Thriving in a Liberalised Market (April 2004)
Competition exists whether we like it or not. For New Zealand Post this is the reality for an organisation that's been used to a position of industry leadership for many years. Today we're picking up the challenge by raising our game even higher. Our vision? To increase our efficiencies and productivity and customer innovation now so that tomorrow takes care of itself...  "The Way Forward for New Zealand Post" was the title of the speech given by Transend's former GM Bruce Heesterman in Amsterdam at the European Postal Services Conference in January 2004.


Bruce focused on the reality of the current market conditions, customer expectations, and how New Zealand Post and Transend plan to tackle both head on.

The following article is a summarised version of Bruce Heesterman's speech.

Competition = Choice
Competition is a reality for most businesses, and postal organisations are no exception, especially if we look back at the last 10 years.

Whether it's direct or technological in nature, competition is happening and it will not go away simply by ignoring the challenge. Here in New Zealand alone, the number of postal operators has increased to 29 in the space of just 7 years since the market was liberalised.

Indeed, with the combined effect of internet-based selling and the globalised economy, it's inevitable that customers will demand more choice whether for telecoms, electricity, airlines or postal providers. And this means we, as a postal organisation, have to work that much harder to encourage customers to choose New Zealand Post above our nearest competitors.

The shape of competition in New Zealand
Despite nearly 30 competitors, New Zealand Post has yet to see anyone offering a truly universal service. This is partly because alliances have yet to be formed between the smaller players, and partly because New Zealand Post has always embraced universal service as an opportunity not an obligation. What our competitors may lack in service coverage or quality however, they will surely make up for in a cost structure that's reflected in their prices. The battle lines initially formed almost entirely on price, not service.

Our response
Our task, long before the official onset of liberalisation, has been a comprehensive range of strategic responses. Apart from constantly reviewing its costs to enable a static price for a decade, New Zealand Post continues to offer excellent service, and provides different customers with more choice or tailored solutions. For larger customers, tailored solutions is now the norm. Built upon the strong core business New Zealand Post undertook a significant amount of business diversification by investing in banking and financial transactions, logistics, and e-Commerce options.

Key Lessons
One of the key lessons for New Zealand Post has been to get the traditional postal business in the best possible shape. This is something that's not only essential but time-consuming. It is therefore vital to start this transformation early so that we have the foundations upon which to build new capabilities. Of course, the loss of market share will to some degree be inevitable, and the aim has not been to prevent loss of market share per se but to manage where it occurs and at what rate. Replacing revenue and margins through a process of diversification takes time and needs the brand and fiscal strength of the core postal business in the short and medium terms.

Vigilance about market activity and a sense of perspective are never far from our minds. We see technological substitution as just as big a threat, for example, as direct competition. Postal companies around the world, who are relying on legislative protection to shield them from customers exercising their right to choose, are in for a shock in the not too distant future.

Two other key lessons that New Zealand Post sees as important are worth mentioning. Firstly, it is critical to ensure that assets are made to deliver for the business. Whether they are automation, fleet, IT platforms or building infrastructure, the need to minimise costs and realise benefits in the face of low cost competition means there is no longer room for under or poorly utilised assets. Secondly, establishing a reasonable market rate for competitor mail access is proving successful in maximising the amount of competitor mail remaining in the New Zealand Post network. We have been fortunate to have a regulatory framework that is quite "hands off" in approach to let the industry set access or interconnect rates that make economic sense to both parties.

Four Key Ideas
To summarise, I pose four thoughts. Firstly, our traditional postal business must be increasingly cost-effective if it is to remain the postal provider of choice. Secondly, reliance on legal mechanisms as a means of sheltering us from competitive threats will not provide long term relief from the impact of liberalisation. Thirdly, heavy investment in diversification options without simultaneous core business transformation will not deliver sustainable profits. And lastly, our goal must be to have existing customers choose to use postal organisations through their unique proposition of price, service, innovation and national coverage.

It's time for all postal organisations to embrace our customers' right to choose, by planning for the inevitable and living the reality of competition now.