Introduction
DHL has managed to enter China and Hong Kong’s logistics market through the only means available to them at the time, and that was by teaming up with a Chinese company called Sinotran. DHL’s entry took place in 1986, a time when Chinese regulations on foreign businesses were very strict and the only way to join the Chinese market was to enter a joint venture with a local company. But DHL took the risk and chose Sinotran because of Sinotran’s expertise in Chinese foreign trade and export industry (Raman, 2004). After gaining a solid foothold in the Chinese market, DHL-Sinotrans then eyed expansion. Branches of this joint company where established in other Chinese cities. By 2004, they had built a network of DHL-Sinotrans all over China in only 3 years time since they started.
DHL-Sinotrans is not the only logistics company in China. The American FedEx and UPS are also presenting this existing company good competition, among other companies such as TNT-Skypack Sinotran and the local China Couriers Service Company. FedEx entered China in 1984, two years before DHL, while UPS joined in 1988. Like DHL, they too established partnerships with existing local companies; FedEx with Da Tian Air Services Limited, and UPS with Sinotrans. DHL stayed on top of the competition by an expert combination of business strategies, product innovations and well-thought out company expansion.
With annual revenues of nearly euro22 billion in 2003, DHL is the global market leader of the international express and logistics industry, specialising in providing innovative and customised solutions from a single source. DHL offers expertise in express, air and ocean freight, overland transport and logistics solutions, combined with worldwide coverage and an in-depth understanding of local markets. DHL's international network links more than 220 countries and territories worldwide. Over 160,000 employees are dedicated to providing fast and reliable services that exceed customers' expectations.
DHL's new Central Asia hub operated from Hong Kong International Airport (HKIA) at Chek Lap Kok beginning on March of 2000. DHL International also formed a partnership with Cathay Pacific Airways.
This paper will attempt to present, discuss and analyze the strategies undertaken by DHL with their expansion in China and HongKong. These topics are important areas for study because they show the nature of the logistics business in China. China has always been a country with great potential for progress. However, they were formerly strict when it came to doing business with other countries. But, in 2001, China had agreed to be affiliated with the World Trade Organization, or WTO. With this welcome change, companies had converged upon the country to explore the numerous possibilities there.
The information was gathered from various sources such as press releases by DHL, reports, and graphs. The history of DHL and the business environment in China before the year 1980 was also taken up. In order to better articulate the advances made by DHL, other companies such as UPS and FedEx were also explored briefly.
DHL Business Strategies
The joint venture between DHL and Sinotran is an example of a strategic alliance. The selection of a partner is the first crucial step in collaboration. The more you can learn about your potential partner, the greater the chance of making the right decision about a long-term relationship (Culpan, 2002). Each of the company has to ask questions about goals, ambitions and values. There is also a need for them listen for where they might complement each other and create a future together.
Communication is the next step. The ability to communicate is very essential in the management process (Culpan, 2002). This is not only communication between the management and the workforce but also communication between the company and the consumers. After all, it is from the demands of the consumers where the company would take its cue.
Lastly, there should be effective management control. Communication, support and organization are factors affecting management. Plans should be carried out in consensus with both the management and the workforce. This way, a smooth course of activities could be expected.
DHL-Sinotran had used expansion as one of their major business strategies. With their expansion came more efficient services. They also took advantage of technological advances that made their products, which was mainly on delivery, faster, better and safer, much to the customers’ satisfaction. They increased their investments in the Chinese market so they can open up more branches and improve their domestic network (Raman, 2004).
Another of DHL-Sintorans strategies is to continue with the use of commercial airplanes for transportation. Other companies have their own airplanes and airways, but DHL-Sinotrans prefers to concentrate on ground services. The recent collaboration of DHL with Cathay Pacific in Hong Kong is an example of this and is a move to further improve their quality of service.
DHL-Sinotrans also adopted an advertising strategy which involved changing their company logo to that of bright red lettering against a background of yellow. It is very eye-catching, and likely to advertise the existing company all the more for those with logistics needs. They launched an advertising campaign claiming that they are Asia’s one stop for all their logistics services needs.
DHL-Sinotrans offered new services and improved their old ones. Among those new services were the Import Services, which offered the delivery of packages from suppliers straight to its destination, wherever it may be. This particular service was designed with the Chinese importer in mind (Raman, 2004). There is also the new Jumbo Box, a larger, safer box for the transport of packages ideal for door to door delivery. Documents didn’t entail too much hassle and the costs were cheaper too.
DHL Web Shipping and DHL SMS Tracking were part of DHL’s e-solutions strategies. Both of these new services required online access. Web-shipping enabled customers to arrange for all their shipping needs from documentation to billing to pick-up arrangements (Raman, 2004). SMS enabled customers to keep track of their packages wherever they may be. With the launching of their Time Definite Delivery service, DHL improved the speed of their services. With TDD, customers are offered choices among the earliest collection times.
DHL also established their Asian Air Network to guarantee their delivery time service (Raman, 2004). DHL proved that they valued their customer’s trust by implementing their Shipper’s Interest Insurance to provide cover for any damages or loss to a customer’s package while in the process of delivery. Their latest strategy has been dubbed as China Domestic, which is an international express service centered in China (Raman, 2004).
But of all their strategies, DHL has won accolades for their part in e-logistics. They provide quality service using the almost limitless capacity of the Internet. Instead of the tedious shipping procedures done manually, DHL’s customers can do it online with the aid of a step by step guide should they need to be directed as to what to do. The customer can complete his airway bills, custom documentation and other arrangements online. It is easier and does not cost as much hassle.
Customers can also take advantage of printing out their airway bills or invoices from the system database. So if a problem comes up, they can help solve it by showing the proper receipts. Any information they might want about their shipment, they can retrieve it from the database, too. The SMS service makes sure that customers are aware of the status of their shipment. All they have to do is enter an airway bill number and send it to the local DHL SMS tracking service center. This way, DHL provides peace of mind for their customers by allowing them to be a part of the shipping process and giving them a feeling of being in control (Raman, 2004)
The establishment of the hub and the alliance with Cathay Pacific is in line with our long-term strategies for the DHL Asia-Pacific/Middle East region. According to Charles Longley, CEO for the Asia- Pacific/Middle East region of DHL, "We aim to provide our customers with the best possible services by creating multiple hubs across the region.”
The creation of a strategic alliance with an established partner would be beneficial for business organizations, as is exemplified by DHL and Sinotran as well as that with Cathay Pacific. An alliance is often better even if in the longer run a takeover is an option, since an alliance is of course easier than a takeover. It is vital to design collaboration, at the start, with a view to options for later adjustments, and options for exit (Child & Faulkner, 1998).
If in the event that the alliance did not turn out well, it is better that the company knows how to get itself out of the mess. In an alliance between two business organizations or any other organization for that matter, the leading concern is privacy (Culpan, 2002). But companies need not be worried about this since developments in technology makes it possible for organizations to work together without compromising the privacy of each other's company.
Even with these strong alliances created by DHL, it is still inevitable that the company will still face troubles and decline in quality of service. A decline in quality is attributed to several factors including the lack of proper training of workers, lack of effective communication among the management staff themselves and with the workers, and of course lack of effective and quality management (James & Weidenbaum, 1993). Therefore, be it an alliance between two companies or not, there are risks being faced by business organizations.
Competition between business organizations put pressure on the company to produce products of excellent quality at a competitive price which won’t bring about a negative return of investments. Sometimes, the lack of resources, manpower and capital and the high demands for a product would influence business organizations to employ strategic collaboration. FedEx and United Parcel Service are not just competitors of DHL, they are also competitors against each other. Recently, the two giants of the logistics industry have met and butt horns with each other in China. DHL therefore has to come up with better service and employ strategic measures so that it will continue to do well in the Chinese logistics market.
Conclusion and Summarization
The continued globalization of businesses and economies raise the expenses needed to run a company into staggering amounts. Sometimes, the company would not be able to cope up with such financial demands and thus would rather collaborate with other companies than suffer loses or worse be closed. This is the kind of strategy that DHL made at the start of their expansion in China and ultimately in Hong Kong.
Alliances give business organizations a chance of improvement. Innovative ideas which wouldn’t have been possible can be realized with the collaboration of companies. Factors such as added resources, increased number of workers, and effective management can contribute to the success of alliances between organizations. New ideas and developments must be generated by business organizations if they aim to succeed in this globally competitive environment.
So far, DHL’s business strategies in China and Hong Kong are working well. They cater to their customer’s needs, always keeping in mind the need for speedy, efficient and safe delivery while striving to provide simple documentation needs and cheaper costs. In the near future, DHL plans to continue its partnership with Sinotran, even though other companies are already beginning to eye whole foreign ownership of their companies without aid from their local company ties in China. It is also expected that China would become DHL’s largest market by 2006.
It is clear that DHL will continue to improve their strategies, especially in the presence of their strong competitors. So far, they manage to meet their customer’s needs very well. However, it remains to be seen whether the market in China will continue to be solid for the logistics industries, and whether the WTO requirements on China’s foreign industry regulations will give DHL’s competitors an edge against DHL, especially because they’re already striving for independence of their company from their local partners, while DHL has opted to continue its partnership with Sinotran.
REFERENCES
Child, J. and Faulkner, D. 1998. “Strategies of Cooperation: Managing
Alliances, Networks, and Joint Ventures.” Oxford University Press.
Culpan, R. 2002. “Global Business Alliances: Theory and Practice.” Quorum
Books.
James, H. and Weidenbaum, M. 1993. “When Businesses Cross
International Borders: Strategic Alliances and Their Alternatives.” Praeger
Publishers.
No Author. 1999. DHL Establishes Hong Kong Hub, Forms Alliance with Cathay
Pacific, World Airport Week.
Raman, S. 2004. DHLs Business Strategy in China. ICFAI Center for
Management Research. Hyderabad India.: European Case Clearing House.
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