dhl pakistan modified
TRANSCRIPT
PROJECT OF STRATEGIC MANAGEMENT
GROUP MEMBERS
ANAM JAMAL
FAIZA ABBAS
MEHWISH SABEEN
MINAL RASHID
SUBMITTED TO
SIR ABID SALEEM
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ACKNOWLEDGEMENTS
First of all we would like to thank Allah Almighty, by whose Grace; we were able to complete this project in time.
We would like to thank Mr. Amir Mehmood, Branch Manager DHL, F-8/2, Madina Market Branch for his cooperation and help with our project.
We would also like to thank Mr. Abid Salim who taught us with dedication throughout this semester. Through the numerous assignments he gave throughout the semester and especially this project, we have attained a lot of knowledge.
Finally we would like to thank our parents, who have always supported us and through their efforts and prayers, we are where we are today.
May Allah grant us success in our lives and studies.
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TABLE OF CONTENTS
ACKNOWLEDGEMENTS...........................................................................................................................2
COMPANY OVERVIEW..............................................................................................................................4
DHL VISION ...............................................................................................................................................4
DHL MISSION.............................................................................................................................................4
DHL CORPORATE VALUES......................................................................................................................4
CORPORATE SOCIAL RESPONSIBILITY..............................................................................................5
DHL PAKISTAN...........................................................................................................................................5
NETWORK IN PAKISTAN..........................................................................................................................5
BUSINESS MODEL FOR DHL..................................................................................................................7
PORTER’S FIVE FORCES MODEL.......................................................................................................11
PEST ANALYSIS .......................................................................................................................................13
COMPETITIVE PROFILE MATRIX FOR DHL....................................................................................15
INTERNAL FACTORS EVALUATION (IFE) MATRIX........................................................................17
EXTERNAL FACTORS EVALUATION (EFE) MATRIX......................................................................18
SWOT ANALYSIS......................................................................................................................................19
TOWS..........................................................................................................................................................23
SPACE MATRIX........................................................................................................................................25
THE INTERNAL- EXTERNAL (IE) MATRIX).......................................................................................27
BCG MATRIX.............................................................................................................................................28
QSPM..........................................................................................................................................................31
CONCLUSION AND RECOMMENDATIONS:.......................................................................................33
APPENDIX:................................................................................................................................................34
REFERENCES:..........................................................................................................................................35
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COMPANY OVERVIEW
DHL is the world leader in mail and logistics services. DHL corporate brands provide a unique business portfolio of logistics and communications services. DHL is the world market leader in global express transport and air freight. It is also no .1 in ocean freight and contract logistics. Almost 500,000 employees in 220 countries and regions form a world network emphasis on service, quality and stability that crosses customer's perceptions in 120,000 locations in all continents. [1]
Three companies joined the brand of DHL in 2003, to set new and better standards in the courier business the world over. These companies are:
The worldwide leader in air express. DHL Worldwide Express Global leader in sea and air freight , Danzas European leader in parcel services. Duetsche Post Euro Express.
VISION:“Customers trust DHL as the preferred global express and logistics partner, leading the industry in terms of quality, profitability and market share.” [2]
MISSION:“Making the most of scale experience and passion DHL’s mission is to be the first choice worldwide.” [3]
DHL CORPORATE VALUES:DHL is customer conscious and working upon the strategy of “Customer is King”. Therefore their corporate goal is to get the customer satisfaction by providing good quality, reliability, and accepting the challenges… Also
To provide superb values To act with honesty externally and internally Foster openness Act in entrepreneurial way To act according to specific priorities Accept social responsibilities [4]
CORPORATE SOCIAL RESPONSIBILITY:
Since the company operates globally, company has a distinctive responsibility to avail their knowledge, experience for the improvement of society and to control any bad influence that their business may have on the environment. Living Responsibility appreciated DHL’s struggle in the
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field of education environmental protection and disaster relief. DHL took many steps in Go Green, Go Help and Go Teach programs supported by the skills and devotion of their 500,000 employees. [5]
DHL’s business emphasizes on health, ethics, safety, and protection of cultural differences. People, environment and community are basis of DHL philosophy of citizenship. Company brands are true representative for commitment and honesty. Company efficiently avail its logistics expertise by using its resources and managing disaster in the affected areas. Company tried their best to support victims of the 2005 and 2008 earth quakes by delivering donations to victims. Company also supports a variety of social welfare organizations one of these are Family Educational Services Foundations and SOS Children’s Village. [6]
DHL PAKISTAN
DHL Pakistan started its operations in Pakistan in 1982 headed by Sarfraz Siddique country and director manager of DHL. After the acquisition of Exel Inc., the company started its logistics operations in 2002, headed by Imran Sheikh, who is the Managing Director. [7]
Employees more than 600 Gateway:4
NETWORK IN PAKISTAN:
DHL is the largest service provider in Pakistan and also largest air express company with 65% market share. Operating in more than 40 location and have above 200 vehicles and over 300 employees.DHL delivers documents and heavy weight parcels efficiently. Besides this, it also provides unique services that add value to their customers. DHL Logistics presents end to end Logistics solutions to clients.Head office of the company is in Karachi, with branch offices in Lahore, Sialkot and Islamabad. There are 48 branches of company in different cities of Pakistan as Express Centers, Service Centers and Gateways. Dominantly company operates in four locations with a workforce of above 300. [8]
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The main cities where DHL has its service centers are Karachi Lahore Islamabad Multan Sialkot Peshawar Faisalabad
Besides these it is operating with its Express Centers which are located in different cities of Pakistan.
BUSINESS MODEL FOR DHL
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1) INFRASTRUCTURE:
Key partners:
DHL International
Manufacturers and service provider Customers. Pakistan & country Business community Government of Pakistan United Nations (Go Teach Project) Logistic Providers Airline Express
Key activities:
Research & Development Marketing Sales(Product &Services) Finance Operations IT and Procurement.
Key Resources:
Human resource.
Key Competitors:
FedEx UPS TCS OCS, Leopard`s Pakistan Post (Mail) NLC
2) FINANCING:
Cost Structure:
Cost incurred in delivering all services and basic cost incurred in transportation.
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Air freight charges and rent charges of warehouses. DHL invested up to $8 million in construction of Logistic Centers in Karachi and Lahore,
new and modern Airside Express and in improving its facilities. Investment of DHL assures DHL’s honesty and commitment towards partnership with
Pakistan and toward business community of Pakistan.
Revenue Stream:
Sales from all channels throughout the company National Sales profitability by an efficient operation of the Priority Support Service
3) OFFERING (VALUE PROPOSITION):
DHL MAIL:
Global Mail of company is directly connected with 40 production centers in 5 continents and with 100 sales offices in 200 countries and also in touch with cross border solutions for global mail shipments. DHL provides cross border mail and parcel solutions and variety of added value services to make cost reducing customized mail solutions for you and to your customers from each country in DHL network. [9]
Mail service includes:
International ServicesDHL works to create a flexible, cost reducing solution to match with your distribution and mail fulfillment needs in areas of(1) General correspondence (2) direct mail (3) catalogs (4) publications ((5) invoices (6) parcels. [10]
DHL EXPRESS: Is the world leader in global Express Shipping and ships more global packages as compared to rest of them. Result is more customers trust DHL with their package no matter it’s around the world or around the corner. [11]
Shipping:Express Shipping of DHL support area for both new and old customers. [12]
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Export Services – International Express Delivery
DHL offers reliable and variety of delivery options to other countries in export services. Including incase of emergency same day to guaranteed time to next day and offer certain options for less urgent days. [13]
Import Services – Inbound Express DeliveryDHL offer variety of delivery options in import services to Pakistan ranges from time critical guaranteed next day to days which are not urgent with certain choices. [14]
Domestic Services – Local Express Delivery
In Pakistan domestic service offers wide range of delivery options including emergency same day to guaranteed time critical next day to less urgent. [15]
DHL LOGISTICS:
DHL Logistics included: Warehousing and distribution Supply chain solutions freight transportation.Because of which DHL is the globally largest logistics expert. [16]
Freight Transportation
DHL is a logistics partner because of which it is able to deliver cargo of any type to any location through air, ocean, road or rail. DHL has the capability of giving its customers the personal attention they require. [17]
Warehousing and Distribution
Specialist of DHL provides uncountable and quick solutions that will drive value for your business. Make sure that businesses can deliver their service promise to their customers worldwide DHL provides dedicated warehousing and distribution services. [18]
Supply Chain Solutions
DHL provides a variety of services on their global network local insight to provide value covering your supply chain. As the world's largest logistics specialist, from the initial consultancy and design, to last mile delivery and reverse logistics; they provide tailored supply chain solutions covering all industry sectors. [19]
Industry Sector Solutions
Company emphasis on specific industry sectors like customers benefit working with experts. [20]
4) CUSTOMERS:
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Relationship with customers:
DHL’s customers come from across the commercial spectrum and the public sector.DHL is customer conscious and working upon the strategy of Customer is King therefore there corporate goal is to get the customer satisfaction based with providing good quality, reliability, and accepting the challenges.
COMPETITIVE ADVANTAGE:
DHL is enthusiastic regarding sustainable competitive advantage for our customers by delivering their products to market as fast as possible effectively and more efficiently. Regardless of their size DHL customers can rely on company to draw on our international scale and domestic insight to provide value covering every area of their supply chain.Deutsche Post DHL is built upon two strong pillars to strategically position for the future.
An integrated international logistics business Solid mail business with new electronic value added services.[21]
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PORTER’S FIVE FORCES MODEL
RIVALRY:
On the basis of prices, strong competition is found between the transportation firms. These firms frequently cut prices to secure their market share. The large companies in the global transportation industry are FedEx, UPS, and OCS.
THREAT TO ENTRY:
To become leader in the international transportation business the companies must have large distribution network, well capable hub for parcel organization all around the world and have contact to a huge number of planes, truck, trains and ship. Any new entrant who want to come in the market oh having specialize in one of the sub division of the market, not necessary to be in the competitive situation. Entrant having obligatory market capitalization has to fight for making brand image. A very important matter that large companies have with big organization is the long term contracts and commitment. Entrants also experience big revenge from existing competitors on the considerable level.
THREAT OF SUBSTITUTES:
Substitute does not appear with the probable threat on the transportation business. Though present all feasible shipping solutions, competitors ensure their market share whether the user decide to alternate his air fright operation with a land or marine fright operation. Yet one market division, the sudden text delivery marketplace is in front of a considerable risk of alternative by facsimile and email. ISP train more individuals about the email and online text delivery.
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Businesses and companies are more convivial than before to allow ODS to accumulate money and time.
SUPPLIER BARGAINING POWER:
Profitability of shipping industry is strictly distressed by the changeable prices of fuel. Oil suppliers are in strong bargaining position which is due to the prices that are indomitable based on the political as well as economic concern. On other hand the transportation business fighting with this issue on collecting fuel charges due the continuously increase in fuel prices. Suppliers that wrap tools like plastic and boxes are not in position of having high bargaining power. The vehicle supplier will not be in a high bargaining position due to the competition of automobile assembling business. Workers of shipping vehicle with limited power such as train have some bargaining power. Bargaining power of check providers can be reduced by making investment in the technology that automates the wrap-up arrangement process.
BUYER BARGAINING POWER:
To offer delivery services to the large businesses and firms, the shipping firm faces severe fight. Shipping firms are facing large competition to arrive at storage and ware houses as well as spare parts. The users of these corporations don’t have the lightness to select their shipping supplier but they have used the services of other shipping firms to take advantage of transportation solutions. Furthermore switching cost is also low. This condition laid these firms in a very high bargaining situation. Users want to select the companies that provide low prices. But by providing competitive advantage to the users, companies can capture them. Also many supply centers as well as warehouses are combined with shipping firms each user with some bargaining power.
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PEST ANALYSIS
POLITICAL ENVIRONMENT:
Political environment of Pakistan is very weak and unsure. The problem there is the security condition and has clear impact on the sustainable expansion of DHL Pakistan. As an example the high security risk in Pakistan, most of the embassies, consulates and international organizations (e.g. NGO's) cease their operations temporarily, thus crafting a direct impact on the business of DHL Pakistan.The country's import and export regulatory authority (Pakistan Customs) has a direct interaction with DHL Pakistan as all their inbound and outbound shipments must be accepted by custom authority. The company has contracted an independent broker to get all their inbound and outbound shipments cleared through Pakistan Customs but the delays are still occurring on standard basis. It generates a detrimental pressure on the company's repute and customer base.
ECONOMIC ENVIRONMENT:
Pakistan is an agrarian country with a large number of populations associated with agriculture. State Bank of Pakistan decides the monetary issues.
Till 2007 the economic conditions of the country were flourishing, while the country maintained a growth rate of 6% third highest in Asia after China and India. Government policies made the country got rid of IMF dictation for the first time ever in history. It also favored foreign investors. Lots of money was coming in the country as foreign aid.
For the past few years, there has been virtually no Foreign Direct Investment. Inflation rate is 12.9% and the interest rate is 14%.Dollar reached record high of Rs87 severely deteriorating the debt management. Pak`s role in War on Terror costs billions of rupees leaving very few funds for development work. Although many countries and organizations like Friends of Pakistan promised huge amount of aid but actually they just turned out to be loans on extremely strict conditions putting the country’s sovereignty in question. Electricity, gas and water shortages have become a common thing.
Many areas of the country especially north and south westerns region have been untapped. They can turn out great markets. As the economy of Pakistan becomes more and more service oriented, there are huge prospects of growth for DHL as people all over the country want faster communication.
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SOCIAL ENVIRONMENT:
Pakistan's economic forecast, flawed by aggressive human development indicators, low levels of foreign investment, and dependence on international creditors for hard currency inflows, were however on an upswing during most of 2001. Musharraf government made considerable progress in macroeconomic reform. While Pakistan has exploited its international standing after the 11 September terrorist attacks on the US, long-term prospects remain unclear. GDP growth will continue to turning point; oil prices also goes high and foreign and domestic investors remain careful of starting new projects with Pakistan. Moreover the level of trading system decline as a reason of global economic recession.
The facts recommend that maximum of population is very price aware and because of great rivalry in the courier business, DHL suffers in the context of profit with certain limits.
TECHNOLOGICAL ENVIRONMENT:
Technology is important as main driver of globalization as well as for the competitive advantage. It also provides way to the firms to be in touch with the users, for example CRM. Because of the low income level and literacy rate the technological environment in Pakistan is simply old fashioned as compared to the developed countries.
The employees of the company are provided training on regular basis to help them understand and digest the new systems in place and how to use them effectively. Furthermore, DHL Pakistan also keeps its customers up-to-date of any new developments. An example of this is the launch of a new software by the company for its customers ("Fast Forward") enabling them to track down their shipments in transit plus also be able to monitor the exact route of their shipment. This software also permit clients to carry out a comparison between the Air Freight prices being charged by different Airlines and DHL's prices for different weight slabs. In addition, a training session was also organized to educate the clients as how to use the software.
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COMPETITIVE PROFILE MATRIX
COMPETITIVE FACTORS
WEIGHT RATING AVG. SCORE
RATING AVG. SCORE
RATING AVG. SCORE
Price 0.11 3 0.33 2 0.22 3 0.33
Financial Position
0.10 4 0.40 4 0.40 2 0.20
Service Quality 0.15 3 0.45 4 0.60 2 0.30
Customer Loyalty
0.09 3 0.27 3 0.27 3 0.27
Innovation 0.12 4 0.48 4 0.48 2 0.24
Management 0.10 3 0.30 3 0.30 2 0.20
Reach and frequency
0.10 4 0.40 2 0.20 2 0.20
Market Share 0.11 4 0.44 2 0.22 1 0.11
Advertising 0.12 3 0.36 2 0.24 1 0.12
Total 1.00 3.43 2.93 1.97
Critical Success Factors:
Critical Success factors are factors important for a company’s success. They are identified after an analysis of the firm. A high rating means that the firm’s strategy is supporting the critical success factors well and lower rating means that the strategies do not match them well.
Rating:
The rating represents the firm’s response towards the CSF. Higher rating means better response and vice versa. Rating ranges from 1 to 4.• 1 means poor response• 2 means average response• 3 means above average response• 4 means superior response
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DHL UPSFEDEX
Weight:The weight assigned in the CPM indicates the factor’s importance in the industry in which the company operates. The weight ranges from 0, which indicates not important and 1, which indicates important. The sum of all the weights should be 1.
Weighted Score:
The weighted score is obtained by multiplying each factor weight with its rating.
Total Weighted Score:
The sum of all weighted scores gives the TWS. Its value can be from 1 (low) and 4 (high). If a company’s TWS is higher than 2.5, it is considered to be in a strong position. In CPM, the firm with the higher TWS is deemed to be most successful among its competitors.
RESULTS:
DHL’s total score is higher than its competitors which show that it has an edge over its competitors in terms of the CSF, due to which it is the market leader in the industry.
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INTERNAL FACTORS EVALUATION (IFE) MATRIX
STRENGHTS: WEIGHT RATING WEIGHTED SCORE
1. Global reach 0.11 4 0.44
2. Brand image 0.15 4 0.6
3. Corporate symbiosis 0.10 2 0.2
4. Technology and eservices 0.13 3 0.39
5. Innovators 0.15 3 0.45
WEAKNESSES:
1. High Prices 0.15 2 0.3
2. Less revenue from import service 0.10 2 0.2
3. Weak Visibility 0.11 1 0.11
TOTAL 1.00 2.69
RATING SCALE:
Rating 1 – Major Weakness Rating 2 – Minor Weakness Rating 3 – Minor Strength Rating 4 – Major Strength
RESULTS:
The IFE matrix results show that the company has a score of 2.69, which indicates that the company has an above average internal position and is strong internally.
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EXTERNAL FACTORS EVALUATION (EFE) MATRIX
OPPORTUNITIES: WEIGHT RATING WEIGHTED SCORE
1. Global Expansion 0.10 4 0.40
2. Expansion of e-commerce 0.10 3 0.30
3. Joint Ventures with local transportation companies
0.10 1 0.10
4. Expansion of customer base 0.09 3 0.27
5. Products and Services Expansion 0.10 3 0.30
THREATS:
1. Economic Recession 0.09 3 0.27
2. Political Uncertainty 0.09 3 0.27
3. Increase in fuel prices 0.10 3 0.30
4. Threat of new entrants 0.06 3 0.18
5. Lower Cost Competitors 0.06 2 0.12
6. Rules And Restrictions In Foreign countries
0.11 3 0.33
TOTAL 1.00 2.84
RATING SCALE:
Poor - 1 Below Average- 2 Above Average- 3 Superior- 4
RESULTS:
The EFE matrix results show that the company has a score of 2.84, which indicates that the company is strong in position and responds well to the external environment.
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SWOT ANALYSIS
STRENGTHS WEAKNESSES
S1 Global reach W1 High prices
S2 Strong Brand image W2 Weak Visibility
S3 Corporate symbiosis W3 Low revenues from import
services
S4 Technology and e-services
S5 Innovators
OPPORTUNITIES THREATS
O1 Global Expansion T1 Economic Recession
O2 Expansion of E-commerce T2 Political Uncertainty
O3 Joint Ventures with local transportation companies
T3 Increase in fuel prices
O4 Expansion of customer base T4 Threat of new entrants
O5 Product and service expansion T5 Lower Cost Competitors
STRENGTHS:
Global Reach:
DHL has a global network and a presence in 220+ countries. They operate in a large market and provide remarkable services and solutions to fulfill the needs of their worldwide customers. Therefore they are able to earn outstanding revenues. They are also able to achieve global economies of scale through their worldwide network.
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Strong Brand Image:
In 1997, DHL became the transportation and logistics company to acquire concurrent ISO 9001certification in International Quality Standards. DHL also has its own quality system to ensure that they meet their customer’s requirements.
Corporate Symbiosis:
DHL has developed its own executive structure, to enhance its position in the global market, which is known as “Corporate Symbiosis”. This technique requires the empowerment of the DHL personnel at a local level and simultaneously acknowledging the interdependence of the units of DHL, which combined together, form a corporate and cohesive whole.
Technology and e-Services:
DHL currently uses and strives to explore new technology. Nearly 10% of their revenues are spent on information technology. DHL also has good e-services that provide access to systems, which ensures that customers can control and are in charge of their supply chains at all times. Shipments and deliveries can be tracked and queries can be made online.
Innovators:
Customers of DHL receive innovative products and services which meet the needs of both businesses and individual customers. DHL is the pioneer of the innovative services and solutions in the global courier and logistics industry and has positioned itself at the cutting edge of the growth market.
WEAKNESSES:
High Prices:
DHL’s prices are somewhat high in comparison with their competitors. This is a weakness for the company if the customers do not differentiate between the other companies’ services and DHL’s.
Weak Visibility:
The company has weak visibility in the community as compared to its competitors.
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Low revenues from import services
DHL contributes only 10 to 15% of revenue from import services which needs to be improved. They should improve their import services in Pakistan.
OPPORTUNITIES:
Global expansion:
DHL can continue to expand its business globally. This is an opportunity for the company since it operates in many countries and can still tap into some new territories as well as expanding its business in the more remote areas of Pakistan.
Expanding e-commerce in Pakistan:
DHL has a major presence of online shipping. They have an opportunity to try and find internet companies to deliver their services on contract delivery. As e-commerce is growing day by day, DHL can earn more revenues and increase their brand name recognition through such ventures.
Joint Ventures:
DHL can enter into strategic partnerships and joint ventures e.g. with local transportation companies, to benefit from the opportunity and growth of incorporating their customer bases and lower their costs.
Expansion of Customer Base:
Pakistan is a country where still large numbers of people are still residing in rural areas. They aren’t much aware of DHL, so it has an opportunity to capture that market by forming strategic alliances with the organizations like Pakistan Post, as it has countrywide presence and in rural areas people are much aware of it so they can access it easily.
Products and services expansion:
The World Trade Organization has estimated that the rate of world trading in manufactured goods will increase in the coming years. So this is an opportunity for DHL. Also they have an opportunity to expand their business to tap small industries like the hotel industry which are few in number but have high weight or frequent imports. They can also introduce the Smart Truck Project in Pakistan. It is a project which allows DHL to deliver faster. The data regarding the
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location is transmitted directly to the dynamic route planning system, which calculates the most efficient routes, while considering the current order situation and volume of traffic. [22]
THREATS:
Economic Recession:
Like other countries in the world Pakistan is also suffering from the economic recession. Inflation rate was almost 13% as of Feb ’11, there hasn’t been virtually any foreign direct investment over the last few years, and purchasing power of people is also decreasing. So it can be threat for DHL.
Political Uncertainty:
Political uncertainty in the country always poses threats to investors as they fear laws and regulations that may not be friendly. Besides there is also a risk of operational difficulty.
Increase in fuel prices:
Nowadays, fuel prices are climbing everyday due to international increase in oil prices. DHL can pass that along to the customer but even then fuel is always a concern, both in price and availability.
Threat of New Entrants:
Small and new coming organizations reduce the business of the DHL. With low cost packaging services offered by competitors are also the threats for the DHL.
Lower competitor prices:
Competitors of DHL are offering their services at lower prices and lower cost as compared to DHL. This can be a threat if the customers do not recognize a difference between DHL and their competitor’s services.
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TOWS MATRIX
STRENGTHS WEAKNESSES
1. Innovators2. Strong Brand
image3. Corporate
symbiosis4. Technology and e-
services5. Global reach
1. Weak Visibility2. High prices3. Low revenues from import
services
OPPORTUNITIES S-O STRATEGY: W-O STRATEGY:
1. Product and service expansion
2. Expansion of E-commerce
3. Joint Ventures with local transportation companies
4. Expansion of customer base
5. Global Expansion
S1,4-O5S1-O1
W1-O3W3- O5
THREATS S-T STRATEGY: W-T STRATEGY:
1. Lower Cost Competitors
2. Political Uncertainty
3. Increase in fuel prices
4. Threat of new entrants
5. Economic Recession
S1,2,4-T1 W1-T1,2
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S-O STRATEGY:
S1, 4-O5
In order to increase their market share and find new customers, they need to make their advertisements about their new technologies and online ordering system.
S1-O1
The company can introduce their innovative smart- truck project which was introduced in Europe in 2009. It is an environmental- friendly, fast and efficient way of transportation, which uses the advanced Radio Frequency Identification (RFID) technology for navigation purposes.
S-T STRATEGY:
S1, 2, 4-T1
To decrease the negative effect of economic recession they need to focus on more promotions on online ordering system.
W-O STRATEGY:
W1-O3
To decrease their prices by cutting cost and increase their market share, they can enter into joint ventures and strategic partnerships with local logistics and transportation companies.
W3- O5
To offer low price import services, by reducing their costs.
W-T STRATEGY:
W1-T1, 2
To decrease their prices as the competitors and the negative effect of economic recession and political uncertainty begin to acquire small local companies.
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SPACE MATRIX
FINANCIAL STRENGTH RATING ENVIRONMENTAL STABILITY RATING
Return on Investment 5 Inflation Rate -4Leverage 4 Price Elasticity of demand -3Net Income 6 Risk Involved in Business -4ROE 5 Economic Conditions -3Cash Flow 5 Barriers to entry in new markets -2
Average 5.00 Average -3.2Y-AXIS 1.8
COMPETITIVE ADVANTAGE RATING INDUSTRY STRENGTH RATING
Market Share -1 Ease of entry into market 2Product/Service Quality -2 Financial stability 5Customer Loyalty -2 Profit Potential 3
Demand Variability 3Growth Potential 3Competitive Pressures 5
Average -1.66 Average 3.5X- AXIS 1.84
Internal Strategic Dimensions: Financial Strength (FA) Competitive Advantage (CA)
External Strategic Dimensions:
Environmental Stability (ES) Industry Strength (IS)
The CA and IS values are graphed on the x-axis. CA values vary from -1 to -6. IS values vary from +1 to +6
The FS and ES dimensions are graphed on the y-axis. ES values range between -1 and -6 FS values range between +1 and +6.
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RESULTS:
An analysis of the company on the four dimensions of financial strength, environmental stability, competitive advantage, and industry position in the SPACE matrix shows that the company needs to follow an aggressive strategy.
The company has a strong competitive position in the market with an opportunity of rapid growth therefore it should utilize its internal strengths to develop a market penetration strategy to utilize the opportunities present in the environment. Their strategies can also include product development, integration or partnerships with other companies, acquiring their competitors etc. For this purpose the company can choose from the strategies developed in the TOWS matrix.
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1.84 , 1.8
THE INTERNAL- EXTERNAL (IE) MATRIX:
EFE SCORE
Strong Average Weak
4.0
High
2.84
Medium
Low
1.0
4.0 2.69 1.0 IFE SCORE
We have obtained the IE matrix by plotting the scores from the EFE matrix and the IFE matrix along y-axis and x- axis respectively.
The score for the EFE matrix is 2.84, which shows that the company has an above average ability of responding to the external factors. The total score for the IFE matrix is 2.69, which shows that the company has an above average internal strength.
The point where the horizontal line meets the vertical line is in Quadrant 5. This suggests that the company should follow a Hold and Maintain Strategy. Therefore the strategies of the company should concentrate on market penetration and product development e.g. introducing the Smart- Truck project in Pakistan and cutting costs to reduce prices.
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7. 8. 9.
HARVEST OR DIVEST
4. 5. 6.
HOLD AND MAINTAIN
1. 2. 3.
GROW AND BUILD
BCG MATRIX
DHL MAIL:
DHL Market Share =41.35 % Market Growth Rate = 0.09%
INTREPRETATION
BCG matrix indicates that in terms of mailing services DHL is placed in cash cows. It means that market growth rate is low but DHL`S market share is high so it should milk as much profits as possible. Increasing investment in supporting infrastructure can help in improving efficiency and increase cash flows for the company.
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STARS QUESTION MARKS
DHL MAIL
CASH COWS DOGS
DHL EXPRESS:
DHL Market Share = 50.2 % Market Growth Rate = 11%
INTREPRETATION An analysis of DHL Express shows that in express, DHL is a star. It means that it has high relative market share and also high market growth rate, so it should continue in express as there is tremendous potential in it. Increasing investment in Express can help DHL in further increasing its market share and profitability. They can use intensive strategies like market penetration etc. to further enhance their business.
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STARS QUESTION MARKS
EXPRESS
CASH COWS DOGS
DHL LOGISTICS:
DHL Market Share = 34.6 % Market Growth Rate = 2.43%
INTREPRETATION
BCG matrix indicates that the logistics operations are placed in question marks. It means that the rate of market growth is high and DHL`S market share is low so it should make any decision considering the market conditions. The company can invest more in its Logistics business and can also use the revenues generated by the Express Business to help out the Logistics Business.
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STARS QUESTION MARKS
DHL LOGISTICS
CASH COWS DOGS
QSPMINTRODUCE SMART TRUCK PROJECT ( NEW PRODUCT
DEVELOPMENT)
OFFER LOW PRICE IMPORT SERVICES (MARKET
PENETRATION)Key External Factors Weight Attractiveness
Scores (AS) Total Attractiveness Scores (TAS)
Attractiveness Scores (AS)
Total Attractiveness Scores (TAS)
STRENGTHS:
1 Global reach 0.11 4 0.44 3 0.302 Brand Image 0.15 4 0.60 4 0.603 Corporate Symbiosis 0.10 3 0.30 2 0.204 Technology and e-
services0.13 3 0.39 1 0.13
5 Innovators 0.15 3 0.45 3 0.45
WEAKNESSES:
1 High Prices 0.15 2 0.30 4 0.60
2 Less revenue from Import services
0.10 0 0 4 0.40
3 Weak Visibility 0.11 3 0.33 4 0.44TOTAL 1.00OPPORTUNITIES:
1 Global Expansion 0.10 4 0.40 3 0.302 Expansion of e-
commerce0.10 1 0.10 3 0.30
3 Joint ventures with local transportation companies
0.10 3 0.30 3 0.30
4 Expansion of customer Base
0.09 4 0.36 4 0.36
5 Product and services expansion
0.10 4 0.40 4 0.40
THREATS:
1 Economic Recession 0.09 3 0.27 4 0.362 Political Uncertainty 0.09 1 0.09 2 0.183 Increase in fuel
prices0.10 4 0.40 3 0.30
4 Threat of new entrants
0.06 2 0.12 3 0.18
5 Low cost competitors
0.06 1 0.06 4 0.24
6 Rules and Restrictions in foreign countries
0.11 3 0.33 3 0.33
SUM TOTAL ATTRACTIVENESS SCORE
1.00 5.64 6.37
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Attractiveness Score: 1 – Not Acceptable 2 – Possibly Acceptable 3- Probably Acceptable 4- Most Acceptable 0- Not Relevant
RESULTS:
On the basis of the strategies developed in the TOWS matrix, we chose two strategies. Either DHL can introduce its Smart- Truck project in Pakistan or it can introduce low price Import Services. From the results obtained from the QSPM matrix, we can conclude that DHL should choose the second strategy of offering low price import services in Pakistan. Because market research shows that DHL is earning lower revenues from its import services (Only about 10-15% of the total revenues). This is because of high prices, due to which, customers prefer to utilize their competitor’s services. Therefore DHL should try to lower their operation costs and to differentiate from the competition to gain a stronger competitive advantage. To do this, heavy cost driver of the operations like gas prices, government policies and restrictions etc. have to be observed. They can also create new partnerships and joint ventures with transportation and airline companies, with an aim to reduce their costs. They should also increase their advertising to increase their visibility. These steps can help DHL in increasing their market share and consolidate their status as the market leader.
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CONCLUSION AND RECOMMENDATIONS
From our analysis, using various strategic management tools and techniques, we have concluded that DHL is the market leader in courier services in Pakistan, since they have the majority market share. Therefore its strategies should aim at holding and maintaining its strong market position. Like any other company, there is always some room for improvement in every company’s performance but regardless of the tough economic and political situation in Pakistan, DHL seems to be going strong.
Using the strategies proposed in the TOWS matrix, we narrowed down the list to two strategies for the QSPM analysis, which concluded that DHL should offer low price import services in Pakistan. But the other strategy proposed in the QSPM should also be kept in mind. If DHL introduces its smart- truck project in Pakistan, it would enhance both their services and reputation, but the current market conditions are not feasible for this project. Therefore, DHL should consider introducing this project in Pakistan in a few years time. In the meantime they should concentrate on differentiating from the competition to gain a stronger competitive advantage and staying ahead of the competition.
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APPENDIX
WORKING FOR BCG MATRIX:
1) MAIL
Market Share:
DHL=12747*100= 41.35% 30825
Market Growth rate:
30825-30546*100=0.09% 30546
2) EXPRESS
Market Share:
DHL=6786 *100=50.2% 13515
Market Growth rate:
13515-12154*100= 11% 12154
2) LOGISTICS
Market Share:
DHL= 11178 *100= 34.6% 32216
Market Growth rate:
32216-31449*100= 2.43% 31449
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YEAR SALES-2009 SALES- 2010
DHL12495 12747
TOTAL 30546 30825
YEAR SALES-2009 SALES- 2010
DHL5878 6786
TOTAL 12154 13515
YEAR SALES-2009 SALES- 2010
DHL10516 11178
TOTAL 31449 32216