1. Airborne Express
Group Presentation by: The Braves
Spring 2008

2. Agenda History & Background: Jennifer Smith
Industry Overview: Jennifer Smith
Business Strategy & Analysis:Ryan McNulty
Competitor Analysis: Pete Marcus
DHL Today!: Ryan McNulty
Conclusion & Recommendation:Pete Marcus

3. Airborne Express-An Overview
Headquarters-Originally Seattle, with a hub in Wilmington,OH
Formed by merger of 2 airfreight carriers (in 1968-Airborne Freight Corp)
1. The Airborne Flower Traffic Assoc. of
California
2. Pacific Air Freight

4. Airborne Express -An Overview Continued……
Service Offerings
Letters and Packages
Less than 1lbs to over 50 lbs.
Overnight, morning, afternoon, and 2nd day deliveries
Target Customers-(Prior to the 1980’s)
Business customers-EX: Xerox, IBM, & catalog companies
Specifically ignored residential deliveries and infrequent shippers
Target customers-Xerox and IBM, including catalog companies with seasonal deliveries such as Sears, Pennies, and ect They targeted customers that needed regular items shipped , large volume, and urgent items, to primarily business locations. In 1995-Airborne decided to stop serving catalog companies with heavy seasonal delivery requirements. To achieve objective of targeting specific business customers (not all business customers). They felt they were not particularly good at serving businesses with deliveries to residential areas.
Targeted customers in major metropolitan areas (80-85%) as opposed to Fed ex 60% in metropolitan areas.

5. Airborne Express -An Overview Continued
Shipments-900,000 packages & documents daily
Employees-12,700 full-time & 8,000 part-time employees
Fleet
13,300 Vans
175 aircraft (primarily purchase used aircraft and refurbish them)
Airborne purchases used aircraft around $5 million and invest $5-10 million into refurbishing them. As opposed to higher costs of new aircraft.

6. Industry-Overview
Competitors-mergers and consolidations common (suppliers saturated market)
Technology-constantly changing
Market
Products & Services-dynamic and easily imitable
Customer preferences-non-loyal, price consciencious, convenience, habits
Growth Opportunities
Domestic markets saturated, global opportunities increasingly important.

7. Industry Revenues Trend-Revenues declining 1985-Revenue per shipment
Airborne-$19.37
Fedex- $19.19
Airborne- $
Fedex- $
Revenues in the industry are declining due to the competitive landscape-saturation of market, changing technology, and changing business environment-faster needs for information due to internet technology. Customers can schedule pickups online and price shop competitors for the lowest price, consumers are not brand loyal and are looking for convenient solution to their business needs. So if Fedex is on their mind they just call them--just wants available at that point in time and brand name.

8. Airborne Express- Business Strategies
Corporate
Dominant Business diversification
Business Level Strategies
Focused Cost Leadership
Strategy Analysis
External & Internal Factors
Technology
Market Share
Global Expansion
People/Culture
Marketing/Sales
Agenda

9. Corporate Strategy Dominant-business diversification Single Business
Majority of business
Shipping-95+%
Warehouse Space Rentals-Less than 10%
They operate a single business which is shipping letters and packages to and from metropolitan areas. They also were able to increase revenues by renting space from their airport they owned. It was just a incidental benefit of owning airport.

10. Business Level Strategy
Owned Airport Hub-Wilmington OH
Reduced costs in landing fees, rental space
Increased revenues renting & landing fees from other airline business customers
Aircraft-filled to 80% capacity vs. Industry
65-70%
Focused Cost leadership -
Lowest costs-Used airplanes, outsourcing, pickup & delivery rates
Different geographic markets- metro areas only
Airborne puchase Wilmington OH airport in 1985 for $ Reduced landing and rental space fees for aircraft/freight. Increase revenues due to warehouse renting and landing fees for other airlines utilizing airport. The Airport was also the nation’s only privately owned foreign trade zone. Airborne use commercial planes in which they were able utilize capacity of 80% as opposed to the industry norm of 65-70% by Fedex and UPS.
Focused Cost leadership-which is providing the lowest cost compared to Fed Ex and UPS -originally and providing services to a narrow target. Targeted specific large metropolitan areas as opposed to residential areas which they avoided. Airborne did what they could do best which was to shipments to and from metropolitan areas. Airborne contracted out 60-65% of their pickup and delivery services which were 10% less expensive than company owned pickup and delivery.

11. Focused Cost Leadership
Pricing
Overnight, morning delivery rates
Airborne-$
Fedex- $
UPS $
Overnight, afternoon delivery rates
Airborne-$
Fedex- $
UPS $ *
Second-day delivery rates
Airborne-$
Fedex- $
UPS $
Overnight morning delivery vs Fedex 13.86

12. Focused Cost Leadership

15. Core Competencies & Resources
External
Technology
Market Share
Internal Factors
People & Culture

16. Technology
Airborne selectively invested in technology, and let its rivals be forerunners
Customers could trace packages on their own, utilizing Airborne’s Freight On-Line Control and Update System (FOCUS)
Airborne’s website was not as sophisticated as it’s rivals
Customers could only track packages, but not schedule pickup or create shipping paperwork

17. Market Share Airborne was often overlooked
Many people used Fed Ex or UPS
By 1997, market share grew faster than Fedex and UPS
Up to 16% of domestic express mail market

18. People and Culture
Employees described Airborne as “Straight-laced,” “frugal,” and “very conservative”
Top executives answer their own telephones, shield away from interviews, and discourage fringe benefits
Company statements reflected modesty

19. Growth Trends-Outlook!

20. Growth Trends-1986-1997 Airborne Express-Revenues
: $
101% increase
: $
9.6%*
: $ ,520
50%
1985 -Revenues per shipment Airborne $19.37, Fedex $19.19

21. Global Expansion
Only 6% ($78 Million) of Total Assets were invested internationally
Fed Ex -19% and UPS-12%
“There are no significant service advantages which would justify the operation of our own aircraft on international routes”
Airborne used commercial airlines and local partners for international shipping

22. Today- DHL DHL acquired Airborne Express August 14, 2003
Global company-headquartered in London (Deutsche Post World Net)
World’s largest international air express network
Available to over 220 countries worldwide
They own and operate the majority (2/3rds) of offices worldwide
This is far greater than their competitors
Faster transit times, smooth customs clearance, simplified billing, and effective shipping tracking are a result of dedicated personnel

23. Competitor Analysis Strengths
Concentration in metropolitan areas
Owns airport
Product Differentiation: 3 Ways
No Retail Service Centers
Used Independent Contractors
Cheaper but later delivery

24. OOPS
“ When it comes to technology, Airborne doesn’t add on bells and whistles. We use our competitors as guinea pigs. Let them try out the new stuff and see what works”.

25. Strengths Concentration in metropolitan areas
Exploited Core competencies
Owns airport
Product Differentiation: 3 Ways
No Retail Service Centers
Used Independent Contractors
Cheaper but later delivery

26. Weaknesses Technology Wages to their Employees
Efficiency and Reliability
Globalization

27. Analysis

28. Conclusions Weaknesses counter-acted strengths
Metropolitan areas vs. Efficiency
Owns Airport vs. Globalization
Product Differentiation vs. Efficiency

29. Recommendations Be a leader not a follower
Stay ahead of the competition
Know customers and what’s important to them
Keep low price differentiation but not at expense of efficiency
Continuous Improvement & Growth
Avoid being comfortable
Search for different markets/geographic locations