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CASE STUDY - "Airborne Express"

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Q1. What is the company generic strategy? Is it a good strategy? Justify?

Answer - The present study is based on a case study company "Air-born Inc.". It is basically a transportation company that provides "express delivery" service for small to medium sized packages. The clients of this service is not limited to business-to-peers, however, it also pics delivery parcel from community residences and offer similar services. This shows that the company is retaining customers from wider segment of the community along with company sources. In conjunction to the rivalry companies in the market, there exists a high range of competition to the parcel delivery services offered by Airborne Company, such as FedEx and UPS. The competition in the present market segment is mainly reflective with reference to timely delivery, pricing strategies, offering discounts to retain loyal customers, as well as in terms of offering clear and transparent customer support.

In order to maintain a competitive edge, the company primarily focuses on its operating structure, organizational culture, and structure. Based on the case study, it is identified that the company focuses on low-cost strategy as its prime generic strategy (Hough, & Nowak, 2018). It emphasizes on fulfilling the requirement of high-volume corporate customers. In this context, it planned to become the "lowest-cost" company to serve the needs of this market segment. Note that in this industry, the price or cost of transportation is the main differentiating agent. To survive and remain ahead in this industry, the company adopted a low-cost structure by strategizing the dealing with distributors, bulk transportation, low-cost and high efficiency middle-man transporters, and offering timely updates to the customers. Hence, this strategy is effective for Airborne in several aspects and it is able to make a higher profit, by raising the high volume of sales. For example, it focuses on the ground-based transportation with the help of trucking hubs which reduces the operating costs as compared to other air transportation services. According to reports, the average cost of package transportation through the air is almost five times higher than transported through the ground (Günther, 2019). This is also the reason that customers are aware of this cost differentiation and preferred Airborne Company for parcel delivery.

Based on these analysis, the generic strategy of the company is efficient. For instance, it also focusses on improving its efficiency through effective Inventory management. By reducing delivery cost and delivery time, the company was able to fulfil the customer's expectation. To maintain its low-cost leadership, the company did not fly its own aircraft overseas. Instead, it contracted with passenger airlines or cargo airlines for package delivery. It also holds alliances in Malaysia, Japan, Thailand, and South Africa such that the overhead expenses with middle-man delivery can be reduced. Also, in the context of low-cost strategy, the company prefers to purchase "used planes" rather than buying a new one. For example, it cost around $10 million for purchasing and modifying a second-hand aircraft as compared to buying a new one which can cost approximately $40 million (Balliauw, Meersman, Onghena, & Van de Voorde, 2016), and thus saves overhead expenses. Airborne Company is also known for emphasizing on large corporate customers by maximising service through ground capacity. The company's delivery driver dropped off and picked up more packages in every single stop, which in turn helped them to enhance its productivity and reduce operation cost. Overall, these strategies helped Airborne to reduce its delivery time then its competing companies, making it more flexible and customer friendly. On the other side, there exists a risk with this strategy of Airborne. The strategy was specifically designed for the niche market, and this market segment might change or disappear with time creating a risk for the company. However, in the present marketing conditions the existing strategies of the company are beneficial and have the capabilities of attract and retaining loyal customers.

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Q2. Write the 6 forces (Porters) only from the articles and right down what you understand from it?

Answer - Porters 6 force analysis

In this section, the discussion is based on analysis of Porter forces, which were concluded in conjunction to the given case study.

Threat of new entrants - The possibility of new entrants in the parcel transport service is low due to limited ability to adopt the air transport services, which in turns reduces the risk factor for Airborne. Also, the express mail market has become a saturated market as it has been mostly occupied by Airborne, FedEx and UPS, and leaves the least possibility for any new entrant. The existing companies can also retaliate against the new company. However, it is also considered saturated as there does not exist many ways of differentiating the new service from the service provided at present (Beaumont, 2018). The threat of new entrants is not in impending concern for the company because it requires high capital investment to establish the business in terms of Plain fleet, marketing, trucks fleet and hubs, and spokes. Moreover, that exist several airline regulations to deliver parcel through the air route. However, some major companies, such as Star Track Express, DHL, and CourierPlease from other countries can come up with needed capital to open a business

Bargaining power of suppliers - According to the present case, the bargaining power of suppliers is also low. It is a little dependent on suppliers. Since it mostly works on a contract basis with other companies, it has to deal less with fuel suppliers. However, the company's work strategy highly depends upon the middleman and distributors for picking and deliver packages. These employees the company unionized in nature which proves to be an advantage (Perboli & Rosano, 2019). The facility of Wilmington Hub which is certified through Foreign Trade Zone (FTZ) in the United States. FTZ does not charge any tax or customs duty on inventory storage, which helped the company to provide just-in-time delivery to US customers.

Bargaining power of buyers - The bargaining power of Airborne is high, which is attributed to the reason that the existence of numerous other alternative companies providing the same service. The buyers or customers are attracted to those companies who are providing faster delivery service at a low cost. In order to reduce the probability of brand switching by customers, Airborne introduced a low-cost service strategy (Perboli & Rosano, 2019). Thus, some of the factors which can reduce buyers bargaining power include brand loyalty, low cost, effective and innovative service.

Threat substitute product of services - There exists a high threat of substitute products in this industry. Some of the examples of substitute products include fax, email, Skype, bus transport, telephone which can replace package delivery through new technology. With the emergence of e-commerce businesses, such as Amazon, customers are able to purchase and deliver the product with just one click (Wang, Jia, Schoenherr & Gong, 2018). Airborne is best known for its low price strategy, thus, companies with similar or better strategy can create a threat to the existing business.

Rivalry among the competition - There exist high risks from the rivalry of the company. There are basically two main competitors of Airborne, FedEx and UPS. Airborne operates mostly in the niche market, UPS and FedEx operate in all markets. The competition is dependent on service quality, deadline maintenance, low cost, advertisement, and market approach.

Complementary product - There is a high impact of complementary or similar services provided by other companies. In this context, the complimentary service will have an adverse impact on its profit and company growth. However, for the contemporary approach of parcel delivery, the alternative services will not be able to satisfy the needs of consumers.

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Q3. Suggest a new strategy for airborne express and measure it with balance score card and KPI?

Answer - New strategy for Airborne express and its measurement through balanced scorecard and KPI

Based on the case study, it is evident that Airborne lacks a strong marketing campaign. A marketing campaign is necessary in the present marketing conditions (competition), which have the potential to foster the customer base and improve brand imaging. Considering the positioning of rivalry companies such as UPS and FedEx, they have a strong marketing strategy which helps in gaining competitive advantage (Sriram, & Shapiro, 2015). Moreover, the marketing campaign is also useful to promote the brand at local as well as international presence. In context of developing a new strategy for Airborne Company, they should step forward to develop a marketing department having the responsibility of designing an aggressive marketing campaign. The ideology is motivated with objective to promote increasing market share and enhancing the customary popularity, in the successive business years. Remaining as an eye of mass media and social media increases the opportunity to gain potential clients which in general were unaware of its presence. The strategic measures that are necessary in this regard, include increased emphasis on its cost differentiation strategy, as a major objective. Mass media in this context can be considered as an important mediator to deliver information for companies which will be the target customers. The information transaction and data exchange will be smother, which will account for the advantages of communication and technological advancement. For instance, Airborne has already tried the television for its advertising campaign which proved to be a costly approach. However, it is recommended to move towards social media platform which requires less investment and covers a wide range of customers from the different economic background (Ashley & Tuten, 2015). Other advantages of using social media for marketing campaign include easy return of feedback, estimation of the outreaching messages, and availing opportunities to create new customers.

For measuring the new strategy's effectiveness, balanced scorecard and key performance indicator (KPI) are the two most effective tools. As per the recommendation, the company can advertise its brand on different social media platforms such as Facebook, Twitter, YouTube, and Instagram. The balanced scorecard is dependent on 4 basic principles, viz., financial, customer service, internal process, and learning and growth (Tan, Zhang, & Khodaverdi, 2017). In accordance to the financial perspective, it needs objectives related to financial, which must include the following:

(i) Total revenue,

(ii) Net profit,

(iii) Profit margin and

(iv) Profit per customer.

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Further, from the customer service perspective, it should analyse factors that could help in estimating the marketing campaign effectiveness, as well as can account for the brand positioning. These factors include the following:

(i) Active customers,

(ii) Customer sign-ups,

(iii) Customer retention in conjunction to bimonthly, half-yearly, and annual basis, and

(iv) Customer satisfaction, based on feedback analysis.

Similarly, with reference to the internal process perspectives, it should analyse factors, such as:

(i) Average employee absenteeism,

(ii) Labour effectiveness, and

(iii) Average over time.

Additionally, in order to render analysis over the learning and growth perspective the company should emphasize following factors that are linked with operation and functioning. These include

(i) Operating cost,

(ii) Development of new service per year,

(iii) Staff training hours,

(iv) The opening of a new sales region.

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Financial perspective

Objectives

  • Total revenue,
  • Net profit,
  • Profit margin and
  • Profit per customer

 

Measures

  • Cost charge per delivery

Targets

  • 60%
  • 70%
  • 30%
  • 10%

 

Customer service perspective

Objectives

  • Active customers,
  • Customer sign-ups,
  • Customer retention
  • Customer satisfaction

Measures

  • Survey
  • Questionnaires
  • Interview
  • Feedback

Targets

  • 20%
  • 30%
  • 37%
  • 50%

 

Internal process perspectives

Objectives

  • Average employee absenteeism,
  • Labour effectiveness, and
  • Average over time

Measures

  • Internal survey
  • Analysing employee records

Targets

  • 20%

 

  • 40%

 

  • 30%

 

Learning and growth perspective

Objectives

  • Operating cost,
  • Development of new service per year,
  • Staff training hours
  • The opening of a new sales region

Measures

  • Analysing cost of transportation and salary to employees
  • Quality of service and customer's response

Targets

  • 20%
  • 45%

 

  • 34%
  • 20%

The company should consider some of the key social media metrics using social media KPI for measuring the performance of social media campaigns. Some of these social media metrics include the number of likes, followers, views, traffic conversion, followers' growth, social visitors, views, impressions, and social shares (Oliveira, & Figueira, 2017).

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