Strategic Review of DHL: Internal & External Analysis - MGT 30625

This Strategic Review Report, prepared by a student, analyzes DHL's operations and strategic position within the logistics industry. The report begins with an introduction to DHL, highlighting its global presence and service offerings. It then delves into an internal capability analysis using the resource-based view (RBV) strategy, identifying threshold and unique resources and competencies. A value chain model is applied to assess DHL's primary and supporting activities. The external environment is examined using the PESTDN model, considering political, economic, socio-cultural, technological, and natural factors. An industry analysis based on Porter's Five Forces is conducted to evaluate the competitive landscape. Finally, a SWOT analysis, derived from the TOWS matrix, synthesizes the internal and external assessments to identify DHL's strengths, weaknesses, opportunities, and threats, providing a comprehensive overview of the company's strategic position and recommendations for future success.

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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.