Analysis of DHL: Opportunities and Threats in the Global Delivery Services Industry

Analyze DHL. Include citations for external sources used.

At the end of this analysis you will identify the opportunities and threats to the organization.  Complete the following three sections. 

Here you have to discuss the effect of the general environment on the organization and its strategy (e.g. political, environmental, social, technological). 

In this section you may wish to analyze the organization and the industry in which it operates (e.g. suppliers, competitors, consumers, partners) 

An internal environment analysis leads to the identification of strengths and weaknesses. Your analysis must include the following: 

Resources

Core competencies

Whether the firm has sustainable competitive advantage or not

Analyze the firm using a value chain

The global delivery service industry has been booming in the last few years, primarily because of the significant increase in online sales. The three largest global market shares in this industry are held by DHL at 38 percent, FedEx at 24 percent, and UPS at 22 percent. DHL is a German-based company and both FedEx and UPS are home based in the United States. The four largest markets for delivery services are in the United States, Europe, China, and Japan. These three companies are major participants in each one, but they play a much smaller role in the local delivery services in China than the other three. And, although DHL has the largest global market share, it has a much smaller share of the U.S. market. There UPS is number one and FedEx is a close second. The U.S. Postal Service (USPS) is the third largest in the U.S. market. DHL currently handles about 500 million packages annually in the United States. That sounds very large until it is compared to the 750 million packages that UPS delivered during the 2017 Christmas season alone. However, DHL has made major investments in 2017 and 2018 to increase its business in the U.S. market.

In many ways, the future for this industry looks to be bright with the increasing amount of online sales that then require the goods to be delivered. Of course, a major portion of online sales are made by Amazon, which has its own delivery service. And it supplements its delivery service with local deliveries by the USPS. Still, many other retail and other firms are selling their goods online. New technology is being developed and used to facilitate deliveries such as drones and robotics. With the significant growth in the market that is expected, the future should look bright especially for the three companies with the largest global market shares. However, they also face some unusual economic risks and uncertainties. As noted earlier in the chapter, the future of NAFTA is uncertain. If, by chance, the trade agreement is extinguished, economists predict negative economic consequences for all three countries involved, Canada, Mexico and the United States. And, a number of specific industries are likely to suffer lower sales revenue, which will translate into fewer packages shipped within and across these countries’ boundaries.

An additional and potentially even larger and more disruptive economic risk is on the horizon. In 2018, the U.S. government implemented tariffs on specific goods imported from European countries, Canada, Mexico, and China. In response, the European Union, Canada, China, and Mexico all instituted tariffs on specific goods imported into their countries from the United States. In return, the U.S. government has threatened to implement even larger tariffs on a greater number of goods. There are fears of a major trade war among these countries. If that happens, economists predict that the gross domestic product (GDP) of each country is likely to decline. In other words, no country is likely to come out of a trade war as a winner (based on the outcomes of past trade wars). If economies decline, the demand for delivery services will also decline. However, the negative effects are likely to be uneven in a trade war, partly because tariffs are commonly placed on specific products and so some sectors suffer more than others. The delivery services have little or no control over the changes in demand that are likely to occur from a trade war, and it may be difficult to predict the industries/sectors and companies that will be harmed the most. This is partly because some of the goods on which tariffs are placed may be used in the manufacture of multiple products. And the demand for these products will vary because of the price increases due to the tariffs. Additionally, some companies in the same industry may import more of these goods than others. Some companies may rely more on local suppliers and thus avoid the price increases due to tariffs on imported goods.