The next decade
At this 10-year anniversary we also try to look ahead at what the next 10 years will bring. What will the world we operate in look like in 2018? We see three trends shaping our business environment, three more for Express and three for Mail.
What does the future hold in store?
By 2018 world population is projected to hit 7.5 billion people, a billion people more than today. Most of the population growth will occur in developing nations in Asia, Africa and South America. These continents will therefore offer growing markets in the years to come, with business development opportunities for TNT as well.
Peter van Laarhoven, group director Strategy: “In the industrialised parts of the world population growth will slow down or even turn into a decline. Because people are also living longer, these parts of the world will also see the percentage of elderly people grow. This trend has some obvious implications for our business: for example we can expect a growth in medical services and home deliveries.”
The second trend with implications for our business is corporate governance. In the past years we have seen strict new rules and regulations come into force on how companies should be managed. “I expect the drive to increase transparency and internal controls will continue,” says Group Legal director Onno van Klinken, “especially on subjects like management remuneration and social responsibility. Also supervisory boards will get more involved in management and strategy issues.”
The third trend is the increasing importance of the environment. Carin ten Hage, director Planet Me: “The drive to reduce carbon emissions will influence the configuration of global supply chains. Regulation aimed at reducing CO2 emissions will increase as well, leading to all sorts of measures a transportation company needs to anticipate and respond to.”
Express
Three trends shaping our express business in the years to come:
- Choosing reliability over speed. For some years now there has been a trend of customers preferring reliability over speed of delivery. Ben Klaassen, managing director European Road Network, explains: “As road cargo delivery times become more reliable our customers increasingly incorporate transportation into their supply chains. They aren’t keeping goods in inventory anymore but ship them directly. Obviously this way they save money, both on inventory and in lower shipping costs.”
- Emerging markets. Over the last 10-15 years the economic growth of the emerging economies has been double that of the developed world. As a result the economic power of the emerging economies, in real terms, is now greater than the developed economies.
This offers huge business opportunities, says Mark Gunton, managing director Americas, Middle East and Africa: “As large consumer markets develop in the emerging economies supply chains will move increasingly onto the road and across domestic networks.” Michael Drake, managing director China concurs: “The increase in demand for goods and services is good news for domestic transportation. Now we operate China’s largest delivery network we have the potential create a huge business in China.” - Special Services. Special Services has been a fast growing business over the past years. Managing director David Burton expects this to continue: “An important aspect of Special Services is that it differentiates us from our competitors. I see Special Services playing an increasingly important role in winning new and highly profitable business for TNT.”
There are also three trends governing the mail business in the decennium ahead:
- Liberalisation and consolidation. A large part of the European mail market is set to be liberalised on 1 January 2011. This will enable us to start competing with national postal operators on their own market, setting steps towards our ambition of becoming the first pan-European postal operator. In order to strengthen themselves against the expected competition postal operators are looking at the possibility of mergers and acquisitions. “The first steps have been set,” observes Pieter Kunz, managing director European Mail Networks, “The Danish and the Swedish Post have recently announced a merger. It is to be expected that a further consolidation will follow in the years to come.”
- Continuing substitution. The volume of Dutch mail declines because in the Netherlands all preconditions are present for a rapid substitution of physical communication by electronic communication. There is a high degree of computer literacy, combined with the highest penetration of broadband internet connections in the world. Does this mean physical mail will disappear altogether? Strategy director Paul Overdijk does not think so: “Goods ordered electronically will need to be delivered. The parcel business will therefore grow healthily in the years to come. But ten years from now letter mail will also still be around. We see that even in the Netherlands about 10 percent of the population remains computer illiterate. Governments will always need a way to reach all of their citizens, so there will always be an obligation for a postal operator to deliver mail all across the country, but the volumes will of course be low, and the service levels different from what we’re used to today.”
- Growth in competition. The opening of the mail market naturally leads to more competition. Customer needs will shift into more differentiated requirements for price, service levels, quality and added value services. In the Netherlands we are facing two competitors: Sandd and SelektMail. “They are now competing with us on price, not on quality,” says managing director Marketing & Sales Ger Jacobs, “They only deliver once or twice a week, but in this non-time critical segment they have already gained significant market shares. With our Netwerk VSP subsidiary we are giving them quite a run for their money. Competition will expand by focusing on smaller customers and after full market opening enter the higher quality segments.” The ongoing price pressure in the market and the decrease of mail volumes through substitution will necessitate continuous costs savings in the mail supply chain.