fedex vs dhl - report

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MME30001 Engineering Management 1 ASSIGNMENT 1: RESEARCH PROJECT FINAL REPORT Semester 1, Submission Date: May Prepared By 4315103 – Moaz Ahmed 4314700 – Khalis Afiq 4315154 – Mohamad Norazri Bin Azmi

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A subject report on the comparison between FedEx and DHL

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MME30001 Engineering Management 1

Table of ContentsEXECUTIVE SUMMARY4Team Reflection5Objectives61Background71.1FedEx71.2DHL82Environmental Factors92.1Overview92.2External Environment92.2.1DHL92.2.2FedEx112.3Internal environment133SUSTAINABILITY133.1Overview133.1.1FedEx133.1.2DHL154SOCIAL RESPONSIBILITY AND ETHICS164.1Overview164.1.1DHL174.1.2FedEx185SWOT analysis195.1SWOT analysis of FedEx195.2SWOT analysis of DHL206Porters Five Forces Analysis216.1Threat of New Entrants216.2Threat of Substitute Products and Services226.3Buyer Power determinants226.4Determinants of Supplier Power226.5Intensity of Competitive Rivalry237Challenges faced by the organisations247.1Challenges faced by DHL247.1.1Entry into the US market247.1.2Competitive edge created by additional services247.2Challenges faced by FedEx247.2.1Treatment of truck drivers of FedEx Ground247.2.2Decline in express delivery258Handling of Structured and Unstructured Problems258.1Structured and unstructured problems of DHL258.1.1Structured258.1.2Unstructured258.2Structured and unstructured problems of FedEx268.2.1Structured268.2.2Unstructured269Policies and Procedures269.1Procedures and policies adopted by DHL269.1.1Procedure269.1.2Policy279.2Policy and Procedures in FedEx279.2.1Procedure279.2.2Policy2810Decision making2910.1Wrong decisions2910.1.1FedEx2910.1.2DHL3010.2Right decisions3010.2.1FedEx3010.2.2DHL3110.3Decision characteristics3110.4Similarities and differences3211Summary3312Conclusion3413References35APPENDIX47

EXECUTIVE SUMMARYThis report is a comparison of two organisations, FedEx and DHL that operate as courier and logistics companies. The contents of the report provide a thorough and in-depth research into the workings, management style and culture of the organisations and their business models, strategies and decisions. The report is divided into sections covering various areas of each company and compares and contrasts their activities in each area.The inception of FedEx was in 1971 while DHL began its operations in 1969. A PEST analysis is performed for both the organisations to understand the environmental factors impacting each organisations business and their ability to cope with them. This is followed by a research in the efforts and contributions of the organisations towards sustainability including new environmental friendly innovations. After that is the comparison of DHL and FedExs social activities and the worldwide impacts they have and the implementation and encouragement of ethics in their internal environment. In addition, a SWOT analysis and five porters forces analysis is conducted to comprehend the external factors affecting the companies. Furthermore, the policies and procedures and the decision making style and characteristics of the two organisations are compared. Finally, a concluding comparison with a third similar business organisation is tabulated, that is between DHL and UPS and FedEx and UPS, and an overall distinction between FedEx and DHL is highlighted.

Team ReflectionThis project has thought us members to work together and collaborate as a team. It also helped us to understand each other more and identify any unique attributes we have that helped us complete this project successfully. Since we understood each others ideals, we were confident in choosing the topic DHL vs FedEx.Time management was an essential component in our project flow network. Its importance is understood all the way when working in the project. This included planning, setting up meetings for discussions and also maintaining balance in our time between other units as well. This experience has in the end helped us in learning to not only manage our time, but adapt to any emergencies should they happen, such as a member not being able to come for a meeting can request for postponing the date and it will happen.We also made proper use of technology for our communication such as Blackboard, WhatsApp and Facebook.To total it all up, everybody from the group made an equal contribution for this project. Nobody was forgotten and everybody was extremely ready to work for the task by staying up late to complete the investigations and composing of the report. The subjects of what was composed were dispersed in light of every individual's enthusiasm for it. Moreover, the colleagues saw how expansive organisations maintain the business and manage distinctive difficulties by realizing all the parts of the organisations. We composed the report to our earnest attempts and we are fulfilled by our completed work.

ObjectivesThe objectives of this research project to investigate and develop an understanding between two organisations, namely, DHL and FedEx. We examine their impact on their external and internal environment as well as the future challenges they may face. This report was written with an emphasis on detailed analysis, strengths and weaknesses, and comparison and contrasts.This report details further on the similarities and differences of the two organisations based on structure, sustainability and ethics, strategies, and management decision making style.

BackgroundFedExThe Federal Express Corporation was established in 1971 by Frederick W. Smith. The company originally was named Federal Express since the founder wanted to secure a contract with Federal Reserve Bank. Even though the bank rejected his proposal, the name was kept as he believed the name will attract a lot of peoples attention.(FedEx 2015d) The idea of creating the corporation was because of a term paper written by him during his study in Yale University, Connecticut. The paper mainly discussed on the challenges faced by the current logistics companies. There are three important highlights stated in the paper. First of all, the unsuitability of using air passenger for air freight. For that time, almost all of the logistics companies were using air passenger to deliver their customers products. He believed that the requirement of air freight is not as same as the air passenger. Second, he stated the service speed is way more important than the cost. The most important for a logistics company is to be efficient in delivering. It must consumed less time and fast. Lastly, he also highlighted the importance of accessing to small cities to provide the delivery service. However, his professor did not find that his paper interesting and only graded his paper as an average.(Advameg 2015b) In 1971, by using 4 million dollar inheritance by his father and 91 million dollar venture capital, he started his logistics firm. He bought interest in Arkansas Aviation Sales. Two years later, the firm officially began operation. The company owned 14 Dassault Falcon Aircrafts. With 389 employees, FedEx provided their service over 25 cities in America. Until early 1975, the company was having loss and slow growth rate. However, in the mid of 1975, the company managed to get profit of 43.5 million dollar in the business. By late of 1976, FedEx became one of the best and important logistics company in America. Per night, the company had to cover average of 19,000 packages. In 1983, the company wrote their name in the American business history. The company was the first American company to reach financial hallmark inside 10 years of start up without mergers or acquisitions. (FedEx 2015d)DHLThe DHL Express Corporation was established on 25 September 1969 by three individuals in San Francisco. The name of the company was taken from the initial of the three founders name. The letter D stands for Adrian Dalsey, H for Larry Hillblom and the letter L for Robert Lynn. The company begins their operation by only providing door to door delivery service. The company only deliver documents between four cities; San Francisco, Hawaii, California and Honolulu.(Ag Deutsche Post 2015)The idea of creating the corporation was because of the huge potential seen by the three founders. They believed air freight for document delivery would be very effective and efficient. That way, it will speed up the delivery process and reduce the shipping cost. Thus, with this idea, they agree to build a company that will use air courier for the delivery process. In 1970, the founders personally transported the documents from San Francisco to Honolulu by using a plane. The delivery process consumed shorter time than usual. It significantly reduce the waiting time and the custom process also can be done before the actual arrival of the shipment. The founder then decided to begin flying routes to the Far East.(Advameg 2015a)The growth rate of DHL Express was very high. It continue to develop as in early 1971, Bank of America become their primary customer. The bank need a single logistics company to deliver their important documents and letter of credits. In the mid of 1971, DHL Express started to open their branches in Pacific Rim and Philippines. The company are more focusing on the international service. (Ag Deutsche Post 2015)Until now, the company had managed to cover almost all countries in the world. In 2002, the Deutsche Post (DPWN), a German Company Group buy majority of 51% of DHL shareholder. (Advameg 2015a)

Environmental FactorsOverviewDHL and FedEx are both global courier delivery services companies. They both aim to achieve consumer satisfaction and excellence on a global scale and they thus opt for an ethnocentric attitude. However their approaches and practices towards their external and internal environments differ from each other. So a PEST (which the acronym for Political, Economic, Social and Technological) analysis will be conducted to examine the external environment and view how both companies respond to the current challenges faced.External Environment

DHLPoliticalDHL made a name for itself for its involvement in government elections and campaigns. It mainly focuses on the following political areas: Integration into regional trading alliances Liberalizing of global tradeDHL tries to integrate its operations in countries initially by abiding their laws and regulations. But sometimes if there are any barriers in between, then they are willing to go to great lengths in order to bypass it.For instance, in 2013, when DHL came to know that The United Kingdom was departing the European Union, they were worried about the coming situation of their business. Phil Couchman, UK head of DHL Express quoted, If something went dramatically wrong with the trading relationships between the UK and the EU, it would affect us and a lot of businesses. They were aware that the UK could probably change its regulations of trading which could be another hurdle for themselves and other corporations. (Bennet 2013)In 2008, DHL wanted to establish a strategic alliance with a rival company UPS in hopes of utilizing its air cargo facilities. This is because DHLs operations in the US are declining, facing losses of upto $1 billion annually. Of course this deal grabbed the attention of US lawmakers and politicians alike. They claim that the merger could bring about a huge crisis, because if achieved, would result in the closure of its cargo hub in the state of Ohio, and in turn result in job losses upwards of 10,000.(Pitzke 2008)Economic and SocialEven with the advent of the global economic crisis, DHL continues to offer its services through involvement in economic forums and provide better investment opportunities for investors and entrepreneurs alike.A study conducted by the Economist Intelligence Unit (EIU) on behalf of DHL shows that small and medium sized enterprises (SMEs) expect a substantial growth in the international market in a few years. However, they have a biased way of choosing their markets and are not willing to make investments in other regions that require attention. For example, they choose to invest in countries like China just because they see it as a gateway to global investment, whereas regions such as Africa are neglected since they assume it has no growth potential. According to Ken Allen, CEO of DHL express, DHL believes that they, as a logistics and transportation firm, can provide a critical support in overcoming infrastructural challenges and cultural barriers while saving costs in order to compete. (Bonn 2014)DHLs social influence lies in its long history of offering services to relief organisations. Using its expertise in logistics and air delivery, it has provided assistance to transport relief supplies to many affected countries around the world. It was also involved in the UNHCR relief operation by providing free storage facilities for relief supplies in Indonesia. (BusinessWire 2005)TechnologicalIt is no exception that in order for a global company like DHL to cope with the modern lifestyle, it has to improve its services through means of technology. Fortunately, DHL achieves this by adopting to a number of technological trends it assesses and researches. Key technological advents that are currently implemented include, but are not limited to:DHL SMARTSENSOR- It is a unique and secure system developed to monitor and record temperature, humidity and light data and identifies its geological location throughout the course of its shipment.(Deutsche Post DHL Group 2015a)SmartTrucks by Quintiq technology- As the name suggests, these vehicles are being used first in Germany and then later 48 other countries since they have proven to be successful in helping save money and time thanks to the dynamic route planning system designed by Quintiq.(Quintiq Inc. 2010)DHL BREAK BULK EXPRESS- Its a shipment delivery service designed to consolidate all shipments under one waybill at the origin point. That way, they can be cleared as one shipment altogether and upon arrival at their final destination facility, they get separated into individual shipments and finally make their way to their respective addresses.(Deutsche Post DHL Group 2015b)

FedExPoliticalFedEx aspires to maintain political stability and adhere to government policies and regulations as well. A way FedEx believes in an effective political participation process by making cautious political contributions that complies with reporting requirements and applicable laws. For example, FedEx does not allow its employees to rally for a candidate by using its resources and funds. Instead, they do it themselves as a whole for the beneficial of the company and its stakeholders.(FedEx 2015g)During the 2014 election cycle in the United States, FedEx was the 112th largest contributor from a pool of 16,793 contributions made. It was a major donator since 1990, and thus their influence and strong ties developed with the white House and congress members gave them unprecedented access to tax rebates and international trade.(The Center for Responsive Politics 2014)Economic and Social FedEx takes into consideration a number of factors when analysing its economic status, and they include interest rates, inflation and exchange rates. These factors are important as they have the potential to cause hardships among customers. FedEx is also more inclined to serve in densely populated areas as they provide a greater marketing platform. To further strengthen this statement, there has been recent shift of the growth narrative that reflects more towards the consumers, now that oil prices have dropped and labour market supports more purchasing power and incomes.(FedEx 2015b)FedEx places its commitment towards the services it offers to its employees and communities. FedEx is known to develop several strategic partnerships with charitable organisations that share similar values. Their services include emergency and relief support where they cater aid quickly through the use of several relief agencies established via relationships. Another service include their involvement in the field of education and hence provide programs in the field of cultural diversity, global economics and trade to enhance learning.(FedEx 2015c)

Technological FedEx has a long history in making advancements to delivery services using the latest technology. They have a very systemic approach to innovation, said JAMES (1996).Among its great contributions was the revolutionary tracking number. This system was first introduced by FedEx for customers which enabled them to track their shipments as they make their way to them and is now an industry standard in courier services.(Baldwin 2013)Also, as a part of its ongoing expansion of its alternative-energy vehicle fleet, FedEx announced its first foray of all-electric delivery trucks. They began service from 2010 starting at the US.(FedEx 2010)

Internal environmentThe companys internal environment can be assessed by analysing the various factors that constitute it. Since FedEx and DHL are both global logistics companies, both of them are known for their global operation, brand association, quality control and their nature as learning organisations. But there are some factors which introduces the difference between them. For example, DHL runs heavy marketing campaigns in order to increase their brand awareness and incur profits. However, they lack corporate trust among their workplaces. On the other hand, FedEx offer a faster and a more reliable service towards its customers and follow their ethics and moral of conduct adequately.SUSTAINABILITYOverviewSustainability is one of the most important issues currently faced by the majority of organisations. Courier services are usually concerned with the high carbon footprint generated by their various modes of transport. Another concern for courier and delivery organisations are the raw materials used in manufacturing packaging materials.FedExFedEx are committed in reducing environmental impacts and promoting sustainable practices in their organisation. Their environmental policy statement briefly explains their stance and approach to environmental issues. The main objectives of the statement are summarized below: Dedication to continuously enhance environmental management. Assessment of the influence of FedEx operations, facilities and packaging products on the environment to curtail harmful effects. Development of environmental conduct of employees through instruction, training and acknowledgement of excellence. Utilizing natural resources efficiently to decrease waste production achieved by recycling resources and innovative technology. Estimation of environmental execution by utilization of a system to set and audit goals and targets, review advancement, endorse worker responsibility and report to senior administration and outside partners. Incorporation of environmental obligations and contemplations into every day operations and business choices. Implementation of modern technology to reduce atmospheric emissions and noise generation. Acceptance and fulfilment of all applicable environmental rules and regulations. (FedEx, 2015)To achieve the goals and fulfill the policies given in the environmental policy statement FedEx initiated several projects to make the organisation more sustainable and environment friendly. FedEx initiated EarthSmart, a scheme to promote responsibility towards the environment in the FedEx organisation and to the wider public. (FedEx 2015)FedEx launched the carbon-neutral envelope shipping program in 2012 with the aim of reducing carbon footprint. Since its inception, it is estimated that about 150,000 metric tons of associated carbon has been offset. FedEx replaced its Boeing 727s with 757s which decreased fuel consumption by 47% and FedEx Fuel Sense, a program designed to inspect aircraft operations at each stage, has approximately saved about 247 million gallons of jet fuel to date. (Cleantechnica 2015) This amount is sufficient to completely occupy 374 standard swimming pools used in the Olympic Games. (FedEx 2015) Furthermore, FedEx recycled the waste produced in its facilities that significantly reduced the carbon footprint. (GreenBiz 2015)In addition, FedEx also invested in alternate energy programs and many FedEx facilities around the world are being powered using solar-cells which has saved about 7000 metric tons of annual carbon emissions and 783,520 gallons of non-renewable resources. (2degrees Community 2015)

DHLDHL tackles the problems of sustainability in similar ways as FedEx however, there are some clear distinctions in certain approaches of DHL when they deal with sustainability. The gist of the environmental policies of DHL is outlined in the following points: Environmental insurance is an essential part of the DHL corporate method. Motivation and training of employees to conduct in an environmentally friendly manner. Management and accountability of DHLs environment damaging factors that are difficult to completely remove. Methodical evaluation of environmental performance with a desire for sustained development. Observance of regional and international environmental laws. As can be read above, most of the policies are similar to the policies of FedEx. (Deutsche Post DHL 2015)The scheme of DHL that provides solutions to environmental and sustainability issues is called GoGreen. The main objectives of GoGreen are substituting inefficient vehicles with environmentally friendly vehicles, optimization of transport utilities and funding and research in renewable energy.Firstly, to ensure the reduction of carbon emission of their vehicles DHL opted to use alternative fuels rather than conventional fuels. The alternative fuels tested and used by DHL are ACP Evolution Diesel, BioDME and Perstorps RME. Electric powered cars and bicycles were also introduced by DHL into their mail delivering fleets. (Chemrec 2015)DHL initiated a service called the Green tons, which were deliveries made by trucks consuming renewable fuel at the cost of a small fee. (Chemrec 2015) Similarly, go green product is another service that charges an extra fee which is used to offset the carbon emission by using the extra money to plant trees and invest in other sustainability programs. (Sustainable Ink 2015)Furthermore, the design of the vehicles was altered to make them more sustainable. Tires and engine designs were modified and the body of the vehicle made more aerodynamic to improve vehicle efficiency. A double decker system was introduced to manage space efficiently increasing the amount of deliveries that each cargo could carry. (Chemrec 2015) In Europe, 25% of DHL facilities are powered using renewable energy while in USA energy saving lightings have been implemented decreasing waste energy. (Sustainable Ink 2015)Majority of the DHL group carbon emission can be attributed to subcontractors. To promote environmental responsibility to the subcontractors DHL organises and funds awareness programs. (Chemrec 2015)SOCIAL RESPONSIBILITY AND ETHICSOverviewBy definition, social responsibility is a term in which any entity, whether a person, corporation or otherwise, is expected to perform and complete their obligations to the society at large. Corporate social responsibility, abbreviated CSR, is defined as the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large" by Lord Holme and Richard Watts in The World Business Council for Sustainable Development's publication 'Making Good Business Sense'. Basically, a corporation has the responsibility to perform its stated objectives and functions to the benefit of society without infringing any of its stated values and ethics. As companies, DHL and FedEx are obliged to be bound by corporate ethics. In definition, it means that they need to follow business conduct applicable with established ethics and applies to all aspects of business conducts, as well as on an individual level. Ethics are the rules or standards that govern our decisions on a daily basis and standards of professional conduct expected of all in the field. As courier services, DHL and FedEx have an obligation to the public to deliver packages around the world and in the shortest time possible. They were obligated to pick up, send and deliver whatever packages that their customers trusted them with, while at the same time, abide by the law and regulations of their respective governments. Both companies have the obligation to fulfill their functions according to their claims and slogans; FedExs slogans, for example, are We Live to Deliver and The World on Time (2008 present), while DHL claims to be the worlds largest logistics service provider.DHLFor their part in the practice of Corporate Social Responsibility, both companies place humanitarian and environmental issues as their main focus. DHL, for example, has the motto, Living Responsibility for their CSR slogan. They have, according to their website, programs such as GoHelp (disaster management) and GoTeach (education). (Deutsche Post DHL, 2015) GoHelp GoHelp is DHLs disaster management program in which, in partnership with the United Nations, DHL utilizes their logistic expertise and global network to support global relief efforts. Programs under GoHelp include Get Airports Ready for Disaster (GARD), in which DHL, according to their website, help prepare airport personnel and disaster management agencies for the logistics challenges associated with disaster relief efforts. Also, among other things, DHL supports on-site logistics support in airports to ensure disaster relief efforts go smoothly. (Deutsche Post DHL, 2015)GoTeachGoTeach is DHLs program to improve educational opportunity for young people and prepare them for the working world. According to DHLs website, the long-term success, sustainability and innovative power of our economy and society depends on a strong educational system and targeted efforts to develop the next generation of working professionals. Simply put, DHL supports efforts for education worldwide. To do this, DHL partnered with two educational NGOs, Teach for All and SOS Childrens Villages. DHL aims to help children and youth around the world, regardless of background, to developtheir potential, learn skills and access new opportunities for their career development. (Deutsche Post DHL, 2015)

FedExFedEx also has CSR programs similar to DHL, in which FedEx also focuses on environmental issues, disaster relief and philanthropy. Environmental ProgramsOn environmental efforts, FedEx focuses on sustainability by introducing their carbon-neutral envelope shipping program, in which they, according to their website, shipped more than 300 million envelopes and invested in projects calculated to offset the associated carbon more than 150,000 metric tons. They have also engaged in fuel-saving measures through their team, FedEx Fuel Sense, in which they have saved 247 million gallons of jet fuel, enough to fill 374 Olympic-size swimming pools. (FedEx, 2015)Disaster ReliefLike DHL, FedEx engages in disaster relief programs by utilizing their network to deploy our resources and logistics expertise to aid stricken areas. FedEx utilizes its team members to distribute relief supplies to communities in need, as well as to provide financial support to disaster relief organizations. They work with a number of relief organizations to coordinate their efforts, including the American Red Cross, Direct Relief, Interaction, and The Salvation Army. Besides that, FedEx helps to support preparedness initiatives and long-term recovery efforts. (FedEx, 2015)Road SafetyAnother part of FedExs CSR program is road safety, an issue they take seriously as more than 90,000 FedEx trucks (are) on the road. FedEx is actively involved in road safety initiatives around the world such as Safe Kids Worldwide, EMBARQ and UN road safety programs. FedEx also supports the UN Decade of Action for Road Safety in its goal to save five million lives by 2020. (FedEx, 2015)As two of the biggest courier and logistics companies in the world, DHL and FedEx have a responsibility to the society in general to contribute to its betterment and to improve conditions around the world. SWOT analysisSWOT analysis of FedExStrengthWeakness

Large scale operations. According to 2014 annual report, the company has built new hubs, made strategic acquisition and enhanced services in the foreign countries. Strong brand name, FedEx is known as the largest logistic/transportation company in the world Efficient transportation segment as the company had decided to add 1900 new light weight vehicles and replace 4000 vehicles in fleet Strong revenue growth. In the year of 2014, the FedEx revenue and earnings has increased due to proficient transportation segment and service (FedEx Annual Report 2014). Service expanding in high-growth countries. currently, FedEx has been investing in growing countries including FY14 countries Concentrating on giving excellent customer care. The main priority of the company is the customer. They need to provide first-rate service to the people in order to gain profit.

Expensive cost in air freight businessand in 2013, this had caused them to experienced 31% of loss Weak forecasting, in 2012, the company shares fell by 3.1%. The loss impacted FedEx severely as the deceleration of global economy was faster than what FedEx predicted High dependency on U.S, FedEx depends on America market to gain income (71.5% of company revenue contribute by America ) FedEx operating margin is only at 5.75%, this caused the cost management of the company to be very weak and having slow company annual growth

OpportunityThreat

Cost-cutting approaches. In order to minimize the fuel cost, FedEx plans to replace their Boeing 727s with Boeing 757s which is more fuel efficient Aggressive growth strategy. For example, FedEx will created schedule according to the manufacturer need. It shows FedEx is flexible and prioritizing the customer need. Alliancing with foreign company. This will bring great opportunity for both companies to expand their market and sales. New e-commerce strategy. Under this strategy, the retailers are planning to use their own delivery vehicles to ship the packages to their customers. Strong competition, this threat will cause most of the logistic companies to be involves in price war. Local Shipper Company. The local shipper have advantage as they have the trust of the locals and get full support from the local government.

SWOT analysis of DHLStrengthWeakness

Fully benefit on the advantages of technology. This can be seen by the various eService provided by DHL. The customer are able to get high control of the process by this electronic services Established a long time ago and have strong brand name, DHL owned by the German Post and known as the third largest logistic company in the world. Innovative and provide smart service. In the year of 2009, the company managed to make a new unit called DHL Solution and Innovation. This unit will help customers in solving the customer problems Large customer base. DHL revealed that they had approximately 8 million customers and the annual shipments of their company is about 850 million. Good public image. For example, the company had replaced almost all of their aircrafts with more environmental-friendly aircrafts.

Lack of liability insurance, for any loss or defectiveness of the shipping packages, the company will be not fully responsible and this might cause loss to their customers Inadequate of promotion and advertisement. Compared to other logistic companies such as FedEx and UPS, the companies are commonly seen in the television advertisements and even in some football teams.

OpportunityThreat

Providing E-commerce service, this will increases the potential customers of DHL Making Strategic Alliances with other foreign companies. DHL made a partnership with China. Due to this alliance, DHL is known as the largest logistic company in China. Developing the company internet service and introducing electronic communication devices. The company want to use business computerization in their company management in the future.

Strong competition, this threat will cause most of the logistic companies to be involves in price war. Local Shipper Company. The local shipper have advantage as they have the trust of the locals and get full support from the local government.

Porters Five Forces AnalysisPorters Five Forces Analysis is a framework used to analyse the level of competition in an industry based on five parameters. It was established by Michael E. Porter from Harvard University and draws upon industrial organization economics to derive a set of five separate forces that determine the intensity of competition within an industry and, therefore, the attractiveness of said industry. In this report, the Five Forces Analysis is used to gauge the level of competition faced by both DHL and FedEx, and the strategies utilized by both companies, based on the five parameters: Threats posed by new organisations Danger of alternative products or features Determinants of buyer power Determinants of supplier power Competitive aggression and rivalry Threat of New EntrantsFedEx and DHL, as well as other established brands like UPS and TNT, are well established names in the global courier and logistics management service. Realistically, threat of new entrants in this business is low, due to factors such as capital requirements and barriers to entry. In terms of capital requirements, both DHL and FedEx have the advantage in global services that require a vast network of ships and aircraft carriers, as well as ground transportation vehicles. FedEx, for example, had an assets total of USD33.567 billion in 2013, while Deutsche Post AG, DHLs parent company and the worlds largest courier company, had an assets total of 38.40 billion in 2011. New entrants will have to work very hard to match the two companies, especially in competing with their brand name, established around the world and has millions of customers globally. (Amsler 2010)Another reason why threat of new entrants is low for both companies is barriers to entry, namely in terms of regulations by local governments. In the case for the United States, new entrants will first have to deal with the Federal Aviation Administration for air routes and landing rights. Even UPS and DHL had difficulties in competing with FedEx in the United States, despite being major brand names themselves.Threat of Substitute Products and ServicesFor major courier service providers such as FedEx and DHL, threat of substitute services are realistically low and of no major concern. Despite the advent of electronic documents and e-mail, certain documents still need to be delivered in hard copy to its intended recipient. Besides that, the advent of online shopping and delivery necessitated the services of these companies. Customers have no other means of delivering products to faraway places, other than relying on shipping, which is the essential service provided by both FedEx and DHL. Buyer Power determinantsAs global courier services, DHL and FedEx have large numbers of customers, including individual customers and other companies of different industries who rely on courier companies to get their products around. Some agencies even have courier contracts with either company. However, due to both companies offering essentially the same service, which is delivery and logistics management, there is strong tendency for customers to switch from one to the other, or even to other courier companies, mainly UPS. Especially with large companies in need of shipping their products to other places, there is need for competition between FedEx and DHL to serve these companies, and usually they compete in price and discounts for bulk shipping.Determinants of Supplier PowerThis is fairly complex to analyse, considering these companies customers can also be their suppliers, being courier services. In fact, as FedEx and DHL are responsible for shipping products of other companies, they are also partly responsible for determining the final price of the product, as well as affecting the price of supplies, such as packaging material and others. Ultimately, supplier power is fairly low for both FedEx and DHL, since they have the power to change suppliers if the competitor has a better price. For instance, FedExs fuel supplier has bargaining power over FedEx, but FedEx can offset their vulnerability with future contracts or fuel surcharges. However, FedEx and DHLs most powerful suppliers are aviation agencies around the world, which has the power to grant or restrict both companies access to their respective countries airspace, aviation routes and landing rights. If airspace access is denied to either company, FedEx and DHL may have to resort to sea shipping and ground transport, or their customer will have to choose another courier company, like UPS.Intensity of Competitive RivalryAs providers of shipping services, competition between FedEx and DHL, as well as UPS, is very high. Prices are low for both services, and the cost of switching services to either company is very low as well. There is need for continuous improvement in service quality, prices and innovation. However, in the United States, DHL exited the industry a few years back, leaving FedEx and UPS to be in competition. Aside from each other and UPS, FedEx and DHL face competition with smaller courier services and express delivery services in local area, and this leads to fierce competition for dominance.

Challenges faced by the organisationsChallenges faced by DHLEntry into the US marketDHL decided to enter the US market and offer domestic delivery services as part of its expansion plans to offer delivery services to over 200 countries. Its decision to withdraw from the market marked a major strategic reversal by the German postal Giant. Its ambitious expansion drive began in 2003 when it acquired domestic airliner Airborne Inc. for $1.05 billion and merged it with DHL. Despite the fact that it maintained leadership positions Europe, shares in market share in the US remained below 10% thanks to its competitors. After investing and losing billions of dollars over the past five years, DHL decided to cut down operating costs by shutting down ground hubs and lay off jobs. (Esterl 2008)Competitive edge created by additional servicesResearch by DHL has shown that competing courier companies are trying to attract market share by developing new value-added services in a bid to attract more customers and tapping new markets. It is observed that business customers are interested in integrated services provided from a single source. Extra services provided such as obtaining shipment information via text message and department delivery are additional trends in the courier sector. Simultaneously, the line between transport services and contract logistics is blurring.(DHL 2008)Challenges faced by FedExTreatment of truck drivers of FedEx GroundFedEx employed strict standards on truck drivers regarding their duties such as delivery times, truck maintenance, drivers grooming and punctual handing of paperwork. And since the companies introduction of its FedEx ground service, the companys treatment of its truck drivers reflect those of contractors, and not as employees. As a result, FedEx was subjected to several lawsuits against them which highlighted their treatment of drivers, such as deducting utility costs such as truck washing, uniform clothes and log shipment scanners from their wages, and manipulating their operating agreements so they could be labelled as independent contractors and avoid supplementary costs associated with employees.(Eidelson 2014) Decline in express deliveryAnother major problem faced by FedEx in general is the declining need for its core business: express delivery. This is because according to analyst Logan Purk, Freight is moving, but customers and shippers are trading down. Businesses arent paying for two days express shipping as much and are willing to put their goods in a boat and wait two weeks instead to cross the Pacific. A lot of consumers are in belt-tightening mode and dont want to pay for express. So as part of an effort to improve profitability and reduce costs, FedEx decided to retire some of its older aircraft fleet and decrease services to Asia.(Mouawad 2013)Handling of Structured and Unstructured ProblemsStructured and unstructured problems of DHLStructuredDHL operates with a code of conduct which binds all its regions and divisions and is to be followed by all employees in order to avoid mishaps from occurring (Deutsche Post DHL 2006). Disciplinary action would be taken if an employee is caught violating the code. For example, if an employee was caught in the act of money laundering, which is strictly illegal, then in worst case scenario, he/she will be discharged. UnstructuredAs an organisation specialized in the logistics business with a repetitive work practice, DHL figures out how to far off itself from a great deal of unstructured issues. But in any case, no organisation on the planet can free themselves totally of them. For example, after DHLs acquisition of Airbornes ground shipping operations, the company decided to outsource from Airbornes IT assets and decided to merge it with its own. This caused complexity among IT firms as they were forced to learn and understand each others IT systems and business practices.(Whiting 2006)Structured and unstructured problems of FedExStructuredFedEx also follows its own set of rules with integrity and reliability. Every FedEx director, employee and officer are to comply with the code of business conduct and ethics set for them in order to maintain healthy working environment (FedEx 2015f). Henceforth, workers are to avoid all types of practices that could jeopardize FedEx and its staff; this includes using the companys sources for illegal gain.UnstructuredDue to the problems faced in the economy around Europe and Asia, FedEx continues to face fuel problems. Managing director of FedEx Express Richard Smith quoted, With the slowdown of world trade, economic problems in Europe and Asia, and the U.S. low economic growth, FedEx's bottom line continues to be threatened.This obliged the company to resort to improve fuel efficiency by increasing the number of alternative vehicle fleet, using of natural gas-fuelled trucks. (Xinhua 2013)Policies and ProceduresBelow are some of the examples of what DHL and FedEx refer to as a policy or a procedure in regard to delivery of packages.Procedures and policies adopted by DHLProcedure Pick Up - DHL e-commerce goes to your business and picks up your domestic and international shipments. We ensure flexibility to our customers regarding pick up times. Transport to Distribution Center We bring your items to one of our state-of-the-art distribution centres located throughout North America. Processing - Inside our highly automated distribution center, advanced processing technology helps ensure fast, accurate delivery. Sophisticated sorting enables us to bypass many postal facilities before inserting your items into the postal stream. Network - We expedite your materials through our global network, bringing them as close as possible to their destination before transferring them to local postal authorities for final delivery. Delivery - As a USPS Workshare partner, we rely on their local carriers in order to deliver your domestic shipments with the rest of the mail. Other dependable postal partners abroad handle final delivery of your international shipments. Online Shipping Tools - Throughout the delivery process, our online tools keep you informed, helping you monitor your shipments and manage your shipping program.(DHL eCommerce 2010) PolicyHere are some of the key policies they follow in order to ensure a smooth procedure (Deutsche Post AG 2015): Business Ethics Policy Privacy Policy for International Data Transfers Environmental PolicyPolicy and Procedures in FedExProcedure Pickup - Based on your average daily shipping volume, we offer a customized solution to get your packages from your facility to our high-tech distribution facilities for same-day sorting. Scanning and sorting - Scanners read package bar codes and cross-check them against merchant manifests. Packages are weighed, measured and logged into our data-collection system. This system assigns thousands of packages an hour to the proper destination ZIP codes, and fully automated tilt-tray sorters carry them to the appropriate chutes for loading. Zone skipping - Tractor-trailers carry packages to entry points deep in the postal system, thereby skipping several postal processing centres along the way, which results in reduced transit time, minimized handling and maximized postal discounts. Throughout the delivery process, we utilize our technology to provide shipment visibility of your packages while they are en route to their destinations. Delivery - The USPS completes in-home delivery to your customers addresses, P.O. boxes, or military APO and FPO destinations. Web-Based Tools - A suite of tools on fedex.com provides 24/7 access to package information, shipment-status tracking, logistics analysis, billing statements and report creation, enabling you to run your business more effectively and efficiently. (FedEx 2015e)PolicyBelow are some of the main policies adopted by FedEx for its delivery services (FedEx 2015a): Money-Back Guarantee Policy In the case of outgoing express packages and envelopes to be shipped, FedEx may be contacted directly Shippers will be quoted FedEx Retail Rates for shipments originating in the U.S. that are paid for by cash, check, debit or credit card instead of being charged to a valid FedEx account

Decision makingThe decision making style of both the organisations leans more towards rational than intuitive as the prevalent decision making criteria is logic.Wrong decisionsEvery company is prone to making ill judgements and wrong decisions every once in a while. The companies that identify their wrong decisions and endeavour to rectify their mistakes are more successful in the long-term.FedExThe decision of FedEx to consider their drivers as contractors instead of employees can be labelled as a wrong decision. The motive behind the decision was to prevent the drivers from becoming eligible for overtime, medical insurance, social security and unemployment insurance. (msnbc 2014)The decision was not popular with the van drivers and many decided to sue FedEx. Initially, the cases were won by FedEx however, recently the courts have started issuing verdicts in favour of the drivers. Reggie Gray, a driver for the FedEx Ground division sued the company for categorizing him as a contractor instead of an employee. He bought a van and a delivery route for a total of $22,000 after which he bought another van on the insistence of FedEx for $11,000 and employed another driver as there were more packages and objects to be transported on that route. In addition, the costs of FedEx uniform, software, hardware and the servicing and repairing of the vans were covered by Grays personal finances. Then FedEx charged him a hefty fine for misplacing a package worth $400 which caused him to go bankrupt after which he sued FedEx for labelling him as a contractor yet treating him as an employee. Gray won the court battle and FedEx had to pay about $90,000 in damages. (Rooney 2014)

DHLDHLs decision to increase its business in the US and to confront rivals UPS and FedEx directly was an incorrect decision based on the results produced.DHL acquired the rights to Airborne Express to grow its domestic market share in the US and financed a huge improvement project to transfer larger amounts of packages. This was followed by a dynamic marketing scheme to advertise itself as a rival to UPS and FedEx in the US and to quickly establish itself as a viable contender to them. DHL also lowered service charges to compete with its rivals.Unfortunately, the output was really low compared to the expected results. In fact, the results were so abysmal that DHL then took the decision to completely pull out of the domestic US market. The complete withdrawal from the domestic market cost DHL about $9.5 billion and about 15,000 DHL employees lost their job. DHL now only operates international shipments in the US and has completely left the domestic business. (bloomberg.com 2015)Right decisionsFedExFedEx made a decision to start charging for packages using dimensional charges instead of charging based on the weight of the package in 2014. The packages would be charged based on their length, breadth and width. The decision was made to improve revenues made from bulky yet light packages. These packages weighed less so fetched less profit while simultaneously covering large volumes in trucks and vehicles restricting space for other objects. Another example of a good decision made by FedEx is to improve the delivery on time rates for the holiday season. This decision helped FedEx earn more revenue from packages delivered during the holidays. The shipping routes are busier and people want their packages to be delivered on time before the holidays begin which is what FedEx achieved by its decision to concentrate more on shipments for special occasions. (Team 2015)

DHLDHLs decision to build a Business Intelligence System in collaboration with SDG Consulting enabled it to evaluate the resources required in each aviation operation and to distribute it accordingly. This decision increased the efficiency of analysing operations and decreased the duration of investigations. It also allowed DHL to make riskier business decisions for more growth and increased profit. (SDG 2015)Decision characteristicsThe above cases feature characteristics that are common and specific to each type of decision, either right or wrong. The decision making characteristics that are specific to each type of decision can be distinguished from each other. The characteristics are highlighted below:FedEx

Right decisionsWrong decisions

Decision making does not suffer from making biases and errors Employing drivers as contractors which is characteristic of decisions to reduce costs

Sustainability is the driving force for innovation Choosing the wrong alternative of keeping the decision of employing drivers as contractors instead of rectifying the decision mistake

DHL

Right decisionsWrong decisions

In-depth analysis of decision criteria during the inception of the organisation Weight allocation of criteria suffers from decision making biases and errors

Customers are the first priority Underestimating competition during the establishment in US

No evaluation of the decision of having an aggressive marketing strategy

Similarities and differencesDHL and FedEx both have similarities and differences in their priorities and in the way they operate, expand, and do business. However, to understand their business strategies and plans in a broader context it is useful to compare them to an organisation of the same type. For the comparison UPS is chosen as it is another similar organisation that holds a major global market share in the courier industry.FedEx vs UPS

SimilaritiesDifferences

Both organisations hold the majority share in the US domestic market FedEx owns more vehicles that use renewable fuels and have more sustainable practices and services

UPS and FedEx both have excellent customer service UPS owns the largest fleet of ground vehicles

FedEx strategy is aggressive growth while strategy of UPS is stable growth

FedEx provides faster delivery times while UPS has the higher delivery on time rate (Roggio 2015)

DHL vs UPS

SimilaritiesDifferences

UPS and DHL both have a geocentric approach DHL has larger global market share and transports to more countries

DHL focuses on growth strategy while UPS focuses on stability internationally

UPS has a better tracking system than DHL

DHL is more expensive compared to UPS (helpme.com 2015)

Summary

Similarities

FedEx and DHL

Both organisations have policies that prioritize customers, work ethic, strong cultures and sustainability Sustainability approach is to utilize renewable fuels and reduce carbon footprint in transportation and package material Socially responsive Threat of new competitors is low while e-commerce is an opportunity Ethics and a strong culture is promoted within the organisations Both organisations have similar stakeholders Use of latest technology to make work and business at home an attractive option and to ease the tracking of shipments

Differences

FedExDHL

Primarily based in US from where the majority revenue is earned The main challenge faced is the treatment of drivers Brand name is a huge strength Primary strategy is focused on stability Initiated programs such as EarthSmart (Sustainability) and CSR (Disaster relief and road safety) Worldwide organisation with revenues earned globally The main challenge faced is entry into US market The main strength is reliability and experience Primary strategy is growth Initiated programs such as GoGreen (Sustainability), GoHelp (Disaster relief) and Go Teach (Education)

ConclusionFedEx and DHL are the leading brands in the shipping and logistics industry worldwide. However, they both face stiff competition from UPS which is another leading brand. Together, these three companies lead the world shipping and courier industry. The threat of new entrants for both the organizations is minimal so they concentrate more on triumphing over each other. This results in an intense rivalry which is reflected in their marketing and advertisement strategy.The reach and impact of DHL worldwide is more compared to FedEx which mainly operates and generates revenue in the United States. Both organizations share a strong organizational culture with heavy emphasis on ethics. It is difficult to classify such large organizations however it can be concluded that FedEx has an ethnocentric approach while DHL adopts a geocentric approachOverall, DHL is more expensive and reliable compared to FedEx but FedEx outmatches in customer relations and sustainability solutions.

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