Before it was acquired by DHL in 2003, Airborne Express had already become one of the fastest-growing companies in the United States of America. It operated in both domestic and international markets. Through its direct operational tactics and strategies, it delivered letters, small packages, freights, and documents in a time-sensitive manner. To survive the prevailing intense competitive operational market, Airborne acknowledged the need for lowering operational costs through the deployment of cost reduction strategies. For example, by establishing the foreign trade zone (FTZ) approach, it ensured any consignment would be held without the payment of duty unless it was necessary. By tailoring its services to suit the needs of different customers while ensuring flexible operations, Airborne was sure of acquiring a sizeable express market share. Airborne had developed unique domestic and international operations and strategies. However, this paper only offers an analytical discussion of the company’s international operation and strategy.
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Following the advent of globalization, different companies have pursued the internationalization strategy to secure a global market share. Airborne understood the need to exploit international markets. According to Hill, by 2002, Airborne Express had extended its services to over 200 nations, which accounted for 11 percent of its total revenue (245). Nevertheless, it did not operate its own freights in the international markets. Instead, it contracted space, which would be availed in passengers and cargo planes. It is crucial to question whether this move was well aligned with the need for increasing the company’s performance and productivity to help it in competing with its rival companies. In my view, companies should deploy operational and strategic initiatives that ensure that they reach a large number of consumers of their services and goods. In response, Airborne’s exploration of an internationalization strategy that leveraged the benefits of globalization was a well-calculated strategy. It appreciated the awareness of the extent to which globalization has altered how firms conduct businesses at international fronts. Owing to the witnessed technological, communication, and general infrastructural developments, Child et al. agree that businesses such as Airborne Express can now supply or distribute goods and services in virtually every geographical location around the globe (664).
Venturing into international markets is a risky endeavor because companies are required to be strategically prepared and organized to overcome any cultural impediments, currency differences, and language barriers, including the prevailing regulatory and legal environments. Such elements may be inconsistent with an organization’s policies. In my opinion, companies such as Airborne Express that do not have extensive resources to aid them in overcoming obstacles that interfere with their operations in international commercial bases should consider altering their policies to suit the particular market. According to Child et al., although such companies may be using the same brand name, they are predominantly characterized by non-homogeneity in organizational policies (665). Hence, it suffices to conclude that Airborne Express’ decision secure space in both cargo and passenger planes via strategic alliances and local foreign agents was satisfactory to overcome the challenges.
Several reasons explain why organizations may consider diversifying their markets to include international markets. For example, as Child et al. assert, the emergence of demand potentials in foreign markets is one of the common reasons (666). In my judgment, sales expansion, the acquisition of new resources, the need to minimize risks, currency depreciation, and local market saturation account are the major drivers of business internationalization. One may need to find out the extent to which Airborne Express benefited from this strategy that facilitates the achievement of economies of scale. However, responding to the above issue, the reader should realize that effective business operations in foreign nations require the selection of an appropriate entry and operations strategy. In line with this observation, Airborne Expresses owned facilities in foreign nations such as London, New Zealand, Australia, Singapore, and Hong Kong (Hill 245). While these facilities functioned like those in the domestic market, the company had its distribution operations in the international markets mainly executed by large, localized, and well established foreign agents. Such an operational strategy in these foreign markets reduced the chances of the company encountering challenges associated with operating in an unfamiliar culture.
Entering new markets, especially foreign commercial zones, requires organizations to exercise substantial caution. While organizations can develop strategies to cope with entry challenges related to their internal structure, the case of Airborne Express confirms that indeed dealing with macro-environmental factors in a foreign nation is problematic. Based on my opinion, developing an appropriate entry strategy can ensure that an organization maximizes the existing knowledge and experience in operation in foreign nations. Such strategies include opting for franchising and licensing before focusing on full ownership arrangements. As Child et al. assert, “All firms operate within an environment, which directly or indirectly affects the way they function” (669). Consequently, as evidenced by the case of Airborne Express, successful colonization of new markets should include an effective entry strategy. Nonetheless, I find it crucial to point out that the internationalization strategy has operational cost reduction implications. For Airborne Express, the internationalization was easier due to the existence of effective communication and technology mechanisms. For example, even in the international market, the company could track its operations through the FOCUS system.
One of the major challenges encountered by organizations operating in an environment of fierce competition entails securing enough capital to enhance their economies of scale. While UPS and FedEx reduced the cost of holding inventories by establishing global air express services to guarantee just-in-time deliveries, Airborne Express lacked adequate financial resources to pursue a similar strategy. In my point of view, the company’s adoption of a variable cost strategy, which entailed entering into strategic alliances with businesses that had elaborate ground delivery systems, as appropriate. For example, its strategic alliance and joint venture with Mitsui not only enhanced its operations in Japan but also increased Airborne Express’ financial capability following an investment of 40 million USD in the form of preferred stocks and a further commitment of 100 million USD in aircraft financing (Hill 248). In other words, strategic alliances constituted an important success story for Airborne Express in its international market.
Internationalization constituted an important growth strategy explored by Airborne and its competitors such as UPS and FedEx. However, new markets often present challenges in terms of aligning organizations’ culture with the prevailing local tastes and preferences, attitudes, and beliefs. Possible entry modes that may work in foreign markets include franchising, exporting, and joint ventures such as mergers and acquisitions. Indeed, while Airborne Express’s competitors chose to establish their international airlift capabilities coupled with distribution networks similar to those deployed in the US market, the company pursued a variable cost strategy through premeditated alliances and contractual arrangements. The strategy proved effective, especially upon noting that Airborne Express lacked the financial capability necessary for it to imitate its competitors.
Child, John, et al. “SME in the International Business Models: The Roles of Context and Experience.” Journal of World Business, vol. 52, no. 5, 2017, pp. 664-679.
Hill, Charles. Airborne Express: The Underdog. University of Washington, 2011.