UK Business Plan 2004

1. UK Business Plan 2004 2nd Draft for Discussion

2. Purpose of this document: • This document provides an initial outline of the analysis and likely contents of the 2004 plan. Proposed Sections of Final Document • Executive summary • Corporate objectives • Review of 2002/3 and straight line 2004 projection • External analysis; • Political, social, economic & technological, industry & market review, competitors • Internal analysis; • Customers (by geography, industry & business unit), capabilities (by function and business partners and product portfolio) • Key issues/assumptions (inc critical success factors) • Commercial objectives (by product, business unit, industry) • Strategies & contingencies

3. Vision DHL will become the leading express distribution company in the UK by exploiting our Global presence, setting market leading service standards, consistently innovating our product range, leveraging the strength of the DPWN group and differentiating through customer intimacy.

4. 2004 Revenue Assumptions The 2003f Price increase includes £4.8m of fuel surcharge. Hence the 2004 increase figure needs to net out the probable loss of this revenue.

5. Revenue Growth Achieve revenue growth by maintaining focus on protecting our existing air express market share position by offering a market leading service proposition, whilst continuing to exploit opportunities within adjacent markets in line with the wider market definition of Courier, Express and Parcel (CEP). Yield Improvement Maintain our margin position within the UK through a continuing yield improvement program and the development of dynamic pricing solutions. Sales Development Maximise sales performance through the continued execution of SSI, the attraction and retention and development of best in class sales people and the development of market leading sales materials to support the sales cycles. Customer Focus Invest in customer intimacy to create a sustainable competitive advantage by integrating our customer focus activities to attain increased levels of customer satisfaction through the delivery of the core functional and emotional needs of speed, reliability, accessibility, feeling valued and feeling confident. Partnership Development Deliver business benefits across the 3D partners through the progressive integration of activities. Brand Development Build awareness and manage brand perceptions of the ‘new’ DHL brand through the full integration of all marketing communications. Cost of Sales - Management UK Commercial Strategies

6. Revenue Growth Air Express WPX, IMPEX, TDD, Sector Development (USA) Adjacent Markets SameDay, EU Road Distbn, DOM, Mail Sales Channel development Yield Management Pricing Strategy 2004 Ad Hoc strategy Extra charges Value Added Services NPTS / Out of Area Sales Development Salesforce Automation Sales Training Competitor Analysis Sales Communications Customer Focus Integrated Customer Focus Programme Drive service performance (speed/reliability) Drive sales performance (valued/confidence) Drive customer service (valued/confidence) Innovate to meet customer changing needs Partnership Development Integration of activities Co-ordinated marketing communications Joint selling and cross-selling activities Manage integration programme Brand Development Integrated marketing communications Corporate Social Responsibility Programme Cost of Sales - Management Channel opportunities Commercial Focus 2004

7. 5 C Analysis (Summary) • Customers • Increased mode switching to Road • Competitors • Brand spend, USA strengths. • Capabilities • Service decline in last 12 months (?) Uncertain future. • Context (i.e. Market) • No market growth in 2002, Little forecast in 2003. Zero Growth in 2004. • Culture • Uncertainty over future integration, impact of distraction.

8. Strengths, Weaknesses, Opportunities, Threats • UK Mail Market • Education Sector, Textiles growth in RBU, Pharma/WPX • TDD Dutiable + Expansion • Sell one stop shop concept • Channel/Pricing/Partner Strategy • Airborne Express • Integrated Customer Focus S O • Field Sales (inc. Hi Tech) & DSC stable • Brand Name (rejuvenation) • SSI Initiative • Banking/Finance Decline • Business Failures (esp. Manufacturing) • Over reliance on Telcoms & Elec. components (Key Accounts) • Competitors will exploit new DHL integration service failures. • Mode Switching • Fuel Surcharge • Corporate Social Responsibility • Domestic Network • US Service Capabilities • Europolitan Brand • Field Perceptions of Service, OH, ND, MD and non- scanning. • Cut-offs becoming an issue. (B runs) • Systems Capabilities W T

9. Political, Economic, Social & Technological • Political • Nation-wide congestion charging • Aviation white paper: Polluters pay principle, cargo tax • Working time directive - inclusion of drivers hours • Amendment of Terrorism act requiring more info from DHL • Budget: Company car tax, NI increases • Removal of de minimus on Import clearances • 4th runway @ Heathrow • Economic • Some uplift in global economic growth inc. EU • Better UK export prospects, better Import opportunity • Projected weakening of Sterling v Euro • Continued rise of Far East + India • Growth of bio-tech sector • Aviation industry decline • Continued improvement in comms and infrastructure have increased distribution options • Expansion of EU • Social • Growth of e-commerce (residential delivery) • Growth of working from home • Environmental awareness increase • Anti-big business/globalisation • Backlash v UK and US post Iraq • Greater employee churn (customers) • Relocation of traditional manufacturing now expanding to service sector • Technological • Continued Electronic substitution of documents • Growth of customer automation preference • Proactive track and trace customer requirement • User friendliness and accessibility of new technology • Awareness of technology raising expectations

10. Macro-Economic Trends impacting on the UK International Express Market INCREASING UK ECONOMIC GROWTH EXPORT GROWTH FCAST UPLIFT BUT EXPORT CONFIDENCE NOT STRONG “UK MANUFACTURING SLIPPED BACK INTO RECESSION” “Manufacturing output continues to shrink” “Expansion of Service sector business activity slowed to weakest in almost a year” “Retail sales saw greatest fall in a decade” HOWEVER, £ vs EURO WEAKENING Sources: ONS, DHL QEI, OEF

11. DHL’s strongest competitor remains the fragmented ‘Others’, perceived as more flexible and lower cost. For the main integrators, UPS is the RBU’s biggest threat, TNT in the DBU. Price: main integrators increased their rates this year, ranging from 3% (FedEx), 5% (TNT) to 9% (UPS), well above DHL’s inflationary increase of 2.4%. Their pricing structures continue, with no change in their workings of fuel or volumetric surcharge’s. Others lower price. Product: UPS increasing TDD service emphasis and expansion. FedEx focus on e-commerce. TNT – pushing road-based, expansion of ground network and logistics in Europe. Focus on core mail business, expanding int. Mail. Re-launch of pharm. Service (medpak). Promotion: 2002 total ad spend approx. £9m (60% TV). DHL SOV (13%) lags behind UPS (56%) and FedEx (30%). DHL’s brand image lead has eroded even though there is evidence that competitor activity has been mis-attributed to DHL underlining the robustness of the DHL brand. Others no promotion. Place: UPS targeting US and far east (network expansion). FedEx focus on emerging markets in Asia (e.g. Drop off boxes in china). TNT shift of focus to supply chain solutions in Asia + big drive in India. Emery forwarding and Nippon Express improve Asia networks. Others localised. People: FedEx working through agencies so weaker. UPS?. TNT?. Others? Processes: UPS and FedEx considered better than DHL. TNT? Others thought to be less sound. Perceptions of CS: others have the strongest CS, UPS and TNT follow being relatively robust in tracking Competitors

12. Context (Market) • The AX market growth in 2002 was zero or negative. • For Q103, the market is forecast to remain flat • 2002 saw evidence of mode switching • Q102 TMA indicated growth for Road Express • DHL loss of heavyweight traffic • decline in ECX due to upgrading to TDD but also downtrading to Road • lack of image differentiation • cost pressures on exporters (strength of sterling) driving increased selectivity • In 2002, Air Freight through GFS grew at 11% though the trend is one of declining growth • DHL is seen as market leader in terms of overall brand image and awareness, usage and share • But it is a commoditised market, there is no clear leader on the 6 core needs. What slight differentiation being undermined in part by low DHL SOV well below that of UPS and FedEx. • High-Tech sector which accounts for 17% of total revenue went backwards by 20% in 2002. At the current rate of positive trend, growth should break even May03 • Focus on new economy for growth: e-commerce (on-line purchase requiring rapid delivery), IT (R & R), Telecoms, Pharmaceuticals (Perishables), BioTech, Electrical components (high-value, JIT - low stocks needed) • Focus on countries that are projected to develop and grow: South East Asia, China, India, Eastern Europe

13. 30% 25% UK UK 20% ES ES FR FR 15% Net Margin DE 10% DE IT IT 5% 0% rest NL NL* BE domestic core -5% BE* -10% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% Market Share Courier, Express & Parcel (CEP) CEP Market Definition DHL Express Market Definition WE average: 11% DtD Margin & 44% Market Share WE Bubble size signifies RpD size N.B. DHL has a 13% share of a €4.5b Market

14. Same Day/ TDD Next Day/ Express COB/ n Day Definite/ Deferred Road Domestic and International n Inbound and Outbound n Pieces up to 70 kg and no maximum n shipment weight B2B, B2C (latter only a target if profitable n opportunity identified) Logistics services n • Mail Services UK Market Definition - CEP

15. Revenue Contingency Plan 2003/4 High Impact Project Day Job Euro Express MMD/SD £0.5M Integrated Campaigns Pricing Strategy 2003 JW SSI RB Same Day Services MMD (£?) TDD DOM Drive VF/MMD (£) UK Mail £2m Focus Exploiting Best Practice i.e. Intelligent Delivery Higher Educ. (DK/TH) (£ ?) Unbundling Surcharges Remote/NPTS (£?) JW/MD/TW DPGM CRM JG Exploit 2 Leg R&R (£?) DK/WB/RS 2003.9 Tariff Dangerous Goods 6.2 (£?) RM Difficult to Execute Volumetric Change JW (£?) Easy to Execute Channel Alignment TBC Freight Forwarders JG/RM (£) Physical Channels MD Consumer Deliveries Textiles CJ/MMD (£?) Special Services Desk JW (£?) Ignore/ Delay Food (£ ?) Pilot IT MMD Low Impact