International logistics company Deutsche Post DHL has announced an ambitious earnings goal as it unveiled a new business strategy for the coming years built on three key growth areas.
The new Strategy 2020: Focus.Connect.Grow. “builds on what we have achieved so far,” said CEO Frank Appel. “It will power the group’s next big growth stage and open up new opportunities for sustainable profitable growth in today’s ever-changing environment. Our aspiration is to be the leading force in the logistics industry by 2020 and the company that defines logistics.”
The three “pillars” of the new strategy are organic expansion, emerging markets, and eCommerce-related logistics. In addition, the group targets earnings growth of more than 8 percent per year on average through 2020, based on the 2013 EBIT of EUR2.86 billion (US$3.91 billion).
Despite the general slowdown of growth in the forwarding market, the group expects its DHL division to continue to be the main contributor to its growth, with an annual average EBIT growth of about 10 percent per year over the period. In addition, the group also sees the strongly increasing importance of the parcel business in improving its operating profit of around 3 percent per year on average for its mail division.
The new strategic plan aims to “anticipate and prepare for changes in the market, in the competitor landscape, and in customer requirements,” said a company statement.
“As far as trends go, the logistics industry is seeing a continuing shift towards emerging markets. The eCommerce segment, while posting accelerated growth, brings with it steadily increasing consumer demands in regard to the convenience and flexibility of delivery. As digitization also leads to changes in the competitive environment in the logistics markets, new opportunities and new business models for logistics companies are evolving. Moreover, customers are increasingly considering the company’s contribution to the environment and society when choosing a provider,” noted the company.
Under its Strategy 2020, logistics will remain at the core of the group’s business activities “due to growth and overall attractiveness.” Its mail division will be renamed to “Post-eCommerce-Parcel” to better reflect the division’s business activities in the years to come.
“In addition to traditional postal services, the division will increasingly focus on expanding the products and services offered for the high-growth eCommerce market,” said the company.
Further expansion into emerging markets is a key aspect of the company’s growth strategy. Emerging market revenues currently contribute just over 20 percent of revenues and are expected to climb to 30 percent by 2020. “Given the significant increase in revenues expected by the year 2020, this means a substantial increase in absolute revenue growth in the emerging market countries,” said the statement.
Another major area of focus will be eCommerce-related logistics services, where Deutsche Post DHL wants to establish itself as the number one provider of cross-border eCommerce services on the most important international trade lanes, and one of the top three B2C domestic parcel delivery service providers in selected markets.
The group plans to gradually export its expertise in the parcel business to other parts of the world, taking its German model to countries in Europe, Asia, and the Americas. To this end, it already shifted parcel activities in the Benelux countries, Poland, the Czech Republic, and India from DHL to the mail division earlier this year.
“Over the past several years we have demonstrated what we are capable of,” said Appel. “Now we will accelerate our organic growth and continue to pursue a clear vision: we want Deutsche Post DHL to be not only the most global company in our industry, but also the clear leader in quality and customer orientation.”
