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1Airbornes performance from 1986-1997 can be described as dismal Throughout the period the company managed to remain profitable every year but they underperformed the McGahan averages Airborne averaged 172 ROS including 1997 which was an outlier for this set 246 ROA and 934 ROE This was compared to the ROS ROA and ROE of 47 59 and 126 respectively Airborne also had lower margins than its competitors FedEx and UPS so it can be inferred that Airbornes performance is poor not just in general but also considering the industry It should be noted that the industry leader FedEx could not consistently beat the averages either so the industry is not earning large margins to begin with However UPS does consistently beat the averages so Airborne should not be entirely excused due to its industry The strategy seems to be low-cost broad based Based on Exhibits 1 and 8 it is obvious that Airborne is charging lower prices than the competition This is only half of the low-cost strategy It would at first appear that Airborne is simply charging lower prices but has not developed a lower cost structure because its margins are so low However there is evidence to support a lower cost structure as well First of all it would be quite difficult to have a similar cost structure and even turn a profit if one looks at the FedEx comparison in Exhibit 1 This is not the only evidence of a low cost strategy At first glance it appears that Airborne may not have a lower cost structure because of the size of their Depreciation cost versus revenue Because Depreciation was the only cost that was present in the Financial Results Exhibits for all three companies it has to serve as the number for comparison Versus revenue size Airborne actually was much higher than UPS and barely lower than FedEx It is important to consider what the cost means though Most likely the
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