Executive Summary
The research presents international business strategy with the case of Aramex International. Aramex grew from a small local firm to a global player in the logistics and transportation business. The company considers international market as a platform for further growth.
It has used acquisition, joint ventures and franchises to grow its brand globally. Aramex experienced few challenges related to time zone, language, cultural and legal differences and capital constraints. It is recommended that Aramex must continue with further growth in international markets through acquisition, joint ventures and franchises, as well as grow the business in the domestic market.
Introduction
Established in 1982 as “an express wholesaler to the US-based express delivery companies” (Aramex International 2014a), Aramex has grown from a local company to a global brand. The company has changed delivery services globally by providing “express, domestic, and freight forwarding services within its operation” (Aramex International 2014a).
Aramex went public in 2005. As a result, the company’s major objective is to deliver increased shareholders’ returns by a growth strategy that focuses on enhancing the company’s competitive ability among the main global transportation and logistics companies.
Aramex main approach strategy is based on a sustainable business model. This is obvious through its corporate culture and value creation. In 2006, the company released its Sustainability Report. Through this report, Aramex aimed at becoming the first carbon-neutral global logistics and transportation company in the world (Aramex International 2014a).
According to Aramex, sustainability management refers to “integrated development and growth of economic, environmental, and social performance in a manner that optimises value for all stakeholders” (Aramex International 2014a).
Aramex has been able to exploit free trade agreements and levelled economic conditions across the global to explore new markets. This has enabled it to compete in the global arena. Aramex depends on several factors to drive its business model of strategic growth. These market strategies entail joint ventures, acquisitions, franchises, and leveraging on resources.
The company has been able to develop reliable logistics and transportation systems that deliver successful results within its complex operations. Consequently, Aramex has been able to rely on its massive resources and global presence to deliver values to all its stakeholders.
Performance Assessment
Aramex’s approach to internationalisation/globalisation
Aramex developed from a local firm to a major global transportation and logistics solution company with many operations internationally. In the Arabian Gulf, Aramex has become the company of choice in the logistics and other related services. Aramex’s approach to internalisation involves geographical focus with certain products that enhance shareholders’ value based on the company’s growth strategy.
The company aims to repeat its model used in the Gulf region in the other parts of the global. Aramex strategy has been “connecting high growth emerging markets, such as those in Africa and Asia, to its global network” (Aramex emerging markets strategy “paying off” after another record year 2014).
According to Aramex, this strategy of promoting trade links between high growth markets has worked well in the global market. Consequently, the company focuses on acquisitions in the major trade routes.
In this regard, Aramex noted that “international express and supply chain services were the major drivers of solid revenues in its major geographies and high performing markets, particularly in the Middle East and sub-Saharan Africa” (Aramex emerging markets strategy “paying off” after another record year 2014). Through geographical positioning, Aramex hopes to capture current and future opportunities in developing economies.
Aramex has concluded that Arab countries near the Persian Gulf are its key markets in addition to its new markets in sub-Saharan Africa. Markets in different geographies are responsible for the bulk of its revenues. The company pointed that its approach to link emerging markets to its global operations and hubs is effective.
Aramex’s globalisation strategies also involve franchising in emerging markets, mainly in “Africa, Southeast Asia and the Commonwealth of Independent States” (Aramex International 2014a).
Aramex’s market entry strategies
The company has depended on various market entry strategies globally. Today, Aramex claims its position among the leading logistics and transportation firms in the world.
Strategic acquisitions and partnerships have remained the major entry strategies for Aramex in certain markets and regions (Porter 1998). For instance, the company used such strategies in Turkey, Malaysia, Bangladesh and Vietnam (Aramex in strategic acquisitions 2011). Through all these market entry strategies, Aramex aims to achieve sustainable growth that creates values to shareholders.
Geographical expansion based on acquisitions in emerging markets, such as Asian countries and sub-Saharan Africa has been identified as the main pillars in the global trade (Parasie 2014). The geographical expansion strategy has ensured that Aramex gains significant presence in the US and China.
Aramex also relies on franchises to globalise its brand in emerging economies. Such a strategy has been effective in Africa, the Commonwealth of Independent States and Southeast Asia (Aramex International 2014a).
At the same time, Aramex leverages on its existing infrastructures with additional products when expanding into international markets. The company integrates supply chain management alongside document storage business into its existing portfolio in certain regions.
Aramex uses organic growth strategy to gain access to international markets. In this regard, the company capitalises on its good reputation as the best logistics and transportation company with all solutions in one location.
In addition, technology has driven Aramex business strategy by enhancing efficiency in operations, service quality, sales, business growth and profitability (Aramex International 2014b). Still, Aramex supports small businesses and uses e-commerce to facilitate growth in trading activities.
The trade limitations/barriers that apply to Aramex and how it deals with them
As Aramex evolves from its local operations into an international business with many products and services, it has faced several drawbacks. The company has used several unique strategies to counteract such barriers.
First, Aramex experienced capital constraints. Usually, getting adequate capital for local, regional and international growth strategies could be challenging for any organisation. In some cases, firms may opt for financial markets to fund such expansion ambitions.
The company used the funds to expand its regional operations. Aramex also received private funds for further expansion and exited the NASDAQ. The company launched its IPO in 2005 and raised the capital for global expansion. Today, it forms alliances and engages in acquisitions because of adequate capital.
Another challenge to effective operations that affected Aramex was time zone differences. Global business operations are difficult because of differences in time zones. Different time zones require an organisation to establish a 24-hour operation and therefore, effective management team must run the company at all times.
Schedules for real time collaboration and coordination of business activities in diverse geographical locations were difficult for the company. The farthest east and west with a large time differences were the most difficult to coordinate.
Time zone differences have presented many challenges to many multinational firms even with the development in technologies. Aramex has attempted to overcome time zone differences by dividing operations into regions. Decision-makers, however, must be available at all times to execute important decisions required.
Aramex also faced language and culture challenges. When Aramex decided to venture into global markets with several diverse languages and cultures, there were challenges associated with business laws, labour market practices, cultures and business languages. Understanding basic elements of these factors are critical for any company that seeks global expansion.
Cultures and business practices also differ significantly. Aramex aimed to avoid language and cultural difficulties by seeking joint ventures and franchises with local companies. As a result, the company was able to establish reliable partnerships and a team of professional advisers in different target markets. The company has been able to exploit many untapped markets in emerging economies despite the barriers faced.
There were also legal issues that Aramex faced in different markets (KPMG LLP 2011). Generally, states have different types of laws that control specific business operations. For instance, many countries have strict rules about individual privacy, and therefore, courier companies must observe parcels confidentiality at all times.
On the other hand, some countries have less strict laws on privacy, intellectual property rights, labour laws, civil rights groups, and environmental issues. All of these differences presented increased costs to the company as it strived to comply with legal requirements and other issues, but Aramex aimed to operate within legal provisions in different countries.
Performance Analysis
Internationalisation/Globalisation
Aramex considers internationalisation as an opportunity for the new growth phase and aggressive expansion (Aramex in strategic acquisitions 2011). The company’s senior executives claim that it has started to invest in key emerging economies.
The globalisation strategy has served the company well and therefore, Aramex considers it as a strategy for gaining significant market shares in emerging markets (Grant 2005). It aims to explore further investment opportunities in Africa and Asia.
Acquisitions, joint ventures and franchises have fulfilled Aramex’s efforts of creating a comprehensive network in Asia, Africa, the Middle East and other parts of the world. Through international ventures, the company focuses on providing comprehensive logistics and transportation services, enhancing the expansion of customer base and increasing market shares globally.
As the company increases its presence in several regions, Aramex also strengthens and complements its existing networks and operations in such regions.
Market entry
The company’s “strong cash position is ideally placed to support its development and expansion plans globally” (Aramex International 2014a). As a result, Aramex’s performance in the global market has been impressive as it continues to increase sales and profits (Aramex emerging markets strategy “paying off” after another record year 2014).
The company has focused on new markets through acquisition, joint ventures and franchises that have generated positive results and profits. Aramex’s robust business model of agile is closely aligned with its “growth strategy, making it a stable investment choice for local and foreign investors” (Aramex International 2014a).
Consequently, it can respond rapidly to unexpected events in the market. Moreover, its decentralised business model has empowered management teams to make critical decisions and respond to customers’ needs effectively.
Trade
In the year 2013, Aramex recorded an increase in sales by eight percent and net profits by 14 percent. The company’s trade and business activities in international express services supported by robust e-commerce services were responsible for the growing sales and profitability.
Aramex has benefitted immensely from its “online platform and e-commerce strategy, particularly in the retail sector globally” (Aramex emerging markets strategy “paying off” after another record year 2014). In fact, the company’s revenues increased by 23 percent in the year 2013 because of its global e-commerce trading activities (Aramex emerging markets strategy “paying off” after another record year 2014).
Specifically, this strategy has facilitated business in Africa and Asia by linking high growth emerging economies with its established businesses in other regions. Consequently, increased acquisition has become the main approach that Aramex uses in these regions to increase trade links.
Aramex has noted strong performances notwithstanding increased difficulties in international markets. The company has attributed such increased revenues to the growing international business in its major geographical regions and high potential areas, particularly in the Gulf region and emerging markets in Africa.
Aramex, therefore, aims to promote its strategy with the purpose of seizing current and future trade opportunities across several emerging economies.
The company has noted that its core markets are found in the Persian Gulf. These markets contributed the most revenues relative to other regions. Sub-Saharan Africa also recorded strong growth. Aramex asserts that emerging markets and its entry strategies of connecting emerging economies have facilitated global operations and created reliable business hubs.
Increased investment activities and acquisitions in emerging markets have contributed to strong performances noted in the company. The company executives note that they will continue to approach global markets bullishly with the aim of driving expansion plans aggressively and leveraging on existing assets, agile business model and global alliances to differentiate business activities.
Suggestions
Internationalisation/Globalisation
Aramex noted that international express and supply chain services have contributed significantly to its sales and profitability globally. In the international front, therefore, the company has been successful. Nevertheless, Aramex also aims to embrace e-commerce in its international expansion efforts.
The company must observe that e-commerce and technologies are growing fast in new economies, particularly in Africa, the Gulf region, Asia and Africa. It, therefore, must seek for talents that can implement effective e-commerce strategy and capitalise on high demands across such regions.
Aramex must also focus on the emerging business-to-consumer market in order to grow and strengthen its e-commerce business. This would result in a highly efficient platform that will establish Aramex as e-retailer in the international field (see appendix).
At the same time, the company must also continue to grow its domestic market because it experienced low growth in the year 2012 due to slow economic activities in Asia and Europe (Aramex emerging markets strategy “paying off” after another record year 2014).
Market Entry
Aramex’s market entry strategies of acquisitions, franchises and joint ventures have worked exceptionally well. The company, therefore, should continue to focus on these modes of entry to grow its brand in the international market as competitions with local firms increase. At the same time, it must focus on experiential marketing to engage new customers.
Customers will have opportunities to experience Aramex’s international express and logistics services firsthand. Hence, they will understand how Aramex’s products and services will improve their lives and businesses. The company can provide cost-free and risk-free services for new customers and other existing customers to grow its market share globally.
Trade
Aramex has performed well in the international market. However, the company must seek for further acquisitions, joint ventures and franchises to grow its trade activities. Emerging markets in sub-Saharan Africa and Asia have presented better business opportunities for Aramex.
In addition, the company must develop its e-commerce business model to facilitate growth and establish strong links with new markets (Charnovich 2009). This should include a same day e-commerce delivery business (Aramex buys same day e-commerce delivery firm in Australia 2014). Aramex, however, should not ignore its domestic markets since it recorded slow growths at home (Banalieva and Dhanaraj 2013).
Conclusion
This researched focused on international business strategy. It used Aramex as a local company that expanded rapidly into the international market. The research has covered performances in globalisation, market entry and trade activities of Aramex, as well as challenges associated with internationalisation.
It shows that the company has utilised international business opportunities to grow its brand by focusing on emerging markets, particularly in sub-Saharan Africa and Asia, which it has considered as new emerging markets with strong potentials for growths.
Recommendations
It is recommended that Aramex should promote its e-commerce in emerging markets globally to grow its international brand and create strong links in emerging markets.
It must focus on further acquisitions, joint ventures and franchises alongside experiential marketing strategies to grow its market share, revenues and profitability. Finally, Aramex must increase its trade activities in emerging markets through e-commerce platforms and facilitate trade in the domestic market too.
Reference List
Aramex buys same day e-commerce delivery firm in Australia, 2014. Web.
Aramex emerging markets strategy “paying off” after another record year 2014. Web.
‘Aramex in strategic acquisitions’ 2011, Gulf Industry, vol. 20, no. 1, p. 1.
Aramex International 2014a, Overview of Aramex. Web.
Aramex International 2014b, Strategic Direction. Web.
Banalieva, E. and Dhanaraj, C. 2013, ‘Home-region orientation in international expansion strategies’, Journal of International Business Studies, vol. 44, pp. 89–116. Web.
Charnovich, J. 2009, ‘How to Maximize Technology ROI and Create and Lead Superior IT Performance’, TecExecs, pp. 1-2.
Grant, R. M. 2005, Contemporary Strategy Analysis. Hoboken, Blackwell Publishers, New Jersey.
KPMG LLP 2011, Succeeding in a Changing World: International Strategy. Web.
Parasie, N. 2014, Dubai’s Aramex Earmarks Africa for Future Growth. Web.
Porter, M. E. 1998, Competitive Advantage: Creating and Sustaining Superior Performance: New Introduction, Simon and Schuster, New York.
Appendix
