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Case Discussion:
Airborne Express
Prof. Jan W. Rivkin

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Synopsis

Despite being one-ninth the size of its largest rival in

an industry with significant economies of scale,
Airborne survived for years and, at times, prospered.

It did so by targeting a subset if customers with

particular needs and tailoring its every activity to meet
those needs uniquely well.

The differences in activities between Airborne and its

rivals created a 20% cost advantage for Airborne.

Dynamics of the Express Mail

Industry

The express mail industry in the United States is

dominated by FedEx and UPS, who hold 70% market
share. Small players have struggled. Emery/Purolator
and BAX were pushed to the periphery of the market,
and Roadway Global Air exited the business after losing
hundreds of millions of dollars. Why is this such a tough
market for small players?

Why are there benefits of being big in this business?

Dynamics of the Express Mail

Industry

It looks very costly to ship a handful of units. Yet FedEx

entered this business at a very small scale (186
packages the first night) and even started to make
money at a small scale. How do we make sense of
that?

How would you characterize the competition between

FedEX and UPS?

Why is the rivalry between these two companies so

fierce?