Airborne Express

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 air express industry. The Internet and information systems are transforming the air express market into an electronic commerce market, and Airborne needs to transform it’s operations to meet this growing market.
This report describes the strengths and weakness of the organizational structure of Airborne Express. Furthermore, it also gives recommendations for future changes in Airborne Express. The first section of this report addresses how the organization of the firm evolved, and what changes are taking place structurally in its industry. The second section discusses labor issues in the air express industry and how they affect Airborne Express. The third section addresses the growing electronic commerce market and how it’s affecting the industry and Airborne Express.
1) Structure of Airborne Express
During the eighties many air express companies were formed and many were destroyed. However, three companies came out of this highly competitive period on top. They were FedEx, U.P.S. and Airborne Express. Airborne survived this highly competitive period by adapting to the external forces affecting the industry. One of the external forces affecting Airborne was the size of the competition. U.P.S. and FedEx were just swallowing up competitors. So Airborne decided the best way to compete was to be the low-cost provider of air express service. Robert Cline, CEO of Airborne explains their strategy “When you are up against UPS and Federal Express, those guys are so big and so well capitalized that you have to have a tool to fight with them. It wasn’t going to be size; it wasn’t going to be how well-known we were. So, we decided to be the low-cost operator.”(Washington CEO P 33). However, to become the low cost operator Airborne had to make many structural changes. One of those structural changes was that Airborne centralized its organization as much as possible. After all, why pay middle management high salaries when upper management can make all the decisions. Furthermore, what CEO would trust middle management to make decisions during the unstable period of the company’s history?
Another major change Airborne underwent in the eighties, was to differentiate its service. Unlike its two major competitors, FedEx and UPS, Airborne changed its strategy to concentrate on providing services for large corporations (Airborne Express’s 10-K form p5). This strategic change not only gave Airborne product differentiation and market specialization, but also benefited by taking away the need for advertising. Therefore, it could save the $35 to $40 million it was spending a year on advertising, and use it to help become the low-cost operator (Washington CEO p 36).
Airborne made important structural and strategic changes in the eighties, which contributed to its success. However, in the nineties, Airborne is reluctant to change with the environment. As mentioned earlier, many firms are moving towards a more decentralized structure. Airborne seems to be using the same structure that got it through the eighties. Consequently, its decision making is still coming from top management, and no responsibility is being delegated to lower management. FedEx however, has experienced growing success by using a decentralized structure. “Delegation, as demonstrated by FedEx, can lead to a more empowered work force and resulting heightened productivity and quality, reduced costs, more innovation, improved customer service, and greater commitment from employees” (Management Challenges in the 21st Century p 285). Airborne’s centralized structure is also one the reasons its been experiencing labor problems.
2) Labor Issues
The last few years have plagued the air express industry with labor problems that have kept CEO’s of major companies like UPS, FedEx, and Airborne Express on their toes (The New