NOTES: AIRBORNE EXPRESS

- Written in 2007
- Overall results wer eincreasing
- Airborne had been the fastest growing compay in the industry for years, but tis margins
had been anemic
- Now, efforts to fatten those margins finally seemed to be taking hold

THE EXPRESS MAIL INDUSTRY IN THE UNITED STATES

- Physical delivery of the package was only part of the service offered to customers
- Can track packages en route
- Customers
- 2 million “current customers” in 1996
- Items shipped by express mail usually had a high ratio of value to weight and
were perishable in some sense of the word
- A number of factors influenced the decision to ship an item by express mail
rather than normal delivery, but the urgency of the shipment and price plaed
dominant roles
- Operations
- Each company maintained a large fleet of vans and drivers
- Packages were driven to the airport and placed in containers
- Cargo containers were trucked to a hanger filled with a maze of conveyor belts,
chutes, automated guide arms, and barcode scanners
- Hub facilities were massive
- Supporting the physical distribution network of each company was an extensive
infrastructure devoted to customer service and information management
- Competition
- Three major firms - federal express, united parcel service, and airborne express
- Serve dmore than 85% of the market
- DHL and TNT focused on the international market
- Competition came not noly from within the industry, but also from alternative
products

MAJOR COMPETITORS
- Federal express
- History
- Federal express virtually invested the express mail industry
- Operations
- By 1997, federal express had become a major enterprise with revenue of
$11.5 billion
- Its facilities spanned the globe, with eight huvs in the united states and
five more overseas
- Technology
 - Federal express was founded just as computers began to be used widely
in business, and the firm prided itself on its cutting-edge information and
logistics technology
- Marketing and sales
- Aggressive marketing had been the hallmark of the company since the
1970s
- People and culture
- Fred smith, still firmly in command of federal express in 1997, often
repeated the companies mantra: “people, service, profit… when people
are placed first, they will provide the highest possible service, and profits
will follow”
- Federal express emphasized communication throughout the company
- International ventures
- In 1985, federal express began to pursue fred smiths vision of global
delivery of express mail
UNITED PARCEL SERVICE
- History
- If federal express was the purple and organe company of the 1970s, united
parcel service was the pullman-brown firm fo an earlier, humbler america
- Through most its history, UPS viewed the united states postal service as its main
rival
- With rates heavily regulated, UPS focused relentlessly on reducing costs
- Operations
- Ni 1996, the 336,000 employees, 160,000 trucks, and roughly 500 aircraft of UPS
delivered 12 million parcels each day and generated revenue of more than $22
billion
- Technology
- UPS had made a determined effort to match federal express’s information
technology prowess, investing $3 billion in advanced technology between 19990
and 1995
- Marketing and sales
- Prior to the 1980s, UPS had no marketing department and did little or no
advertising
- By 1996, however, the press reported advertising campaigns of &80-100 million
- People and culture
- UPS prided itself on being “owned by managers and managed by owners”
- Stock in the corporation was not traded on public exchanges
- Rather, stock was issued to company managers who would hold onto it, sell it to
the company or to other managers, or bequeath it to heirs
- International operations
- Like federal express, UPS had invested heavily in constructing a global
distribution system

AIRBORNE EXPRESS
 - History
- The company was descended from two specialist airfreight carriers
- Early on, airborn targeted the business customer that regularly shipped a large
volume of urgent items, primarily to other business locations
- Operations
- With 12,700 full-time and 8,000 part-time employees, 13,300 vans, and a fleet of
175 aircraft, airborne express delivered roughly 900,000 packages and
documents each day
- Unlike federal express and UPS, airborne owned the airport that served as its
major hub
- Technology
- Airborne invested selectively in technology
- Marketing and sales
- Airborne did not advertise in the mass media
- Rather, it targeted logistics managers of major shippers, primarily via a
500-person sales force
- People and culture
- Airborne employees described the company as “strait-laced,” “frugal,” and “very
conservative”
- International operations
- Airbornes overseas ambitions were far more modest than the aims of federal
express or UPS

RPS RELATIONSHIP
- In 1995 and 1996, airborne began to forge a relationship with roadway package system
(RPS), a subsidiary of caliber systems
- The relationship between the two companies remained an arms-length affair, with joint
offers to customers on a case-bycase basis

AIRBORNES FUTURE
- In the wake of the UPS strike - and those terrific financial results - airbornes senior
management team paused to review its situation
- More tactically, should airborne follow the lead of UPS and federal express and move
toward distance-based pricing?
- A few features of the competitive landscape seemed to be shifting