DHL Companys Global Strategy to Be The Logistics Company for the World - Coursework Example

? Strategy Assessment: DHL Company’s Global Strategy to Be “The Logistics Company for the World” (DHL: Corporate Portrait, Instructor’s Name Date DHL Company’s Global Strategy to Be “The Logistics Company for the World” Globalization has been the contemporary trend facing diverse organizations of today. A multitude of research literatures focusing on global strategy have emerged through the past century. There have been identified factors and elements that need to be closely evaluated to ensure that global organizations compete effectively and sustain productive operations through the future. More aggressive competitive pressures, coupled with drastic changes in the external environment have tested global organizations’ existence in the last few decades. DHL Company has sustained diverse challenges and remained successful through time. It is the objective of this essay to proffer a strategy assessment of DHL Company, as a global organization, with the specific aims of addressing the following concerns: (1) an identification of the organization’s companywide strategy; (2) a determination of the specific aspect of the strategy being focused on; (3) the competitive advantages of DHL; (4) the competitive strategies employed; and (5) an exploration of any identified issues on global management. The analysis of the organization would be used analytical tools such as SWOT and PESTLE analysis for a more comprehensive illustration of its competitive advantage on a global scale. Brief Executive Overview The management report is designed to proffer an assessment of the global strategy of DHL to be “The Logistics Company for the World” (DHL: Corporate Portrait, 2010) where focus would be on logistics and mail. The specific strategies to support the attainment of the global strategy would focus on improving customer orientation, a concentration on the digital and physical solutions in the dialog marketing, providing a more secure electronic communications system, improving employee involvement and commitment, promoting communications through cross-divisional experience and enhancing leadership culture through improving the incentive scheme. Particularly, DHL envisioned an expansion through “its airfreight operations in Asia in a move linked to the inauguration of its expanded central Asia hub in Hong Kong and the launch of its north Asia hub in Shanghai” (Wallis, 2008, p. 38). By identifying and enumerating the organization’s internal resources and the factors that influence its external environment through both SWOT and PESTLE analyses, the report would clearly indicate the viability of the global strategy to sustain leadership in the logistics industry. Short introduction to the organisation and its markets DHL Company boasts of being “an express shipping multinational company operating in diverse countries and territories around the globe” (DHL:About us, 2010, par 1). The official site of DHL revealed its “expertise in international express, air and ocean freight, road and rail transportation, contract logistics and international mail services to its customers. A global network composed of more than 220 countries and territories and 300,000 employees worldwide offers customers superior service quality and local knowledge to satisfy their supply chain requirements” (DHL: About us, 2010, par. 1).  DHL operates in countries such as Hawaii, the Far East, Middle East, Africa and Europe, and now reached 220 countries in all. DHL’s operations focus on four major divisions such as: DHL Express (global dispatch and delivery of parcel and express shipments); DHL Supply Chain (customized, IT-based solutions); DHL Freight (national and international transport solutions); DHL Global Forwarding (air and ocean freight and a project logistics services provider operating worldwide) (DHL: Company Portrait, 2010). The incredible growth story of the organization utilized exemplary leadership, high quality of service at competitive price. The growth and geographic diversification to other countries assisted in the organization’s continued growth. The entry of Deutsche Post World Net was instrumental in further expanding the global markets of DHL to sustain leadership in logistics and transport delivery. Overview of the generic organisational strategy According to its official website, “the Group presents its Strategy 2015 and is renamed as Deutsche Post DHL. Strategy 2015' s vision is to make DHL "The Logistics Company for the World" through respect and results, simplifying customers' lives and providing a positive contribution to the world. A new organizational unit called 'DHL Solutions & Innovation' is established as the driver for innovative logistics solutions” (DHL: Corporate Portrait, 2010, pars. 17 – 19). It can be deduced that as a global leader, its strategy which was designed in 2009 is projected six years into the future. Likewise, as Wallis averred, the expansion in Asia, particularly in China, was reported by “Thomas Murphy, DHL Express Asia-Pacific senior vice-president for aviation…included more and larger aircraft, new routes and a possible a tie-up with a Chinese carrier to help develop a Chinese domestic express network” (Wallis, 2008, p. 38). The specific aspect of strategy The following trends were noted to manifest the need for the expansion in Asia, to wit: (1) there is a forecasted growth of 25% to be contributed by the region in Asia; (2) an increasing trend in express cargo volume in the same region is established over the last five years; (3) there have been initial efforts to expand the organization’s facility to accommodate increasing capacity in the Asian region; (4) the organization has not established any aircraft in the Asian region; (5) DHL has made business affiliations through joint ventures with other carriers that ply the Asian region; and (6) “in the longer term DHL is considering how it should inaugurate its North Asia hub at Shanghai’s Pudong International Airport in December 2010 with the development of a domestic air express network in China” (Wallis, 2008, p. 38). Key issues facing management The report on DHL’s global strategy revealed that as with any other global organization, analytical tools like SWOT analysis and PESTLE analysis are used to evaluate their internal resources and the external environment where they operate. In this regard, the following analyses are crucial to assess the strategy designed by the organization: SWOT Analysis Strengths The FAI Consulting Services (2009) revealed that one of the prominent strengths of DHL as a global organization is managing complexity. According to their study, “the company has employed cross-functional teams around the world to plan, design, and manage facilities” (FAI, 2009, 1). The organization’s strengths are their competitive advantage over competitors with focus placed on a highly professional and competent personnel and management team who sustains global operations. DHL’s competitive advantage takes into consideration the following: (1) the span of 220 countries around the world; (2) a fleet of 60,000 vehicles and an increasing number of aircrafts for transport services; (3) a professional team composed of 300,000 staff and management personnel globally; and (4) the strategic design of offering one stop shop logistics and transport service needs. Likewise, DHL is an example of a multinational company whose mission statements include satisfying the customer’s needs. By taking into account the needs of the customers and creating strategies that work on satisfying customers’ needs, DHL continue to exhibit strength and success in their fields of endeavor. Further, the changing and challenging external environment is continuously monitored. The strategy of implementing a regular environmental scan is seen crucial to identify factors that significantly change and affect DHL’s future. “Environmental scanning is the process of monitoring and analyzing the marketing environment, usually with the intention of identifying trends and developments in the environment that may require (production, operations, and marketing) strategies or tactics to be adjusted” (Wilson, n.d.). The endeavor enables management to identify strengths and weaknesses in the organization’s internal resources, in conjunction with opportunities and threats available from the external environment (Koontz, 2006). To assist DHL to monitor environmental factors that continually affect global markets, an Innovation Center which is considered a place for research, meetings and a place to present innovation in logistics were recently opened (DHL Global, 2009). Weaknesses The research conducted by Apostolopoulos, et.al. (1998) revealed that an eminent weakness is present in terms of a propensity for complacency among personnel which could be traced from the merits and incentives accorded by the organization. The level of motivation and satisfaction, coupled with a conducive working environment were perceived as productive enough for status quo. Opportunities Apostolopoulos, et.al.(1998) revealed that the organization’s ability to use its competitive advantage of sustaining market leadership enabled it to invest on an appropriate amount of funds for information technology to evaluate and assess opportunities in the environment. Through the opening of the center for innovative research, a more standardized and structured system and process of assessing opportunities in emerging markets globally are continuously made by professionals like scientists and engineers. As indicated, “the 'laboratory of the future' represents a key element of the Group's corporate strategy, which aims to position Deutsche Post World Net as both the biggest and the most innovative global logistics company” (DHL Innovation Center 2008). Further, as recently identified, opportunities abound in the dialog marketing, electronic communication and parcel (Logistics Today, 2009, par. 6). Also, the fact that DHL does not have operate any aircraft in Asia and that the Asian market is dominated by Japanese logistic operators ((Murray, 2009, par. 2), it would be an opportunity to expand its operations in the Asian market, particularly focusing in a country with vast population and large geographic area: China. Threats The strategical measures from competition such as FedEx and UPS provide continuous threat in the market leadership of DHL. Recent updates revealed that there are efforts by management of DHL for a cooperation agreement with UPS due to a restructuring of DHL Express delivery in the US (Journal of Commerce, 2008). As a result of this, there is a threat of impending decline in market share of DHL for domestic dispatch of parcels. The economic environment is closely related to factors affecting the financial markets. With more people becoming unemployed, there is a significant decrease in purchasing power of individuals. People would rather buy basic commodities rather than spend it on other items. This would have an effect in the number of people and businesses opting to send documents and parcels domestically or internationally. As such, there was already an imminent threat with the cooperation agreement mentioned with UPS. A projected decline in domestic parcels in the US might also affect other markets internationally. PESTLE Analysis The effect of the global financial crisis in the environment has significant repercussions for DHL. In the political front, the newly elected president, Barak Obama, had made strategic moves to save the financial markets. In so doing, the political environment poses positive outlook for the future of DHL and other enterprises affected by the financial crunch. The economic environment is closely related to factors affecting the financial markets. With more people becoming unemployed, there is a significant decrease in purchasing power of individuals. People would rather buy basic commodities rather than spend it on other items. This would have an effect in the number of people and businesses opting to send documents and parcels domestically or internationally. As such, there was already an imminent threat with the cooperation agreement mentioned with UPS. A projected decline in domestic parcels in the US might also affect other markets internationally due to the financial crisis. There are no significant changes affecting DHL with regard to social factors. The demographics and cultural aspects of the environment do not have any foreseen change as a result of the financial crisis. Therefore, in this aspect, DHL would remain in status quo. On the technological factors, as previously mentioned under opportunities, DHL has just opened their Innovative Research Center which is positioned as the ‘laboratory of the future’. Therefore, as projected, advances in the technological market in terms of logistics and express transport delivery would be their focus. Legal factors in the expansion in the Asian market would require close coordination with government in China and Hong kong, where they plan to expand their airfreight operations. Any trade and regulations requirements need to be addressed to facilitate operations in these areas. Finally, for the environmental factors, the major factors that influence the strategy outline for 2015 are the following: globalization (“the elimination of trade and customs barriers is enabling companies to develop new markets and move activities to locations that offer competitive advantages”(DHL: Factors, 2010, par. 2)), outsourcing (“activities that are not considered part of the core business are being outsourced to a greater extent” (DHL: Factors, 2010, par. 3)), digitalization (“demand for binding, confidential and reliable electronic communication is growing on the virtual market”(DHL: Factors, 2010, par. 4), and climate change (“energy-saving transport options and climate-neutral products, and climate protection goal”) (DHL: Factors affecting our business, 2010, par. 5). Evaluation – how successful is the strategy likely to be? The implementation of the global strategy can be measured and assessed in terms of its impact on the financial condition of the organization. As revealed from the facts and figures of DHL, the organization generated “revenue of more than 46 billion euros in 2009” (DHL: facts and figures, 2010, par. 4). The report on 2009 Global Rankings for Logistics Providers by Martin Murray (2009) revealed the following: “Globally, the top three logistics providers are in the same positions as last year, DHL Supply Chain is ranked number one, followed by CEVA Logistics and then Kuehne Nagel of Switzerland. In Europe, DHL Supply Chain dominates, followed in second place by UK-based logistics provider Wincanton, with CEVA taking the third spot. In North America DHL Supply Chain is again number one, but is being challenged by a number of US-based logistics providers such as Penske, Caterpillar, Ryder, and Schneider” (Murray, 2009, pars. 1 – 3). It is evident, therefore, that the global strategy of DHL is so far successful and effective as the report indicated the organization to be the leader in the logistics industry, as aimed. However, there is still the opportunity to improve in the Asian market. Murray averred that “the Asia Pacific region has a completely different make-up with Japanese logistics operators Hitachi, Sankyu and Mitsubishi taking the top three spots” (Murray, 2009, par. 2). It would be a challenge for DHL to evaluate and assess the strategies of these Japanese logistics operators in order to determine areas for improvement. The global strategy of DHL is to clear and concise as it focused on accurate aims which are the product of collaborative efforts of management and personnel. The expansion to the Asian market is consistent with the global strategy in terms of defining opportunities for increasing revenues in the long run. As indicated in their official website, DHL dominated the Asian market by establishing a 36% market share: (Illustration sourced from DHL: About us, 2010) According to the report, “in 2009, we were able to increase our market share by two percentage points to 36%. In April, we opened new gateways in Taipei (Taiwan) and Incheon (South Korea). All in all, we have invested more than €1.9 billion in our regional infrastructure in the past few years and will continue to invest in Asia’s core markets in the future” (DHL: About us, 2010, par. 2). When objectives and strategies are clearly established and standards are communicated along the lines, the methods enumerated to achieve these goals helped provide the direction for their attainment. The motivational schemes provided through the open leadership culture ensured that diversity in culture is enhanced and career development through training and rewards assisted in the improvement of employee satisfaction leading to increased performance and productivity. Conclusion The management of evaluating the process of strategic decision-making should take primary concern on the continuous monitoring and surveillance of the external environment. Any relevant factor must be determined in terms of drastically influencing the internal resources of the organization. The success of every endeavor is measured on the organization’s ability to use their internal resources and competitive advantage to minimize cost and to maximize profits for the benefit of diverse stakeholders. The success of DHL as a global organization is seen through its commitment to satisfy the needs of their customers, despite their diversity, and to be socially responsible in terms of taking into consideration the protection of the environment. Management’s focus on the organization’s vision that “customers trust DHL as the preferred global express and logistics partner, leading the industry in terms of quality, profitability and market share” (DHL Vision, Mission and Values, 2009, 1) serve as their defining direction. The global strength and competitive advantage were identified as offering exemplary service, ensuring that the needs of the customers are addressed and satisfied, a regular scan of the environment is sustained, and the retention and development of highly professional team of management and personnel committed to the organization’s global strategy. By matching resources, capitalizing on strengths, competitive advantage and tapping the appropriate opportunities in the environment. Wallis emphasized that “DHL forecasts growth in all domestic markets in Asia will surge more than 20% over the next five years, while volumes within China’s domestic market will show “well above double-digit growth,” according to McHugh” (Wallis, 2008, p. 38). By continuing to focus and sustain specific strategies in this area, consistent with their global strategy, DHL will remain to be the market leader in logistics and adhered to attain its goal of sustaining the commitment to be “the logistics company of the world”. Reference List Apostolopoulos, G., Katsibras, K., Silabros, F. & Mavropulos, M 1998. Express Delivery Industry, [Online]. Available at: http://dossantos.cbpa.louisville.edu/cbpa1/students/athens7/index.htm [Accessed 08 January 2011]. DHL Global 2009. Innovation Center, [Online]. Available at: http://www.dhl.com/publish/g0/en/information/excellence/innovation_center.high.html [Accessed 08 January 2011]. DHL 2009. History. Divisions. History of Success, [Online]. Available at: http://www.dhl.de/dhl?tab=1&skin=hi&check=yes&lang=de_EN&xmlFile=3001215 [Accessed 08 January 2011]. DHL 2009. Vision, Mission and Values, [Online]. 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Environmental Scanning. Blackwell Reference Online. Available at: http://www.blackwellreference.com/public/tocnode?id=g9780631233176_chunk_g97814051025448_ss1-10 [Accessed 08 January 2011]. Read More