DHL Case Study - Strategic Planning and Strategy

Contents:

Unit 1

Management Strategy

1. Definition of Management Strategy.

2. Proposal of a suitable structure for Identification of DHL’s appropriate

participation from its stakeholders for the development of strategic

management

3. Development and description of the key criteria of that DHL considers

when reviewing management strategy options

4. 4.1. Construction of an appropriate strategy of DHL employs and

indication of its resource implications in the organization.

4.2. Discussion of DHL’s proposal of strategic alliance with UPS for

strengthening of market posisstion and share.

Unit 2

Vision, Mission, Objectives and Measures

1. 1.1. Identification of DHL’s ethical, cultural, environmental, social and

business

Objectives.

1.2 How these influence by the current business and economic climate

between 2002 and 2008.

2. Description of DHL’s vision and mission statement. How these effect on

DHL’s core organizational values.

3. 3.1. Establishment and evaluation of any organizations achievements with

its objectives like DHL.

3.2. Process of management of DHL’s culture issues as a result of being a

global player.

Unit 3

Implementation of the Strategy

1. Development of a timetable outlining the anticipated strategy

implementation of the

partnership between DHL and UPS including key milestones.

2. 2.1. Appropriate dissemination processes that might assist DHL to

encourage participation and commitment to the new strategic collaboration

with UPS.

2.2. Setup monitoring and evaluation systems for this new strategy.

2.3. Outlining how this might be possible within DHL.

MANAGEMENT STRATEGY

can be defined as the future oriented conception in which the relationship

between the industry and environment (pattern for adopting to the

environment) is described and forms the guiding principles for the people in

the industry for decision making. It is definite that the state of affairs with

regard to the management strategy like the number of years for which the

strategy has been planned, how clearly it has been described and for what

level of people it forms the guiding principles etc., differ from industry to

industry.

Strategic planning of an organization determines over the next years or

more, how its going to get there and how it will know if got there or not.

The focus of strategic plan is usually on the total organization, while the

focus of a business plan is usually on a particular product. Service or

program.

There are variety of perspectives, models and approaches used in strategic

planning both in profit of non-profit organizations. The way that a strategic

plan is developed depends on the nature of the organizations leadership,

culture of the organization, complexity of the organizations environment etc.

Regarding with my assignment on a case study on DHL’s success partnering

with UPS, it is found that both of these organizations adapted the goals-

based strategic planning with issue-based and organic based strategic

planning.

1.

DHL ensures appropriate participation with different stakeholders in different

ways for the development of its strategic management processes. DHL

believe that it is vital that they identify their stakeholders and either consult

them, or establish a dialogue with them to understand their key concerns-

this will help them shape their future activities and to be sensitive to the

impact that they have. Engaging stakeholders can allows them to gather

input.

After engaging with the World Economic Forum’s Logistics and

Transportation Corporate Citizenship Initiative (L&TCCI), DHL can participate

with stakeholders for the development of its strategic management process

on the two levels:

First, stakeholder consultation, for the main concern about environmental

emissions, ensuring positive impact on local communities, the health safety

and well-being of employees. For example, Currently DHL consulting with

customers relate to suppliers meeting strict environmental management

systems standards, the monitoring of greenhouse gas emissions and

adherence to human rights codes etc.

Second, multi-stakeholder dialogue: which is convened by the much-

respected Goal Reporting Initiative (GRI). Most importantly, DHL can make

corporate governance. It is the set of processes, customs, policies, laws and

institutions affecting the way in which a corporation is directed, administered

and controlled.

It can help DHL in declaration of conformity, their corporate values with other

stakeholders like employees, suppliers, customers, bank and other lenders

etc. O

One of the important example of the development of the strategic

management process is its partnership with the rival party UPS. By

partnering with this win-win strategy, DHL has benefitted shipping, financial

services and telecommunication industries and has yielded a positive

outcomes in the Fed-ex-US postal services which was signed in 2001.

Partnering with rival party can play a major cost-cutting initiatives as the fuel

prices are on the rise, may be positive step towards controlling pollution by

optimized use of planes.

2. DHL’s most important reviewing management strategy criteria is the cost

reduction programs. The chief executive of DHL’s global business, John

Mullen admitted that maintaining a scale of network similar to that of UPS

and FedEx with just 6% or 7% market share, gave them financial benefits.

According to this agreement, UPS will carry DHL’s US domestic and

international shipments within North America. The agreement mention that

UPS will carry express, deferred and international packages but not freight. It

was identified that UPS will also transport DHL air packages between US,

Canada and Mexico. Under the deal DHL is expected to pay every year $1

billion to UPS.

DHL also plans to restructure its domestic footprint.

The third point is the go green programme by reducing carbon emission by

implementing a number of measures including,

• Reducing gas and electricity usage across DHL’s building portfolio, through

a means of increased awareness and technique and improve building

management.

• Using 100% renewable energy across all DHL express UK properties.

• Investing alternative fuel option- DHL is proactively seeking alternative to

the fuel volume that are purchased. These trails have been undertaken in

collaboration with DHL’s industry partners and have included both courier

vans and trucks and are helping to pave the way for future transport

solutions.

• The introduction of 12 fuel efficient double-decker trailers, contributing to a

reduction of circa 250 operating runs per annum.

• Continuing increased amount of waste that is recycled.

DHL has three pilot schemes underway whereby waste is sorted on site,

baled and

sold to recycling agent.

3. Strategic alliances with its rival company like UPS, FedEx can be an

appropriate strategy for the DHL and it can be a resource which can DHL

implement for its organizations development. Jerry Hempstead, president of

Hempstead Consulting in Orlando, said that a large number of shippers who

use DHL because of its flexibility with its flight scheduling to accommodate

the special needs of specific shippers, will see at least 3.3% decline in the

service performance.

As a part of its strategic move in 2003, DHL acquired Airborne Express which

was the third largest player in the US and ABX Air started providing airlift

along with ASTAR Air Cargo for DHL. DHL had big aspirations for its express

business in the US after it acquired Airborne Express. Making alliances with

other parcel services can save a lot of money especially if these express

companies can create a similar route network.

Alliance with UPS can cut costs a lot. UPS will carry express, deferred and

international packages. It was identified that UPS will also transport DHL air

packages between US, Canada, and Mexico. Under the deal, DHL expected to

pay every year $1 billion to UPS.

Proposed strategic alliance can strengthen the DHL not only for above

reason but also this deal was one of the series of transactions such as

acquisition of Emery by UPS in 2006 and Airborne by DHL in 2003 which

reduced the competition in the express industry.

Unit 2

1.

1.1 There are varieties of objectives in related with ethical, cultural,

environmental, social and business can be found in DHL. Such as

a) Ethical commitment:

? Quality focus- DHL’s commitment is the quality first makes the difference.In

order to achieve high quality standards; it works constantly to improve its

structure and processes to satisfy the customers.

? Customer’s satisfaction- DHL believes that customer’s satisfactions

guarantee their own success. They prioritize customer focus in all of their

business processes, projects and dealings.

? Besides these, DHL believes in laws and ethical standards, transparency,

accounting and reporting standards, and money laundering as well.

b) DHL’s business integrity:

? Shareholders trust- DHL’s corporate management very much transparent

to their shareholders and investors.

? Business partner dialogue- share principles of ethical behavior, social

engagement, respect their suppliers, subcontractors, agents etc.

? Besides these, conflicts of interests, fair competition, bribery and

corruption, gifts and benefits, facilitating payments etc.

c) Social responsibilities:

? Communities- DHL is committed to support the communities in which they

work. They work for community development with non government

organizations.

? Environment- They are committed to improvement the environment as

well. They regularly assess and monitor their impacts on the environment.

? Cultural achievements.

1.2. After purchasing by a privatized German postal services, DHL could not

fill the planes with cargo to capacity made way for losses. Within a short

span, 2004-2008, DHL’s US business lost $3 billion.

But, for the above objectives, in 2003, it contributed $64 billion to world

GDP. In 2004, it became a global market leader of the international express

and logistic industry by attaining revenues over $32 billion. DHL’s overall

revenue for the year 2007 was $20.2 millions. Globally, in 2007, DHL express

processed approximately $1 billion shipments annually. It was reported that

the worlds number 1 in ocean freight and contract logistic in 2008.

2. DHL’s mission is to be first choice worldwide by making the most scale

and experience and the passion.

Its vision is the transform the logistic industry and to deliver beyond

customers experience for the future. DHL’s vision is

• To intensify customer focus.

• To deliver consistence service excellence.

• To extend capabilities ( creating local strength and driving practical

innovation)

• To attract, develop and retain talents.

• To relentless drive efficiency.

• To be proactive in social.

With using the vision and mission statement, DHL’s core organizational

values can be increased by examining its weakness, threats, strength and

opportunities. The following swot analysis can be done in DHL.

STRENGTH: WEAKNESS:

o Strong brand image. High price

o Globalism Market share estimate

o Eservices and technology Weak visibility

o Corporate symbiosis Not as well known as UPS or FedEx

o Smart-truck projects.

OPPORTUNITIES:

o Expansion globally

o Joint venture

o Expansion of ecommerce

o Increased the number of manufacture good.

THREATS:

o Relation with foreign countries.

o Economic and political condition

o Restriction

o Economic slow down.

COMPANY STRENGTH:

Strong brand image- In 1997, DHL became the global express transportation

company simultaneous system-wide ISO 9001 certificate in international

quality standards.

Globalism- DHL operate mare than 220 countries over the world on a global

scale.

E services and technology- it uses and search for a new technology. Product

can be tracked, queried, and ordered online.

Corporate symbiosis—it helps to encompass the empowerment of its

personnel at a local level.

Smart-truck projects—it allows DHL to deliver faster.

COMPANY WEAKNESS:

High prices—prices above their rival company.

Mistakes in market share estimate—it it’s the biggest weakness of DHL.

Weak visibility—in the community compared with its potential.

COMPANY OPPORTUNITY:

Expansion globally—it can expand globally including other companies under

DHL.

Joint venture—DHL can form joint venture integrating their customer bases.

Expansion of ecommerce—it serves with shipping online. DHL can enjoy both

profit and brand name recognition form this kind of expansion.

Increased in the number of manufactured goods—manufactured goods will

increased exponentially as a report given be WTO.

COMPANY THREATS:

Relations with foreign countries—in every country, DHL subjects to laws and

order which hinders their operation and efficiency.

Economic and political condition—as a global company they are subjects to

more risks than other domestic companies.

Restrictions—some restrictions like to prevent from china are big problems in

the logistic sector.

Economic slow down—it decrease the number of products they produced.

3. It is very much difficult to establish and evaluate the achievement of

objectives of any organizations like DHL. However, if any organization can

manage its own cultural issues properly, then it may be possible to achieve.

DHL employees can share common value and strong corporate culture. Their

corporate values represent a responsibility and a challenge. They can view

themselves as a member of society, and this attitude is reflected in the

responsibility that they assume for people and environment.

UNIT 3

Implementation of the strategy:

1.

Implementation of the Group strategy presented by CEO Frank Appel in the

spring of this year is progressing according to plan. Deutsche Post DHL

presented DHL Solutions & Innovation (DSI), its newly launched business unit

at the 26th German Logistics Congress in Berlin. As a motor of innovation

and a cross-cutting function of DHL it pools and drives technological

development within the Group. Headed by Petra Kiwitt, it reports directly to

CEO Frank Appel. "Logistics is becoming a sector for trendsetters and setting

standards not only with respect to technological development. Petra Kiwitt

and her team will contribute to ensuring that our Group remains one of these

trendsetters and helps to secure the economic success of our customers by

offering future-oriented logistics solutions," said Frank Appel.The newly

created organizational unit consolidates the innovation activities of the

individual branches of DHL. Based on the results of market studies, analyses

of sector strategies and intensive customer surveys, DHL Solutions &

Innovation lays the groundwork for future-oriented and standardized logistics

solutions that are becoming applicable across sectors. "Our customers

expect sustainable solutions, understandable services that are easy to use

and uncomplicated access to their service provider. We are achieving this

among other things by enhancing connections between the various DHL

Units dealing with research and development. This is a way to tap the full

creative potential of our staff," Petra Kiwitt stressed.Right from the start, DHL

Solutions & Innovations has been able to benefit from successful platform

approaches, such as the Control Tower Concept. Used for several customers,

this concept enables a strategic transport management through modern IT

solutions which provide a permanently updated access to all details of the

supply chain. The experience and innovative strength of the DHL Innovation

Center, which opened in 2007, is another asset. This is where

groundbreaking logistics solutions such as the parcel robot, the carbon

offsetting procedure and the smart truck originated.DSI also proves that the

Group Strategy presented in March 2009, which is aimed at strengthening

Deutsche Post DHL's leading role in the international logistics market, is

being implemented. The strategy is aimed at leveraging the full potential of

the world's leading logistics provider and increasing the profitability of DHL

by improving cooperation as "One DHL" and increasingly dovetailing

operations with DHL Global Customer Solutions (GCS). The needs in

particular of the 100 biggest customers handled by GCS are valuable

indicators, which are now being fed into development processes at an early

stage.DHL Solutions & Innovations is also the result of the study "Delivering

Tomorrow - Customer Expectations in 2020 and Beyond" that was recently

presented by Deutsche Post DHL. "Our study shows that the omnipresence of

the Internet, sustainable resource management and climate change are

issues of relevance to society. The logistics sector too must respond to these

challenges," stated Frank Appel. "DHL Solutions & Innovation is another

building block that will help Deutsche Post DHL turn these challenges into

opportunities."

Strategy 2015:

The Strategy 2015, which CEO Frank Appel announced on March 11, 2009, is

based on two pillars: The first is a strong mail business that is clearly

committed to carrying out the universal service obligation of Deutsche Post

and that plans to add new value-added electronic services to its range of

offerings. The second is an integrated international logistics business that

vigorously focuses on quality and customers.

The core aim of this strategic shift is to unleash the company's unexploited

potential following the aggressive phase of expansion pursued in recent

years. The objective is to achieve growth in all divisions that exceeds market

performance by 1 to 2 percentage points. At the same time, the Group is

committed to ensuring that these growth targets are reached in accord with

its responsibility for the environment and society.

At DHL, the individual divisions in the future will work even more closely

together in order to better address customer needs and to improve

profitability of the entire business.

The Group has also introduced a new guiding principle for employees with

the aim of increasing employee involvement and commitment and of

ensuring swift implementation of the Strategy 2015. The strengthening of

the First Choice customer initiative will also contribute to this end.

Challenges 2009:

The world's economy has been experiencing a tailspin of historic proportions

since the fourth quarter of 2008. Throughout all regions and sectors, many

customers of Deutsche Post DHL are seeing unparalleled decreases in

demand, which then result in lower shipping volume.

In the United States, the restructuring of the Express business continues to

make good progress. The termination of the entire domestic business was

carried out on schedule at the end of January. The remaining international

express cargo will be shipped by DHL's current carriers ABX Air and ASTAR

Air Cargo. The talks between UPS and DHL about a potential airlift

agreement have been terminated.

Despite having to master major economic challenges this year, the Group

will remain fully committed to its responsibility for the environment and

society. As presented in its Sustainability Report 2009, the Group has

introduced various initiatives in all Corporate Divisions covering the areas of

fleet, buildings, innovative technologies and employee motivation to help

improve carbon efficiency. Deutsche Post DHL a year ago launched its Go

Green climate protection program aimed at improving carbon efficiency by

10 percent through 2012 and by 30 percent through 2020.

Financial improvements: In terms of costs, DPWN expects to see overall

profits for DHL Express US improve by $1 billion in 2011, with expected

losses of $1.8 billion in 2008, $900 million in 2009, $500 million in 2010, and

$300 million in 2011.

Although this restructuring is expected to have a significant material impact

on DHL’s cost base and overall infrastructure, it is expected to have a

smaller impact on customers, said DHL Express CEO John Mullen. DPWN said

it expects to spend up to $2 billion to finance the restructuring plan, which

will go towards termination costs, leases, severance, aviation assets, and

pickup and delivery optimization. And DPWN noted that it anticipates these

restructuring efforts will result in annual savings of $1 billion per year (in

earnings before taxes), with key changes expected to be completed by the

end of 2009 and full plan implementation taking hold by 2010.

“As a result of this, we will have a less complicated ground and air network

than we had before, which should deliver more reliability across the whole

platform of our combined operations,” said Mullen. “Most importantly, we

believe this plan will protect our international network franchise and our

global coverage, which is critical to a global player such as us. It is essential

that we have a continuing presence in the U.S.”

Industry analysts suggest that there are pros and cons in terms of the type

of impact today’s news may have for shippers.

“DHL has stated in the past that its customers pay less than its competitors

on many occasions,” said Doug Caldwell, executive vice president of

ParcelPool, a small parcel delivery consultancy and services provider. “So

now you have a situation where current DHL shippers with good rates can

think this is a positive, because it says DHL is clearly staying in the U.S. and

they don’t have to worry about DHL shipments down the line.”

But shippers will want to see a smooth transition for DHL’s U.S. restructuring,

noted Caldwell, and he said they don’t necessarily need to be exploring other

options. Instead, shippers using DHL should be looking to hold onto those

rates for as long as they can for two reasons: one being that DHL’s rates are

by and large better than what the competition offers, and the second point

being the reliability of UPS airlift.

“Why would a shipper want to switch from DHL to UPS, when UPS is already

handling the line haul for airfreight on shipments right now? Also, UPS

operationally is second to none linehaul with very few service failures. This is

a plus for DHL shippers, except for those with a lot of rural shipments, and

for those in rural areas normally have a different service expectation.”

While Parcel Pool’s Caldwell, said that DHL’s probable agreement with UPS is

largely favorable for shippers, Jerry Hempstead, president of Hempstead

Consulting in Orlando, Fla., said that today’s announcement overlooks some

important points for shippers. One point being that this deal with UPS leaves

DHL bound to the UPS flight schedule.

DHL, said Hempstead, has a large number of shippers that use DHL, because

it has been flexible over the years with its flight scheduling to accommodate

the special needs of specific shippers.

As an example, he said DHL has a special flight into Memphis that allows it to

deliver as early as 4 a.m. to a company that repairs laptops. This gives the

laptop repair company the ability to extend its repair window so that laptops

can be turned in the same day and shipped out to the customer. He also

pointed out that other businesses have special flights into certain cities via

these specific DHL flights.

“I am not sure how the new arrangement with UPS is going to address the

special situations DHL has developed over the years,” said Hempstead. “In

addition large shippers, by way of the announcement, will see, by DHL's

admission at least a 3.3 percent decline in the service performance, and the

delivery will be through a hand-off to the USPS. DHL was already struggling

with its service image in the marketplace. You can’t price poor service low

enough to keep many of the large shippers upon which DHL built its

domestic business.”

He also cautioned that there are a lot of unknowns in this announcement,

with the most disconcerting one being that they announced a deal with UPS

without having a definitive contract in hand with UPS, leaving UPS in the

driver’s seat in negotiating the final agreement.

Its infrastructure network and in aviation with a restructuring plan that

focuses on three mainelements:

1. Reducing infrastructure network capacity by approximately 30 percent

through the following detailed measures:

- Consolidating and closing smaller sorting facilities into modernized, larger

stations, resulting in reductions of approximately 34 percent

- Rationalizing pickup and delivery routes by 17 percent, including new

courier routing plans to enable better route planning and avoiding peaks in

the operation, as well as making changes to staffing plans

- Ground linehaul network rationalized by 18 percent through improved

capacity utilization and footprint reductions in some remote areas.

2. A proposed contract between DHL and UPS whereby UPS will provide air

uplift for DHL Express U.S. domestic and international shipments within

North America

3. Reduction in overhead and other administrative costs As one central part

of its restructuring activities, DHL and UPS will pursue a contract to provide

air uplift, creating a single airline partner for DHL Express in the U.S. DHL will

continue to operate its courier and ground network as well as pickup and

delivery services to its customers across the country. The proposed

agreement, in character and scope representing an efficient model in the

express industry, will extend for 10 years. The commencement of UPS

service into the DHL network is expected to begin later this year. The

proposed contract provides both DHL and UPS substantial economic benefits

in the U.S. Express market, which remains one of the most challenging

marketplaces worldwide in light of the current economic downturn. DHL will

continue to compete in the U.S. market under its own brand, offering

attractive value to customers. The restructuring action in no way diminishes

DHL's commitment to retaining a significant presence in the U.S. market,

which is key to DHL's global network.

DHL's strategic priorities in the U.S. will be to continue to provide record

service reliability, and accelerating growth in more profitable segments of

the market through leveraging innovative sales channel strategies like the

recently announced Walgreens partnership.

To drive the implementation of the restructuring plan, DHL recently

announced the appointment of long-time DHL senior executive, Ken Allen, as

CEO of DHL Express U.S. Allen has extensive experience executing

restructuring plans within DHL. In his previous role as CEO of DHL Express

Eastern Europe, Middle East and Africa (EEMEA), Allen has doubled revenue

growth and margin within two years. In addition, his experience as CEO of

DHL Express Canada resulted in turning many years of negative performance

into what is now positive financial development for the company.

Conclusion:

From the above discussion, it can be said that-Centralization is not a benefit

in and of itself, but it does enable the practice of strategic planning. Strategic

Planning can be applied to both a centralized and a decentralized model. But

is easier to apply strategic planning to a centralized model, and it’s more

difficult to apply strategic planning to a decentralized corporate culture. It

allows for economies-of-scale on a worldwide basis, the benefits of which can

be applied to every component of the value chain.

In my opinion, DHL can make successful their business buy developing a

contract whereby UPS will provide airlift for DHL express US domestic and

international shipments within the US. The two parties will now rapidly

conclude a definitive contract with the goal of being able to provide service

in the second half of 2008. The two parties will now rapidly conclude a

definitive contract with the goal of being able to provide service in the

second half of 2008.

References:

? Applied Strategic Planning: How to Develop a Plan That Really Works, by

Leonard Goodstein.

? The Board Member’s Guide to Strategic Planning: A Practical Approach to

Strengthening Nonprofit.

? Organizations (Jossey-Bass Nonprofit and Public Management Series) by

Fisher Howe.

? Organizations (Jossey-Bass Public Administration Series) by John M. Bryson,

Farnum K.

? Alston. Jossey-Bass, 1995. ISBN: 0787901423.

? High Impact Tools and Activities for Strategic Planning: Creative

Techniques for Facilitating Your.

? Organization’s Planning Process by Rod Napier, Patrick Sanaghan, Clint

Sidle.

? Strategic Planning: What Every Manager Must Know, by George Albert

Steiner. Free Press.

Additional Resources

? Websites

? www.wikiswot.com/swot4_user_generated/DHL.html

? Community Associations Institute—www.caionline.org

? Foundation for Community Association Research—www.cairf.org