- 34 - In 1983, DHL decided to increase its domestic coverage, both to protect its share of the outbound market and to handle more domestic shipments that could improve profitability and provide more potential for foreign outbound customers. DHLI management, however, was not in favor of DHL’s domestic expansion plan. DHL’s domestic expansion included the establishment of its own airline (DHL Airways), which was a capital-intensive and expensive method to ensure expansion capacity and more individualized and reliable schedules. There were also additional capital expenditures for new locations, vans, couriers, and other equipment, which further strained DHL’s cash-flow in the mid-1980’s. Because Federal Express had an established comprehensive overnight delivery network, it had achieved the highest volumes and the lowest per- shipment costs, and as a result, the DHL expansion was insufficient to effectively compete. A bigger company with large volume and existing ground network, such as UPS, was better equipped to challenge Federal Express. DHL bid low on a U.S. Government contract with the General Services Administration (GSA) to help fill its planes and help with the extra cost of expansion. Additional costs, however, were incurred under the GSA contract because the deliveries were not at consolidated locations but rather were to specific floors, offices, or desks. The low bid and added costs made the GSAPage: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Next
Last modified: May 25, 2011