The International Air Express Industry:

The air express industry offered two main products: document delivery and parcel delivery.
Industry revenues were split roughly 75:25 between parcels and documents. In 1989, the
parcel sector grew 40% while the document grew 15%. The growth of parcel and document
express delivery was at the expense of the air cargo market and other traditional modes of
shipping. The total revenues for the international air express industry were approximately $
3.4 billion in 1989 and $ 4.3 billion in 1990.

Main Issue
DHL wanted to make recommendations on pricing strategy, structure and decision making.
Whether to use price leadership strategy or market response strategy.

Problem Statement

1. Should any difference in price charged for documents and parcels?

2. Should any difference in price across different industries?

Setting the price:

A firm must set a price for the first time when it develops a new product, when it introduces
its regular product into a new distribution channel or geographical area, and when it enters
bids on new contract work. The firm must decide where to position its product on quality and
price.

DHL using market skimming as a pricing strategy, because with this strategy it will earn
business revenue and market share, usually using this strategy for leaders in their industry.
This strategy will work if the market is large enough, if there are enough buyers, if there is
high product or service demand, and if the company has a good (and low) cost structure.

As we know DHL’s price were historically 20% - 40% higher than those of competitors. In
most countries, DHL published a tariff book which has updated yearly. Competitors who
followed DHL into new markets often pattern their pricing structure after DHL’s.