Blue Dart Express Delivery Services: Competition and Strategy
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Group No. 13 analyzed the express delivery service industry in India. Blue Dart Express is the market leader with over 40% market share in air cargo. It has an extensive network across India and provides fast and reliable service. While Blue Dart has sustained competitive advantages through its brand, network, and alliance with DHL, competition is increasing from players like Gati and DTDC who are improving technology and expanding networks. To maintain leadership, Blue Dart should focus on customer service, expanding reach, adopting new technologies, and partnering with e-commerce companies.
Blue Dart Express Delivery Services: Competition and Strategy
- 1. Group No. 13 – PGP 2012 – Section D 1211254 - Chandan Satapathy 1211269 - Ashlesha Vishnu Kadam 1211284 - Pushpendra Singh 1211299 - Sherene Annabel 1211314 - Vishrut Shukla THE EXPRESS DELIVERY SERVICE INDUSTRY
- 2. Industry Overview - Logistics evolved from being a passive, cost-absorbing function to one that provides competitive advantage - Drivers: Trade, regulatory changes, infra builds, 3PL - Challenges: Fuel costs, labour shortage, Indian Post - Express Delivery: Collection, transport, delivery of documents, printed matter, parcels, other goods on an expedited basis, while tracking and maintaining control Different Sectors of the Logistics Industry Porter’s Five-Forces Analysis Unorg. & fragmented suppliers Low threat of fwd integration Availability of substitutes Low switching cost SPs threat of bkwd integration Capital requirement & technology access Economies of scale, delivery n/w access Operating costs – fuel, manpower, infra Brand identity & switching costs High Concentration Limited product differentiation Low switching cost Significant capital, fixed costs Standard & undifferentiated service Large business buyers, price concern Contribution to quality and cost No threat of fwd/bkwd integration Need is time-bound, reliable service Limited availability of close substitutes Substitute’s price-value proposition Switching cost if adopting IT as substitute > Government – Regulations, fuel price hikes, infra development, control of Indian Post > Goods and Service Tax (GST) to be positive; allowance of 100% FDI encouraging step > Express Industry Council interacts with govt., customs to get clearances & resolve issues Summary of Facts & Figures > Logistics Industry’s Contribution to GDP - 13% > Organized vs Unorganized Players – 65% organized > Employment provided to over 1 million people > Market – Rs. 143.4 bn (’11), Rs. 359.9 bn (’16) > CAGR of entire Logistics Industry - 9.9% > CAGR of express delivery - 20.2%
- 3. The Firm – Blue Dart Express - South Asia’s premier courier & integrated air express package SP - A group company of the Singapore-based DHL group (81% equity) - Started operations in ’83; incorporated as private company in ’91 - Market leader in air cargo, commands more than 40% of market share in air express logistics segments, 12.8% in ground market - Customer-focused; maintains reliability levels of 99.96% in service - Strong pricing power, results in above-industry margins (10-12%) Performance of Blue Dart’s Stock Relative to Sensex Blue Dart DHL in Numbers > No. of employees - 7841 > Fleet - 5885 ground delivery vehicles - 7 dedicated cargo aircrafts > Locations Serviced - 36,474 across India > Countries Served – 220 (with DHL) > Annual Shipments - 77 million (domestic), 0.66 million (foreign)
- 4. Analysis of Blue Dart’s Strategy Generic Strategy of Blue Dart - Firm employs strategy of differentiation based on service level and geographical reach via its strong n/w - Innovative product mix, customized to meet specific needs of both business and retail customers - Product mix ensures sharing of resources & utilization - Strong global distribution through its alliance with DHL - State-of-the-art technologies in express logistic industry > Smart Trucks –intelligent route-planning capability, CO2 reduction under the GoGreen drive > Trimble GPS system in all truck for real-time tracking > SOTI MobiControl - Location-specific delivery assistant - Blue Dart charges a premium (upto 50%) over other air carriers on account of higher service levels, efficiency and larger portfolio of services - Increasing focus on ground services market poised to grow at ~25-26% every year; creating a niche presence - Introduction of value-added products like temperature controlled logistics and services like demand-draft on delivery, freight on demand etc. for accelerated growth by charging higher margins Resource-Based View Structure Support from DHL - Valuable - Rare - Inimitable - Non-Substitutable Brand Value - Valuable - Difficult to imitate - Non-Substitutable Sustained competitive advantage Fast and Reliable Service - Valuable - Not rare - Difficult to imitate - Non-Substitutable Temporary competitive advantage Extensive Network, Infra & Tech. - Valuable - Not rare - Imitable - Non-Substitutable Temporary competitive advantage Sustained competitive advantage
- 5. Competitive Landscape Revenue: Rs. 15171 mn 78000 employees PAT: Rs. 1242 mn Key Success Factors Strategic Alliances Market Cap Rs. 54,874.44 mn 45.91% (Industry Leader) An unmatched extensive pan India infrastructure advantage compared to its competitors Aircraft fleet ownership and high service standards Tailor made services with the most advanced communication systems for specific industry needs With group company DHL, the No.1 international air express services provider, for international deliveries and pick-ups Market Cap Rs. 2,471.86 mn An intrinsic network that spans the length and breadth of the country covering 1,300 locations through 345 branches Large warehousing space with fully automated system & a highend vehicle tracking system (VTS) With GLS, providing easy access for customers in Europe Joint Venture with KWE leveraging its freight forwarding expertise and global customer base Value-added services & complete supply chain solutions to suit the unique needs of customers Well connected routes which cover 13,000 delivery locations across India. Joint venture with Mitsui and Co. Ltd. Joint venture with CONCOR for bulk multi-modal logistics solutions Strategic tie-ups with global airexpress companies Low cost shipments along with timely delivery Joint venture with Eurostar With Kerry Logistics in China Trans Corp Revenue: Rs. 11911 mn 32000 employees PAT: 416 m (in Rs) Market Capitalization • • Revenue: Rs. 19594 mn 5000 employees PAT: 595 m (in Rs) Market Cap Rs. 4213.22 mn DTDC Gati Blue Dart + DHL Company Size Revenue: Rs. 5500 mn 13000 employees Market Cap Rs. 3250 mn Due to imitation of the track and trace facility of Blue Dart, provision of multiple modes by other players at rates much lower than that of BDE and with differentiated services Blue Dart challenged to maintain its leadership position amidst growing competition and imitation
- 6. Challenges & Recommendations Challenges & Changes in the Industry • • • • • • High correlation with GDP growth rates Entry of foreign majors like FedEx and UPS in the Indian express delivery market Fluctuations in oil and aviation fuel prices Increasing market share in the ground services market The upcoming 3PL/4PL logistics wave due to entry of big retail players in Indian market Emergence of e-commerce websites as big buyers Recommendations • • • • • • Retain the market leadership position via differentiated service: value focus on customer relationship, ease of payment options and elaborate coverage network for delivery services Increase footprint in Tier II and Tier III towns Continuously adopt new technologies to improve workforce efficiency Provide specialized end-to-end logistics services like cold storage, trans-national shipments Increase portfolio of value-added services to create differentiation in the industry Create lock-ins with the e-commerce platform owners to become their preferred shipper