Airborne Express: Harvard Business School case.

Harvard Business School Airborne Express Case Study Q1. How and why has the express mail industry structure evolved in recent years? How have the changes affected small competitors?

market. This suggests that the company is highly influenced by the condition of the U.S. economy. UPS is currently in a strong position in terms of increasing shipping volumes (directly affecting the domestic segment) as a result of the improving economic climate and increase in consumer spending. Although the U.S. economy is progressing, consumers remain weary and tend to limit their spending and prefer lower-cost alternatives. The price of raw materials is also a significant factor. Oil prices in particular are highly volatile and a number of external factors such as foreign exchange fluctuations, foreign policy agendas, and supply and demand levels from emerging markets all affect dramatic price changes. The U.S. Energy Information Administration estimates 2016 fuel prices will decrease from the previous year, to a predicted price per gallon of $2.38 (Investopedia). As companies like UPS take initiatives to cut costs and maintain efficiency, profit margins have increased from 11.9% in 2011 to an estimated 13.5% in 2016. This increase is a result of implementations such as UPS’s Worldport expansion of utilizing more “fuel-efficient aircrafts to help lower operating costs” (IBIS). With the increase use of e-commerce platforms, U.S. consumers have access to more information than ever before—allowing them to make more informed purchase decisions. Technology has allowed

UPS Strike      In early August of 1997 the United Parcel Service (UPS) had a predicament on its hands, a teamsters strike. UPS, the world’s largest package distribution company was coming off a year [1996] in which they reported sales of $22.4 billion. UPS Employed 75,000 management and non-union employees compared with 185,000 teamsters who are part of the AFL-CIO that were going on strike. The teamsters rejected a contract extension offer from the company leaving the fate of millions of packages carrying everything from lobsters to laser printers up in the air (Johnson).

Airborne Express: Analysis of HBS Case Study Q1) 1. Threat of New Entry For the US Express Mail industry, the overall threat of new entry is very low. The following list and explanation captures the difficulty an entrepreneur might face in trying to penetrate the express mail market: *

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.

Executive Summary JetBlue Airways, the latest entrant in the airlines industry has gone through the initial stages (entrepreneurial and collectivity) of the organizational life cycle rapidly under the successful leadership of David Neelman. JetBlue Airways is currently in the formalization stage of the life cycle where in it needs to create procedures and control systems to effectively manage its growth. Also as it proceeds to grow further to reach the elaboration stage, JetBlue needs to continue to align itself with the environment in order to maintain its sustained growth.

In 2009 FedEx launched a multimillion –dollar campaign aimed at its rival UPS, “Why is mega-corporation UPS trying to use its political clout to get a bailout from the U.S. Congress, leaving you to pay the tab”. Rival UPS calls FedEx the only company in the transportation industry with ‘ground’ employees covered by a railroad and airline law. Most of the forces are from moderate to low besides the threat of intense rivalry which signals that this is an attractive industry to be within.

Exhibit: Five Forces Outline 1. Barriers to Entry—Medium to High for the following reasons: 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.

______________________________________________________________________________ Executive Summary: Airborne Express the current underdog in the express mail business has been able to compete with market leaders due to innovation and optimization strategy. The company built on cutting cost and emphasizing reliability now faces pressure from the leaders UPS and FedEx to change their pricing strategy. This change from standard rate pricing to distance-based pricing puts Airborne in a dilemma in which they must choose to match the competition which will make them lose what sets them apart in the market or stay with the current strategy. Changing will increase their flexibility and could open them up to new consumers while staying the same

1. What led UPS to pursue an integrated marketing communications approach? What was the promotional objective as it repositioned itself in the "synchronized commerce" marketspace? UPS has been in the package delivery business for 95 years, providing services to businesses and consumers worldwide in more than 200 countries. In 1994,

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.

Industry Analysis As the world’s largest package delivery company and a leading global provider of specialized transportation and logistics services, UPS, continues to develop the frontiers of logistics, supply chain management and e-commerce combing the flow of goods, information and funds. This past October UPS Logistics Solutions was voted #1 logistics provider by Logistics Solutions. When conducting an industry analysis, it is important to explain the competitive forces model (CFM) of UPS. The first component of competitive forces model are the customers. Their customers consist of business organizations, and the general public. The second CFM component is competition. UPS have a lot of competition in its field, but the most competitive company is FedEx. Since FedEx provides the same services as UPS; both are neck to neck in competition, but UPS has an established history, and because of that, they have more loyal customers, and they are worldly known. They have established them-selves as the elite, with their commercial on television. Showing how they can deliver from one place to another with same day delivery and

Question 2: How is the industry structure changing in 1979? Are the changes for the better or the worse?

Abstract This paper is about United Parcel Service (UPS). The company is described, with specific reference to the nature of its service offering. UPS is an international firm, and as such there is discussion of the different countries in which it operates. The focal point of the paper is an

 Real World Internet Activity 1. Use the Internet to compare the current status of FedEx, UPS, and DHL in terms of revenue, profitability, parcels delivered, and other measures of business success. Who is winning the competitive battle? Why?