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Movement of documents and parcels by air. Air express industry offered two main products: document delivery and parcel delivery 75% Parcels(WPX) 25% Documents(DOX) The industry is growing at 6% per annum 4/12/12 Tolani Institute of 22
Speed of service. Door to door delivery. Proof of delivery. Tracking system. Security & reliability. Global network.
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DHL Expressis adivisionofDeutsche Postproviding internationalexpress mailservices. Originally founded in 1969 to deliver documents betweenSan FranciscoandHonolulu. The company expanded its service throughout the world by the late 4/12/12 Tolani Institute of 55 1970s.
Cont..
In 1998,Deutsche Postbegan to acquire shares in DHL, finally they achieved majority in ownership and completed the purchase in 2002. Today,DHL Expressshares DHL brand with other Deutsche Post business units such asDHL Global ForwardingandDHL Exel Supply Chain.
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DHL Express collaborated with AFL (Air Freight Ltd.) to enter in Indian market. Before Collaboration AFL was in the business of transportation of goods through maritime cargo and surface logistics. DHL India is a centralised unit. The management of this unit is in the 4/12/12 Tolani Institute of 77 hands of AFL.
Vision:
Mission:
To provide organization and individuals the best value in integrated logistics though a global network, innovative use of 4/12/12 technology and caring people Tolani Institute of 88
DHL India is among top air express service provider. DHL India had installed a sophisticated IT network to provide customers quick information and other services. All the strategies are based providing the best value customers.
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on to
Case Background
The case is providing the overview of the Air Express Industry. Data is provided from the year 1991 to 1997. Comparisons between different Air Express service providers but mainly focused on DHL India.
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Cont.
How to run the two segments of business namely domestic and international? What should be the response to the recent moves of competitors? What should be the future relationship between AFL & DHL Worldwide Express.
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INDUSTRY ANALYSIS
1. 2. 3. 4.
ETOP Analysis Potters 5 forces analysis Major competitors analysis Key success factors
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Environmental sectors
Economic Market
International Politics
Regulatory
Social
Supplier
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Analysis of ETOP
Here, unfavorable impact of the industry are on Regulatory and International sectors. Other impacts are almost favorable to the industry. The major threat is entry of global players. To remove this threat, the better strategies are:
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Face of competition: Threat of substitutes: Threat of new entry: Bargaining Medium Here, 4/12/12 power of
3. Competitors analysis
Blue Dart, Elbee, First Flight, Overnite Express, Speed Post, Fedex are the major competitors of DHL India. Most of the competitors are concentrating on domestic and non document market because of higher growth rate.
Competitors are investing in fixed costs (transportation vehicles), so they are having the benefit of economies of scale. 4/12/12 Tolani Institute of 1717
Global reach. High Speed in providing services. Using advanced technology (IT Network, Tracking software). Maintaining Customer data base. Maintaining Personal relations with corporate customers. Use of marketing communication 4/12/12 1818 tools(Direct Tolani Institute of mail).
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ETOP:
Most of the Impacts are favorable and other unfavorable impact can be minimized by adopting the beneficial strategies.
Porters 5 Forces:
Most of the forces are favorable and threat of competitors can be removed by providing the better services to the customers.
Competitors Analysis:
Tolani Institute of Most of the competitors have 2020 benefits of
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Overall, the industry is having good opportunities and it is also very attractive in terms of long term returns.
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COMPANY ANALYSIS
SWOT Analysis Value Chain Analysis Financial Statement Analysis
1. 2. 3.
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SWOT Analysis
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Strength
On time delivery. Effective Communication System. Loyal customers(Philips, Motorola). Market Share leadership(DOX). Strong Brand Equity. Use of updated technology. Low fixed cost.
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Weakness
Higher dependency on airlines. Low investment on transport vehicles(No benefits of economies of scale) High prices. Not able to capture enough market share in domestic (Parcel) market.
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Opportunities
Emerging new market. Product and service expansion. Takeovers small units of unorganized sector to capture domestic market. Increase in global shopping.
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Threats
Upcoming private competitors. External Changes(government, policies, tax). Price Wars. Decrease in traditional services (Letters) due to electronic communication(email).
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Inbound Logistics
Operation s
Outbound logistics
Primary Activities
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Investment Return
Capital Market ratios:
BLUE DART
More EPS is beneficial for the shareholder, here DHL is giving good return compare to others, It shows the profitability of the DHL is strong than the others.
Source: www.DHL.co.in, www.bluedart.co.in, www.elbee.co.in 4/12/12 Tolani Institute of 3030
Financial strength
Liquidity ratio:
2006-07 2007-08
Ability of the firm to meet its current liability, Higher the current ratio the greater the short term solvency. Here ,DHL was not in good position as compared to others so it was needed to improve.
Source: www.DHL.co.in, www.bluedart.co.in, www.elbee.co.in 4/12/12 Tolani Institute of 3131
Solvency Ratio:
2006-07 2007-08
1.27 0.92
The lower the debt-equity the higher the degree of protection enjoy by the creditors, Here the DHL position is better than the others.
Source: www.DHL.co.in, www.bluedart.co.in, www.elbee.co.in 4/12/12 Tolani Institute of 3232
Debt-Assets:
DHL BLUE DART 0.39 0.34 ELBEE 0.26 0.39
2006-07 2007-08
0.39 0.32
This ratio measure the extent to which borrowed funds support the firms Assets, here all company had similar position in 2007 - 08.
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Ability of firm to pay its interest burden, high interest ratio means company can easily meet its interest burden, DHL was not in good position in 2006-07 but profit increased and company paid the debt which increased the interest coverage ratio in 2007-08. It was better than ELBEE but similar to Source: www.DHL.co.in, www.bluedart.co.in, BLUE DART.
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Management performance
Profitability Ratios:
2006-07 2007-08
Its shows the margin left after meeting manufacturing costs, it measures the efficiency of production as well as pricing, here all over industry cost is high so all over Gross profit margin are lower for all companies. www.bluedart.co.in, Source: www.DHL.co.in,
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It indicates the over all efficiency of the production, administration, selling, financing, pricing and tax management, here over all company profit margin was lower compare to other industry.
It indicated the return on assets, how much return on equity and preference holder were getting from contribution of all investors from all the assets. Here, all the companies had similar ratio.
Source: www.DHL.co.in, www.bluedart.co.in, www.elbee.co.in 4/12/12 Tolani Institute of 3737
A measure of great interest to equity shareholder, here the DHL had high Return on equity ratio than the others ,so it was good for existing investors and for the new investors than the other air express companies. Source: www.DHL.co.in, www.bluedart.co.in,
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Generally return on capital employed should be greater than cost of capital, here DHL had more than 12% so that may beat the cost of capital.
Source: www.DHL.co.in, www.bluedart.co.in, www.elbee.co.in 4/12/12 Tolani Institute of 3939
Asset turnover ratios refer to the efficiency of assets , high ratio indicates that the high degree of efficiency In asset utilization, here DHL company had high efficiency than others.
Source: www.DHL.co.in, www.bluedart.co.in, www.elbee.co.in 4/12/12 Tolani Institute of 4040
Financial strength
Growth of AFL.
Growth of the Airfreight ltd has been increasing every year in term of turnover (18% to 30%), net worth (20% to 60%) and number of employees(10% to 15%).
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Growth in turnover and revenue of its divisions have been increasing i.e. 15% to 25% every years. It indicates the healthy growth of the company.
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DHL India has been steadily increasing in Indian market in terms of revenue (35% every year), customer(25% to 35%), IT investment(25% to 45%), and No. of express centers(15% to 30%).so Its shows that huge potential market in air express industries.
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BCG Matrix
Relative market share
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STAR (High relative market share, High growth): Maintaining relative market share Keeping sufficient funds available QUESTION MARK (Low relative market share, High growth)
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STRATEGIC ISSUES
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1. How to run the two segments of business namely domestic and international?
DHL India is leader in international segment. The market share in domestic segment is low. DHL India should do Promotion to capture domestic market. It should acquire small local courier companies.
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Competitors are focusing on non document segment. DHL India should also target non document segment and offer better services at cheaper rate.
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3. What should be the future relationship between AFL & DHL Worldwide Express.
AFL should adopt the technology and information system of DHL Worldwide Express. DHL India is among the top three Air Express service provider in India, So they should continue their relationship. They can also diversify into other online services.
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CONCLUSION
Strong Supply Chain is the major factor to sustain in the market. Corporate customers mainly focus on On time delivery As per the Porters 5 forces model the industry is attractive. As per ETOP most environmental factors are favorable to the industry.
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THANK YOU
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