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Air borne Ex press. 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

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AirborneExpress

Group Presentation by: The Braves

Spring 2008


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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


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AirborneExpress-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


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AirborneExpress-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


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AirborneExpress-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)


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Industry-Overview

  • Competitors-mergers and consolidations common (suppliers saturated market)

  • Technology-constantly changing

  • Market

    • Products & Services-dynamic and easily imitable

    • Customerpreferences-non-loyal, price consciencious, convenience, habits

    • Growth Opportunities

      • Domestic markets saturated, global opportunities increasingly important.


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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


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AirborneExpress- Business Strategies

  • Corporate

    • Dominant Business diversification

  • Business Level Strategies

    • Focused Cost Leadership

  • Strategy Analysis

    • External & Internal Factors

      • Technology

      • Market Share

      • Global Expansion

      • People/Culture

      • Marketing/Sales


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Corporate Strategy

  • Dominant-business diversification

    • Single Business

      • Majority of business

        Shipping-95+%

        Warehouse Space Rentals-Less than 10%


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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


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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


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Focused Cost Leadership


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Core Competencies & Resources

  • External

    • Technology

    • Market Share

  • Internal Factors

    • People & Culture


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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


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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


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People and Culture

  • Employees described Airborne as “Straight-laced,” “frugal,” and “very conservative”

  • Top executives answer their own telephones, shield away from interviews, and discourage fringe benefits

  • Company statements reflected modesty


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Growth Trends-Outlook!


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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%


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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


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Today- DHL

  • DHL acquired Airborne Express August 14, 2003

    • Global company-headquartered in London (Deutsche Post World Net)

  • World’s largest international air express network

  • Available to over 220 countries worldwide

  • They own and operate the majority (2/3rds) of offices worldwide

    • 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


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Competitor Analysis Strengths

  • Concentration in metropolitan areas

  • Owns airport

  • Product Differentiation: 3 Ways

    • No Retail Service Centers

    • Used Independent Contractors

    • Cheaper but later delivery


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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”.


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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


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Weaknesses

  • Technology

  • Wages to their Employees

  • Efficiency and Reliability

  • Globalization


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Analysis


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Conclusions

  • Weaknesses counter-acted strengths

    • Metropolitan areas vs. Efficiency

    • Owns Airport vs. Globalization

    • Product Differentiation vs. Efficiency


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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


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