UK Postal Service: Navigating Market Challenges

The UK Postal Service has existed for three hundred and sixty years. Consignia , the present service provider, now faces it's greatest challenge posed by the impending opening up of the postal service market to competition. On this occasion renaming, regrinding or refocusing alone will not suffice. The loss of it's monopolistic position and imminent threats from a new competitive market will require Consignia to adopt a more efficient business-wide approach if it wishes to compete and survive.

Any discussion on this subject must look at the company's present situation, clarify what is to happen and take account of the affects to certain parties.

In particular affects to customers, who must be the primary concern, will be looked at as not many businesses can survive without customers. While there will be some negative affects which must be noted these are greatly outweighed by the positive outcomes which could be generated as a result of Consignia becoming part of a truly competitive market.

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Also previous experiences of privatisation may provide valuable insights and lessons for future reference. We can then look to the future and summarise how a truly competitive market could help the UK Postal Service to attain it's true potential from a customer point of view. In order to adequately discuss our postal service's future we must first illustrate the present. Unfortunately factors such as poor management, poor industrial relations, under-investment and increased costs have resulted in Consignia under-performing recently.

In period June 2001 to November 2001 losses totalled i?? 280 million. ( Financial Times, 13th Feb 2002 ) Consignia has had more industrial stoppages than any other organisation in Britain ( Logistica, 6th Feb.

2002 ) Last year 547 post-offices closed and it is estimated that twenty thousand jobs will be lost over next thirty months (Watchdog, BBC2, December 2001 ) Our current post-office provider relies heavily on profits from its parcel division to subsidise the mail delivery where it costs twenty seven pence to deliver a twenty eight pence letter.

A recent detailed report by the regulator, Postcomm identified that Consignia was only running at around seventy per cent efficiency and that operating costs have also increased by approximately twelve per cent year on year. ( " The impact of liberalisation on efficiency; Postcomm ; January 2002 ) Much has been said of the postal market being opened up but what exactly does this involve ? . The Postcomm Report of January 2002 has laid down that the market will be opened up to competition in three main stages.

Stage one is planned for period 2002 to 2004 when . large mailing and consolidation licences are to be issued. This will represent approx thirty per cent of Consignia`s current business being made available to competitors. The second stage should occur from 2004 to 2006 when further business may be made available depending on results of interim reviews carried out during first stage. Finally by 2006 it is hoped that all restrictions will be abolished and that the postal market will be fully competitive.

A truly competitive market is one where no single supplier can influence the market and where all consumers are fully informed. Also the type of products available should not vary greatly and all resources are allocated effectively thereby minimising wastage. If the postal market becomes truly competitive then there should be no need for Government intervention with only the most efficient companies surviving. In such an environment supply and demand for products attain equilibrium in that they are evenly matched.

It should be noted however that while the goals of a truly competitive market are desirable, they are rarely attained in totality. Also Consignia`s metamorphism from a monopoly into being part of such a competitive market may have some adverse affects. Postcomm believes that by allowing competition across profitable services this may strengthen Consignia in the other weaker areas. ( Observer, 3rd Feb 2002 ) ) However such asset-stripping may lead to Consignia`s profits being reduced further and undermine it's very existence.

It seems apparent that the workforce will not be un-scathed. Consignia has committed itself to large-scale job losses. It is estimated that twenty thousand jobs will be lost over next two years. (Watchdog, BBC2, December 2001 ). This would have obvious detrimental affects to communities both financially and socially. Unions have committed themselves to resisting change and redundancy. The Lord Sawyer report regarding industrial relations within Consignia ( July 2001 ) found a work-based culture which relied on strike action and management bullying ( Guardian February 2002 )