Sunday, October 13, 2019
Analysing a Company: DHL
Analysing a Company: DHL          The aim of this strategic planning document is to thoroughly analyze a company and based on the analysis find the right strategy that fits the companys business purpose and mission. The right strategy, depending at what is directed, should help the company strengthen its position on the market; increase profits; help with further development. If a company implements a wrong strategy, it can cause bad damage or it can have huge financial impact on the company which could even end up in bankruptcy, which wipes the company off the market. The company chosen for this paper is DHL Express with focus on European region. DHL is part of the Deutsche Post DHL (further DP DHL) brand/group. The reason why I have chosen DHL for the Strategic Planning Document is that I have been working for DP DHL group for four years. I work specifically for IT Services which is the service line that internally supports the whole IT technology of the whole DP DHL group. ABOUT THE COMPANY          DHL was founded in San Francisco exactly 40 years ago by 3 budding entrepreneurs Adrian Dalsey, Larry Hillblom and Robert Lynn. It went from small company shipping papers by airplane from San Francisco to Honolulu1 to global company shipping EVERYTHING around the world. DHL delivers time-critical shipments as well as goods and merchandise by road, rail, air or sea. DHL transports courier and express shipments via one of the worlds most extensive networks to over 220 countries and territories. The company employs more than 300,000 employees all around the world.          DHL Express provides wide range of easily accessible services and solutions for their customers; from transport of letters, information to transport of parcels and goods. It operates in more than 220 countries around the world and employs more than 100,000 employees. DHL Express is number one in Europe with 25% of market share. Brief history 2 1969 DHL founded by Adrian Dalsey, Larry Hillblom and Robert Lynn in San Francisco; 1974 The first UK office opened in London. Globally, DHL had more than 3,000 customers; 1979 DHL extends its services to delivering packages. Only document services had been available until now. 1983 DHL is the first air express forwarder to serve Eastern European countries. An international distribution centre was opened in Cincinnati, USA; 1985 A state of the art hub was opened in Brussels. More than 165,000 shipments are handled per night 1998 Deutsche Post became a shareholder in DHL; 2002 Deutsche Post World Net became the major shareholder in DHL and 100% shareholding was completed by the end of the year. DHL: Our Company Portrait [online]. Available at www: DHL: Steps to success [online]. Available at www: 2005 DP DHL acquires Exel, the British logistics corporation. Exel primarily offers transport and logistics solutions for key customers; 2008 DHL opens new state of art European air hub at Leipzig/Halle Airport in Germany. DHL legally operates under Groups title defined as Deutsche Post AG and uses its brand name DHL. As previously mentioned DHL is part of DP DHL group and is formed by 3 divisions: Express, Global Forwarding, Freight and Supply Chain supported by internal services Global Business Services. Mail is a standalone division that is part of Deutsche Post brand. All four divisions together create Deutsche Post DHL as the picture below describes. DP DHL: Corporate Presentation, October 2009, p. 3 [online] Available at www. DHL has a divisional form of structure. The DP DHL group is organized into four operating divisions, each of which operates under the control of its own divisional headquarters. The Group management functions are performed by the Corporate Center. Management responsibilities are structured in accordance with decision-making, responsibility and reporting lines: Board departments Corporate departments Business departments Service departments Regions Departments DHL Express provides standardized products and services courier, express and parcel (CEP) both locally and globally depending on the country. Whether it is document or parcel, road or air, DHL Express provides several different types of services that are divided to four basic groups: 1. Same Day An immediate pick-up of a shipment by a dedicated courier, with an emergency delivery within the same day via a dedicated network. 2. Time Definite Express door-to-door delivery by a certain time on an overnight or next possible business day basis. 3. Day Definite Reliable door-to-door delivery within a certain number of days 4. Optional Services Shipping convenience with a range of optional services to support your express transportation DP DHL: Annual Report 2008, p. 22 [online] Available at www. DHL: Express Services Good afternoon [online]. Available at www: External Analysis Courier Express and Parcel (CEP) services exist in every single country around the world. It is neither country specific nor region specific industry. There are thousands of logistics companies operating locally or internationally around the world and Europe is not an exception. PESTLE PESTLE analysis is a view on external environment companies operates in. There are five external factors that influence life of organizations: Political environment, Economical environment, Socio-cultural environment, Legal environment and Environmental factor. The below PESTLE analysis focuses on CEP companies in European market. Political Environment          European region is stable environment that is not affected by any significant political crisis in countries and no major changes in political structure are expected in near future. More than half of European states are integrated into European community, European Union and create one of the biggest single markets for trade and investment in the world. EU enlargement has removed border lines and has made trade and business more accessible for its members. It has brought greater opportunities for businesses, wider range of companies and benefits for their customers.          EU has created closer links with immediate neighbors and enables bigger exports, free movement of services, payments and capital for trade and investment. Prior liberalization in 90s there were many national postal operators acting as monopolies. EU decided to start postal reform that firstly completely liberalized CEP market. Liberalization has enabled both national postal operators (Post Offices) and private postal companies to enlarge their business portfolio into parcel and express market. This happens through acquisitions of well-established companies and smaller national companies. Exactly, as it happened to DHL through acquisition by Deutsche Post in 2002. Full liberalization in Europe will be completed by 2012 which gives current companies time to strengthen their positions, build new networks and gain wider portfolio of customers. EU has also built up confidence in European political and economical future of each member which enables companies to make longer term decisions, strategies and investment plans. Currently the CEP market is highly competitive and companies have to have capital to establish strong and powerful position in such an environment and have to have built up networks supported by the modernist technologies. Summary: Europe is stable environment where no major political changes are expected. Full liberalization of European postal market that will be finished by 2012 will bring more competition especially on domestic level. However, there is a potential to merge or acquire those companies operating in the local markets and increase market share. Big companies operating on international level have an advantage of built global networks and modern technology behind them. Economical Environment CEP is highly potential market and its growth is directly related to the level of GDP. Global trade is on the rising level and together with industrialization has made CEP services more important for majority of industries. Additionally, product life cycles have been reduced, quality awareness among customer is growing and in order to succeed companies are forced to maintain high quality standards. The global economic crises caused decline in economy and it has affected the entire logistics sector. Volume of shipments decreased and the recession slowed down the whole market. Even the big corporations have to fight with decreased revenues and change their investment plans and business strategies. Governments around Europe support investment plans by structural reforms and programs that encourage investors to invest. During the big economic crisis in 30s this did not happen and governments tended to act individually without multinational or even global cooperation. Todays economies learnt from those mistakes which help to lower the implications, increase customer demand and support start of growth. Due to the crisis companies changed their investment plans but did not stop them. Merges with smaller companies, agreements and strategic acquisitions represent one way of increasing the competitive advantage. Emerging markets represent big opportunity in long-term perspective. There is potential for investment and development in emerging markets and it is expected that industrialization will bring opportunities, the economy will growth and market for services will accelerate. The crisis negatively affects profits of every company on one hand but on the other hand big corporations with strong brand and position in the market have to exploit this opportunity. Smaller companies do not have potential to expand because they are in bigger risk of losing money or even bankruptcy if they fail. Big corporations are able to absorb that risk much easier. Companies have started to reduce cost and people have started losing their jobs. Restructuring of company structure is one of the way how to move forward. IT is core element of every company that operates in logistics industry. Companies have to invest huge amount of money to development and maintenance of their IT infrastructure. Recent trend leaves development in Europe and transfers hosting and maintenance of the infrastructure to Asia. Summary: Conclusion from the Economical environment analysis is that companies should not stop their investment plans because of economic crisis. It is important in current situation to strengthen position in the market and expand if possible. Emerging markets represent a potential of rapid economy growth. The risk of loss is the same for all companies but for big corporations is more acceptable. Reduction of cost is evitable for every company and restructuring or outsourcing are the ways of dealing with it. Socio-Cultural Environment The third aspect of PESTLE analysis focuses on forces within society. Social and cultural forces affect customers attitudes, interests and opinions. Companies must be able to offer products and services that aim to complement and benefit customers needs and wants. If they do not quickly respond to changes in society they will lose market share and demand for their product or service will decrease. Removing of border lines makes trade and business in Europe more accessible. Emerging markets are place that is constantly developing and rapidly growing. Although the infrastructure is not as developed as in Western countries, there will be improvement with economic growth. It is important for the company to establish its brand and achieve good and reliable image and service quality among its customers. The portfolio of services that is offered in developing countries is not usually complete and focuses on the biggest needs and wants of the business. Companies do not have the only affect and responsibility to their customers. There are different parts of society they are in contact with. There are needs of employees, investors and the society as a whole. Research Development department play an important role in this area. Customer satisfaction surveys, employee satisfaction surveys, market surveys help the company to build its brand and image, increase employees commitment and shape public awareness. CEP market and logistics industry play one of the key roles in the economic growth globally not only within European market. Increases in volumes of goods transport has lead to higher CO2 emissions which according to climate scientists have direct affect on global warming. It is social cost for the society and governments discourage those social costs with fines, taxes and legislation. Companies responsibility is to decrease these cost and work with more efficient and environmentally friendly means of transport. Social cost have negative affect on customers spending but could be balanced by larger offer of environmental friendly oriented products. Summary: Social forces affect customers needs and wants and it is important for the company to know it and benefit from it. Therefore the role of Research Development is very important. Company has to respond to changes in society quickly not to loose market share and demand for services. Customer satisfaction surveys, market surveys, employee surveys play important role in building companys brand and image in the market. Border lines have been removed within EU and services are more accessible in the whole Europe. Emerging markets represent an opportunity for companies to enter and establish their brand and image. Additionally, there are also social costs for the society that companies have responsibility for. The affect on environment is significant and companies role is to decrease those costs by working with more efficient and environmentally friendly technology which is then balanced by larger portfolio of environmental friendly oriented customers. Technological Environment          Technology environment is vital part of every business that rapidly moves it forward. Technological innovations have changed the world and manner in which every business operates. Technology has created society expecting immediate results. Information exchange between customers, companies, people or any stakeholders is faster. That gives benefit to businesses as they can react quickly to any changes in the operating environment. However, the ability to quickly react also brings extra pressure on companies because they are expected to deliver on time and without any delays. Customers in service industry have to continuously face new challenges in planning, managing and monitoring their business processes. Companies in CEP market (and not only there) started offering customized logistics solutions to meet challenges: for example safety transport of sensitive products such as pharmaceuticals and vaccines to the healthcare industry done within a temperature-controlled environment. Operations in logistics industry is not only about cars, vans and aircraft there are other parts of infrastructure that needs technological development and improvement: posting, collection, sorting, transport, warehousing, delivery and last but not least Information Technologies. IT is core. Speed and reliability are key success factors to be able to meet standards and quality and gain advantage among competition.          It is important to pay special attention to IT area because service industry is fully dependent on it. Companies invest huge amount of money to development and maintenance of their IT infrastructure. As mentioned above IT is one of the key elements for logistics and operations processes. Systems must be accessible and available at all times; security is evitable unauthorized access to data and data manipulation must be prevented, to ensure that software is not delivered with defects or too late. Companies have to fight with decreased revenue and reduce their cost in times of economic crisis but importance of IT technology is so significant that they cannot stop investing in it. Otherwise there is a threat that they will fall behind and loose their market share.          Outsourcing or in other words subcontracting is a way of reducing cost in IT area. Development of new technologies, software or applications goes to another organization. Usually, the company is specialized in software development. Or hosting and maintenance of applications or services are transferred to another company. The decision whether to do in-house or outsource is often based on achieving lower production cost and usage of available resources in better way and focus energy on the core competencies of the business. Summary: Modern technology and environment is key to success of the company that helps to maintain or gain competitive advantage. IT is the most important technology factor for logistics business because speed and reliability are equal to success. However, there is an indisputable constant threat of falling behind.Investments to the modernist technologies are evitable and in times of economic crisis are much more important then anytime before. Company has to decide if it runs internal IT organization or if it outsources most of the services and reduce cost. Legal Environment Legal rules play a role in nearly every aspect of companys operation from state regulations through contracts to treatment of employees. Legal factor is very important because companies work within legislative framework where legislation can either place numerous obligations or can create market conditions beneficial for business. CEP market is regulated by Postal directive applicable in all EU states. Full liberalization process will be completed by 2012 which gives current companies time to strengthen their position, build new networks and get more customers before new competition arrive. CEP market was fully liberalized during 90s and no special license or authorization is required in most of the EU countries. Ten states of EU require companies to receive explicit decision of National regulatory authority that is called general authorization that enables them to start operating in those countries but it does not represent a barrier. General authorization document contains several conditions that are related to e.g. confidentiality of correspondence, restrictions on transport of dangerous goods, data protection standards, etc. As I said previously there are social cost for the society that must be balanced by companies obligations in terms of fines, taxes and additional legislations related to regulation of aircraft noise, regulations concerning emission standards, obligations to reduce greenhouse gas that forces companies to invest into more environmentally friendly means of transport. Summary: Legal factor is important for operations of every company. Companies have obligations like directives, taxes and rules that they must be aligned with to be able to operate in the market. Legal factor can either place numerous obligations on the company or can create market conditions beneficial for business. Liberalization is an example of the benefit. Removal of border lines together with liberalization enabled building and strengthening of positions in the logistics market. There are no special and expensive authorizations necessary in CEP industry which is another benefit for companies. On the other hand there are obligations that balance the above benefits in terms of fines, taxes and directives that are mainly related to environment. Companies are forced to invest into environmentally friendly operations. Environmental Analysis Transportation industry causes major impact on the green house gases in the atmosphere. Mobility has increased and brought many indisputable advantages that must be weighed against the social, economic and environment costs it causes. Countries issue legislation that forces companies to reduce emissions. Companies have started implementing projects that help them to find out ways how to reduce pollutions and to be compliant with issued legislation. Transportation companies are dependent on fossil fuels and to reduce their dependency they have to look for commercial vehicles and aircraft powered differently or non-conventionally. Change of vehicle is not the only option that would reduce air pollution there are other ways that companies could take: to make their business more efficient and effective, to reduce shipping time, to take uniform approach, to offer climate-neutral products or train employees. Research Development department plays important role in those projects because it helps to come up with new ideas, technologies, procedures and processes. Summary: Transportation industry has great effect on air pollution globally. It is undisputable fact and companies are forced to fulfill the requirements of governments to reduce their contribution on pollution of the global environment. Companies have started implementing projects that help them fulfill those requirements. Research Development department is key to the success of it. PESTLE Summary Based on the PESTLE analysis I have identified opportunities and threats that will be taken into account during the SWOT analysis. Opportunity: Full liberalization of European postal market that will be finished by 2012 brings new opportunities to increase market share by acquisitions or merges with other logistics companies or newly liberalized companies. Established companies wit big market share, global network and technology have competitive advantage. Opportunity: Border lines have been removed within EU and services are more accessible in the whole Europe. Emerging markets represent a potential of rapid economy growth therefore it is an opportunity for companies to enter and establish their brand and image and gain bigger market share. Threat: Role of Research Development department in the company is very important. Company has to respond to changes in society quickly not to loose market share and demand for services. Customer satisfaction surveys, market surveys, employee surveys play important role in building companys brand and image in the market. Threat: In times of economic crisis economy slowed down and revenue decreased. Reduction of cost is evitable for every company and restructuring or outsourcing are the ways of dealing with it. Threat: Social costs represent a responsibility of companies towards society. The affect of transportation and logistics companies on environment is significant and companies role is to decrease those costs by working with more efficient and environmentally friendly technology which is then balanced by larger portfolio of environmental friendly oriented customers. Companies are forced to invest into environmentally friendly operations by fines, taxes and directives placed by governments. Therefore, companies have started implementing projects that help them fulfill those requirements. Threat: Modern technology and environment is key to success of the company that helps to maintain or gain competitive advantage. IT is the most important technology factor for logistics business because speed and reliability are equal to success. However, there is an indisputable constant threat of falling behind. Investments to the modernist technologies are evitable and in times of economic crisis are much more important then anytime before. The role of Research Development is evitable here. Porters Five Forces          Courier Express Market is highly competitive market and its growth is directly related to growth of GDP. Customers of logistics companies are demanding. Technology improvements reduce product life cycles, quality awareness among customer is growing and in order to succeed companies are forced to maintain high quality standards. DHL Express has three biggest competitors in CEP market. They are UPS, TNT and FedEx. As you can see in the Picture 2 below DHL Express has the highest market share of 25% as a single company in Europe. All four major competitors operate internationally and have global network with good and modern technology behind them. The picture below also shows us that third of the European market is dismantled among small and medium sized companies that operates independently. European market portrait Customers of logistics companies vary from individuals to big industrial or manufacturing companies. All of them expect that the delivery service will be simple and convenient and that the delivery will be on time without any delay and in a good quality. Customers are more and more demanding because range of suppliers is broadening and they are looking for customized and innovative solutions for delivery of their goods. DP DHL: Annual Report 2008, p. 58 [online] Available at www. The range of offered products is wide but could be introduced in three basic categories: Courier services are fast, door-to-door pick up and delivery services of high-value goods or urgently required documents. Express services are time-sensitive, usually guaranteed services and have delivery time a specific day (in general the next day) and/or specific time. Parcel services are the transport of largely standardized packages with usually non-guaranteed delivery time of 2-3 days (Time-definite and Day-definite) Porters Five Forces mode will help me to analyze five forces that influence the logistics industry and better understand the environment in which DHL Express operates in and competitive advantage the company has or could gain. Threat of New Entrants HIGH          CEP market is large and very attractive to business. Everyone needs to deliver package or parcel. Everyone needs to use courier. Logistics industry is important and dominates to the service sector. It is very easy to entry. There are no special legal barriers, patents or licenses necessary to run the business. There are exceptions as described in PESTLE analysis but those exceptions do not represent impossible to achieve requirements. The market is still growing and there is an assumption that will grow further.          There are no border lines among members of EU which would threaten new companies to enter the CEP market. Company that wants to succeed in such a competitive environment has to have a good network that enables it to operate on local and international level. Good network requires time and financial investment. High technology standard is must. Companies have to protect themselves from the threats of new entrants therefore it is important for them to find ways to turn disadvantages in their favor. They have to capitalize from their historical experience and try to find better ways to provide their service. Current big players in CEP market are well established leaders that have significant cost advantage that is unavailable for the new entrants. Large companies have buying power that allows them to offer discounts to their customers. Simply, bigger the business is lower average unit cost they are able to produce. Customers loyalty is another important factor that increases barriers to entry for other competitors. Loyal and satisfied customer will be unlikely tempted to go to competitors or new entrants. Established companies usually do business set on long-term partnerships and contracts. The basic rule says that customers get everything they need or want.          There are many advantages that economies of scale gives to big corporations but there are also limitations that must be taken into account. Those limitations give competitive advantage to smaller and medium sized companies. Large companies are very complex and with higher complexity the product range is widening. This makes it difficult to succeed and be the best. Specialization and innovative ideas are crucial. Large companies are also known for their high level of bureaucracy which gives smaller companies big advantage because they can satisfy customer faster and it is what matters in logistics industry. Also large companies have thousands of employees with different labor relations in every country which causes additional legal cost. In case of powerful workers union it can decrease power of the company and make their operation more difficult especially in time of restructuring.          As I have mentioned modern technology is an important factor that significantly helps to increase market share and creates more barriers for new entrants. Outsourcing or off shoring are possibilities for companies to take advantage of other economies of scale and use their buying power and specialization in favor of further development. Summary:          In summary, logistics market is large and is attractive to business because when GDP grows the demand for services grows. There is no special barrier to entry. In fact, it is very easy to entry. The market is still growing and there is an assumption that will grow further. Successful companies have built networks that enable them to operate on local and international level. Good network requires time and financial investment. High technology standard is must. Historical experience and appearance in the market is an advantage for companies like DHL. Big companies and corporations use economies of scale in their favor. Bigger company can provide higher discount and has lower profit. Customers loyalty is another important factor that increases barriers to entry for other competitors because of long-term partnerships and contracts.          On the other hand there are also disadvantages for big companies that must be taken into
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