Airbone harvard case
The domestic express mail market consisted of 3 major firms: Federal Express, United Parcel Service (UPS), and Airborne Express and six second-tier players: BAX Global, DHL Worldwide Express, Emery Worldwide, Roadway Package System (RPS), TNT Express Worldwide, and the U.S. Postal Service. The 3 majors firms took 85% of the market and the 6 second-tier players company shared 15%. The U.S. Postal Service served much of the rest of the market (7,5%). They are popular among residential customers.
There are competitors out of the industry with alternative products like electronic mail and the facsimile. The marginal cost of document delivery via electronic mail was essentially 0 cents. Documents can be scanned into the computer and emailed directly to the receiver. It’s speedier than express mail.
Businesses and individual spent $16-17 billion on expedited shipments within the United States in 1996. In industries such as financial services and consulting, express mail had become the standard means of delivering docs. The shipping volumes rose only of 15-20% per year from 1986 to 1996, but because of the price had fallen, total revenue of the industry had grown by only 10-15% each year. The flagship service of the industry promised overnight shipping with next-morning delivery.
For years, the industry had set fixed prices without taking the distance into account. It is UPS that switched in 1996 to distance based pricing. Prices were raised on long distance shipments and lowered on short shipments. Federal Express followed this change and Airborne decided to stick with fixed prices. Airborne’s decision will be largely comment later on in this paper.
The portion of goods considered perishable or time-sensitive increased over time, so that companies wanted to drive inventories out of their logistic system and compete on the basis of