1. What aspects of DHL’s strategy for entering the United States reflect a low-cost strategy? A differentiation strategy? DHL’s low-cost strategy can be reflected from the fact that “DHL is investing $1.2 billion over the next three years in sorting centers, drop-off points, and other network improvements”. While DHL’s core competency in the US market lies in its collaboration with Airborne and the established air shipment network, it is too costly for the majority of customers.
The high fuel cost pushes DHL for an alternative from air parcel transport. And the lack of ground transport capability puts DHL into a disadvantageous position when competing with business rivals such as UPS and FedEx. The established sorting centers, drop-off points and network improvements will provide cheaper options of delivery to customers and thus help DHL to take up market share in the US. By building a high quality ground transport network, it will enhance DHL’s position in competing for the national No.3 in the parcel delivery business.
On the other hand, DHL’s personalized delivery services can be considered a differentiations strategy. Compared to its rivals, DHL tries to foster a more customer-friendly workforce. The return from the investment in hiring and training for customer service improvements can
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The delivery services which DHL provides offer something more than those from UPS or FedEx. Thus some customers are willing to switch from existing service providers to DHL who is willing to go an extra mile to satisfy the customer needs. Just like what Michael Cardenas said, “UPS and FedEx are more reluctant to go to remote locations. DHL will just do it. If their driver has to sit in the parking lot and fill out the air bills, he’ll do it.” 2. What appear to be DHL’s most important competitive advantages? Are they best suited to a mature industry or a growth industry? Which way would you characterize the U.S. parcel market and the global parcel market?
One of DHL’s most important competitive advantages is its personalized delivery service. In comparison with the two industry giants UPS and FedEx, DHL is more willing to offer a personal touch and customised delivery services to its customers. And as seen from the example that shoemaker Skechers USA Inc. has already shifted one third of the business from its Manhattan Beach headquarters from FedEx to DHL, it helped DHL to gain market share in the US market which was already dominated by established firms.
Another competitive advantage that DHL enjoys is its international brand name. DHL can easily enter the US parcel service market by tabbing on its success in the European and Asian markets. The famous brand name will help greatly when gaining entry to the market. Also, the technical and business expertise gained from Europe and Asia will expedite the initial business building process in the US.
Such competitive advantages are best suited to a mature industry rather than a growth industry. The reason is that neither of the competitive advantages focuses on product innovation. They are more on satisfying customers’ needs in a matured market than helping to explore untapped market. Also, these competitive advantages help neither to gain access to additional distribution channels and sales outlets nor drive down costs to enable price reductions that attract new customers. Overall, both personalised service and sound brand name help to increase market share in an existing market, and not so on helping the firm to develop new markets.
With this, it can be concluded that the US parcel market is considered as a mature market. There are already established market players dominating in the industry. Ways of parcel services such as airborne or grounded delivery which serve different group of customers have been fully developed. The existing players are fighting over fixed group of customers and the potential for market expansion within the country has become limited. On top of those, the players in the US parcel industry have already begun to use cost reduction as the most effective tool when competing for the business.
However, unlike the US parcel market, the global parcel market should be considered as growth industry as many companies in the Asian Pacific region are still new to the global delivery service. Potential to acquire new customers in the emerging economies is still high while industry players are still figuring out the ways to build an efficient delivery network in developing countries such as China and India.
3. What appears to be the likelihood that DHL will succeed? What key factors will determine that? Judging from the company’s present situation, it is highly likely that DHL will succeed in achieving its target No.3 position in the US market. The key factors are as follows: Its humble goal of achieving no.3 in the country is well backed by its dominating success in the European and Asian market in which DHL both enjoys no.1 position. Though business culture and context could be different at these regions, there is no doubt that experience and expertise could be brought over from the successes and utilized in its US operation.
Strong and distinct competitive advantages will smooth out DHL’s business venturing process. While the personalized delivery services have already shown its usefulness in competing against market leaders FedEx and UPS, the strong brand name that DHL has will ensure that DHL has an upper hand when competing with smaller companies in the market. DHL is not rushing into any over ambitious business strategies.
Right now its goal of raising market share to between 10% to 12% and becoming no. 3 in the market is reasonable for such a successful player in the global business. Furthermore, the company has backing of deep-pocketed corporate parent to ensure sustainability if in any case things do not go smoothly as planned. Therefore, as long as DHL is able to follow its business growth plans closely, attract and please customers and effectively conduct operations, DHL will eventually gain footing in the US parcel market.