Term Paper Dhl International Business

Kazakhstan Institute of Management, Economics and Strategic Research

Table of Contents:

1. DHL company profile……………………………………………………………………3 a) DHL approach………………………………………………………………………..4 b) DHL Global presence………………………………………………………………...5 c) DHL Internalization…………………………………………………………………...6 d) DHL's use of Information Technology……………………………………………….7 e) Services of DHL……………………………………………………………………….8 2. Main competitors…………………………………………………………………………9 3. Diamond Model…………………………………………………………………………10 4. Risks in International Business………………………………………………………….10 5. Value Chain……………………………………………………………………………...11 6. Conclusion……………………………………………………………………………….12 7. References……………………………………………………………………………….13

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DHL Company Profile History of DHL At all times an opportune and unique idea was a key to success and a sort of revolution in any sphere of business. Such a unique and original idea of important documents and parcels express delivery created by founders of DHL - Dalsey, Hillblom and Lynn in 1969 allowed DHL to take a leading position in courier industry. During all the history of its existence DHL Worldwide Express stays a pioneer in mastering new technologies and opening new markets. The name of DHL comes from the first letters of the last names of the three company founders, Adrian Dalsey, Larry Hillblom and Robert Lynn. In 1969, just months after the world had marveled at Neil Armstrong's first steps on the moon, the three partners took another small step that would have a profound impact on the way the world does business. The founders began to personally ship papers by airplane from San Francisco to Honolulu, beginning customs clearance of the ship's cargo before the actual arrival of the ship and dramatically reducing waiting time in the harbor. Customers stood to save a fortune. With this concept, a new industry was born: international air express, the rapid delivery of documents and shipments by airplane. The DHL Network continued to grow at an incredible pace. The company expanded westward from Hawaii into the Far East and Pacific Rim, then the Middle East, Africa and Europe. By 1988, DHL was already present in 170 countries and had 16,000 employees. Widening of activity and history of the company growth reflect the process of globalization in trade sphere. Along with its clients that won new markets DHL developed and provided infrastructural support for them. In the Republic of Kazakhstan DHL offers its service since 1991 through its agencies and in 1994 "DHL International Kazakhstan" was registered as a company with 100% foreign capital. Within the period from 1994 till 2001 state bodies, banks, embassies, representative offices of largest foreign companies and international organizations and leaders of Kazakhstan business became the clients and business partners of the company. At present over 500 Kazakhstan and foreign companies and representative offices are the permanent clients of DHL International Kazakhstan. In order to widen a range of service offered to the companies interested in express delivery of documents and parcels throughout Kazakhstan, DHL has opened a head office in Almaty and 8 branch offices and agencies in the regional centers of the republic including a branch office in the capital of Kazakhstan - Astana and agencies in the Caspian region. In 2000 DHL International Kazakhstan opened its own gateway in Almaty International 3

Airport. It allowed shortening time for proceeding all inbound, outbound and transit materials for Central Asia. Round-the-clock operation of the terminal allows carrying out customs proceeding immediately after materials arrival to the airport. At the beginning of 2002, Deutsche Post World Net became the major shareholder in DHL. By the end of 2002, DHL was 100% owned by Deutsche Post World Net. In 2003, Deutsche Post World Net consolidated all of its express and logistics activities into one single brand, DHL. The DHL expertise is pooled from a number of companies acquired by Deutsche Post World Net. To name a few: Deutsche Post Euro Express: in operation since 1997 through internal growth and investments in leading European companies, network for parcel and express services in more than 20 countries, market leader for business customers in Europe. Danzas:

founded

in

1815,

based

in

Basel,

Switzerland,

acquired

by

Deutsche Post World Net in 2000, world leader in air freight and ranked second in ocean freight. Overland transport and supply chain management complete the Danzas service portfolio. Air Express International: largest American air freight provider, integrated into the Danzas group in 2001. The new DHL is a global leader in express, freight and logistics and is positioning itself as a multinational enterprise. It has 60,000 vehicles and an integrated network that links more than 220 countries and territories worldwide. The DHL approach

”Our task as a global logistics provider is to network the world. Our aim is to provide excellent service quality to our customers at attractive prices, in the most environment-friendly way possible, embracing our social responsibilities.” Increasingly, the challenges that global companies must address to be profitable longerterm are intertwined with the challenges that broader society must address to improve quality of life. Company believes commitment to good corporate citizenship is a fundamental part of achieving sustained value creation for both society and company, and thus to ensuring the future of the work that they do. 4

“We believe being a good corporate citizen requires building successful partnerships with our customers, suppliers and communities and is critical to establishing a trusted brand and responsible reputation. We also believe, in line with our values, that we have a responsibility to be a positive force in society by harnessing our core competencies in logistics and transportation to achieve social as well as commercial goals, where relevant.” Company took definition of Corporate Citizenship from the World Economic Forum - it says: 'Corporate citizenship is about the contribution a company makes to society through its core business activities, its social investment and philanthropy programs, and its engagement in public policy. The manner in which a company manages its economic, social and environmental relationships, and the way it engages with its stakeholders (such as shareholders, employees, customers, business partners, governments and communities), has an impact on the company's long-term success.' ”Our vision for DHL as a good corporate citizen is founded on our awareness of what the company is, and what has made it successful. We operate almost everywhere in the world - in over 220 countries and territories worldwide, including long-established operations in China and the Pacific Rim. We respond quickly to customers' needs, working in partnership with them to provide solutions to their commercial needs. It was therefore natural for us to adopt this same approach for corporate citizenship. At DHL, we believe that it is as important to be a citizen as much as we are a corporation.” DHL's Global Presence DHL Worldwide Express is the world's largest and most experienced international air express network with service to more than 635,000 destinations in the world. DHL maintains its position as the world's leading international air express network by continually expanding and upgrading its network of offices, hubs and services, and by offering superior service through a well-trained and dedicated work force. On an average day, more than 260 thousand DHL shipments are sent to destinations throughout the world. DHL serves virtually every city in 228 countries around the world.

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Number of

Number of

Number of

Number of

Number of

Countries

Stations

Vehicles

Hubs

Sub-hubs

Europe/Africa

119

1,491

9,556

107

14

Asia/Pacific

40

810

3,421

12

4

Middle East

11

97

596

7

2

The Americas

58

604

5,003

126

13

Total

228

3,002

18,576

252

33

Revenue 2004: EUR 24.5 billion Number of Employees (full time): more than 170,000 Number of Offices: around 4,400 Number of Hubs, Warehouses & Terminals: more than 450 Number of Gateways: 238 Number of Vehicles: 72,000 Number of Countries & Territories: more than 220 Number of Customers: 4.2 million Shipments per Year: more than 1 billion Destinations Covered: 120,0001 DHL Internalization DHL started to internationalize its services in Philippines in 1971. In 1972, was taken the next step of internalization in the following countries: •

Japan

•

Hong-Kong

•

Australia

•

Singapore

In 1980, DHL internationalized through China and later in 1986 became the first international joint venture express company with Sinotrans. In 1973, it was a Europe, the next-the Middle East and Africa. From 1985-1995 the Hub operations were established in Brussels, Cincinnati and Manila. DHL's use of Information Technology 1

DHL Express Overview brochure (2005)

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DHL leads the international air express delivery industry in providing state of the art technology that gives customers easy access to shipping and tracking information. The investment in information technology allows company to continue to harness new technologies to streamline the shipping process and provide services that allow customers to be more competitive. a) DHLNET (TM) DHLNET is global, high-speed TCP/IP communications network enabling customers to track the status of shipments and research delivery schedules and pricing information from anywhere in the world. DHLNET uses both X.25 and Frame Relay technology. DHLNET also provides invaluable information on routing, delivery times and system capacity which enables shipments to move as efficiently as possible around the world. b) Automated Sorting DHLNET ensures that information travels ahead of the goods, enabling DHL to provide expedited transit times through its sorting/distribution centers. The automated sorting system is programmed with shipping information so it recognizes each package as it comes through and routes it to the appropriate outbound flight. It also provides a backup to ensure that all packages have been properly received by the sorting/distribution centre. c) Customs Clearance DHLNET also forwards shipping documentation to customs officials at the destination country so goods can be cleared before they arrive and delivered immediately. d) Electronic Data Interchange (EDI) EDI allows DHL's customers to communicate using standard electronic messages directly with DHL. DHL's use of EDI enhances speed and efficiency in shipping, billing and data management. e) Automated Voice Response Services In selected countries, DHL offers a tracking system customer can access through automated phone prompts. Services of DHL DHL Import Express Import Express service involves the collection of inbound document or parcel from virtually anywhere in the world, then sending the shipment through the DHL network to chosen address in Kazakhstan. All dutiable shipments need to clear Customs. DHL EndDay Express 7

Express delivery service is available for when client have to send dutiable and nondutiable items anywhere around the world. Reliably fast to more global destinations across a single integrated network than any other express delivery company. All dutiable shipments need to clear Customs. DHL Domestic EndDay Express The standard pre 6 p. m. delivery service offers a reliable, cost effective solution for sending urgent parcels or documents door-to-door to any address within. Average delivery time is 24 to 48 hours depending on destination. DHL StartDay Express The premium pre 9 a. m. delivery service is offered to the majority of European business centers, with a pro-active notification of delivery sent to client and a money-back guarantee for even more peace of mind. DHL currently offer this premium service for non-dutiable items in almost any shape, size or weight. DHL Domestic StartDay Express Many customers need to send parcels and documents within Kazakhstan that are time critical. The integrated domestic network of DHL allows clients to send urgent shipments to key Kazakhstan cities and DHL make sure they are there before 9 a.m. Company ensures a moneyback guarantee for this service. DHL Domestic MidDay Express When the parcels and documents should be delivered pre 12-noon to any major city in Kazakhstan, the Domestic MidDay Express service is the solution. Almost any shape, size or weight, door-to-door can be sent, and DHL ensures a money-back guarantee for this service. DHL Express Freight Delivery of shipments, weight of which are minimum 30 kg and maximum 1000 kg, within Kazakhstan, door-to-door delivery till definite day to such cities as Almaty, Balkhash, Karaganda, Temirtau, Astana, Pavlodar, Ust -Kamenogorsk, Semipalatinsk, Taldy-Korgan. A premium freight service with track and trace capability. Main Competitors a) United Parcel Service UPS company, due largely to its strong position in the dominant US market. UPS operates in over 200 countries and territories and is now competing closely with FedEx in air delivery. UPS delivers an average of 13 million packages per day and also operates UPS. Logistics and UPS e Ventures to develop operations supporting ecommerce and Internet-based firms. UPS is 90% controlled by its management, staff, ex-staff and the company’s founding 8

family. A 9% stake was sold to the public in 1999. In Asia, UPS has major hub locations in Taipei (Taiwan), Hong Kong and Singapore. b) FedEx FedEx is one of the world’s leading express mail transportation companies and operates 648 planes, the second-biggest aircraft fleet in the world. FedEx is actually five units including Federal Express, the transport firm, FedEx Ground unit (formerly called RPS) which specializes in shipping small packages within North America, FedEx Custom Critical (formerly Roberts Express) which specializes in urgent deliveries, FedEx Global Logistics which specializes in just in- time delivery, warehouse management and distribution services and Viking Freight, a lessthan-truckload carrier in the US. FedEx delivers some 3.3 million packages daily. The company's unmatched air route authorities and infrastructure make it the world's largest express transportation company providing fast, reliable and time-definite transportation of more than 3 million items to over 210 countries each working day. FedEx Express employs approximately 138,000 employees and has more than 30,000 drop-off locations, 653 aircraft and more than 44,500 vehicles in its integrated global network. c) TNT Express House TNT is the world's leading business to business express delivery company delivering 3.6 million parcels, documents and pieces of freight a week to over 200 countries using its network of 878 depots, hubs and sortation centers. The company operates more than 20,000 road vehicles and 43 aircraft and has the biggest door to door air and road express delivery infrastructure in Europe and leads the industry in offering customers a state of the art range of internet and software-based facilities. It employs over 40,000 staff worldwide and is the first ever organization to achieve global recognition as an Investor in People. TNT is a division of TPG N.V., the global provider of express, mail and logistics services. TPG N.V. is listed on the Amsterdam, New York, London and Frankfurt stock exchanges and has reported sales of Euro 11.7 billion in 2002, an increase of 5% over the previous year. Diamond Model 1. Firm’s strategy, structure and rivalry- The Company started to operate in the USA that is known to have quite many express companies like Fed Ex, UPS, TNT and others. This pressure allowed USA to produce leading companies in express delivery system. The firms compete not only for market share, but for the quality, service and fast delivery of the documents, products. 2. Factor Conditions-The competitive advantages of the companies located in the USA are high technology and the presence of strong capital. These factors are leading to success in 9

terms of working process and development of different spheres of the express delivery industries. 3. Demand Conditions- in the United States, there are lot of big internationalized companies that are in high demand of fast delivery of products or documents worldwide. 4. Related and Supporting Industries- There are related industries that manufacture transport such as planes, trucks, ships, trains that help company to be successful in their market. Risks in International Business •

Country Risk- Every country has different regulations and legislations that expose DHL to potential loss or adverse effects on company operations and profitability. On the other hand, governments of countries where DHL is presented could give a support to business activities that DHL provide.

•

Cross-cultural Risk- Unlike political, legal, and economic systems, culture has proved very difficult to identify and analyze. Its effects on International Business are deep and broad. DHL is also has challenges in terms of cultural Risks in different countries where DHL has subdivisions, through making business in various countries DHL should focus on different aspects that will be accepted and lead to success in chosen country. For example, Asian people are much more focused on respect and honesty, whereas Europeans having priorities mainly in business ethics and getting the better results-profit.

•

Commercial Risk- The strategy of DHL is standardized for all subsidiaries and there is a low rate of risk that this strategy will not be accepted by subsidiaries. DHL Company expands its business worldwide with implementing the same procedures, tactics and strategy. The structure of the company is well organized and DHL Company is operating successfully in USA, Middle East, Africa and Europe.

•

Currency Risk - One of the major risks that the company can face is inflation which can have immediate consequences for exchange rates, which influences on the value of the firm assets, earnings and income.

Value Chain. 10

DHL and every business have a Value Chain Model in order to be able to make sure that you have the best values for your internal and external customers. They have two activities, which are the Support and Primary. The DHL Support activities involve the Firm Infrastructure, Human Resource Management, Technology Development, and Procurement. The Firm Infrastructure has to deal with the important aspects of Financial Policy, Accounting, and Community Affairs. In order to make sure that DHL has the best customer service they employ a continuous customer service educational system that spans across all aspects of management. DHL internally uses some of the most sophisticated communications equipment available in the world in order to continuously track each package through every step of its delivery process. The Primary activities include Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, and Service. Both of the Logistics has to deal with their customers’ parcel packages from dropping off to delivering. Their Operation primary activity has mostly to do with the scheduling, routes, and other transportation requirements to make sure that the packages are transported and handled safely to their destination. For DHL to stay on top with their 11

competitors they use frequent customer deals, company uniforms and trucks to portray their image, corporate accounts, advertising, and etc. as part of their Marketing and Sales strategies. The largest concern for DHL is that customer satisfaction is not just met but exceeded through use of superior services by their phone service, lost package and complaint follow-ups, and damage package investigations.

Conclusion Transportation remains one of the most important functions when dealing with international supply chains. It is not only a costly aspect but also has the strongest influence on the efficient flow of goods overseas. There are many problems facing the international transportation industry. Some of these problems include increasing oil prices, the importance of freight forwarders, and the possibility of unexpected events. Increasing fuel prices can greatly cause a problem in international shipping. The cost to send something overseas can be a substantial part of a company’s decision in choosing whether to outsource. As prices rise, transportation companies are taking added initiatives to prevent the economic blow it could have on their profits. DHL has implemented a fuel surcharge on their international shipping costs. This extra charge was necessary for this shipping company to combat the rise in fuel prices. Another problem that is associated with international transportation is the indirect shipping process. Currently freight forwarders play an important role in international shipping. “An international freight forwarder will transport your shipment from one of its consolidation points in the U.S. to the airport or seaport and will help with documentation” (R. Skolnik). The involvement of a multitude of parties can cause inefficiencies in the supply chain. By integrating freight forwarders into your international supply chain, a company is now adding another party in addition to the truckers who move containers or cargo to and from sea ports or airports, the customs brokers and the carriers. This increases the likelihood that the products could be either potentially late or damaged. Another possible problem is the possibility of unexpected events in an unstable country. This problem will force an international supply chain to focus on forecasting accuracies and flexibility. If a company does not take into account this possibility the impact could be disastrous. Cargo could be tied up or potentially lost in the pipeline. By participating in an international supply chain, a company is essentially exponentially multiplying the length of their value chain. They are now dealing with 900 mile supply chains which increases the likelihood of 12

inefficiencies and problems which will ultimately affect the bottom line and customer satisfaction (T. Craig). Moreover we can add following problems of international transportation: idle time on customs; non-tariff and tariff limitations from the side of foreign countries; shortage of refrigerators; absence of logistic centers infrastructure; high amortization of mobile train; discrimination of Kazakhstani carriers by foreign one. Transport business is one of the most difficult business processes in the world, as the “forwarders” are under a constant pressure of trading and manufacturing companies trying to reduce a transport component in the structure of costs of production as much as possible, plus a powerful competition among forwarding companies. Despite everything DHL is developing successfully. It has a wide geography of clients and partners so it escapes from all this problems relying mostly on its image, reputation. The new DHL is a global leader in express, freight and logistics. It has 60,000 vehicles and an integrated network that links more than 220 countries and territories worldwide. It can be called “Number one in Logistic Service”

References: 1. www.dhl.com 2. Sources from www.google.com 3. Materials from the book”International Business” 4. www.ups.com 5. www.fedex.com

"EMS Kazpost" Courier service

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"Kazpost" JSC offers «EMS Kazpost» services, that is urgent delivery of correspondence, documents and other posting on the "hand-to-hand" principle in maximum possible short term ensuring preservation and secured delivery: • • •

fast-time delivery of correspondence, documents and other posting in the city of Almaty; forwarding and delivery of correspondence, documents and other postings in the Republic of Kazakhstan; forwarding and delivery of correspondence, documents and other postings to CISand overseas countries.

To make use of "EMS Kazpost" services, call up by contact telephones: +7 (3272) 79-33-58, Call center: +7 (3272) 596767 and to "Kazpost" JSC branches. Calling up an mobile group express: (+7 3272) 50-50-90. Further information on express postal service may be found at here. EMS tracking "Morning – 10" service is the secured delivery of postings before 10 a.m. at the addresses of legal entities by Astana-Almaty route and backwards. EMS express postings are accepted at 106 acceptance stations of the Company. You can call up for a messenger to your house or office by the following telephone numbers: • •

In Almaty city – 8 (3272) 50-50-90 In Astana city – 8 (3172) 33-40-77, 33-46-47, 33-33-32.

Companies, rendering courier services, constantly improve their technologies, optimize routes and ways of delivery, strive for tariffs decrease, and at the same time pay much attention to the service quality – a Client should feel no discomfort and disturbance. The courier Company assumes all problems, concerning secure delivery. However, each Company suggests different complex of services and different servicing level. The Bekk Courier Kazakhstan Ltd. aims to suggest its clients combination of beneficial to a Client tariffs, minimal terms of delivery, maximum convenience and reliability. Set up in 1995, the Company initially rendered courier service delivery of correspondence only in Almaty. But already at the end of the first year of its activity, it had its own network of agents all over Kazakhstan, which implemented not only delivery, but pick- ups and forwarding of shipments in all regional centers of the Republic of Kazakhstan. The Company staff currently includes highly qualified professionals, able to make decisions under any transport and delivery problems, both, concerning correspondence and freight. The Bekk Courier Kazakhstan Ltd. was awarded with Certificate on Dangerous Goods Transportation in 2002, which put the Company in an exclusive position, as compared with other courier Companies. Applying to the Company office, a Client can quickly and safely send a business letter, small parcel, samples of his production of middle size or a heave weight shipments.

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Co-operation with large International Courier Companies and freight forwarding Companies allow making delivery of correspondence and other freight, irrespective of its weight and distance, all over the world. The main air carriers of our Company are the following airlines: the “Lufthansa Cargo”, “British Airways”, KLM and “Air Kazakhstan”. The Bekk Courier Kazakhstan is a delivery agent for “Menlo Worldwide / UPS Supply Chain Solutions” and “Aramex” companies. Being a Kazakhstan Company, the Bekk Courier Kazakhstan Ltd. makes the main accent in its activity on extension and improvement of services and possibilities for Kazakhstan clients, preserving at that, beneficial tariff for delivery within Kazakhstan by all transport means. Well developed work of the Sales Department, operating with clients; Operational Department, implementing export-import operations; Customs Department, responsible for co-operation with the State Customs Bodies; Courier Department and Department for Non-Standard Freight, allows the Company to occupy one of the leading positions in Kazakhstan among the Companies, performing delivery on the territory of the republic and beyond its bounds. The World Bank, United Nations Organization, Embassies of foreign States in Kazakhstan; “British Gas”, SGS, ABB, “Stimorol”, “Volvo”, “Petroleum Inc.” ltd, “Interteach”, “Bosh” Company representative office and other Companies make regularly use of the Bekk Courier Kazakhstan Ltd. The Bekk Courier Kazakhstan Ltd. finds individual way to each Client and fulfils non-standard orders under special express delivery of shipments any day, any time of day, according to a Client’s wish (transportation of fragile shipments, high-accuracy equipment, support of the required temperature regime and etc.).

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