Custom «Airborne Express» Essay Paper Sample
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In an industry dominated by Federal Express and United Parcel Service (UPS), Airborne made a breakthrough to improve its positions and increase its prospects in the third quarter of 1997. Although Airborne Express gained a competitive advantage from the strike that had affected UPS, the strike only contributed a small fraction of its earning. Airborne Express business operation strategies had steadily improved in the third quarter of 1997, which led to the increase in the productivity gains margins in the United States express mail industry (“Airborne Express”, 2007). Research conducted regarding the United States express mail industry confirmed that the customers of this market considered relative price, reliability, and brand name as the main factors when making decisions. The customers also consider customer service, access to tracking and convenience of the dropping schedule when choosing an express mailing company to deliver their parcels (“Airborne Express”, 2007). Considering the market share of Airborne Express in the U.S express mail industry, this paper aims at Airborne’s competitive advantages and their consistency with both the external and internal structure of the company.
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Airborne Express sought to gain a competitive edge over its major competitors Federal Express and United Parcel Service. The UPS experienced a strike, which improved both Airborne Express and Federal Express’ competitive advantage over it since most of its customers shifted to its competitors. In addition to the strike challenge for UPS, which was a boost to Airborne Express competitive prospects, its major competitors had launched a new pricing policy.
Consequently, the new pricing policy adopted by UPS and Federal Express shifted their pricing from the traditional single pricing to distance-based pricing. Therefore, these two companies raised their long distance prices and lowered their short distance charges. The new pricing policy move played to the advantage of Airborne as the relative price was the primary factor determining the customers’ selection of a mailing company in the US express mailing industry. Additionally, unlike its major rivals, Airborne offers flexible prices to its clients (“Airborne Express”, 2007).
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Product Market Scope
Airborne Express served approximately 16% of the domestic express mailing industry as compared to the leading company, Federal Express that served roughly 46% of the local mailing industry. Unlike its competitors, Airborne Express was selective about the clients they served and services they offered. Airborne targeted customers that regularly shipped urgent items in high volumes. Airborne offered low and flexible prices as compared to its major competitors. Additionally, Airborne Express tailor made its services to meet the customers’ preference. The customization of services the services it offered helped it win major delivery contracts such as Xerox, Nike, Technicolor, and Compaq (“Airborne Express”, 2007). The customization of services enhances customer loyalty by increasing the client’s satisfaction, hence promoting competitive advantages over the rival companies in the industry (Wagner & Hollenbeck, 2014).
Moreover, the recipients and carriers of Airborne Express parcels were concentrated in the metropolitan areas. In should be noted that 80-85% of Airborne's operations were among the top 50 cities as compared to its competitors. For instance, Federal Express shipped below 60% of its parcels to the top 50 cities. Additionally, the greatest portion of Airborne's deliveries constituted the afternoon and second-day deliveries and, therefore, used trucks more often as compared to its major competitors. For long distance deliveries, its competitors used airplanes, which led to the increased operation cost (“Airborne Express”, 2007).
Value Chain Activities
Unlike its major competitors, Airborne Express owns an airport that serves as its principal hub. Therefore, the company does not pay landing fees and has the freedom to tailor-make its facility to serve its needs. Although Airborne faced the challenge of maintaining the airport and other facility expenses, the airport reduced their overall operating cost. Additionally, the airport harbored its warehouse leased to Airborne’s retailer customers and it could take orders as late as 2 AM and deliver the goods via Airborne. Although Federal Express and UPS offered similar services, Airborne had a competitive advantage since it ran the warehouse in its airport's site. In addition, due to its status as a Community Reinvestment Act, the airport enjoyed a reduction in property taxes (“Airborne Express”, 2007).
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Regarding pickups and deliveries, Airborne Express was different from its primary competitors Federal Express and UPS. First, Airborne Express only owned a fraction of its shipping vans. Secondly, Airborne Express did not own retail service centers. However, it held approximately 11,000 drop-off boxes. Independent contractors were hired and paid per mile or some parcels delivered. The contractors handled nearly 65% of the deliveries, and that reduced the operating cost by 10% (“Airborne Express”, 2007).
Unlike Federal Express and UPS, who promised next day delivery by 10.30 AM, Airborne Express pledged to offer next day deliveries before noon. Therefore, Airborne had more time to make the deliveries and maintained higher on-time deliveries than its competitors. Moreover, an Airborne Express driver picked up and delivered more parcels than a Federal Express courier per stop. Consequently, the droppings resulted in the reduced labor cost per unit by 10% for deliveries and 20% for pickups (“Airborne Express”, 2007).
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Airborne Express did not invest sufficiently in technology as compared to its major competitors. Although Airborne did not use the manual data entry system, their system only allowed clients to track the shipment process, but one could not create shipping paperwork or schedule parcel pickups. Airborne competitors, on the other hand, offered many functions on their internet sites and software systems.
Unlike its competitors, Airborne did not invest in mass media advertisements. The company used the logistics managers of major merchants as their advertising and sales agents. The managers had the freedom to set prices and they were compensated generously based on sales volume. Airborne Express encouraged higher sales margin products (“Airborne Express”, 2007). Airborne Express maintains a conservative culture in its operations. The company remained skeptical on international operations investing only 6% of their assets concerning operation activities as compared to UPS and Federal Express with an investment of 12% and 19% respectively in 1996 (“Airborne Express”, 2007).
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External Consistency Test
Airborne’s flexible pricing policy is consistent with the market demands. Therefore, Airborne is well positioned to claim a larger portion of the customers since most of the customers are price sensitive. Additionally, due to its customer and service selective strategy, Airborne is well suited to claim a larger market share since the clients in the U.S mail industry are time sensitive. Efficient customer service is paramount in ensuring the increased market share for any particular company (Rego, Morgan, & Fornell, 2013). The customers in the U.S express mail industry value convenience in deliveries. Therefore, time is a vital factor when making their purchasing decision (Barney, 2012). The current strategy of hiring contractors to make the deliveries suits the customers' needs since the contractors are well positioned to make timely droppings.
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However, the technology employed by Airborne Express does not serve consumers as effective as its main competitors. The system is more likely to limit the customers' access to information regarding their parcel shipping. Since the customers in the express mail industry value convenience and access to tracking, it is more liable to decrease their competitive advantage. Airborne relies on logistics managers for their advertisements.
Internal Consistency Test
Airborne’s pricing policy is consistent with its internal structure. Since Airborne targets businesses that ship urgent products and do that in high volumes, it is easy to negotiate prices with these kinds of customers. The reduced rates lead to the increased customer attraction and consequently larger market share (Schilke, 2014). Additionally, due to its flexible pricing policy, the logistics managers are well positioned to offer discounts to the customers as an advertisement strategy. Airborne's policy of using contractors to make its deliveries is consistent with its internal structure. The policy is beneficial to the company since the contractors can make more deliveries on a single stop than its competitors, hence reducing the labor cost. In addition, due to the concentration of its target customers around the major cities, Airborne's distributions reduce operation cost incurred.
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Due to its strategic selection of customers to serve and the area of operation, Airborne is well positioned to offer timely deliveries. The strategy also fits well with the company's mode of transactions since Airborne makes more than 60% of its deliveries using trucks. This strategy is sustainable since it increases Airborne’s reliability, which promotes customer loyalty.
The technology used by Airborne is not sustainable as it limits the customers' access to the relevant information. The sustainability of business strategies is critical in ensuring that the company is well positioned to serve its customers better both in the short-run and in the long term (Rothaermel, 2015).
Although the current advertising strategy of using logistics managers to market the company’s services seems to be effective based on the company’s success over the past few years, it is not as efficient as mass media in the long-run. Mass media advertising is a better strategy to reach more people than their current approach of using logistics managers (Chiarini, & Douglas, 2015). Therefore, this strategy is not sustainable, and consequently, Airborne needs to adopt mass media advertising.
Lastly, the company’s strategy of using hired trucks to make its deliveries is not sustainable even though it is effective currently. Airborne’s competitors use airplanes to make most of their deliveries, so they are well positioned to offer better delivery hours than Airborne.
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Based on Airborne Express business strategy, one should say that the company is well placed to claim a competitive advantage over its major competitors. Airborne's competitive advantages are well consistent with its internal and external structure, but some of them are not sustainable since its competitors also adopt them. Therefore, Airborne Express needs to change some of its strategies that cannot stand the test of time to ensure that they are tailor made to suit the customers' preference. Customer satisfaction leads to the client loyalty that, in turn, translates into increased competitive advantage over major rivals on the market.