Company Critical Analysis: Dalsey, Hillblom, and Lynn - Research Paper Example

?Company critical analysis - DHL Table of Contents Table of Contents 2 Introduction 3 Background of the company (DHL) and its problem with competitors 3 Interview Review 4 Analysis of the resources and capabilities of DHL 5 Competitive Analysis 5 Industry Evolution 7 Recommendations 8 Reference 9 Introduction DHL was founded in the year 1969 by Adrian Dalsey, Larry Hillblom and Robert Lynn at San Francisco (DHL, 2011). The founders are involved into shipping and discovered that the documents can be shipped by air which can reduce the turnaround time of the company in port and thus discovered the new division DHL Airways which was based at San Francisco and operates along with DHL International of Brussels which is mainly concerned with the operations outside US. With time the company grew rapidly operating in over 200 countries with 110,000 employees and very recently the company was renamed as Deutsche Post DHL and established a new innovation centre division for more innovative and sophisticated way of logistic system (DHL, 2011). This research is concerned with the in depth study of the company for critical analysis of the core competence of the firm and the competitive analysis for DHL. Background of the company (DHL) and its problem with competitors The two companies under DHL are the exclusive delivery agents of the other company and the reason behind the domestic shipping of the company within US is mainly to reduce the cost and on the other hand increase reliability of the international shipping of the company. During the year 1990 the company on experienced 3% of the shipment inside the country but about 20% of the overseas shipment from US is accounted under DHL. From the beginning the company is focused towards delivering excellent services to the customers and is always committed towards its activities. The success factor of the company is mainly its employee base that is always acting according to the needs of the customers and serving with a customized approach. Today the company is operating in over 220 countries worldwide with a wide network and diversified business expertise in express, ocean freight, contract logistics, international mail services and overland transport (DHL-a, 2011). The company’s main competitions in the market are Federal Express, UPS (Silverstein, 2011). The competitors’ strategies of using third party help during the logistic process is one of the problem faced by the company as the company follows a network of self owned agents which takes time for the company to enter into new market for establishment of the business. Another issue is intense price competition in the industry which needs to be evaluated by the company to implement an effective pricing strategy. Differentiation in the pricing strategy of documents and parcel should be there for the company and the company needs to evaluate its pricing techniques for different industries also which the competitors are taking advantages of. Interview Review The interview conducted with the different members of DHL also reflected the problems that are prevailing within the organization and its competitors. As the Regional Manager of DHL, Dean Jones mentioned that the company is mainly focused towards quality service rather than concentrating on the pricing of products or service. Due to this the company is losing market share to its competitors with competitive pricing strategies. Johnson Par, the country manager of Africa on the other hand mentioned about a problem on the logistic system. The company has their own logistic systems which sometimes fail to serve on time as the competitors use their third party service for faster delivery of products. But DHL believes that customers will trust in the companies on logistic system than on any third party channel. Analysis of the resources and capabilities of DHL DHL broadly comprises of four divisions which are mainly operated by their divisional headquarters. All the groups are managed by the centralized centre all under one group. The centralized internal services from different departments like financial operations, Procurement and IT division supports the central group through their individual services. This strategy of the company helps to improve its service quality and flexibility in working individually as well as taking the advantage of economies of scale (DHL-b, 2011). DHL mainly operates through hub system for the process of transport shipment. In regions of Europe, US, and Middle East the company use self owned or leased aircrafts for the shipments while on intercontinental routes it uses scheduled airlines. A higher percentage of the shipment for the company is done through scheduled airlines. The company’s operation was divided into nine regions geographically. Regions manager looks after and directs the country’s manager or any DHL agent in the region and he is responsible for the profit and loss performance in that particular region. The marketing service department is operating worldwide for the business development and information processing and the sales co-ordination of the company amongst different operating units. Competitive Analysis In order to take an extra edge in the competitive world the company uses the Porter’s Generic Strategy to understand its business process and decide the position of its product or services in the market. Company generally places its product within the four sector of the Porter’s Generic matrix according to its characteristics. Either it wants to be the overall cost leadership or place the product with a differentiation strategy. Many companies also place its product focusing a particular segment in the market i.e. the niche market. Very few also follow the Differentiation focus strategy to enter the market with a differentiated product focused towards a particular segment of the market. Figure 1: Porter's Generic Model (Source: Botten, 2007, p. 264) Pricing of the company being the main problem of the company it needs to evaluate its generic strategy to place its product to the customer to get the competitive advantages in the market. DHL use the market skimming strategy to set its price as it earns huge revenue for the business being the leader of the business and there are not many players in the market and there is a huge market for the company. The companies price are always set high than its competitors in the market following which other players set their prices in new market. It mainly follows the differentiation strategy in which it first launches its product at higher price then with more players in the segment it decreases its price to be the cost leader to grab the lower segment of the market. But the pricing structure of the company is facing some problem from its competitors in the long run. The company primarily follows three structural approaches- monthly flat handling fee, loaded half-kilo approach and frequent discount technique. The monthly flat charge is for the customers who are interested in regular pickup in their route. But it does not adds any value to the unit thus if not properly marketed it’s of no use for the company. The discount structure of the company is also not very effective as the flat discount strategy can be replicated by competitors and act accordingly. The half-kilo structure is also not very effective as the discount should be on number of shipments rather than on total weights shipped per month. More over the price negotiation of DHL sales representative according to the customized service to the clients also gives a bad impression on the customers and gives the competitors better opportunity to provide better service and more customer centric approach. Industry Evolution The two main products of air express industry are parcel delivery and document delivery to the customers. There are few players in the market dealing worldwide and domestically. Parcels delivery grabs the major share of the industry revenue with a ratio of around 75:25 between parcel delivery and document delivery service. During the year 1989 the parcel sector grew rapidly to approximately 40 % compared to that of document delivery section with 15 % growth. This growth in parcel and document delivery sector is primarily at the expense of air cargo market and other means of traditional shipping. The total revenue of the industry is increasing at a very fast pace. In International air express industry the total revenue grew approximately from $3.4 billion to $4.3 billion during the year 1989 to 1990. Taking the advantage of the technological growth and industry DHL is constantly working on its processes. In the year 2009 the company introduced a new division of DHL Solution and Innovation for a more innovative approach towards logistic system (DHL, 2011). Recommendations DHL should maintain its quality of service otherwise it may give a false impression on the mind of the customer if the company reduces its price. This may lead to switching of customers to the competitors in the market. The company should have a differentiation in the price structure for documents and parcels as the competitors take this advantage to target a particular segment. The price strategy should not be different for cross industries and the shipping price must be same across the different sectors of the industry. The marketing team should offer special discounts to large accounts like MNCs’ who drive huge business for the company. Thus if the pricing strategy of the company can be reformed by the company then it can have a great advantage over its competitors in the market along with quality service provided by DHL. Reference 1. Botten, N. (2007). CIMA Official Learning System Management Accounting Business Strategy. Butterworth-Heinemann. 2. DHL. (2011). Key Dates. Retrieved on: July 18th 2011 from http://www.dhl.co.in/en/about_us/company_portrait.html#key_dates. 3. DHL-a. (2011). Our History. Retrieved on: July 18th 2011 from http://www.dhl.co.in/en/about_us/company_portrait.html#history. 4. DHL-b. (2011). Our Organization. Retrieved on: July 18th 2011 from http://www.dhl.co.in/en/about_us/company_portrait.html#organization. 5. Silverstein, B. (2011). Delivering Overnight Brands. Retrieved on: July 18th 2011 from http://brandcameo.org/features_effect.asp?pf_id=398. Read More