External Analysis:

As already mentioned, it is very essential for any organization today to define its Vision and Mission statements very clearly. To achieve its goals and objectives it needs to form a strategy which is in tune with its targets. The ultimate aim of any organization is to maintain sustainable competitive environment in the long run. The SWOT analysis helps an organization gauge its position in the industry and forms a solid base to achieve its objective. It helps an organization recognize its Strengths, Weaknesses, Opportunities and Threats. SWOT analysis helps us analyse an organization internally as well as externally. The internal analysis of an organization helps it recognize its strengths and weaknesses. Equally important is the external analysis of the environment in which the company is operating. The external analysis can be conducted at two levels viz. macro and the micro levels.

Macro-environment Analysis:
The macro level analysis is done using the PESTEL analysis which comprises analyses of the Political, Economic, Social, Technological, Environmental and Legal aspects.

1. Political:
Government has increased spending in infrastructure in early 2000, which should help achieve the growth targets. During the 12th five year plans, the infrastructure spending has doubled, which has gone well for logistics demand in India. Central government has also developed some large scale infrastructure such as golden quadrilateral and up gradation of all major airports and expansion of ports, the rising economy and FDI in Indian economy should drive the need for improved logistic network. Some state governments have given more focus to support and develop private ports. For example, Gujarat Government has taken many initiatives in the logistics industry to increase the competence in the sector. The government has introduced private sector participation, especially in the port sector. The major initiative in transport infrastructure is an introduction of National Maritime Development Program (NMDP) with an investment of Rs 568bn. NMDP would be addressing the challenges of the growing international traffic demand of the country along with developing the port facilities at par with world class standards In order to liberalize the railway services, the government opened its doors of container business to private parties The Government is planning to remove the differential state-level taxes that were causing higher unit and inventory carrying costs, and introduced uniform Goods and Services Tax (GST) to reorganize warehousing system in India FDI Regulations: In general 100% FDI under the automatic route is permitted for all logistics services.

2. Economic:
India is developing itself as a manufacturing hub. Government of India is trying to increase the share of manufacturing from 15-16% of GDP currently to 25% of GDP within a decade with the implementation of National Manufacturing Policy. Growth of logistics goes hand in hand with growth in manufacturing

sector. In that line, Indian logistics industry is expected to grow from the size of USD 225 billion in 2012 to USD 350 billion by 2015. Another booster is the rapid growth of both international and domestic trade. With large number of Free Trade Agreements and Preferential Trade Agreements signed by India in recent years, both imports and exports are growing at breathtaking pace. In the last six years, India-ASEAN trade has grown at a CAGR of 22%. On the domestic front, introduction of Goods and Service Tax is going to facilitate freer movement of goods across the state borders. It implies surge in volume of goods distributed across the length and breadth of country. All these factors are propelling the logistics industry on a fast growth trajectory. The next significant development that has a major impact on logistics industry is the growth of organized retail and e-commerce in India. Retail sales is expected to leapfrog from USD 400 billion in 2011 to USD 785 billion in 2015. On the other hand, e-commerce in India has jumped from USD 2.5 billion in 2009 to USD 14 billion in 2012. This is going to change logistics scenario with development of warehouses and supporting infrastructure and activities. Indian companies are increasingly going global for sourcing of raw material and markets. Increased movement of these commodities and products over long haul routes is helping logistics stay on steady growth track.

3. Social/ Demographic:
The working population of age group 20-60 years in India was about 620 million in 2012 and average age of working population was 27.5 years. This predominantly young population is driving the sustained consumption boom which is the underlying factor behind growth of logistics. Another significant demographic trend is the increasing number of women joining the work force. This is a factor behind the growing middle class with significant disposable income. Increased consumption by this middle class is the driving force for growth of logistics sector. There has been a significant change of food habits in even lower strata of economic classes with the increased rural income fueled by social sector spending by the government. Even poor people are consuming more vegetables, fruits and protein foods resulting in increasing production and distribution of these food items. The kind of efficient and fast supply chain required to fulfill this demand creates lucrative opportunity for logistics players. Therefore the overall demographic scenario augments a conducive environment for logistics industry.

4. Technological:
According to current estimates the total investment in logistics infrastructure would be over USD 500 billion by 2020. Approximately USD 45 billion is lost each year due to inefficiencies in Indias logistics network.

Inefficient in Indias logistics infrastructure could constrain Indias growth. Approximately 2.5 times increase in freight traffic in the next decade will put further pressure on Indias logistics infrastructure. As a result, economic losses, which are about USD 45 billion today could rise to around USD 140 billion in 2020. This would impact user industries. Indias exports for example, could be rendered less competitive on account of higher transit times and lower reliability. To remove bottle neck, India need to build the right network and ensure flows along the right mode. Road is the dominant mode of transport for Indias freight traffic. Current plans earmark half of the planned investment for roads even as capacity on rail and waterways (including last-mile connections) remains inadequate. However, to meet the demands of growing freight traffic, a shift to more economically as well as environmentally suitable modes i.e., waterways and rail is vital. A network design is vital to develop effective and efficient logistics infrastructure, particularly if the funds are limited and freight flows are concentrated. Investments need to be targeted and initiatives focused in connecting growth clusters. There are few steps that could be taken to bring efficiency in Indias logistics network. 1) Network optimization by developing network It talks about constructing last-mile links and approx. 20 logistics parks to ensure interconnection between modes and include standardizing equipment, containers and pallets and upgrading skills. 2) Maximize the usage from existing infrastructure It include better maintenance of roads, rail tracks, improving the capacity of the rail network by accelerating the implementation of automatic block signaling, moving to lower tare load wagons, improving the efficiency of scheduled rake maintenance operations and enhancing road efficiency through electronic tolling systems on highways. These measures could unlock 5 to 10 per cent of freight capacity with much lower investments than is needed for new infrastructure creation.

5. Environmental
Apart from the legal aspects the environmental aspects have become very essential in today's business scenario. Companies are taking on the CSR role and are actively participating to do their bit in saving the environment. Sustainable development has become the key word for organizations today and it encompasses meeting the needs of the organization as well as protecting the environment. Talking specifically about the logistics industry in India, a lot of paper is wasted in the packaging of goods . The paper is used in making carton boxes, small boxes for goods etc. Logistics organizations need to look at sustainable material for the long term which can be reused and is strong and durable at the same time. A lot of companies face a lot of difficulties in getting environmental clearances because of the huge amount of resources they consume. A lot of fuel is used up by the companies for transport purposes. Infrastructure, therefore, needs a boost in the country. A lot of money and fuel can be saved by if proper impetus is given to building of roads and infrastructure in the country.

6. Legal:
The legal aspects covers the logistics regulatory landscape in India, including foreign investment norms, emerging investment themes for foreign organizations investments risks and mitigants and the way forward for different companies in India. Regulations in India permit 100% FDI in most of the sub segments. Foreign companies can also enjoy certain tax benefits and incentives when investing in key sub sectors such as cold storage, agricultural warehouses free trade warehousing zones (FTWZ). Historically, investors in the Indian logistics have entered the industry through Greenfield projects, setting up joint ventures in India or through acquisitions. As already mentioned there is permission of 100% FDI in most of the sub segments of logistics in India. Investments by foreign companies can be made in India through two routes viz. the automatic route and the government- approval route. Under the automatic route companies can invest directly without intervention from the RBI or the government. Under the government approval route, prior permission of the government is essential. Mergers and acquisitions are also one way through which organizations can invest in the logistics industry in India. Over the last few years, several leading global powerhouses have established themselves in India through acquisition of both regional as well as pan Indian logistics companies. Currently, around 70% of the top 50 logistics companies have established themselves in India. Apart from the inorganic route, companies can also invest in India through Wholly owned subsidiaries, Liaison and Branch offices. Recently a lot of tax incentives have been given by the government to prompt investment in the logistics industry by foreign players. A lot of tax incentive is being given in the Food processing industry, Cold Chain Facility, Warehouse facility and Special Economic Zones. Depending on the mode of growth of an organization, there are a lot of complexities involved and companies face a lot of risk and barriers while entering the industry. A certain number of approval and licenses are required for doing business. It remains a fact that India is not an easy place to do business. India languishes quite behind other countries in terms of the overall ease of doing business. A lot of regulations and laws make it even difficult for companies. Regulations include environmental clearances, FIPB clearance, ministry clearances etc.

Micro-environment Analysis:
Monitoring of macro-environment helps in evaluating the conduciveness of the country for the industry as a whole. Though the survival and growth prospects of the players in an industry is more or less related to that of the industry as a whole, their profitability is contingent to factors guided by interplay of their immediate surroundings i.e. the rivals, suppliers, buyers, etc. Opportunities and threats to any company largely depend on this micro-environment. This micro-environment can be very effectively analysed with the help of five forces framework propounded by Michael Porter. In the following section well analyse the competitiveness and profitability of the logistics industry with this framework.

1. Threat of new entrants:

As per our analysis the factors behind threat of new entrants have the following weights. We have decided on a scale rating system for each of the sub points wherein the scale ranges from 1 through 10 with 1 being the lowest and 10 being the highest threat of new entrants. Economies of scale: [15%] There is no significant cost advantage for operating large capacity in this industry. Since largest portion of cost comes from transportation which service can be procured proportionally with volume without much difference in rate, there is hardly any economy of scale that puts a new player to disadvantage. So its scale rating is 7. Product differentiation: [20%] Some large players like DHL has expertise in niche segment like express service which is the air transport segment. But most of other players offer similar kind of service with transportation by road, rail or sea. So, new players can easily enter. So the scale rating of threat is 8. Capital requirements:[20%] Capital requirement is not very high because almost every fixed property required for starting a logistics business can be taken on lease or rent. Though having own property gives better flexibility of utilization and management control, it is not a sufficient barrier to prevent competition. The scale rating is 5. Switching Cost:[10%] Though there is some cost advantage in getting into long term contract with the logistics service provider for any company, it is not a binding factor at all if the service quality is not satisfactory or there are cheaper alternatives. So, buyers dont hesitate to switch and its an advantage for new entrants. The scale rating is 9. Access to distribution channels: [25%]

The geographical access is the key to good service levels at low costs for organizations . The scale rating is 3. Other cost disadvantages:[10%] There may be some advantage for established players due to experience curve. But this is a weak barrier. The scale rating is 4. The overall value of factor calculated is 5.7/ 10. Hence, we can conclude that threat of new entrants is moderate.

2. Bargaining power of Buyers:

High bargaining of buyers means resistance to increase prices when required and, therefore, pressure on the bottom line. We have calculated rating with a scale of 1 to 10 where 1 results in lowest and 10 results in highest bargaining power of buyers. Concentration of large volume purchase by buyers:[20%] High because there are limited B2B buyers in market for every players, who avail the service in bulk quantity. The scale rating is 7 Products purchased by buyers are standard:[15%] Products offered by logistics industry are standards to large extent except to few premium services which are limited to few big players. The scale rating is 8 Switching cost for buyers: [30%] Low as there is not much of problem for buyers if they switch services. In this industry there is not much customized services offered to buyers. The scale rating is 7 Threat of backward integration: [15%] Low as there are only few example of backward integration happened in past in India. For example Flipkart has developed its own logistics network to deliver goods. The scale rating is 2 Extent of dependency on quality of the buyers product: [20%] Low due to high price sensitive buyers and there is no direct dependency on quality of buyers product to the industries final products. The scale rating is 8 Therefore, bargaining power of buyers is high. The overall rating is 6.9/10.

3. Bargaining power of Suppliers:

Suppliers can well eat into profitability of the industry if they have the liberty to rigidly price their products and service. We have calculated rating with a scale of 1 to 10 where 1 results in lowest and 10 results in highest bargaining power of suppliers.

 Concentration of large few suppliers:[25%] High because in rail transport Indian Rail has almost monopoly and in air freight also there are few players available in the market. The scale rating is 7. Importance of customer for suppliers groups: [10%] High because major chunk of Indian rails (Only supplier for rail freight service) revenue come from freight service and in sea freight also logistic industries are the important customer. The scale rating is 8. Suppliers product is important for business:[25%] High as there are few suppliers who are vital for this industries business. Typically majority of transportation means are provided by suppliers which life line of logistics industry. Scale rating is 6. Switching cost:[25%] High because there are limited options available especially for bulk goods. Scale rating is 7 Threat of forward integration:[15%] There is almost no threat of forward integration as there is no evidence in industry till now. Scale rating is 3 Based on the above points we can say overall bargaining power of suppliers is high. The overall rating is 6.25/10.

4. Threat of substitute products:

The business of today heavily relies on logistics. Be it transfer of important documents or the transfer of goods from one place to another, big organizations use logistics to move their products from one place to another. The question of substitutes does not arise in this industry for the end consumers, for instance, if someone has to send a courier from one place to another, it can only be done through a logistics company such as DTDC, Blue dart to name a few in India. For regular movements of goods from one place to another, huge organizations require companies which could do the same for them. Even if they tried to do it on their own, the costs and investment would be too high, and given the fact they do not have an expertise in this area, it would be detrimental. In a nutshell, the threat of substitutes does not exist in the logistics industry. It is a necessity. Scale rating is 1.

5. Rivalry among competitors in the industry:

Talking about the logistics industry in India there are a vast number of players today who operate in different areas. Over the past few years, the number of competitors has drastically increased which has led to a lot of competition for customers in this growing industry. Given the growth in India and the increase in number of businesses which use logistics heavily, there is room for growth of different logistics organizations in India despite the high level of competition. The rivalry in this industry is judged

taking into account a number of factors. We have calculated rating with a scale of 1 to 10 where 1 results in lowest and 10 results in highest intersegment rivalry. Numerous balanced competitors:[30%] There are a large number of balanced competitors in India who provide similar service to customers. The service differentiation in this industry is quite low. Given the large number of competitors, there is also a fight for the competition in prices. A large number of logistics companies operate in India today such as GATI, DHL, DTDC, etc. Scale rating is 7. Industry growth rate:[20%] The growth in the logistics industry in India today is quite good and there is ample scope of growth for different logistics companies in India. Since the growth is good, given the expanding businesses in India, there is future for different companies starting in India. Scale rating is 4 Differentiation of product and switching cost:[25%] There is little differentiation in the products or services offered by different logistics companies in India. The service differentiation is low, only differing in schemes offered by different companies in different regions. For instance, DHL charges its customers for the premium service it provides and the range of schemes it has. On the other hand, talking in general, given the large number of players in the logistics industry today, the switching cost for customers is quite low. They can easily switch to a different company if they are not satisfied with the service of their existing company and the cost charged by other companies lies in the similar range. Therefore there are a lot of options for customers which leads to increased competition in the industry. Scale rating is 6 Increment in capacity: [10%] Another factor which is important is cost of increasing capacity. The players in this industry mostly transport the parcels or goods through means which are leased or are rented. For instance, different logistics corporations have tie ups with railways or airlines wherein they are given space for a fixed sum, according to their requirements. In case more capacity is required, the companies can enter a contract for more space. Therefore the additional cost for capacity augmentation is not very high. Scale rating is 4 Exit barrier:[15%] The exit barrier in the logistics industry is not very high. Given the initial costs for these companies is not very high, the cost of exiting is not very high. For most of the players, warehouses and rents are the only costs. It is only for the big players such as DHL or FEDEX for examples, who own their own flights and means for transport, that the exit barrier is high. Scale rating is 3 In short, summing it up, the inter segment rivalry in this industry is moderate, but there is a lot of scope for growth of companies in India given the growth and technological advances in India. The overall rating is 5.25/10.

Combining all the forces, we get the overall average point as 5.02. It shows that this sector is neither very lucrative nor does fiercely competitive.

Support activities: Infrastructure: It has overall approx. 350 Retail Express Centres and around 30 Offices across India. It has total over 1,152,700 sq. ft. of floor space. It has dedicated aviation infrastructure to support time-definite and day-definite morning deliveries through night freighter operations along with an extensive countrywide Surface network to complement air services. It has range of general support activities such as management, finance, accounting & legal support that are required to support the work of the entire value-chain. Human resources: It has more than 6892 employees. The DHL drives leadership position in market through its motivated employees, cutting-edge technology, value-added services & innovation to deliver high standards of quality of service to its customers. Dynamic training process is in place, which developed individuals in their career path growths and also training is provided to business partners (drivers &franchises etc.). Technology: It has developed its own State-of-the-art Technology, indigenously developed, for Track and Trace, MIS, ERP, Customer Service, Space Control and Reservations. It has started using state of the art RFID technology, it has innovation Centre in Germany where it develop the latest logistics innovations and also has the lab, which offers an interactive demonstration playground for prototypes. The laboratory provides a common research and development platform for the Group's initiatives in the area of technical innovation. Procurement: It also has three Boeing 737 and four Boeing 757 freighters along with 5451 ground vehicle support.