Short essay questions
1. What was Airbone’s long term strategy to address low willingness to pay among its target customers?
2. How has (sunk) cost changed over time as the industry expanded?
3. Explain how (relative) marginal costs and total costs determine Airborne’s business priorities.
4. Explain Airborne’s relative cost positions.
5. Provide examples of three businesses (from the MOS book) that faced the same economic issues by Airborne.
Answers:
1. Firstly, Airborne Express chose its customer very selectively and pursued an emphasis on low price strategy. The main target customer for airborne was the high volume, frequent, service; consistent with flexible environment and price is the main competitive defense for attract to the
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Fourthly, The Airborne maintained low prices, provided tailored services and achieved higher efficiencies and lower cost in order to long run and remain competitive in the market. So, Airborne targeted business customers who shipped frequently and was able to better serve them through repetition and experience including using customization codes to provide tailored service to specific large business accounts. Moreover, Airborne had a high concentration of customers in metropolitan area and a high percentage of afternoon and second day deliveries, permitting it to use ground shipping more often than its competitors and save up to two-thirds the cost of air shipping (Exhibit 8). Finally, Airborne had total control of its airport hub, which is design as per the needs and expand to enclose warehouse space for its business customers. Furthermore, Airborne achieved greater efficiency in its shipping by utilizing 80% of shipping space therefore; Airborne lowered cost not having retail service centers, using independent contractor van services and it was more efficient by picking up and delivering more parcels per stop than FedEx. Hence, Airborne becomes a stronger competitor in the market due to low prices and provided excellent service to the customers.
2. I personally believe that Airborne‘s business strategy is play a vital role for emerging industry. It would take a very large
Air Canada has been in the business of air transport for an extended period of time. Due to the experience and the exposure of the carrier in the field, it has made a commendable progress through many strategies as well as customer proximity. One of the approaches taken by the airline involves the identification as well as an implementation of cost reduction initiatives in a bid to increase revenue from its operations (Air Canada, 2016). It is also attempting to connect with the existing carriers across the world to connect the current customers to the international world. This approach has been adopted to increase its competitive advantage over other existing airlines.
The first technique suggested by Yoffie and Kwak to master movement was referred to as the “puppy dog ploy”. They believed small companies should “keep a low profile and avoid head-to-head battles that they’re too weak to win.” (Yoffie&Kwak, 3) Airborne succeeded in mastering this technique through direct marketing. They targeted large clients directly, which allowed them to keep a low profile while building a strong position. Airborne’s actions also related to Yoffie and Kwak’s technique number 2: define the competitive space. Airborne recognized that FedEx and UPS held a solid ground in the industry, so they decided to focus on large-volume business customers. While still competing in the same express mail industry, Airborne found their own space in the market.
Known as one of the most brutal wars in the history of the world, World War II claimed the lives of millions of people around the world. Soldiers had to rely on their brothers in arms in order to survive. Band of Brothers: E Company, 506th Regiment, 101st Airborne from Normandy to Hitler’s Eagle’s Nest by Stephen Ambrose explores the life of E Company in WWII, and serves to show how successful they were through all of their close bonds with one another.
Spirit Airlines, the leading ultra-low-cost, no-frills carrier; the worst all round Carrier charges for every service besides the basic fare. For this purpose, this paper will discuss the Carrier ticket distribution channels, pricing strategy and product promotion.
In terms of pickup and delivery, Airborne did not maintain retail service centres. It hired contractors to handle 60% to 65% of its volume, so it could save cost by owning a lesser portion of delivery trucks. Its courier generally picked up and delivered more parcels per stop than FedEx, reducing labour costs per unit by 20% and 10% for pickup and delivery respectively.
Southwest has been projected as a low-cost airline and has been a source of inspiration to other low-cost airlines because of its successful pricing strategies. The company has targeted middle-class society as its potential customers and has adopted variable-price as another pricing strategy. The company has also introduced innovative programs and offer incentives along with discounts to attract a larger customer base under its variable cost pricing strategy (Bhasin,
carrier; the worst all-around carrier charges for every ancillary product. Established under Airline Segmentation, Spirit targets price sensitive, business-class, middle-class, students and solo travelers within psychographics (Zigu, 2017). Consequently, this paper will discuss the carrier; ticket distribution channels, pricing strategy, and product promotion.
One of the key decisions of Airborne Express was to target regularly shipping business customers and purposely passing over residential deliveries and infrequent shippers. Ray Berry, vice president of Field Services Administration, commented this selection of customers: “ Since we can’t be all things to all people, we pick our kind of customer deliberately.” And it
In a highly competitive industry the structure of a firm is very important to its success. Today firms are moving away from the centralized structure of the past, and adopting a more decentralized structure (Management Challenges in the 21st Century p 315). The air express industry is no exception. FedEx, the leader in the air express industry since the late eighties, is also leading U.P.S. in the race to become decentralized. Airborne Express is not even in the race. In order to compete in today's changing environment, Airborne Express needs to move away from its old fashioned centralized structure and form a more decentralized structure. The old fashioned structure is not the only variable that makes Airborne the follower in the
How have the changes affected small competitors? How has Airborne survived, and recently prospered, in its industry? Quantify Airborne’s sources of advantage. As the note on “Creating Competitive Advantage” (HBS 798-062) discusses, it is often useful to analyze a company’s cost position relative to its rivals and to examine the willingness of customers to pay for the company’s products relative to competitors’. The case allows you to analyze the relative costs of Airborne Express in detail. Specifically, compare the costs of an overnight letter shipped by Airborne Express to one shipped by Federal Express. The case does not allow you to compare willingness to pay across companies more than qualitatively, but it does permit you to examine relative prices. To examine relative costs, start with the cost structure of a Federal Express overnight letter, given in Exhibit 3. Using information in the case and your understanding of what influences each cost item, estimate each of the items for Airborne Express. 4. What must Robert Brazier, Airborne’s President and COO, do in order to strengthen the company's position? 3
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By looking at all the data showed by the case we can realize that the worst company in the industry of aircraft manufacturing was McDonnell Douglas because it confronted serious financial problems since 1980s when Airbus squeezed its market share. In 1984, MD's fleet comprised 28% of aircraft in service, by 1989 had only 23% of the worldwide fleet, while for example Boeing had 53% in the same year; in 1990 Boeing had 45% of the market share while Airbus had 34% leaving only 21% of the market to MD. The strongest company was Boeing which cover about 70% of worldwide demand, nevertheless the Airbus Industry was
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