Airborne Express Case

Topics: United Parcel Service, FedEx, Express mail Pages: 5 (1775 words) Published: May 9, 2012
1. From the point of view of the industry incumbents, is the express mail industry attractive? How has Airborne survived, and recently prospered, in its industry? Is its success attributable to its capabilities, its position, or industry attractiveness?

The express mail industry can easily be considered an inherently tough industry to operate within given the myriad of factors that come into play, such as unions, government regulations, cost of technological advancement, and international borders to name a few. Despite this, the industry could be seen as offering opportunities, which could be seized by attracting customers based on the quality of the service being offered. Consequently, this also encouraged mimicking between competitors to a certain degree, were they would endeavor to secure growth and market share by eliminating the competitors competitive advantage. This was highly contrasted in the services that Federal Express (Fedex) and United Parcel Service (UPS) provided and developed in the 80’s and 90’s. Once a competitor came up with a formula that attracted the attention of potential customers, other incumbents were compelled to follow suit with similar services, or better yet, an improved version. The industry required service providers to invest in a complex and expensive infrastructure to be competitive in the express mail market. To achieve sustainability and a numerable market share, high volumes were important regardless of the high cost of “fedexing”. However, since the items being shipped normally had a high ratio of value to weight, the rates were accepted by customers, making the industry attractive for its high turnover. The attractiveness of the industry can however be carped when on-time delivery guarantees, alleged US Postal Service market manipulation, and emergence of fax and later email technology are taken into consideration. Airborne Express (ABX) found its niche amongst the major players (Fedex and UPS) by identifying the company’s core capability of servicing a certain category of customers and sticking to them. This meant that ABX was selective in their customer base and even went as far as to cancel relatively sizable accounts, which did not match the accounts ABX was primarily focused on keeping. ABX’s main capability was to tailor their services to the needs of their customers and thus win large accounts that were vital to their growth. ABX positioned themselves as a low-cost service provider by operating frugally from their owned hub in Wilmington, Ohio where they also operated a free trade zone, allowing them to reduce landing fees and property tax. As their main competitors, Fedex and UPS, invested heavily in technology to improve their services, ABX chose to rely more on their workforce while the technology was being tested by the two giants. A choice of less expensive fleet of aircraft was yet another cost saving measure but all of the measures taken to save cost allowed ABX to offer the lowest prices amongst the industry leaders. ABX’s success can therefore be considered to be largely attributed to both the company’s capability to keep cost down and to select a client base which best matched their capabilities and tailoring to those needs. This can also be construed as optimal positioning since it can be argued that if ABX had targeted exactly the same customer base as Fedex and UPS, they could have been wiped out by higher cost and an even tougher competition.

2. Explain how Fred Smith was able to enter the express delivery industry?

Fred Smith identified the need for express mail to be carried on dedicated express mail carriers rather than continuing down the path it had done for decades i.e. being carried in the cargo hold of passenger aircraft. He saw and increasing demand for express mail to be delivered in a timely manner. This could not be done any longer by sending it on passenger aircraft that had schedules that were tailored to the...
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