4 Paragraphs to rephrase them1 Airborne Express’ value chain is tailored to deliver the cost leadership competitive
advantage it seeks. By focusing on business customers who regularly have large
shipments from one major city to another, and by focusing on afternoon and second
day delivery, Airborne can utilize the available infrastructure and use cheaper
transportation, including trucks and partnership with RPS (Operations). The company
cuts the need to maintain retail center by having drop boxes in metropolitan area
(Inbound Logistics). Cost is further lowered by filling to 80% capacity for planes and
using independent contracts as couriers for pick-up and delivery (Operations and
Outbound Logistics). Independent contractors handle 60-65% of Airborne’s volume, and
are 10% less expensive than company-owned pickup and delivery. Only 50% of the
workforce is unionized, including all pilots. This allows Airborne to rely on cheaper, parttime labor for activities such as sorting, which further cut down cost (Operations,
Outbound Logistics). Instead of spending expenses on mass-media advertisements, a
team of sales persons and senior managers are in charge of developing new accounts
(Marketing and Sales). Their performances are supported by the company’s culture and
incentive structure.
The VC activities have positive interactions with one another. Being able to use drop-off
boxes instead of having to maintain retail centers is made possible by focusing on
customers that want delivery between major cities. These customers’ businesses were
originally developed via the specialized sales force and senior managers, who are in turn
influenced by culture and incentives. Access to FOCUS (for high-volume shippers) and
tracking functions on website decrease the need for customers to talk to service rep.
This allows a smaller service-rep force and easier for the client to reach the same rep by
using that automated call center system. Cheaper ways of transportation (trucks and
RPS) are available due to having a larger portion of afternoon and second-day delivery,
and customers delivering from and to major cities. Owning airport hub eliminates
variable cost such as paying for ground time, which allows more time for the planes to
be filled up.
2-
Airborne Express does not have a sustainable competitive advantage. It has positioned
itself to provide cheaper but reliable and tailorable carrier services for business
customers operating in major cities. There is no significant barrier for its competitors to
also operate in these fields. Airborne has the advantage of owning its own airport, but
so can the other competitors. Its competitors can also imitate using cheaper
transportation methods (truck) and partnering with a company such as RPS. Moreover,
Airborne’s reliability has not measured up to Fedex and UPS (96% to 97% on-time arrival
vs 99% or higher on-time arrival) and its offer of tailored services has been imitated by
its competition by mid-90’s. While not spending money on marketing in mass-media
means a reduction in cost, it also hurts Airborne’s brand awareness. Using part-timers
and non-unionized workers lowers the cost of labor, but unionization of labor poses a
threat. With the introduction of internet and decreasing geographical restraints,
international shipping became increasingly important and Airborne did not invest
enough in this area. Financial results support this conclusion, Airborne has been
consistently underperforming in terms of revenue and operating margin compared to
Fedex and UPS. Fedex and UPS are larger than Airborne and their economies of scale
pose as a continuous threat to its position.
Airborne Express did implement the hub activities; the competitive advantage is not
sustainable because Airborne did not make these activities costly for its competitors to
imitate as mentioned in previous paragraph. Many of Airborne VC activities contributed
to the lowering of cost, and they are possible because early on, Airborne decided to
target “business customer that regularly shipped a large volume of urgent items,
primarily to other business locations” as well as afternoon and second-day delivery.
Other activities, such as maintaining drop-off boxes instead of retail centers (relatively
easy for couriers to pick up parcels in metropolitan areas), using independent
contractors for pick-up and delivery, operating using its own airport, supplemental air
transportation with cheaper ground transportation options…etc., all followed after the
hub activities of receiving and sending parcels in metropolitan areas. These all work with
one another to drive down costs.
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