case 2 questions

User Generated

GbbGnn

Business Finance

Description

Read the “Airborne Express” article. Then apply the concepts and techniques learned in this module to answer the following questions:

  1. Identify the type of business strategy used by Airborne Express, including the type of competitive advantage it seeks, the product-market scope, and the value chain activities used to deliver the competitive advantage. Then explain if the Airborne Express strategy meets the external consistency test? (Hint: To apply this test, you must first do an industry analysis to identify the challenges faced by firms in the express mail industry, and then explain if Airborne Express has a strategy that addresses these challenges).
  2. Does the Airborne Express strategy meet the internal consistency test? (Hint: To apply this test, first explain if activities in the Airborne Express value chain are tailored to deliver the competitive advantage it seeks. Next, explain if the VC activities have fit. Finally, explain if there are positive interactions or negative interactions among the VC activities.)
  3. Does the Airborne Express strategy meet the dynamic consistency test? (Hint: To apply this test, explain if Airborne Express has a sustainable competitive advantage? If yes, explain why and how. If not, explain why not. Also explain if hub choices are addressed.)

Please make sure no plagiarism and use simple language not complicated

Unformatted Attachment Preview

Harvard Business School 9-798-070 Rev. May 23, 2007 Airborne Express 1 The officers of Airborne Express could hardly be more pleased. Results for the third quarter, 1997, were spectacular. Revenues for the quarter were up by 29% over the previous year, and yearto-date net earnings had increased by more than 500%. Airborne’s management team knew that the great results were, in part, fleeting. As the third largest player in the express mail industry, Airborne had gotten a boost from the recent strike at rival UPS. But that seemed to account for only a small portion of the earnings gain, perhaps one-fifth. Roy Liljebeck, the company’s chief financial officer, commented: While the UPS strike was the headline news in the quarter, Company operations outside the strike window were steady, trending higher than performance in the second quarter of 1997. Productivity gains remain strong and the overall operating 2 cost per shipment continues to improve. Airborne had been the fastest growing company in the industry for years, but its margins had been anemic. Now, efforts to fatten those margins finally seemed to be taking hold. Of course, it didn’t hurt that Federal Express, the industry leader, had raised its prices. Prospects seemed much brighter than they had a year earlier. At that time, Federal Express and UPS were unleashing a flurry of new services and pricing schemes. One industry analyst interpreted their moves as an effort “to sweep the corners of the market…. Fedex and UPS tower over [Airborne]. They have saturated the core market and are looking for marginal revenue 3 opportunities.” Airborne could easily “be hammered...between the two 900-pound gorillas.” One move by the “gorillas” required an immediate decision. For years, the industry had set prices without regard to distance. An overnight letter sent from Boston to New York carried the same price as one from Boston to Los Angeles. In 1996, UPS moved to distance-based pricing; prices were raised on long-distance shipments and lowered on short shipments. Federal Express followed suit in July, 1997. Now customers were asking Airborne’s sales people whether they too would adjust prices to reflect shipping distance. The Express Mail Industry in the United States Businesses and individuals spent $16-17 billion on expedited shipments within the United States in 1996. The flagship service of the industry promised overnight shipping with next-morning Professor Jan W. Rivkin prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1998 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. 798-070 Airborne Express delivery. Services had proliferated, however, with some companies offering next-afternoon delivery (for a price 10-20% lower than next-morning service), second-day service (40-50% less), third-day delivery, and same-day or early-next-morning delivery (for several times more than next-morning service). Physical delivery of the package was only part of the service offered to customers. Major delivery companies made it possible for customers to track shipments en route. They provided consolidated information on shipments to major customers. Many offered extensive customer service and guarantees of on-time service. For international shipments, delivery companies expedited customs clearance. Some companies also offered warehousing services and logistics consulting services. Shipment volumes had risen 15-20% per year for the past decade, but, because prices had fallen, total revenues of the industry had grown by only 10-15% each year. Industry observers expected volumes to grow at roughly a 10% annual clip for the next five to ten years. Customers. Virtually every business and many individuals used express delivery services to ship their most urgent documents and parcels. Federal Express alone reported that it had two 4 million “current customers” in 1996. The highest-volume customers, including some catalog retailers, relied on express services for the vast majority of their shipments. In industries such as financial services and consulting, express mail had become the standard means of delivering documents. Businesses varied significantly in terms of volume of shipments and the predictability of volume. Items shipped by express mail usually had a high ratio of value to weight and were perishable in some sense of the word. Business documents, electronic components, medical samples, and replacement parts were typical shipments. Shipments were diverse, however; one firm reported 5 that it had shipped rhinoceroses, art collections, race cars, and fishing bait. The portion of goods considered perishable or time-sensitive had increased over time, as companies sought to drive inventories out of their logistics systems and compete on the basis of time-to-market. A general acceleration in the pace of business and shorter fashion cycles in some industries also tended to broaden the customer base and to increase the express volume shipped by each customer. 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 played dominant roles. Among business customers, some had standardized procedures for determining which items were shipped by express mail while others left each decision in the hands of employees. Having chosen to ship an item by express mail, the customer then had to choose among delivery companies. Relative price, the reliability of a carrier, brand name, access to tracking and other information, customer service, the convenience of drop-off, and sheer habit—all of these factors affected the selection of a carrier. The weights attached to the factors differed from one setting to another, as did the decision maker and the decision-making process. Among high-volume business customers, shipping managers typically negotiated rates and services with sales representatives of one or more delivery company. Discounts from list prices of 50% were not uncommon. In some companies, all shipments went via a single carrier. In others, mail-room personnel or the individual shipping the item selected among a set of carriers. Discounts based on volume encouraged customers to focus on one carrier. Despite volume discounts, large customers were not known for their fidelity. In the words of one observer, “Customers don’t have any loyalty when a contract 6 comes up.” Operations. The express companies delivered a staggering number of packages. Collectively, the three largest companies—Federal Express, UPS, and Airborne Express—routed more than 5 million packages each day. Over 98% arrived on time. The physical, information, and 2 Airborne Express 798-070 human assets deployed to accomplish this feat varied from company to company, but the basic infrastructures and activities were similar. Each company maintained a large fleet of vans and drivers. Each afternoon, drivers in a city left a central depot and collected packages from regular customers, from customers who had called to schedule a pickup, from retail sites staffed by the company and allied companies, and from dropoff boxes. At the point of pickup, the driver used a hand-held computer to scan the barcode on the package and enter data concerning the package. The data were transferred to a central computer, which determined the routing of the package. At each subsequent transfer point, the barcode was scanned and the computer alerted. In this way, the company could track the package’s progress. Packages were driven to the airport and placed in containers. The containers were then loaded onto cargo airplanes, which were operated by the company. Planes lifted off throughout the evening and descended onto hub airports around 11 PM, usually landing 90 seconds apart. The largest carriers used multiple hubs, but each had a central hub located in the middle of the United States. As soon as planes landed and parked, a ground crew unloaded the cargo. Assisted by special equipment, the crew typically could unload a full plane in 20 minutes. A second crew began to service the plane and prepare it for an outbound flight. Cargo containers were trucked to a hanger filled with a maze of conveyor belts, chutes, automated guide arms, and barcode scanners. There, packages were sorted according to their final destination. Companies differed in the degree to which they automated the sorting process, but all employed an army of caffeinated workers to guide the process. Workers sorted packages at rates up to 60 packages per minute. Once sorted, the packages were placed into new containers and loaded onto planes. Plane departures typically began between 3 AM and 4 AM. The planes landed at destination airports around 6 AM. Packages were then unloaded, distributed to vans, and delivered to their final destinations. For the highest priority packages, companies promised delivery times ranging from 8 AM to noon. Lower priority packages, particularly those scheduled for second-day delivery, followed a slightly different route. Such packages were much more likely than overnight deliveries to travel by truck rather than air, and they were sorted in hubs during the daytime. Hub facilities were massive. Federal’s Superhub in Memphis, for instance, had 2.4 million square feet of floor space and gates for 147 planes. Running at capacity with over 8,500 employees, it 7 could sort 160,000 boxes and 325,000 documents per hour. A new Federal Express hub near Dallas, slated to open in 1997 with a sorting capacity of 100,000 items per hour, was reported to cost $250 8 million. A new UPS hub, intended to sort 300,000 packages each hour, was budgeted at $860 9 million. Capital expenditure for air and ground fleets were also large. A new Boeing 767 cargo 10 plane, for instance, cost $90 million. Supporting the physical distribution network of each company was an extensive infrastructure devoted to customer service and information management. Customer service centers of the major companies handled hundreds of thousands of telephone calls each day. Service representatives helped customers schedule a pickup, track packages, and obtain rate information. Sophisticated information systems planned optimal routes for packages, assisted in billing, and permitted the tracing of packages. Competition. The domestic express mail market consisted of three major firms—Federal Express, United Parcel Service (UPS), and Airborne Express—and six second-tier players—BAX Global, DHL Worldwide Express, Emery Worldwide, Roadway Package System (RPS), TNT Express Worldwide, and the U.S. Postal Service. The Big Three, described in detail below, together served more than 85% of the market. 3 798-070 Airborne Express The U.S. Postal Service served much of the rest of the market. The convenience of the post office made the Postal Service popular among residential customers. The Postal Service was prohibited by law, however, from offering volume discounts to business customers. Moreover, it could not track packages efficiently and had an on-time delivery record much worse than commercial carriers. Competitors claimed that the Postal Service maintained high prices for firstclass letters, where it had a legal monopoly, and subsidized products such as express mail, where it had rivals. DHL and TNT focused on the international market. Roughly 80% of DHL’s shipments crossed an international border, and DHL handled more than 40% of all trans-border express 11 shipments. With hubs in places such as Nairobi and Bahrain, DHL offered extensive service to hardto-reach portions of the globe. Speedy delivery in such areas often depended on quick customs clearance, and DHL made a major effort to know both customs procedures and customs officials. DHL, however, had never invested heavily in domestic U.S. capabilities. A company executive commented, “The main reason DHL is involved in domestic shipping within the United States is to lower the costs and increase the reliability of our international shipments.” Like DHL, TNT maintained a low profile in the United States. With roots in Australia and a Dutch corporate parent, TNT focused its efforts on Europe. 12 BAX Global, previously Burlington Air Express, and Emery, a former freight forwarder, focused on heavy cargo. Neither was considered competitive for overnight letters. In a bid to expand into the letter and small package market, Emery acquired Purolator Courier in 1987. Company officials described the acquisition as “disastrous.” The company suffered large losses until it specialized in heavyweight, business-to-business cargo. RPS, a subsidiary of Caliber Systems, did not offer overnight delivery. Rather, it focused on two-day delivery via a ground network, targeting price-sensitive business customers. RPS was known for its efficient ground transportation and its sophisticated information technology. Competition came not only from within the industry, but also from alternative products. While overnight delivery of a letter might cost as much as $15, ordinary mail delivery cost only 32¢. A five-page domestic facsimile cost roughly 50¢, and the marginal cost of document delivery via electronic mail was essentially 0¢. Both facsimile and electronic mail were speedier than express mail. Major carriers competed on multiple fronts, matching each other’s prices, products, and customer support. In the early 1990s, industry observers heralded a bloody “parcel war” between Federal Express and UPS. Each company matched not only the other’s prices, but also the other’s innovations; in short order, the companies introduced early-morning delivery, same-day service, and an ability to track packages by the Internet, for example. The war subsided as the industry consolidated and the economy picked up. In early 1997, Federal Express led a price increase, principally for high-volume, low-margin business customers. See Exhibit 1 for the history of revenue per package. Major Competitors Federal Express13 Memphis-based Federal Express held roughly 45% of the domestic express mail market and was the (disputed) leader of the industry. Its purple and white envelopes were a familiar sight in virtually every U.S. office, and the verb “to fedex,” meaning “to ship overnight,” was common in business circles. (See Exhibit 2 for financial results.) 4 Airborne Express 798-070 History. Federal Express virtually invented the express mail industry. Prior to Federal’s founding, express deliveries flew primarily as freight in the holds of passenger airplanes. Hundreds of airfreight forwarders collected urgent cargo from customers, consolidated it, shipped it via passenger airlines, and delivered it to final destinations. Routinely through the 1950s, 1960s, and 1970s, industry observers heralded a breakthrough in airfreight, but the delivery of mail and other cargo by air remained a relatively small and marginally profitable business. Indeed, in the early 14 1970s, airlines began to cut back on freighter service. One industry expert observed: Various analysts have attempted to identify a single flaw that has held back the breakthrough in the airfreight industry. But...this industry represents a complex system, shaped as much by pricing policies as by shipper requirements, carrier costs, route network design, aircraft, development in ground support, airport curfews, 15 regulatory constraints, and a variety of other variables. As far back as 1965, a Yale undergraduate had envisioned an entirely different system. In an economics term paper, Frederick Smith proposed an airline dedicated solely to express delivery of mail. The essay argued that airlines designed to ferry passengers were inherently suboptimal for carrying express mail. Airlines in those days carried passengers directly from origin to destination. They did not (as they do today) take passengers through hub cities. Unlike passengers, Smith argued, packages do not care how far they travel. As long as a package arrives reliably and on-time, any route is acceptable. Smith claimed that hub-and-spoke routing would be efficient for express mail. On his all-express-mail airline, packages from across the nation would be lifted to a single 16 airport, sorted, and sent to their destinations. The term paper received a “C.” Smith was not deterred. Following a tour of Marine duty in Vietnam, he incorporated Federal Express in 1971. He then spent two years (and much of his family’s large fortune) confirming the market’s desire for overnight mail delivery; refining the target market to focus on the small packages that were largely ignored by other air carriers; assembling a fleet of executive jets and modifying them to carry cargo; constructing a hub operation at the Memphis, Tennessee, airport; securing initial customers; and gaining government approval, a major obstacle in the heavily 17 regulated airline industry. On April 17, 1973, Federal Express commenced service, shipping 186 18 packages to and from 25 cities. Originally a shoestring operation (legend has it that pilots paid for fuel with their personal credit cards and that Fred Smith turned to the Las Vegas gambling tables to cover one week’s payroll), Federal Express gained altitude at a stunning rate. The firm reached $1 billion in revenue in 1983, the first company in American history to reach that threshold within ten years after start-up, 19 without a single acquisition. Operations. By 1997, Federal Express had become a major enterprise with revenue of $11.5 billion. Its facilities spanned the globe, with eight hubs in the United States and five more overseas. Each day it deployed 129,000 employees, 38,000 ground vehicles, and over 600 aircraft to deliver 2.8 million packages. In the United States alone, its couriers traveled 2.5 million miles—100 times around the globe—every day. The company maintained approximately 1,400 retail sites and 32,000 drop-off boxes. It also struck alliances with retailers whose sites served as “authorized shipcenters.” Exhibit 3 gives one estimate of the costs incurred by Federal Express to deliver an average overnight letter within the United States. 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. Its central computer system, COSMOS, coordinated vehicles, people, packages, routes, and weather 5 798-070 Airborne Express information. Supertrackers, hand-held barcode scanners and small computers, were used by couriers to enter information about each package. A Digitally Assisted Dispatch System (DADS) connected the central computer to the dispersed couriers. DADS directed couriers to pickup locations and uploaded information from Supertrackers to COSMOS. Workstations in customer service centers, tied into COSMOS, helped service representatives handle customer requests. The company described its command and control system, which oversaw flight operations, as “the largest object20 oriented, client-server UNIX undertaking in the world.” Its hubs were among the most heavily automated in the industry. To complement these internal systems, Federal tried to place matching technology at customer sites. The company gave to customers, free of charge, Powership computer terminals and shipping software which allowed customers to prepare shipping paperwork, streamline billing, and track shipments. As of 1997, 600,000 customers had Powership systems, and users of Powership stations or shipping software accounted for 60% of Federal Express volume. Federal’s Internet site (http://www.fedex.com) was acclaimed by World Wide Web observers as a rare site that allowed users to do something useful: customers could track the status of a package, schedule a pickup, prepare paperwork, or print a bar-coded label for a package. Federal Express was widely recognized for its quality improvement efforts. In 1990, the company became the first service organization to win the Malcolm Baldrige National Quality Award. Service quality was measured on a routine basis, in a number of ways. The company tracked delivery performance by assigning a weight on a 10-point scale to each type of failure (e.g., one point for a late delivery on the right day, ten points for a lost package) and monitoring failure points on a daily, weekly, and monthly basis. Similarly, the company measured how satisfied customers were with telephone service. Forty-eight times each day, it monitored the performance of call centers—the average speed of answers, the number of holds, the number of transfers, etc. Federal Express also surveyed customers each quarter. The often-stated service goal was 100% customer satisfaction. Quality Action Teams of 4 to 10 employees tackled specific obstacles to achieving 100% satisfaction. Marketing and sales. Aggressive marketing had been a hallmark of the company since the 1970s. Its nationally advertised mottoes (“when it absolutely, positively has to be there overnight” and, more recently, “the world on time”) were widely recognized. In 1996, advertising expenditures topped $138 million. In addition to advertising, Federal Express deployed over 1,100 sales representatives to canvas major business customers. Federal backed up its marketing with a moneyback guarantee. People and culture. Fred Smith, still firmly in command of Federal Express in 1997, often repeated the company’s mantra: “People, Service, Profit. When people are placed first, they will 21 provide the highest possible service, and profits will follow.” A host of human resource policies underpinned this philosophy. Whenever possible, Federal Express promoted people from within its ranks. An internal computer program matched employees with job openings. The company also espoused a policy of no layoffs. To make this policy possible, Federal cross-trained employees and cultivated a large parttime workforce. The company devoted millions of dollars to extensive training programs. Customer service agents, for instance, attended a six-week course before fielding service calls, had several hours of follow-up training each month, and took two computerized quizzes per year. The company tested managers and hourly workers alike, via computers, and assigned remedial courses to employees who failed. Many training programs focused on quality improvement. Employees were given wide latitude to make decisions on their own. Billing center employees, for example, could offer refunds up to $2,000 without management approval. Top 6 Airborne Express 798-070 management expected employees to take risks and resolve problems on their own. Legends of risktaking and problem-solving were common. One courier, having misplaced the key to a drop-off box, 22 loaded the entire box into his van and took it to the city sorting station, where it could be unlocked. Federal Express emphasized communication throughout the company. An Employee Communications department of 50 people spent roughly $70 per employee per year on hundreds of print products and audiovisual programs. An internal closed circuit television system—FXTV— broadcast daily company news (shipment volumes, service success levels, stock price), weather conditions around the nation, information about the competition, and so forth. Top managers occasionally conducted call-in talk shows via FXTV. Managers up to Fred Smith received incentive pay based on performance against negotiated objectives. Employee satisfaction, measured by an annual survey, played a significant role in determining a manager’s pay. Hourly workers who performed well against objectives were also eligible for bonuses; scores on the tests mentioned above affected these bonuses. Compensation programs tended to emphasize measurable objectives that were linked to customer satisfaction. All employees who worked more than 1,000 hours a year and were not covered by a union contract automatically benefited from a profit-sharing plan. At Federal Express, only flight crew members belonged to a union. Recognition programs complemented the formal compensation system. Local managers had discretion to grant a “Bravo Zulu” (Navy-speak for “well done”) award to anyone who performed above and beyond the call of duty. The awards granted were small, but they were swift and visible. Following the 1997 UPS strike, Federal Express distributed one-time bonuses totaling $20 million to thank employees for extra effort exerted during the strike. International ventures. In 1985, Federal Express began to pursue Fred Smith’s vision of global delivery of express mail. Establishing an integrated global network proved to be prohibitively expensive, however. After overseas operating losses topped $600 million in 1992 (see Exhibit 4), the company scaled back its ambitions sharply. The company focused on deliveries to and from the United States and relied on partner companies to complete deliveries in many locations. In 1997, however, the company seemed poised to renew its global expansion. A new venture focused on intraAsia shipments, and CFO Alan Graf predicted that international earnings would surpass domestic 23 contributions within five years. Federal Express reported that its global network, including partners, covered 211 countries and 99% of world GDP. United Parcel Service24 Atlanta-based UPS was the largest package delivery company in the world. Its daily volume of 12 million parcels far exceeded Federal Express’s (2.8 million), but most of that volume was not express mail and traveled via UPS’s traditional ground network. In the domestic market for expedited delivery, UPS held only a 25% share and took second place to Federal Express. (See Exhibit 5 for financial results.) History. If Federal Express was the purple and orange company of the 1970s, United Parcel Service was the Pullman-brown firm of an earlier, humbler America. Founded in Seattle in 1907 as a messenger service, UPS soon repositioned itself as the delivery arm of major department stores. In 1922, in Southern California, UPS launched an experimental “common carrier” service to deliver parcels in general, not just department store deliveries, by truck. As automobile ownership became widespread and retail stores moved to the suburbs in the 1950s, UPS reinvented itself around this experiment. To establish itself as a common carrier of parcels, the company had to fight dozens of legal and regulatory battles for the right to deliver within and between states. Only in 1980 did UPS reach its goal of complete national coverage. 7 798-070 Airborne Express From the 1913 purchase of its first Model T Ford, UPS moved most its packages on the ground. (Vehicles were painted brown to hide the dirt of often-unpaved roads.) In 1929, a group of investment bankers planned a national air express company and sought UPS to provide ground service to complete deliveries. UPS allowed itself to be bought out by the banking interests. The onset of the Great Depression killed the infant air service, but left UPS in the hands of the bankers. The founders and managers of the company struggled under the bankers, then celebrated, four years later, when they bought back the company. In the words of one founder, Four hazardous years after our first entanglement with those outside financial interests and at the very lowest point of the general depression...we recovered for our own people full possession of all stock in our company. we learned a lesson in 25 those four years that should never be forgotten. Starting in 1953, UPS offered two-day service by air between major cities in the United States. The air service coupled UPS’s ground network with the cargo services of major airlines. Only in 1981 did UPS purchase its first aircraft. The company took direct control of all air operations in 1987. Through most of its history, UPS viewed the United States Postal Service as its main rival. With rates heavily regulated, UPS focused relentlessly on reducing costs. The founders of the firm admired the scientific management principles of Frederick Taylor and employed Taylor’s disciples to 26 apply the principles to UPS. Time-motion studies identified the most efficient practices for drivers to follow. Drivers were instructed, for instance, to maintain a brisk walking pace, to knock on the door and ring the doorbell when making a delivery, and to get keys ready while walking back toward the truck. The result was an extremely low cost per unit. Like the Postal Service, UPS historically charged a single price to all customers. As one former CEO said, “We’d always prided ourselves on saying your grandmother paid the same price 27 General Motors did.” To drive down costs, UPS picked up parcels at its own convenience, not the customers’. Since it saw little reason to spend money collecting information, it could not track packages easily. The success of Federal Express in air express service and especially the success of RPS on the ground shook UPS from its slumber in the late 1980s and early 1990s. To match competitors, UPS refocused itself around customer service and invested billions of dollars in aircraft, sorting infrastructure, and technology. By all accounts, the change was wrenching for a company that took pride in its heritage. Even a proposal to paint globes on its trucks encountered opposition from 28 traditionalists. By the 1990s, however, UPS was hailed in the business press as one of a rare breed: a 29 large company that altered its course radically and successfully. Operations. In 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. The company delivered roughly 1.6 million express packages daily. Air operations centered on a hub in Louisville, Kentucky, with five regional air hubs distributed around the nation. As a privately held and soft-spoken company (see below), UPS revealed few details of its operations. Judging from the sheer scale of the capital invested in facilities during the late 1980s and 1990s, most industry observers speculated that UPS’s sorting and routing facilities were highly automated and employed the latest technology. Air operations shared certain facilities with UPS’s traditional ground network. Most importantly, a single fleet of trucks handled the pickup and delivery of all UPS shipments. As a result, UPS drivers picked up as many as three times more parcels per stop than Federal Express drivers did. 8 Airborne Express 798-070 Technology. UPS had made a determined effort to match Federal Express’s information 30 technology prowess, investing $3 billion in advanced technology between 1990 and 1995. The 31 headcount of technical, computer, and R&D staff had swelled from 95 in 1984 to over 4,000. By 1997, the company had closed most of the technology gap. It could, for instance, track packages efficiently, deliver proof of delivery electronically, and confidently offer a money-back guarantee of on-time delivery. Its Internet site (http://www.ups.com) provided functions very similar to Federal Express’. Customers could use the site to track a package, schedule a pickup, prepare shipping paperwork, check rates, and so forth. A 35-acre site in New Jersey housed the company’s main computer operations, and a backup site in Georgia stood ready in case a disaster hit the New Jersey facility. Marketing and sales. Prior to the 1980s, UPS had no marketing department and did little or 32 no advertising. By 1996, however, the press reported advertising campaigns of $80-100 million. An agency that tracks leading national advertisers found that UPS spent nearly 80% more on media than 33 Federal Express did during 1996. Roughly 2,700 account executives were responsible for highvolume customers. 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 could hold onto it, sell it to the company or to other managers, or bequeath it to heirs. The company itself made a market in the stock, setting a price at which it would purchase a certain number of shares. In determining the stock price, the Board of Directors considered the long-term prospects of the company. They explicitly ignored what they considered short-term swings in the valuations of 34 comparable companies. Prior to the 1997 strike, the stock price of UPS had never fallen. Its value rose especially quickly from January, 1995, when it stood at $23 ½, to August, 1997, when it crested at $30 ½ . Each year, UPS allocated up to 15% of its pre-tax profits to buy company stock. The stock was then distributed to managers, from entry-level supervisors up to the CEO. As a result, said one former CEO, “We have [thousands of] owner-managers who have virtually every cent they own invested in stock of this company.” A program established in 1995 allowed non-management employees to purchase stock as well. As of the end of 1996, 27,000 active managers owned roughly 32% of the stock and 60,000 non-managers owned 2.7%. Retired managers, their heirs, and trusts held the rest of the equity. UPS expected its managers to view their jobs as lifelong endeavors. Virtually all members of the top management committee started their UPS careers as hourly employees or front-line 35 supervisors. The majority of them joined UPS as drivers. The UPS Policy Book made an explicit pledge to promote managers from within UPS ranks whenever possible. The Policy Book served as a virtual Bible within UPS. A former CEO (who joined UPS as a clerk in 1925) noted that “except for editing changes to update language, our Policy Book today is 36 basically the same as the original book, distributed to 14 UPS managers in 1929.” The Policy Book emphasized management by consensus. “Although we are organized in corporate form, ... we make our management decisions as partners.” The book also reinforced an ethic of humility. A visitor to corporate headquarters reported: The buildings were stark, contemporary, and simple…. Chairs and tables were functional. Walls, if not barren, displayed folksy, Norman Rockwell-type images of UPS package cars serving small communities. Carpets, where they existed, were thin and laid for the convenience of cleaning, not comfort. Offices were comparably 9 798-070 Airborne Express sized. Parking spaces were available on strictly a first-come, first-served basis. The parking lot was filled with conservative, mid-sized cars. People who drove flashy 37 sports cars were subject to peer teasing. By tradition, white-collar managers cleared their desks at the end of each day, and food and drink were not allowed at any computer terminal. The regimented work style extended to blue-collar workers. Industrial engineers continued to perfect the techniques of drivers and sorters, and managers rode along with drivers occasionally to 38 clock their movements and check their efficiency. Historically, high wages had kept labor-management relationships good. In 1997, full-time 39 UPS drivers were among the best paid in the nation, earning $20 per hour plus benefits. The International Brotherhood of Teamsters, which represented 190,000 UPS employees, had been instrumental in establishing the high wages. In contrast, drivers at non-union Federal Express earned $10-17 per hour. During the late 1980s and early 1990s, the Teamsters focused on raising the wages of fulltime UPS employees, who tended to be more committed to the union. The gap between full-time and part-time wages widened dramatically, and the company increasingly relied on part-time labor. Because overnight mail was sorted in short, intense bursts, part-time workers were especially important to express services. Of 5,200 workers in the Louisville air hub in 1997, 4,900 were parttimers. Part-time sorters started at $8 per hour. Roughly 10 to 20 part-time workers in the hub moved up to full-time employment each year. Tensions between UPS management and labor unions came to a head in August, 1997, when UPS suffered the first national walkout in its history. The 16-day strike paralyzed the company and caused a noticeable disruption to the U.S. economy as a whole. Customers scrambled to ship 12 million parcels per day by other means, and competitors found their systems flooded. The contract that resolved the strike was hailed as a victory for labor. UPS agreed to create 10,000 additional full-time positions over the five years of the contract. Wages of senior part-time employees were slated to increase 35% over five years, and full-time wages were scheduled to rise by 15%. Moreover, UPS had wanted to withdraw from a multi-employer pension plan and set up its 40 own, separate program. The contract prevented such a move. The strike immediately cost UPS $700 million in lost revenue, and it tarnished the firm’s reputation for absolutely reliable delivery. Following the strike, shipping volumes appeared to be 41 running at 5% lower levels than normal. On August 20, 1997, the Board of Directors reduced the internally regulated stock price for the first time in firm history, half a point to $30. International operations. Like Federal Express, UPS had invested heavily in constructing a global distribution system. Overseas assets valued at nearly $2 billion served over 200 countries. Operating losses continued to run in the hundreds of millions of dollars, but the company appeared committed to additional investment. Airborne Express Seattle-based Airborne Express was the often-overlooked company in the express mail 42 business. While Federal Express made headlines and UPS reluctantly found itself in the headlines, Airborne rarely attracted notice. Yet over the past five years, it had grown far faster than either of its 10 Airborne Express 798-070 larger, better known rivals. (See Exhibit 6.) By 1997, Airborne held roughly 16% of the domestic express mail market. History. The company was descended from two specialist airfreight carriers. The Airborne Flower Traffic Association of California was founded in 1946 to ship fresh flowers from Hawaii to the mainland. Pacific Air Freight, founded in 1949, focused on the delivery of perishables to and from Alaska. Each diversified to become general airfreight forwarders, and the two merged in 1968 to form the Airborne Freight Corporation. Of the hundreds of forwarders that existed before Federal Express and the handful that entered the express mail industry in Federal’s wake, Airborne was by far the most successful. Early on, Airborne targeted the business customer that regularly shipped a large volume of urgent items, primarily to other business locations. A typical customer was Xerox, which had to deliver parts daily from central warehouses to repair technicians spread throughout the United States. The company purposely passed over residential deliveries and infrequent shippers. In 1995, for instance, Airborne decided to stop serving catalog companies with heavy seasonal delivery 43 requirements. Ray Berry, vice president of Field Services Administration, emphasized the importance of targeting particular business customers: There’s an advantage in our being selective about the customers we serve and the services we offer. The customer needs we have targeted to fill are what we are best at. If, for example, we had large mail-order customers requiring nothing but residential delivery, we might not be able to serve them as well as we know how to serve IBM or Xerox. Since we can’t be all things to all people, we pick our kind of 44 customer deliberately. 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. Airborne purchased the facility, an abandoned Strategic Air Command base in Wilmington, Ohio, for $875,000 in 1980. As a result, it did not pay landing fees, nor did it face any obstacles to tailoring the facility to its needs. On the other hand, it had to maintain the airport itself, and it did not share facility expenses with other airlines. Airborne had built warehouse space on its Wilmington property, which it leased to business customers. For instance, a number of mail-order computer retailers stored goods in Airborne’s “Stock Exchange” warehouses. These retailers could take orders from their customers as late as 2 AM and have goods delivered via Airborne the same day. Federal Express and UPS offered similar warehousing options, but not on the airport site. Airborne also operated the nation’s only privately owned foreign trade zone in Wilmington. The airport’s status as a Community Reinvestment Act zone led to reduced property taxes. In its sorting operations, Airborne relied less on automation and more on humans than Federal Express and UPS did. Part-time wages for a starting position in rural Ohio were roughly $7 per hour. The Wilmington hub was not unionized. Overall, unions represented roughly half of Airborne’s workforce, including all pilots. Airborne’s fleet consisted primarily of used aircraft—built in the 1960s and 1970s, used by others, purchased by Airborne, and modified for Airborne’s purposes. (See Exhibit 7.) Airborne officials estimated that a typical used aircraft could be purchased for $5 million and refurbished for $5-10 million. The company had recently arranged to buy and convert 12 Boeing 767s for $24 million each. Airborne’s patented cargo containers fit through the passenger door of an aircraft; they did not require a cargo door. Airborne managed to run its aircraft roughly 80% full. Competitors typically 11 798-070 Airborne Express attained utilization rates of 65-70%. Industry observers estimated that 80% of the costs of a flight did not vary with the amount of cargo carried. Shippers and recipients of Airborne parcels were concentrated in major metropolitan areas. (Industry experts believed that 80-85% of its volume was shipped between the top 50 metropolitan areas. For Federal Express, this figure was below 60%; for UPS, even lower.) Moreover, a greater portion of Airborne’s volume consisted of afternoon and second-day deliveries. As a result, Airborne could use trucks more often than its competitors for the long-haul portion of a delivery. Roughly 45 30% of Airborne’s volume never saw the inside of an airplane (versus 15% for Federal Express). Industry observers estimated that the costs of a truck were only one-third the cost of owning and operating a similar amount of aircraft capacity. In its pickup and delivery activities, Airborne differed from its rivals in at least two ways. First, it did not maintain retail service centers. (It did, however, have roughly 11,000 drop-off boxes.) Second, Airborne owned and operated only a portion of its delivery vans. Independent contractors, paid by the mile or parcel, provided the balance of the pickup and delivery services. By one estimate, contractors handled 60-65% of Airborne’s volume, and contracted pickup and delivery was 10% less expensive than company-owned pickup and delivery. An Airborne courier typically picked up and delivered more parcels per stop than a Federal Express driver. By one estimate, this reduced labor costs per unit by 20% for pickup and by 10% for delivery. In contrast to UPS and Federal Express, which typically promised next-morning service by 10:30 AM, Airborne typically pledged to deliver before noon. An industry expert estimated that 9697% of all Airborne shipments arrived on time. Comparable figures for Federal Express and UPS were 99% or higher. Technology. Airborne invested selectively in technology. An commented: Airborne manager 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. We won’t introduce new technology unless there’s a clear derived benefit for our 46 customer. Airborne’s major software system, its Freight On-Line Control and Update System (FOCUS), provided many features comparable to Federal Express’ COSMOS. Airborne offered high-volume shippers a number of software products and devices which tied customers directly into FOCUS. These linkages allowed customers to trace packages themselves rather than engage service agents. Moreover, they allowed customers to submit shipping information electronically, which eliminated manual data entry. A new project on call center automation ensured that many customers would speak with the same service agent each time they called. Airborne’s Internet site (http://www.airborne.com) did not offer as many functions as its rivals’ did. A customer could use the site to track a shipment, but not to schedule a pickup or create shipping paperwork. 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. Senior managers also took an active role in courting major accounts. Prior to 1996, salespeople operated relatively autonomously. They had wide latitude to set prices and were compensated largely on sales volume. Starting in 1996, incentives were shifted to encourage sales of higher margin products. Corporate headquarters also began to review volume discounts and the pricing of large accounts. 12 Airborne Express 798-070 Airborne was known for its low prices. Exhibit 8 compares the list prices quoted by competitors for various services and shipment weights. Starting in the mid-1990s, Airborne had begun to bill itself as “the flexible, solution-oriented express carrier” with an ability to tailor its services to the needs of particular large business 47 customers. The firm touted highly customized services for companies such as Nike, Compaq, Technicolor, and Xerox. Xerox, for instance, needed its spare parts delivered to technicians very early; its technicians could not start their workday without the parts. To accommodate early delivery, Airborne created special sort codes, programmed each courier’s barcode scanner to emit a special beep when it scanned a Xerox package, and instructed couriers to deliver Xerox packages first. As a result, Airborne could make Xerox deliveries as early as 8 AM. This customization helped Airborne win the Xerox account in 1988. By the mid-1990s, however, Federal Express and UPS offered 8 AM delivery to any customer for a surcharge. Moreover, both rivals claimed to be able to tailor services to customer needs. People and culture. Airborne employees described the company as “strait-laced,” “frugal,” 48 and “very conservative.” In a headquarters designed to be functional, top executives answered their own telephones, discouraged perquisites, and shied away from interviews. Both the facilities and the statements of the company reflected humility. President and COO Robert Brazier commented on the year’s great financial results to date: It wasn’t that we were so smart, that we knew this was going to happen. It’s just one of those things that works out. I’d love to sit here and tell you we planned it, but that would be a bald-faced lie…. Anyone who’s been in this business very long knows that situations change in a heartbeat. You just take what you have at the moment and plan as far as you think you can be realistic. Just don’t get too strung out. And, for God’s sake, don’t get arrogant or cocky, because that’s not the way to 49 be. International operations. Airborne’s overseas ambitions were far more modest than the aims of Federal Express or UPS. Assets invested in international operations were a mere $78 million in 1996, 6% of total identifiable assets. (Comparable figures for Federal Express and UPS were 19% and 12%, respectively.) Airborne took a “variable-cost approach” to international shipments, using commercial airlines and local partners to complete shipments. Senior officers believed that “there are no significant service advantages which would justify the operation of [our] own aircraft on 50 international routes.” RPS Relationship In 1995 and 1996, Airborne began to forge a relationship with Roadway Package System (RPS), a subsidiary of Caliber Systems. By targeting the ground transport needs of large-volume business customers, RPS had made deep inroads into UPS’s traditional customer base. RPS offered shippers low prices and superior information and tracking capabilities. RPS’s parent company had tried to introduce air operations, but folded its startup, Roadway Global Air, in 1995 after hundreds 51 of millions of dollars of losses. The combination of RPS on the ground and Airborne in the air had a strong appeal. A traffic manager at a large shipper commented: RPS is far and away the package delivery information leader. But they have had to find a way to offer one-stop shopping. Airborne does not get the publicity that UPS and Federal Express get, but they are a major player. So this could be a real 52 broadside against those carriers. 13 798-070 Airborne Express The relationship between the two companies remained an arms-length affair, with joint offers to customers on a case-by-case basis. The companies’ physical distribution systems remained entirely separate. Most of the cooperation occurred in the marketing process and in the sharing of shipment information. Officials of both companies, however, hinted at a closer alliance, perhaps with an integrated pickup and delivery system. Airborne’s Future In the wake of the UPS strike—and those terrific financial results—Airborne’s senior management team paused to review its situation. Was its position in the industry as secure as it hoped? How dangerous, and how agitated, were the two “900-pound gorillas”? Was its approach to the international market sound? And how important was the RPS partnership to its future? More tactically, should Airborne follow the lead of UPS and Federal Express and move toward distance-based pricing? Unless it did so, its discount versus the competition would be much larger on coast-to-coast traffic than on intra-regional shipments. A few features of the competitive landscape seemed to be shifting. The Postal Service had performed admirably during the UPS strike, and its success seemed to have reawakened its ambitions, particularly those of its chief officer Marvin Runyon, a former Ford Motor Company executive. The Service planned a major advertising blitz to promote its express services. It was also 53 petitioning Congress for the right to grant volume discounts. In addition, industry analysts were confident that UPS would make some play to recoup its lost volume. Customers, especially those that relied heavily on a single company for shipping, were shaken by the strike. “Single-sourcing as a buzzword lost its buzz,” said Ivan Hofmann, president of RPS. “That’s good for us and it’s good 54 for the industry.” 14 Airborne Express 798-070 Exhibit 1: Revenue and Pounds Per Shipment, 1985-1997 Federal Express* Year 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Revenue per shipment 19.19 17.92 16.97 16.32 16.28 16.76 17.33 16.38 15.30 15.12 14.62 14.87 15.11 Pounds per shipment 5.6 5.3 5.1 5.3 5.4 5.4 5.6 5.7 5.8 6.0 6.3 6.4 7.2 Airborne Express** Revenue per shipment 19.37 16.24 14.20 12.73 11.73 11.43 10.78 9.68 9.23 8.84 8.24 8.25 NA Pounds per shipment 7.3 6.4 6.1 5.7 5.2 5.0 5.0 4.8 4.8 4.8 4.6 4.5 NA * Includes domestic and international shipments; fiscal year ends on May 31 ** Includes domestic shipments only, fiscal year ends on December 31 Source: Company annual reports 15 798-070 Airborne Express Exhibit 2: Financial Results of Federal Express, 1986-1997 Summary Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Revenue ($ mm) 2,573 3,178 3,883 5,167 7,015 7,688 7,550 7,808 8,479 9,392 10,274 11,520 Operating income ($ mm) 344 365 379 415 387 252** 23** 377 531 591 624 699 Net income ($ mm) 132 (66) 188 166* 116 6** (114)** 110*** 204 298 308 361 Operating margin (%) 13.4 11.5 9.8 8.0 5.5 3.3** 0.3** 4.8 6.3 6.3 6.1 6.1 Return on equity (%) 13.8 (6.0) 15.6 11.8* 7.4 0.4** (7.0)** 6.8*** 11.4 14.3 12.8 13.0 * Excludes $18 mil accounting change ** Includes restructuring charges related to reduction of European services *** Excludes ($56) mil accounting change Details (millions of dollars) Revenue Operating expenses Salaries and employee benefits Rentals and landing fees Depreciation and amortization Fuel Maintenance and repairs Other Operating income Net income Total assets Total equity Note: Fiscal year ends May 31 Source: Company annual reports 16 1997 11,520 1996 10,274 1995 9,392 5,095 1,071 777 690 724 2,462 4,620 959 720 579 618 2,155 4,425 819 652 502 544 1,858 699 361 624 308 591 298 7,625 2,963 6,699 2,576 6,433 2,246 Airborne Express 798-070 Exhibit 3: Estimated Cost Structure of Federal Express Overnight Letter Item Pickup Labor Fuel Maintenance and depreciation Subtotal Cost per unit $1.09 $0.07 $0.21 $1.37 Long-haul transport Flight- and trucking-related expense Hub labor Hub depreciation Subtotal $2.44 $0.30 $0.25 $2.99 Delivery Labor Fuel Maintenance and depreciation Subtotal $1.64 $0.10 $0.31 $2.05 Advertising $0.22 Sales $0.21 Information technology $0.54 Customer service $0.20 Corporate overhead $0.97 Total cost $8.55 Margin $0.45 Price* $9.00 Source: Case writer estimates, based on company documents, security analyst reports, and interviews with industry experts * The price reported here is lower than the list price shown in Exhibit 8 because of discounts granted to large-volume customers. 17 798-070 Airborne Express Exhibit 4: Federal Express Financial Performance by Geographic Segment United States Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 Revenue ($ mm) 3,459 4,145 4,785 5,058 5,195 5,668 6,200 6,839 7,466 Operating income (loss) ($ mm) 410 467 608 671 636 559 560 466 542 International Operating margin (%) 11.9 11.3 12.7 13.3 12.2 9.9 9.0 6.8 7.3 Revenue ($ mm) 423 1,022 2,230 2,630 2,355 2,140 2,280 2,553 2,807 * Includes restructuring charges related to reduction of European services Source: Company annual reports 18 Operating income (loss) ($mm) (31) (43) (195) (419)* (613)* (182) (29) 126 82 Operating margin (%) (7.3) (4.2) (8.7) (15.9) (26.0)* (8.5) (1.3) 4.9 2.9 Airborne Express 798-070 Exhibit 5: Financial Results of United Parcel Service of America, 1986-1996 Summary Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Revenue ($ mm) 8,620 9,682 11,032 12,358 13,606 15,020 16,519 17,782 19,576 21,045 22,368 Operating income ($ mm) 1,203 971 1,075 1,215 1,052 1,251 1,278 1,458 1,556 1,794 2,029 Net income ($ mm) 669 625* 759 693 597 700 765** 810 943 1,043 1,146 Operating margin (%) 14.0 10.0 9.7 9.8 7.7 8.3 7.7 8.2 7.9 8.5 9.1 Return on equity (%) 29.8 22.7* 24.4 20.5 16.6 18.7 20.1** 21.1 22.0 21.3 20.7 * Excludes $159 mil accounting change ** Excludes ($249) mil accounting change Details (millions of dollars) Revenue 1996 22,368 1995 21,045 1994 19,576 Operating expenses Compensation and benefits Repairs and maintenance Depreciation and amortization Purchased transportation Fuel Other occupancy expense Other Restructuring charge 13,305 823 936 1,306 685 388 2,896 -- 12,401 809 866 1,144 621 359 2,679 372 11,727 812 786 1,206 564 361 2,564 -- 2,029 1,146 1,794 1,043 1,556 943 14,954 5,901 12,645 5,151 11,182 4,647 Operating income Net income Total assets Total equity Note: Fiscal year ends December 31 Source: Company annual reports 19 798-070 Airborne Express Exhibit 6: Financial Results of Airborne Freight Corporation, 1986-1996 Summary Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Q1-3: 1997 Revenue ($ mm) 542 632 768 950 1,182 1,367 1,484 1,720 1,971 2,239 2,484 2,157 Operating income ($ mm) 26 19 22 46 64 59 28 83 89 69 79 171 Net income* ($ mm) 13 6 7 19 31 27 2 33** 38 24 27 89 Operating margin (%) 4.9 3.0 2.8 4.8 5.4 4.3 1.9 4.8 4.5 3.1 3.2 7.9 Return on equity (%) 15.2 5.5 5.6 12.9 14.4 9.9 0.8 10.8** 10.7 5.9 6.5 13.9*** * Net income available to common shareholders ** Excludes $4 mil accounting change *** Annualized Details (millions of dollars) Revenue Operating expenses Transportation purchased Station and ground operations Flight operations and maintenance General and administrative Sales and marketing Depreciation and amortization Loss related to aircraft accident Operating income Net income Total assets Total equity Note: Fiscal year ends December 31 Source: Company annual reports and 10-Q 20 1996 2,484 1995 2,239 1994 1,971 828 782 387 181 60 164 4 788 693 328 157 60 144 -- 670 596 279 146 53 138 -- 79 27 69 24 89 38 1,307 432 1,217 406 1,079 387 Airborne Express 798-070 Exhibit 7: Aircraft Fleet, 1997 Aircraft type Airbus A300 Airbus A310 Boeing 727 Boeing 747 Boeing 757 Boeing 767 Cessna 208 Fokker F27 McDonnell Douglas DC8 McDonnell Douglas DC9 McDonnell Douglas DC10 McDonnell Douglas MD11 McDonnell Douglas YS11 Other Total owned Leased from others Chartered Total Federal Express (7/97) 20 35 163 — — — 264 32 — — 49 24 — 21 489 119 — 608 UPS (12/96) — — 61 14 60 15 — — 49 — — — — 330 180 19 330 529 Airborne (12/96) — — — — — — — — 35 66 — — 9 65 98 12 65 175 Source: Company Form 10-Ks and Internet sites Exhibit 8: List Prices of Express Mail Carriers Weight Letter 1 lb. 2 lb. 5 lb. 10 lb. 50 lb. Weight Letter 1 lb. 2 lb. 5 lb. 10 lb. 50 lb. Overnight, morning delivery Fedex UPS Airborne $13.86 $12.54 $10.95 $19.46 $17.54 $14.95 $21.57 $19.39 $15.75 $27.21 $24.71 $20.95 $36.96 $33.50 $30.15 $86.86 $90.18 $80.70 Overnight, afternoon delivery Fedex UPS Airborne $12.04 $10.82 $9.25 $16.93 $15.07 $12.50 $18.75 $16.68 $13.50 $23.68 $21.21 $17.75 $32.14 $28.82 $30.15 $82.54 $77.68 $80.70 Second-day delivery Fedex UPS Airborne $8.00 $6.50 $6.25 $8.00 $7.18 $6.25 $8.79 $8.00 $7.75 $12.14 $10.93 $9.75 $18.43 $16.64 $16.00 $54.89 $57.11 $58.00 Note: Federal Express and UPS figures are unweighted averages over seven distance-based zones Source: Company price lists 21 798-070 Airborne Express Notes 1 Though legally the “Airborne Freight Corporation,” the company used the trade name “Airborne Express” for public purposes. 2 “Airborne Freight Corporation Reports Third Quarter 1997 Results,” company press release, Airborne Express Internet site. 3 Brian Clancy of MergeGlobal Inc, quoted in J. Ott, “New Products, Services Put Twists in Air Express Competition,” Aviation Week and Space Technology, August 26, 1996, pp. 47-49. 4 Federal Express Corporation, Form 10-K, 1996, p. 5. 5 Federal Express Corporation, “Information Packet,” 1997, pp. 51-52. 6 Security analyst quoted in D. Greising, “Watch Out for Flying Packages,” Business Week, November 14, 1994, p. 40. 7 Federal Express Corporation, “Information Packet,” 1997, p. 6. 8 “Why Fedex Is Flying High,” Fortune, November 10, 1997, pp. 155-160. 9 D.A. Blackmon, “UPS to Expand Its Primary Hub As Battle With FedEx Heats Up,” Wall Street Journal, December 22, 1997, p. B4. 10 Information provided to case writer during tour of UPS Louisville facility. 11 G. Conley and J.A. Quelch, “DHL Worldwide Express,” Harvard Business School Case 593-011. 12 G. Conley and J.A. Quelch, “DHL Worldwide Express,” Harvard Business School Case 593-011. 13 This section draws especially from public documents of Federal Express as well as a number of books concerning the company: R.A. Sigafoos, Absolutely Positively Overnight, Memphis: St. Luke’s Press, 1983; AMA Management Briefing, Blueprints for Service Quality: The Federal Express Approach, New York: AMA, 1991, p. 12; and V.H. Trimble, Overnight Success, New York: Crown Publishers, 1993. 14 “Emery Worldwide,” Harvard Business School Case 184-019, p. 2. 15 N.K. Taneja, The U.S. Airfreight Industry, Lexington: Lexington Books, 1979, p. xviii. Italics added. 16 V.H. Trimble, Overnight Success, New York: Crown Publishers, 1993, pp. 80-81. 17 R.A. Sigafoos, Absolutely Positively Overnight, Memphis: St. Luke’s Press, 1983. 18 Federal Express Corporation, “Information Packet,” 1997, p. 9. 19 Ibid., p. 10. 20 Federal Express Corporation, “Information Packet,” 1997. 21 AMA Management Briefing, Blueprints for Service Quality: The Federal Express Approach, New York: AMA, 1991, p. 12. 22 AMA Management Briefing, Blueprints for Service Quality: The Federal Express Approach, New York: AMA, 1991, p. 30. 23 “Why Fedex Is Flying High,” Fortune, November 10, 1997, pp. 155-160. 24 This section draws especially on the SEC filings of the company, internal publications concerning the history of the company (particularly Our Partnership Legacy), and J. Sonnenfeld and M. Lazo, “United Parcel Service (A),” Harvard Business School Case 488-016. 25 James Casey, quoted in Paul Oberkotter, “Recollections,” Our Partnership Legacy, United Parcel Service, 1991. 26 C.W.L. Hart and B. Chew, “Productivity and Performance Systems: A Comparative Analysis of Northern Telecom and United Parcel Service,” Harvard Business School case 689-022. 27 C. Hawkins and P. Oster, “After a U-turn, UPS Really Delivers,” Business Week, May 31, 1993. pp. 92-93. 28 D.A. Blackmon, “Out of the Box; UPS Tries to Change How It’s Perceived by the Public,” St. Louis Post-Dispatch, p. 5C. 22 Airborne Express 798-070 29 See, for instance, Gertz and Baptista, Grow to be Great, pp. 171-175. 30 D.A. Blackmon, “Out of the Box; UPS Tries to Change How It’s Perceived by the Public,” St. Louis Post-Dispatch, p. 5C. 31 C.R. Day, “Shape Up and Ship Out,” Industry Week, February 6, 1995, pp. 14-20. 32 D.A. Blackmon, “Out of the Box; UPS Tries to Change How It’s Perceived by the Public,” St. Louis Post-Dispatch, p. 5C. 33 Leading National Advertisers / Mediawatch Multi-Media Service, Ad$ Summary, 1996. 34 United Parcel Service of America, Form 10-K, December 31, 1996, p. 9. 35 C.R. Day, “Shape Up and Ship Out,” Industry Week, February 6, 1995, pp. 14-20. 36 Paul Oberkotter, “Recollections,” Our Partnership Legacy, United Parcel Service, 1991, p. 26. 37 J. Sonnenfeld and M. Lazo, “United Parcel Service (A),” Harvard Business School case 488-016, p. 12. 38 A. Bernstein, “In the Line of Fire at the Teamsters,” Business Week, August 30, 1993, p. 39. 39 Data in this paragraph and the next are from A. Bernstein, “At UPS, Part-time Work Is a Full-time Issue,” Business Week, June 16, 1997, pp. 88ff. 40 D.W. Rockel, “United Parcel Service of America—Company Report,” Furman Selz LLC, August 21, 1997. 41 N. Harris, “UPS Puts Its Back Into It,” Business Week, October 27, 1997, p. 50. 42 This section draws especially on the SEC filings and press releases of Airborne Express. Information about the relative efficiency of Airborne comes primarily from analyst reports and extensive interviews with security analysts who cover the express mail industry. 43 J. Bond, “The Underdogs Deliver,” Washington CEO, 1997. 44 Quoted in M. Treacy and F. Wiersema, The Discipline of Market Leaders, Reading, MA: AddisonWesley, 1995, p. 144. 45 B.R. Routledge, “Airborne Freight—Company Report,” Prudential Securities, October 4, 1996, p. 10. 46 Telephone interview with Tom Branighan, Director of Public Relations, Airborne Express. 47 Airborne Freight Corporation, Annual Report, 1996. 48 Telephone interview with Tom Branighan, Director of Public Relations, Airborne Express. 49 J. Bond, “The Underdogs Deliver,” Washington CEO, 1997. 50 Airborne Freight Corporation, Form 10-K, December 31, 1996, p. 5. 51 C. Isidore, “Roadway Getting Out of Air Cargo,” Journal of Commerce, November 7, 1995, p. 1A. 52 Quoted in P. Page, “RPS, Airborne Forge Contract Cooperation in Blended Bid for Large Shipper Deals,” Traffic World, April 22, 1996, pp. 40-41. 53 N. Harris, “UPS Puts Its Back Into It,” Business Week, October 27, 1997, p. 50. 54 J.D. Schulz, “Up or Down? RPS’ President Sees Future Small Package Rates Increasing But Airborne Express President Sees Them Declining,” Traffic World, September 22, 1997, p. 35. 23
Purchase answer to see full attachment
Tags: a n
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Your assignment is complete

Airborne Express Outline
I.

Business strategies used
This section explains business strategies used by Airborne Express

II.

Internal consistency test
This section explains if the strategies used by Airborne Express meet its internal
consistency test

III.

Dynamic consistency
This section explains if the strategies used by Airborne Express meet dynamic
consistency test


1

Running head: AIRBORNE EXPRESS

Tittle
Student name
Institution name
Course name
Date

2

AIRBORNE EXPRESS
Airborne Express
Business Strategies Used
Business strategies are the strategic plans, tactics, and approach used by companies t...


Anonymous
This is great! Exactly what I wanted.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Related Tags