MGT 693
Spring 2008
Team Bethoveen
Agenda
Value Chain
 Industry Analysis
 Airborne Strategy
 Recommendations
 Current Situation
Update

2
Express Mail Value Chain
Customers
Express Mail
Companies
Sorting
Facilities
Ground
Air
Transportation Transportation
Destination
-Businesses
-Fed Ex
-Hub & Spoke
-Vans
-Cargo planes
-Businesses
-Individuals
-UPS
-Trucks
-Hub & Spoke
-Individuals
-Postal Service
-Airborne Express
3
Industry Analysis

Rivalry
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Threat of Entrants
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Fierce Competition
Price is Basis for Competition
Strong Brand Images
Access to a Large Fleet of Transportation Vehicles
Long-term Contracts with Customers
Threat of Substitutes

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Low Threat of Traditional Substitutes
Technology is Creating a New Threat
4
Industry Analysis

Power of Suppliers
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Fuel Suppliers
Packaging Equipment
Service Suppliers
Power of Buyers

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Moderate Power due to
Price Competition
Dependent on Technology,
Service, and Speed
5
Airborne’s Differences & Sources of Advantage
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Owns Hub Airport in Wilmington, OH
Operates nation’s only foreign trade zone in
Wilmington
Less automation, more human resources
Runs aircraft 80% full
Shippers/Receivers in major metro areas
Majority afternoon & second day deliveries
6
Airborne’s Differences & Sources of Advantage
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No retail service centers
Pick-up and delivery by
consultants
Pick-up and deliver more
parcels per stop
Later delivery times
Lower customer service levels
Technology not always
“cutting edge”
7
Recommendations for Airborne and Robert Brazier

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Strengthen its alliance with RPS
Form a similar alliance with an
international partner
Follow the industry lead and
move toward distance-based
pricing
Continue to focus on costsavings strategies to remain low
price leader
8
Recommendations for Airborne and Robert Brazier


Continue a targeted marketing strategy aimed at
logistics managers, etc.
Maintain the niche philosophy-- “Since we can’t be all
things to all people, we’ll pick our kind of customer
deliberately.”
9
Timeline: Airborne Express and DHL
Enters
Fortune 500
Start of ground
service
Airborne@Home
alliance with
USPS
1998
1999
Purchased by
Van Gend & Loos
Euro Express
Shareholders
approve DHL
acquisition of
$1 billion
10:30am Delivery,
Airborne.com
services
2000
2001
2002
Deutsch Post World
Net (DPWN) acquires
majority shares (51%).
Remaining shares
purchased in 2002.
2003
Acquires Airborne
Express and
begins to integrate
it into DHL
Old and new DHL
merge
10
DPWN and DHL today

Initial high cost to expand ground network to catch-up
with FedEx and UPS

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No longer expect to meet target break-even of 2009
Struggle to integrate Airborne Express into DHL

Write down of fixed U.S. assets

$800 million in 2006, $900 million in 2007

Annual losses of nearly $1 billion
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$25 million class action settlement

Paid to contractors over payment system trouble
11
The Future of DHL

John Allen, new CFO of DPWN (Nov ‘07)

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Focus on cutting costs and pleasing investors
Rumors

DPWN may give up control of DHL
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Await 2007 Annual Report (March 6, 2008)
FedEx to acquire DHL?
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Anti-trust issues
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FedEx 49% of U.S. Market Share
DHL 9% of U.S. Market Share
12
Questions?
13