Situation of Airborne Express in 1997
Autor: lulu0913 • January 13, 2016 • Coursework • 572 Words (3 Pages) • 1,393 Views
Now consider the situation of Airborne Express in 1997:
a. What activities does Airborne perform differently / more effectively than its competitors?
1. Select customers wisely: targeted the business customer that regularly shipped a large volume of urgent items, primarily to other business locations. Because of the limited locations, the use of air fleet is reduced, saving cost.
2. Own an airport: saved property tax; convenient especially combined with a warehouse nearby. Although operating cost would be a little higher
3. More rely on human resources than computer system: significant saving in Capex on IT system. Wait until new system is verified by other competitors.
4. Purchased second-hand fleet: saving cost compared with buying brand new fleet.
b. How much does it cost FedEx to ship an overnight letter? How much does it cost Airborne?
The cost of an overnight letter for FedEx is about 8.55 USD. Main cost includes: pickup for $1.37, long-haul transport $2.99 and delivery $2.25. For Airborne, the revenue per letter is $9.25 for overnight afternoon delivery, the margin is 7.9%, so the cost for Airborne is $9.25* (1-7.9%)=$8.52
c. Are Airborne’s competitive advantages sustainable? Why or why not?
I think the Airborne’s competitive advantage is sustainable in the short term. Its strong client relationship management and service would ensure the revenues in the next few years. Moreover, its low-cost strategy (which leads to low-priced service) would attract the clients since the first glance on the price list. However, in the long run, the advantages is not sustainable. First, lack of presence in the international market would hamper Airborne to grow further. The market size is limited if only US market is considered. Second, with bigger labor force, potential issue on dealing with people and the union would endanger the operation and financials of the company. Third, lack of experience in serving ordinary customers and lack of service in remote areas would limit the whole cake that the company can get.
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