DHL's Business Strategy in China
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Case Details:
Case Code : BSTR138
Case Length : 17 Pages
Period : 1995-2004
Organization : DHL International
Pub Date : 2004
Teaching Note : Available
Countries : China
Industry : Logistics
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Foreign Logistics Companies in China
Globalization offered more and more opportunities for companies operating worldwide. To realize these opportunities, global organizations shifted their production sites to low cost developing countries like China. China's entry into the WTO led to sustained improvement of its international trade (Refer Exhibit I and II for China's export and import partners in 2001).
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The growth in international and domestic trade also led to the rapid growth of
the Chinese logistics industry (Refer Exhibit III for logistics industry's share
in China's GDP). A report by the Beijing Post and Telecommunication Institute in
2003 indicated that the average annual growth rate of China's express delivery
market was 30 per cent and that the overall logistics market was valued at US$
120 bn. The improving prospects of the latter attracted significant foreign
investments. The rising demand for international deliveries prompted many
foreign logistics companies to expand their business in China. These companies
employed modern management practices, aggressive promotion strategies, used
advanced technological support and offered high quality services.
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The expansion plans of leading foreign logistics companies also led to intensified competition with each player competing for a bigger pie in the market. Commenting on this, David Cunningham, President of FedEx Express, Asia-Pacific, said, "China is growing incredibly fa... it is arguably going to be the biggest and fastest-growing marketplace in the world within the next two decades. But, there is enough market for all. The cake is getting bigger all the time."5
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The four major players in the market were DHL, FedEx, UPS and TNT. The US-based FedEx entered China in 1984. It became the first foreign express transporter to launch direct air-cargo flights in and out of China. In 1999, it formed a joint venture with the Tianjin-based Da Tian Air Services Limited.6 The same year, FedEx launched its express handling facility in Shenzhen, which became a major revenue generator. By the end of May 2003, FedEx had a network covering 220 Chinese cities. The company also planned a separate China business unit in Shanghai to capitalize on opportunities arising in the booming airfreight market. To strengthen its position, FedEx also proposed to expand its network by 100 more cities in China by 2008... |
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