Airborne Express 10

Topics: FedEx, Express mail, Deutsche Post Pages: 2 (459 words) Published: August 8, 2008
How and why has the structure of the express mail industry changed?

As express mail has become more commonplace it has become increasingly difficult for companies to maintain revenue growth. The top three companies serve over 85% of the market and competition is fierce. In addition, six second-tier players were hungry to make inroads and competition from the Post Office and even e-mail made prospects for large increases in volume unlikely. Investments in overseas markets mostly failed to pay-off. And since the highly publicized labor problems experienced by UPS, it was no longer practical to expect customers to be loyal to any single delivery company.

In order to attract customers, companies were forced to offer many new services, invest heavily on capital-intensive facilities, and improve customer service while at the same time dropping prices to match those of competitors. Margins suffered and prospects for growth were low. Companies increasingly turned to exploiting niches, “sweep the corners of the market” and to new pricing schemes.

What can Robert Brazier do to strengthen Airborne Express’s position?

Automation. Airborne relies less on automation than it’s competitors. And while it also enjoys lower labor cost due to less union participation I believe that it can deliver significant reductions in cost by incorporating more automation. This is especially true since many of the processes have been in use by competitors and would not entail high R&D costs. Automation would also help play up one of it’s other strengths. Airborne runs aircraft 80% full compared to 65-70% for competitors. It may be possible to strengthen this even further with automated sorting and better tracking software.

Moving to distance-based pricing. Failing to follow in their competitors footsteps means that Airborne would be much more attractive as a coast-to-coast shipper via their fleet of planes. Currently, 30% of their volume was second day and...
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