Airborne Express Case
1. How has Airborne survived, and recently prospered in its industry? Please address why you think it was difficult for bigger competitors such as FedEx to imitate Airborne’s strategy. Although Airborne does not get the publicity that FedEx and UPS get, they have managed to remain the third largest player in the express mail industry. One unique aspect that has helped Airborne maintain a leading position in the industry is their ownership of an airport, which serves as their major hub. This is a huge advantage because they have complete control over the timing of each shipment and what comes in and out of the airport. Airborne also purchases and modifies used aircrafts, which saves costs and allows them to run roughly 15% more full than their competitors. Onsite at the airport, Airborne leases out warehouse space to their business customers, which allows for quick delivery on last minute orders. This is a unique offering in which their competitors cannot match without purchasing an airport. Another important aspect of Airborne that helps maintain their position in the industry is their selective process for choosing customers. Ray Berry, vice president of Field Services Administration at Airborne, was quoted stating, “We pick our kind of customer deliberately.” (Rivkin, 11) The company would purposely pass over business with customers who didn’t fit their vision. Airborne mainly targeted “the business customer that regularly ships a large volume of urgent offerings.” (Rivkin, 11) By targeting businesses with large volume shipments they were able to narrow down their target market to specific customers with specific needs. This also allowed them to save money in other parts of the business, such as marketing. Unlike its competitors, Airborne did not advertise in the mass media. Instead they “[targeted] logistic managers of major shippers, primarily via a 500-person sales force.” (Rivkin, 12) Their direct marketing approach allowed them to form relationships with their customers, which built loyalty and stronger ground for communication. Airborne also placed a large emphasis on cutting costs in their company. By contracting with 3PLs they were able to save up to 10% on pickup and delivery, compared to their competitors who use privately owned vans. The contractors were able to deliver more parcels per stop, which “reduced labor costs per unit by 20% for pickup and by 10% for delivery.” (Rivkin, 12) Not only did this aspect reduce costs, but it also saved the carriers’ time, which allowed for faster delivery. In the express mail industry reliable on-time delivery plays a large role in customer satisfaction rates. An industry expert estimated “96-97% of all Airborne shipments arrive on time.” (Rivkin, 12) To increase their reliability, Airborne set their next-morning delivery time an hour and a half after their competitors. Instead of following the industry norm they set a realistic time based on their capabilities to ensure dependable delivery. It would be difficult for bigger competitors, such as FedEx, to imitate Airborne’s strategy because they are already settled into a much different strategy. To match Airborne’s low costs they would be required to cut costs in areas of the company that a crucial to their reputation. For example, FedEx’s cutting edge innovations stand as a major building block for Airborne. Airborne doesn’t introduce new technology until they see a clear benefit for their customers. There is a drastic difference in costs of R&D and technology between Airborne and FedEx, but that is how each company functions. Without innovative technology FedEx wouldn’t be the company they are known as today. FedEx would also be forced to cut costs in areas such as employee wages and training, which would through off the culture of their firm.
2. Carefully apply the principles in the Judo Strategy article to Airborne Express. To what extent do you believe Airborne was using some of these