Strategic Analysis of Aramex

Executive Summary

This report highlights various aspects related to Aramex, a global mail delivery logistics company. One of the key elements discussed in the report is location and product offerings where it is established that the company is located in 60 countries with diverse product offerings, including management of records and information, logistics and warehousing, online shipping services, domestic and international domestic delivery, e-business solutions, as well as logistics and warehousing (Aramex 2016). The light asset model serves as the best strategy of success in the market for the company. Moreover, the report entails a discussion of the external environment and in this respect, it is established that the company has opportunities for technological development, as well as expansion through its global strategy amidst threats related to competitiveness. The five forces are also explicated in the report as they influence the competitiveness of Aramex. With the medium bargaining power of buyers and suppliers, medium competitive nature of companies, and low levels of entrance into the market, Aramex has remained highly positioned on the competitive scale. This ensures that it continues generating high levels of profitability. The report also discusses various strengths of the company, including strong profitability, strong brand name, and product diversification. (Ahmed 2013). The only weakness relates to the management of its activities in different parts of the world. However, the agile business model makes it distinctively competitive. The report explains that by addressing the management and security issues. The report recommends a technological management system that would facilitate uniformity and consistency in its approach to managing different locations.

A Brief Description of the Organization’s Current Business and Operations

Aramex is one of the largest mail delivery logistics companies around the globe. It is worth noting that the company was founded in 1982 and it made history as the first Arab-based company listed in the NASDAQ stock exchange (Aramex 2016). It is also a key company in the Dubai Financial Market. The company is driven by the mission, “To be recognized as one of the top five global logistics and express transportation service providers” (Aramex 2016). In terms of the product-markets served, Aramex is termed to have a unique and highly innovative multi-product offering. Specifically, the company serves the market in diverse areas, including freight forwarding, management of records and information, logistics and warehousing, online shipping services, domestic and international domestic delivery, e-business solutions, as well as logistics and warehousing. Operation in diverse areas in the market plays an instrumental role in giving the company a competitive advantage in the market.

The headquarters of Aramex are situated in Dubai, the UAE. Apart from the United Arab Emirates, the company operates in other parts of the globe with the view of reaching every customer in the most effective ways possible. Specifically, Aramex operates across different continents and boasts of having 354 locations around the world in around 60 countries (Aramex 2016). The company takes advantage of the existing opportunities to advance its locations around the world, hence ensuring that needs of customers are served in the most desirable manner possible. Based on its extensive coverage across the globe, the company employs about 13,900 employees, illustrating the significant role that it plays in the development of strong networks across the locations (Aramex 2016).

The current strategy of Aramex is anchored on two aspects. The first strategy is focused on the continued establishment of global networks. The strategy of global networks means that Aramex is always focused on the identification of new markets and extension of its operations into these markets for the maximization of its operations and profitability. The strategy of establishing global networks with the view of having the world presence is seen in respect to its role of establishing the Global Distribution Alliance (GDA) that impacts 240 countries (Aramex, 2016). The strategy of having presence in all parts of the world is working positively in terms of strengthening the organization’s operations. The second strategy that Aramex employs is adoption of the agile business model. In tandem with this strategy, the company focuses on the combination of information technology with business in the course of its operations. Thus, there are always enhanced innovations in the organization, hence giving it a stronger position and allowing it to remain sustainable amidst the changing market and economic conditions (Aramex 2016). The agile business model ensures that Aramex appreciates uncertainties of the market and the need to be prepared to address challenges that come with such uncertainties. In the overall sense, the two strategies are vital for the performance of the organization and its stability over the course of operations.

External Analysis

One of the most significant factors in the external environment of the transportation and logistics industry in which Aramex operates is technology. Accordingly, smooth operations within the industry are always anchored on effective technology used to link different parts of the globe, as well as the company to its customers (SWOTanalysis24.com 2016). Thus, the growth in technology presents an opportunity for growth of Aramex because of advanced innovations that are bound to make it a more reliable company in serving its customers through timely deliveries and communication. Technology gives the company the opportunity to take over the market and establish a competitive edge over competitors.

The second notable aspect of the external environment in the industry is the economic aspect. The economy influences the ability of customers to purchase or consume the sets of products that are offered by the organization. In this case, the world economy is looking stronger and this gives Aramex the opportunity to be stable and profitable through the expansion into global markets (SWOTanalysis24.com 2016). The positive economic environment gives the company some sense of leverage in widening its global operations because of the presence of customers with purchasing abilities in the markets. In essence, favorable economic conditions give Aramex the opportunity to exploit more markets in all parts of the world for a continued growth of business.

Another relevant opportunity that Aramex could enjoy in the external environment is the potential of growth in new products and services in the industry. The transportation and logistics industry is multifaceted in nature and this offers an opportunity for Aramex to increase the level of its product offering in the market and general increased growth over the years of its operations. The expansion of the product offering translates into increased operations and enjoyment of even larger profits for the organization (SWOTanalysis24.com, 2016).

As much as the external environment of the industry offers opportunities for the growth of Aramex, it also comes with its own threats. One of the key elements of the external environment that poses a threat to Aramex is the stiff level of competition. Specifically, DHL Express poses stiff competition to the company in the course of its operations, hence limiting its possibility to continue generating the desirable level of cash flow and profitability (SWOTanalysis24.com 2016). The threat of competition is noticeable from the abilities of other companies such as DHL Express to operate in all countries around the world with its strong brand.

Increasing costs of operation in the industry as a result of fluctuations in the economy also pose a threat to the profitability and position of Aramex in the industry. It is important to note that economic conditions vary across different locations of Aramex’s operations and they lead to increasing costs of operations. Increasing costs of operation are undesirable because they lead to the decline in the levels of profitability in the organization. Apart from the economic conditions, the rising costs of operations emerge from the high rates of taxes that it has to pay in different countries in the course of its operations.

Five Forces

Porter’s Five Forces that affect the transportation and logistics industry have a direct impact on the competitiveness of Aramex. First, the notable element of the Porter’s five forces that affects the industry is the bargaining power of consumers. In the transportation and logistics industry that Aramex operates in, the bargaining power of consumers is medium because of average costs of switching from one company to another (Ahmed 2013). Companies in the industry tend to provide similar products and similar rates, hence ensuring that the switching costs of consumers remain at an average rate. This ensures that Aramex remains highly competitive at the moment. However, any change in the bargaining levels of consumers would have a significant impact on Aramex’s competitiveness. In instances when buyers have a high bargaining power, Aramex would experience a decline in its competitiveness because of low switching costs, while a lower bargaining power would strengthen its competitive position as consumers would have to pay more to switch to other companies.

Second, the bargaining power of suppliers is medium in the transport and logistics industry because of the high level of expertise and efficiency that is experienced in the supply chain (Ahmed 2013). The competitive position of Aramex in respect to the bargaining power of suppliers is high because its supply chain management (SCM) has customized solutions that give its clients the opportunity to increase the speed of transactions, minimize the costs of inventory, as well as ensure the improvement of sales. In any instances of change in the bargaining power, competitiveness of the company is also affected. For instance, an increase in the bargaining power of suppliers will reduce competitive capabilities of Aramex because of ineffective deliveries, while a lower bargaining power of suppliers means that the company will be even stronger in its competitiveness as a result of efficient systems of delivery and reduced costs.

The rate of rivalry among existing competitors in the transportation and logistics industry is medium. Some of the key competitors in the industry include Agility, UPS, and DHL Express. Medium competitiveness emanates from the fact that all companies have a stronger focus on innovativeness in the course of their deliveries around the globe (Ahmed 2013). Thus, the current competitive position of Aramex is high, especially because of its technological innovations and efficiency in deliveries. In case of changes in the competitive landscape in the industry, there is the likelihood of Aramex maintaining its competitive advantage because of its adherence to the asset light model in operations.

Moreover, the threat of new entrants is low because the industry is demanding in terms of the costs of running the business (SWOTanalysis24.com 2016). Besides, the low threat of new entrants is caused by already established brands such as Aramex that cannot be easily displaced from the market. The company has a strong competitive position with the absence of new entrants because of its huge investments, as well as stronger brand name. In case of a change, Aramex would maintain its competitiveness based on its innovative nature and the brand name established in at least 60 countries (Ahmed 2013).

Last, there is a high threat of substitutes in the transportation and logistics industry. The high threat of substitutes emanates from the fact that Aramex has to deal with various regional competitors such as Agility, Empost, and GAC, as well as global competitors such as DHL Express, FedEx, and TNT (Ahmed 2013). Consumers are always likely to consume substitute products because they would meet the same needs as Aramex. However, the competitive position of Aramex remains higher amidst the threat of substitutes because of the asset light model. It has been able to ensure that the costs for its clients are minimized and improve the consumption rates of its products. However, a change in the industry would mean that the company has even a higher rate of competitiveness because there would be no stronger threats to its own operations.

Internal Analysis (Strengths, Threats, and Distinctive Competencies)

Strengths

The first strength associated with the company is the high levels of revenue and profitability as a result of its global operations. The company generates high levels of profitability that play an instrumental role in ensuring that it remains strong and sustainable all the time. A stronger growth in revenues was evidenced in the first quarter of 2015 when the company posted a 10% increase in its profitability to Dh86.6 million from Dh78.7 million (Saadi 2015).

The second relevant strength in the company is its strong brand name that ensures it is not only known in the GCC, but also in other countries. The company’s brand name has continued growing over the years of its operations and this has been vital in giving it an advantage over competitors both in the GCC and the world (Ahmed 2013). The strong brand name has also made it easier to continue attracting more customers. The brand name has been instrumental in ensuring it stands strong against its competitors such as DHL Express at the global level.

The third key strength of the company is the high level of diversification of its product offering to the market. The company provides diversified services to its consumers, including such aspects as express delivery, logistics and warehousing, and e-business solutions that give it the opportunity to be highly competitive and generate cash from different sources. Reliance on different sources of business gives it the chance to dominate the market. There is always an assurance of profitability because of different sections of the business environment that it serves in the course of its continued operations (Ahmed 2013).

Weaknesses

Aramex faces one significant weakness, in particular because of its large operations. The weakness in the company is that there are always deficiencies in the management capacity of the company as a result of many operations (Ahmed 2013). Inefficiencies experienced in the management of the company always have the potential of affecting effective planning and subsequent success of its different operations. Deficiencies noticeable in the management pose challenges to the success of the organization in the markets of its activities.

Distinctive Competencies

The key distinctive competency of Aramex is the unique asset light model that has given the company the opportunity to increase its rates of growth as compared to competitors such as DHL Express. With this distinctive model, Aramex has been able to be adaptable to changing trends of the global business environment because of high capacities of the management team, as well as the entrepreneurial attitude of its workforce (Aramex 2016). They focus on ensuring that customers from all locations of operation are satisfied in the most efficient manner, hence remaining loyal to the company and its activities. The unique light asset model has offered the company a supportive competitive muscle and survival abilities as it is one of the few that have been able to withstand the 2008 financial crises.

Major Strategic Issues and Challenges that Aramex Should Address

In light of the above, one strategic issue that Aramex should address relates to the management of its different operations around the globe. As much as Aramex looks forward to the development of its branches and markets in different parts of the globe, Aramex must address issues in management capacities it faces currently (Aramex.org 2010). There should be an understanding of the fact that each business unit is distinctive and requires separate management capabilities. Moreover, deficiencies in management across different regions that the company operates in should be addressed for ensuring smooth operations and continued sustainability. The failure to address the challenge of management has the capacity of leading to undesirable performance in some of its locations or a set of services, hence affecting the overall financial standing of the company both in the short and long term (Aramex.org 2010). In the overall sense, the company must conduct an in-depth analysis into the contemporary management issues and ensure that it is addressing them in the best ways possible that lead to stability and consistent profitability. There is a need to understand the levels of management and how they could be linked effectively across all parts of the world for ensuring profitability of the company and collaborative attainment of the set targets.

The second strategic issue that Aramex needs to address in light of the above discussion concerns security issues, especially those that come with the delivery of its products to different companies around the globe. As noted in the discussion above, Aramex is highly innovative in nature and is aimed at basing its operations on this innovative strategy. Nevertheless, there are security risks that could affect the belief of its clients in its activities. The strategic security challenges that the company needs to address relate to ownership, integrity, and ability of individuals to access information (Aramex 2016). In this sense, it needs to address any gaps that would pose a risk to the information stored in its computers and networks. The exposure of information to hackers could lead to malicious attacks that are always likely to affect the business’s ability to continue generating profits and remaining stable over the years. Therefore, innovations in the company must come with strong protective mechanisms that would ensure that every piece of information is secured appropriately.

Conclusion and Recommendations

In conclusion, Aramex remains one of the most innovative and competitive companies in the transport and logistics industry around the globe. The light asset model has been at the center of its operations and has delivered desirable strategies even in the most challenging markets. With the dominance over competitors and limited opportunities for new entrants, Aramex has to continue maintaining its strong position in the market for ensuring sustainability. Technological utilization at every part of the organization should continue enhancing the level of profitability and success in the course of operations. More global opportunities would keep the organization on the right path for expanded profitability in both the short and long term.

Thus, it is recommended that the company comes up with a technologically supported management system that would ensure that all aspects of its management ranging from freight forwarding, warehouse management, and even e-business solutions are run in a uniform manner across different countries of its operations (Ahmed,2013). Inefficiencies in management tend to be emanating from different approaches to the implementation of different activities that are core to its success in the market. This recommendation should be implemented by first identifying all the locations of the company. The identification of different locations ensures that they are all linked to the management system that is developed in line with technological tools. The second stage of implementation should capture all the activities of the management, while the last stage should ensure that they are collaborated to avoid any deviations in their performance. This will ensure that the process of making decisions is unified and successful across global operations of Aramex.