Conducting business in China is not for the light-hearted. DHL, part of the Deutsche Post World Net, has become the market leader by moving faster – and in a more daring way than its international competitors. In February last year, DHL flexed its muscles by spending US$58 million on a 5% stake in its Hong Kong-listed Chinese partner, Sinotrans.
Early bird
DHL was the first express delivery service to enter
China in 1980 shortly after the country opened up, “although
there was not much going on then”, admits Alan Wong,
DHL National Marketing Manager in Beijing.
Six years later, DHL started a 50/50 joint venture with Sinotrans. “The relationship with our Chinese partner has been one of our critical success factors,” says Wong. While other international express delivery companies had a troublesome relationship with their partners over the past decades, DHL and Sinotrans' relationship “grew stronger and stronger over the past eighteen years”, boasts Wong. “You could see that our competitors did not share the same commitment and vision as their Chinese partners. That commitment and a shared vision are critical for success in this market.”
First-mover advantage has not always been the blueprint for success in China, but for DHL, first mover advantage gave it a firm lead and it is still moving ahead: “Today we serve 318 cities. We are the biggest player, but are not satisfied with our position. We need to grow further.”
At the end of 2003, DHL and Sinotrans jointly invested an additional US$215 million to speed up the growth of its China operations. Seventy-five new stations, 1,200 new vehicles, and 2,000 additional jobs will be added to DHL's assets, facilitating an expected annual growth of between 35 and 45%. Wong adds: “We are now working on 70 different projects to improve our performance in China.”
In the backdrop to DHL's China growth has been its purchase early last year by Deutsche Post, the merging of its operations with two other companies including the former Danzas, and its purchased of US-based Airborne Express, which has allowed it to strengthen its position from China in the US. “We are now moving to integrate the three companies under the DHL-brand, and we are looking forward to adding new synergy to our back office. The integration of the three DHL companies has worked well in most markets. In China we are slightly behind, since we are working with three different partners in different JV's, but we are targeting to achieve integration. The purchase of Airborne Express has clearly put us into the US, where Airborne Express was always a strong player,” Wong says. A concrete date of when a full integration of the three DHL companies will be in place has not yet been announced.
Pioneering
Looking towards the future, Wong says, “DHL's target is the expansion of its own network, already covering up to 50 cities”. However, “Only our own people can give the customer the same level of service you would expect in Europe or in the US. That is the key focus of our expansion. Most of our competitors can only work through third-party agents in a large part of this big country. We have already 20 branches in the Yangtze Delta alone, more than anybody else, with our people using the same cars, the same scanners, and staff who have all gone through the same training.”
DHL has built up a network of cross-border connections that is much larger than that of its competitors, guaranteeing next-day delivery in Asia thanks to its alliance with Cathay Pacific. Says Wong: “This system makes us actually more flexible than were we to operate our own network. For example, now we can use four flights leaving Shanghai for the US a day. When we had our own airplanes we could only afford one flight per day, but this way we can serve our customers better.”
Wong avoids comment on the row that flared up in May this year with China Post, both the regulator and operator of domestic express company EMS. EMS, the express courier service of China Post, holds a near monopoly of the document and private letter market. The central government is trying to separate its administrative tasks from the operating business, but in the postal services that development is lagging behind. “EMS is not our competitor since we work in a different market segment,” Wong explains. Until the regulator clarifies how it wants the industry to develop, DHL focuses on freight and parcels over two kilos, avoiding a head-on collision course.
“DHL will not be deterred from its aggressive approach.” As Wong points out, however, the proof is in the pudding: “We have been a pioneer in every market we entered, including China.”
