TNT chief prefers to work within regions
In an industry over-staffed with apostles of globalisation, Peter Bakker, chief executive of TNT, the Dutch express delivery group, is a heretic. While competitors evangelise about how global networks are transforming the world of commerce, Mr Bakker enjoys debunking their myths.
"Only 5 per cent of volumes being shipped in express delivery networks move between continents," he said. "Our belief is this is mainly a regional game."
TNT is the smallest of the "big four" express delivery groups, behind UPS, FedEx and DHL, and the only one without a significant presence in the US. Instead of seeking to match its rivals' geographic breadth, the group has focused on a patchwork of domestic markets in Europe and Asia.
The strategy rests on Mr Bakker's argument that, even in an era of globalisation, what matters most is local and regional strength.
More than 80 per cent of TNT's business is in Europe, where it vies for market leadership with German-owned DHL.
Because most of its volume stays within Europe, Mr Bakker says TNT can be selective about which other markets it enters. In the US, for example, he says the cost of challenging UPS and FedEx on home soil would outweigh the returns.
The Dutch group has a nightly transatlantic flight to New York and makes deliveries in 15 large US cities but the service is aimed at European customers.
TNT's indifference to the world's largest parcel market sets it apart from DHL, which is expanding aggressively in the US. DHL entered the country three years ago through its Dollars 1bn acquisition of Airborne, a Seattle-based parcel courier.
DHL believes a US presence is crucial to unite its powerful European and Asian businesses into a global network. But DHL's performance in the US so far – it has lost more than Dollars 1bn in the past two years – appears to vindicate Mr Bakker's caution. Instead of North America, TNT is focusing on Asia. While UPS and FedEx dominate the US market and TNT and DHL have a stranglehold in Europe, Asia represents neutral territory.
TNT is concentrating investment in China and India and making domestic rather than international business its primary target.
Over the past six months, TNT has struck agreements to buy two large domestic road freight companies – Speedage in India and Hoau in China – that will give it nationwide reach in both countries. Following completion of the Hoau deal, TNT will have 1,100 depots in 56 major Chinese cities.
While exports have offered the most immediate returns for express delivery companies in Asia, Mr Bakker says domestic markets provide the long-term opportunity. "The next wave of growth in China and India is going to come from domestic consumption," he says. "That can only happen if there are reliable transport solutions."
TNT also has a large Netherlands-based mail business that is poised for expansion as the European postal market is liberalised.
In August, the group sold its global logistics division to Apollo Management, a private equity firm, to focus on mail and express. Yesterday it announced it would also sell its freight-management unit, which arranges air and sea shipments and offers additional services.
The strategy contrasts with that of Deutsche Post, owner of DHL, which expanded deeper into logistics last year through the acquisition of Exel, the largest company in the sector.
But Mr Bakker says TNT found few synergies between express and logistics and has not lost any business because of its switch.
Some analysts remain sceptical about its ability to remain competitive against its rival's greater might and predict that one of the US groups could mount a bid.
Mr Bakker insists TNT can prosper on its own. "Do we need a partner? The answer is clearly no," he says. "We have everything we need to succeed."
