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contract an additional burden on DHL’s financial condition rather
than helping to facilitate expansion.
In addition, DHL embarked on its expansion at a time when
the U.S. overnight delivery market was becoming more competitive,
especially because UPS had entered that market. Federal Express
responded to the market forces by cutting prices, and U.S. market
prices fell steadily during the period when DHL was trying to
expand. Because of its expansion and the market forces, DHL
experienced increased financial strains and severe cash-flow
problems during the mid-1980’s.
From 1983 through 1988, DHL’s domestic volume increased
sharply, and its domestic revenues also increased, although at a
lower rate. Although DHL did achieve some reductions in its per-
shipment costs, the cost of the expansion, price competition in
the U.S. market, and DHL’s failure to achieve the same economies
of scale as its larger competitors caused DHL to sustain heavy
losses, ranging from $5 million to $25 million per year. Some of
the reasons for DHL’s poor performance in its attempted domestic
expansion were similar to Federal Express’ poor performance in
its attempted foreign expansion in attempting to compete with
DHLI.
DHL’s losses from 1983 through 1988 were attributable to its
domestic business, not to its outbound business. During the same
period as the domestic expansion and losses, DHL’s outbound
volume and revenues were steadily increasing. DHL experienced
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