Strategic Review Report - DHL

Read the Strategic Review Report on DHL by U.S.Sirimanne for MGT 30625 Strategic Management course. Learn about DHL's internal capability analysis, value chain model, external environment analysis, industry analysis based on 5 forces model, and SWOT analysis.

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Strategic Review Report - DHL
A Report by
U.S.Sirimanne - SAB/BSc/2018/11/2/A/50
Course: MGT 30625 Strategic Management
Dr. Bandara Wanninayake
Year 3, semester 1
School of Accounting and Business
The Institute of Chartered Accountants of Sri Lanka
2nd January 2021

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Acknowledgement
At the successful completion of this report, I would like to thank the people that supported me
throughout while giving immense courage.
First, I would like to express my sincere gratitude to our Strategic management lecturer Dr.
Bandara Wanninayake who gave us the valuable opportunity of working on this report. His
guidance, support, instructions, and suggestions were the major influence behind the successful
completion of this report.
Next, I would like to thank my family and friends who helped me with their knowledge, and
provided moral support.
Finally, I would like to say that I have gained valuable knowledge during this process of
completing this report and would really like to thank everyone once again.

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Table of contents
Abstract ........................................................................................................................................... 4
Introduction to DHL ....................................................................................................................... 5
Internal capability analysis by using resource-based view strategy ............................................... 6
Value Chain Model ......................................................................................................................... 7
External environment analysis ...................................................................................................... 10
Industry analysis based on 5 forces model ................................................................................... 12
SWOT analysis of DHL ................................................................................................................ 15
Conclusion .................................................................................................................................... 19

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Abstract
The purpose of the Strategic Review Report is to apply the concepts and techniques learnt in the
module to analyse real-world situations by using appropriate organizational analysis and external
environment analysis models. This report is an in-depth evaluation about how the company I
have chosen “DHL” operates in its environment.
In this report I have used RBV and value chain models conduct an internal capability study,
PESTDN model to analyze the external environment, 5 forces model to analyze the industry
DHL operates in, and a SWOT analysis based on TOWS matrix.

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Introduction to DHL
DHL was founded by Adrian Dalsey, Larry Hillblom and Robert Lynn 40 years ago in San
Francisco. DHL stand as one of the global market leaders of the international express and logistics
industry.
DHL employs around 300,000 employees and its international network links more than 220
countries and territories worldwide. DHL services include air and ocean freight, it offers expertise
in express, contract logistics solutions, overland transport and international mail services.
Their success has always been based around delivering excellent service for our customers. Never
complacent, DHL has become a brand acknowledged for personal commitment, proactive
solutions and local strength. At the heart of its success are its employees who focus on the
customer’s needs and provide individually customized solutions.
DHL mainly provides 4 services: Freight transportation (air and sea), Warehousing, Packaging
and Distribution. They’re well recognized for their secure importing and exporting of goods
globally as well as for their warehousing facilities among local and international businesses.

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Internal capability analysis by using resource-based view strategy
Threshold capabilities of DHL
Threshold resources
• The logistical network can be identified as a threshold resource as not only DHL but all the
competitive companies such as FedEx, UPS possess a strong logistical network to transport
their freight throughout the world.
• Strong workforce throughout the world. The workforce includes freight & cargo handlers,
drivers, management. Trackers, etc. without these sorts of workforce a logistics company
cannot sustain.
Threshold competencies
• The know how and awareness to new technical advances can be identified as threshold
competency. Without full view of the entire operations and procedures and he latest
technical developments a company cannot survive in the logistical industry.
Unique Capabilities of DHL
Unique resources
• The major unique resource of DHL is its loyal customer base. DHL is one of the oldest
and most reliable logistical service providers in the world. Therefore, they have a strong,
unwavering customer base that completely relies on the company.
• The expert panel od researches and innovative minds at work in DHL is one of their main
resources. DHL have managed to stay at the top of the logistics industry for a long time
due the people who quickly identify new trends and technical developments. They have
become the trendsetter in the industry due their innovative thinking and innovative
services they provide.

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Unique competencies
• One of the major competencies of DHL is their ability of providing a high-quality service
at a price below their competitors. This ability makes DHL the strongest player in the
industry.
• They were the first company to implement the system where a customer is able track and
monitor the entire process of freight transportation until the products are delivered to their
doorsteps. This technology is one of the leading factors behind DHL’s Success.
• Further DHL has managed to provide a superior and differentiated service for their
customers which has given them the competitive advantage over the competitors.
Value Chain Model
The value chain model introduced by Michael E Porter includes all the activities which add value
to the final product starting from procurement to production, marketing, sales, and customer
service. Optimization of the value chain helps companies achieve superior results like higher
operational efficiency and minimization of wastage as well as reduced operational expenses. It
can also help companies generate new sources of competitive advantage.
Primary activities in DHL Value Chain:
Activities that directly impacts the creation of product or services are known as primary
activities.
Inbound logistics:
Inflow of packages and parcels which are transported to various location around the world can be
identified as inbound logistics in relation to DHL There are over 150,000 entry points in the
network of DHL. The customers can use these entry points to tender packages at any time or
location according to their convenience.

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Operations:
DHL provides its services all around the world across 220 countries. DHL has mainly divided its
global operations into three segments; International package, US domestic package, and supply
chain, and freight. The biggest segment which generates the highest revenue for DHL is the US
domestic packages. DHL also runs one of the largest airlines globally. Additionally, DHL boasts
one of the largest ground networks in the world.
Outbound logistics:
Outgoing packages and cargo can be identified as the largest component of outbound logistics of
DHL. DHL has established a large air and ground network that the company utilizes to deliver
packages across 190 countries. The international air network of DHL is one of the largest in the
world. There are several regional air hubs in the US as well that support the central air hub.
Flights from these hubs carry parcels and packages to various parts of the world.
Marketing and sales:
The brand awareness, well established reputation, and loyalty among customers are main
strengths of DHL. Due to these reasons, they don’t focus intensively on marketing when
compared with its competitors. Apart from providing excellent customer service and experience,
DHL has built a strong reputation on an employee-centred organizational culture that focuses on
employee welfare. DHL vehicles and equipment are freely recognizable with their logo
displayed. Further DHL in the past has used the method of sponsoring major sports events to
create awareness. Additionally, their workforce is trained extensively on behaving courteously
and professionally. Utmost customer dedication is one of the main priorities of its employees.

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Products/Services:
DHL provides various services targeting different segments of customers. Apart from individual
customers, DHL also targets SMBs and larger e-commerce businesses through its wide array of
services. Providing Big businesses around the world with an extensive range of supply chain and
logistics solutions are their forte.
Supporting Activities in DHL Value Chain:
Technology:
Technology is increasingly playing a central role in driving the international expansion and faster
growth of DHL and its customer base. The company uses several types of technologies including
visibility, billing, and shipping technologies to support its business operations globally. With the
growth of e-commerce worldwide, the company has also adopted technical strategies to improve
customer experience.
HRM:
Human resource management is one aspect where DHL heavily focus on continuous
improvement. Since the inception of DHL, management of employees and employee satisfaction
have been identified as the foundation for growth. Higher employee dedication at DHL is a direct
impact of implementation of strategies such as employee-owner concept. Training and
development of employees are considered as a main priority and DHL invests a large portion for
this purpose every year. As of 2019, DHL employed 300,000 people worldwide.
Procurement:
DHL has a Global procurement Team for managing its procurement function. The procurement
team at DHL is responsible for selecting and contracting with the right suppliers for the right
goods and services. The company focuses on building long term relationships with its suppliers
globally.

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External environment analysis
An external environment is composed of all the outside elements that impact the operation of
business. The business must act or react to keep up its flow of operations. PESTDN model is used
for this analysis.
Political Factors
Being mindful of the political conditions of the areas they operate is of utmost importance for
strategy formulation of DHL. Gaining the European market is relatively easy as the political
condition of Europe is usually stable with very easy trade rules. However, when operating in
countries with volatile political conditions DHL's business might be negatively affected and
strategies are required to overcome those obstacles. Additionally, DHL also has to be mindful of
complying with tariffs and trade policies, import and export restrictions.
Economic Factors
As the business of DHL heavily depends on the success of other big companies DHL provide
services to, if there are economic crisis globally, that will have a negative effect on DHL's business,
decreasing their business and causing them financial losses. DHL’s sale might be lower in times
of inflation as it reduces the customers purchasing power. On the contrary, if a certain country is
flourishing in terms of its growth rate, this will increase the business for DHL. When operating
globally, the effects of the exchange rates should also be considered.
Socio-cultural Factors
People's perceptions and attitude towards the company can affect the sales of DHL. As DHL is a
German company with a glowing reputation for decades, people may be inclined purchase more.
As DHL has a reputation of being a high-end product people with specific mindsets will acquire
their services for the quality. Demographics with low cost purchasing attitude may look for
alternatives. Therefore, it is paramount instilling the right attitude among the public.

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Technological Factors
Technology is one of the most important factors when it comes to logistics business because DHL
has based its brand on the basis of reliability and speed. So, keeping up with the technological
trends is very important for its business as it helps them maintain their brand image and also results
in higher profits, though it may come with higher costs at times. Thus, providing convenience and
differentiation to the customers comes with huge costs in using technology but it also gives them
a competitive edge.
Natural Factors
The logistics or transportation industry involves use of vehicles; they contribute a lot to the air
pollution which is damaging to the environment as well as the company's reputation. Due to this,
they might lose out on customers if they develop this perception about DHL. DHL can recover
from these loses by investing in CSR activities. The ongoing corona pandemic is another
environmental factor that directly affects the business of DHL. With the quarantine restrictions the
demand for the logistical and transportation industry has increased rapidly. But there are heavy
restrictions and limitations due to the health and safety standards.

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Industry analysis based on 5 forces model
DHL Porter’s Five Forces Analysis
1. Threat of New Entrants
• With high fixed costs involved, the economies of scale are fairly difficult to achieve in the
industry in which DHL operates. Therefore, companies that produce in larger scale will
have a cost advantage. This also results in high cost for new entrants. There is high product
differentiation in the industry. There are high capital requirements and strict legal
requirements within the. These factors make the threat of new entrants a weak force within
this industry.
• Distribution networks are easily accessible, which makes it easier to set up their
distribution channels and come into the business for new entrants.
How DHL can tackle the threat of New Entrants?
• DHL can fight off the new entrants by using their cost advantage and economies of scale
in the industry.
• Innovation and differentiating their service are two methods of counteracting the new
entrants. Marketing budget can be expanded to raise brand awareness. This will help DHL
to retain its customers rather than losing them to new entrants.
2. Bargaining Power of Suppliers
• There are large number of suppliers in the industry in which DHL operates. Therefore, the
suppliers do not have a strong claim over the prices which makes the bargaining power of
suppliers a weak force.
• The products supplied by these suppliers are less differentiated, relatively standardized
and have minimum switching costs. This makes it easier for buyers such as DHL to easily
switch between suppliers which weakens the bargaining power of suppliers.

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How DHL can tackle the bargaining Power of Suppliers?
• DHL can choose the suppliers according to their will as there are abundance of suppliers
in the industry. Due to low switching costs DHL can easily switch suppliers if the costs or
products are not according to their preference
• Another strategy is to have multiple suppliers across different geographic locations to
ensure maximum efficiency within the supply chain.
3. Bargaining Power of Buyers
• There are only few companies in the industry of logistics and these few companies hold a
large market share. The companies have a large control over the buyers and the buyers only
have few companies to choose from and therefore, do not have much control over prices.
This makes the bargaining power of buyers a weaker force within the industry.
• Due to high differentiation in services and products in the logistics it is difficult for buyers
to find alternative firms that produce a similar product or service. This difficulty in
switching makes the bargaining power of buyers a weaker force within the industry.
How DHL can tackle the Bargaining Power of Buyers?
• DHL can attract customers by focusing on innovation and differentiation. The speed of
service, differentiation and new trends are appreciated by the buyers within the industry.
Therefore, by implementing these strategies DHL can retain and attract new customers
effectively.
• Marketing campaigns aimed at developing brand loyalty can help DHL easily retain their
customer base.

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4. Threat of Substitute Products or Services
• Within the industry of logistics there are only few substitutes which presents a threat to
DHL. These few substitute firms are relatively expensive compared to the price levels
offered by DHL. DHL is producing a service at a lower cost without compromising the
quality of service. Therefore, buyers switching to substitute firms is less likely which in
turn weakens the threat of substitutes within the industry.
How DHL can tackle the threat of Substitute Products?
• DHL should keep on focusing improving the quality of service without lifting their price
levels, which will further attract the customers of competitors as well as new customers.
5. Rivalry among Existing Firms
• Although there are only few competitors in the industry, they hold a large market share.
Therefore, these firms will compete to attract customers and become the market leader.
Further fixed costs within the industry are relatively high, which drives the firms to push
to their highest possible capacity. These factors make the rivalry among existing firms a
stronger force within the industry.
• The logistics industry is consistently growing and shows no signs of slowing down in the
near future. Therefore, the competing firms can focus on attracting new customers instead
of fighting each other. This makes the rivalry among existing firms a weaker force within
the industry.
How DHL can tackle the Rivalry among Existing Firms?
• DHL can minimize the efforts and competitive actions of the competitors by focusing on
providing a differentiated, unique service which attracts the customers.
• DHL should prioritize creating new customer bases instead of trying to win over from the
competitors.

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SWOT analysis of DHL
Strengths of DHL:
Large Network: DHL has a network of over 220 countries, making it the largest global freight
carrier. DHL has a clear advantage over its competitors in this regard. DHL has been able to expand
its network with the use of Effective communication and excellent in-house.
Innovation: In the logistics industry DHL projects itself as leader in every aspect. DHL has
structurally invested into solution development and trend research. The innovation centre
developed by DHL presents a platform for stakeholder, especially the customers to interact with
DHL experts.
Strong Brand Equity: DHL is ranked 77 on the best global brands ranking by Interbrand in 2018
with a brand valuation of $5708Mn.
Growing in developing countries: To establish their footprint in emerging markets DHL has
invested greatly in developing countries in order expand their market. DHL investing $16.3Mn in
India is clear example of this strategy. Capturing these markets will pay dividends in the future
years to come.
Excellent financial position: DHL has a very good finance background and have ample resources
backing it up. Due to this reason companies around the world trusts DHL for their services.
Weaknesses of DHL:
Requires heavy investment: Logistics is investment driven industry due to high fixed costs
relating to setting up and expansion. Further it takes time for return on investments.
Dependence on external agencies: DHL has to collaborate and depend on local agencies due its
wide network. This impacts the efficiency of DHL and lack of communication can lead to delays
and mistakes.

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Dependence on regulatory bodies: Logistics is an industry which is heavily regulated around the
world. Accordingly, DHL has to adhere to the regulatory restrictions. These Regulations differ
according to the region and the government policies; thus, DHL has to be diligent of different laws.
Poor Marketing: In comparison with competitors such as UPS and FedEx, DHL does not invest
much in advertising and branding activities. Brand popularity, brand awareness and acceptance
among general public has been negatively affected by lack of proper marketing strategy.
Opportunities of DHL:
Emerging Markets: DHL has set its foot in almost all the emerging markets but it needs to expand
to utilise the potential in such markets. They need to focus on its customer-focused international
supply chain.
Inorganic Growth: DHL, being a big name in the industry to acquire several local players to
expand its reach in its target markets.
E-commerce: Increased electronic shopping has created a new path for DHL to penetrate new
markets and expand its reach. E-commerce is considered as the future of shopping so it becomes
important for DHL to be present in this platform as well.
Threats of DHL:
Competition: FedEx and UPS are DHL’s prime competitors and are giving DHL a tough fight in
all the markets. Various local brands also possess a threat for DHL in its specific territory.
Economic Slowdown: In times of economic slowdown, logistics is one industry that is hit the
hardest.
Declination of traditional services: With development of technology all around the world the
demand for conventional services such as letter and posts have decreased significantly.

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Local players: Local agencies and courier services that operates at lower prices in domestic
markets presents clear competition for DHL in all aspects specially the local players who provides
quality services seriously challenge the reign of DHL
The TOWS Matrix is a method used for strategy formulation.. After deeply analyzing the strengths,
weaknesses, opportunities and threats of DHL, TOWS matrix can be used to develop strategies for
each and every situation to optimize the position of the company
Strength (S) Weaknesses (W)
OS strategies
• Acquire local competitors to expand
its reach and market.
• Using innovative methods such as
Ecommerce in order attract more
customers.
• Invest more in developing countries
and get a stronghold in untapped
markets.
• Use customer-oriented supply chain to
reach the optimal potential.
OW strategies
• Acquiring already established
businesses can be the ideal method to
overcome the high startup investment.
• Strong marketing campaigns can be
promoted to differentiate and standout
from competitors such as UPS.
• Overdependence on external agencies
can be minimized creating own network
without relying on other parties.
Opportunities (O)

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TS strategies
• Use cost leadership to fight off
competitors such as FEDEX, UPS
• Plan for economic slowdowns
implement strategies to overcome them.
• Create interest among general public
to use traditional services such as posts
and letters by providing a differentiated
service.
• Use local players to extend the reach
and build networks all around the world.
(e.g.; DHL can partner up with Kapruka
in Sri lanka to extend its reach)
TW strategies
• Discontinuing product lines that are less
profitable.
• Identify the areas where competitors
have a competitive advantage and focus
less time and resources on these areas.
• Pre-enter to contracts with regulatory
bodies on operating in certain areas and
try to negotiate on the limitations.
Threats (T)

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Conclusion
In this report I firstly gave a brief introduction to the company (DHL) I chose for this report.
Next, I focused on the internal analysis of DHL by focusing on threshold and unique capabilities
using the RBV model. Then Value chain model was used to analyse the total value addition of
their entire process.
My next focus was to analyse the external environment of DHL using the PESTDN model. In
this analysis the main external elements that directly impact DHL was identified and discussed.
Next Porters five forces model was used to analyse the industry in relation to five areas covered
in the model. The impact of each element was thoroughly discussed and methods to tackle those
elements were also suggested.
Finally, the TOWS matrix was used to analyse the Strengths, Weaknesses, Opportunities and
Threats of DHL and strategies for each situation was discussed as well.
By overall analysis of external and internal factors, it is found that the competitive advantages of
DHL rely on customer satisfaction, hi-tech transportation service, differentiated unique service
provided at an affordable price. The long-term relationship with customer brings win-win
situation to both parties, which means DHL makes customer feel safe and happy, meanwhile
customer gives opportunity to DHL to earn economic benefits. Through this analysis it is evident
that DHL is a thriving company that fully utilizes its external and internal elements achieve their
desired targets.

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