Business Strategy - DHL Assignment

Business strategy

INTRODUCTION
Business strategy is concerned with the course of actions that an organization follows in
order to achieve the goals and objectives effectively and efficiently. It is basically a master plan
that a business follows to achieve competitive edge in the market. Business strategies help a
company in optimum utilization of resources which provides them various cost benefits in the
long run. These strategies are framed by top level management executives and managers and also
outline how a business must be carried out in order to reach the desired results. It not only helps
in planning but also in identifying strengths and weakness, skills& knowledge, resource
allocation and environmental scanning. DHL (Dalsey, Hillblom and Lynn) is an American-
German logistics company that provides courier and parcel facilities globally. The company was
founded in the year 1969 by Adnan Dalsey, Robert Lynn and Larry Hillblom in San Francisco,
California, United States. Currently headquartered in Germany, DHL currently employs more
than 300,000 people globally and has spread its operations in 220 countries and it delivers
around 1.3 billion parcels per year. The current study will focus on the business strategy adopted
by DHL, its PESTEL (political, economic, social, technological, environmental and legal)
analysis, VRIO (value, rarity, imitability and organization) model, Porter’s five forces and
SWOT ( strengths, weakness, opportunities and threats) analysis and how it helped the
organization in achieving competitive advantage.
PART 1
i) Macro Environmental Analysis
Analysis of the PESTEL factors depicting the external environment in which the
company operates is the best tool for identifying the various pros and cons of the industry in the
market. In order to conduct a macro environmental analysis of DHL, PESTEL factors of the
environment can be used in following manner:
Political Factors: These comprises of the political environment of a particular economy in which
the DHL is operating and the policies and regulations amidst which a company has to survive.
Furthermore, if there is a multinational company similar to DHL, there are multiple political
backgrounds and the company needs to take into account the political environment of the host
country as well as foreign countries in which it is dealing. Currently, although Brexit has had a
major impact on all the MNCs operating in UK, yet the company has managed to maintain their
business in a stable manner (Rastogi and Trivedi, 2016). The trade policies are easy to operate
their business but apart from this, while operating in other countries, tariffs i.e. import or export
charges are sometimes a major factor that the company has to consider while dealing in other
countries.
Economic Factors: The economy i.e. factors like inflation, GDP growth, per capita income etc.
are some of the major factors that impact a company’s decision whether to conduct business or

not, its pricing policies etc. For DHL, countries facing economic crisis are non-profitable to deal
with and countries with higher growth rate are more profitable. Apart from this, the currency
exchange rate is also a main factor in determining the trade policies. In UK, the country is
growing and the currency rate is strong which has presented DHL a favourable market to trade
in. Further, the economy is a growth oriented one and therefore, the company is operating in
profitable economy.
Social Factors: Since the company targets a consumer, it is imperative to respect their emotions
and traditions. While marketing a product in a actual country, an MNC must keep in mind the
local sentiments and feelings of the local residents of that country. A country which is
developing will usually have a population that prefers services at a a lower cost and since DHL is
a premium brand, therefore, they might not get substantiate revenue from this type of country
(Zahari and Romli, 2019). On the other hand countries like UK have rich consumer base who can
afford and would even prefer to use services provided by DHL. Therefore, the social factor can
turn into a major benefit for the company, yet it is essential that they are delivered the quality of
service that they were promised because a British consumer is a proud but polite consumer.
Technological Factors: Since DHL basically is all about the reliability and speed of the services
that they provide, it is crucial for them to ensure that the methods adopted by them are
technologically updated and sound. The company spends a large chunk of their income or profits
on updating and maintaining a higher and safer speed and technology and therefore, they are able
to gain competitive advantage over their consumers which has made this aspect a profitable one
for the company. This ultimately improves their customer service and they are able to generate
more revenue thus maintaining the balance between expenditure and income.
Environmental Factors: Since DHL is basically a transport or logistics oriented industry, their
major business is done through vehicles which are a major contributor in air pollution (Abbott,
2015). Further, this can act as a negative factor since the company might face backlash from its
consumers who might even boycott their services. However, in order to compensate for the
damages that it is creating towards the environment and to ensure that tits customers remain
loyal to the company, there are a lot of CSR activities that company adopts for the benefit of the
societies and economies in which they are operating. The recent involvement of company in
waste management programs in UK and the innovative ideas for its solution i.e. for its recycling
has shed a better i.e. good light on the company altogether.
Legal Factors: Since DHL is a multinational company, there are a variety of legal requirements
that the company is expected to comply with while operating in different countries. DHL needs
to comply with the employment laws of different countries, health and safety laws, intellectual
property rights like patents, copyrights etc. according to their norms. While these conditions i.e.
regulations can be profitable in one country, it might not have the same effect in other country
(SHTAL and et.al., 2018). However, in UK currently, the company can utilise the benefit of

market conditions because the legal environment is in favour of such MNCs and provides a lot of
relaxation to them and DHL can take this as an opportunity.
ii) Micro Environmental Analysis
Porters five Force Analysis: Porters five model is the tool which looks at strategic management
in the organization, by the way of determining competitive landscape of the industry. As the
name suggest this model is based on the five forces which helps the strategic planner understand
and inherent profit potential with in an industry. This model believes that these forces used to
vary from industry to industry which explains that every industry is different regarding
profitability and attractiveness.
 Threat of New Entrants
 Bargaining Power of Suppliers
 Bargaining Power of Buyers
 Threat of Substitute Products or Services
 Rivalry Among Existing Firms
Porters five mode will help the company in analyzing the DHL industry in better way as the
information can be used by the manager at the time of making strategic decision.
Threat of new Entrants: This force is suitable for DHL as in the industry in which DHL
operates there is difficulty of economic scale which help the company like DHL in getting the
cost advantage which is difficult to get for the company who is looking to enter into the market
(Eskandari and et.al., 2015). In the industry there is trend of differentiate product as compare to
the standard product which force the company to invest heavily in the advertisement and
customer service. This all thing used to create many hurdles for the new entrant in the market.
Capital requirement to enter the industry is too high as compare to the other industry which
makes it difficult for the new entrant who is looking to enter in the Industry. So it can b
interoperated that threat of the new entrant is very poor in this industry.
Bargaining Power of Supplier: This force or the factor of the model is also on the favorable
side of DHL as number of the supplier in the industry is very low as compared to the buyer in the
industry which eventually takes the control over the price of supplier. Suppliers in industry do
not provide threat for forward integration into the industry in which DHL operates. This makes
the bargaining power of suppliers a weaker force within the industry. Supplier of the industry
does not contend with other product in the industry. At the same time Bargaining power of
supplier sometimes affects also the industry as there is low level of substitute product to sell for
the supplier which eventually makes the power of the supplier stronger in the industry
(Mathooko and Ogutu, 2015). Positive impact of the force is more than enough to overlook the
negative impact of force.