Airborne Express Case
1. From the point of view of the industry incumbents, is the express mail industry attractive? How has Airborne survived, and recently prospered, in its industry? Is its success attributable to its capabilities, its position, or industry attractiveness?
The express mail industry can easily be considered an inherently tough industry to operate within given the myriad of factors that come into play, such as unions, government regulations, cost of technological advancement, and international borders to name a few. Despite this, the industry could be seen as offering opportunities, which could be seized by attracting customers based on the quality of the service being offered. Consequently, this also encouraged mimicking between
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Several factors contributed to ABX’s low cost and subsequently lower pricing. ABX for example operated their own airport, which rid them of all landing fees and allowed them to facilitate all their needs at the airport at little cost. By operating older aircraft and contracting up to 65% of the vans operating their ground network, asset cost and depreciation was therefore inevitably lower. Their drivers were not unionized and received somewhat lower hourly wages than Fedex, which translated into lower labor cost. The contracted labor cost them approximately 10% less in delivery and pick-up cost further contributing to the lower rates. ABX’s overhead was more controlled with a very frugal approach to the running of the company. Marketing was not as aggressive, and less costly than that of Fedex. Instead, they ran a strong sales force which targeted logistics managers of high volume customers. ABX was quite selective in their technology investments. In turn they did not offer all the online features as Fedex did but they ensured that some of the high volume customers had a link to ABX’s computer system, FOCUS, so that they could access the information they required. The low overhead cost was also supported by the fact that no retail outlets were operated, which supported the low overhead and in turn the lower price of overnight letters.
b) Second, how does the