Yamato co ltd international business strategy

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INTERNATIONAL BUSINESS STRATEGY A MINORITY SHARE HOLDINGS PROPOSAL YAMATO Holdings Co.,Ltd Copyright Andrew John Heffernan (12KN004D) 2014 Andrew John Heffernan (12kn004d) Master of International Business Dissertation St. Paul’s University, Tokyo 2014 Supervisor: Pr. Scott Davis

description

Yamato Co.Ltd has been an innovator and market leader in the express small package delivery industry of Japan for 30 years. Its strong domestic position opens up the possibility of international expansion to achieve sustained growth. The business opportunity to develop an intranet of logistics in cities across Asia, Oceania and Africa is open but is time sensitive and relative to the following points: 1. Infrastructure (roads, traffic congestion, internet penetration, potential service and logistics partners, urbanization and density of population) 2. Overhead (human resource, fuel, electricity and other transport costs) 3. Political (stability, rule of law (safety of delivery), open to foreign investment) 4. Wealth (consumption rate, consumer price index) 5. Cultural (demand for convenience and reliability over cost, adoption of online retailing, attractiveness of point of deliver pay) In this dissertation I argue that Yamato should focus on its core competency of

Transcript of Yamato co ltd international business strategy

Page 1: Yamato co ltd international business strategy

INTERNATIONAL)BUSINESS)STRATEGY�A)MINORITY)SHARE)HOLDINGS)PROPOSAL)��YAMATO)Holdings)Co.,Ltd))Copyright)Andrew)John)Heffernan)(12KN004D))2014))�

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Table&of&Contents&

Executive)Summary) 3!Business!Opportunity! 3!Marketing!Highlights! 3!Operational!Highlights! 4!Financial!Highlights! 4!

FINANCIAL)PLAN) 6!Aramex!Balance!Sheet! 6!Income!Statement!Analysis!(Comparative)! 8!Cash!Flow!Statement! 9!Free!Cash!Flow!Scenario’s! 11!

FINANCING)THE)DEAL) 14!Financial!Intermediaries! 14!

Company)Profile) 18!Business!Operations,!TaKQKBin!Solutions! 18!Business!Description! 19!Proposed!Location! 19!

Industry)Overview) 20!Competitive!Advantages! 20!Industry!Trends! 20!Express!Industry!Key!Success! 22!Barriers!To!Entering!New!Market’s! 22!

Target)MArket)SYNERGIES) 23!Competitive)Analysis) 26!

Why!Seek!Growth!Externally! 30!Key)Marketing)Strategies) 32!Operational)Plan) 35!

Operations!Regulations! 36!Research!And!Development! 37!Human!Resources! 38!

Works)Cited) 39!

&

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ARAMEX&MINORITY&SHARE&BUSINESS&PROPOSAL�

EXECUTIVE(SUMMARY�

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EXECUTIVE SUMMARY

BUSINESS OPPORTUNITY Yamato Co.Ltd has been an innovator and market leader in the express small package delivery industry of Japan for 30 years. Its strong domestic position opens up the possibility of international expansion to achieve sustained growth.

The business opportunity to develop an intranet of logistics in cities across Asia, Oceania and Africa is open but is time sensitive and relative to the following points:

1. Infrastructure (roads, traffic congestion, internet penetration, potential service and logistics partners, urbanization and density of population)

2. Overhead (human resource, fuel, electricity and other transport costs) 3. Political (stability, rule of law (safety of delivery), open to foreign investment) 4. Wealth (consumption rate, consumer price index) 5. Cultural (demand for convenience and reliability over cost, adoption of online

retailing, attractiveness of point of deliver pay) In this dissertation I argue that Yamato should focus on its core competency of small packages when formulating international expansion strategies and not its legacy services such as specialist freight forwarding and packing for Japanese manufacturing firms.

MARKETING HIGHLIGHTS

Yamato’s Service Distinctive Features “Ta-Q-Bin” offers advanced and innovative services for a slight premium over traditional express package delivery. Yamato’s reliable Cool, Frozen, and Time delivery services are provided 365 days a year and are expected to suit the target market:

Target Market Summary The target market discussed in this dissertation is the Gulf Cooperation Council, particularly the UAE. Members of GCC: UAE, Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia. This market is targeted due its geographical location in East Asia and the fact it meets the criteria deemed necessary (ibid) for Yamato’s products to be profitable: 1. Rapid adoption of e-commerce (growth rate 50% higher than OECD average at 35%

p/a) (VISA International, 2013) 2. Harsh climates (suited to “Cool” and “Frozen” Ta-Q-Bin services) 3. Demographics (50% under 30 years old in GCC, 75% migrants in UAE) 4. High disposable income (the highest per capita income in the world, consumption

per capita is 53% higher than Japan’s) 5. Cultural factors which restrict the ability of women to shop without a male chaperon.

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Competitive Analysis Companies such as Agility, KGL and Aramex dominate logistics industry in the Middle East. However Aramex is the market leader in express package segments with its only major competitor postal services throughout the region. This dissertation argues Yamato Holdings should target Aramex for minority share holding and eventually full acquisition.

OPERATIONAL HIGHLIGHTS

Regulatory Issues Local investment laws limit holdings by foreign entities in business ventures to 49%. To acquire a share in Aramex greater than 49%, Yamato would first need to establish a 100% UAE owned subsidiary.

Management Issues The two companies have differing managerial systems and corporate structures. Namely Yamato has a 20 man BOD (90% internal) while Aramex has a 9 man BOD (90% external). In terms of managerial systems, Aramex uses both expatriates and locals in its management structure where has Yamato relies primarily on locals to run its subsidiary businesses. Both companies are actively seeking expansion and growth through merger and acquisitions.

FINANCIAL HIGHLIGHTS

Financial Forecast Assumptions ! 10 year cash flow growth 12% ! Purchase shares at estimated NVP value (1.02 Per Share) ! Depending on free cash flow scenarios a per share price premium between

18%~36% above the market value is considered acceptably ! A 49% minority share holding recommended to give Yamato maximum influence

on the board of directors Notes: ! A share holding of 11% would make Yamato Aramex’s largest shareholder ! Aramex (at current growth rates) is currently undervalued by the market ! $729 Million USD will be raised by a combination of share swap, bank facility, cash

and a bond issue.

NVP EVALUATION Million USD

CAPITIAL REQ (49%)

CAPITIAL REQ (39%)

CAPITIAL REQ (29%)

CAPITIAL REQ (19%)

Share Price

$1,488 ���� ��� ���� ��� $1.02

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FINANCIAL'SECTION�DEAL%ANALYSIS�

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FINANCIAL PLAN

ARAMEX BALANCE SHEET

Figure 1 Aramex Balance Sheet

���� �������������� * In Millions of AED (except for per share items)

2012 2011 2010 200931/12 31/12 31/12 31/12

$1,052.5 $982.7 $1,056.5 $937.9Cash and Short Term Investments $333.7 $314.0 $554.7 $501.9Cash - - - -Cash & Equivalents $333.7 $314.0 $554.7 $501.9Short Term Investments - - - -Total Receivables, Net $583.5 $499.7 $404.0 $349.1Accounts Receivables - Trade, Net $583.5 $499.7 $404.0 $349.1Total Inventory - - - -Prepaid Expenses $43.5 $42.0 $33.0 $24.5Other Current Assets, Total $91.9 $127.1 $64.7 $62.5

$2,715.2 $2,492.8 $2,286.5 $2,058.2Property/Plant/Equipment, Total - Net $569.9 $445.4 $332.1 $246.9Property/Plant/Equipment, Total - Gross $835.4 $674.5 $501.2 $426.5Accumulated Depreciation, Total ($265.6) ($229.1) ($169.1) ($179.6)Goodwill, Net $999.2 $1,010.1 $863.2 $853.4Intangibles, Net $26.9 $30.4 $8.9 $5.7Long Term Investments $54.7 $21.6 $23.2 $12.7Note Receivable - Long Term - - - -Other Long Term Assets, Total $12.0 $2.6 $2.6 $1.5Other Assets, Total - - - -

$563.7 $505.1 $406.1 $367.3Accounts Payable $156.2 $163.2 $129.2 $118.4Payable/Accrued - - - -Accrued Expenses $313.7 $250.6 $208.8 $186.8Notes Payable/Short Term Debt $19.3 $26.3 $12.9 $9.0Current Port. of LT Debt/Capital Leases $7.7 $5.2 $0.7 $7.5Other Current liabilities, Total $66.8 $59.9 $54.6 $45.6

$701.5 $627.7 $505.5 $462.6Total Long Term Debt $12.4 $9.6 $6.5 $6.5Long Term Debt $4.9 $4.3 $0.5 $6.5Capital Lease Obligations $7.4 $5.4 $6.0 -Total Debt $39.4 $41.1 $20.1 $22.9Deferred Income Tax $1.3 $1.1 $1.3 $1.0Minority Interest $32.4 $31.0 $24.6 $28.1Other Liabilities, Total $91.7 $80.9 $67.0 $59.6

$2,013.6 $1,865.1 $1,781.0 $1,595.7Redeemable Preferred Stock, Total - - - -Preferred Stock - Non Redeemable, Net - - - -Common Stock, Total $1,464.1 $1,464.1 $1,464.1 $1,331.0Additional Paid-In Capital - - - -Retained Earnings (Accumulated Deficit) $584.2 $418.7 $323.2 $267.2Treasury Stock - Common - - - -ESOP Debt Guarantee - - - -Unrealized Gain (Loss) - - - -Other Equity, Total ($34.6) ($17.7) ($6.3) ($2.6)

$2,715.2 $2,492.8 $2,286.5 $2,058.2$1,464.1 $1,464.1 $1,464.1 $1,464.1

- - - -Total Common Shares OutstandingTotal Preferred Shares Outstanding

Total Current Assets

Total Assets

Total Current Liabilities

Total Liabilities

Total Equity

Total Liabilities & Shareholders' Equity

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Chart 1 Aramex Balance Sheet Ratio's " Aramex has a healthy balance sheet. " The balance sheet shows Aramex to be a company run primary on equity " Aramex’s balance sheet shows the company can afford to take on debt putting it in a

strong position to continue growth through mergers and acquisitions " A current ratio of 2.1 shows that Aramex is in a position of financial strength " Retained earnings growth (5 year average) shows the company is building

significant cash pile, which could also be used to pursue growth.

Chart 2 Comparative Debt Ratios Aramex is under no financial stress and is more than able to take on debt. Debt equity ratio is extremely strong meaning shareholders have a vested interest in growing the business. Yamato’s ability to access cheap capital for investment would assumedly be highly attractive to Aramex’s shareholders.

7%!

9%!11%!

0%!2%!4%!6%!8%!10%!12%!14%!

LT!Debt!Equity! Debt!to!Equity!! Retained!Earnings!Growth!

Balance'Sheet'Ratio's'

0.0%$5.0%$10.0%$15.0%$20.0%$25.0%$30.0%$35.0%$40.0%$45.0%$50.0%$

2009$ 2010$ 2011$ 2012$ 2013$

debt%ra(o%

ARAMEX$ YAMATO$

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ARAMEX 31-Dec 31-Dec 31-Dec YAMATOMillions of US Dollars USD USD USD USD Millions of US Dollars USD USD USD USD

2009 % 2010 % 2011 % 2012 % 2009 % 2010 % 2011 % 2012 %

TOTAL REVENUES 533.8 100% 602.2 100% 699.9 100% 845.5 100% TOTAL REVENUES 11,744.20 100% 12,093.20 100% 12,330.90 100% 12,541.60 100%Cost Of Goods Sold 232.2 43% 278.2 46% 331.9 47% 392.3 46% Cost Of Goods Sold 10,865.30 93% 11,178.60 92% 11,381.70 92% 11,558.30 92%GROSS PROFIT 301.7 57% 324 54% 368 53% 453.1 54% GROSS PROFIT 878.9 7% 914.6 8% 949.2 8% 983.3 8%Selling General & Admin 216.6 41% 150.8 25% 171 24% 217.4 26% Selling General & Admin 245.6 2% 240.7 2% 254.7 2% 286.9 2%EBITA 85.1 16% 173.2 29% 197 28% 235.7 28% EBITA 633.3 5% 673.9 6% 694.5 6% 696.4 6%Depreciation, Amortization & Other 28.8 5% 110.8 18% 127.5 18% 153.9 18% Depreciation, Amortization & Other 46.3 0.4% 44.2 0.4% 44.7 0.4% 50.7 0.4%OPERATING INCOME 56.4 11% 62.4 10% 69.5 10% 81.8 10% OPERATING INCOME 587 5% 629.8 5% 649.8 5% 645.6 5%Interest Expense -0.5 -0.3 -0.5 -0.8 Interest Expense -6.9 -8.6 -7.2 -6Interest and Investment Income 3.9 4.4 2 1.2 Interesta and Investment Income 5.4 5.5 5.9 6.5NET INTEREST EXPENSE 3.4 4.1 1.5 0.4 NET INTEREST EXPENSE -1.6 -3.2 -1.3 0.5Other Non-Operating Income (Expenses) -0.3 -0.7 -0.1 -1.3 Other Non-Operating Income (Expenses) 36.3 23.6 15.5 18.8EBT 59.5 11% 66.7 11% 70.9 10% 80.9 10% EBT 621.7 5% 650.3 5% 664.1 5% 665 5%Merger & Restructuring Charges -- -0.1 -0.2 -- Merger & Restructuring Charges 1.3 -- -- --Gain (Loss) On Sale Of Investments -- -- -- 0.4 Gain (Loss) On Sale Of Investments -5.9 -0.4 -19.4 -15.5Gain (Loss) On Sale Of Assets -0.1 -0.1 0 -0.1 Gain (Loss) On Sale Of Assets -2.3 -2.6 1.2 0.5Other Unusual Items, Total -- -- -- -- Other Unusual Items, Total -24.2 -83.7 -391.6 -22.6EBT, INCLUDING UNUSUAL ITEMS 59.4 11% 66.6 11% 70.6 10% 81.2 10% EBT, INCLUDING UNUSUAL ITEMS 591 5% 604.7 5% 448.1 4% 628.7 5%Income Tax Expense 3.1 4.1 4.8 7.3 Income Tax Expense 274.8 278.6 254.9 289.1Minority Interest In Earnings -6.1 -6.9 -8.3 -7.5 Minority Interest In Earnings -0.5 -1.3 0.3 4.1NET INCOME 50.2 9% 55.6 9% 57.6 8% 66.5 8% NET INCOME 315.7 3% 324.8 3% 193.5 2% 343.7 3%

(see Figure 2) Common-sizing the income statements of both companies shows that despite Yamato generating profits more than 5 times that of Aramex, overall Aramex is in a stronger financial position due to its higher margins, profit growth and low debt ratio.

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CASH FLOW STATEMENT

Figure 3 Aramex Historical Cash Flow Statements (see Figure 3) We see that Aramex has historically had a positive cash flow and is generating strong profits from sales. The cash flow scenarios found below are very conservative and with only marginal improvements on cash flow assumed after a minority share holdings. If the cash flow growth rate increases significantly after a minority shareholding or merger Yamato stands to benefit handsomely from this proposal.

CASH FLOW STATEMENT 31-Dec 31-Dec 31-Dec 31-DecAED Millions 2009 2010 2011 2012NET INCOME 184.3 204.1 211.5 244.1Depreciation & Amortization 44.8 47.7 53.1 69.5Amortization Of Goodwill And Intangible Assets 0.9 1 2.2 3.2DEPRECIATION & AMORTIZATION, TOTAL 45.7 48.7 55.3 72.8(Gain) Loss From Sale Of Asset 0.3 0.5 0 0.5(Gain) Loss On Sale Of Investment -- -- -- -1.8Other Operating Activities 16.8 23 40.8 39.9(Income) Loss On Equity Investments -0.1 0.3 0.8 4Provision & Write-Off Of Bad Debts 8.8 8 7.5 14.6Net Cash From Discontinued Operations -- -- 0.4 -0.9Change In Accounts Receivable -5.5 -60.9 -39 -98.8Change In Accounts Payable 1.6 9.9 12 -6.6Change In Other Working Capital 12.7 12.9 -27.3 102.5CASH FROM OPERATIONS 264.5 246.4 261.9 370.1Capital Expenditure -47.7 -136.9 -160.2 -169.3Sale Of Property, Plant, And Equipment 2.9 1.8 2.4 4.6Cash Acquisitions -26 -11.9 -217.1 --Sale (Purchase) Of Real Estate Properties -4.6 -- -- -31.2Sale (Purchase) Of Intangible Assets -0.2 0 -2.7 --Investments In Marketable & Equity Securities -7.6 -12.5 -1.5 -34.7CASH FROM INVESTING -65.7 -146.7 -374.1 -234.4Long-Term Debt Issued -- -- 8.4 6.5TOTAL DEBT ISSUED -- -- 8.4 6.5Long Term Debt Repaid -13.5 -0.9 -- --TOTAL DEBT REPAID -13.5 -0.9 -- --Common Dividends Paid -- -- -109.8 -73.2TOTAL DIVIDEND PAID -- -- -109.8 -73.2Other Financing Activities -26.5 -46.5 -31.6 -32.3CASH FROM FINANCING -40 -47.4 -133 -99Foreign Exchange Rate Adjustments 3.6 -0.8 -10.4 -8.2NET CHANGE IN CASH 162.4 51.5 -255.7 28

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Chart 3 Divisional Gross Profits

We can see that Aramex receives excellent profits from international express something Yamato is targeting specifically (Yamato, 2012). These profits are also growing rapidly. Chart 4 Regional Revenue Aramex’s key market is the Middle East and Africa. However it does receive almost 30% of its revenue from external markets. This is comparable to UPL (UPL , 2012) and is something Yamato is targeting specifically in its growth strategy. ! In short Aramex has both a superior geographical and divisional spread of revenue

72%$

17%$

2%$ 9%$

Revenue&

Middle$East$&$Africa$ Europe$ North$America$ Asia$

39%$

18%$

26%$

7%$

10%$

Gross%Profit%By%Division%

Interna1onal$Express$ Frieght$Forwarding$ Domesi1c$Express$

Logis1cs$ Other$

Table 1 Year on end profit growth by segment

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Even a pessimistic growth rate scenario of 9% per annum, almost 2% below the historical average shows Aramex to be undervalued by the market by 5%. This scenario does not include any allowance for improvements in efficiency as a result of a joint venture. Additionally it does not take into account any likely cash flow improvements arising from additional services, business synergies and ongoing investment activities in subsidiaries which are likely to add to cash flow growth.

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(BY DIVISON) 2012 Ratio's 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023AED'000 31/12 31/12 31/13 31/14 31/15 31/16 31/17 31/18 31/19 31/20 31/21 31/22International Express $989,933 ��

Freight Forwarding $1,176,041 ��

Domestic Express $598,275 ���

Logitics $138,284 ��

Distribution $25,630 ��

Others $177,223 ��

TOTAL REVENUE $3,105,386 �� � �� �� � �� �� � ������ �� �������� ��������� ��� ���� � ��������� ���������� ��������� ���������� ��������

Depreciation/Amort $69,540 �� ������� �� �� ������� ��� �� ������ ����� � �� ���� �������� ������� ��� ���� �������

Cost Revnue $1,441,010 ������� �� ���� ���� �������� � ��������� ���������� ��������� ���� ����� � ���� � �������� � �� ���� � �������

International Express $338,335 �� � ����� ������ �������� ������� �� ���� �������� �������� ������� ������� ������� ����� ��

Freight Forwarding $868,106 ��� �������� �������� ��������� ��������� ��� ������ ��������� ��������� ��������� ��������� ��������� ��� ������

Domestic Express $170,864 ��� �������� ������� �������� ������� ������� �������� � ������ � ������ � ����� ����� � ����� ��

Logitics $24,651 ��� ������ ������� � ����� � ����� � ����� ������� ������� ���� �� ������� ������� �������

Distribution $18,875 ��� ������ ������ ������ ����� � ������ � ����� � ����� � ����� �� ��� ������ ����� �

Others $20,179 ��� ������� ����� � ������� ������� � ����� � ����� � �� ����� ������ ������ ���� ��

GROSS PROFIT $1,664,376 ��� ��������� ��������� ��������� ��� ����� �������� � ��������� � ����� � � � ����� � �� ���� � ������� ��� ������

Operating Expense $2,808,500 ��������� ���������� ��������� �������� � ������� ��������� ���������� ������ �� ���������� � �������� � ������ �

OPERATING INCOME $296,886 �� � ��� �� � ������ � ���� ����� � ������� ������� ��� ��� �������� �������� �������� ��� ����

Net Non, Operating $145 � ���� ���� ���� ��� ���� ���� ������ ������ ����� ������ ������

EBIT $296,741 �� � ����� � ������ � ���� �������� �������� ��� ��� ������� ������ ������� ������ �������

Provision for ITaxes $26,680 � ��� � � ����� � ���� ����� � ������� ������� ���� �� ������� ������� ������ ���� ��

Minority Interest $26,171 ���� �� ������ �� ����� �� ��� �� ��������� ������� ��������� ��������� ��������� ��������� ����� �� ���������

NET INCOME/FCF $243,890 ��� ������� �������� � ������ � ������ � ������ ����� �������� ��� �� � ������� ����� �� ��������

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#��� ��� �)$.'��-+&*,( ��� �� ��� ��� NPV2 $4,699,3260$4�.$0'� �� ������ � ������� � ����� ��� ��� USD '000 $1,279,462

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(BY DIVISON) 2012 Ratio's 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023AED'000 31/12 31/12 31/13 31/14 31/15 31/16 31/17 31/18 31/19 31/20 31/21 31/22International Express $989,933 ��

Freight Forwarding $1,176,041 ��

Domestic Express $598,275 ���

Logitics $138,284 ��

Distribution $25,630 ��

Others $177,223 ��

TOTAL REVENUE $3,105,386 �� � ����� � � ����� �� ��� ������ ������� �� ���������� ���������� ��������� ���������� ��������� ���������� ��������

Depreciation/Amort $69,540 �� ������� ����� � ������� ������ ������� �� ���� ��� �� � �������� ������� �������� ��������

Cost Revnue $1,441,010 ����� �� � ������� ��������� ���������� ���� ����� ���������� � �������� � �������� � ����� � ���������� ���������

International Express $338,335 �� � ���� � ������� ����� � �� �� �� �������� ������� �������� �� ���� �� ��� �������� ����������

Freight Forwarding $868,106 ��� �������� ��������� ���������� ��� ������ ���������� ����� ���� ��������� ������� �� ������ �� ��������� � ������

Domestic Express $170,864 ��� ����� �� ����� � ������ �������� � ����� � ����� � ������ ��� �� ��� ���� �� ���� ����� ��

Logitics $24,651 ��� ������ � ���� � ��� � ����� �� ��� ������� ������� ���� � ���� �� ������� ������

Distribution $18,875 ��� ������ �� ���� ������� ����� � ���� � ����� ������� ����� � ���� �� ������ �������

Others $20,179 ��� ����� ���� � ���� � � ����� � ����� � ��� ������ ������� ������� ������ ������

GROSS PROFIT $1,664,376 ��� ���������� ������� ������� �������� ��������� � ������� � �������� � �������� ��������� ����� � �� ����������

Operating Expense $2,808,500 ����� ��� ���������� ����� ���� ������ �� �������� � ��������� ������� �� � ��� ���� � ����� �� ��� ��� � ����������

OPERATING INCOME $296,886 �� � ����� � ������ ������ �������� ��� ���� ����� ����� � �� ���� ��� ���� ������ ��� ���

Net Non, Operating $145 � ��� ���� ��� ���� ����� ������ ��� �� ���� ������ ����� �����

EBIT $296,741 �� � ����� � ���� � ������ � �������� �������� �������� �������� �� ���� �������� ������ ��� ����

Provision for ITaxes $26,680 � ���� � ����� ������ ������� ���� �� ����� ����� � �� ��� ���� �� ������ �� ���

Minority Interest $26,171 ���� �� ����� �� ������ �������� ��������� ����� � � ��������� �������� ��� ����� ��������� ����� ��� ��� � ���

NET INCOME/FCF $243,890 ��� �������� �������� � ����� � ������ �������� ������� ��� ��� ������� �������� �� ��� � ��� ����

"��� ���������

DCF ��" ����������

"$.*$%+'/� �*/0/ ��"������ ����������

�'2',1'��.-30)� ��� �� �� �� �"��!���� ����������

#��� ��� �)$.'��-+&*,( ��� �� ��� ��� NPV2 $5,468,8170$4�.$0'� �� �������� ������� �� ���� ������� USD '000 $1,488,968

In the most likely scenario I forecast a slight improvement on historical growth levels (0.02%) the reason for such a low improvement ratio is that Aramex’s historical rate is marketing leading and will be difficult to maintain in new markets such as Africa, India, South East Asia and China. While it is reasonable to expect revenue to grow at a much faster rate, it is arguably unreasonable to see bottom line growth grow in tandem. Despite a forecast increase in competition Aramex can expect continued strong growth in its key market segments (The middle east and express packaging). Furthermore full acquisition by Yamato would decrease the cost of capital and allow the combined business to move forward with less interest burden.

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(BY DIVISON) 2012 Ratio's 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023AED'000 31/12 31/12 31/13 31/14 31/15 31/16 31/17 31/18 31/19 31/20 31/21 31/22International Express $989,933 ��

Freight Forwarding $1,176,041 ��

Domestic Express $598,275 ���

Logitics $138,284 ��

Distribution $25,630 ��

Others $177,223 ��

TOTAL REVENUE $3,105,386 �� � ������ ��� ���� �������� ��������� ���������� �������� � �������� ������� �� ��������� �������� � �� ������

Depreciation/Amort $69,540 �� ������� ��� �� �� ��� ������� �� ��� ������ � ������ ����� �� �������� ������ ��� ����

Cost Revnue $1,441,010 ���������� �������� � ���� ���� ���� ��� ���������� � �������� � ������� �������� �������� ��� ����� ������

International Express $338,335 �� � ����� �� ��� ������� ������ � ������ � ������ � ������� ������ �������� ��������� ����������

Freight Forwarding $868,106 ��� �������� ���������� �������� � ���������� ���������� ��������� �������� � ������� �� ����� � � � �������� � ��������

Domestic Express $170,864 ��� �������� ������� ��� ��� �������� � ������ � ����� �������� ������� �������� �� �� � ��������

Logitics $24,651 ��� ������ � �� � � ����� ����� � ������ ������ ������ ��� �� ������ ���� �� �������

Distribution $18,875 ��� ������� ����� ������� � ����� � �� �� ����� ����� �� ��� ���� �� ������� ������

Others $20,179 ��� �� �� ������� ������� � ���� � ���� ������� ����� ������� ������� ������ �������

GROSS PROFIT $1,664,376 ��� ��������� ��������� ��� ����� ����� ���� � ����� � ������ � ������ ��������� ������� �� ��������� ���������

Operating Expense $2,808,500 ��������� ���������� ��������� ���������� ��������� ���������� � ������� � ������� ��������� ���������� �������� �

OPERATING INCOME $296,886 �� � ���� � ���� �� ���� ������� �������� �������� �������� ������� �������� �������� ���������

Net Non, Operating $145 � ��� ��� ���� ����� ������ ��� �� ������ ������ ���� ������ ������

EBIT $296,741 �� � ����� � ����� �� ��� ��� � ����� � ������� ����� � �������� ��� ���� ������ �� ��������

Provision for ITaxes $26,680 � ���� � ���� �� ���� ����� ������ ������� ������� ������� ������� ������ ��������

Minority Interest $26,171 ���� �� ����� �� ������ ����� �� ������� ������ � ������� � ����� ��� ��������� �������� ��������� ����������

NET INCOME/FCF $243,890 ��� ������ � ����� � ����� ��� � ������ ������� �������� �������� ����� � ������ �����

"��� ���������

DCF ��" ���������

"$.*$%+'/� �*/0/ ��"������ ���������

�'2',1'��.-30)� ��� �� �� �� �"��!���� ������� �

#��� ��� �)$.'��-+&*,( ��� �� ��� ��� NPV2 $6,210,2570$4�.$0'� �� ������� �������� ���� �� � ������ USD '000 $1,690,836

The optimistic scenario assumes a growth rate of 14%. Slightly more than 2% above the historical average. This rate assumes there are immediate and sustained benefits arising from the merger in terms of efficiency and sales growth. This scenario does not take into account benefits of lower cost of capital, the acquisition Of smaller companies by a Yamato-Aramex joint venture. If this case proves to be accurate it means Aramex is significantly undervalued by the market (39%) making a minority shareholding at a lower price extremely enticing. Even in cases of a leverage buyout share premiums rarely bridge the 50% mark. Considering the significant synergies between the two companies a merger should be considered at length by Yamato’s board.

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FINANCING THE DEAL

FINANCIAL INTERMEDIARIES ! 729 Million USD to be raised (1.02 per share) ! Yamato has 2.26 Billion USD in Cash Equivalents 1. 70 Million USD Share Swap (@18USD per share) 2. 659 Million Cash (bond rates not expected to be effected)

A) AA- JC Rating B) BBB+ Standard & Poor B C) 259 Million 0.2%-6.9% 2015-2019 Existing Loan Facility D) 100 Million Preferred coupon Bonds due 2020 @2.58% (Average Investment

Grade Bond yield in 2012) E) 300 Million in Cash

Notes: 2.2 Billion is a large sum of cash even for a company with 13.6 Billion in Revenues.

1. Most likely scenario 729 million USD needed 2. Even without accounting for goodwill, post Aramex investment, Yamato’s

Debt/Ratio will still be within 50% meaning there is very little risk of financial stress

3. Investment grade 5 year bonds rates are currently 2.58% JGB 5 year bond is 0.19% ~ In other words Yamato’s capital forecast to be is cheap.

Chart 5 Yamato Debt Ratio After Aramex Acquisition

2009$ 2010$ 2011$ 2012$ 2013$ 2014$Yamato$ 44.08%$ 40.42%$ 41.68%$ 43.02%$ 42.86%$ 48.74%$

35.00%$

37.00%$

39.00%$

41.00%$

43.00%$

45.00%$

47.00%$

49.00%$

51.00%$

Debt%Ra(

o%

Yamato%

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Chart 6 Acquisition Price Range (Per Share) We can see expected cost of proposed minority share holdings depending on the free cash flow scenario. Chart 7 Acquisition Price Range, Depending on % of Aramex Purchased (Million's USD, Most Likely Scenario Growth Rate of 12%) Market Cap = 49% of current total. The cost of the acquisition will depend on the share price, however if the price is considered a barrier by Yamato’s management, a lesser share holding may be preferable. The above graph shows the amount of capital required dependent on the shareholding.

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Figure 4 Sensitivity Analyses Depending on Terminal and Free Cash Flow Rates The Above figure illustrates potential share price after 10 years depending on the cash flow growth rate and terminal value. According to my forecast the share price will be $10.37 in 2023.

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$11.78&&

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COMPANY(PROFILE�A(Minority(Share(Proposal(�

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COMPANY PROFILE

BUSINESS OPERATIONS, TA-Q-BIN SOLUTIONS Logistics industry trends suggest that services are becoming increasingly automated and connected. Yamato Holdings provides logistic solutions, which can help businesses and even individuals compete and thrive in the 21st century. These solutions, once only available to the biggest and most powerful corporations will soon be at the disposal of small to medium sized enterprises (SME’s) around the world.

For example a small fishing operation outside of Abu Dhabi may not be able to sell their goods to a significant customer base due distance, inability to process credit cards or lack of delivery facility (fish needs to be kept refrigerated). At the same time, customers may have to work late, be hesitant to disclose their credit card number to merchants online or simply be unable to get to a point of sale.

Ta-Q-Bin solves the above problems, with its 365-day, cash on delivery (COD) and e-payment delivery services even online customers can experience a “point of sale” transaction at their own doorsteps.

Ta-Q-Bin logistic services solve problems all along the traditional value chain and are applicable to even middle to large sized companies especially those who deal in component manufacturing or require low inventories. Yamato targets any firm that can leverage its storage, automated stocktaking and packing services. All these companies need to do is have complaint software and QR or JAN codes on their products. It’s that simply.

Ta-Q-Bin even has the ability to create entirely new markets, where individuals can send and receive packages from others without having to leave their neighborhoods (through drop off service points1) or homes (door to door).

B2B (storage, automated stocktaking and packing)

B2C (automated shipping for online orders, COD)

C2C (drop off and pick up service centers, door to door)

1 Service points are rather unique to the Japanese express packaging industry. They are often local CVS

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BUSINESS DESCRIPTION Yamato separates itself from other international2 express delivery companies by offering the following services (ibid): 1. Service points (where customers can send and pick up packages, often 24/7)3 2. Cool, Frozen and recreational package delivery (golf, ski, travel bags etc.) 3. 365 days a year delivery 4. Free time nominations for all customers, free re-delivery for missed packages

Before entering new markets, Yamato needs to match established firms existing services and also be able to deliver its core additional services (above). Without these additional services it becomes impossible for Yamato to differentiate itself from other express delivery companies.

In addition to the above demand density (number of express packages) is unlikely to be sufficient in markets that are overly price sensitive or whose population density is low. Therefore Yamato must seek out densely populated, well-developed and wealthy regions when formulating new market entry strategies.

PROPOSED LOCATION Although the size of the target market (UAE) is significantly smaller than Yamato’s domestic one, the low costs of doing business (corporate tax, fuel and labor costs) mean that it provides an opportunity for significantly higher operational margins.

Its geographic position also opens up key East Asian and Middle Eastern markets like India, Saudi Arabia and Iran, in addition to developing South East Asia and Africa.

Aramex, a UAE based express packaging and freight forwarding company is the acquisition target discussed in this dissertation and is currently less than 10% the size of Yamato (by revenue). Overall Aramex is significantly more financially efficient than Yamato. The value Yamato can provide to the market is its advanced logistics intranet, which will increase operational efficiency of Aramex and held provide added value services for Aramex’s customers.

2 Domestic Rivals mirror Yamato’s service portfolio, but this dissertation is aimed at the international market where these services are not yet readily available. 3 Yamato has over 260,000 agents in Japan. This may be difficult to replicate in some international markets

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INDUSTRY OVERVIEW

COMPETITIVE ADVANTAGES Yamato operates in a competitive environment domestically which is also defined by high costs of business. While Aramex and its regional competitors benefit from a generally business friendly business environment which features low logistics industry wages, low transport costs (tolls, fuel etc) (Bloomberg, 2012), relatively low construction costs and an advanced logistics infrastructure. The fiercely competitive business environment in Japan means that Yamato should have a competitive advantage in logistic management and delivery systems technology and operations over Aramex. Yamato’s business efficiency combined with the low costs of doing business in the UAE should provide the platform for Yamato to be extremely competitive in the target market. Although Aramex is a highly capable and financially efficient business, like many other global express package company’s it does not offer the services that Yamato has adopted domestically. These services not only increase demand in existing segments such as B2C they create new segments such as C2C which is 30% of Yamato’s revenue share in its domestic market (Yamato, 2012). Roughly ten times smaller than Yamato, it is questionable whether Aramex will have the size to ward off foreign giants such as DHL and UPL indefinitely. Ta-Q-Bin is an order density based product. If Yamato can become online-retailers preferred logistics partner in regions where ecommerce growth is strong and markets are mature enough to find Yamato’s services valuable, opportunity abounds. Yamato’s additional service portfolio should help it capture significant market share where cost sensitivity is not a significant factor in consumer decision making or whereby Yamato can offers its additional service at no extra cost to the end user.

INDUSTRY TRENDS

Social & Demographic 1. Rapid adoption of online retailing is fueling global express package growth 2. Aging population and universal internet access helps increase per capita delivery ratio 3. Increasing inability to shop during traditional retail hours 4. Increasing urbanization (which improves order density ratios and profitability)

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Economic Changes 1. Increases in natural disasters have caused companies across the globe to reorganize

their supply chains to spread exposure to extraordinary items 2. The emergence of component manufacturing 3. Rapid increase in content value of small packages 4. Just in time business models increase demand of express delivery and inventory

management 5. Lower inventory levels increase frequency of deliveries 6. Large retailers internalizing logistics

Technological 1. GPS systems improve delivery efficiency 2. Live tracking improves missed delivery ratio 3. Mobile coms allow drivers to communicate with HQ and customers at all times in

additional to enabling mobile monetary transactions. 4. Low emissions vehicles 5. Automated supply line technology (POS systems, stocktaking, order packing) 6. Big Data allows for more effective and accurate business analysis meaning lower

inventories can be kept

Environmental 1. Logistics has an enormous impact on Co2 emissions. Reducing carbon footprint is not

only good CSR it is also essential for improving operational margins and competitiveness

2. Package waste management

Political & Regulatory 1. Increasingly prevalence of legal limitations to hours driven per person per day, lower

speed limits 2. Privacy regulations regarding the handling of mail/packages 3. Carbon taxes and other emission related laws 4. Antitrust bodies actively blocking transport industry mergers and acquisitions

Future Trends 1. Entry of ecommerce giants such as Amazon into delivery (ibid) 2. Automation of delivery through smart trucks (The Economist, 2103), drones (Wall

Street Journal , 2013) 3. Industry consolidation 4. Increase in international express packages as percentage of sales 5. COD as preferred payment in developing markets 6. Decreasing cost of transportation and inventory management

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7. 3D printing technology presents the possibility for logistic centers to double as manufacturing centers4

EXPRESS INDUSTRY KEY SUCCESS 1. Power Purchasing Parity =ecommerce contracts: developing preferential or exclusive

delivery rights with major ecommerce firms is essential in establishing a strong top line.

2. Strong B2B sales segment 3. Service and Price leadership are equally important 4. Advanced service infrastructure (hub and spoke distribution centers, service points) 5. Geographic location and scope 6. C2C market is undeveloped outside of Japan (Yamato’s core competency) 7. Ability to raise funds necessary to meet the above factors (logistics is a capital

intensive industry)

BARRIERS TO ENTERING NEW MARKET’S

1. Lack of express agencies network (typically needs to be built from scratch) 2. Capital requirement of logistics means entry must be through joint venture or

acquisition 3. Competitive environment, price wars etc. 4. Infrastructure (roads, traffic conditions, internet speed, mobile utilization) 5. Regulations in terms of package handling, legal hours of operation, antitrust etc. 6. Foreign ownership laws 7. The needed for establishing service network through external business partnerships

4 Imagine ordering a custom vase, which is manufactured and delivered same day.

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TARGET MARKET SYNERGIES

United Arab Emirates Specific Factors (ATkearney, 2012) 1. 200% mobile communication penetration (i.e. people have on average two mobile

phones) 2. 78% broadband penetration (world’s 2nd fastest network behind south Korea) 3. Delivery Industry wages of 170,000 JPY per month 4. Fluid employment market (75% of population migrant workers) 5. Flue Price 46 JPY p/l 6. Consumption per capita 53% greater than Japan 7. Population 9.2 million, Density 89.85 p/sq, Urbanization close to 100% 8. 35% annual ecommerce growth rate 9. 49% limit on foreign ownership in UAE corporations 10. World’s highest GNI (World Bank, 2013) 11. CVS industry YOE growth 50%, Circle K entering the market as a potential service

partner 12. International hub with the world’s 32nd busiest hub, Tokyo is 33rd 13. Japan is the UAE’s number one trading partner

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Consumer Psychographics The small package delivery service is a mass-market consumer product. It is applicable to individuals as well as small to medium sized firms. The service fills the customers need to have something delivered to their door in a timely, safe manner. More recently express packaging services fills needs as an alternate point of sale. It can also provide stocktaking, storage and packing solutions. According to Yamato Japanese receive on average 30 express packages per person per year. Industry trends suggest this can not only be emulated in other markets but improved upon significantly as ecommerce grows as a % of total retailing and personal expenditure.

Figure 5 According to this A.T. Kearney study the UAE is an attractive ecommerce market

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COD and point of sale transaction means that essentially anyone can make a purchasing decision today, credit cards or pay-pal accounts are no longer necessary. Case Point: In Muslim countries many women are unable to leave the house to shop without a male chaperon. Ecommerce and express package services has unlimited potential in light of continuing conservative culture norms throughout the Middle East, Africa and parts of South East Asia. This is very much in line with Yamato’s mission statement of improving lives through convenient logistics services.

Geo-Political Considerations Although many Japanese manufacturing firms have moved into south East Asia and India (Toyota, Suzuki, Mitsubishi) governments are already positioning themselves in the region expected to grow most over the coming years, Africa (Nikkei, 2013). China and more recently Japan have been pouring billions of dollars into African infrastructure, paving the way for the immanent relocation of manufacturing from China to Africa as costs in Asia soar. If Yamato can establish itself a strong and profitable base in the middle-east, it will be in a very strong position to offer logistic solution to manufacturers moving into the region in the future. Although this would essentially be freight forwarding, it opportunity to diversify revenue from the express segment is a stated aim of Yamato’s management. A second geopolitical opportunity exists in the changing dynamics of Japan’s domestic energy sector. Even the popular Abe government has been unable to re-start Japan’s nuclear reactors after the 2011 Fukushima, incident. With strong resistance from the Japanese people it remains highly unlikely these facilities will reopen on mass anytime soon, if at all. Establishing a presence in the Middle East through a relationship with Aramex would allow an exchange in intellectual property. Although outside of its core-business Aramex is involved in the transport of crude oil and petroleum (Aramex, 2012) This dissertation argues that in terms of international strategy, Yamato should focus on its core competency of express package delivery. However, if Yamato’s management is looking to re-enter the B2B segment through freight forwarding (an industry that effectively died out in Japan in the 1990’s) the Middle East’s strategic position between India and Africa would have to be (In terms of geographic, economic (corporate tax rates ety and geo-political) an excellent one. China plus one equals the Middle East.

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COMPETITIVE ANALYSIS

! Sector: Industrials ! Industry: Transportation & Logistics ! Sub-Industry: Post & Courier Services (Express) Before entering a new market it is necessary to do a competitive analysis. Due to the initial capital requirement of direct entry, joint ventures and mergers are the most viable way to enter new markets in this particular industry. The financial section showed that Aramex gets 39% of its gross profit from international express. For Yamato this figure is less than 1%. Aramex’s product spread is better than Yamato’s however it is similar in many ways. For example Aramex’s express segments are highly profitable and net income growth while freight forwarding is relatively unprofitable. This is not where similarities between the two companies end. Both companies have launched fledging operations in China and South East Asian countries over the past few years. Both companies entered these new markets through joint ventures and minority share holdings. Both companies fledgling subsidiaries are currently making losses5.

5 Aramex Sino Trans Co.Ltd China (50% share holdings) 6 mill revenue, 3.8 operating loss in 2012. Global Distribution Alliance Indonesia (33% share holding) .556 mill revenue, .176 loss.

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Chart 8 Operating Profit Margins A comparison between the two companies shows Aramex’s Profit Margin is consistently twice as strong as Yamato

Chart 9 Net Income Comparison Aramex’s Net income ratio is also significantly stronger than Yamato’s. Proving that despite its smaller size, it is a much more financially efficient business. The net income ratio has been trending downward despite a period of significant growth.

11.0%! 10.7%!10.2%! 10.1%!

10.7%!

4.45%!5.11%! 5.20%! 5.21%! 5.16%!

4.0%!5.0%!6.0%!7.0%!8.0%!9.0%!10.0%!11.0%!12.0%!

2009! 2010! 2011! 2012! 2013!

Operating'Po5it'Margin'

ARAMEX!YAMATO!

9.40%! 9.23%!8.23%! 7.87%!

2.69%! 2.69%!1.57%!

2.74%!

0.00%!

2.00%!

4.00%!

6.00%!

8.00%!

10.00%!

2009!! 2010!! 2011!! 2012!!

Net'Income'

Aramex!

Yamato!

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Chart 10 Returns on Equity Ratio Considering Aramex is financed almost entirely on equity its ROE is very impressive.

Chart 11 Returns on Assets ROA shows us Aramex’s investors and stakeholders are getting a better return on invested capital in comparison to Yamato. In fact Aramex’s ROA is comparable to companies like UPL which are almost 10 times its size.

12.27! 12.09! 11.6!12.6!

13.6!

5.25!6.17! 6.33!

3.78!

6.47!

3!

5!

7!

9!

11!

13!

15!

2009! 2010! 2011! 2012! 2013!

ROE'

ARAMEX!YAMATO!

9.44!

9.4!

8.85!

9.37!9.84!

2.94!3.67! 3.69!

2.16!

3.71!

0!

2!

4!

6!

8!

10!

12!

2009! 2010! 2011! 2012! 2013!

ROA'

ARAMEX!

YAMATO!

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Chart 12 Valuation Ration's ~ Industry Comparison (Bloomberg Business Week, 2014) Chart 12 shows that Aramex performs exceedingly well against industry index. On a global scale Aramex certainly punches above its weight. The above data suggests to us, that any market entry strategy that would put Yamato in direct competition with Aramex would be very hard to execute. The product/service differentiation between the two companies is not wide enough in itself for Yamato to overcome such efficient established competitors. Yamato’s pricing strategy should reflect its ability to deliver the service it has standardized in Japan. Without a comparable level of service, it is difficult to forecast strong market penetration if pricing remains at a premium over competitors. In other words, Yamato’s pricing strategy needs to reflect its ability to deliver additional services and disregard pricing strategies in Japan where Yamato’s brand is omnipresent. If Yamato is able to increase Aramex’s top line and eventually incorporate the company as a subsidiary it will have the intellectual capital and global capabilities to make a sustained entry into emerging mass markets like India, China and South East Asia. In addition to more mature markets such as South Africa, Europe and Australasia. According to this competitive analysis Yamato has two market entry options: 1. Joint Venture through minority shareholding of Aramex 2. Entry as specialist express delivery company (aiming for cool and frozen niche)

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WHY SEEK GROWTH EXTERNALLY

Figure 6 Japanese Logistic Industry (Asian Development Bank, 2013) 1. 2012 saw recording breaking outbound transactions for Japanese Firms 2. Macro-Economical across all industries Japanese firms are once again looking

externally for growth 3. Logistics in Japan is forecast to decline even if express package segments continue

to grow due to immanent population contraction 4. Recurring deflation and recessions since the 1990’s has pressured bottom lines

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MARKETING*TRENDS�DEAL%ANALYSIS�

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KEY MARKETING STRATEGIES

“Creating services that facilitate convenient, comfortable lifestyle through innovative logistics” ~Yamato Annual Report 2013 The combined companies would have an unrivaled service portfolio and geographic presence. This dissertation recommends the Aramex Brand be used in the Middle East, Africa and European Markets and the Kuro-Neko Brand to be used throughout Asia, Oceania and America. Whatever brand chosen, the following should be taken into consideration when formulating marketing strategies in the express package delivery industry: 1. Partnerships with ecommerce platforms:

1. With ecommerce sales making up as much as 60% of small package delivery volume worldwide, having preferred delivery contracts with major ecommerce players is essential to market ones brand

2. Brand recognition, when a company or individual is in search of a distribution partner they will generally seek out the largest and most trusted company.

3. Bargaining power come with brand recognition. Businesses may be willing to pay more per package if they believe their packages are more likely to reach customers safely and on time

Two factors that are essential in logistic company selection processes are brand recognition and service experience. Brand recognition is something that takes time, however it is essentially about getting branded trucks out on the roads, establishing distribution centers and hubs in highly visible locations, online presence at point of sale and engaging business partners and sales drivers to promote the companies differentiating services. In Japan Yamato is Associated with convenience, reliability and friendliness. Its business relies primarily on demand for service and not price. It is promoted heavily by service partners with flags, stickers and signs featured on literally hundreds of thousands of shops throughout the region.

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Table 2 Key Services

The above table shows that each company offers cutting edge innovative services, which should be fully transferable between markets and allow for differentiation from global competitors. As Yamato’s core competencies have been discussed previously, the following will focus on Aramex’s unique service offerings. 1. Nokia Mapping is a GPS system and part of globally competitive “smart trucks”

technology. This and similar technologies help drivers shave millions of hours of delivery routes, UPS and other major companies have adopted similar systems to decrease ecological footprints and improve operational efficiency.

2. Atlantic Express is a guarantied 3-5 business day delivery service for packages crossing the Atlantic. A similar Pacific Express service may be something Yamato could introduce to its home market.

3. Shopandship.com is Aramex own ecommerce online market site 4. E-House is a conceptual Aramex business initiative where startups rent a space from

Aramex and receive full logistic support at the same location. Traditionally Yamato has been a market leader and generator of new business streams at home. Aramex is also a highly innovative company and is far above the regional competition when it comes to offering new services.

ARAMEX� YAMATO�

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COD%(2012)� 365%days�

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SHOPANDSHIP.com%� Cool%TaPQPBin�

PAYPAL%ALLIANCE� CollecUon%Centers%(CVS)�

ATLANTIC%EXPRESS%PLUS� AMAZON%JAPAN�

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OPERATIONAL*PLAN*�

A*Minority*Share*Proposal*�

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OPERATIONAL PLAN

Overview “Ta-Q-Bin is an express delivery service that provides safe, reliable and on time delivery in Japan. Specifically it has developed unique services expected to benefit and be readily adopted in the target market. These include, cool and frozen services, time nomination service, live tracking, same day delivery, e-payment, cash on delivery and door to door services. Unlike the existing private (Aramex) and public (Emirates Post) express package service providers, Ta-Q-Bin provides an intranet of package delivery, if emulated affectively strong relationships with Amazon and service provides (CVS stores) allow large online or small private businesses or individuals to deliver their products efficiently”

Table 3 Operational Structure Comparisons

Regardless of the business synergies discussed in the financial section of this paper, mergers and strategic partnerships often fail due to clashes in corporate cultures. Looking at the above table we see that many aspects of the business structures are indeed polar there are also familiarities. Including high employee retention and flat organizational structures. Most tellingly both companies are looking to grow through mergers and acquisitions and both companies specialize in express packaging.

ARAMEX� YAMATO�

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BOD$89%$External� BOD$10%$External�

14,000$Employees� 140,000$Employees$(66%$full$?me)�

22%$Indian,$13%$Jordanian$(91$Diff)$� N/A�

Managers$51%$Local,$49%$Expat� 98%$Local�

High$Employee$Reten?on� High$Employee$Reten?on�

100%$Maternity$Return$Rate� Part$Time$Females�

LEED$Cer?fica?on$“Cairo$Dist.$Centre”� Engineers$Demand�

ISO14001$� Rigid$Japanese$HR$system�

845$Mill$Rev/$66.4$Mill$GP$$‘12� 13,635$Mill$Rev/$373$Mill$GP$‘13�

Open$to$M&A’s$Historically$

Flat$Organiza?onal$Structure$ Flat$Organiza?onal$Structure�

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In approaching new markets Yamato has to be flexible with managerial processes adapting to regional intricacies without sacrificing core competency. With 49% expatriate managers, Aramex’s human resource prowess should prove invaluable to Yamato as it continues to seek growth through international expansion. Operational Goals (Short Term):

1. Preferential Shipping Rights for Amazon, EBay and regional ecommerce sites 2. 50% of settlements to be via e-payment or COD (worldwide) 3. 50%+ of revenue to be from express package segments (New Markets) 4. Introduction of C2C sales segment in the UAE (New Markets) 5. Introduction of Yamato’s core services to Aramex markets, 6. Introduction of E-house and Pacific Express to Yamato’s markets 7. Sign service counter agreements with Circle'K'(21'stores)6,'Emarat'(80'stores)7

Operational Goals (Long Term): 1. Aramex-Yamato Joint Ventures in Indonesia, China, Thailand and India 2. Merger of the two companies or takeover by Yamato Holdings 3. Become one of the worlds top 3 express package delivery companies by

revenue 4. Become the number one express delivery company in Asia

OPERATIONS REGULATIONS A combined company would have the power to change lives throughout the developed and developing world; by adhering to local customs and laws while encouraging new life styles through innovative services a combined company would be much more able to reach their mission statements in the not too distant future. ! Women in the workplace ! Hours driven per day ! Emissions related ! Privacy (specifically the handling of packages) ! Tax liabilities ! Export/Import Permits ! Workplace safety ! Intellectual Property Registration 6 http://franchise-circlek.com/site/content/circle-k-officially-launches-uae 7 http://www.emarat.ae/index.php The above companies are leaders in the UAE in the CVS market. Emarat also is strong in service stations which to date is the CVS equivalent in many countries; selling petrol in addition to snacks and so on.

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RESEARCH AND DEVELOPMENT

Delivery In order to stay ahead of competitors and prepare for possible direct entry of ecommerce giants such as Amazon and potentially Google, Yamato will need to expend significant capital on developing delivery systems of the future. Trends covered in this paper suggest that with technology already readily available the adoption of automated delivery by means of drones or driverless vehicles in something that will immerge over the next 10 years in markets were regulations are most in touch with technology. This means that operationally Yamato must focus on automation of delivery as a means to reduce costs and increase levels. Yamato employees over 140,000 people while UPS 300,000 and Aramex employees 14,000 people.

Warehousing The advent of 3D printing technology creates possibilities for order made manufacturing to emerge as a viable alternative to mass production in the not too distance future. Warehousing and packing is as valuable to Yamato’s customers as physical transport itself. Mergers and Acquistions can help gain intellectual property, but it is clear in house IT systems will need to be developed in partnership with industry leaders in order to assure Yamato’s warehouses continue to run with market leading efficiency and adapt to the entry of new technologies.

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HUMAN RESOURCES

Human resource issues have often been a major stumbling point for Japanese companies investing in foreign markets. The following factors typify Japanese companies human resource environment: ! Lack of middle and senior management English proficiency ! Absence of internationally experienced middle and senior management ! Absence of women in management ! Unwillingness Japanese employees to be transferred internationally The above factors have meant that Japanese companies have been largely hands off when expanding internationally (I.e. acquiring companies without making sweeping changes to management or downsizing significantly) For Yamato, with its labor-intensive service portfolio, a hands off strategy is not an option. The corporate analysis shown above shows that while Yamato is true to its heritage and uses only locals in its employee and management structure. Aramex is the epitome of the modern firm. Aramex human resources assets should not be undervalued when considering the synergies of a merger. By merging with Aramex, Yamato will gain the skills and perspectives of employees from 91 countries. By employing a wide range of nationalities, analysis and understanding of new markets becomes smoother. The human resource assets of Aramex should prove highly valuable to Yamato.

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WORKS CITED

Aramex. (2012). Annual Report. Aramex. Asian Development Bank. (2013). Country Profile: Japan. ATkearney. (2012). Global Retail E-Commerce Index. Retrieved from http://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/e-commerce-is-the-next-frontier-in-global-expansion/10192 Bloomberg. (2012). Retrieved 2012, from http://bloomberg.com/visual-data/gas-prices Bloomberg Business Week. (2014, 01 15). Investing Businessweek. Retrieved 01 15, 2014, from http://investing.businessweek.com/research/stocks/financials/ratios.asp?ticker=ARMX:UH Nikkei. (2013). Japan-needs-durable-relationship-with-Africa. Geared-for-success . The Economist. (2103, 04 20th). Driverless Cars. The Economist , 3. UPL . (2012). Annual Report. UPL. VISA International. (2013). http://www.itp.net/587088-visa-says-uae-has-largest-share-of-e-commerce#.Uu7w53mR-R9. Wall Street Journal . (2013, 12 2). Amazon Developing Drones for Delivery. Wall Street Journal . World Bank. (2013). Country Report: United-arab-emirates. World Bank. Yamato. (2012). Company Documents.