Thinking Globally – DHL Case Study
1.
It is universally assumed in today’s business world that speed is good and desirable. This assumption is strongly connected to concept of the first mover advantage. The company that leads the way into a new market as a first mover has definitely some important top-line benefits and competitive advantages that might ensure superior sales and profits on a long-term perspective. Furthermore, first movers tend to create a large and lasting impression on customers and develop strong brand recognition (Boulding & Christen, 2001). On the one side, services are generally characterized as being higher in experience and credence qualities than products, which increases the risk in their purchase. Therefore, customers rely more on word of mouth rather than advertising. While customers that purchase goods get something tangible in exchange of their money, service purchases do usually not result in ownership of something physical. Because of that intangibility, services do generally not attract customer’s attention that easily and the appreciation of the services is harder to evaluate for the customer than in the case of purchasing goods (Kotler & Keller, 2012). For that reason, I would argue that service companies have a lesser advantage of being the first mover in a market compared to manufacturing companies, since the customer appreciation of purchasing goods is easier than in the case of purchasing services. This makes services generally less recognizable and harder to evaluate for customers, even if the company providing the service was the first mover in the market.
2.
Service companies need to understand how to achieve global customer satisfaction. First of all they should set a special focus on creating a globally uniform corporate identity and corporate image. Moreover, service companies must ensure to implement a worldwide quality standard of the services they offer their customers. One crucial aspect of that is having particularly well trained employees. This might also be the most important difference between service and manufacturing companies in terms of setting their international focus. Unlike product manufacturers, service companies have an extremely high degree of customer interaction. Hence, it is essential that service employees are capable of dealing with customers from different countries and are aware of different cultural beliefs and backgrounds in order to ensure the most customer satisfaction. A possible solution for service companies would be to hire local employees to which local customers can connect and built a strong relationship to.
Another central element for service companies to be globally successful is to efficiently market their services. One option might be to integrate a tangible component into their services to enhance and differentiate themselves from their competitors. Service marketers must either focus on making intangible elements of their services more tangible or on featuring a “physical evidence” element of their services. According to Wagner and Busse (2008), physical evidence plays a crucial role in creating a certain atmosphere and environment in which a service is bought and influences the customer’s perception of the service. Physical evidence is the tangible component of a service package, which the company has control over. Thus, service marketers might use uniforms, logos, written contracts and guarantees or color schemes to tangibilize their services.
3.
DHL’s international human resource strategy to focus on hiring personnel in the countries in which it operates is a crucial step to create significant customer relationships. By employing local people who know local customs and regulations, DHL is able to efficiently manage their business locally. Local employees have some essential advantages compared to foreign agents. First of all, they know the local language, culture and beliefs. Having that knowledge, local employees are able to better understand customer’s expectations and needs which creates a higher overall customer satisfaction. Furthermore, employing local people rather than foreigners increases the overall image and acceptance of the company in the operating country tremendously.
However, there are some disadvantages linked to DHL’s international staffing approach. Hiring only local employees might increase the company’s administrative costs. It can be challenging for companies to find suitable employees, since evaluating employees’ qualifications could differ significantly from the standards in the company’s country of origin. Moreover, depending on local rules and regulations the whole process of employing local people might take longer and involve more costs than hiring employees internally or from the company’s country of origin. Another drawback might be a more difficult and slower communication and information flow from the foreign subsidiary to the company’s headquarter. This might be not only reasoned in the use of different languages, different work attitudes and expectations also have a huge affect on the quality of internal communication and workflow.
4.
On the one hand, first movers are able to generate cost advantages by being ahead of their competitors in the experience curve and generating economies of scale. Moreover, they are able to gain control over scarce inputs or establish leadership in certain technologies or patents. Because of the stronger brand recognition first movers have, they incur less costs for advertisement and other marketing efforts. On the other hand, there might be some disadvantages for first mover that early follower might turn into their advantages. Being a first mover in a new market goes along with high investments and a certain degree of risk and uncertainty. Furthermore, on a long-term perspective first mover often remain entrenched with less efficient technologies and processes as it was their original way of doing business. Compared to that, early followers can clearly have some cost advantages. They are able to learn from first mover mistakes and success and by that reduce their investment costs and risks. In addition to that, followers have the opportunity to adopt newest technologies and are able to implement efficient processes more easily. Based on a research published in the Harvard Business Review, first mover gained significant sales advantages, but they incurred even larger cost disadvantages. First mover had a three to four percent lower return on investment (ROI) than early follower. Hence, on a long-term perspective being the first mover might be substantially less profitable and advantageously than being a later entrant (Boulding & Christen, 2001).
References
Boulding, W. & Christen, M. (2001). First-Mover Disadvantage. Harvard Business Review. Retrieved on February 2nd, 2014, from http://hbr.org/2001/10/first-mover-disadvantage/ar/1
Kotler, P. & Keller, K. (2012). A Framework for Marketing Management (5th ed.). Noida, IN. Pearson Education.
Wagner, S. M., & Busse, C. (2008). Managing Innovation. The New Competitive Edge for Logistics Service Providers. Bern, CH. Die Deutsche Nationalbibliothek.