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Juan Perez Strategic Management
Juan Perez Strategic Management |Airborne Case 1 Strategic Management 6/7/2011
First Case Analysis: Airborne Express
Analysis of the Express Mail Industry: In order to have a clear understanding of Airborne’s position and to make recommendations about future moves, it is critical to examine the industry environment—competitors, customers, and suppliers—and examine the firm internally. To do so, the Porter’s five forces framework and a resource & capability analysis will be utilized. Threat of Substitutes: In today’s aggressive environment, product substitutes are regarded as one of the most threatening ...view middle of the document...
(For example, obtaining volume discounts for fuel used in airplanes and trucks). As widely known the airline industry is heavily regulates, this creates an effective barrier of entry for firms planning to enter the express mail industry. Long waits for approvals, tedious procedures and inspections discourage many potential entrants. Furthermore, as a consequence of the 2001 events of terrorism, governmental bodies increased the security and regulation of airfreight carriers, thus hindering the profitability and attractiveness of this industry. The final barrier of entry is retaliation from established firms. Potential entrants may fear that their entrance would trigger an aggressive response from United Parcel Service or Federal Express such as price cutting, increase advertising, sales promotion or litigation. A good example of aggressive retaliation, that happened in a similar industry during the late nineties, was the aggressive behavior adopted by American Airlines when several low cost carriers attempted to enter one of American’s hub—Dallas FortWorth. American matched their prices, increased supply and drove them out of business. Federal Express and United Parcel Service are in the position of taking similar actions if any new entrant threatens to disperse their market share. Industry Rivalry: The express mail industry is highly concentrated. The two main players have over 70% of the industry’s market share. The third player—Airborne—held 16%, and the other players were focused on international delivery rather than domestic express mailing. The remaining of market share was held by The United States Postal Service; however, it was prohibited by law from offering volume discount to large customers, could not track packages efficiently, and had an on-time record much worse than commercial carriers. Considering the elastic demand, rivalry was intense. The two main players constantly look for best practices to maintain their competitive edges. For instance, Federal Express devoted much of its resources to raise its quality standards both in operations and customer service. United Parcel Service Strategic Management |Airborne Case 3
followed by investing largely in technology. This allowed them to maintain at the competitive level of its archrival. There wasn’t a lot of diversity of competitors in this industry. Firms offered basically the same service: transport a good from Point A to Point B overnight. Although, they competed in different dimensions (For example, friendly websites that permitted customers to track their packages, extensive customer service, and 100% satisfaction guarantees), Price was the main mean of competition. Price competition allowed Airborne to survive and recently prosper in its industry. Airborne’s cost structure was significantly more flexible than Federal Express and United Parcel Service’s. The
following aspects highlight the advantages that Airborne had in respect to costs: (1)relying on part-time labor...