Case Analysis on

DSL de Mexico S.A. 12/13/12 (A) de C.V.

A visual presentation by

Group H

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Presented by
Izazul Haque Jyoti Jiban Khisha Sanjida Erfan 093 0957 030 091 0849 030 092 0259 030 083 371 530

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Hussain M Elius

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Background
Whats the case all about...
The case, DSL de Mexico S.A. de C.V. (A), portraits the ethical dilemmas managers often face in international business. In this case we have observed, the history of DSL in Mexico, reviews industry conditions and background on the devaluation of the Mexican peso. The case focuses on Lane Cook, the 28 year old General Manager of DSL de Mexico, as he intends how to respond to a questionable request by a potential customer.
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Background
The Beginning Story of DSL In 1978, Distribution Services Limited, commonly
known as DSL, was founded by Philip Clarke, Sr. and Cobb Grantham. Both of them served together in the Korean War. Experience of Philip and Cobb: Sea-Land Corp., a major U.S.-based shipping company Discovered Opportunity: the Pacific shipping market Target Market: DSL which was based in Hong Kong, focused on consolidated orders for U.S.-based retail 12/13/12 companies which were interested in accessing Asian

Background
Growth of DSL

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DSL was one of the few consolidators working the Hong Kong-Southern California route n the late 1970s and early 1980s. Sales grew by an average rate between 15% and 20% over its first ten years. Gross margins hovered in the 15% range, a rate which was considered very healthy in the industry. Over time, DSL opened 12/13/12 offices in Taiwan, Korea,

Background
DSL and Retailers

The standard custom for U.S. retail companies was to negotiate prices that were FOB at the suppliers dock. For large retailers like Sears, Wal-Mart, and J.C. Penney, substantial volume discounts could be secured on massive volumes of goods being shipped. Retailers could also control shipping schedules and manage priority freight more effectively. Finally, FOB contracts enabled U.S. retailers to perform full quality inspections prior to shipping. 12/13/12

Background

Consolidators relied on two types of retail customers:

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Background
Relationship between WalMart and DSL

Due to close relationship with Wal-Mart, DSL got highly benefited. Since the mid-1960s, Both Cobb Grantham and Philip Clarke, Sr. had known Sam Walton when he was just establishing his first Wal-Mart, and Clarke and Waltons had strong friendship. Because of this relationship DSL grew as Wal-Mart 12/13/12 grew.

Background
Wal-Marts growth and intense competition among freight carriers By the end of 1995, DSL had grown to a $200 million company. Of this amount, about $80 million was derived from Wal-Mart; another $50 million came from Target Stores. The balance was derived from such retailers as Edison Brothers, JC Penney, Fingerhut, Shopko, Hills Department Stores, the American Retail Group, as well as various U.S.-based trading houses.

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DSL Expansion to Mexico

Background

In 1988, DSLs regional director in San Francisco made contact with a large Bay-area trading company that had considerable business with a major Mexican retailer. In 1990, DSL formed a joint venture with a Mexico City-based shipping agent to assist in managing the new business. In August 1992, the Prime Minister of Canada and Presidents of Mexico and the U.S. announced the North American Free Trade Agreement (NAFTA) which would come into effect on January 1, 1994. Later, DSL broke off the relationship with its partner and establish a wholly-owned affiliate in Mexico that would pursue more aggressive growth objectives.
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Background
DSL de Mexico S.A. de C.V.

In October 1993, Wal-Mart opened its first store in Mexico as a 50-50 joint venture with Cifra. Within the month, DSL started to serve Wal-Marts consolidated freight from Asia and domestic consolidation of Mexican suppliers for delivery to its new Mexico Supercenters. In November 1993, DSL subcontracted the use of a small warehouse in Mexico City.

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Background
Big challenge for DSL de Mexico: The Devaluation

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Mexico moved to devaluing the Peso just after the contract of DSL. Between December 20, 1994 and February 1, 1995, the pesos value fell close to 40 percent against the U.S. dollar. The devaluation substantially lowered DSLs warehouse cost in $U.S. dollar terms. But imports went into a tailspin, drying up DSLs Asian consolidation business. Purely domestic business also suffered.
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Background

Need for Revenues In order to gain revenue, Cook believed that the key to growth lay within developing local business, including warehouse accounts and the company faced steep competition.

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Theme
The DSL case documents the history of DSL in Mexico, reviews industry conditions and provides background on the devaluation of the Mexican peso. As the service period of DSL increased, they lacked the uniqueness. As DSL was handling huger inventory warehouse, they faced problem to manage it as WalMart became independent. Falling the value of a currency brings competitive disadvantage and vice versa. Despite initial successes, the collapse of the Mexican economy hit DSLs business hard. Faced with falling revenues and substantial overhead costs, DSL was in a trouble with the economic imbalance.
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Main Issue
What strategies should be taken by the management to mitigate issues related to questionable negotiations, ethical stance and business sustainability of DSL in Click to edit Master subtitle style Mexico?

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SWOT Analysis

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HRPP Model

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Strength
q Good relations with different individuals provides strong plot to gain success in the business q Relatedness to the statement: Because of friendship with Sam Walton DSL became Wal-Marts principal consolidator out of Southeast Asia. DSL grew as Wal-Mart grew. q Relatedness with HRPP Model : Product/Service Demand and Organizational Growth under Forecasting DemandConsideration

Technological Advancement made DSL to serve more to customers than its competitors Relatedness to the statement: By following Wal-Marts lead, DSL became entrenched in Wal-Mart technology and learned many key advantages in just-in-time and inventory management earlier than many competitors 12/13/12 Relatedness with HRPP Model: Technology and Product/

Strength
The DSL U.S. office provides strong backup during the time of crisis q Relatedness to the statement: Due to the uncertain economic downpour; with so much unused capacity and costs cut to the bone, Cook was under enormous pressure to raise revenues. DSLs U.S. offices helped considerably here. DSL had 20 offices in the U.S. and many of these had large accounts that did business in Mexico. The collapse of the peso brought about a significant increase in U.S. imports from Mexico. q Relatedness with HRPP Model: Product and service demand and Management philosophy consideration

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Weakness
Dependency on few customer puts DSL in a disadvantageous position. Relatedness to the statement: DSL was dependent on consumers like Wal-Mart; J.C Penny Sears etc. DSL acted as Wal-Marts sole consolidator within Mexico, a role that included working with Wal-Marts Mexican vendors by consolidating their small orders and sending full truck loads to the Mexican stores Relatedness with HRPP Model: Product/Service Demand and Organizational Growth under Forecasting Demand- Consideration

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Weakness
Lack of uniqueness in the business makes DSL more vulnerable in the competitive market. Relatedness to the statement: DSL lacked the uniqueness which could differentiate them. Though they tried to differentiate through service provided; it could not make a major difference But there are essentially no barriers to entry in the consolidation business. Relatedness with HRPP Model: Management Philosophy and require Trend Analysis from HRPP model

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Weakness

Too much fixed cost is an obstruction of profit in the business of DSL. Relatedness to the statement: DSL continued to act as a consolidator for Asian goods purchased by companies but lost its domestic consolidation business. However, WalMarts domestic consolidation account was a huge percentage of the business in Mexico, As a result they cut off the jobs of the employees which make them to lose the qualified workers. Relatedness with HRPP Model: Inventory management techniques for the organization 12/13/12

Opportunity
Presence of very few Competitors in Consolidating business provides DSL to capture more market share. Relatedness to the statement: Presence of potential trans-Pacific market for ocean freight consolidation and the consolidation business had not been developed across the Pacific, which gives DSL an opportunity to have a market and expand their business in different areas in the time of globalization. Relatedness with HRPP Model: Organizational Growth under Forecasting Demand- Consideration.

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Opportunity
Emergence and Expansion of large retailers grants more opportunity to expand the business Relatedness to the statement: DSLs main accounts were Gigante, Comercial Mexicana, and the newly arrived Wal-Mart. For each of these accounts, DSL acted as the sole consolidator of shipments from Asia to Mexico. Relatedness with HRPP Model: Organizational Growth under Forecasting Demand- Consideration

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Opportunity
Different trade agreements worldwide give DSL plot to expand its business. Relatedness to the statement: The passage of NAFTA clearly caught DSLs attention as it promised a dramatic increase in trade between the U.S. and Mexico. Relatedness with HRPP Model: Product/Service Demand and Organizational Growth under Forecasting DemandConsideration

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Threat
No barrier of entry in consolidating business makes this field attractive, eventually leading to entry of new competitors in the market Relatedness to the statement: As the service period of DSL increased, they lacked the uniqueness. But there are essentially no barriers to entry in the consolidation business. Logistics companies dont require a lot of capital investment. Relatedness with HRPP Model: Management Philosophy and require Trend Analysis from HRPP model.

Economic instability of the host country might cost the business. Relatedness to the statement: The pesos value fell close to 40 percent against the U.S.12/13/12 dollar, and caused what most Mexican experts call the worst economic crisis in

Threat
Self dependency by the large retailers in the consolidation business shrink the market size . Relatedness to the statement: Wal-Mart turned to its wholly-owned affiliate, McLane. Based in Temple, Texas, McLane, a national distribution and food processing company, was purchased by Wal-Mart. Relatedness with HRPP Model: Product/ Service demand under managerial estimates techniques The unwanted demand made by the host might hinder the business of DSL in near future. Relatedness to the statement: Unwanted demands many times creates adverse situation. Demand by Hernandez where he wanted something not to be 12/13/12 mentioned in the contract.

HR Challenges

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HR Challenges

DSL needs an HR department so that it can manage the proper allocation of the employees worldwide. To avoid unwanted demands DSL must have professional negotiators as Mexico is not like USA and the political, socioeconomic factors are different in the host country.
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HR Challenges
DSL management had lacking in terms of proper decision making and long chain of command where HR needs to make people train and design organogram to communicate more effectively

The market of Consolidation industry is very competitive, and the competition is getting higher day by day, so the industry market itself can become a huge challenge in the near future where retention of efficient employees might be difficult.

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Alternatives
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Alternative No.1: Do Nothing

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Alternative No.2: DSL may introduce a customized service line for the Mexican market

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Alternative No.3: DSL can do businesses in Mexico by accommodating clients requests and preferences

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Alternative No.4: DSL can exit the Mexican market

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Alternative 5: Charging clients in U.S. dollars and not in Peso

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Recommendation

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Alternative No. 3: DSL can do business in Mexico by accommodating clients requests and preferences.

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Reasons for Not Recommending Other Alternatives

Alternative 1 cannot be the best alternative as it will lead DSL towards an end in Mexico. Introducing a new service strategy will not be a feasible idea because it will hamper the overall image of the company and hence Alternative 2 is not a viable one. The market situation of Mexico is still
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Implementation
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Implementation

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General Implementation
DSL needs to bring some major changes in the company policy to sustain in the Mexican market in the long-run. One of the major changes that it should incorporate is by accommodating the needs of its clients, even if they seem unethical. DSL set up its business in Mexico to begin handling not only WalMarts consolidated freight from Asia, but also its domestic consolidation of Mexican suppliers for delivery to its new Mexico Supercenters. However, as that business is failing, it must now evolve. The key to growth now is within developing local business, including 12/13/12 warehouse accounts.

General Implementation
Right now our main aim is should be to survive and have a controlled growth in the market. With the loss of Wal-Mart, Cifra and other Wal-Marts account, we face tough times and the goals we developed might need to be scrapped. However we can continue trying to gain that market back or Mexico can be our hub in the process of transferring goods from the United States to Asia, as it was planned. Our presence here is required. As a business goes into another country it is expected of them to change12/13/12the with

Operational Implementation R&D

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Marketing Implementation
DSL needs to implement the recommended alternative from their marketing perspective as well. The marketing implementation of this recommended solution will be done in several steps. This will increase the market value of the products and the way of being established as a brand will be much smooth. For DSL to sustain in the Mexican market in the long-run as well as a greater future expansion and profitability they need to be establish themselves with better marketing. A proper marketing plan can lead any company to the top of the pyramid. In the marketing 12/13/12 implementation we have suggested them to

Marketing Implementation
Since we are offering a business to business service, our marketing strategy will be very different from a business to consumers one. However, we must not diminish the need to pre-sell our service. If the customer does not know who or what DSL is, it is very unlikely that they will want to listen to what we have to say in the first place. With targeted advertisements in television, billboards and business magazines we can establish our brand in the minds of the consumer so when we are pitching business to them that they 12/13/12 feel more at ease with our brand.

Marketing Implementation
A bigger challenge, however, is to develop the market to understand the value of our service. This will be most necessary for the sustainability of the business. DSL offers a very premium service with the use of advanced technology and sophisticated tracking system, on the other hand competitors have unreliable service where goods often get lost and damaged. But the market remains very price sensitive to even the smallest changes.
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Marketing Implementation
We have also been accused of providing a very ambiguous service. It remains the task of the marketing department to clarify what we provide and to whom. Providing warehousing to the local companies is a divergence from what we used to traditionally provide. Lastly, we need to continue trying to get new accounts. With big departmental stores such as Cifra and Wal-Mart now handling their own logistics, we need to find other accounts, 12/13/12 perhaps in other industries. That is actually

Financial Implementation

In this case, the financial implementation is immensely important because finance ensures that there are adequate funds available to acquire the resources needed to help the organization achieve its objectives, ensure costs are controlled, ensure adequate cash flow, establish and control profitability levels. One of the major roles of the finance department is to identify appropriate financial information prior to communicating this 12/13/12 information to managers and decision-makers,

Financial Implementation
To execute the recommended solution, at first DSL needs money. This can be gained from the very understanding DSL host country. DSL has already invested a lot of money in Mexico in buying warehouse and equipment. We can hope to gain more from the headquarters to build up our business. Each and every department will need money to perform their job. Starting from the operation & production to marketing and HR, every department have to execute their parts. Finance is responsible to provide the amount every department needs. Financial managers have to work hard 12/13/12 to test the feasibility of the demand and they

Human Resource Implementation

In this case, one of the most important parts of the total implementation process is the HR implementation. As the recommendation states to the Improvement of the network coverage as soon as possible; and it is necessary for the organization to execute this part perfectly. In the tough times of DSL, it is HR department 12/13/12 which will keep it afloat. Already the company

Human Resource Implementation

Organizational Development To ensure its success, a company must establish a hierarchal reporting system. The funnel of responsibility is critical to the efficiency of a smoothly operating business entity in which there is a clearly defined understanding of who is responsible for what. They provide consultation to a company's 12/13/12 management team to identify what the

Human Resource Implementation

Employee Recruitment There are many steps to recruiting and selecting qualified employees. First, a department head must inform the HR manager of an opening in their department. Then the HR manager must obtain the job description to formulate a Job Description Sheet for publication either internally, publicly, or both. Then HR must field the (many) responses to that job announcement to weed out the 12/13/12 qualified from the unqualified applicants.

 Employee Compensation & Benefits

Human Resource Implementation

Whirlpool should try to keep the employees happy by giving them good compensation and benefits. It will increase the association of the workers with the organization and will make them happy. A happy workforce can work more efficiently and it will also help the organization to overcome the future risks of strike, vandalism, and other unavoidable mishaps.

Employee Relations
With the increased rise in unethical practices and misbehaviors taking place in today's workplace such as age, gender, race, and religion discrimination and sexual harassment, there needs to be mandatory compliance with governing rules and regulations to ensure fair treatment of employees. In short, employees need to know they have a place to turn when a supervisor abuses his or her authority in anyway. Whether corporate or union, the HR Department 12/13/12 will get involved to act as arbitrator and liaison between legal entities, regulatory agencies such as Human Rights, supervisors (who might be falsely

Total Integration
The reason that DSL is suffering problems now is because it has lost its major accounts. It has as the saying goes it has put all its eggs on one basket. By relying on the major accounts it has failed to develop other accounts which is the reason that Wal-Mart and Cifra pulling out as DSLs customer base has taken a major toll on the company. DSL should try to have a balanced business account.
12/13/12 The market for DSL in Mexico is not very

Total Integration
There is some reliance on the headquarters for understanding the situation here in Mexico and help us with the manpower and the money while DSL attempts to get back on its own two feet. We have already invested a lot of money on expansion of our premises and right now the focus should be on cutting cost and maintaining cash flow. The Human Resource is needed to come up with the right people to help us through the 12/13/12 tough times. As we have right sized, we

Thank You!!

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