Airborne Case Study

In July 2009, the Government Accountability Office (GAO) listed the budget of the United States Postal Service as “high risk” and recommended oversight from Congress and the Executive Branch. Specifically, the GAO stated that “Amid challenging economic conditions and a changing business environment, USPS is facing a deteriorating financial situation in which it does not expect to cover its expenses and financial obligations in fiscal years 2009 and 2010” (“Restructuring”, 2009, pg. 1). The GAO claimed that the mail volume in 2009 would likely decrease by about 28 billion as compared to 2008 and that the USPS would likely see declining volumes for the next five years (“Restructuring”, 2009, pg. 1). Clearly, the USPS is currently facing a

If I were the current CEO for the United States Postal Service, I would be gravely concerned about the future of my business, as it has recently taken a steep plummet from its success and popularity in the 19th and 20th centuries. The USPS is now faced with the decision to renovate itself due to the extreme loss of business as technology takes over the 21st Century. Some say that the USPS should be entirely reconstructed because the business is only headed further downhill, while others say that paper mail is still very practical, more so than e-mail, and we must each write more letters to do our part in reviving the business to profitability again. Because the USPS has been such a vital part of our country through

Royal  Mail  is  the  largest  provider  of  postal  services  in  the  United  Kingdom  and   one  of  the  largest  postal  service  providers  in  the  world.  This  paper  analyzes

a) Economies of scale—the top three carriers (Federal Express, UPS, and Airborne Express) serve slightly more than 85% of the domestic express mail market. All three carriers deliver a high volume of packages, and thus, are able to spread fixed costs over more units. Also, each carrier has integrated technological systems that improved operational efficiency. In addition, intensive training programs of employees increase service and delivery efficiency.

FedEx’s new product Courier Pak makes sense because of its’ high profit margin and potential to generate new volume. Out of the 3 services that Fed Ex provides, CP yields the highest profit margin at 66% while Priority-One is at 55% and SAS is only at 27%. In addition to this, the company believes that it will be able to boost up sale of CP from 1300 to 6000 packages per day. This shows that CP is the most profitable and huge potential for growth.

Airborne Express has long differentiated itself in the market by structuring itself as a big business only carrier. They have specialized in large unit deliveries through metropolitan areas. Everything they do is aimed to optimize the delivery process and slash cost where ever possible. However, Airborne is now faced with a huge decision. They must decide whether to step away from their differentiation strategy to match the new pricing tactics of the market UPS and FedEx or to continue the old norm of delivery pricing. The new distance-based pricing strategy threatens Airborne’s consistent strategy to cut prices. Clients will seek to ship packages at the lowest cost. The short distance deliveries will be ruled by UPS and FedEx since they are the once who are

The US express mail industry is highly consolidated. 85% of the market is served by 3 service providers. There are six second tier players who serve the remaining 15%. FedEx and UPS lead the industry in services and innovation. The following trends have been observed in this Industry.

FedEx has not fared as well as UPS in financial performances. FedEx¡¦s total revenue has grown 60% from 1996 to 1999 while their net income has doubled in the same period. FedEx¡¦s acquisition of RPS will challenge UPS for the ground delivery business and affect the sustainability of UPS¡¦s advantage in the ground deliver business. FedEx has been competing well in the higher-end, high-service segment of the package delivery market. Although, digitations of documents and emergence of electronic signatures is threatening the express business which FedEx has the advantage over UPS.

The industry is defined as the Domestic US Express Mail industry. This includes overnight and second day delivery. In order to assess the attractiveness of the industry, a Porters' Five Forces analysis has been conducted as follows.

Fourthly, The Airborne maintained low prices, provided tailored services and achieved higher efficiencies and lower cost in order to long run and remain competitive in the market. So, Airborne targeted business customers who shipped frequently and was able to better serve them through repetition and experience including using customization codes to provide tailored service to specific large business accounts. Moreover, Airborne had a high concentration of customers in metropolitan area and a high percentage of afternoon and second day deliveries, permitting it to use ground shipping more often than its competitors and save up to two-thirds the cost of air shipping (Exhibit 8). Finally, Airborne had total control of its airport hub, which is design as per the needs and expand to enclose warehouse space for its business customers. Furthermore, Airborne achieved greater efficiency in its shipping by utilizing 80% of shipping space therefore; Airborne lowered cost not having retail service centers, using independent contractor van services and it was more efficient by picking up and delivering more parcels per stop than FedEx. Hence, Airborne becomes a stronger competitor in the market due to low prices and provided excellent service to the customers.

In the past there was no thing as overnight express delivery for packages or freight. Then the top 3 competitors in the delivery service industry that held 85% of the market were Airborne Express (AE), United Parcel Service (UPS) and Federal Express (FedEx) and, the remaining market share was among six second-tier companies. In the past few years, the express mail businesses had grown extremely fast due to the ability to provide and fulfill overnight shipping accompanied by next-morning delivery services for both individuals and businesses customers. By 1996, this segment of the expedited shipment delivery had grown to a $16-17 billion dollar industry business in the US alone.

FedEx has two major customers who consist of businesses and individual customers. These business customers have accounts with FedEx to arrive at their location to pick up packages daily or weekly. Two-thirds of FedEx’s business comes from these customers so FedEx curves their operations to satisfy this clientele. Since FedEx’s competition is trying to acquire some of this clientele they have begun to operate and market to this clientele more effectively. Individual customers are also in FedEx’s internal environment. These customers represent one-third of their business. With increased competition from competitors FedEx has marketed to this market substantially. They have created boxes that are prepaid for shipment as long as the contents fit into the box. This has effectively increased business amongst individual customers for FedEx.

In any organization, financial analysis is one of the most basic parts of evaluation of a company operation in any business environment. As businesses operate, it is very important that the managers know the real environment for which a firm carries out its activities. The competitions evident in the market are substantial to the decision making process of a firm. Also, firms need to give much attention to the market forces of a particular industry to make sure that they are able to make these forces turn to their advantage. This paper will indicate the UPS 's bussiness enviroment, porter’s five forces, trends in the package delivery industry ,factors for success in the UPS 's industry, UPS 's relative strengths, the appropriate benchmark companies for valuation purposes, and the UPS 's accounting policies and methods,.

UPS and FedEx are the leading parcel carriers in the U.S. FedEx has significantly expanded their capability to compete with UPS’s dominant ground delivery service.

In this report we focus on the two main competitors in the package delivery industry: Federal Express Corporation (FedEx) and United Parcel Service of America, Inc.