DHL Company External Analysis
Strategic Analysis of DHL Company
Background of DHL Company
DHL is a logistical German-based company that was found by Larry Hillblom, Robert Lynn and Adrian Dalsey in San Francisco in the year 1969 (Rahman, 2018, p. 53). The company was mainly involved in offering offshore as well as intercontinental deliveries; however, the success of FedEx encouraged intra-US expansion in 1983. In the year 1998, Deutsche Post started acquiring shares in DHL, and they reached a controlling interest in the year 2001 and acquired all the shares by the year 2002. Deutsche Post absorbed DHL Company into its Express division. The company has grown over the years, and it is one of the companies leading in providing logistical services globally. DHL Company comprises DHL Global Forwarding, DHL Express and DHL Supply Chain, and it offers services in over 220 countries globally. The deep understanding of the local market, as well as global markets by the company, enables it to offer professional services in ground transportation, ocean shipping and air freight, and international posting services (Dhir, 2019, p. 124).
The main competitors of DHL Company are UPS, FedEx, Roval Mail, and United States Postal Services. However, DHL has a partnership with United States Postal Services, and this allows it to transport small parcels to customers through USPS network, which is well-known as DHL e-commerce. DHL Company has made important progress with the strategy 2020 and because of its geographical presence and widespread provision of logistics; it is now in a better position. In addition, the company has “Strategy 2025 – Delivering Excellence in a Digital World” and therefore it is doing the groundwork of ensuring that its successful development or growth continues beyond 2020 (MacGillavry and Sinyan, 2016, p156). Four main developments in recent years have been affecting or impacting logistics and helping in shaping the industry, and they are Digitalization, globalization, sustainability and E-commerce. DHL Company hopes to build on digitalization, globalization, sustainability and E-commerce to enhance continuous development within its main logistics and also stepping up digitalization.
External Analysis
Macro-environmental Analysis
DHL Company operates in a dynamic and complex environment that is characterized by technological changes, growing environmental activism, regulatory change, legal changes, social-cultural changes and economic changes as described below:
Political Environment:
DHL Company started from Germany and grew internationally, and therefore it needs to consider the political environment of the global market it operates. The political structure existing in Europe is stable and has trading rules that are easy and flexible hence making it to operate easily in the market (Oflac et al., 2015, p.78). However, if DHL Company also operates in regions where the political structure is unstable; this will have a great influence on the business and may lead to more costs and fewer sales. DHL also complies with the export and import restrictions, trade policies and tariffs. At sometimes high tariffs makes it hard for DHL to make operations in certain regions or countries.
Economic Environment:
Economic crisis globally always hurt the business of DHL, and this reduces their sales, leading to financial losses. For instance, countries or regions experiencing inflation reduces the consumers’ purchasing power, and this reduces DHL’s sales. The countries experiencing high economic growth increases the purchasing power of the customers hence increasing the sales of the company. The exchange rates when the company is operating globally can sometimes make it to experience huge losses or high profits depending on the host country (Oflac et al., 2015, p.78).
Social-cultural environment
The attitude, as well as the perception of the people towards the company, affect the DHL’s sales. For instance, if individuals from a certain region perceive products based on the nation of origin and might prefer using services from their own country. This perception reduces DHL’s customer base in the global arena. DHL considers the demands of the customers first to ensure that there is a continual relationship with the customers. DHL Company has customers that are spread globally, and it accepts any types of delivery requirements. It always offers the best technology as well as service to its strategic customer or consumers, and this helps in building a stable cooperation relationship (MacGillavry, and Wilson, 2018, p. 321).
Technological Changes
Technology environment is an important part of every company that is considering operating in the foreseeable future. In the logistics business, technology plays a vital role and DHL brands itself basing on the reliability as well as speed. Therefore, being up to speed with technology trends is crucial for DHL because it helps in maintaining the brand image and leading to huge profits. Implementing technologies in the DHL are always associated with high costs; however, it also gives it a competitive edge among the competitors because of its convenience of delivering services to customers.
Environmental Factors
The most pressing test that is facing humanity is climate change, and as the biggest logistic company, DHL is dedicated to taking the corporate responsibilities of safeguarding the environment. DHL maintains environmental quality or value by ensuring that there is sustainable development. Sustainable development in the DHL is the development that meets the present needs without compromising or affecting the ability to meet the needs of future generations (Herold and Lee, 2017, p.234). DHL Company has the GOGREEN strategy that is used in measuring the environmental impact, and this is important because it makes a positive influence on the world.
Legal Factors
As DHL expands globally, some legal requirements or regulations are supposed to comply and they include copyrights, consumer protection laws, and patents. In some countries, the legal requirements can favourable to DHL business operation while in some other countries, the regulations result in huge expenditures (Senkel, 2015, p.78). DHL Company fulfils all the legal conditions, and this helps it to maintain its brand image.Industry Analysis
Porter’s Five Forces Analysis
Porter’s Five Forces evaluation gives the analysis of competition levels of DHL in the logistics basing on five factors or forces. The five forces are the threat of the new entrants, the threat of substituting services or products, buyer bargaining power, supplier bargaining power and competitive rivalry intensity.
The intensity of Business Rivalry
Competition between DHL Company and other competitors in the logistics industry such as UPS, FedEx, Roval Mail, and United States Postal Services is high. The prices for products as well as services are low and switching services to other companies are less costly. Therefore, DHL needs to make continuous improvement in innovation, prices and service quality to maintain its market share (Senkel, 2015, p.90).
Threats of the New Entrants
DHL Company is an established brand name in the logistics management services globally. Therefore the threat of the new entrants is low because of the factors like barriers to entry and capital requirements. DHL has the advantage due to its capital requirements that require massive transportation networks of air, seas and land and this makes it hard for new businesses to compete with its brand image (Herold and Lee, 2017, p.234).
Threat of Substitutes
The Threat of the substitute services for DHL is low, and therefore customers do not have other means or methods of delivering products or services to distant places. The understanding of the local market, as well as global markets by the company, enables it to offer professional services in ground transportation, ocean shipping and air freight, and international posting services (Dhir, 2019, p. 233).
Bargaining Power of the Buyer
The logistics industry has strong buyer bargaining power and hence DHL as an international courier service provider, it has several customers that include individual customers as well as other firms that are in different industries. However, since other competitors are offering similar services, there is a strong tendency of customers switching from one company to another.
Bargaining Power of the Suppliers
DHL Company is responsible for the transportation of products or services to other companies and is also partly involved in determining the final cost of service and therefore affecting the costs of the supplies. The supplier power of DHL is fairly low since it has the power of changing the suppliers in cases where competitors have better prices (Herold and Lee, 2017, p.234).
References
Bagalwadi, P., 2015. DHL: Addressing the skills gap in East Africa. Africa Journal of Management, 1(4), pp.437-439.
Dhir, S., 2019. DHL. In Cases in Strategic Management (pp. 55-72). Springer, Singapore. Herold, D.M. and Lee, K.H., 2017. The influence of the sustainability logic on carbon disclosure in the global logistics industry: The case of DHL, FDX and UPS. Sustainability, 9(4), p.601.
MacGillavry, K. and Sinyan, P., 2016. Focusing on the critical link between employee engagement and customer centricity at DHL freight. Global Business and Organizational Excellence, 35(4), pp.6-16.
MacGillavry, K. and Wilson, A., 2018. Delivering loyalty via customer experience management at DHL Freight. Global Business and Organizational Excellence, 33(6), pp.6-20.
Mocker, M., Ross, J. and Ciano, P., 2018. Building a global process standard at the most international company on earth: DHL express.
Oflac, B.S., Dobrucalı, B., Yavas, T. and Escobar, M.G., 2015. Services marketing mix efforts of a global services brand: The case of DHL Logistics. Procedia Economics and Finance, 23, pp.1079-1083.
Rahman, M., 2018. A Study of Business Analysis of DHL. A Study of Business Analysis of DHL (November 8, 2018).
Senkel, M.P., 2015. Corporate Social Responsibility (CSR) information disclosure by annual reports: the Deutsche Post-DHL case (1998-2011). Journal of Economics and Business, 17(1), pp.39-62.