Airborne Express - Essay Example

   What are the industry forces that impact the profitability of incumbent firms in the Express Package Delivery industry?

Industry force's impact on profitability can be examined using Porter’s five-force analysis. This framework views the profitability of any industry as determined by the combined effect of the five forces in action.

Ease of entry, a force affecting industry profitability, influenced airline business since the domestic deregulation of the U.S. air cargo industry in 1977, the competition in the industry intensified and more and more companies strived to defend their profitability by either coming up with better competitive strategies or influence them in its favor. Now it was easier for companies to invest in jets and pose a threat to the profitability of firms. With respect to the power of suppliers, it can affect the relationship between a business and its customers by influencing the quality and price of the final product. The power of buyers had a great impact on profitability as they began to negotiate in groups and enjoy discounts and lower costs. Availability of substitutes is high in the industry and with the advancement of technology and better systems, more promising channels flared up, inflicting damage to the profitability of the industry. Competitive prices also lead to a decline in profitability levels. Competition from conventional rivals has had the biggest impact in depressing industry profitability: the express package delivery industry has become more concentrated in recent years, because of mergers between companies and the bankruptcies of many firms.

 What strategies did Airborne adopt to try and increase profitability?  Why was it unable to gain any competitive advantage over FedEx and UPS?

Generally, Airborne strategies focused on gathering information about competitors in the market, the service’s uniqueness, description of key clients, channels for distribution, pricing strategy, expenses, and research and development. It acquired its own fleet of aircraft in April 1980, which enable the company to provide next-day delivery of small packages. It started the second-day delivery trend in 1991 and later followed the trend of third-party logistics which enabled special advantages to its customer and the ability to make late shipping decisions. Instead of staying ahead and innovating, the company mostly tried to catch up and follow what its main competitors did.

The main reasons that attributed to its non- competitiveness over FedEx and UPS include lack of funding, poor strategic planning, price wars, lack of competitive services and products, and not understanding the competition. In order to stay ahead and get an edge over one’s competitors, the company must closely monitor the moves of all the competitors. One must be aware of how their business operates. The survival of the business depends on how well one is able to adapt to the competition’s changing strategies. It can be done by strengthening your own business and watching theirs and avoiding this common failure. Airborne failed to stay ahead of its competition and was unsuccessful to offer new innovative offerings that could compete and maintain the profit margins of the company.