Case Assignment Questions
DHL Worldwide Express
1. How do customers purchase air express services? Are there differences between documents and parcels? Yes, there are differences. There are two principal types of customers. First, there are the people who base their decisions depending on the level of satisfaction that the shipment company’s current customer base have. They are not price sensitive and because it is easy to anticipate their purchase volume and shipment, it is easier for DHL to come up with a base price. However, there are customers whose destinations are not foreseeable. Hence DHL cannot set their discounts properly on the basis of anticipated volume for these customers. Customers purchase air express service based on the carriers standing in the market place, specifically that are well-received and well-respected by their own customers, both external and internal. Many of them are price sensitive as well as very service sensitive. Customers split their air express service requirements among several firms – usually between 2 or 3 three preferred providers. Parcel services are scrutinized for best cost options and often discounts and annual contract are negotiated on anticipated volumes by the purchasing department. Large companies consolidate these shipments and put up the business for bid soliciting proposals from interested parties, the decision of service provider is taken by the VP – Logistics, Yes, there are differences between documents and parcels.
Documents are non-dutiable and non-declarable items and mostly comprised of inter-office correspondences, computer printouts and contracts. Documents had no commercial value at all. They are also light weight shipments managed by the individual or their secretaries.
Parcels are usually non-document items that have a commercial value and/or need to be declared to the customs authorities. Typical items would include prototype, samples, spare parts, diskettes and videotapes; had external dimension and weight restrictions of 175cms and 50 Kg respectively. Most companies have dedicated teams managing these within the Logistics or SCM.
2. What are DHL’s strengths and weaknesses compared to its competitors? 3. Strengths:
• Fastest delivery amongst all service providers in the industry • DHL is a large player, their revenues are more than the combined revenues of their 3 nearest competitor. • Split operations – DHL Airways – based in SF and managed all US Operations • DHL International. – Based in Brussels and managed all operations outside US. 4. • Efficient use of the Hub model
• Usage Optimization of own...
6. - DHL has a well-established brand name that is synonymous with reliability and value for money. Experienced player (20 years) 7. - Extensive International Network an accessibility of package shipment locations much more than its competitors. 8. - Faster Speed of delivery By using a variety of scheduled international carriers, DHL is able to optimize its transport network to minimize deliver times 9. - Worldwide scope, infrastructure, relationship network and people 10. - Custom network and relationships for faster parcel clearing 11. - Higher ratings in reliability and value for money
12. Strong Europe foothold
14. - Very less global contracts (only 10)/ Less MNC accounts when DHL infrastructure is suited to serve widely spread out global companies 15. - Single sales force selling both documents and parcels, although the decision makers for the two product lines are different at the customers’ end 16. - The pricing scheme is complex and varies greatly throughout the regions based on country managers decisions 17. - Not a strong domestic player in large countries like US, Canada and Australia 18. 3. What are some advantages and disadvantages of DHL’s current pricing structures? Are they exercising price leadership? Explain.
How does DHL set prices?...
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