Question

In the early 2000’s, DHL expanded its worldwide air express package delivery service to the US market in direct competition with UPS and FedEx. After several years and more than one billion dollars in losses, DHL admitted defeat in 2008 withdrawing from most US markets while shedding some 15,000 US jobs.

Think back to DHL announcement of its intention to enter the US market. Various stakeholders would greet the prospect of increased competition differently.

In this discussion forum, address the following:

Choose two of the following stakeholder groups, preferably with opposing views, and explain from their perspective why you oppose or support the entry of DHL in the US domestic market:

• Federal, state and/or local governments
• FedEx and UPS management
• FedEx and UPS employees
• DHL management
• DHL employees
• Labor unions representing FedEx and UPS employees
• Small package shippers

Answer 1

DHL expanded its worldwide air express package delivery service to the US market in direct competition with UPS and FedEx. However it exited most of the market in 2008.

In terms of Federal state and local government, they would support the entry of DHL in the US domestic market in order to increase the level of competition and make the prices as competitive as possible. The government would also support the entry as the level of investment in the economy would increase, which would drive up the domestic output generation and create jobs in the economy. They would earn more from federal and state taxes as a new business will be set-up.

While FedEx and UPS management would oppose the entry of DHL in order to keep their hold on the market and help retain the market in being as oligopolistic as possible. Where they both hold the majority of the market share and avoid distributing the share as much as possible. There would be greater price competition which could reduce the profit making of both the firms as the market price could reduce, this could reduce the scope for growth of the business and reduce the tax payouts to the governments as revenue would be low. It could also harm the economic stability of the economy as due to higher competition, all three firms could face losses.