Table of Contents

Abstract......................................................................................................................................... 2

1.0 Introduction........................................................................................................................2

2.0 Environmental Analysis.......................................................................................................3

3.0 Industry Analysis.................................................................................................................7

4.0 Courier Industry Strategic Mapping..................................................................................13

5.0 Analysis.............................................................................................................................16

Figure 1: PESTEL model..................................................................................................................4

Figure 2: Porters 5 Forces..............................................................................................................8

Figure 3: Courier Industries Strategic Mapping...........................................................................13

Figure 4: Factors Impact on the industry.....................................................................................16

Abstract

The objective of the following report is to undertake an in-depth study which takes into

consideration the various factors that affects the courier industry. It will take into account the

factors which affect the industries environment and also takes into consideration the

components from its general environment that has an impact on its functionality. This in-depth

analysis will be conducted in four stages so that it provides a clear strategic analysis of the

courier industry and it will be done in the following order. Firstly a study will be conducted on

the general environment followed by the industries environment, once this has been

completed the industries environment will be studied so that it paints a clear picture of the

attractiveness of the industry.

Once this has been completed an analysis will be conducted between the main competitors in

the courier industry and its key strategic groups will be mapped. After these tasks have been

achieved, the key issues which has an impact on the industry will be identified and with the

help of a matrix. The trends identified from the study will then be prioritized and their

implications on the industry will be discussed.

1.0 Introduction

The courier industry is a specialized industry where an individual chooses to pay a premium for

sending money or goods via a company or an individual who pursues a career or an enterprise

in delivering parcels and goods between prearranged destinations. With the onset of

globalization the courier industry is rapidly growing and many companies are vying for a greater

percent of the market share due to the attractiveness of the industry. One of the main reasons

many individuals are attracted to courier rather than normal postal companies is because they

guarantee speed, safety and service.

With the onset of technology and rapid growth in computer science, courier services are

providing high tech services for its customers by providing them with a unique signature that

enables them to track their parcels progress and distance to its place of arrival. It is due to

these special services and extra customer services that the costs of courier services are higher

than ordinary postal service.

The courier industry is a rapidly increasing and developing industry which see’s a lot of new

companies being formed over the globe. All these companies vary from each other since they

have their own strength and weakness which they seek to exploit in order to gain a portion of

the market share. Depending on the amount of capital and recourses a company has they

conduct operations on different spectrums of the industry.

They can either have operations within a city, between cities, regional, national and in the

extreme end of the spectrum on a global scale. Some of the largest companies in the courier

industries are UPS, FedEx and DHL. It is due to this reasons that it is important to conduct a

study of this particular industry.

2.0 Environmental Analysis

In order to conduct a study on the industries general environment, it was very critical to pick a

model which would enable a thorough analysis of the factors in the macro environment which

would have a significant affect on the industry.

There are many factors in the macro environment which has a significant impact on the

industry. Therefore to conduct an in-depth study of the macro-environment of an industry the

PESTEL model utilized and it is illustrated by Fig.1 below.

Figure 1: PESTEL model

By making use of the framework shown in Fig.1 a guide line is provided to study the various

different factors in an industries general environment.

The first factor to be analyzed will be the economic factors that affect the courier industry.

Many companies in the courier industry operate globally and have offices in different locations

around the globe. Due to this it is very important that they are able to have smooth interactions

between their offices. As a result of globalization the economic landscape of the courier

industry is changing because there is a very high demand for companies which operate globally

due to which the air-line industry has seen a boom. This is because speed is vital in the delivery

of packages and documents.

When talking about the environmental factors it has to be stated that it covers a lot of fields. It

consists of the populations GDP, government legislation and regulation and the immediate

competitive environment in the industry. In the terms of courier industry many of these factors

are not important except for the competition which is very high. The other factor which could

affect the industry is the health of the economy. The recent recession which spread from the

United State of America affected many companies in the courier industry and due to this many

airlines were cutting down the size of the fleet due to the loss of customers and rising oil prices

many companies were forced to close down because they were unable to meet up with the

demands and stay operational.

This shows that there are many factors in the economy which affects the courier industry and

managers need to be aware of these changes and take appropriate action to ensure the

company survives and gains a competitive edge over its competitors.

The next factor that could have a significant impact on the courier industries operation is the

Political and Legal factors. This is because many courier companies operate globally and they

have offices in over 200 different countries around the globe and each country comes with its

own sets of rules and regulation. Also every countries barrier to new entrants differs, for e.g.

China has very high barrier to new entrants whereas in country like Srilanka, UAE, Oman and

Kuwait the barrier to new entries is very low.

Also many companies have different laws and political viewpoints on foreign direct

investments. In countries like USA and Japan foreign companies are only allowed to have 25

and 50 percent stakes in the companies’ ownership. Whereas as many countries in South Asia

like Singapore and Honk Kong are more inviting and politically opened to foreign direct

investment.

The policies of many companies depend a lot on the political environment that surrounds them in different countries. For e.g. one of the main problems Germany faces is noise pollution and due to this DHL was unable to open a hub in Germany since the government rejected DHL’s proposal to increase the number of flights to international destinations in the night. Hence they were forced to open hubs in Honk Kong and Bahrain (Tellechea, 2010)

.

Another very sensitive issue due to politics is when a country declares a no-fly zone over the

other. This tends to become a bureaucratic nightmare to companies since they will loose the

confidence of the customers if they are unable to deliver a package or be reprimanded to

conducting business transactions with a country that’s imposed with a no-fly zone and

economic sanctions. The perfect example of this situation was during the Bosnian war when

FedEx was reprimanded by for continuing deliveries to the country (Al jazeera, 2011).

From this we can see that the political and legal factors in each country has a big impact on the

courier industries due to which many companies feel that there is a lot government

interference in their operations.

The third factor in the general environment which the courier company pays close attention to

is technology. This is because this industry handles a lot of logistics due to the nature of their

services and operations and is always on the look out for the latest cutting edge technology in

the fields of information sharing automation and security.

DHL was one of the first companies in the courier industry to use technology to gain a

competitive edge over its competitors. They were the first company to make use of the

technology in the information and internet age and launched Easy Ship the worlds first online

shipping transactions which were conducted vi the internet [7].

Since it set the trend by adopting technology it has been the company to set the trends in the

industry.

Technology is very vital in the courier industry because each company tries to out do each other

by providing high tech services to their customer due to the premium they pay. These services

come in the form of tracking service designed specially for use with WAP-enabled mobile

phones and devices. Many companies provide global SMS tracking service to allow customers

to track their shipments status from text and online transactions which act as a source of

business intelligence for companies and helps guide them in their transition from traditional

non-internet business into e-business.

From this it can be observed that the courier industry falls under the technology umbrella and

helps different companies build a bridge to their different offices around the globe in order to

have seamless operations and gain a competitive edge over its counter-parts.

The last factor that is taken into consideration is the social factors. It is not surprising that

society has been evolving and has come a long way since the medieval ages. Also religion has

become a commercial tool many industries are capitalizing on with the season of Christmas for

people who follow the cross and Ramadan for people who follow Islam and with the massive

influx of offers in this season people are encouraged to buy gifts for their loved ones and these

periods of the calendar the courier industry experience a spike in their customer engagements.

From this analysis it can be seen there is no specific factor which affects each company but a

cauldron of factors since they vary from country to country. This is because the courier industry

has broken borders and embraced globalization. To deal with these factors in different regions,

each courier company has a home office in different financial centers around the globe to

monitor change and implement strategies according to the scenario.

3.0 Industry Analysis

To conduct an analysis of the courier industry Porter’s 5 forces will be applied. This is because it

takes into account the various factors which may increase or decrease the attractiveness of the

industry. The model which is going to be used is shown below and represented by Fig.1.

Figure 2: Porters 5 Forces

There are many companies in the courier industry and they are exposed to many factors in the

industry that has a diverse or an adverse affect on the companies’ profitability. Fig.1

demonstrates the various components which affects all the companies in the industry.

One of the main components in the model is the Rivalry within the different companies in the

industry. Rivalry is very high and brand name alone does not ensure a companies success. This

is understood by DHL because in North America alone there are more than 50 courier

companies and they all battle with each other to garner a greater percent of the market share.

That being said it has to be understood that the competitive landscape varies in different

regions of the globe largely due to the concentration and diversity of companies around the

globe (Peter, 2010).

The competition is most fierce in the developed countries in comparison to developing

countries due to the boom in technology, infrastructure and sophistication of an individual’s

personal life style. For e.g. courier companies in Australia, UK and USA experience very fierce

competition. Another reason behind the intensity of the competition in these regions of the

globe could also be due to the fact that in many of these countries the aviation industries have

matured and since many of their companies operate on a global scale, they share the same

recourses and try to outfox each other by forming strategic alliances. This form of exploitation

is shown by DHL when they formed a strategic alliance with Cathay Pacific Airlines and used

their recourses exclusively without having to share their services with other firms.

This is the main catalyst which leads to the various different companies to lock horns with each

other. Imagine having to share recourses and handle and maintain the logistics to more than

3.6 million documents or parcels that are delivered internationally (Peter, 2010). This is the

reason companies experience fierce competition because the aviation has reached its peak and

there is not much more room for growth.

The other reason the rivalry is very high is because this is an industry that is growing and its

market share keeps growing on a yearly basis by 18 percent [x]. Therefore the need to attract

this new pool of customers increases due to which advertising increases and as many

companies start to advertise they try to out do each other in the field of marketing, in order to

gain an upper hand. All this shows that the level of rivalry in this industry is very high.

The second factor which is taken into consideration is the bargaining power of the customers.

In this industry large volume transporters sometimes demand for concessions on price in the

form of discounts. That being said buyer power is not high but not low either. This is because

even though many postal companies offer low prices (which takes longer time for delivery)

customers are still more inclined to pay the premium to undertake the services of courier due

to the efficiency of their services. Whereas a normal postal company would hire the services of

a third party who might sometimes be un-reliable.

It is due to this reason that buyer’s power is very moderate in this industry because even

though the services of the courier companies are quite dear, people choose to pay the

premium due to safety, efficiency and speed of their deliveries.

The third factor which has a large impact on the courier industry is the bargaining power of

suppliers. This is because the decisions they take have a direct effect on a company’s revenue.

It is very important to understand that many companies in the courier industry share very close

ties with airfreight suppliers due to the nature of their business.

Courier companies specialize in the service of delivering goods between two specified locations

and in order to achieve this they need a steady supply of aircrafts when dealing with

international packages and vehicles when delivering local packages and a steady supply of

packaging materials. From this it can easily be seen that suppliers have very strong bargaining

power and have control of almost all the prices since they are the basic building block around

which this industry is built.

For example one of the main suppliers of vehicles around the globe for courier companies is

Budget Rental Car and has offices around different regions of the globe. Were they to stop

providing vehicles to the companies there whole operation would come to a standstill since

they are unable to make any deliveries. Where Budget Rental Cars hold sway over land

transportation, Airbus and Boeing hold the same control over the air transportation. Therefore

it can be clearly seen that suppliers have extremely strong bargaining power.

The fourth factor is the competitiveness of substitute product. The only time a substitute

product becomes a threat is when it has the ability to curtail the growth of a certain product in

the industry that it’s substituting. With the exponential growth in technological centre many

pundits predicted that the courier industry would suffer due to e-mails and e-cards. While this

may be a valid point it has to be understood that there are no replacements for fast, reliable

delivery of goods. Therefore the threats from substitute products are very weak and almost

negligible.

The last and final factor is the threat an industry faces from new entrants. In the courier

industry the threat from new entrants is relatively weak. This is because the amount of capital

and recourses required to open a courier company is vast and setting up the logistics for such

an operation is virtually impossible. This is because a new company would have to make

arrangements with aviation firms who already share a business relationship with courier

companies who have entrenched themselves in the industry.

Table.1.below shows the amount of affect each factor in Porter’s 5 forces have on the courier

industry.

Factor Degree of Effect on The Industry

Industry Rivalry Very High

Customer Bargaining Power Moderate

Supplier Bargaining Power Very High

Threat from Substitude Product Negligible

Threat fom New Entrant Weak

Table 1: Affects of Porter's 5 forces on the Courier Industry

From this analysis it can be seen that even if a company is well entrenched in the industry

doesn’t guarantee its success because competition in this industry is very intense whether a

particular firm operate locally or internationally. In order to succeed companies should make

strategic alliances and consider mergers or acquire other similar firms in order to increase their

recourses because in this industry suppliers call the shot. These companies needs highly

developed infrastructure and supply chain since they deal with a lot of logistics and the amount

of capital and expertise needed to start up one of these operations is immense due to which

there are very few new players emerging in the market. All in all the courier industry is very

attractive to companies who are already operating in the industry because it is a growing

industry. The other reason that it is very attractive is due to the fact that even though the

capital and expertise needed to start a new company is huge if this process could be conducted

successfully the potential for growth and competitiveness is exponential.

4.0 Courier Industry Strategic Mapping

The purpose of the mapping strategy is to analyze the competitors who participate in the

courier industry. It takes into consideration firms which have similar strategies and similar levels

of recourses. Once this has been analyzed they will be placed in a single strategic group in

mapping graph as shown in Fig.3.

Figure 3: Courier Industries Strategic Mapping

From the graph illustrated in Fig.3 the y-axis indicates the price range in which a company falls

under and the x-axis indicates the company’s geographical establishment.

The companies in the courier industry have captured the market by either aggressively taking

over the market share or by forming strategic alliances with other well established companies.

The chart in Fig.3 indicates the positions of the different companies in the courier industry. DHL,

FedEx and UPS are the global leaders of this industry. These companies have been placed into

its strategic group according to the price offered by them for their services and there

geographical reach.

FedEx, UPS and DHL are the market leaders in courier industry. There brands are recognized all

over North America, Europe and Middle East, Central America, South America, Oceania &

Geographically Low High

Pric

e Ra

nge

Aramex BluedartBombino Express

The Professional Couriers

DTDCYellow Express Sydney

GD Express

FedExUPSDHL

Low

Pacific, Asia and Africa. These express mail service providers are placed in same strategic group

and at the highest level of the chart because their services are very expensive in comparison to

other companies and they are established all over the world. Each of these companies have

their own competitive advantages over their counter-parts.

DHL which was founded in 1969 and it has established itself as the main contender in the

courier industry. In order to gain this status, DHL offered its services at lower rate compared to

FedEx and UPS. They also provide free boxes for packaging purposes to attract customers but

deliver quickest to only certain location. FedEx being the most expensive in this sector, it offers

service at the swiftest rate. They deliver it at the earliest but are also the most expensive one.

FedEx is very quick and provides the most detailed online tracking system which provides them

with a very critical competitive advantage over their rivals. UPS was one of the forefathers in

the industry but lost its foot hold when FedEx and DHL entered the market. UPS started

providing services at cheaper rate then FedEx and started providing free insurance for the

packages that were valued under $200. This strategy enabled UPS to gain their market share

but DHL and FedEx seeing this strategy adopted counter strategies to limit UPS’s growth. Today,

UPS delivers almost 15 million packs across the world in a day.DHL has already spend a lot on

advertisement and is planning to spend more than $1 Billion in order to compete effectively

with FedEx and DHL. These 3 companies provide similar type of services and equally expanded

themselves throughout the world and are effectively competing with each other and it is due to

this reason that they fall in the same category.

The next strategic group represents the companies which are under the process of expanding

their services to a more global pool of customers because they do not cover the entire globe.

The prices offered by them are lower in comparison to the heavy muscles in the industry.

Aramex is one of the companies which fall into this category as they have not geographically

expanded themselves to Africa and the price range offered by them are comparatively lower

than the above genre. This company was found in 1982 providing express, logistics, freight

forwarding and domestic distribution services. Aramex has been performing really well in Egypt

and the Middle East region. Aramex lost its value in United States when DHL took over Air

Borne Express which was Aramex’s Global Distribution Alliance. The other competitors in the

same segment are Bombino Express, Blue Dart, International Courier Network and The

Professional Couriers. Certain areas which are not covered by these courier companies like

Bombino Express does not cover Africa and Blue Dart do not cover Europe and the Middle East.

The same way they are also very strong in the region which they have targeted. Bombino

Express and Blue Dart are very strong in India but because of Blue Dart’s Strategic Alliance with

DHL it gives them a competitive advantage. The same goes with the professional couriers, they

are very well established in Asia and follow the HUB & SPOKE concept which is based on cost-

effectiveness, reliable and time advantage. The Professional Couriers is the only Courier having

this largest network in India, covering more than 24000 destinations through over 2485 offices

all over the country.

Each of the company in this segment is strong in their position. Aramex is fighting back with

DHL, FedEx and UPS for its worldwide position where as the Blue Dart, Bombino Express and

The Professional Couriers are competing effectively with each other.

The third strategic group are the once which focus locally more than international and their

price range are much lower compared to the other two strategic groups. DTDC falls into this

category because it highly concentrates on its local customers rather than the international

market. It delivers about 10 million consignments every month locally. It is knows as Indian’s

Largest Domestic Delivery Company. Same goes with Yellow express Sydney which focuses on

the Oceanic and Pacific region. They have kept their local service charges very low in order to

compete with bigger players effectively in that region. GD express is in the same category as

DTDC and Yellow Express Sydney which concentrates on the Malaysian market and the market

around it. These companies form strategic alliance with bigger players and deliver their services

internationally.

The first category players are known to be the global industry players who operate worldwide

and may make some small adjustments for country-specific circumstances. The second category

group are the once who primarily coordinate their activities regionally. The third strategic group

are the once who are known as the Multi-Domestic industry players who are specific to each

country or group of countries

5.0 Final Analysis

This section of the report conducts an analysis on the findings done during the evaluations of

the courier industry. Fig.4 below is constructed from the findings garnered during the process

of the study.

Figure 4: Factors Impact on the industry

From the above picture the following pattern was garnered and since many of the factors

mentioned above are explained in detail in the previous chapters the key points will be

explained in-depth followed by examples:

Threat of New Entrants

Cost Of Labor Unions

Power of buyerTransportation

Network

Strength of Opposition

GroupCompetition

Nature

Technological Development &

Economic factors

Cost of Transportation

Power of Supplier

Government Regulations &

Political Interventions

HIGH

HIG

H

MediumLow

Medium

Low

Probable Impact on Industry

Probability of Occurrence

- Increasing cost of Transportation:

This is a factor that keeps occurring in the industry very often and due to the current

fiscal scenario in the Middle East, the price of transportation is rapidly increasing due to

increasing oil prices. That being said the impact on the industry is medium since

companies find ways to balance this change in the environment by cutting down

number outbound flights to international destination.

- Government Regulations and Political Intervention:

Governments and trade unions have major impacts on the courier industry since they

keep passing new bills and regulations on a daily basis. This is a factor that the industry

watches very closely. There are many governments that are going green these days due

to which many countries try to cut down on the number of flights arriving and departing

from their airports since they want to decrease noise pollution. This causes massive

logistics nightmares for the industry since they need to be able to respond fast and

figure out the fastest route to transport their international goods.

- Technological Development and Economic Factors:

Technology is a very vital part of the industry and companies keep upgrading their

logistic departments on a daily basis. That being said it doesn’t have a major impact on

the industry since many firms tend to copy or build on their counter parts technology.

Due to this specific reason this factor was placed in its respective grid.

- Power of Buyer:

The buyer’s power in this industry is relatively medium since the rates being charged

among the industries is relatively the same. Therefore companies keep offering deals

and promotions to attract customers especially during peak seasons. That being said in

other times of the year there aren’t much deals due to this reason it can be said that the

buyers power is relatively low because they cannot change the price much during off-

peak seasons.

- Threat of new entrants:

Due to the very high entry barrier in the courier industry, it is very rarely that a new

company is formed in the courier industry and its impact on the industry as a whole is

very minute. This is due to the capital needed for the operations being very high and

technology needed to handle the logistics in its operation very complicated. Therefore

there aren’t many new entrants and they fall into their respective grid in Fig.4