Sample Case Study on Air Borne Express

Q1 The Five Forces Analysis.

The five forces analysis is based on Porter’s 5 Forces model which is used to analyze the level of competition in an industry. The elements of the model are threat of new entrants, bargaining power of buyers, threat of substitutes, bargaining power of suppliers, and competitors (Thompson 2001; Porter 1980).

Threat of new entrants: Airborne operated in a capital intensive and competitive industry, which made it hard for new entrants to succeed in the market. Moreover, because of the facilities and infrastructure required, it is hard for new competitors to enter into the market. Other than these barriers of entry, it is notable that government policy is very restrictive which limits entry into the market (Porter 2008). In this case, the industry is restricted to small number of players, which grants them monopoly, reducing the threat of new entrants.

Bargaining power of buyers: According to Porter (2008), buyers are considered as powerful if they have negotiating advantage that is relative to the industry players. With regard to Airborne Express, the buyers had limited negotiating leverage because of the industry has numerous consumers, both domestic and international. Moreover, the services provided in the industry were differentiated and for this reason, it was hard for consumers to play one vendor against another.

Threat of substitutes: the threat of substitutes was very low in the industry, which means that the profitability of the company was not affected. Moreover, it is hard to substitute services given that the industry is well regulated and it had limited number of players, which means that the threat of substitutes was limited (Porter 2008).

Bargaining power of suppliers: Airborne had power over its suppliers, which gave it a competitive advantage. For example, the company had control over the movement and consolidation of component parts from the major suppliers all the way to the Hong King Assembly operations. Such power over its suppliers reduced costs of operations and inventory-holding costs. As indicated in the case study, the company consolidated its hundreds of suppliers in-house and went ahead to arranged for the shipment of materials and equipment. This ensured that the company not only cut down its costs but also created a competitive advantage over its competitors (Porter 2008).

Rivalry among Existing Competitors: In regard to Airborne Express, the company faced completion from existing players such as UPS and FedEx (Hill 2012). It also faced competition in foreign markets which prompted the company to enter into strategic alliances. It also faced competition from DHL before its assets were acquired by DHL. Therefore, the intensity of rivalry in the industry was low since the competitors are few and exit barriers were few (Porter 2008). However, this does not mean that the industry was less competitive.

Q2 Business Level Strategy

Porter’s generic is composed of cost leadership, differentiation, and focus strategies. Cost leadership strategy is used to minimize operational costs of a company. Differentiation is a strategy used to gain a competitive advantage over closer rivals and competitors. Differentiation strategy increase market share and profitability of an organization (Miller 2009).  Focus strategies entails supplying and targeting a certain segment or group of consumers or better a geographical market whilst Cost focus concentrates on behaviours of consumers, especially through price sensitive, while differentiation concentrates on unique offerings (Murry 2008). With regard to the case study, Airborne Express pursed a focus/low cost strategy. For instance, according to Hill (2012), the company’s major focus was to serve the needs of high volume corporate customers, while at the same time aiming to be the lowest cost company serving this specific segment. Moreover, it provided the lowest cost compared to Fed Ex and UPS (Hill 2012). Moreover, the company contracted 60-65% of delivery services, which were cost effective given that the company had delivery and pickup. In addition, it had overnight morning delivery, which was 10.95-80.70 versus FedEx 13.86. It made use commercial planes in which they were able apply capacity of 80% contrary to the industry standard of 65-70% by UPS and FedEx.

 Q3 Corporate Level Strategy the Company

At corporate level, Airborne Express operated under the dominant business diversification, which was realized through the diversification of product through including logistics services. It is imperative to note that the company operated a single business that encompasses the shipping letters and packages to and from metropolitan areas. In addition, they were in a position to revenues through renting space from their airport which they owned. The shipping business share was 95 percent while the warehouse space rentals were less than 10%.

Q4: The Strategic Alliances in the Case. The Benefits and Drawbacks Of Strategic Alliances,

A strategic alliance is described by Peng (2008) as a long-term cooperative arrangement between two or more independent firms or business units that engage in business activities for mutual economic gain. Strategic alliances are employed to obtain or learn new capabilities, obtain access to specific markets, and reduce financial risk and reduce political risk. In respect to Airborne Express, the company entered into a number of exclusive strategic alliances with large foreign agents, with the aim of having access to foreign markets as well as reduces political and financial risks. Some of countries in which Airborne had alliances were in Japan, Thailand, Malaysia, and South Africa. As indicted in the case study, the company had joint ventures in the four mentioned countries. In addition, the company was also in a joint venture between Airborne (40%), Mitsui (40%), and Tonami (20%), which formed the Airborne Express Japan (Hill 2012). The justification for entering strategic alliances was to ensure market penetration into the Japanese market and share costs, hence promoting financial advantage over competitors. Moreover, the prime advantage of expanding through strategic alliances is that the Airborne Express got a reputable ground-based delivery network overseas without the need to make capital investments. The other advantage experienced through strategic alliances with overseas companies was to benefit from well-established ground delivery networks.

The limitation associated with this kind of strategic alliance was limited ownership and ability to make core decisions. For example, despite the fact that Airborne Express owned 40% of its overseas operations, the company did not have majority ownership and for this reason. It was hard for it to make major decisions (Peng 2005; Peng, 2008). However, joint ventures allowed the organization to own a stake of an existing management. In respect to market share, Thompson (2001) adds that the use of joint ventures when entering into new markets results to limited growth, which was a disadvantage to Airborne Express.

Q5 Distinctive Competencies, SWOT Analysis and TWOS analysis

Distinctive Competencies

Core competencies are the unique abilities used by organisations to differentiate themselves from the rest of the players in the industry. They are used to provide a business with competitive advantages while delivering and creating value for money to potential and loyal consumers (Porter 1980). In reference to Airborne Express, some of the core competencies are such the use of technology like ERP, Customer Linkage, and an electronic data interchange (EDI) program and the third information system (Hill & Jones 2012). Airborne’s Freight On-Line Control and Update System (FOCUS), could be used by customers to track down packages. It had knowledgeable employees described as “very conservative”, “Straight-laced,” and “frugal.”

SWOT Analysis

SWOT analysis analyses the strengths, weaknesses, opportunities and threats experienced by the company. In regard to Airborne Express one of its major strength is ensuring reliability of its delivery schedules. This was achieved through the use of FOCUS system to track the shipment. Another strength was the integration of technology is supply and chain management. For example, from the case study, Airborne Express Airborne developed Customer Linkage, an electronic data interchange (EDI) program and the third information system. As noted by Hill and Jones (2012), EDI system was designed to eradicate the flow of paperwork between Airborne and its primary clients. This played a major role in cost reduction, hence saving. The company also had its crafts and trucks which were used to transport and delivery. In addition, The Wilmington maintenance facility was significant in reducing the costs of aircraft maintenance. As an international company, Airborne provided services in over 200 countries.

In respect to weaknesses, Airborne Express, the company depended on international operations, which relied heavily on freight products. In addition, the company did not fly its aircrafts overseas, but rather depended on third parties to deliver freight and express services.  Moreover, the company’s financial performance was volatile in 2002 which resulted to losses. The company was also faced with integration problems, missed delivery deadlines and poor customer services. Airborne Express faced rivalry and competitive threats from existing companies like UPS and FedEx among others.

As indicated in the case study, Airborne Express was faced with multiple strategic threats and opportunities. Some of the opportunities were fast globalization of the air express industry, the development of logistics services based on rapid air transportation, the growth potential for deferred services and ground-based delivery services. Some of the threats experienced were lower margins associated with the new GDS offering, persistently high fuel costs (for instance, oil prices increased from $18 to$25 a barrel) and the superior scale and scope of its two main competitors, FedEx and UPS (Hill & Jones 2012).

TWOS Analysis

The TOWS is made of threats, opportunities, weaknesses, strengths elements.

  Strengths

reliability of its delivery schedules

-crafts

-presence in 200 countries

Weaknesses

depends on 3rd parties

-depends on international markets

  Strengths-Opportunities Weaknesses -Opportunities
Opportunities

fast globalization of the air express industry,

-the development of logistics services based on rapid air transportation,

-the growth potential for deferred services and ground-based delivery services.

-increase the use of technologies

-have consumer oriented services

-Customer relationships

-Launch new products and services

  Strengths-Threats Weaknesses-Threats
Threats

high fuel costs

-threats from UPS and FedEx

 

-Introduce new services and products -Benchmark with String competitors

 

 

 

 

 

 

 

 

References List

Hill, C W L 2012, Airborne Express: The Underdog, In Hill, C. W. L., & Jones, G. R 2012. Strategic Management. Cengage Learning

Hill, C. W. L & Jones, G. R 2012. Strategic Management,  Cengage Learning.

Miller, D 2008, The strategic strategy trap, Journal of Business Strategy, vol. 13, no. 1, pp. 37-41.

Murray, A J 2008, A contingency view of Porter’s generic strategies, Academy of Management Review, vol. 13, no. 3, pp. 390-400.

Peng, M 2005, Global Strategy, Sage, New York

Peng W M 2008, Global Strategy, South – Western Cengage Learning, USA.

Porter, M E 1980, Competitive Strategy, Free‐Press

Porter, M 2008, The Five Competitors Forces that Shape Strategy, Harvard Business Review, pp. 1-17

Thompson, J L 2001, Understanding Corporate Strategy, Thomson Learning