Will Postal Strike Knock Poczta Polska Out?

Over 12,000 postmen going on strike spells trouble not only for millions of Poles looking forward to sending Christmas cards to their loved ones; the protest by employees of Poczta Polska has ruined the promotional strategy of a number of companies which rely on the state mail and has generally made life much harder for virtually all of its customers. At the same time, it uncovered the inefficiency of the state-controlled institution. Perhaps the strengthening competition will wake it from its slumber.

Tension among the postmen had been growing over the last few weeks. Reportedly, the straw that broke the camel's back was the immense number of political leaflets which they had to deliver on the eve of the local elections. The trade unions reacted by presenting the institution's senior management with their demands concerning improved working conditions and salary rises. Altogether, around 50 percent of Polish postmen went on strike, which resulted in great chaos at post offices throughout the entire country. Moreover, their decision posed a serious problem for Poczta Polska business partners, such as e-shops, which deliver goods to customers by mail. "At present, we are able to deliver only 10 percent of sold items," estimates www.ram.net.pl owner Rafal Modzelewski. E-shop owners are particularly worried about the situation, as they expected record-high sales in Q4. In the present circumstances, they had no choice but to advise their customers to use the more expensive courier mail services. The strike has also hit companies operating on a mass scale, such as gas-works, mobile network operators and power stations, which were unable to deliver millions of invoices to their customers.

The protest of Poczta Polska's employees took the institution, which is experiencing problems in adapting to the reality of a free market, by surprise. The domestic post market is to become fully liberalised on 1 January 2009, although the state-controlled enterprise is hoping to push this date back 12 months. If it fails, the institution, which currently employs around 100,000 people, will clash with the competition in two-years time. According to Prof. Henryk Babis from the University of Szczecin, as a consequence it may lose up to 40 percent of the market. Paradoxically, among other things, the current strike was provoked by the measures taken by senior management in order for Poczta Polska to be able to withstand free market competition. One such measure was the attempt to increase earnings from promotional flyers and advertising leaflets delivery. According to estimates, over the next 12 months the revenue from this source is to grow from around ZL100m to ZL181m. From the economic point of view, this step seems to be very reasonable. Moreover, while Poczta Polska may be criticised for low quality of provided services, high prices and excessive employment, its assets include a strong brand, a well-developed logistics infrastructure and over 8,000 branches. However, unless it manages to make the best use of them, it will not obtain the funds for carrying out necessary investments, eventually falling prey to market rivals.

So far, Poczta Polska has lost the battle for the courier mail market segment. The arrival of international giants, such as DHL Express, TNT, DPD Masterlink and UPS, has been beneficial for customers, as it has significantly improved the quality of courier mail services. At present, the state-controlled enterprise is also facing competition in the field of advertising leaflet distribution from the recently established company InPost. It can be expected that its example will soon be followed by foreign state mail services, which are looking forward to entering the Polish market. According to Aleksander Morozowski, CEO of the Polish branch of DHL Express, they have already undertaken lobbying activities in Brussels as a result of which Poczta Polska may lose its monopolist position sooner than it thinks. All these institutions surpass the Polish mail in the field of organisational structure, management efficiency and available financial means, which leaves it with grim prospects for the future.