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Strategic Management Presentation on

DHL Express

Ashok Amipara 09003Vikram Dutt 09009Vimal Boda 09018Mehul Dhamsaniya 09025Salim Dodhiya 09027Hiten Mandaviya 09058

By group 7:

Tolani Institute of Management Studies 2

AIR EXPRESS INDUSTRY

• Movement of documents and parcels by air.• Air express industry offered two main products:

document delivery and parcel delivery• 75% Parcels(WPX)• 25% Documents(DOX)• The industry is growing at 6% per annum• Operations in domestic and international

market


Main features of the industry

• Speed of service.• Door – to – door delivery.• Proof of delivery.• Tracking system.• Security & reliability.• Global network.


Air Express Industry In India

• Started In 1979.• Growth rate – 13% (Approximately)• Major Players:– DHL– Blue Dart– Elbee– First Flight– Overnite Express– Speed Post


About DHL Express.

• DHL Express is a division of Deutsche Post providing international express mail services.

• Originally founded in 1969 to deliver documents between San Francisco and Honolulu.

• The company expanded its service throughout the world by the late 1970s.


Cont..

• In 1998, Deutsche Post began to acquire shares in DHL, finally they achieved majority in ownership and completed the purchase in 2002.

• Today, DHL Express shares DHL brand with other Deutsche Post business units such as DHL Global Forwarding and DHL Exel Supply Chain.


Entry of DHL Express in India

• DHL Express collaborated with AFL (Air Freight Ltd.) to enter in Indian market.

• Before Collaboration AFL was in the business of transportation of goods through maritime cargo and surface logistics.

• DHL India is a centralised unit.• The management of this unit is in the hands of

AFL.


Vision & Mission

• Vision:– “To be the acknowledged leader in providing

world class integrated logistic solution”

• Mission:– “To provide organization and individuals the best

value in “ integrated logistics” though a global network, innovative use of technology and caring people”


Evaluation of vision and mission

• DHL India is among top air express service provider.

• DHL India had installed a sophisticated IT network to provide customers quick information and other services.

• All the strategies are based on providing the best value to customers.


Case Background

• The case is providing the overview of the Air Express Industry.

• Data is provided from the year 1991 to 1997.• Comparisons between different Air Express

service providers but mainly focused on DHL India.


Cont….

• Major issues faced by DHL India at that time.– How to run the two segments of business namely

domestic and international?– What should be the response to the recent moves

of competitors?– What should be the future relationship between

AFL & DHL Worldwide Express.


INDUSTRY ANALYSIS

1. ETOP Analysis2. Potter’s 5 forces analysis3. Major competitors analysis4. Key success factors


1. Environment Threat and

Opportunity Profile (ETOP)

14

Environmental sectors Nature of impact Impact of each sector

Economic ↑ Bank ,telecom, IT are growing.

Market → Speed is only key to success which required huge investment.

International ↓ Threats from global players.

Politics ↑ The industry is very big so the political attention is very high.

Regulatory ↓ Rules and regulation of export and import, strict rules of air ways.

Social ↑ Trends of society is changing and everyone is transacting globally.

Supplier ↑ Accurate timing followed by the Air line industry.

Technology ↑ Technology increases the efficiency of the service.


Analysis of ETOP• Here, unfavorable impact of the industry are on

Regulatory and International sectors.• Other impacts are almost favorable to the

industry.• The major threat is entry of global players.• To remove this threat, the better strategies are:– Long term contracts with corporate customers.– Collaborate with competitors to capture enough

market share.


2. Porter’s 5 forces Analysis

• Face of competition: High• Threat of substitutes: Low• Threat of new entry: Low• Bargaining power of buyers: Low• Bargaining power of suppliers: Medium

Here, most of the forces are low, which indicates that the industry is very attractive and having good opportunities.


3. Competitors analysis

– Blue Dart, Elbee, First Flight, Overnite Express, Speed Post, Fedex are the major competitors of DHL India.

– Most of the competitors are concentrating on domestic and non document market because of higher growth rate.

– Competitors are investing in fixed costs (transportation vehicles), so they are having the benefit of economies of scale.


4. Key Success Factors

• Global reach. • High Speed in providing services.• Using advanced technology (IT Network, Tracking

software).• Maintaining Customer data – base. • Maintaining Personal relations with corporate

customers.• Use of marketing communication tools(Direct mail).• Safety of couriers.


Overall Attractiveness of the Industry


• ETOP: • Most of the Impacts are favorable and other

unfavorable impact can be minimized by adopting the beneficial strategies.

• Porter’s 5 Forces:• Most of the forces are favorable and threat of

competitors can be removed by providing the better services to the customers.

• Competitors Analysis: • Most of the competitors have benefits of economies

of scale.


• Key Success Factors:• Key success factors can be achieved by huge

investment.

Overall, the industry is having good opportunities and it is also very attractive in terms of long term returns.


COMPANY ANALYSIS

1. SWOT Analysis2. Value Chain Analysis3. Financial Statement Analysis


SWOT Analysis


Strength

• On time delivery. • Effective Communication System.• Loyal customers(Philips, Motorola).• Market Share leadership(DOX).• Strong Brand Equity.• Use of updated technology.• Low fixed cost.


Weakness

• Higher dependency on airlines.• Low investment on transport vehicles(No

benefits of economies of scale)• High prices.• Not able to capture enough market share in

domestic (Parcel) market.


Opportunities

• Emerging new market.• Product and service expansion.• Takeovers small units of unorganized sector to

capture domestic market.• Increase in global shopping.


Threats

• Upcoming private competitors.• External Changes(government, policies, tax).• Price Wars.• Decrease in traditional services (Letters) due

to electronic communication(email).


2. Value Chain Analysis

Inbound Logistics

Operations

Outbound logistics Service Profit

MarginSales and marketing

Product R&D, Technology, Systems Development

Human Resources Management

General Administration

SupportActivities

Primary Activities


Financial Statement Analysis


Investment ReturnCapital Market ratios: EPS: PAT/No of Equity shares.

DHL BLUE DART ELBEE

EPS 2006-07 36.38 10.05 17.85

EPS 2007-08 38.67 14.60 10.82

More EPS is beneficial for the shareholder, here DHL is giving good return compare to others, It shows the profitability of the DHL is strong than the others.

Source: www.DHL.co.in, www.bluedart.co.in, www.elbee.co.in

http://www.dhl.co.in/

http://www.bluedart.co.in/


Financial strength Liquidity ratio: Current ratio: Current assets/Current Liabilities

DHL BLUE DART ELBEE

2006-07 1.95 4.46 6.69

2007-08 2.53 2.74 2.48

Ability of the firm to meet its current liability, Higher the current ratio the greater the short term solvency. Here ,DHL was not in good position as compared to others so it was needed to improve. Source: www.DHL.co.in, www.bluedart.co.in, www.elbee.co.in




Solvency Ratio: Debt-Equity Ratio: Debt/Equity

DHL BLUE DART ELBEE

2006-07 1.27 1.06 2.8

2007-08 0.92 1.45 1.37

The lower the debt-equity the higher the degree of protection enjoy by the creditors, Here the DHL position is better than the others.





Debt-Assets:

DHL BLUE DART ELBEE

2006-07 0.39 0.39 0.26

2007-08 0.32 0.34 0.39

This ratio measure the extent to which borrowed funds support the firm’s Assets, here all company had similar position in 2007 - 08.





Interest coverage Ratio : PBIT/INTEREST

DHL BLUE DART ELBEE

2006-07 5.71 9.925 6.126

2007-08 12.152 14.112 4.1247

Ability of firm to pay its interest burden, high interest ratio means company can easily meet its interest burden, DHL was not in good position in 2006-07 but profit increased and company paid the debt which increased the interest coverage ratio in 2007-08. It was better than ELBEE but similar to BLUE DART.





Management performance Profitability Ratios: Gross Margin: PBIT/Sales

DHL BLUE DART ELBEE

2006-07 0.118 0.104 0.099

2007-08 0.168 0.103 0.110

Its shows the margin left after meeting manufacturing costs, it measures the efficiency of production as well as pricing, here all over industry cost is high so all over Gross profit margin are lower for all companies.





Net Profit Margin: PAT/ Sales

DHL BLUE DART ELBEE

2006-07 0.086 0.097 0.126

2007-08 0.090 0.108 0.131

It indicates the over all efficiency of the production, administration, selling, financing, pricing and tax management, here over all company profit margin was lower compare to other industry.





Return on Asset: PAT/Average total assets

DHL BLUE DART ELBEE2006-07 0.1198 0.104 0.1176

2007-08 0.144 0.153 0.150

It indicated the return on assets, how much return on equity and preference holder were getting from contribution of all investors from all the assets. Here, all the companies had similar ratio.





Return On Equity: Equity earnings/Average Equity

DHL BLUE DART ELBEE

2006-07 0.371 0.157 0.207

2007-08 0.447 0.230 0.263

A measure of great interest to equity shareholder, here the DHL had high Return on equity ratio than the others ,so it was good for existing investors and for the new investors than the other air express companies.





Return on Capital: PBIT(1-Tax)/A total Assets.

DHL BLUE DART ELBEE

2006-07 13% _ _

2007-08 15% _ _

Generally return on capital employed should be greater than cost of capital, here DHL had more than 12% so that may beat the cost of capital.





Assets Turnover: Net Sales/Average total Assets DHL BLUE DART ELBEE

2006-07 1.32 1.062 0.9328

2007-08 1.66 1.408 1.133

Asset turnover ratios refer to the efficiency of assets , high ratio indicates that the high degree of efficiency In asset utilization, here DHL company had high efficiency than others. Source: www.DHL.co.in, www.bluedart.co.in, www.elbee.co.in




Financial strength

• Growth of AFL.

Growth of the Airfreight ltd has been increasing every year in term of turnover (18% to 30%), net worth (20% to 60%) and number of employees(10% to 15%).


• Growth of AFL in terms of Turnover and Revenue

Growth in turnover and revenue of its divisions have been increasing i.e. 15% to 25% every years. It indicates the healthy growth of the company.


• Growth of DHL India.

DHL India has been steadily increasing in Indian market in terms of revenue (35% every year), customer(25% to 35%), IT investment(25% to 45%), and No. of express centers(15% to 30%).so Its shows that huge potential market in air express industries.

BCG Matrix

Market growth rate

Relative market share

DHL India (DOX) DHL India (WPX)


Analysis of BCG Matrix

Basic strategic rules:• STAR (High relative market share, High growth):

Maintaining relative market shareKeeping sufficient funds available

• QUESTION MARK (Low relative market share, High growth)

Increase relative market shareReleasing Funds available.


STRATEGIC ISSUES


1. How to run the two segments of business namely domestic and international?

• DHL India is leader in international segment.• The market share in domestic segment is low.• DHL India should do Promotion to capture

domestic market.• It should acquire small local courier

companies.• They should go for low price strategies to

attract the domestic market.


2. What should be the response to the recent moves by the competitors?

• Competitors are focusing on non document segment.

• DHL India should also target non document segment and offer better services at cheaper rate.


3. What should be the future relationship between AFL & DHL Worldwide Express.

• AFL should adopt the technology and information system of DHL Worldwide Express.

• DHL India is among the top three Air Express service provider in India, So they should continue their relationship.

• They can also diversify into other online services.


CONCLUSION

• Strong Supply Chain is the major factor to sustain in the market.

• Corporate customers mainly focus on “On time delivery”

• As per the Porter’s 5 forces model the industry is attractive.

• As per ETOP most environmental factors are favorable to the industry.


THANK YOU

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