Aramex offers services in six categories known as freight forwarding, logistics, domestic express delivery, document management, international express delivery, and mailbox, shopping and magazine distribution. Aramex uses expansion into untapped markets such as Africa, which are less attractive to market leaders.
Competitive Strategy
Aramex avoids owning fixed assets such as aircraft, and the use of debts to fund its expansion or operations. FedEx for example, has “aircraft and related equipment accounting for 40% of its assets”1. Its strategy includes competing with the other big companies such as FedEx, UPS, and Expeditors in the form of presence in a global market rather than profits2.
Competitive Advantage
Aramex obtains its competitive advantage from non-asset based approach. Grant counts competitive advantage as “a disequilibrium phenomenon that is a consequence of change”3. For a firm to benefit from its competitive advantage, it must be faster and more effective in exploiting change. Its growth rate is the highest in the market through acquisitions, and franchising. The Aramex’s expansion includes acquiring companies that are well-known in other regions.
The company has a management team that targets small companies for business agreements. In this case, Aramex targets them as customers. This reduces their bargaining power as their impact of withdrawal is lessened compared to the withdrawal of a large company. DHL targets more big-sized companies.
Direct and Indirect Competitors
Empost, a delivery division of Emirates Post Group Holding, uses the same strategy of engaging in partnerships. It has partnered with DHL to have it “upgrade and manage all international shipments on behalf of Empost international services and offer superior logistics solutions”4.
DHL wants to take advantage of Empost’s recognition, and retail outlets in the Middle East. Empost will benefit from its superior tracking devices, and DHL’s global presence.
Collaborators and Complementaries
Aramex collaborates with institutions of higher learning such as “INSEAD, IMD, Said Business School, the Judge Business School at Cambridge University to develop management and leadership skills and capabilities”5. The industry requires a well-informed management team, this calls for continuous training of its top personnel to have foresight on emerging trends.
Aramex got its major boost a few years after its foundation when it was still struggling to keep up with a little revenue that was making it difficult to conduct its operations. The first global courier company to offer Aramex a good deal was the Seattle-based Airborne Express. This offered to grant many of its sub-contracting deliveries in Asia to Aramex. With this in hand, Aramex was able to enter into an agreement with FedEx as well. Its revenues increased substantially to make operations easier to finance than before. Aramex took advantage of “Airborne’s package-tracking device technology at a very low cost”6. It also benefitted from Airborne’s experience, and global reach.
Aramex recognizes the importance of customer feedback on satisfaction. This has made it to enter into a business agreement with nPario. The company, nPario, has big market data analytics software which allows detailed information to be generated about customers.
According to Hassan Mikail, who recognizes the goal of the company, claims that “with nPario, we are confident that our marketing team… to understand our customers and deliver the best value in shipping services in the market today”7. This assists in providing information on customer needs in the “Shop and Ship” delivery service.
Aramex’s Competitiveness Analyzed Using Porter’s Five Forces
Porter’s five forces model takes into consideration the bargaining powers of customers, and suppliers. It examines the intensity of competition in the market, the likelihood of substitutes being developed, and new entrants8.
Suppliers’ Bargaining Power
Aramex depends on several airlines to deliver its goods to various parts of its geographic coverage. It takes the strategy of short term arrangements with the airlines such that there are no binding contracts. This gives the company ease to choose among a number of suppliers without delay for contracts’ periods to elapse9. The bargaining power of suppliers is considered low because of the flexibility of choices.
Considering the fact that Aramex is operating at the lowest cost, this poses entry barriers. According to Porter, “buyers can exert power only to drive drive down prices to the next most efficient competitor”10. Another factor that creates barriers to new entrants is brand loyalty. Aramex’s customers are moderately loyal to the brand.
Aramex reported a 14% increase in profits in the last quarter of this financial year. The profits moved from Dhs 56.5m the previous year to Dhs 64.4m ($17.53). Revenues also increased by 21%11.
This may attract new companies to enter the market. This is an industry where the fixed costs are high because a company may be required to “invest in planes, package-sorting facilities, and delivery trucks”12. This lowers profits, and discourages new entrants.
Customers’ Bargaining Power
Aramex has over 50,000 customers who are spread globally. Since the company does not have a concentration of customers over a small area, customers have a weak bargaining power 13. With its target being medium and small-sized companies, their withdrawal impact has no threat to the company. This reduces their bargaining power.
Threat of Substitutes
The field on which Aramex operates seems to have covered land, sea, and air ruling out the possibilities of substitutes emerging14.
Competition
Empost’s strategy of partnering with DHL is similar to what Aramex used when it partnered with Airborne freight company. Considering DHL is the global leader, it will give Empost technological superiority.This may pose a threat to expansion because it eliminates part of Aramex’s competitive advantage.
Competitive Analysis Table
References
Aramex sees Q2 profits rise 14%. (2012). AME info.com. Web.
Aswan, H. (2008). Aramex, One of a Kind. The National Investor. Web.
DHL signs strategic partnership with Empost. (2012). AME info.com. Web.
Grant, R. M. (2010). Contemporary Strategy Analysis and Cases: Text and Cases. Hoboken, U.S.A: John Wiley & Sons.
Groysberg, B. Kelly K. L., & MacDonald B. (2011). Executive Summaries, The New Path to the C-Suite. Harvard Business Review. Web.
Hill, C., Jones, G., & Jones G.R. (2012). Strategic Management Theory: An Integrated Approach. Mason, U.S.A: South-Western Cengage Learning.
nPario’s big data application chosen by Aramex. (2011). TCM News Desk. Web.
Porter, M. E. (1998). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York, U.S.A: The Free Press.
The GCC’s top employers revealed, Aramex. (2012). Arabian Business Publishing. Web.
Xomba. (2008). Business Strategies of World’s successful Companies: DHL’s WinningBusiness Strategies. Web.
Footnotes
- Aswan, H. (2008). Aramex, One of a Kind. The National Investor.
- Aswan, H. (2008). Aramex, One of a Kind. The National Investor.
- Grant, R. M. (2010). Contemporary Strategy Analysis and Cases: Text and Cases. Hoboken, U.S.A: John Wiley & Sons.
- DHL signs strategic partnership with Empost. (2012).
- The GCC’s top employers revealed, Aramex. (2012). Arabian Business Publishing.
- Groysberg, B. Kelly K. L., & MacDonald B. (2011). Executive Summaries, The New Path to the C-Suite. Harvard Business Review.
- nPario’s big data application chosen by Aramex. (2011). TCM News Desk.
- Hill, C., Jones, G., & Jones G.R. (2012). Strategic Management Theory: An Integrated Approach. Mason, U.S.A: South-Western Cengage Learning.
- Aswan, H. (2008). Aramex, One of a Kind. The National Investor.
- Porter, M. E. (1998). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York, U.S.A: The Free Press.
- Aramex sees Q2 profits rise 14%. (2012).
- Awan, H. (2008). Aramex. One of a Kind. The National Investor.
- Burnson. P. (2012). Top 25 Freight Forwarders: Thriving in the complexity. Logistics Management.
- Burnson. P. (2012).