December 31st, 2007
To: Robert Brazier & Senior Management Team of Airborne Express From: Strategic Analyst
Re: Recommendations and Implementations for recent issues in Airborne Express
Airborne Express has many options available for sustainable growth and success in the coming years. After the recent 29% increase in revenue over the past year, there are opportunities to take into consideration that will boost this growth for the fourth quarter. This company should join the “industry trend” of distance-based pricing. This will result in higher revenues, and will give Airborne Express a more substantial budget to merge with Roadway Package System in order to create a more technologically advanced tracking system. This will not only increase revenues, but will also gain customer support by offering a new service. Although the express-delivery industry is extremely difficult to differentiate, it is necessary for Airborne express to keep up with Federal Express and United Parcel Service to ensure they maintain a competitive advantage in the industry. While UPS is experiencing a strike, Airborne Express should take advantage of the distance-based pricing and possibly gain customers of UPS who saw RPS as a luxury service.
Mission of Airborne Express:
After the recent UPS strike, Airborne Express has experienced substantial financial results of a revenue increase of 29% over the previous year. The main concern for Airborne Express now is to recognize how secure their position currently is held in the industry. There are several ways to measure the success of this company, and I have found it most useful to use Porter’s Five Forces Model to analyze the options. I have focused mainly on whether or not Airborne Express should follow the path of their major competitors, UPS and Federal Express, and move toward distance-based pricing. Also, the approach that Airborne Express takes with the international market needs to be taken into consideration with a “variable-cost approach”. The Roadway Package System (RPS) partnership should be further analyzed and possibly made into a more concrete operation. Marketing, technology, and employee satisfaction should also be considered for the future success of this company. By focusing on distance-based pricing, maintaining international operations at a variable-cost approach, and forming more of an existent relationship with RPS, it will lead to a definitive strategy to sustain the competitive advantage of Airborne Express. Environmental Scanning of Airborne Express:
Rivalry: This industry consists of 3 major companies, including Airborne Express, Federal Express, and UPS. The prices between UPS and Federal Express cause severe competition between these companies. Revenue growth has been unstable within each company due to decreasing prices in order to reach the top of the competition. Innovations in this industry remain minimal, and they are easily copied by other players in the industry. This makes differentiating a difficult task, especially for Airborne Express. By using the competitors as guinea pigs, it will make it almost impossible to ever overcome it’s key competitors. Because the products are priced extremely low in this industry, producing return is based merely on a high volume of sales. It seems as if since 1990, when UPS and Federal Express began “price wars”, the attractiveness to this industry has declined.
Supplier Power: Lower industry attraction has also been a result of the main suppliers of this industry, the employees. The recent strike at UPS was caused by the employees demanding higher wages and benefits. The next most important supplier in this industry is airports, followed by fuel. These both are factors that this industry has little to no control over. Clearly, technology and other equipment supply a great deal to the express mail industry, and these factors are capable of being negotiated.
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