Strategy Management about Australia Post —it is a difficult work, you need read a lot of materials Essay Example
Australian Post Product Range
According to the Australia Post’s organization structure, there are three fundamental business units that constitute the company’s business model:
Postal services – Mail and retail segments
Corporate and commercial services
Inasmuch as the Australia Post enjoys the benefits of operating as a monopoly in the domestic postal market, it still faces stiff competition in its corporate and commercial services segments. Moreover, the emerging trends in integrated digital communications has pointed out on the need for the corporation to have in place effective measures to retain its clientele. In the telecommunications sector, the greatest concern to the postal services industry has been the emergence of electronic substitution. This has had a significant impact on the postal services, a fact that is attested to by the 1.3 percent decline in profitability in these services for the financial year 2014-15. Additionally, the significant increase in Group loss after tax figures from $116 million in the financial year 2014 to $222 million in 2015 is an indicator that the increased competition has adversely affected the company’s profitability (Australia Post Financial Report 2014/15). Electronic substitution has resulted in a decline in the mail volumes. Moreover, the parcel services segment has been under intense competition from Toll holdings, which is a close substitute to Australia in parcel distribution and delivery. The two corporation command a total of 60 percent of the entire parcel market, but with Australia taking the lead. Other competitors who hold a rather small client coverage in the parcel delivery business include DHL and TNT holdings (Korporaal 2015).
In order to gain better insights into the critical external factors that have shaped the unique situation facing the Australian post, it is imperative to conduct a strategic analysis of the macro-environment and the industry as a whole. This analysis is key to understanding the industry dynamics and, ultimately, aids in coming up with an accurate forecast of future profitability of the company in the industry.
Porter’s Five Forces Model
Bargaining Power of Buyers
The Australian government has taken a key role in price regulation in the postal delivery services. This has been done particularly to alleviate the likely effects that would result from Australia Post having a total monopoly in the market. In return, Australia Post has been able to enjoy stable prices, and has total monopoly for parcels over 250 grams. One of the observable changes in buyer preferences has been the increased demand for online shopping among consumers. As indicated in the Australia Financial Report 2014/2015, the convenience associated with online shopping has led to a diversion of parcel deliveries from home addresses to business addresses as customer want to have better control of their postal services. Since Australia Post covers has extensive coverage in the Australian region, with a total of 15,805 posting boxes and 4417 outlets, out of which 2560 outlets are in the remote and rural areas, the company has been able to retain significant control over the buyers. However, parcel buyers have a greater power than those who are dependent on postal services alone since they have the privilege to choose from other competing brands such as DHL and Toll.
Invariably, competitive rivalry emanates from the presence of a high number of competitors in the market. In the case of the Australian Post, the fact that this corporation has been existent in the market more than any other competing brand gives it a competitive advantage and a subsequently better customer loyalty. However, as already mentioned, the main competitors to Australia Post are in the Parcel delivery services. Australia Post has engaged in a series of strategic alliances aimed at integrating their services and easing the logistic shortcomings that have been a key concern in the company’s network. One of these alliances has been through the incorporation of StarTrack Express (Australia Post Financial Report 2014/15). Ultimately, this has made it more efficient for the company to increase their international air freight capacity. The delivery services market has equally become highly fragmented with the other major players including FedEx, TNT Australia and UPS. However, Australia Post has maintained a leading position by offering affordable vehicle and air delivery services.
Bargaining Power of Suppliers
The fact that Australian Post enjoys considerable monopoly in some of the market segments – particularly in the rural and remote areas – gives suppliers little bargaining power. Moreover, the corporation has established an extensive network of agency and retail services in major cities and, therefore, suppliers would still have little control over the prices in these regions. However, the parcel delivery and logistics services face intense competition and as such, certain industry players such as truck suppliers and technology providers enjoy a high bargaining power as suppliers.
Threat of New Entrants
The letter delivery service in Australia has been subject to stern legislative barriers dictating who can participate in the trade. This makes the threat of new entrants quite unlikely and insignificant. The agency services provided by the Australian Post could be to a certain degree vulnerable to new entrants since insurance and banking industries offer similar services. However, the most significant threat is in the parcel delivery services where the threat of international corporations would have an effect on the market and the company’s profitability.
Threat of Substitution
Australians spend over $15.5 billion annually on ecommerce with market indicators predicting that this trend is likely to go up in the next five years (Australia Post Financial Report 2014/15). This points out that Australia Post’s delivery of insurance and financial services faces the threat of substitution from online service providers. Similarly, payment of bills online by other competing firms could substitute the company’s online payment services. Most importantly, the parcel and logistics services is exposed to significant threat of substitution by the existent market players such as DHL.
Australia Post 2015b, Home Page, Australia Post, viewed October 23 205, <http://auspost.com.au/>
Korporaal, G 2015, Australia Post rivals picking up the parcel business. [online] Available from http://www.theaustralian.com.au/business/the-deal-magazine/australia-post-rivals-picking-up-the-parcel-business/story-e6frgabx-1227398972233 [1 Nov. 2015].
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