DHL's Business Strategy in China
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Case Code: BSTR138 Case Length: 17 Pages Period: 1995-2004 Pub Date: 2004 Teaching Note: Available |
Price: Rs.500 Organization: DHL International Industry: Logistics Countries: China Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Entry
In 1969, DHL ventured into the air express business and introduced a service between San Francisco and Honolulu. The company came up with a novel idea of sending out documentation before the cargo arrival, which speeded up importing of goods. DHL's network grew exponentially with its success in offering the best and pioneering services to customers. The company expanded its network towards the West, starting from Hawaii to the Far East and the Pacific regions. It then entered the Middle East countries, and thereafter Africa and Europe. By 1973, DHL expanded its customer base in the air express business to about 3000. By 1977, the company extended its range of services and started delivering small packages as well as documents. In 1982, DHL added 30 countries to its network. DHL became the first air express company to open offices in Eastern Europe in 1983. It was also the first air express company to start operations in China in 1986. Before 1980, China was a closed economy with protectionist policies...
The Expansion Drive
In 2001, with the global economy facing a general slowdown, China posted a gross domestic product (GDP) growth of 7.3%. The country's trade volume in 2001 was the seventh largest in the world and significant growth was expected in the near future. With China's WTO membership, the restrictions on foreign international transportation and logistics companies were reduced. A highly conducive and transparent business environment was created. This attracted many foreign companies to invest in the Chinese mainland and expand their business too. The demand for export and import courier services increased significantly. In early 2001, DHL-Sinotrans accounted for 36 per cent of China's international express delivery market. The company sought to expand its operations fast and offer better service quality. Giving a briefing on the company's strategy, Charles Chia, GM and Director of DHL-Sinotrans, said, "In the global view, the service network of DHL is capable of covering more than twenty countries and regions...
Offering Innovative Services
To maintain and fortify its position, DHL-Sinotrans introduced many new services catering to both individual and corporate customers. In 2000, the company brought in a special service called 'Import Express,' for its Chinese importers, to cater to demands arising from the growing volume of trade in the country. This service enabled importers to get their shipments picked up from the supplier's doorstep overseas and get them directly delivered anywhere in the world. This helped Chinese traders avoid hassles of arranging shipments from multiple origins using different vendors. Another new service introduced in 2000 was 'First in Asia'. It was designed to accelerate the growth of DHL's intra-Asia business, focusing on shortening delivery time of packages within Asia. Anticipating the growing access Chinese people would have to international products and services, DHL launched another new-look product in the market. In December 2001, the company initiated its well-known global product, "DHL Jumbo Box"in China...
The Advertising Strategy
In August 2003, DHL-Sinotrans launched an advertising campaign in China to reflect DHL's global brand image. The campaign projected DHL as the world's largest express and logistics provider, leading the market by virtue of its unparalleled capabilities in providing 'one stop' services, covering every key segment with its variety of logistics services. DHL created a new bright and eye-catching company logo in which the letters 'DHL' were written in red colour against a yellow background. The company's vehicles, office facilities, uniforms, packaging and stationery throughout China displayed the new logo. In another advertising initiative, a new TV commercial was aired in 15 major Chinese cities, reflecting DHL's entire range of services using the imagery of the Egyptians building the Pyramids. Print ads were also placed in over 30 leading publications nationwide. In the light of the growing importance of the Asia-Pacific region in its business portfolio, DHL launched a 360-degree advertising campaign in early 2004. The campaign was spearheaded by a new ad with a catchy tagline, 'No one knows Asia Pacific like we do...'
The Furture
By the end of 2003, DHL had captured 37% of China's express delivery market. The company had already built up 160 delivery centres and planned to set up delivery sites in every major city in China by 2005 end. To cement its relationship with Sinotrans, the company entered into a 50- year-long contract. In 2003, China was DHL's third largest market after Japan and Hong Kong in the Asia-Pacific region. However, China was expected to become the largest market by 2006...
Exhibits
Exhibit I: China's Export Partners and their Share in the Market (2001)
Exhibit II: China's Import Partners and their Share in the Market (2001)
Exhibit III: Share of Logistics Industry in China's GDP
Exhibit IV: China's Air Cargo Volumes & Their Growth
Exhibit V: Revenues of Top Five Logistics Companies Operating in China
Exhibit VI: DHL-Sinotrans's Network in China (2004)
Exhibit VII: DHL-Sinotrans Services Network (1986-2003)
Exhibit VIII: A Note on the Logistics Industry in China
Exhibit IX: Regulatory Framework for Foreign Participation in Logistics Industry in China
Exhibit X: Facts and Figures on Courier Industry in China (2003)
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