer Smith  Industry Overview: Jennifer Smith  Business Strategy & Analysis:Ryan.

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Transcript Airborne Express Group Presentation by: The Braves Spring 2008 Agenda History & Background: Jennifer Smith  Industry Overview: Jennifer Smith  Business Strategy & Analysis:Ryan.

Airborne Express
Group Presentation by: The Braves
Spring 2008
Agenda
History & Background: Jennifer Smith
 Industry Overview: Jennifer Smith
 Business Strategy & Analysis:Ryan McNulty
 Competitor Analysis: Pete Marcus
 DHL Today!: Ryan McNulty
 Conclusion & Recommendation:Pete Marcus

Airborne Express-An Overview
Headquarters-Originally Seattle,
with a hub in Wilmington,OH
 Formed by merger of 2 airfreight
carriers (in 1968-Airborne Freight
Corp)

1. The Airborne Flower Traffic Assoc. of
California
2. Pacific Air Freight
Airborne Express
-An Overview Continued……

Service Offerings

Letters and Packages
• Less than 1lbs to over 50 lbs.
• Overnight, morning, afternoon, and 2nd day
deliveries

Target Customers-(Prior to the 1980’s)


Business customers-EX: Xerox, IBM, & catalog
companies
Specifically ignored residential deliveries and
infrequent shippers
Airborne Express
-An Overview Continued
Shipments-900,000 packages &
documents daily
 Employees-12,700 full-time &
8,000 part-time employees
 Fleet

13,300 Vans
 175 aircraft (primarily purchase used
aircraft and refurbish them)

Industry-Overview



Competitors-mergers and consolidations
common (suppliers saturated market)
Technology-constantly changing
Market



Products & Services-dynamic and easily
imitable
Customer preferences-non-loyal, price
consciencious, convenience, habits
Growth Opportunities
• Domestic markets saturated, global opportunities
increasingly important.
Industry Revenues

Trend-Revenues declining

1985-Revenue per shipment
• Airborne-$19.37
• Fedex- $19.19

1990-1991
• Airborne- $11.43-10.78
• Fedex$16.76-17.33

1992-1997
• Airborne- $11.43-10.78
• Fedex$16.76-17.33
Airborne ExpressBusiness Strategies

Corporate


Business Level Strategies


Dominant Business diversification
Focused Cost Leadership
Strategy Analysis

External & Internal Factors
•
•
•
•
•
Technology
Market Share
Global Expansion
People/Culture
Marketing/Sales
Corporate Strategy

Dominant-business diversification

Single Business
• Majority of business
Shipping-95+%
Warehouse Space Rentals-Less than 10%
Business Level Strategy

Owned Airport Hub-Wilmington OH

• Reduced costs in landing fees, rental space
• Increased revenues renting & landing fees
from other airline business customers
Aircraft-filled to 80% capacity vs. Industry
• 65-70%

Focused Cost leadership • Lowest costs-Used airplanes, outsourcing, pickup &
delivery rates
• Different geographic markets- metro areas only
Focused Cost Leadership

Pricing

Overnight, morning delivery rates
• Airborne-$10.95-80.70
• Fedex- $13.86-86.86
• UPS$12.54-90.18

Overnight, afternoon delivery rates
• Airborne-$9.25-80.70
• Fedex- $12.04-82.54
• UPS$10.82-77.68*

Second-day delivery rates
• Airborne-$6.25-58.00
• Fedex- $8-54.89
• UPS$6.50-57.11
Focused Cost Leadership
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
Fedex
Weight
50
10
5
2
UPS
1
Le
tte
r
Price
Overnite, morning delivery
Airborne
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
Fedex
Weight
50
10
5
2
UPS
1
Le
tte
r
Price
Overnite, afternoon delivery
Airborne
$80.00
$60.00
$40.00
$20.00
$0.00
Fedex
Weight
50
10
5
2
UPS
1
Le
tte
r
Price
Second-day delivery
Airborne
Core Competencies &
Resources

External
Technology
 Market Share


Internal Factors

People & Culture
Technology



Airborne selectively invested in
technology, and let its rivals be
forerunners
Customers could trace packages on their
own, utilizing Airborne’s Freight On-Line
Control and Update System (FOCUS)
Airborne’s website was not as
sophisticated as it’s rivals

Customers could only track packages, but not
schedule pickup or create shipping paperwork
Market Share

Airborne was often overlooked


Many people used Fed Ex or UPS
By 1997, market share grew faster
than Fedex and UPS

Up to 16% of domestic express mail
market
People and Culture



Employees described Airborne as “Straightlaced,” “frugal,” and “very conservative”
Top executives answer their own telephones,
shield away from interviews, and discourage
fringe benefits
Company statements reflected modesty
Growth Trends-Outlook!
(in millions)
Revenues
Air borne Ex press -Financial Performance
$3,000
$2,000
$1,000
$0
1986
1990
1994
Years
Growth Trends-1986-1997

Airborne Express-Revenues

1986-1989: $2573-5167
• 101% increase

Airborne Express-Revenues

1990-1991: $7015-7688
• 9.6%*

Airborne Express-Revenues

1992-1997: $7550-11,520
• 50%
Global Expansion

Only 6% ($78 Million) of Total
Assets were invested internationally


Fed Ex -19% and UPS-12%
“There are no significant service
advantages which would justify the
operation of our own aircraft on
international routes”

Airborne used commercial airlines and
local partners for international shipping
Today- DHL

DHL acquired Airborne Express August 14, 2003




World’s largest international air express network
Available to over 220 countries worldwide
They own and operate the majority (2/3rds) of
offices worldwide


Global company-headquartered in London (Deutsche
Post World Net)
This is far greater than their competitors
Faster transit times, smooth customs clearance,
simplified billing, and effective shipping tracking
are a result of dedicated personnel
Competitor Analysis
Strengths
Concentration in metropolitan areas
 Owns airport
 Product Differentiation: 3 Ways

No Retail Service Centers
 Used Independent Contractors
 Cheaper but later delivery

OOPS
“ When it comes to technology,
Airborne doesn’t add on bells and
whistles. We use our competitors as
guinea pigs. Let them try out the
new stuff and see what works”.
Strengths

Concentration in metropolitan areas
Exploited Core competencies
 Owns airport


Product Differentiation: 3 Ways
No Retail Service Centers
 Used Independent Contractors
 Cheaper but later delivery

Weaknesses

Technology

Wages to their Employees

Efficiency and Reliability

Globalization
Analysis
Year 1986
FEDEX
Revenue
Year 1996
Revenue
8,620
542
132
669
13
13.80%
29.80%
15.20%
FEDEX
Change
Revenue
Net Income
Return on Equity
UPS
AIRBORNE
10,274
22,368
2,484
308
1146
27
12.80%
20.70%
6.50%
Net Income
Return on Equity
AIRBORNE
2,573
Net Income
Return on Equity
UPS
FEDEX
399%
233.33%
92.75%
UPS
AIRBORNE
259%
171.30%
69.46%
458%
207.69%
42.76%
Conclusions

Weaknesses counter-acted strengths

Metropolitan areas vs. Efficiency

Owns Airport vs. Globalization

Product Differentiation vs. Efficiency
Recommendations

Be a leader not a follower




Stay ahead of the competition
Know customers and what’s important to
them
Keep low price differentiation but not at
expense of efficiency
Continuous Improvement & Growth


Avoid being comfortable
Search for different markets/geographic
locations