“to learn strategy a longer lense of time must be used”, at least that’s something my strategy professor would regularly say. It did make quite a bit of sense to think longer term to understand business strategy. Many actions taken by people and businesses are in reaction to previous circumstance and they don’t quite make sense without the historical context. This was a study of the development of a specific industry, air express package delivery, over a 30 year timeline.

  • The air express industry grew rapidly in the 1980’s, however it was characterized by low profitability during that period for a number of reason.
    • Deregulation in 1977 created a whole series of small companies began operating in the air express with Federal Express specializing in small packages but especially with previous freight forwarder businesses were squeezed out of the larger cargo market. While the demand was increasing and Federal Express was very successful at increasing demand with marketing campaigns there was still a high degree of supply which created varied and regionalized competition which prevented prices from rising significantly enough for high profitability given high operating cost inherent in airline logistics.
    • UPS entrance into the market in 1982 further increased competition further exceeding even the rapidly increasing demand leading to price wars and consolidated, stronger negotiations from customers.
    • By the late 80s demand growth rates began to decline especially for next day document delivery due to electronic transmission via fax machines.
  • Performance and profitability of the industry improve in the 1990’s and then again in the 2000s.
    • Partially due to decrease of competitive supply allowed prices to stabilize at profitable levels with good volumes for industry participants.  
      • Initially through consolidation in late 80s
      • Entry and exit of DHL taking Airborne Express out of the market.  
    • Increase in product offerings
      • 1980s: 2nd Day Delivery, Premium Services – Early AM delivery, Logistical Services – inventory mgmt., warehousing, transportation, distribution
      • 2000s: expansion of logistics service, ground transportation and bundling of complete transportation solutions: air freight, ground delivery and logistics. Retail sales & service – UPS Store & FedEx Kinkos.
    • Globalization, especially in the manufacturing of smaller and high value products. Continued globalization
    • Going forward – rise of online shopping: Amazon, shopify, eBay, and all other retail operations continues to increase the volume of packages shipped.
    • What was the business strategy of Airborne Express during the 1980s and 1990s? Did this strategy make sense given industry conditions?
      • A niche market strategy to specialize on higher volume business customers.
        1. This enabled a major focus on cost cutting to be possible of concentrated operations.
        1. No advertising but significant dedicated sales team developing and maintaining business accounts.
      • Later day delivery time guarantee but with exceedingly high reliability
      • Significant focus on cost cutting, service effectiveness and efficiency: C-containers and IT systems – LIBRA II, FOCUS, Customer Linkage EDI (+Quicklink to enable easy and fast EDI utilization).
      • Performance measures – Packages per pickup, controllable cost, station profitability,
      • International strategic alliances and partnerships allowing international delivery without capital investment.
  • If you were CEO of Airborne Express in the early 2000s, what would your strategy have been?
    • Continue with domestic niche strategy targeting business accounts
      1. Expand ground delivery options
    • Strategic targeting of international routes and markets to develop international network. Drive sales teams to fill the international market routes as capacity came in.  
    • Look to expand logistics services and partner with the growing online retailers