Aramex Business Report
A new generation expects faster and easier access to information, products and services. Nowadays, courier companies offer many unique services in order to achieve this goal and satisfy its customers. This report analyzes the performance of Aramex from the United Arab Emirates. The SWOT, PEST and Porter’s five forces analysis are conducted for this report. The paper has also discussed the main issues about the logistic industry, competitors, financial statements, external and internal factors.
Aramex is an international courier company that delivers mail orders and proposes logistics services. The headquarters are in Dubai, United Arab Emirates. It was set up by Jordanian Fadi Ghandour and Bill Kingson in 1982. The company was the first courier business in that region. Moreover, Aramex trades its shares on the NASDAQ stock exchange, before any Asian company. Furthermore, in 2003, the company organized the Global Distribution alliance with 40 express companies in order to develop a shipment way of delivering. Aramex’s strategy is to be a multinational company, that is why, they concluded a couple of acquisitions such as InfoFort, FreightProfessionals and Twoway-Vanguard. Nowadays, Aramex has offices in almost 58 countries and its network are spread across 240 countries worldwide. In this industry, the company has its niche.
The regional industry is existed by intense fragmentation with the western markets. UAE is a territory that connects Asia and Europe using transportation facilities, and it is a tourist attractive place (Aramex corporate presentation). Aramex’s express services are international and local delivery of documents and parcels. This company offers latest technological tools, time definite pickup and delivery, reverse logistics, cash on delivery and temperature-sensitive goods delivery. Moreover, Aramex uses land transport, air and ocean freights. In addition, they have unique selling proposition and shopping services. For example, customers can buy products online and give their domestic delivery address, then the company ships packages to their door. (Aramex’s report, 2008).
The Industry Structure Using Porter’s Five Forces
Rivalry among existing competitors is medium. There are four big competitors of Aramex, such as FedEx, USP, THT and DHL. FedEx is the American delivery giant, which operates using its hub airport located on each continent. What is more, one of such airports is in Dubai. Moreover, FedEX expanded into 212 countries working in more than 325 airports. They provide worldwide express delivery, global logistics and ground small-parcel delivery. International delivery usually takes from one to seven days. This company uses electronic transactions. Moreover, FedEx has a strong marketing vision, their logo, slogan and advertising are well-known, which represent their portfolio of services. Management of the company wants to focus on several strategies: first, to grow internationally by using e-commerce platform and alliances; second, to implement cost reduction programs; third, to expand the home delivery network to 80% of the U.S and outside.
UPS is present in almost 250 countries and has one of the most recognized brands in the world. This company focuses on e-commerce for using in business. USP works with SMS Tracking system, which allows following the status of the shipment. Another serious competitor is THT (The Netherland Company). Nowadays, they negotiate with USP for alliance (Hesseldahl). DHL (German-owned global express company) is dominating in almost all non-US markets. They operate in more than 220 countries around the world. Their tracking system is similar to USP. In general, DHL focuses on the quality of their services and expansions into new markets (MacMillian).
Bargaining power of customers is medium. This market has a sensitive price. It is difficult to keep customer’s loyalty, because there are many choices with lower price. Moreover, this market has world-known companies with international offices, so their bargain power became larger.
Bargaining power of suppliers is medium. Firstly, there are many express services in the market and there are no huge differences between competitors. Secondly, it is necessary to use airlines to operate fast in this industry.
Threats of substitutes is low. First, there are no substitutes to shipping. Second, this kind of business is using an e-commerce platform. Third, there are a lot of ways to deliver items.
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Financial Performance of Aramex and Its Competitors
The Aramex’s revenues reached $3,650 million. It increased to 10% in comparison to the previous year. While net profit was $318.4 million and increased to 15% to the previous year. FedEx had $20 billion of annual revenues, USP – $27 billion and DHL – $22 billion. Moreover, the operating expanses of Aramex have grown over the last five years, it seems their business became bigger. What is interesting, the revenue from international express was in general 32% for the past five years and domestic express grew in five years.
Management/Organizational Structure of the Company
Aramex’s corporate culture is highly focused on human resources, and they invest in people’s development. The company encourages a teamwork, employees’ initiative, respect and trust. Their policy is to make customers their partners. They seek to win-win for both over the lifetime. Moreover, Aramex organizes sport competitions, schools and environment programs in order to reduce harm from production. In addition, the company provides almost 200 annual scholarships and internship programs for over 100 students every year. In 2014, the company’s workforce grew by 17% and gave a workplace for 16,273 employees.
The CEO of Aramex is Hussien Hachem, working in this industry for almost 22 years. He had studied at the American University of Beirut (a bachelor’s degree) and at the Wharton Business School, University of Pennsylvania, USA. His management style is very effective, because he played the main role in international expansions and reached the largest revenue (Aramex’s report). The Aramex International is managed by Fadi Ghandour. The organization is driven by a flexible and creative culture with stimulating work environment, which is opposed to fixed bureaucratic management structure.
There are many strength options. First of all, a strong brand name gives a high level of awareness among consumers and a positive reputation. Secondly, this company has a strong supply chain. It helps them to use resources from suppliers appropriately and deliver an order as quickly as possible. Thirdly, Aramex has a high level of innovation strategy, and they produce unique services, which always meet customer’s needs. Fourthly, their biggest strength is economies of scales. This is the cost advantages that Aramex obtains due to size. Moreover, they have a strong and powerful management team, which use its potential avoiding some weaknesses. In addition, Aramex has an ability to change their prices and customers will continue to use their services. It means they have a high pricing power in their region.
Talking about weaknesses, Aramex brand name is not as strong abroad as in the Middle East. Moreover, there are no equal opportunities for employees, according to mentality and culture, and it could bring up some dissatisfaction. On the other hand, there are many opportunities for this company. Firstly, they should use online market in order to reach a wider audience. The technological world develops very fast and builds competitive barriers against rivals. Secondly, there are a lot of new markets that Aramex should expand, especially in the East. Moreover, it allows diversifying their products and services.
In addition, there are some threats. It is an intense competition, which can lower company’s profit. There is no chance to raise a price for Aramex on the international market, because there is a possibility to lose customers. According to the SWOT analysis, Aramex has more strength and opportunities for growth than weaknesses and threats, which they also should consider in their business life.
Political Environment. The UAE’s political situation is stable. There is a clear legal framework for business. The UAE consists of seven states: Abu Dhabi, Umm al-Qaiwain, Fujairah, Dubai, Ras-al-Khaimah, Sharjah and Ajman. The Chamber is the National Federal Council. Each Emirate has a number of representatives equivalent to its demographical weight (Globaltrade.net).
Economic Environment. Dubai is a tourist oriented city. Moreover, oil and gas resources have a huge influence on their economy. There no direct taxes on profit or personal income. Furthermore, UAE is free from exchange controls, trade barriers and competitive import duties. There are no inflation.
Social Environment. There are 80% of expatriate population. The crime level is zero. Therefore, this country is safe for life and business. Dubai is an international financial center. Moreover, the main importers are China, Japan and the USA. In addition, UAE exports the most to IRAN, India and Saudi Aravia.
Technological Environment. This region is focused on IT industry. This country has a modern airport, seaport and highway network. They are connected with 140 global destinations via 85 airlines, some of them are exclusive, and 120 shipping lines.
Talking about problems, Aramex have faced some issues during their lifetime. For example, customers were complaining on poor quality of services. It means orders often were delivered late. Therefore, they are working on this problem and trying to renew delivery process. Moreover, some of their acquisitions are failed, but they managed how to save its business.
Considering everything, Aramex should focus on the Middle East and build its strategies oriented on it. It is a great opportunity to become a number one in that region. Furthermore, it is so hard to succeed on the international platform, because there are many powerful companies, and it is difficult to deal with them as is seen from financial performance. Moreover, it is a great choice to establish partnerships with local delivery companies such as Saudi Post and Empost. In addition, it is a great idea to acquire Asian smaller companies in order to consolidate its positions in Asia and expand into such powerful and economically strong markets as China and India. In the future, Aramex has all chances to grow into a huge Asian corporation.
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Appendix (Brief Information About Management Team)
Fadi Ghandour is the Founder and CEO of Aramex International. He is a member of the Board of Abraaj Capital, is a Founding Board Member of Endeavor Jordan and serves on the Advisory Board of the Suliman S. Olayan School of Business at the American University of Beirut.
Hussein Hachem is the CEO at Aramex. For the last few years, he has served as the CEO to manage the Middle East destinations. Hussein have a bachelor’s degree from the American University of Beirut. In two year, he received a master degree in Economics from Bowling Green State University.
Iyad Kamal is the Chief Operating Officer (COO) of Aramex. He graduated from the University of Jordan in 1989 with a Bachelor of Science.
Bashar Obeid is the Chief Financial Officer (CFO) for Aramex. He had studied at Yarmouk University and have a degree in Accounting. His career in Aramex started in 1993 as an Accountant. (Aramex)