Indian Courier Industry: The Leader's Dilemma

Journal of Services ResearchVol. 6 Nbr. 2, October 2006

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Summary


Indian Express industry has undergone large changes in recent past. Industry which was once dominated by Indian Postal Department is now dominated not only by a few large national players but also comprise large multinational players and small regional and local players. Indian industry is led by Blue Dart Express Ltd which has been maintaining its number one position with largest network. However, with the entry of large international players and plans of expansion in Indian market, lot of upheaval has happened. Thus, the future face of the Indian industry is in a flux. This case presents the current situation of the Indian express industry and provides an overview of the strategies adopted by Blue Dart Express Ltd enabling it to maintain the position of leader in the industry.

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Extract


Indian Courier Industry: The Leader's Dilemma

BLUE DART IN NEWS

On 13 September 2002, passengers on a Jet Airways' Delhi- Bangalore flight noticed an exceptionally merry bunch. It was the Blue Dart team rejoicing in tying up with DHL after having ended a 19-year relationship with Federal Express (FedEx). The new tie-up had been announced at a press conference in Delhi the previous day. What was not announced was that FedEx found out about its partner's new alliance just a day before everyone else.

FedEx's pact with Blue Dart started unravelling a little before the global courier firm set up a direct presence in India in 1997. The main cause of the acrimony was the exclusive nature of the contract. FedEx did not want Blue Dart to deal with any of its competitors. For instance, Blue Dart operated three aircraft, but the contract forbade the domestic courier from carrying any packages for TNT, UPS or DHL. Says Clyde Cooper, managing director, Blue Dart: "The key consideration for Blue Dart was the restrictive nature of the contract. It was not an equitable relationship".

There were other issues too. Blue Dart was a domestic leader and wanted to strengthen its regional presence by tapping Indian trade with the SAARC nations. With three aircraft in Kolkata, Chennai and Mumbai, its infrastructure was ideal for tapping regional trade traffic emanating from places like Dubai and Bangladesh. But the contract with FedEx had territorial restrictions. Says Cooper: "There was some sense that any territory outside of India was not Blue Dart territory. The relationship stopped us from leveraging our domestic infrastructure to the fullest." So now Blue Dart is already exploring agent relationships in the region - Bangladesh, Nepal, Bhutan and the Maldives.

Reluctant to talk about Blue Dart's reasons for walking out, FedEx's India managing director Jacques Creeten says: "We wanted to promote the FedEx brand in India. That was an issue." These were the commercial reasons for the break-up, but businesses can often be about people getting along, and FedEx and Blue Dart did not. Says a source: "Blue Dart viewed this as a master-slave relationship. There was just a lot of bad feeling". Along the way, Blue Dart's reliance on FedEx had diminished. When they signed up initially, 80 percent of the domestic courier company's business was international as compared to just 20 percent now.

Till 1997, Blue Dart had a watertight contract with FedEx with no exit clause. Then a five-year contract was signed with a one-year exit clause. Last year, the relationship had deteriorated to such an extent that in June 2001, Blue Dart informed FedEx that it did not want to renew the contract that was due to expire on 1 October 2002. Thus, began negotiations between the partners. Simultaneously, Blue Dart started talking to othe...

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