Semester 1,

bdulhamid
TABLE OF CONTENTS
EXECUTIVE SUMMARY..................................................................................4

Team Reflection...................................................................................... 5

Objectives.............................................................................................. 6

1 Background......................................................................................7

1.1 FedEx..........................................................................................7

1.2 DHL............................................................................................ 8

2 Environmental Factors.......................................................................9

2.1 Overview..................................................................................... 9

2.2 External Environment...................................................................9

2.2.1 DHL....................................................................................... 9

2.2.2 FedEx...................................................................................11

2.3 Internal environment..................................................................13

3 SUSTAINABILITY..................................................................................13

3.1 Overview................................................................................... 13

3.1.1 FedEx...................................................................................13

3.1.2 DHL..................................................................................... 15

4 SOCIAL RESPONSIBILITY AND ETHICS........................................................16

4.1 Overview................................................................................... 16

4.1.1 DHL..................................................................................... 17

4.1.2 FedEx...................................................................................18

5 SWOT analysis................................................................................19

5.1 SWOT analysis of FedEx..............................................................19

5.2 SWOT analysis of DHL................................................................20

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6 Porter’s Five Forces Analysis.............................................................21

6.1 Threat of New Entrants...............................................................21

6.2 Threat of Substitute Products and Services...................................22

6.3 Buyer Power determinants...........................................................22

6.4 Determinants of Supplier Power...................................................22

6.5 Intensity of Competitive Rivalry...................................................23

7 Challenges faced by the organisations...............................................24

7.1 Challenges faced by DHL.............................................................24

7.1.1 Entry into the US market........................................................24

7.1.2 Competitive edge created by additional services......................24

7.2 Challenges faced by FedEx..........................................................24

7.2.1 Treatment of truck drivers of FedEx Ground.............................24

7.2.2 Decline in express delivery.....................................................25

8 Handling of Structured and Unstructured Problems............................25

8.1 Structured and unstructured problems of DHL..............................25

8.1.1 Structured............................................................................25

8.1.2 Unstructured.........................................................................25

8.2 Structured and unstructured problems of FedEx............................26

8.2.1 Structured............................................................................26

8.2.2 Unstructured.........................................................................26

9 Policies and Procedures....................................................................26

9.1 Procedures and policies adopted by DHL......................................26

9.1.1 Procedure.............................................................................26

9.1.2 Policy................................................................................... 27

9.2 Policy and Procedures in FedEx....................................................27

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 9.2.1 Procedure.............................................................................27

9.2.2 Policy................................................................................... 28

10 Decision making..............................................................................29

10.1 Wrong decisions.......................................................................29

10.1.1 FedEx...................................................................................29

10.1.2 DHL..................................................................................... 30

10.2 Right decisions........................................................................30

10.2.1 FedEx...................................................................................30

10.2.2 DHL..................................................................................... 31

10.3 Decision characteristics.............................................................31

10.4 Similarities and differences.......................................................32

11 Summary........................................................................................33

12 Conclusion......................................................................................34

13 References......................................................................................35

APPENDIX..................................................................................................47

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EXECUTIVE SUMMARY
This report is a comparison of two organisations, FedEx and DHL that
operate as courier and logistics companies. The contents of the report
provide a thorough and in-depth research into the workings, management
style and culture of the organisations and their business models, strategies
and decisions. The report is divided into sections covering various areas of
each company and compares and contrasts their activities in each area.

The inception of FedEx was in 1971 while DHL began its operations in 1969.
A PEST analysis is performed for both the organisations to understand the
environmental factors impacting each organisation’s business and their
ability to cope with them. This is followed by a research in the efforts and
contributions of the organisations towards sustainability including new
environmental friendly innovations. After that is the comparison of DHL and
FedEx’s social activities and the worldwide impacts they have and the
implementation and encouragement of ethics in their internal environment.

In addition, a SWOT analysis and five porter’s forces analysis is conducted

to comprehend the external factors affecting the companies. Furthermore,
the policies and procedures and the decision making style and
characteristics of the two organisations are compared. Finally, a concluding
comparison with a third similar business organisation is tabulated, that is
between DHL and UPS and FedEx and UPS, and an overall distinction
between FedEx and DHL is highlighted.
TEAM REFLECTION
This project has thought us members to work together and collaborate as a
team. It also helped us to understand each other more and identify any
unique attributes we have that helped us complete this project successfully.
Since we understood each other’s ideals, we were confident in choosing the
topic DHL vs FedEx.

Time management was an essential component in our project flow network.

Its importance is understood all the way when working in the project. This
included planning, setting up meetings for discussions and also maintaining
balance in our time between other units as well. This experience has in the
end helped us in learning to not only manage our time, but adapt to any
emergencies should they happen, such as a member not being able to come
for a meeting can request for postponing the date and it will happen.

We also made proper use of technology for our communication such as

Blackboard, WhatsApp and Facebook.

To total it all up, everybody from the group made an equal contribution for
this project. Nobody was forgotten and everybody was extremely ready to
work for the task by staying up late to complete the investigations and
composing of the report. The subjects of what was composed were
dispersed in light of every individual's enthusiasm for it. Moreover, the
colleagues saw how expansive organisations maintain the business and
manage distinctive difficulties by realizing all the parts of the organisations.
We composed the report to our earnest attempts and we are fulfilled by our
completed work.
OBJECTIVES
The objectives of this research project to investigate and develop an
understanding between two organisations, namely, DHL and FedEx. We
examine their impact on their external and internal environment as well as
the future challenges they may face. This report was written with an
emphasis on detailed analysis, strengths and weaknesses, and comparison
and contrasts.

This report details further on the similarities and differences of the two
organisations based on structure, sustainability and ethics, strategies, and
management decision making style.
1 BACKGROUND

1.1 FEDEX
The Federal Express Corporation was established in 1971 by Frederick W.
Smith. The company originally was named Federal Express since the founder
wanted to secure a contract with Federal Reserve Bank. Even though the
bank rejected his proposal, the name was kept as he believed the name will
attract a lot of people’s attention.(FedEx 2015d)

The idea of creating the corporation was because of a term paper written
by him during his study in Yale University, Connecticut. The paper mainly
discussed on the challenges faced by the current logistics companies. There
are three important highlights stated in the paper. First of all, the
unsuitability of using air passenger for air freight. For that time, almost all of
the logistics companies were using air passenger to deliver their customers’
products. He believed that the requirement of air freight is not as same as
the air passenger. Second, he stated the service speed is way more
important than the cost. The most important for a logistics company is to be
efficient in delivering. It must consumed less time and fast. Lastly, he also
highlighted the importance of accessing to small cities to provide the
delivery service. However, his professor did not find that his paper
interesting and only graded his paper as an average.(Advameg 2015b)

In 1971, by using 4 million dollar inheritance by his father and 91 million

dollar venture capital, he started his logistics firm. He bought interest in
Arkansas Aviation Sales. Two years later, the firm officially began operation.
The company owned 14 Dassault Falcon Aircrafts. With 389 employees,
FedEx provided their service over 25 cities in America.

Until early 1975, the company was having loss and slow growth rate.
However, in the mid of 1975, the company managed to get profit of 43.5
million dollar in the business. By late of 1976, FedEx became one of the best
and important logistics company in America. Per night, the company had
to cover average of 19,000 packages. In 1983, the company wrote their
name in the American business history. The company was the “first
American company to reach financial hallmark inside 10 years of start up
without mergers or acquisitions’’. (FedEx 2015d)

1.2 DHL
The DHL Express Corporation was established on 25 September 1969 by
three individuals in San Francisco. The name of the company was taken
from the initial of the three founders’ name. The letter ‘D’ stands for Adrian
Dalsey, ‘H’ for Larry Hillblom and the letter ‘L’ for Robert Lynn. The
company begins their operation by only providing door to door delivery
service. The company only deliver documents between four cities; San
Francisco, Hawaii, California and Honolulu.(Ag Deutsche Post 2015)

The idea of creating the corporation was because of the huge potential seen
by the three founders. They believed air freight for document delivery would
be very effective and efficient. That way, it will speed up the delivery
process and reduce the shipping cost. Thus, with this idea, they agree to
build a company that will use air courier for the delivery process. In 1970,
the founders personally transported the documents from San Francisco to
Honolulu by using a plane. The delivery process consumed shorter time than
usual. It significantly reduce the waiting time and the custom process also
can be done before the actual arrival of the shipment. The founder then
decided to begin flying routes to the Far East.(Advameg 2015a)

The growth rate of DHL Express was very high. It continue to develop as in
early 1971, Bank of America become their primary customer. The bank need
a single logistics company to deliver their important documents and letter of
credits. In the mid of 1971, DHL Express started to open their branches in
Pacific Rim and Philippines. The company are more focusing on the
international service. (Ag Deutsche Post 2015)
Until now, the company had managed to cover almost all countries in the
world. In 2002, the Deutsche Post (DPWN), a German Company Group buy
majority of 51% of DHL shareholder. (Advameg 2015a)

2 ENVIRONMENTAL FACTORS

2.1 OVERVIEW
DHL and FedEx are both global courier delivery services companies. They
both aim to achieve consumer satisfaction and excellence on a global scale
and they thus opt for an ethnocentric attitude. However their approaches
and practices towards their external and internal environments differ from
each other. So a PEST (which the acronym for Political, Economic, Social and
Technological) analysis will be conducted to examine the external
environment and view how both companies respond to the current
challenges faced.

2.2 EXTERNAL ENVIRONMENT

2.2.1 DHL

2.2.1.1 Political
DHL made a name for itself for its involvement in government elections and
campaigns. It mainly focuses on the following political areas:

▪ Integration into regional trading alliances

▪ Liberalizing of global trade

DHL tries to integrate its operations in countries initially by abiding their

laws and regulations. But sometimes if there are any barriers in between,
then they are willing to go to great lengths in order to bypass it.
For instance, in 2013, when DHL came to know that The United Kingdom
was departing the European Union, they were worried about the coming
situation of their business. Phil Couchman, UK head of DHL Express quoted,
“If something went dramatically wrong with the trading relationships
between the UK and the EU, it would affect us and a lot of businesses”.
They were aware that the UK could probably change its regulations of
trading which could be another hurdle for themselves and other
corporations. (Bennet 2013)

In 2008, DHL wanted to establish a strategic alliance with a rival company

UPS in hopes of utilizing its air cargo facilities. This is because DHL’s
operations in the US are declining, facing losses of upto $1 billion annually.
Of course this deal grabbed the attention of US lawmakers and politicians
alike. They claim that the merger could bring about a huge crisis, because if
achieved, would result in the closure of its cargo hub in the state of Ohio,
and in turn result in job losses upwards of 10,000.(Pitzke 2008)

2.2.1.2 Economic and Social

Even with the advent of the global economic crisis, DHL continues to offer
its services through involvement in economic forums and provide better
investment opportunities for investors and entrepreneurs alike.

A study conducted by the Economist Intelligence Unit (EIU) on behalf of

DHL shows that small and medium sized enterprises (SMEs) expect a
substantial growth in the international market in a few years. However, they
have a biased way of choosing their markets and are not willing to make
investments in other regions that require attention. For example, they
choose to invest in countries like China just because they see it as a
gateway to global investment, whereas regions such as Africa are neglected
since they assume it has no growth potential. According to Ken Allen, CEO
of DHL express, DHL believes that they, as a logistics and transportation
firm, can
provide a critical support in overcoming infrastructural challenges and
cultural barriers while saving costs in order to compete. (Bonn 2014)

DHL’s social influence lies in its long history of offering services to relief
organisations. Using its expertise in logistics and air delivery, it has provided
assistance to transport relief supplies to many affected countries around the
world. It was also involved in the UNHCR relief operation by providing free
storage facilities for relief supplies in Indonesia. (BusinessWire 2005)

2.2.1.3 Technological
It is no exception that in order for a global company like DHL to cope with
the modern lifestyle, it has to improve its services through means of
technology. Fortunately, DHL achieves this by adopting to a number of
technological trends it assesses and researches. Key technological advents
that are currently implemented include, but are not limited to:

DHL SMARTSENSOR- It is a unique and secure system developed to

monitor and record temperature, humidity and light data and identifies its
geological location throughout the course of its shipment.(Deutsche Post
DHL Group 2015a)

SmartTrucks by Quintiq technology- As the name suggests, these

vehicles are being used first in Germany and then later 48 other countries
since they have proven to be successful in helping save money and time
thanks to the dynamic route planning system designed by Quintiq.(Quintiq
Inc. 2010)

DHL BREAK BULK EXPRESS- It’s a shipment delivery service designed to

consolidate all shipments under one waybill at the origin point. That way,
they can be cleared as one shipment altogether and upon arrival at their
final destination facility, they get separated into individual shipments and
finally make their way to their respective addresses.(Deutsche Post DHL
Group 2015b)
2.2.2 FedEx

2.2.2.1 Political
FedEx aspires to maintain political stability and adhere to government
policies and regulations as well. A way FedEx believes in an effective
political participation process by making cautious political contributions that
complies with reporting requirements and applicable laws. For example,
FedEx does not allow its employees to rally for a candidate by using its
resources and funds. Instead, they do it themselves as a whole for the
beneficial of the company and its stakeholders.(FedEx 2015g)

During the 2014 election cycle in the United States, FedEx was the 112th
largest contributor from a pool of 16,793 contributions made. It was a major
donator since 1990, and thus their influence and strong ties developed with
the white House and congress members gave them unprecedented access
to tax rebates and international trade.(The Center for Responsive Politics
2014)

2.2.2.2 Economic and Social

FedEx takes into consideration a number of factors when analysing its
economic status, and they include interest rates, inflation and exchange
rates. These factors are important as they have the potential to cause
hardships among customers. FedEx is also more inclined to serve in densely
populated areas as they provide a greater marketing platform. To further
strengthen this statement, there has been recent shift of the growth
narrative that reflects more towards the consumers, now that oil prices have
dropped and labour market supports more purchasing power and incomes.
(FedEx 2015b)

FedEx places its commitment towards the services it offers to its employees
and communities. FedEx is known to develop several strategic partnerships
with charitable organisations that share similar values. Their services include
emergency and relief support where they cater aid quickly through the use
of
several relief agencies established via relationships. Another service include
their involvement in the field of education and hence provide programs in
the field of cultural diversity, global economics and trade to enhance
learning.(FedEx 2015c)

2.2.2.3 Technological
FedEx has a long history in making advancements to delivery services using
the latest technology.” They have a very systemic approach to innovation,”
said JAMES (1996).

Among its great contributions was the revolutionary tracking number. This
system was first introduced by FedEx for customers which enabled them to
track their shipments as they make their way to them and is now an
industry standard in courier services.(Baldwin 2013)

Also, as a part of its ongoing expansion of its alternative-energy vehicle

fleet, FedEx announced its first foray of all-electric delivery trucks. They
began service from 2010 starting at the US.(FedEx 2010)

2.3 INTERNAL ENVIRONMENT

The company’s internal environment can be assessed by analysing the

various factors that constitute it. Since FedEx and DHL are both global
logistics companies, both of them are known for their global operation,
brand association, quality control and their nature as learning organisations.
But there are some factors which introduces the difference between them.
For example, DHL runs heavy marketing campaigns in order to increase
their brand awareness and incur profits. However, they lack corporate trust
among their workplaces. On the other hand, FedEx offer a faster and a more
reliable service towards its customers and follow their ethics and moral of
conduct adequately.
3 SUSTAINABILITY

3.1 OVERVIEW
Sustainability is one of the most important issues currently faced by the
majority of organisations. Courier services are usually concerned with the
high carbon footprint generated by their various modes of transport.
Another concern for courier and delivery organisations are the raw materials
used in manufacturing packaging materials.

3.1.1 FedEx
FedEx are committed in reducing environmental impacts and promoting
sustainable practices in their organisation. Their environmental policy
statement briefly explains their stance and approach to environmental
issues. The main objectives of the statement are summarized below:

▪ Dedication to continuously enhance environmental management.

▪ Assessment of the influence of FedEx operations, facilities and
packaging products on the environment to curtail harmful
effects.
▪ Development of environmental conduct of employees through
instruction, training and acknowledgement of excellence.
▪ Utilizing natural resources efficiently to decrease waste
production achieved by recycling resources and innovative
technology.
▪ Estimation of environmental execution by utilization of a system to set
and audit goals and targets, review advancement, endorse worker
responsibility and report to senior administration and outside partners.
▪ Incorporation of environmental obligations and contemplations into
every day operations and business choices.
▪ Implementation of modern technology to reduce
atmospheric emissions and noise generation.
▪ Acceptance and fulfilment of all applicable environmental rules and
regulations. (FedEx, 2015)

To achieve the goals and fulfill the policies given in the environmental policy
statement FedEx initiated several projects to make the organisation more
sustainable and environment friendly. FedEx initiated EarthSmart®, a scheme
to promote responsibility towards the environment in the FedEx organisation
and to the wider public. (FedEx 2015)

FedEx launched the carbon-neutral envelope shipping program in 2012 with

the aim of reducing carbon footprint. Since its inception, it is estimated that
about 150,000 metric tons of associated carbon has been offset. FedEx
replaced its Boeing 727s with 757s which decreased fuel consumption by
47% and FedEx Fuel Sense, a program designed to inspect aircraft
operations at each stage, has approximately saved about 247 million gallons
of jet fuel to date. (Cleantechnica 2015) This amount is sufficient to
completely occupy 374 standard swimming pools used in the Olympic
Games. (FedEx 2015)

Furthermore, FedEx recycled the waste produced in its facilities that

significantly reduced the carbon footprint. (GreenBiz 2015)

In addition, FedEx also invested in alternate energy programs and many

FedEx facilities around the world are being powered using solar-cells which
has saved about 7000 metric tons of annual carbon emissions and 783,520
gallons of non-renewable resources. (2degrees Community 2015)

3.1.2 DHL
DHL tackles the problems of sustainability in similar ways as FedEx however,
there are some clear distinctions in certain approaches of DHL when they
deal with sustainability. The gist of the environmental policies of DHL is
outlined in the following points:

▪ Environmental insurance is an essential part of the DHL

corporate method.
▪ Motivation and training of employees to conduct in an environmentally
friendly manner.
 ▪ Management and accountability of DHL’s environment
damaging factors that are difficult to completely remove.
▪ Methodical evaluation of environmental performance with a desire for
sustained development.
▪ Observance of regional and international environmental laws.
▪ As can be read above, most of the policies are similar to the policies
of FedEx. (Deutsche Post DHL 2015)

The scheme of DHL that provides solutions to environmental and

sustainability issues is called GoGreen. The main objectives of GoGreen are
substituting inefficient vehicles with environmentally friendly vehicles,
optimization of transport utilities and funding and research in renewable
energy.

Firstly, to ensure the reduction of carbon emission of their vehicles DHL

opted to use alternative fuels rather than conventional fuels. The alternative
fuels tested and used by DHL are ACP Evolution Diesel, BioDME and
Perstorps RME. Electric powered cars and bicycles were also introduced by
DHL into their mail delivering fleets. (Chemrec 2015)

DHL initiated a service called the Green tons, which were deliveries made by
trucks consuming renewable fuel at the cost of a small fee. (Chemrec 2015)
Similarly, go green product is another service that charges an extra fee
which is used to offset the carbon emission by using the extra money to
plant trees and invest in other sustainability programs. (Sustainable Ink
2015)

Furthermore, the design of the vehicles was altered to make them more
sustainable. Tires and engine designs were modified and the body of the
vehicle made more aerodynamic to improve vehicle efficiency. A double
decker system was introduced to manage space efficiently increasing the
amount of deliveries that each cargo could carry. (Chemrec 2015)
In Europe, 25% of DHL facilities are powered using renewable energy while
in USA energy saving lightings have been implemented decreasing waste
energy. (Sustainable Ink 2015)

Majority of the DHL group carbon emission can be attributed to

subcontractors. To promote environmental responsibility to the
subcontractors DHL organises and funds awareness programs. (Chemrec
2015)

4 SOCIAL RESPONSIBILITY AND ETHICS

4.1 OVERVIEW
By definition, social responsibility is a term in which any entity, whether a
person, corporation or otherwise, is expected to perform and complete their
obligations to the society at large. Corporate social responsibility,
abbreviated CSR, is defined as “…the continuing commitment by business to
behave ethically and contribute to economic development while improving
the quality of life of the workforce and their families as well as the local
community and society at large" by Lord Holme and Richard Watts in The
World Business Council for Sustainable Development's publication 'Making
Good Business Sense'. Basically, a corporation has the responsibility to
perform its stated objectives and functions to the benefit of society without
infringing any of its stated values and ethics.

As companies, DHL and FedEx are obliged to be bound by corporate ethics.

In definition, it means that they need to follow business conduct applicable
with established ethics and applies to all aspects of business conducts, as
well as on an individual level. Ethics are the rules or standards that govern
our decisions on a daily basis and standards of professional conduct
expected of all in the field.
As courier services, DHL and FedEx have an obligation to the public to
deliver packages around the world and in the shortest time possible. They
were obligated to pick up, send and deliver whatever packages that their
customers trusted them with, while at the same time, abide by the law and
regulations of their respective governments. Both companies have the
obligation to fulfill their functions according to their claims and slogans;
FedEx’s slogans, for example, are “We Live to Deliver” and “The World on
Time” (2008 – present), while DHL claims to be the “world’s largest logistics
service provider”.

4.1.1 DHL
For their part in the practice of Corporate Social Responsibility, both
companies place humanitarian and environmental issues as their main
focus. DHL, for example, has the motto, “Living Responsibility” for their CSR
slogan. They have, according to their website, programs such as GoHelp
(disaster management) and GoTeach (education). (Deutsche Post DHL,
2015)

4.1.1.1 GoHelp
GoHelp is DHL’s disaster management program in which, in partnership
with the United Nations, DHL utilizes their logistic expertise and global
network to support global relief efforts. Programs under GoHelp include “Get
Airports Ready for Disaster” (GARD), in which DHL, according to their
website, “help prepare airport personnel and disaster management agencies
for the logistics challenges associated with disaster relief efforts.” Also,
among other things, DHL supports on-site logistics support in airports to
ensure disaster relief efforts go smoothly. (Deutsche Post DHL, 2015)

4.1.1.2 GoTeach
GoTeach is DHL’s program to “improve educational opportunity for young
people and prepare them for the working world.” According to DHL’s
website, “the long-term success, sustainability and innovative power of our
economy and society depends on a strong educational system and targeted
efforts to
develop the next generation of working professionals.” Simply put, DHL
supports efforts for education worldwide. To do this, DHL partnered with
two educational NGOs, Teach for All and SOS Children’s Villages. DHL aims
to help children and youth around the world, regardless of background, to
“develop

their potential, learn skills and access new opportunities for their career
development.” (Deutsche Post DHL, 2015)

4.1.2 FedEx
FedEx also has CSR programs similar to DHL, in which FedEx also focuses on
environmental issues, disaster relief and philanthropy.

4.1.2.1 Environmental Programs

On environmental efforts, FedEx focuses on sustainability by introducing
their “carbon-neutral envelope shipping program”, in which they, according
to their website, “shipped more than 300 million envelopes and invested in
projects calculated to offset the associated carbon — more than 150,000
metric tons.” They have also engaged in fuel-saving measures through their
team, FedEx Fuel Sense, in which they have saved 247 million gallons of jet
fuel, “enough to fill 374 Olympic-size swimming pools.” (FedEx, 2015)

4.1.2.2 Disaster Relief

Like DHL, FedEx engages in disaster relief programs by utilizing their
network to “deploy our resources and logistics expertise to aid stricken
areas.” FedEx utilizes its team members to distribute relief supplies to
communities in need, as well as to provide financial support to disaster relief
organizations. They “work with a number of relief organizations to
coordinate their efforts, including the American Red Cross, Direct Relief,
Interaction, and The Salvation Army.” Besides that, FedEx helps to “support
preparedness initiatives and long-term recovery efforts.” (FedEx, 2015)
4.1.2.3 Road Safety
Another part of FedEx’s CSR program is road safety, an issue they take
seriously as “more than 90,000 FedEx trucks (are) on the road”. FedEx is
actively involved in road safety initiatives around the world such as Safe
Kids Worldwide, EMBARQ and UN road safety programs. FedEx also
supports the “UN Decade of Action for Road Safety in its goal to save five
million lives by 2020.” (FedEx, 2015)

As two of the biggest courier and logistics companies in the world, DHL and
FedEx have a responsibility to the society in general to contribute to its
betterment and to improve conditions around the world.

5 SWOT ANALYSIS

5.1 SWOT ANALYSIS OF FEDEX

Strength
➢ Large scale operations. According to
2014 annual report, the company has
built new hubs, made strategic
acquisition and enhanced services in
the foreign countries.
➢ Strong brand name, FedEx is known ➢ Weak forecasting, in 2012, the
as the largest logistic/transportation
company in the world
➢ Efficient transportation segment as
the company had decided to add
1900 new light weight vehicles and
replace 4000 vehicles in fleet
➢ Strong revenue growth. In the year of
2014, the FedEx revenue and
earnings has increased due to
proficient transportation segment and
service (FedEx Annual Report 2014).
➢ Service expanding in high-growth
countries. currently, FedEx has been
investing in growing countries
including FY14 countries
➢ Concentrating on giving excellent
customer care. The main priority of
Weakness
➢ Expensive cost in air freight
business
and in 2013, this had caused
them to experienced 31% of
loss
company shares fell by 3.1%.
The loss impacted FedEx
severely as the deceleration of
global economy was faster than
what FedEx predicted
➢ High dependency on U.S, FedEx
depends on America market to
gain income (71.5% of
company revenue contribute by
America )
➢ FedEx operating margin is only
at 5.75%, this caused the cost
management of the company
to be very weak and having
slow company annual growth
 the company is the customer. They
need to provide first-rate service to
the people in order to gain profit.

Opportunity Threat

➢ Cost-cutting approaches. In order to ➢ New e-commerce strategy.

minimize the fuel cost, FedEx plans to
replace their Boeing 727s with Boeing
757s which is more fuel efficient
➢ Aggressive growth strategy. For
example, FedEx will created schedule
according to the manufacturer need. ➢ Strong competition, this threat
It shows FedEx is flexible and
prioritizing the customer need.
➢ Alliancing with foreign company. This
will bring great opportunity for both ➢
companies to expand their market
and sales.
Under this strategy, the
retailers are planning to use
their own delivery vehicles to
ship the packages to their
customers.
will cause most of the logistic
companies to be involves in
price war.
Local Shipper Company. The
local shipper have advantage
as they have the trust of the
locals and get full support from
the local government.

5.2 SWOT ANALYSIS OF DHL

Strength Weakness

➢ Fully benefit on the advantages ➢ Lack of liability insurance, for

of technology. This can be seen
by the various eService provided
by DHL. The customer are able
to get high control of the process
by this electronic services
➢ Established a long time ago and
have strong brand name, DHL
owned by the German Post and
known as the third largest
logistic company in the world.
➢ Innovative and provide smart
service. In the year of 2009, the
company managed to make a
new unit called DHL Solution and
Innovation. This unit will help
customers in solving the
customer problems
➢ Large customer base. DHL
revealed that they had
any loss or defectiveness of the
shipping packages, the company
will be not fully responsible and
this might cause loss to their
customers
➢ Inadequate of promotion and
advertisement. Compared to
other logistic companies such as
FedEx and UPS, the companies
are commonly seen in the
television advertisements and
even in some football teams.
 approximately 8 million
customers and the annual
shipments of their company is
about 850 million.
➢ Good public image. For example,
the company had replaced
almost all of their aircrafts with
more environmental-friendly
aircrafts.

Opportunity Threat

➢ Providing E-commerce service, ➢ Strong competition, this threat

this will increases the potential will cause most of the logistic
customers of DHL companies to be involves in
➢ Making Strategic Alliances with price war.
other foreign companies. DHL ➢ Local Shipper Company. The
made a partnership with China. local shipper have advantage as
Due to this alliance, DHL is they have the trust of the locals
known as the largest logistic and get full support from the
company in China. local government.
➢ Developing the company internet
service and introducing
electronic communication
devices. The company want to
use business computerization in
their company management in
the future.

6 PORTER’S FIVE FORCES ANALYSIS

Porter’s Five Forces Analysis is a framework used to analyse the level of
competition in an industry based on five parameters. It was established by
Michael E. Porter from Harvard University and draws upon industrial
organization economics to derive a set of five separate forces that
determine the intensity of competition within an industry and, therefore, the
attractiveness of said industry. In this report, the Five Forces Analysis is used
to gauge the level of competition faced by both DHL and FedEx, and the
strategies utilized by both companies, based on the five parameters:
  Threats posed by new organisations
 Danger of alternative products or features
 Determinants of buyer power
 Determinants of supplier power
 Competitive aggression and rivalry

6.1 THREAT OF NEW ENTRANTS

FedEx and DHL, as well as other established brands like UPS and TNT, are
well established names in the global courier and logistics management
service. Realistically, threat of new entrants in this business is low, due to
factors such as capital requirements and barriers to entry. In terms of capital
requirements, both DHL and FedEx have the advantage in global services
that require a vast network of ships and aircraft carriers, as well as ground
transportation vehicles. FedEx, for example, had an assets total of
USD33.567 billion in 2013, while Deutsche Post AG, DHL’s parent company
and the world’s largest courier company, had an assets total of €38.40
billion in 2011. New entrants will have to work very hard to match the two
companies, especially in competing with their brand name, established
around the world and has millions of customers globally. (Amsler 2010)

Another reason why threat of new entrants is low for both companies is
barriers to entry, namely in terms of regulations by local governments. In
the case for the United States, new entrants will first have to deal with the
Federal Aviation Administration for air routes and landing rights. Even UPS
and DHL had difficulties in competing with FedEx in the United States,
despite being major brand names themselves.

6.2 THREAT OF SUBSTITUTE PRODUCTS AND SERVICES

For major courier service providers such as FedEx and DHL, threat of
substitute services are realistically low and of no major concern. Despite the
advent of electronic documents and e-mail, certain documents still need to
be delivered in hard copy to its intended recipient. Besides that, the advent
of online shopping and delivery necessitated the services of these
companies. Customers have no other means of delivering products to
faraway places, other than relying on shipping, which is the essential service
provided by both FedEx and DHL.

6.3 BUYER POWER DETERMINANTS

As global courier services, DHL and FedEx have large numbers of customers,
including individual customers and other companies of different industries
who rely on courier companies to get their products around. Some agencies
even have courier contracts with either company. However, due to both
companies offering essentially the same service, which is delivery and
logistics management, there is strong tendency for customers to switch
from one to the other, or even to other courier companies, mainly UPS.
Especially with large companies in need of shipping their products to other
places, there is need for competition between FedEx and DHL to serve these
companies, and usually they compete in price and discounts for bulk
shipping.

6.4 DETERMINANTS OF SUPPLIER POWER

This is fairly complex to analyse, considering these companies’ customers
can also be their suppliers, being courier services. In fact, as FedEx and DHL
are responsible for shipping products of other companies, they are also
partly responsible for determining the final price of the product, as well as
affecting the price of supplies, such as packaging material and others.
Ultimately, supplier power is fairly low for both FedEx and DHL, since they
have the power to change suppliers if the competitor has a better price. For
instance, FedEx’s fuel supplier has bargaining power over FedEx, but FedEx
can offset their vulnerability with future contracts or fuel surcharges.

However, FedEx and DHL’s most powerful suppliers are aviation agencies
around the world, which has the power to grant or restrict both companies
access to their respective countries’ airspace, aviation routes and landing
rights. If airspace access is denied to either company, FedEx and DHL may
have to resort to sea shipping and ground transport, or their customer will
have to choose another courier company, like UPS.

6.5 INTENSITY OF COMPETITIVE RIVALRY

As providers of shipping services, competition between FedEx and DHL, as
well as UPS, is very high. Prices are low for both services, and the cost of
switching services to either company is very low as well. There is need for
continuous improvement in service quality, prices and innovation. However,
in the United States, DHL exited the industry a few years back, leaving
FedEx and UPS to be in competition. Aside from each other and UPS, FedEx
and DHL face competition with smaller courier services and express delivery
services in local area, and this leads to fierce competition for dominance.

7 CHALLENGES FACED BY THE ORGANISATIONS

7.1 CHALLENGES FACED BY DHL

7.1.1 Entry into the US market

DHL decided to enter the US market and offer domestic delivery services as
part of its expansion plans to offer delivery services to over 200 countries.
Its decision to withdraw from the market marked a major strategic reversal
by the German postal Giant. Its ambitious expansion drive began in 2003
when
it acquired domestic airliner Airborne Inc. for $1.05 billion and merged it
with DHL. Despite the fact that it maintained leadership positions Europe,
shares in market share in the US remained below 10% thanks to its
competitors. After investing and losing billions of dollars over the past five
years, DHL decided to cut down operating costs by shutting down ground
hubs and lay off jobs. (Esterl 2008)

7.1.2 Competitive edge created by additional services

Research by DHL has shown that competing courier companies are trying to
attract market share by developing new value-added services in a bid to
attract more customers and tapping new markets. It is observed that
business customers are interested in integrated services provided from a
single source. Extra services provided such as obtaining shipment
information via text message and department delivery are additional trends
in the courier sector. Simultaneously, the line between transport services
and contract logistics is blurring.(DHL 2008)

7.2 CHALLENGES FACED BY FEDEX

7.2.1 Treatment of truck drivers of FedEx Ground

FedEx employed strict standards on truck drivers regarding their duties such
as delivery times, truck maintenance, driver’s grooming and punctual
handing of paperwork. And since the companies’ introduction of its FedEx
ground service, the company’s treatment of its truck drivers reflect those of
contractors, and not as employees. As a result, FedEx was subjected to
several lawsuits against them which highlighted their treatment of drivers,
such as deducting utility costs such as truck washing, uniform clothes and
log shipment scanners from their wages, and manipulating their operating
agreements so they could be labelled as independent contractors and avoid
supplementary costs associated with employees.(Eidelson 2014)
7.2.2 Decline in express delivery
Another major problem faced by FedEx in general is the declining need for
its core business: express delivery. This is because according to analyst
Logan Purk,” Freight is moving, but customers and shippers are trading
down. Businesses aren’t paying for two days express shipping as much and
are willing to put their goods in a boat and wait two weeks instead to
cross the Pacific. A lot of consumers are in belt-tightening mode and
don’t want to pay for express.”

So as part of an effort to improve profitability and reduce costs, FedEx

decided to retire some of its older aircraft fleet and decrease services to
Asia. (Mouawad 2013)

8 HANDLING OF STRUCTURED AND UNSTRUCTURED

PROBLEMS

8.1 STRUCTURED AND UNSTRUCTURED PROBLEMS OF DHL

8.1.1 Structured
DHL operates with a code of conduct which binds all its regions and
divisions and is to be followed by all employees in order to avoid mishaps
from occurring (Deutsche Post DHL 2006). Disciplinary action would be
taken if an employee is caught violating the code. For example, if an
employee was caught in the act of money laundering, which is strictly
illegal, then in worst case scenario, he/she will be discharged.

8.1.2 Unstructured
As an organisation specialized in the logistics business with a repetitive work
practice, DHL figures out how to far off itself from a great deal of
unstructured issues. But in any case, no organisation on the planet can free
themselves totally of them. For example, after DHL’s acquisition of
Airborne’s
ground shipping operations, the company decided to outsource from
Airborne’s IT assets and decided to merge it with its own. This caused
complexity among IT firms as they were forced to learn and understand
each other’s IT systems and business practices.(Whiting 2006)

8.2 STRUCTURED AND UNSTRUCTURED PROBLEMS OF FEDEX

8.2.1 Structured
FedEx also follows its own set of rules with integrity and reliability. Every
FedEx director, employee and officer are to comply with the code of
business conduct and ethics set for them in order to maintain healthy
working environment (FedEx 2015f). Henceforth, workers are to avoid all
types of practices that could jeopardize FedEx and its staff; this includes
using the company’s sources for illegal gain.

8.2.2 Unstructured
Due to the problems faced in the economy around Europe and Asia, FedEx
continues to face fuel problems. Managing director of FedEx Express Richard
Smith quoted,” With the slowdown of world trade, economic problems in
Europe and Asia, and the U.S. low economic growth, FedEx's bottom line
continues to be threatened”.

This obliged the company to resort to improve fuel efficiency by increasing

the number of alternative vehicle fleet, using of natural gas-fuelled trucks.
(Xinhua 2013)

9 POLICIES AND PROCEDURES

Below are some of the examples of what DHL and FedEx refer to as a policy
or a procedure in regard to delivery of packages.
9.1 PROCEDURES AND POLICIES ADOPTED BY DHL

9.1.1 Procedure
 Pick Up - DHL e-commerce goes to your business and picks up your
domestic and international shipments. We ensure flexibility to our
customers regarding pick up times.
 Transport to Distribution Center – We bring your items to one of
our state-of-the-art distribution centres located throughout North
America.
 Processing - Inside our highly automated distribution center,
advanced processing technology helps ensure fast, accurate delivery.
Sophisticated sorting enables us to bypass many postal facilities
before
inserting your items into the postal stream.
 Network - We expedite your materials through our global network,
bringing them as close as possible to their destination before
transferring them to local postal authorities for final delivery.
 Delivery - As a USPS Workshare partner, we rely on their local
carriers in order to deliver your domestic shipments with the rest of
the mail. Other dependable postal partners abroad handle final
delivery of your
international shipments.
 Online Shipping Tools - Throughout the delivery process, our
online tools keep you informed, helping you monitor your shipments
and manage your shipping program.(DHL eCommerce 2010)

9.1.2 Policy
Here are some of the key policies they follow in order to ensure a smooth
procedure (Deutsche Post AG 2015):

 Business Ethics Policy

 Privacy Policy for International Data Transfers
 Environmental Policy
9.2 POLICY AND PROCEDURES IN FEDEX

9.2.1 Procedure
 Pickup - Based on your average daily shipping volume, we offer a
customized solution to get your packages from your facility to our high-
tech distribution facilities for same-day sorting.
 Scanning and sorting - Scanners read package bar codes and
cross- check them against merchant manifests. Packages are
weighed, measured and logged into our data-collection system. This
system assigns thousands of packages an hour to the proper
destination ZIP codes, and fully automated tilt-tray sorters carry
them to the
appropriate chutes for loading.
 Zone skipping - Tractor-trailers carry packages to entry points deep
in the postal system, thereby skipping several postal processing
centres along the way, which results in reduced transit time,
minimized handling and maximized postal discounts. Throughout the
delivery process, we utilize our technology to provide shipment
visibility of your
packages while they are en route to their destinations.
 Delivery - The USPS completes in-home delivery to your customers’
addresses, P.O. boxes, or military APO and FPO destinations.
 Web-Based Tools - A suite of tools on fedex.com provides 24/7
access to package information, shipment-status tracking, logistics
analysis, billing statements and report creation, enabling you to run
your business more effectively and efficiently. (FedEx 2015e)

9.2.2 Policy
Below are some of the main policies adopted by FedEx for its delivery
services (FedEx 2015a):

 Money-Back Guarantee Policy

 In the case of outgoing express packages and envelopes to be
shipped, FedEx may be contacted directly
  Shippers will be quoted FedEx Retail Rates for shipments originating
in the U.S. that are paid for by cash, check, debit or credit card
instead of being charged to a valid FedEx account

10 DECISION MAKING
The decision making style of both the organisations leans more towards
rational than intuitive as the prevalent decision making criteria is logic.

10.1 WRONG DECISIONS

Every company is prone to making ill judgements and wrong decisions every
once in a while. The companies that identify their wrong decisions and
endeavour to rectify their mistakes are more successful in the long-term.

10.1.1 FedEx
The decision of FedEx to consider their drivers as contractors instead of
employees can be labelled as a wrong decision. The motive behind the
decision was to prevent the drivers from becoming eligible for overtime,
medical insurance, social security and unemployment insurance. (msnbc
2014)

The decision was not popular with the van drivers and many decided to sue
FedEx. Initially, the cases were won by FedEx however, recently the courts
have started issuing verdicts in favour of the drivers. Reggie Gray, a driver
for the FedEx Ground division sued the company for categorizing him as a
contractor instead of an employee. He bought a van and a delivery route for
a total of $22,000 after which he bought another van on the insistence of
FedEx for $11,000 and employed another driver as there were more
packages and objects to be transported on that route. In addition, the costs
of FedEx uniform, software, hardware and the servicing and repairing of the
vans were covered by Gray’s personal finances. Then FedEx charged him a
hefty fine for misplacing a package worth $400 which caused him to go
bankrupt after which he sued FedEx for labelling him as a contractor yet
treating him as an employee. Gray won the court battle and FedEx had to
pay about $90,000 in damages. (Rooney 2014)

10.1.2 DHL
DHL’s decision to increase its business in the US and to confront rivals UPS
and FedEx directly was an incorrect decision based on the results produced.

DHL acquired the rights to Airborne Express to grow its domestic market
share in the US and financed a huge improvement project to transfer larger
amounts of packages. This was followed by a dynamic marketing scheme to
advertise itself as a rival to UPS and FedEx in the US and to quickly establish
itself as a viable contender to them. DHL also lowered service charges to
compete with its rivals.

Unfortunately, the output was really low compared to the expected results.
In fact, the results were so abysmal that DHL then took the decision to
completely pull out of the domestic US market. The complete withdrawal
from the domestic market cost DHL about $9.5 billion and about 15,000
DHL employees lost their job. DHL now only operates international
shipments in the US and has completely left the domestic business.
(bloomberg.com 2015)

10.2 RIGHT DECISIONS

10.2.1 FedEx
FedEx made a decision to start charging for packages using dimensional
charges instead of charging based on the weight of the package in 2014.
The packages would be charged based on their length, breadth and width.
The
decision was made to improve revenues made from bulky yet light
packages. These packages weighed less so fetched less profit while
simultaneously covering large volumes in trucks and vehicles restricting
space for other objects.

Another example of a good decision made by FedEx is to improve the

delivery on time rates for the holiday season. This decision helped FedEx
earn more revenue from packages delivered during the holidays. The
shipping routes are busier and people want their packages to be delivered
on time before the holidays begin which is what FedEx achieved by its
decision to concentrate more on shipments for special occasions. (Team
2015)

10.2.2 DHL
DHL’s decision to build a Business Intelligence System in collaboration with
SDG Consulting enabled it to evaluate the resources required in each
aviation operation and to distribute it accordingly. This decision increased
the efficiency of analysing operations and decreased the duration of
investigations. It also allowed DHL to make riskier business decisions for
more growth and increased profit. (SDG 2015)

10.3 DECISION CHARACTERISTICS

The above cases feature characteristics that are common and specific to
each type of decision, either right or wrong.

The decision making characteristics that are specific to each type of decision
can be distinguished from each other. The characteristics are highlighted
below:

FedEx
Right decisions Wrong decisions
➢ Decision making does not suffer from making biases and errors
 ➢ Employing drivers as contractors
➢ Sustainability is the driving force which is characteristic of
for innovation decisions to reduce costs
➢ Choosing the wrong alternative
of keeping the decision of
employing drivers as contractors
DHL instead of rectifying the decision
mistake

Right decisions Wrong decisions

➢ In-depth analysis of decision
➢ Weight allocation of criteria
criteria during the inception of
suffers from decision making
the organisation
biases and errors
➢ Customers are the first priority  Underestimating competition
during the establishment in US

➢ No evaluation of the decision of

having an aggressive marketing
strategy

10.4 SIMILARITIES AND DIFFERENCES

DHL and FedEx both have similarities and differences in their priorities and
in the way they operate, expand, and do business. However, to understand
their business strategies and plans in a broader context it is useful to
compare them to an organisation of the same type. For the comparison UPS
is chosen as it is another similar organisation that holds a major global
market share in the courier industry.

FedEx vs UPS
Similarities Differences
➢ Both organisations hold the ➢ FedEx owns more vehicles that
majority share in the US use renewable fuels and have
domestic market more sustainable practices and
services
➢ UPS and FedEx both have ➢ UPS owns the largest fleet of
excellent customer service ground vehicles
 ➢ FedEx strategy is aggressive
growth while strategy of UPS is
stable growth
➢ FedEx provides faster delivery
times while UPS has the higher
delivery on time rate (Roggio
2015)

DHL vs UPS
Similarities Differences
➢ UPS and DHL both have a ➢ DHL has larger global market
geocentric approach share and transports to more
countries
➢ DHL focuses on growth strategy
while UPS focuses on stability
internationally
➢ UPS has a better tracking system
than DHL
➢ DHL is more expensive compared
to UPS (helpme.com 2015)

11 SUMMARY

Similarities
FedEx and DHL
Both organisations have policies that prioritize customers, work ethic, strong cultures and sustainability
Sustainability approach is to utilize renewable fuels and reduce carbon footprint in transportation and package material
Socially responsive
Threat of new competitors is low while e-commerce is an opportunity
Ethics and a strong culture is promoted within the organisations
Both organisations have similar stakeholders
Use of latest technology to make work and business at home anattractive option and to ease the tracking of shi

Differences
FedEx DHL
➢ Primarily based in US from where ➢ Worldwide organisation with
the majority revenue is earned revenues earned globally
➢ The main challenge faced is the ➢ The main challenge faced is entry
treatment of drivers into US market
➢ Brand name is a huge strength ➢ The main strength is reliability
➢ Primary strategy is focused on and experience
stability ➢ Primary strategy is growth
➢ Initiated programs such as ➢ Initiated programs such as
EarthSmart (Sustainability) and GoGreen (Sustainability), GoHelp
CSR (Disaster relief and road (Disaster relief) and Go Teach
safety) (Education)

12 CONCLUSION
FedEx and DHL are the leading brands in the shipping and logistics industry
worldwide. However, they both face stiff competition from UPS which is
another leading brand. Together, these three companies lead the world
shipping and courier industry. The threat of new entrants for both the
organizations is minimal so they concentrate more on triumphing over each
other. This results in an intense rivalry which is reflected in their marketing
and advertisement strategy.

The reach and impact of DHL worldwide is more compared to FedEx which
mainly operates and generates revenue in the United States. Both
organizations share a strong organizational culture with heavy emphasis on
ethics. It is difficult to classify such large organizations however it can be
concluded that FedEx has an ethnocentric approach while DHL adopts a
geocentric approach

Overall, DHL is more expensive and reliable compared to FedEx but FedEx
outmatches in customer relations and sustainability solutions.

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APPENDIX