International Business Strategic Planning for DHL Seeking to Enter the Canadian Market - Essay Example

Report on the International Business Strategic Planning for DHL Seeking to Enter the Canadian Market MARKET ENTRY STRATEGY FOR DHL IN CANADA The expansion will have to follow the following pointers which will be examined below: 1. Establish the central headquarters for DHL Canada in the Toronto area. Acquire a suitable premises that will be cost effective and can enable the business to gain access to various stakeholders we will interact with. 2. Choose a major market entry plan that will enable DHL to open major pointers and units that will be used for the postal and logistics movement activities of DHL Canada. Amongst the options are licensing, franchising, foreign direct investments, company acquisition or fully owned subsidiary. 3. Since the expansion of a logistics and courier service like DHL requires a lot of capital and Canada is a large nation, the best option is to choose franchising. Franchising is defined by Czinkota et al as “the granting of the right by a parent company (the franchisor/ franchiser) to another, independent entity (the franchisee) to do business in a prescribed manner. (2011). 4. The Toronto headquarters must the proceed to design the corporate strategy of DHL Canada. Corporate strategy encompasses “the long-term, organisation-wide strategy for a business, formulated by top-level managers” (Johnson, Scholes and Whittington, 2009). In doing this, we must get accurate information about important elements of doing business across Canada, namely an Operational Model, Legal Model, Marketing Strategy and Franchising Model. 5. The Operational Model must define how logistics and goods will be moved from one point to another to Canada. This will involve the identification of warehousing, transportation and other systems that would be used. In doing this, we will need to globalise or localise. If we globalise, it would mean that we will maintain the standards in the home country of DHL in Canada. If we decide to localise, we will examine the way other courier companies work and marketing conditions in Canada and then define a different operational model from the scratch. I recommend a mixed strategy of globalisation and localisation. This will enable us to be flexible in drawing up operational requirements for the company. 6. After this, we have to define the legal requirements for our franchising agreements. We will identify the capital base that each franchisee needs and the rules that they have to follow. Also, the contributions they will make to the company for marketing costs will be defined. Additionally, Franchising fees will be given and a timeline for meeting requirements will also be given. 7. Core facilities for DHL Canada should be purchased by the head office. This include things like Airport rights in the main international airports and primary warehousing positions. 8. When the major planning activities are completed, we can come up with a time, budgetary and resource allocation strategy. Capital must be dispensed for various projects like central warehousing, legal rights, branding and other things. Support services for regional branches in the various states of Canada must be provided at the cost of DHL Canada which is the franchisor. 9. Potential Franchisees must be invited and given a timeline on what to attain before a given period. After aspiring franchisees meet obligations, they can begin operations in their regions and DHL Canada can start operating through these outlets. 2 NATURE OF CANADAS INFRASTRUCTURE & ITS EFFECTS ON DISTRIBUTION STRATEGY OF DHL CANADA In defining the infrastructure of a foreign country that a business seeks to enter, the main pointers include: 1. Government regulations 2. Tariff barriers 3. Geography and Climates 4. Built Environment 5. Communication lines and 6. Information systems (Doole and Lowe, 2008) DHL deals with logistics and courier services. Thus, in Canada, we will be interested in four main things: legal restrictions, transportation systems, communication infrastructure and warehousing/building services. Canada is a member of the North American Free Trade Agreement. The agreement eliminates all kinds of barriers and tariffs that exists between the United States and Mexico. Due to this, if we have an existing DHL branch in the United States, then we can have a very easy to expand to Canada without issues. However, if we are to expand from a foreign country like Australia, then we will have to be more careful to look for opportunities within the country or pay tariffs that we are eligible to pay. Canada has over 9.9 million square kilometres of land and is the second largest nation on earth (DIANE Publishing, 2010). However, the population is under 50 million and the terrain is widely diverse with rocky and other unfriendly terrains. This means that distribution would need to depend heavily on good transportation networks and good airline services. Canada is a developed nation. It has very complicated transportation systems which include over 1.4 million kilometres of roads, ten international airports, three hundred small airports, almost 100,000 kilometres of railway network and three hundred commercial ports and harbours (Statistics Canada, 2008). Since the nation has infrastructure systems that are advanced, there are numerous options that can be explored in terms of acquiring warehousing facilities around the country. Also, the franchisees will have more options in choosing where to site their warehouses and offices. However, the problem of covering a wider scope of land and fuel/transportation costs will be highly significant in defining the best methods to use in each state of Canada. Some states like British Columbia are extremely large and densely populated. In this case, DHL franchisees operating in the region can consider minor contracts with airline companies to deliver mails through various post offices to reach the small town of the state. In other places like Ontario where the highest population density exists, DHL can consider acquiring some landed property and vehicles to carry their couriers from place to place. 3 EXISTING COMPETITION IN THE CANADIAN COURIER INDUSTRY The most popular model of examining competitive forces in every new nation that a business wants to enter is the Porters Five Force Model. The model indicates that there are five important things that defines competition in any given industry. They are as follows: Threat of New Entrants In the case of Canada, it is fairly easy for new entrants to enter the courier markets. This is because the structures are quite good and with a little capital and a few vehicle, almost anyone in Canada, particularly the Toronto area, can commence a parcel delivery service. The investment cost is quite low and the working capital costs are quite easy to come by. However, there is an issue of brand equity with these new entrants, particularly those with limited capital. Since DHL has an international brand name is likely to be fairly capitalised when it starts operating in Canada, this threat is likely to be very minimal and they are likely to benefit from economies of scale and the fact that many of the smaller delivery companies might want to buy franchises from them. So the threats of ease in entry is not really serious for DHL Canada. Presence of Substitutes There is also the chance that buyers might want to switch from courier services to the use of in-house delivery services or other methods of communication like the Internet and other electronic forms of delivering things. For instance, instead of using DHL, people might want to purchase orders online and use supermarkets or shop delivery systems to get items to them. In Canada, it is not practical for a firm to keep an in-house courier service. However, the growth of the Internet and online buying and its related delivery service means that the threats of substitutes could be decisive in the survival of DHL Canada. In order to avoid this threat, DHL Canada can consider capturing the online market share and providing its services online. This way, competing substitutes cannot easily overtake them in the online sales and deliver markets. Bargaining Power of Customers If DHL Canada begins to supply services to large consumers like corporate clients in Canada, there is the chance that these corporate clients might want to set up their own delivery system that can be a competitor courier service. In order to avoid this, DHL Canada might need to treat buyers fairly and improve the quality of their services so that these powerful clients can build trust in them. Bargaining Power of Suppliers DHL Canadas franchisees can become too dominant and powerful that they can decide to take control of local affairs and break away and become competitors of DHL. This can happen in Canada because the nation is big and franchisees in some remote parts of the country can build so much local competency that they could decide to cancel their contract with DHL Canada and set themselves up in business. This could make them competitors. In order to deal with this threat, DHL Canada might want to use small franchisees and maintain several franchisees in all the areas they will operate. Intensity of Competitive Rivalry This refers to firms that are of the same level as DHL Canada. Since DHL Canada has brand equity and is planning to build a strong firm, its competitors are like UPS, CanadaPost, EMS and Fedex. They compete directly for the same customers and they always seek to outwit each other through innovations and better offerings. These companies also run advertising campaigns and promote different options that are aimed to expand their market share. 4 NATURE OF PROPOSED COMMUNICATION STRATEGY FOR DHL IN CANADA Czinkokta and Ilkka (2007) identify five main stages in marketing communication in the international context. This is likely to be relevant to DHL Canada and its quest to enter the Canadian market. This include: Assess Marketing Communication Opportunities The Canadian culture is of a formal nature and people are more susceptible to direct contacts. This are done through networks and people are more likely to seek longer term connection to a brand and pass it on to their children (MacDonald, 2007). Due to this, DHL needs to examine a strategy that promotes its services through a direct penetration into the formal sector and also seek to build ties and direct contact with people. Analyse Marketing Communication Resources DHL Canada will begin with the capital invested from the home country. Due to this, the money for advertising in the first years might be quite limited. However, as the company grows and franchises pay for advertising costs, they can increase marketing expenditure. Also, DHL enters Canada with a brand equity that has been built for decades in other parts of the world. Due to this, they have all the necessary requirements and resources that they can use to promote their brand in Canada. There will be no need to invest in new advertisements and promotions. They might only need to adapt them. Set Market Communication Objectives With the position as a start up, DHL Canada would have to pursue a strategy of market penetration. This means that they will have to unleash their brand and try to expose it to as many people as possible. This way, they will get the core idea of DHL as a common brand. It is only after this, that market share can be expanded and consolidated. Develop/Evaluate Alternative Strategies In order to attain brand exposure, the following promotional strategies could be helpful: 1. Personal Selling. 2. Advertising 3. Publicity 4. Sales Promotion Personal selling will enable DHL to get contacts with the people in top positions in organisations who might want to sign long term contracts. Advertising will promote the DHL brand and publicity will make the brand a household name. Sales promotions will target individual clients in the dense metropolises like Toronto. Assign Specific Market Communication Tasks. Task 1: Launch DHL Canada in Toronto and two major Canadian cities. Take three weeks to undertake activities and complete the three launches in three weeks. Task 2: Make information of the launch public through advertisements and other media outlets. Do this over a three week period. Task 3: Start getting contacts in the corporate world and give them free and good offers to try DHL. This should commence right after the launch. Task 4: Begin adverts on a small scale and show the DHL brand as a whole. This should start a few weeks after the launch. Task 5: Start publicity campaigns on the local level that will make people know more about the brands. This should commence during the launch of DHL Canada. Task 6: Start sales promotions and talk about the packages available to customers. After the brand exposure has gone on for a couple of weeks, specific services should be announced. This should vary and begin to take grounds after six months. As DHL becomes more known, the sales promotions should become the norm for another six months. References Czinkota, M and Ilkka, A. (2007) International Marketing London: Thomas Learning Inc. Czinkota, M., Ronkainen, I., Sutton-Brady, C and Beal, T., (2011) International Marketing, 2nd Asia-Pacific Edition, Sydney: Cengage DIANE Publishing. (2010) California, Canada and Free Trade Darby, PA: DIANE Publishing. Doole, I and Lowe, R. (2008) International Marketing Strategy: Analysis, Development and Implementation Mason, OH: Cengage. Johnson, G, Scholes, K and Whittington, R. (2009) Exploring Corporate Strategy London: FT Press. MacDonald, D. (2007) Canadian Business and Environmental Politics Toronto: University of Toronto Press. Porter, M. E. (1980) Competitive Strategy New York: Free Press Statistics Canada (2008) Transportation in Canada [Online] Available at: http://www41.statcan.ca/2007/4006/ceb4006_000_e.htm Accessed: 9th November, 2012. Read More