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