Polish Postal competition: 2009 will see a revolution
In four years, in 2009, the European Unions postal service market will be subject to liberallisation. Does it pose a threat to Polish Post and can it do anything to avoid this – These are only a few of the questions the companies management should find answers to.
Competition in the postal service market is becoming stronger and stronger. The reason behind this is the development of alternative forms of communication, clients' new needs and the ongoing liberalisation of this sector of services.
After Poland entered the EU, the domestic market is becomung increasingly affecte by Union regulations. EU directives are the most important, as they determine a schedule for the liberalisation of this market. They foresee it's full liberalisation by the year 2009, unless – which can't be excluded – the European Commission puts forth a new draft.
One of the EU's priorities is prtoecting universal services, that is delivering parcels to all recepients (even those located far from post offices) while preserving low prices and maintaining the posts highly competetive position. According to the Union directives, delivering parcels of up to 50 grams will in the near future remain reserved for national post services and that the liberlization will only affect parcels of larger weight.
The market is already analysing possible scenarios up to and after 2009. National post services are considering how the future liberalisation will affect the way they function. Spanish and Danish natinal posts have already done such work, thanks to which they could draw up their strategies in view of current product profitability and undertake efforts to assess the effects of the upcoming liberalisation. – Is Commercialisation Enough?
Polish Post is to be commercialized by 1 Januray 2006, although the State Treasury will retain 100 percent of its shares. Any decisions doncerning its privatization will be made by the parliament. If it is assumed that this is unlikely, it should be considered whether the Polish Posts commercialisation will suffice for it to successfully function on the market. It is becoming increasingly competetive, as more and more often new companies are created, most often with foreign capital, which (although thier services often lack much) take clients away from Polish Post. For now, this is applies only to corporate clients, but its revenue from them that will be the most important in the future.
Polish Post is undoubtedly trying to change – a process which will be accelereated by its commercialisation. Lately (among other things) changes have been introduced in the parcel weight structure (the up to 20 gram range has been dissolved), which resulted in lower prices for some clients. What's more, letter and advertising parcel prices have been unified, cash deposit fees have been lowered and the fees for money transfers have been kept at the same level. On the other hand, fee for foreign money tranfers have risen. According to plans, Polish Post will spend between ZL3.1 and 3.8 billion on investments.
The success the comapnys commercialisation can bring depends on the employees who often fear for their jobs and as a result are disinclined towards changes. If it is assumed that the commercialisation will mean a real reorganisation of the comapny, success is possible. Unfortunately, everything may well end on good intentions.
In Europe, letter-parcels make up 87 percent of the income from basic postal services (packages make up 9 percent, courier parcels – around 3 percent). It is estimated that between 1998 and 2002 the numer of this type of parcels in Central Europe rose by around 6 percent annually. In Poland no increase was noticed. The number of letter-parcels per citizien in Central Europe is close that all EU countries.
The letter-parcel market is the least liberalised. The level of liberlisation grows in the case of packages, unadressed advertising materials and courier parcels, although there are differnces among EU memebr states.
Some EU countries national post services already function with the participation of private capital, in others (Denmark, Italy, Greece, for example) there are serius privatisation plans. German, Swedish and Finnish governments are supporting increasingly fast liberalization. – Consolidation on the Horizon
In the case of express and courier parcels state owned companies have to compete with international and local commercial companeis. The often succeed (in Slovakia and Hungary, for example); unfortunately, it is a different story in Poland. Poliish-Post-owned Pocztex has a insignificant share in the market and there are rumors that Poczta Polska is planning the acquisition of another courier company.
Does this mean Polish Post is not coping with the competition and is trying to increae its hold on the market this way? It would be strange, as theoretically it's them the competition should be learning from how to function properly.
Besides, consolidation and other essential changes have already taken place on the domestic market. UPS has bought Stolica – one of the markets biggest express parcel services. Apart from well established comapnies which are not often appreciated in Poland, new companies keep cropping up and building their own networks, working , for example, on the direct marketing market. Fomex, for example, may in the future become somthing of a new "post", at least for corporate clients. These comapnies' range, and in consequence their capacity for reaching clients is still limited due to the fact the enterprises are still in their initial phase, but undoubtedly with time Polish Posts competittion will become stronger, especially in parcels in lower weight categories and advertising materials supplied directly to clients. Because of the level of development Polands market, the main wave of consolidations is still before us. Consolidation as well as increased cooperation are already clearly visible in Western Europe. Deutsche Post has taken over control of DHL, numerous market alliances are being forged, such as the one between La Poste and FedEx, operational cooperation between national post services (like France and Spains) is also becoming more frequent. Postal comapnies are also developing their product range through developing close ties with banks and other financial institutions. – Future Strategies
To summarize, in the future Europes postal services market will likely become divided into comapnies responsible for the transportation of parcels and comapnies responsible for sales points. There will also be a significant reduction in the companies assets and an increase in their effectiveness. At the same time the private sector wil become more competetive; its influence will become especially visible after 2009. Electronic information exchange technologies will also pose a bigger threat to postal services, although one mioght consider if this threat can't be changed into a chance. Maybe encouraging young people to write letters, convincing them that a letter is a more personal and ambitious form of communication than email is a solution?
In the future additional services (financial, for example) made availiable through a network of sales points will aslo develop. These services will gain importance as sources of supplementary revenue. The number of business-to-individual-client parcels will also increase.
The entire sector will be subject to gradual privatization and consolidation. – What to Do?
What efforts can Polish Post undertake in order to face the upcoming challenge? There are many possibilities:
– Increasing income by offering more and more additional services through the extensive sales point network. Small towns hold the most potential, as other, traditional financial institutions may not be avaailiable.
– Conducting at least a partial privatizationa and commercialization of services. The efficiency of public services has to be bigger than that of other companeis, because they have to supply their own financing.
– Controlling costs, cadre reductions, restructuring the network of branches.
– Investing in technologies that will increase efficiciency in order to face the Posts strong competition in the additional services sector (faster money transferse). This will enable the comapny to supply clients with services of a similiar standard, but at a lower price.
– Engaging in cooperation with companies from the same sector as well as those that could make use of the exsting network of sales points: supplying internet access in post offices or train and airplane ticket sales and reservation.
Polish Post is the largest comapany in its type among the "new" EU countries. Its weak side is that the number of letter parcels is not growing and that the companies position on the domestic courier market is relatively uncertain. During recent years ? unlike similiar companies from Central Europe ? it has managed to increase income not through developing services, but by increasing their prices. The markets liberalization and strenghtening competition mean there is a growing danger of revenue "running away" . Does Polish Post want to put up a fight? And if so, can it come up with new ideas for business?
What will happen to Polish Post, if it does not manage to implement the necessary changes in time? Will it be able to successfully compete on the market? Are the managerial staff, the employees, and most importantly the owners conscious of the upcoming changes? The future holds the wanswer to these questions.
