List of abbreviations
2. Business environment analysis
2.1 Internal Situation
2.2 External situation
3. Strategy formulation
List of abbreviations
Approx. - approximately
B2C - Business to consumer
DPDHL- Deutsche Post DHL
EBIT - Earnings before interest and taxes
GmbH- Gesellschaft mit beschränkter Haftung (German)
IPO - Initial Public Offering
IT- Information technology
p. - page
R&D - research and development
SWOT - Strength, Weaknesses, Opportunities, Threats
USP - Unique selling point
Deutsche Post DHL Group originated from the Deutsche Bundespost, which had been a state-owned postal-delivery, logistics and telecommunication company. It was divided and privatized in 1995 and Deutsche Post AG became a thoroughly independent company with its IPO in November 2000 (DPDHL, 2020). Ever since, the company has continuously expanded its business through acquisition activities and became the world largest courier company. The most significant milestone was the acquisition of DHL in December 2002. Now, around 550.000 employees are working for DPDHL and achieved a revenue of €63,341 million and an EBIT of €4,128 million. The group is structured in five divisions: Post & Parcel Germany, Express, Global Forwarding / Freight, Supply Chain and eCommerce Solutions. In the era of corona and technological breakthroughs, the world is constantly changing and so does the world of business. Especially, a global operating logistic company needs to adapt rapidly to these changes. This essay analyses the internal aspects of the company and identifies its strength and weaknesses. It also offers an insight in the business environment and pinpoints opportunities and Threats. In chapter three, the prevailing strategy of the group is briefly presented and an alternative is formulated based on the previous SWOT-analysis.
2. Business environment analysis
To deliver a comprehensive understanding of the business strengths and weaknesses, the internal as well as the risks and opportunities of the external situation of the DPDHL group will be analyzed in this chapter.
2.1 Internal Situation:
Successful strategic planning presupposes an outright understanding of the company's performance in all internal areas such as marketing, finance, management, operations and R&D. It is obligatory to know your internal strength and weaknesses to formulate strategies and therewith gain and sustain competitive advantages (David, David, 2017, p. 179). For the assessment of the internal situation of the DPDHL group, this chapter starts and focuses on the evaluation of the product portfolio in form of the individual division's operational situation. It offers insights in regard to brand value, the company's R&D efforts and its finance situation.
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With its two brands Deutsche Post and DHL the division Post & Parcel Germany provides letter and parcel delivery for private and business customers, dialogue marketing, international mail and press services. It gained €15,484 million revenue in 2019 and an EBIT of €1,230 million (Group Pocket Guide 2019, p. 37). Accounting for 24.45 percent of the group's total revenue, it produces an EBIT-margin of 7.94 percent. In 2019 €17,101 million in revenue, corresponding to approx. 27% of the groups’ revenue and an EBIT of €2,039 million, has been generated by the Express division of the enterprise (Group Pocket Guide 2019, p. 43). Therewith a comparably high EBIT-margin of 11.92 percent was obtained. The section Express offers its customers a reliable global express delivery service for important and urgent documents.
The division Global Forwarding, Freight focuses on brokering worldwide transport services. The services range from air and ocean freight services, road freight and industry specific transport solutions to all-encompassing transport services. The revenue of Global Forwarding, Freight accounts to 23.88 percent of the group's total. The area contributes an EBITmargin of 3.44 percent and consequently represents the least profitable division of the group (Group Pocket Guide 2019, p. 46). Supply Chain contributes 21 percent of the group's total revenue and the division provides an EBIT-margin of 6.79 percent. It offers contract logistics services along the whole supply chain, such as planning, manufacturing, warehousing, delivery and returns (Group Pocket Guide 2019, p. 49). Ecommerce solution and encompasses logistic services tailored for e-commerce businesses. The division has been part of the division Post & Parcel Germany before an organizational restructuring program was implemented in the end of 2018.
Gained an insight into the divisional distribution of the groups' revenue and into the divisional profitability, one can deductively conclude that the product portfolio of the group is widely diversified with a relatively equal distribution of revenue between the four main divisions. Having in mind that the average profit operating margin of the transport and logistics industry amounts to 7.21 percent (CSImarket, 2020), the performance of the division Express deserves closer attention. The EBIT-margin of approx. 12 percent is the highest of all divisions and ranks much higher than the average EBIT-margin of the competition. Furthermore, the DPDHL group achieved an above-average growth of revenue in this division (DPDHL, strategy 2025, p. 6).
Worth mentioning in regard to its product portfolio are the group's two unsuccessful attempts of diversification beyond its core logistic service products. In 2014, DPDHL bought Streetscooter GmbH to produce fully electric transport delivery vans for emission-free last mile delivery. However, production was abandoned four years later as Streetscooter has not reached profitability (Müller, 2020). Another failed attempt of vertical diversification is the groups' online market place Allyouneed. The market place was launched to create a regional alternative for Ebay and Amazon but was sold to a competitor in 2018 as its revenue stayed behind expectations (Neuhaus, 2018).
The group operates two very successful brands. DHL is one of the world's most recognizable brands with an estimated worth of $20.6 billion and Deutsche Post was ranked the 21st strongest German brand in the Brand Finance Germany 100 in 2018. Besides, the groups' infrastructure in form of post boxes, partner shops, sales points and global logistics network needs to be highlighted as it offers a competitive advantage (DPDHL, annual report 2019, p.6).
In its annual report 2019 is stated, that as being service provider the company does not engage in R&D activities in the narrower sense and therewith has no expenses to register on this account (DPDHL, annual report 2019, p. 17). However, the company operates three innovation centers in Troisdorf, Singapore and Chicago for a regular dialogue with its customer on application of innovative logistic approaches (DPDHL, group pocket guide 2019, p. 55). As the field of logistics is driven by innovations, new technology could imply competitive advantages and abstaining from R&D activities holds the risk of falling behind.
In regard to its financial situation, the company needs to set aside severe reserves for pensions. The enterprise disclosed €4,872 million as pension adjustment in its financial report 2019. Nonetheless, DPDHL has substantial cash reserves at its disposal (DPDHL, annual report 2019, p.40).
2.2 External situation:
Parts of the company's services, especially of the division Post & Parcel, underlie sectorspecific regulation. The agency Bundesnetzagentur in Germany controls and examines compensations and serves as a supervision agency against misusage (DPDHL, Annual Report, 2019, p. 66). The monopoly commission in Germany criticized the dominance of the DPDHL group in its segment Post & Parcel Germany, especially in the letter delivery segment. The group owns 86 percent market share in letter delivery and also shows dominance with 44 percent market share in the parcel segment. Furthermore, it was announced, that the board of counseling of the German Government perceived a tight rise in customer complaints as consequence of lost, damaged and delayed deliveries (Sorge, 2019). The German Federal Government plans to amend the German Postal Act in order to ensure high level quality of the services, a more competitive development of the market and deregulation (DPDHL, Annual Report, 2019, p. 66). This trend represents a threat of the company's monopolistic position. As the DPDHL group operates in 220 countries and its services are more and more internationalized, the global development of stricter and more complex export and transit regulations as well as foreign trade and custom laws constitute a threat to the enterprise (DPDHL, Annual Report, 2019, p. 67). In fact, markets are changing and it is a challenge for the group to adjust its services. Particularly in the letter market DPDHL is suffering from a steady decrease in volume triggered by a lower demand through digital communication. The development leads to lower margins as capacities are not operated fully (Handelsblatt, 2020).
Nonetheless, despite insecurities such as Brexit and the American-Chinese trade disagreement it is assumed that markets continue to grow worldwide and hence the demand for logistic services will grow alongside. DPDHL will benefit from that with its balanced portfolio and superior position as global leading logistics company (DPDHL, Annual Report, 2019, p. 67). The B2C market is growing rapidly through the booming digital retail trade. That implies high growth potential for domestic and international parcel business (DPDHL, Annual Report, 2019, p. 67). The Corona Virus further strengthened this tendency and parcel business reached Pre-Christmas-levels in the first quarter of 2020. Regardless of positive developments in some segments, the economic downturn in the course of the Corona crisis affects the group with €200 million in the first quarter. Therefore, the risk of economic disturbances certainly needs to be considered. On the other Hand, this development creates also possibilities for the strategic acquisition of stumbling competitors.
- Quote paper
- Nicolai Kasper (Author), 2020, Deutsche Post DHL Group. A Strategy Formulation, Munich, GRIN Verlag, https://www.grin.com/document/963038