September 5

Strategy Analysis
and Evaluation
Project
2013
Analysis of Deutsche Post DHL

[By: Amanpreet Singh

Monga – 430549193]
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Company and Industry highlight

Deutsche Post DHL is the world’s leading mail and logistics services group offering expertise

in express, air and ocean freight, overland transport, contract logistics solutions as well as

international mail services linking 120,000 destinations in more than 220 countries and

territories with a network of about 6,500 offices, a fleet of nearly 76,200 vehicles and about

420 aircrafts (DHL, 2012).

While looking at the 2008 industry figures it is worth noting that difference in terms of

revenue between the 1st and 10th globally rated company is more than 13 times. A

considerable difference when global logistic market in 2008 generated total revenue of $

3566 billion, show casing how fragmented the industry is (Data Monitor, 2009) and (World

Logistics Council).

13 times

1.0 The Elements of Strategy

1.1 Arenas

The main product of DHL group is delivery service and the company is active in below

divisions, targeting both B2B and B2C customers:

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a) Mail – Providing Mail and Parcel Services mainly in Europe and from Europe.

b) Express – Providing courier, parcel and express services by rail, road and air.

c) Global Forwarding and Freight – Providing International air and ocean freight as well

as European overland transportation services.

d) Supply Chain - Tailor-made contract logistics services and Corporate Information

Solutions.

Source: DHL Corporate presentation dated March 2012; (Page 4).

1.1.1 Analysis of company’s product with revenue spread

 Deutsche Post Mail provides 6 different products in the market, as discussed below

(Deutsche Post AG):

a) Mail communication deals with mail products, special services, franking and

philately with revenues for H1 2013 at 2804 million euros.

b) Dialogue marketing deals with advertising mail and tailored end-to-end solutions

with revenues for H1 2013 at 1121 million euros.

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c) Press services deals with nationwide distribution of about 2 billion newspaper and

magazines annually with revenues for H1 2013 at 371 million euros.

d) Parcel Germany deals into inbound and outbound parcels with revenue of 1770

million euros for H1 2013.

e) Global Mail deals with cross border mail and parcels with revenue of 877 million

euros for H1 2013.

f) Pension services deals into database administration and payment processes with

revenue of 45 million euros for H1 2013.

 DHL express has three products to offer namely ‘Time definite, Same Day and Day

definite’ with ‘Time definite’ international delivery being the core product. The

revenues from this product are spread geographically with revenue spread (H1 2013) as

mentioned below (Deutsche Post AG):

a) Europe contributing 2902 million euros.

b) Americas contributing 1106 million euros.

c) Asia Pacific contributing 2102 million euros.

d) Middle East and Africa contributing 466 million euros.

 DHL Global forwarding and freight has two core products to offer ‘global forwarding’

and ‘freight’ with revenue contribution as mentioned below (Deutsche Post AG):

a) Global forwarding has operations in more than 150 countries and revenues for H1

2013 at 5306 million euros.

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 b) Global Freight has operations in more than 50 countries with revenues for H1 2013

at 2096 million euros.

 DHL Supply Chain provides solutions in warehousing, distribution, managed transport,

value-added service, business process outsourcing and supply chain & management

consulting with focus sectors being direct consumer, retail segment, technology, life

science and healthcare, automotive and energy. The revenues generated by this

division are split between two sub-division :-

a) Supply chain contributed 6407 million euros for H1 2013.

b) William Lea services which deals into marketing and office document solutions

contributed 629 million euros for H1 2013.

To explain the above product portfolio the figures have been explained in a chart below

for quick synopsis (refer Chart-1).

Chart 1

Gist of above discussed revenue in graphical representation

1.2 Vehicles

The primary modes or vehicles of DHL group for attaining the above needed market and

geographical segment has mainly been a balanced mix of organic (own point of sales or

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outlets & franchisee) and inorganic {acquisitions}. Deutsche Post AG (now known as

Deutsche Post DHL) progressively acquired DHL as global air express service provider from

1998 to 2002 and enhanced its expertise by purchasing other leading logistics companies,

e.g. 1999 acquisition of Danzas, 2004/2005 acquisition of 88 percent of shares of Indian

express company Blue Dart, end of 2005 acquisition of Exel (Deutsche Post DHL, 2013).

1.2.1 Why were these vehicles used?

The main reason what group states is that these acquisitions helped improving group

portfolio in terms of product line, regional coverage or market position (Deutsche Post DHL,

2010). The same can be identified when we look into the acquisition of Blue Dart by DHL,

where The Hindu (2004) states “the acquisition of Blue Dart has a strategic fit as DHL can

now offer one-stop solutions for express and logistics services in India.”

1.3 Differentiators

The key differentiators of DHL group are its ‘geographical coverage’ where it has unique

pan-European coverage with more than 200 offices in 25 countries and in cases where it

does not have its own freight presence, it has an alliance or co-operations in place to ensure

its services are provided to its customer. ‘Broad range of services’ where DHL provides one

stop shopping services to its customers from import and export to custom consultancy and

excise duty handling; the vast fleet of DHL group adds to the list of differentiator where it

uses alternative transport modes like intermodal, short sea, conventional rail to provide

weekend deliveries (improved transit time than others). ‘Innovation’ where the group

through the “GoGreen” program, has not only pioneered the growth of more

environmentally friendly products and services in the mail and logistics sector, it is also

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trying to transform the way they do business, with phenomenal increase (387%) in sales

figures (refer figure 1) achieved within the Group’s “GOGREEN” product range shows

growing demand for more sustainable options by consumer and the business side (Deutsche

Post AG, 2010).

Fig. 1

Image Source: Deutsche Post AG (2010), page 50

The key points which we can infer from above are that it is the brand, customization and

innovation which are key differentiator for the group (Diallo, 2012).

1.4 Staging

The speed of expansion of DHL group was foresighted and fast which we can analyze from

its acquisition planning where when the World Bank in 2005 raised its forecast for East Asia

to 7.8% from 6.6%, DHL had already initiated discussions to acquire companies which would

help create synergy and market expansion for the group. ” [“We will continue to look for

acquisitions,” Price1 said on Friday in Hanoi, Vietnam. “We are in a few interesting

discussions in China. We think it is a market for the future,” he said, without elaborating]”

(Bloomberg, 2006).

1
Mr. Scott Price was CEO DHL Express APAC

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 1.5 Economic Logic

The company has positioned itself as a premium service provider to achieve its return and

profitability. They demand premium from customers as they can provide reliable service,

customise solutions (as already discussed in differentiator section) and provide superior

account management services (DHL, 2012) and (Diallo, 2012). We can also infer this

information from article by Reid (2012) where he discusses the service bifurcation amogst

top three players UPS, Fedex and DHL, where DHL is only catering to the premium segment.

Image source: http://www.iglobalexports.com/internationalblog/2012/01/05/international-shipping-services-for-ups-fedex-and-dhl/

1.6 Consistency and Support between the five elements

DHL has a wide product portfolio and to understand the lifecycle of the customers’

segments, they have bifurcated their B2B & B2C customers into three different groups:

strategic customer; long-term relationship customer; and normal customer. Strategic group

consists of customers with large amount of logistical needs or complex supply chain

requirement with usually top 250 customers globally, long-term customers are those

looking for regular and frequent service from DHL but with simpler logistical needs than

strategic customers and normal customers are the one who are not loyal and can choose

any other company if they want to. To support this wide variety of customer base with

customised requirements, DHL required timely acquisitions (staging and vehicle) to fulfil the

demand of its customer requirements. These acquisitions have helped DHL to expand its
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geographical base and technological skills (differentiator) to focus on long term relationship

building with customers, this focus will help them achieve profit maximization (economic

logic) by providing premium and customized services (Wen, 2012). Overall, they have

consistent elements of strategy.

2.0 Evaluation of Strategy

2.1 Fit between strategy and the external environment

With growing changes in environmental sustainability and increase in costs of fuel DHL is

looking at efficient usage of their transport [example – optimizing the aerodynamic drag of

the truck helps DHL save 10% - 20% of fuel efficiency and 11.3% of CO2 efficiency]

(Deutsche Post AG, 2010). The article by Deutsche Post AG on ’Towards sustainable logistics’

further discusses the change in trend of market from ‘simple model- higher cost for quick

delivery ’ to addition of ‘sustainability’ in the work flow (refer figure 2), not only for DHL

internally but (the external) clients approaching for solution also look for this, the article

further explains this with the case of Heathrow airport where in an effort to reduce

congestion and carbon emissions apart from operational benefit, DHL was contracted to

manage its consolidation centre. DHL consolidated 700 inbound deliveries a week into 300

outbound runs; the centre achieved significant2 environmental and operational benefits.

Figure 2

Image source: Towards Sustainable Logistics by Deutsche Post AG

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DHL reduced CO2 emissions by 70 %, Service levels increased to (~ 99 %) and 50% less trucks around airport (Brown, 2011). There was no
precise information available to quantify operational benefits achieved for detailed analysis.

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With ‘3D Printing’ or ‘additive manufacturing’ and some time also known as ‘factory on

desk’ slowly gaining momentum holds a threat to manufacturing and logistics industry with

expected decrease in volumes of physical transportation and could also reduce the amount

of freights shipped between continents.

The ‘mass customisation’ of products would lead to fall in inventory levels as it is expected

that goods will be made to order which would have the effect of reducing warehousing

requirements. It has been estimated that in 2012 up to 30% of finished products already

involve some kind of 3D printing which by 2016 is expected to rise to 50% and potentially up

to 80% by 2020 (John Manners-Bell, 2012) and (Deutsche Post AG, 2010). Even though

threat by 3D manufacturing is seen not to effect in the short term but in the medium term

(coming 10-15 years)3 it is expected to have some effect, where DHL has already started

preparing itself to work on hybrid model (refer figure 3) to counter the impact of this

technology in future.

Figure 3

Image source: Towards Sustainable Logistics by Deutsche Post AG; Page 122

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The medium term description is my own analysis based on different research papers and historical analysis of 3D industry that though it
is 20 years old but it will still take time to gain momentum in future. Research paper referred (Deutsche Post AG, 2010) & (John Manners-
Bell, 2012)

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 2.2 Key resources and capabilities

The key resources of DHL group are their infrastructure (which includes transport, hubs,

offices, services centres and warehouses), financial (ability to generate internal funds or

external capital), branding or reputation, human capital and innovation which work in

tandem with each other (refer chart below).

Tangible

Financial Physical
Transport
Hubs
Warehouse
Service centre
Intangible

Brand

Innovation

Human
Employees

Franchise
e

Analysis of Key resources and Capabilities of DHL group with VRIO model:

Valuable Rare Costly to Exploited by Competitive Firm

imitate organization implication performance
Competitive Below
No - - No
disadvantage Average

Yes No - Yes Competitive Parity Average

Temporary
Above
Yes Yes No Yes competitive
Average
advantage
Sustained
Persistently
Yes Yes Yes Yes competitive
above average
advantage

The company is efficiently exploiting its resources by smart and effective usage of

transportation and other resources like infrastructure, and regularly investing in technology

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and innovation to come up with niche products4 which are rare but not costly to imitate for

the key competitors like UPS who have equivalent or better cash flows (refer figure 4) of

DHL and are looking for expansion in similar areas but these resources are effectively

exploited by DHL as an organization.

Figure 4

Source: (DHL, 2012), (UPS, 2012) and (FedEX, 2012). The figures of DHL have
been converted from Euro to USD from xe.com as of 05-09-2013 12.30 p.m

2.3 Competitor and Differentiator analysis

Basically, all logistics company do the same or similar job in the market. But the main

competitors of DHL are UPS and FedEx. Though UPS has more manpower which can be

advantageous for them as the industry is majorly manpower driven but this also means

increase in costs for DHL if it tries to compete on basis of manpower, instead DHL is trying to

automate its logistics to an extent possible for effective use of manpower. Looking at the

key differentiator of company, branding is the area which has helped DHL improve its

presence in certain market where they wanted higher market share, Silverstein (2007)

discusses article published by BusinessWeek that DHL had about 40 percent market share in

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To explain it briefly, when life sciences and healthcare sector were looking at advanced technology for cold chain treatments, DHL has
built up Life sciences and healthcare(LSH) specific infrastructure that is scalable to evolving global demands (Deutsche Post DHL , 2013)
and (Stanton, 2013).

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both Europe and Asia, but had only 7 percent market share in the US before it launched the

campaign. Post campaign overall awareness of DHL by its target customers in the US was at

60 percent, a considerable improvement in presence but still this market needs more

attention by DHL which is also discussed by Wen (2012) in his paper where Yunfeng Gao,

Strategic Manager of DHL in an interview says “the quality of DHL service in Asia, West

Europe is very good. Customers like staff’s attitude. But in South America and U.S, it is not as

good as UPS or FedEx.” Being a premium player could be one of the differentiator but it is

also a weakness as Yunfeng Gao further says that the overall cost of DHL makes it

uncompetitive in certain market segments.

Conclusion

DHL might have a weakness of being expensive but its focus on serving as a premium

customer and creating a niche helps them differentiate in an industry where there is a thin

line to differentiate yourself as an organization, this was proved when they won “the great

package race” conducted in 2007 by Supply Chain & Logistics Institute of Georgia Institute of

Technology where UPS, FedEx and DHL were unknowingly competing with each other to

deliver package to five obscure worldwide locations, such as Apia, the only city on Upulu, a

Samoan island with no street address and DHL was a straight winner (Silverstein, 2007).

Further, as already discussed, the group will have to keep innovating to counter the future

threats of new disruptive industry/s (3D manufacturing), environmental impact and cost of

transportation to be socially and operationally effective and profitable.

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Reference
Bloomberg. (2006, 11 06). The Financial Express. Retrieved 08 31, 2013, from The Financial
Express: http://www.financialexpress.com/news/deutsche-post-s-dhl-eyes-acquisitions-to-
expand-in-asia/184379

Brown, M. (2011, 10 25). DHL Solutions and Innovations. Retrieved 09 03, 2013, from Urban
Tech:
http://www.urbantec.de/media/urbantec/downloads_6/pdf_8/vortraege_1/brown_martin.
pdf

Data Monitor. (2009). Global Top 10 Logistics Companies. Data Monitor.

Deutsche Post AG. (2010). Delivering Tomorrow - Towards Sustainable Logistics. Bonn:
Deutsche Post AG, Headquarters.

Deutsche Post AG. (n.d.). Deutsche Post AG. Retrieved 08 31, 2013, from Deutsche Post DHL:
http://www.dpdhl.com/en/investors/the_group/divisions.html

Deutsche Post DHL . (2013, 07 23). Corporate Newsletter - New treatments for the cold
chain. Retrieved 09 05, 2013, from Deutsche Post DHL :
http://www.dpdhl.com/en/media_relations/abonnements/financial_media_newsletter/ne
w_treatments_for_the_cold_chain.html

Deutsche Post DHL. (2013, 03). Deutsche Post DHL - Facts and Figures. Retrieved 08 31,
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http://www.dpdhl.com/content/dam/presse/mediathek/fact_sheet_dp_en.pdf

Deutsche Post DHL. (2010). History. Retrieved 08 31, 2013, from History of DHL Group:
http://www.dpdhl.com/reports/2010/factbook/files/pdf/en/DPDHL_IFB_2010_History.pdf

DHL. (2012). Annual Report 2012 - Pioneering Future Markets. DHL.

Diallo, A. (2012). Our customers are global – so are we. Antwerp: DHL.

FedEX. (2012). FedEx. Retrieved 09 05, 2013, from FedEx:

http://fedexannualreport2012.hwaxis.com/Files/FedEx_Annual_Report_2012.pdf

John Manners-Bell, K. L. (2012). THE IMPLICATIONS OF 3D PRINTING FOR THE GLOBAL

LOGISTICS INDUSTRY. Transport Intelligence Ltd.

Reid, C. (2012, 05 01). International Shipping Services for UPS, FedEx and DHL. Retrieved 09
02, 2013, from iGlobalStores:
http://www.iglobalexports.com/internationalblog/2012/01/05/international-shipping-
services-for-ups-fedex-and-dhl/

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Silverstein, B. (2007, 12 03). Delivering Overnight Brands. Retrieved 09 03, 2013, from Brand
Channel: http://www.brandchannel.com/features_effect.asp?pf_id=398

Stanton, D. (2013, 06 17). Outsourcing-Pharma. Retrieved 09 05, 2013, from Outsourcing-

Pharma: http://www.outsourcing-pharma.com/Commercial-Services/DHL-Launches-Cold-
Chain-Air-Distribution-Service

The Hindu. (2004, 11 09). The Hindu. Retrieved 08 31, 2013, from The Hindu Business:
http://www.hindu.com/2004/11/09/stories/2004110904071800.htm

UPS. (2012). UPS. Retrieved 09 05, 2013, from UPS:

http://thomson.mobular.net/thomson/7/3275/4724/

Wen, J. L., & Yuanyuan. (2012). Study of Competitiveness- A Case Study of DHL. University of
Gavle.

World Logistics Council. (n.d.). World Logistics Council. Retrieved 09 03, 2013, from World
Logistics Council: http://www.axiolog.com/focus/voice_main.htm

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