First in Asia and the World essay
DHL International is one of the leading international express carriers. The company discovered the market segment of combined express services for land and sea in 1969. Eventually, DHL focused on international express delivery. Currently DHL employs more than 300,000 people and targets more than 220 countries with 120,000 destinations. The major market of DHL is Asia, but the company is pursuing a strategy of international expansion. DHL uses local staffing and builds relationships with its customers, customs agents and other stakeholders.
The evolution of the market segment led to the creation of competitors in international express delivery. The competitors have advantages in size, pricing and flexibility. Despite DHL reputation and customer loyalty, the company had the worst service provided for the highest price in the past. DHL started improving the quality of its service, reducing prices and growing through acquisitions. In the U.S., DHL acquired Airborne Express with the intention to combine domestic service with existing international offers.
Case Analysis
Question 1. First mover advantage
There are several advantages of a first mover: the use of positive feedback loops and the ability to lock consumers into the technology, increased brand loyalty, quick increase of sales volume, creation of switching costs for customers and entry barriers for competitors, accumulation of valuable business knowledge (Kozami, 2002). A manufacturing company benefits more from the first mover advantage since it can lock the customers into the technology (which is rarely possible for services) and create switching costs for customers and entry barriers for competitors. The other advantages of first mover apply both to service and manufacturing companies. In general, manufacturing companies benefit more from being first movers, but also experience great risk of losses if their new product fails.
Question 2. Global expansion and company focus
Service companies need to develop brand loyalty and to build relationships with customers to a greater extent compared to manufacturing companies. The focus of manufacturing companies is on reducing price, while the focus of service companies is fulfilling the needs of customers in the best way. The obstacles to global expansion of service companies might be the scalability of service and the ability to customize the service to customer needs in different countries.
Question 3. DHL staffing
International staffing is efficient for DHL since it allows to tailor the service to the local needs and to build more resilient relationships with customers. In the case of international staffing, staff are multilingual and it is easier to work with customers from different destinations. Due to international staffing, DHL also has a larger pool of workforce to select from. However, there exist also cons of international staffing: language barriers, costs of relocation, cultural differences and teambuilding challenges.
Question 4. Faltering in the United States
DHL strategy was good for a new market segment, but was not efficient for the competitive market in the United States. The lack of cost optimization and efficiency, excess advertising and the issues of merging two different businesses after the acquisition of Airborne Express were the key causes why DHL was faltering in the U.S (Hill, Jones & Shilling, 2014). Furthermore, the U.S. labor market is different compared to Asia: workforce is more expensive and the employees are more fastidious. Other dangers of the first mover position include additional costs for developing a new market, higher risks of failure, the risks associated with technological change, the possibility that customers will switch to competitors and the possibility that the competitors will copy or even improve the first mover’s business model (Singla, 2008).
Conclusions and Recommendations
DHL managed to use first mover advantages to grow the new market segment – international express delivery. The company, however, missed the entry of competitors and had to face intensive competition. Furthermore, DHL set high prices and offered poor quality services compared to its competitors. In terms of ethical responsibility, DHL generally demonstrated reasonable approach since it tailored the services to local needs and customized the offers to customer requests. At the same time, there were numerous labor scandals associated with DHL staffing practices and freedom of workers to organize into unions in DHL (Hill, Jones & Shilling, 2014). DHL needs to reconsider its policies and to incorporate ethical values and ethical decision-making. The company should focus on improving its staffing practices and optimizing its costs and services. In particular, in the United States DHL should focus on integrating its core advantage – international express delivery – with local services.
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