STEEP Analysis

1. Hermes Delivery Ltd STEEP Analysis Agnesia Naghmeh ezani

2. Introduction • Hermes Couriers Ltd. is market leader in consumer residential delivery solution. The main vision is to meet the demands of European retail, mail order and online shopping market. To reach this vision, Hermes offers a solution designed and built around tackling the key challenges in a growing and increasingly complex market: How to make parcel delivery as easy and convenient as possible.

3. Introduction • Hermes currently owns over 7,500 couriers in United Kingdom and operates six days in a week. Hermes currently offers various types of delivery service to customers: • Next day delivery • Two day delivery • Two to five day delivery • Simple returns service • Retail stock collection service • European delivery services

4. Introduction • The problem that had been faced by Hermes in these past few years was Hermes seems to loosing out in relation to investment in new technologies. This may also because Hermes was grown in a rather disorganized approach, are failing to gain the expected advantages of scale such growth should bring. Thus, although sales growth has been maintained within a tough market, margins are under severe pressure.

5. Social • Social- culture factors affect people’s choices and include beliefs, values and attitudes of society. The factors are: • Population growth rate • · The UK population is 60.9 million people in 2010, 29.4 million which are male and 31.5 female.(Forrester,2003)Now Hermes has 2.000 employees, including 7.500 couriers, with delivers 110 million business parcels a year. Hermes aiming for 5 million parcels a year by 2012.(search.bbc.co.uk, 2010) • (+) It proves as a positive impact for Hermes, because the population growth rate is increasing, then potential market for Hermes to target the new customers will increase also.

6. Social • Education • The population and therefore the workforce are becoming more educated.(search.bbc.co.uk, 2010) • (+) Education and skills can qualify people for the best available job abroad. • (+-) As the courier business does not cater to customers who are in school or universities, and then the impact for Hermes is impartial.

7. Social • Change in income distribution • According to the National Statistics (2009), the average income per family in 2005-2007 in the UK is approximately £25,000 - £ 30,000. There is a major gap of income distribution among the family, which of highest final income of £52,400 as compared to the lowest final income of £ 14,400. • (+- )The major customers are the contracted customers who constantly use their service irrespective of the gap of income distribution.

8. Technology • Usage of new technology in Hermes company • Hermes company have improve their technology in the company by • implementing Paragon route optimization software. The software helps the • delivery services by automated their routing and scheduling deliveries throughout the UK mainland. (e-couriernews, 2010) Positive (+) • Reduce the cost fuel because by taking the best route, it reduces number of mileage taken by the delivery from point A to point B. • Hermes achieve with significant efficiencies with annual saving 300,000 pound with the usage of new Paragon software. (e-couriernews, 2010) • Saving delivery time in each delivery point Negative (-) • High implementation cost in using new technology approach • New software implementation problem - Mentality of people(driver) to adapt this new technology and maximize on its usage because the driver believe that have better local knowledge to determine the “Best route” in delivery services.

9. Technology 2. Growing of online sales and e-commerce technology in current market Business online sales and e-commerce are growing where nowadays it became new trend for people to purchase the product online. Based on statistical bulletin done in UK, it describes that’ sales over the Internet increased significantly in 2008, across all employment sidebands. Businesses with 250 to 999 employees showed the largest proportional year on year rise in the value of Internet sales of 51 per cent, from£43.7bn in 2007 to £65.9bn in 2008’(National statistic, 2008). Does this improvement of sales technology affect the business roles in Hermes Delivery Company? Positive (+) • High demand from the customer, businesses and warehouse for Faster and secure delivery service Negative (-) • increase new number of competitor in delivery services

10. Technology 3. Internet Accessibility and usage in the workplace • Surveys shows that ‘7.5 million people had Internet access at work in 2008. This represented 45.5 per cent of the employees accessing internet at work increase of nearly half a million since 2007(National statistic, 2008). • From this information how this increasing number of people accessing to the internet can affect in Hermes business operation? Positive (+) • Good internet connectivity leads more people in connecting to online sales website or e-commerce, therefore demand in delivery services shall increase. • Internet accessibility by the customer leads to new ways of communication between the customer and the company therefore, the company can use this as a medium in creating brand awareness to gain customer trust toward their delivery services. • High number of user access lead to better improvement of customer services therefore Hermes Company needs to make an improvement by adding package tracking system for customer to monitor their packages during delivery process.

11. Technology 4. Usage of new hardware technology to support Hermes daily business operation According to Eastern Daylight times on July 14,2009 Hermes Delivery services have equip up to 7,500 couriers with Intermec CN3 Mobile Computers as an effort to improve their customer services. By using this CN3 Mobile computer, it can develop an advance mobile solution that will accurately and efficiency capture ‘last mile’ delivery information to enhance customer services.(businesswire.com, 2009) Positive (+) • Process of collection, barcode scanning and real-time electronic proof of delivery improves the customer service and reduce administration task. • Support new delivery services for private individual including e-bay trader where delivery status and collection is done via Hermes web portal. This enlarges scope of customer in using delivery services.

12. Technology 5. Improvement in communication channel Voice Over Internet Protocol (VoIP) has become current trend for businesses in enhancing their communication level. This is because by using the VoIP, it offers low cost and good quality of call service. How this improvement of communication in using VoIP can affect Hermes Company ? Positive (+) • Currently, the company face problem where the data is record via floppy disk and update once in a week. Therefore, by using this VoIP communication, it also enable the data could be transmitted in real-time. This not only improve in communication but also assist in better decision making process. • The usage of VoIP can handle many call simultaneously, this shows that VoIP is not only effective in managing call but it also cost efficient. Negative (-) • Need to connect to internet, if there is no internet connection it would be impossible to communicate. This surely will interrupt the business process.

13. Economy • UK Inflation Rate Falls for 3% • The fall in CPI to 3% was slightly bigger than expected by economic analysts, who had forecast a drop to 3.1%. A letter from the Bank of England's governor is required if inflation is more than one percentage point above or below the government's 2% target. The rise in the CPI inflation figure to 3.5% in January had been put down to VAT returning to 17.5%. There will now be hopes that that inflation has peaked, and will drop back below the bank’s 2% target by the end of the year. • (-) Negative Impact • ~ The economy down situation may affect the spending behavior of the customers. • ~ People will tend to spend less if the economic in the country is still unstable.

14. Economy • ·UK Economy Still Growing Weakly • The economic expansion came despite the impact of the heavy snow in January, said the National Institute of Economic and Social Research (NIESR).(+) Positive Impact • ~ Since the economy in the country was growing, the spending power of the customers will increase.~ Customers will tend to spend more and may use the delivery service more.(-)Negative Impact~ Although the economy in the country is growing, but not much things were affected by this situation since the growth are considered as weakly.

15. Economy • · UK Economy Comes to a Standstill Bank of England has warned that the UK economy is in for a difficult and painful period due to a combination of high inflation and rapidly slowing growth. Inflation, which at 4.4% is well above the 2% target rate, could make it more difficult for the Bank to cut interest rates to spur the economy. But analysts said the zero growth reading could lead to lower borrowing costs by the end of this year.(-) Negative Impact~ Costs of things like petrol, electricity, and other things and also included costs from supplier will increase.~ May affect the monthly expenditure of the company since the company is forced to pay more to the supplier.~ Since the costs of things will increase, some people will tend to get delivery service by their own self rather than to have a delivery service to done it for them.

16. Economy • · 0.3% Growth – UK Economy Well out of Recession Both consumer and government spending contributed to the fragile recovery while inventories look to have added significantly to growth too. Exports rose strongly, but so too did imports meaning net exports have been a negative for growth during the past two quarters.(+) Positive Impact~ The economic growth may affect the sale of the company, the better the economic situation in the country, the more income the company will have.~ People will feel save and secure by this economy situation, so they buying power may also back to it used to.

17. Economy • · UK Deficit Smaller than Predicted The UK's borrowing will be £11 billion below forecast this year. The £167 billion forecast for 2009/10 - although still a record by some distance - falls short of the £178 billion predicted in his December Pre-Budget Report. In his latest Budget, UK's overall debt would be £100 billion less than expected by 2013/14 as a result of the Government's measures to protect the economy.(+) Positive Impact~ The stabilization of the economic growth in UK will affect every single company in the country.~ Cost of things may slowly decrease, so that people will use more of delivery service rather than to have it delivered by their own self.

18. Economy • · UK Inflation Expected to Ease in February 2010 UK Economy analyst expects the annual rate to be around 3.1%. Last month, the ONS reported Consumer Price Inflation (CPI) rose to a 14-month high of 3.5% in January - a figure that was expected by analysts. Analysts expect Retail Price Inflation (RPI) in February to remain unchanged at 3.7%. RPI includes mortgage costs and is used as the basis for many wage deals.(+) Positive Impact~ The inflation rate will raise means that the value of GBP will slowly back to normal; this may affect the expenditure rate of the company if the company has some suppliers outside UK (cost reduction).~ The value of Great Britain Pound sterling will back to a strong position slowly. This also affects the buying behavior of people and they will tend to use the delivery service.

19. Environment • Green energy awareness • In supporting the green energy, the UK government conducts it plans to become a world leader in making electric and low-carbon cars an everyday feature of life before 2015, the UK is investing 30 million pounds in the scheme “to drive greener”. As part of the plan, the UK government implement Thousands of electric charging points are to be installed in streets and car parks to create up to six “electric car cities” and regions across the United Kingdom. Positive (+) • Reduce the air pollution in the environment • Assist in reducing on fuel usage in transportation Negative (-) • High demand on replace the old vehicle toward hybrid technology where this can give high cost for the delivery company to implement it.

20. 2. Fuel price increase in UK According to March fuel price report in UK, ‘petrol cost price risen by 4 pound per liter(ppl) from 112.1ppl to 116.1ppl.As for diesel, the price risen by 3.1 pound from 113.8ppl to 116.9ppl’(theaa.com, 2010). Based from this increase of petrol and diesel price, how it will affect on the Hermes operation ? Negative (-) • High expenses on daily cost on delivery services • Daily operation of the delivery service is slow down because to save cost of fuel the company might limit number of truck operation per day.

21. 3. Air Pollution issues in UK • Poor air quality is linked to respiratory illness, heart dieses, asthma and leads to condition of lower life expectancy. According to the report in town and cities in UK, 70 per cent of air pollution cause by transportation.(mailonline, 2010). • Based from this issues, how this air pollution can affect the business operation? Negative (-) • The government tightens the rules and regulation on monitoring air consumption release by vehicle on the road especially truck. • The government might take an action where they want to reduce number of transportation running in the cities, this might effect the delivery operation. • This pollution also not only gives impact in businesses but to the environment itself where adverse air quality can kill many organisms including humans.

22. 4. Weather and climate changes • Weather and climates changes are the important factor that can affect the delivery process in Hermes Company. However, there is no solution to overcome the nature. by aware of current weather report and climates changes Hermes Company can use it as main factor in creating customer satisfaction. • The latest news ‘more snow to come where parts of Scotland are currently horrific with heavy snow still falling in many places and affecting the road condition’ (netweather, 2010). • By aware of this news, Hermes can use this information to updates the customer and let the customer know the latest information and the reason why their delivery times are delayed. Positive (+) • Create customer satisfaction where the customer is always being updated with current news. • Create better understanding with the customer • Leads for customer loyalty

23. Politic • According to the finance report of BBC News Since the rich will be taxed a higher rate of interest from April 2010; a new higher tax rate of 50% will be applied to incomes over £150,000 a year, as previously announced this will raise about £2.4bn by 2011-12. Budget 2009 As the rate on income tax increase, Hermes will not be able to generate high amounts of profit. The high amount of tax to be paid is present. It is clear that this factor is a bad influence for Hermes. The usage of the herms services might decrease by the consumers.Hermes can target the middle level employees or companies as they will not require the high rates of interest and will have the capacity to use the services of Hermes in order to complete their fulfillment and needs of use of the services.

24. Politic • Public Borrowing An announcement of the chancellor shows that the Public borrowing would reach £ 175 billion this year, which is clearly higher than the forecasted £ 118 billion. Borrowing will represent the growth of 75% by 2013-2014. (Politics.co.uk, 2009).It will not be beneficial for such company as Hermes, as public borrowing is an impact which, for Hermes since the company will not profit by borrowing therefore this will reduce the economy increasingly further.