What are the consequences for A logistics?
E. Böcker
The enlargement of the EU
What are the consequences for A Logistics?
Groningen, July 2005
University of Groningen
Faculty of Management and Organization Specialization: International Business
Author
E. Böcker
Supervisors University
W.W. Wijnbeek M.E. Boon
- De auteur is verantwoordelijk voor de inhoud van het afstudeerverslag; het auteursrecht
van het afstudeerverslag berust bij de auteur -
Management Summary
Management summary
On May 1, 2004, the EU was enlarged with 10 new countries. Because the countries entered EU the market changed, for instances boarders disappeared, laws about cabotage and labour.
The automotive industry is present in Eastern Europe making this area very important and interesting for A logistics. A logistics operates on the European market therefore; this development has impact on the company. A logistics therefore wants to know what the consequences from the enlargement of the EU are how they can anticipate on this development. The research question is:
What are the effects of the enlargement of the EU with ten new countries for A Logistics and how can A Logistics anticipate on these developments?
After having conducted an internal and external analysis, a few things stand out when we look at Eastern European countries, opportunities as well as threats. Opportunities are:
- The low labour costs. This has attracted many companies towards Eastern Europe - The automotive industry is the overall largest exporting and importing industry in
Eastern Europe, especially in Poland, Czech Republic and Slovakia.
- Low prices of the Eastern European drivers/transport company. Use them instead of western European transport companies.
Threats are:
- Asia becomes increasingly important for the automotive industry, making their future in Europe uncertain
- Many of A logistics’ competitors have subsidiaries in Eastern Europe and are able to offer (mostly) the same services
- Low labour costs. Eastern European companies/drivers have the great benefit of low labour costs making it possible for them to offer much lower prices.
- The degree of competition is high and increases in the future. This increase will be when Eastern European Logistic companies are allowed to do ‘cabotage’ in EU-15.
Secondly, when the volume of transport of automotive customers decreases through the decreasing production in Europe in favour of Asia the competition increases even further.
To be able to survive and to be able to benefit the most A logistics could;
- Be aware that the logistic market concerning Automotive is a hostile market and act like this
o Focus on large customers o Differentiate on reliability o Lower prices
o Large focus on automotive in Eastern Europe - Growth in other market than Automotive
o Actively market them selves in none automotive customers to increase market share
o Try to get a greater share of a companies total logistics
Management Summary
- Differentiate from its competitors o Enhance service quality
o Building a strong brand (company name)
o Enhance quality (of the trailers, but also drivers)
To be more concrete the following steps could be taken:
To survive in the hostile automotive market:
- Especially in Eastern Europe like Poland, Czech Republic and Slovakia focus the marketing on the automotive industry, using local knowledge and of account managers.
o Focus of the large customer like G, J etc.
- Compete on strategic advantages like quality and reliability
o A logistics could pick drivers/ transport companies first on reliability - Save costs where and whenever possible to lower prices
o For instance by eliminate tension and competition feeling between offices that stand in the way of cooperation
o By having compatible and completely functional ICT systems
To grow especially in other markets (geographically or industries):
- Expand C logistics - Increase product usage
- Conduct marketing research, to find the specific needs of specific industries in order to know future customers
- Enhance products and services, for instances getting certificates for transport of Hazardous goods
To differentiate in order to have to deal with increasing competition:
- Conduct a customer research, to find out needs, wishes, motivation and so one
- Enhance quality, for instance in the JIT industry A logistics is operating in, punctuality is a key issue, so increase punctuality. However, for industries like the Chemical industry the key issue is safety, so enhancing quality firstly would mean here, enhancing safety.
- Strong marketing activities. Especially focus on the distinguished feature that separates A logistics from other logistic providers in each marketing activity.
- Keep developing the products, like the roof construction.
Preface
Preface
This thesis is a research I conducted for the international logistic company, A Logistics in B (NL) and was conducted at their headquarters’ in B. This research is the final stage of my study
‘Bedrijfskunde’, specialization ‘International Business’ at the university of Groningen.
The thesis is the result of a research about the consequences from the enlargement of the EU for A Logistics. The results show the consequences of the enlargement and the way A
Logistics could react. The reason for this research the enlargement of the EU, the speculation what this would mean for Western Europe and the fact that they saw customer move to Eastern Europe.
In this preface I would like to thank to who made this thesis and my graduation possible. First, I would like to thank, my supervisor from A Logistics, for all his efforts. He was as great help and great support during this entire research.
Secondly, I would like to thank my supervisor from the university, mister Boon and especially mister Wijnbeek, from their help, critical remarks and input.
Eloise Böcker
Juni 2005
Index
Index
MANAGEMENT SUMMARY... II PREFACE ... II INDEX ...IV
CHAPTER 1 INTRODUCTION OF A LOGISTICS ... 1
1.1 HISTORY... 1
1.2 PRODUCTS... 1
1.3 STRUCTURE... 3
1.4 LOCATIONS... 5
1.5 CONCLUSION... 6
NEXT CHAPTER... 6
CHAPTER 2 GENERAL DESCRIPTION OF THE NEW COUNTRIES ... 7
2.1 NEW EU COUNTRIES... 7
2.2 GENERAL CHARACTERISTICS... 7
2.3 SUBSIDIARIES ALOGISTICS... 9
NEXT CHAPTER... 9
CHAPTER 3 THE RESEARCH ... 10
3.1 RESEARCH MOTIVATION... 10
3.2 RESEARCH QUESTION AND OBJECTIVE... 10
3.3 RESEARCH QUESTIONS... 11
3.4 CONCEPTUAL MODEL... 11
3.5 THE ANALYSES... 12
3.6 DATA COLLECTION METHODS... 14
NEXT CHAPTER... 14
POSITION IN THE RESEARCH ... 15
CHAPTER 4 EXTERNAL ANALYSIS ... 16
4.1 CUSTOMER ANALYSIS... 16
4.2 COMPETITOR ANALYSIS... 22
4.3 MARKET COMPETITION ANALYSIS... 24
4.4 ENVIRONMENTAL ANALYSIS... 26
4.5 CONCLUSION... 33
NEXT CHAPTER... 35
POSITION IN THE RESEARCH ... 36
CHAPTER 5 INTERNAL ANALYSIS ... 37
5.1 THE 7SMODEL... 37
Index
6.3 TS ... 55
6.4 TW... 56
NEXT CHAPTER... 57
POSITION IN THE RESEARCH ... 58
CHAPTER 7 STRATEGIC ALTERNATIVES... 59
7.1 STRATEGIES IN DECLINING AND HOSTILE MARKETS... 59
7.2 GROWTH STRATEGIES... 60
7.3 DIFFERENTIATION STRATEGIES... 61
NEXT CHAPTER... 64
CHAPTER 8 CONCLUSION ... 65
NEXT CHAPTER... 66
CHAPTER 9 RECOMMENDATIONS... 67
LITERATURE LIST ... 69
LOOKING BACK... 71
Chapter 1: Introduction
CHAPTER 1 Introduction of A Logistics
When conducting a research, it is essential to have basic company information. In this chapter, A Logistics will be introduced. A general overview of A Logistics. will be given. The
following topics will be addressed:
- History - Products - Structure - Location
The objective of this chapter is to show:
- Who is A Logistics
- What does A Logistics do (which services and products does it offer)
1.1 History
A was grounded in 1906. Forty years later, A started with their first international transport, towards Germany. Until 1984, transport was expanded over Scandinavia, Switzerland, Austria, France, Italy and England.
A, entered into cooperation with a partner in ferry transport towards England. From this cooperation an independent company originated, D. In the nineties A, bought out D, than A Logistics originated. In time a network with own establishments and partners was created all over Europe in which several logistic services are offered.
In the nineties, A Logistics became a part of the F.F. Investment holding. F.F. Investments BV is a financial holding, F.F. Investments BV aims for a strategy, which creates an optimal horizontal and vertical synergy between the companies, which are connected to F.F.
Investments. From a transport point of view, a horizontal and vertical differentiation took place by buying Sister-Organizations. F.F. Investments has the role of strategists, which should be a stimulant for an optimal cooperation in skills and company activities of the Sister Companies.
The companies keep their own identity and market conformance.
1.2 Products
To serve the customer, A Logistics has several products. The current division between these products is:
- 80 % road
Chapter 1: Introduction
Figure 1 Product and services of A Logistics
A Logistics provides the customer a combination of services and products. The products air and sea were not graded that important until January 1. 2005. Until then, the focus was on Road, Rail and Warehousing. On January 1 2005, C logistic was launched. C Logistics is a newly formed joint venture alliance. The alliance was formed to meet their customer demands for an alternative International Freight Provider who truly understands the cost of failure often
MOVE STORE MANAGE
Central support
- Information and communication management - Fleet management
- Process and quality management - Human Resource management
Road
- Own trailer fleet - Local subcontractors - FLT <L
- Groupage - Distribution - Forwarding Rail
- Own public train - Company (block)
trains - Forwarding
- Conventional rail cars - Intermodal units Air
- Air freight - Air Express - Chartering
(Through global strategic partnership)
Sea
- Deep Sea - Short Sea - River barge
Public and dedicated warehousing
- Tailor made solutions - Value added logistics - Sequencing & line
feeding
- Bonded warehouse
-
VMI
In house Services - Reception desk
-
Line feeding
-
Quality checks
-
Replenishment Warehouse on wheels
- Dock management
-
Yard management
-
Shunting Virtual warehousing
- ICT solutions
-
Manugistics
-
PKMS
Lead logistics provider
- Monitoring on shipment level
-
Integration and
upgrading of transport network
-
Global coverage Supply Chain Management
- Monitoring on order level
- Inventory management - Information
management General
- Packaging design - Packaging pool
management - Duty management Consultancy
- Network design - Carrier reduction
programs
- Replenishment strategy
Chapter 1: Introduction
- Ocean Freight
-
Time Defined Critical Parts Shipments
-
Customs Brokerage
-
Fiscal Clearances
-
Regulatory Compliance
1.3 Structure
Figure 2 provides an organizational chart of A Logistics. A brief description of each aspect will be given below.
14.06.2005
A Group 2004
Corporate Director Finance
Corporate ICT Manager
Manager Fleetcontrol Corporate Sales Manager
Manager Central Purchasing
Corporate Manager BD & Quality Corporate HR Manager Key Account Management
Corporate Manager G&L Affairs
Netherlands Germany Regional Manager
Central
Sweden / Finland United Kingdom Regional Manager
North West
Belgium France Italy Spain Regional Manager
South
Czech Republic Lithuania Poland Rumania Slovakia Regional Manager
East
DirectorAZ Executive Board
Ewals Holdings b.v.
11
22
33
44
77
88
1111
99
1414 1313
55 1010
66
1212 1515
Figure 2 Organizational chart of A Logistics
1 Executive board A Logistics Holdings B.V.
This is the highest daily institution within A Logistics. This board consists of a CEO and an
Chapter 1: Introduction
Accounts
This department takes care of the administrative processing of all financial transaction
concerning invoicing, crediting and purchases. They also take care of the financial means for a large part of the other offices. Further, they control the data, which comes from administration and supervise the debtors and creditors. Finally, they provide the data for the inspections of the tax service and make sure that taxes are paid on time.
Controlling
This department provides management and shareholders; periodical figures concerning balance-, lost- en profit figures. They also make sure that there is good cash-management of the liquid means of the several companies in the various currencies.
3 Fleetcontrol
This department is responsible for the trailer fleet of A Logistics. They coordinate
maintenance, repairs and “APK keuringen”, by approved companies. The available capacity is monitored, and if necessary equipment will be rent. Fleetcontrol also has to make sure that the trailers are frequently washed. Further more, they develop adjustment and sometimes entirely new trailer or trailer constructions, innovation.
Within Fleetcontrol, administration takes care of invoicing of used trailers to the different subsidiaries. The claims-controller makes sure that damages are discovered, repaired and charged to who ever caused the damage as soon as possible. In case of a “large” damage, an appeal is made on the Insurance and Claims department.
4 Central purchasing
This department is responsible for purchasing. They purchase and sell of all kinds of goods (trucks, trailers, tires, etc) for A Logistics and for third parties.
5 Human Resource
This department is responsible for the corporate and local human resource management.
Their attention mainly goes out to improve work-climate on the one side and getting qualified personnel on all levels on the other side. This department also does the salary administration.
6 General and Legal affairs
This department is responsible for all legal matters, like contracting. Also purchase procedures and facilities are the responsibility of this department. The department Insurance and Claim is a part of the department General and Legal affairs. They are responsible for the handling and completion of commodity claims, transport and transporters liability, “casco” and other company insurances. They take care of damage cases.
7 ICT
There are only a few ICT employees within A Logistics, because the ICT activities are
outsourced to IBM.
Chapter 1: Introduction
8 (Corporate) Sales
The sales department, which is located in B, is a local marketing and sales department. The department located here is aggravated with the marketing and sales of A Logistics’, transport services. The Corporate Sales manager is responsible for sales off the entire company.
9 BD and quality
This department’s activities are creating logistic solutions and central engineering. This department develops innovative logistic and network solutions and implements them.
This department also develops and maintains management systems like ISO and TQM.
10 Key account management
The “key account management” structure gives A Logistics the possibility to react better on the customer’s wishes. A Logistics has account managers in every country/region where the
activities of large customer are located. Depending on turnover, the number of countries involved and the complexity of the services a deviation is being made between Key account Manager and Account manager.
11 until 14
The activities within A Logistics are divided by geographic area; each geographic area has its own Regional Manager. The Regional Manager is end responsible for all operations and sales matters of the subsidiaries in his region.
15 AZ
AZ is a “daughter” company of A Logistics. They investigate, if the transport of their
customers could be performed cheaper, they currently do this mainly for one customer. AZ is independent of A Logistics. They purchase transport for their customers, this could be with A Logistics but could also be with another logistic provider.
1.4 Locations
A Logistics has locations in fourteen countries. Figure 3, shows a map of
Europe, in which the locations are represented.
Chapter 1: Introduction
Figure 3 Locations of A Logistics
As can been seen above, A Logistics, has a large European coverage. In some countries there is only one subsidiary in others there are more. The subsidiaries are not always, independent offices, sometimes they are warehouses of particular customers or in-house locations. In-house location means that A Logistics has an office in a plant or office of the customer to arrange the logistic on site.
1.5 Conclusion
A Logistics is an international logistic provider with multiple subsidiaries throughout Europe.
A Logistics offers not only pure transport from A to B by truck, train, boat or airplane. A Logistics offers warehousing and all warehouse services as well as supply chain management.
Next Chapter
As mentioned is A Logistics an international logistic provider with many subsidiaries
throughout Europe. At May 1 2004, a large development took place in Europe. The EU was
enlarged with 10 countries. This was a reason for A Logistics to conduct this research;
Chapter 2: EU enlargement
CHAPTER 2 General Description of the new countries
At May first 2005, the EU was enlarged with ten new countries. This changing situation was for A Logistics a reason to do this research. Before describing the exact research, it is
important to have some information about Eastern Europe. The aim of this chapter is therefore to give general information about the new European Countries. For instance, the following points will be addressed:
- Which countries entered the EU?
- Some general characteristics like where they are located, area and population - Where are the subsidiaries of A Logistics located in these countries?
2.1 New EU countries
On May 1, 2004, ten new countries entered the European Union. These countries are mainly eastern European countries. The countries with which the European Union was enlargement are:
- Poland
- Czech Republic
- Slovakia - Hungary - Estonia - Latvia - Lithuania - Slovenia - Malta - Cyprus
These countries had to fulfil multiple conditions to be able to enter the European Union.
Through this enlargement the border where opened between these countries and the old EU-15.
The European Union now consists of twenty-five countries.
2.2 General Characteristics
Location
The countries are mainly located in Eastern Europe as mentioned before. For the exact
location, look at the map below.
Chapter 2: EU enlargement
Figure 13 Map Europe
As can been in the map, Estonia, Latvia and Lithuania do not have land borders with the EU-15 countries. Malta and Cyprus are Island, and will not be addressed as mentioned before, because there are not relevant for A Logistics.
Area
The countries are very different in size. Poland is fare out the largest country and Slovenia the smallest one. See the table below for the area of the countries.
C o u n t r y a r e a ( s q u a r e K M )
P o l a n d 3 1 2 . 6 8 3
H u n g a r y 9 3 . 0 3 0
C z e c h R e p u b l i c 7 8 . 8 6 6
L i t h u a n i a 6 5 . 2 0 0
L a t v i a 6 4 . 5 8 9
S l o v a k i a 4 8 . 8 4 5
E s t o n i a 4 5 . 2 2 6
S l o v e n i a 2 0 . 2 5 3
Figure 14 Area
Population
The number of people living in a country is an indication for many of things. How larger the population how larger the (possible) market. The population in 2003 is represented below in a
1: Estonia 2: Latvia 3: Lithuania 4: Poland
5: Czech Republic 6: Slovakia 7: Hungary 8: Slovenia 9: Malta 10: Cyprus
Chapter 2: EU enlargement
Population 2003 (in millions)
0 5 10 15 20 25 30 35 40 45
PL CZ H SK LT LV SLO EST
Figure 15 Population 2003
Poland has far out the largest population and Estonia the smallest one.
2.3 Subsidiaries A Logistics
A Logistics has as mentioned earlier subsidiaries all over Europe. In the new countries A Logistics has subsidiaries in Poland, Czech Republic, Slovakia, and Lithuania. In Czech Republic, A Logistics has the most subsidiaries, namely nine.
See figure; locations, in §1.4.
Next Chapter
As mentioned is A Logistics an international logistic provider with many subsidiaries
throughout Europe. At May 1 2004, a large development took place in Europe. The EU was
enlarged with 10 countries. The consequences of this development will de researched, the
research will be described in the next chapter.
Chapter 3: The Research
Chapter 3 The Research
In this chapter, the research will be described. In the first paragraph, the research motivation will be described. In the following paragraphs the following subjects will be addressed;
- Research question and objective - Research questions
- Conceptual model
- Data collection methods
3.1 Research motivation
As mentioned in the first chapter, A Logistics has many subsidiaries is many European countries. At May 1, 2004, the European Union went through a great change, the largest enlargement of the European Union in its history. This expansion has been greatly discussed through out the European Union. According to some, this enlargement will bring great benefits and changes for all. Others instead say that this will threat the existing European countries and it will have many negative effects. The thing that all agree about is that this enlargement will have effect on the old as well as the new EU countries.
A Logistics has watched customer moving towards the new European countries, A Logistics. A Logistics opened many years ago, subsidiaries in Poland, Czech Republic, Slovakia and now also Lithuania. In addition, other logistic providers have opened subsidiaries in the new countries, or took over a local logistic provider and so on.
The question now is what this enlargement will mean for A Logistics and how they can anticipate on these developments.
3.2 Research question and objective
A Logistics wants to have insight in the following topics concerning the enlargement of the EU:
- The relevant strategies of A Logistics key accounts mainly - The relevant strategies of A Logistics main competitors
- Giving insight in the relevant development of possible target markets
- Giving insight in the expected transport imbalances concerning the enlargement of the EU
- Giving insight in the way A Logistics can position itself in the possible target markets EU with existing products/services
- To enable the management team to take strategic decisions which geographic markets an market segments (further) can be developed
In compliance with A Logistics, the following research question and objective were
formulated.
Chapter 3: The Research
Research objective
Giving A Logistics insight in the consequences from the enlargement of the EU and giving possibilities in how to anticipate to this development.
Research question
What are the effects of the enlargement of the EU with ten new countries for A Logistics and how can A Logistics anticipate on these developments?
The research should give quantitative and qualitative support for the management concerning future decision about Eastern Europe.
3.3 Research questions
The following research questions where formulated, in order to answer the research question and reach the research’s objective.
1 Who is A Logistics?
2 What does A Logistics do (which services and products does it offer)?
3 What are the Strengths and Weaknesses of A Logistics?
4 Who are their key accounts?
5 Who are A Logistics current main competitors?
6 What are the opportunities and threats A Logistics, which A Logistics is facing or will be faced with?
7 With which countries will the EU be enlarged?
8 What are their characteristics?
9 Who are the (possible) customers in these countries?
10 Who are the (possible) competitors in these countries?
11 What are the opportunities and threats in these countries?
12 What is the effect of the enlargement of the EU on markets A Logistics is already active?
13 How does A Logistics fit the new situation?
14 How can A Logistics minimize the threats und successful use the opportunities?
3.4 Conceptual model
The conceptual model represents the structure of the research. The conceptual model is
presented in figure 4, on the next page. The research will consists of two SWOT-analysis’. The
Chapter 3: The Research
Figure 4 Conceptual model
3.5 The analyses
The internal and external analysis will both consist of multiple analyses.
The external analysis will be conducted with the use of:
- Customer analysis - Competitor analysis
- Market competition analysis and finally:
- environmental analysis
The internal analysis will consist of three different analyses:
- The 7S model - 4 P’s
and finally
- financial analysis
When we enter these analyses into the conceptual model you get the following picture:
External analysis
Internal analysis
Opportunities, threats, trends, and strategic uncertainty
Strategic strengths, weaknesses, problems, constraints and uncertainties
SWOT
Strategic alternatives
Recommendations
Chapter 3: The Research
External analysis
Internal analysis
Opportunities, threats, trends, and strategic uncertainty
Strategic strengths, weaknesses, problems, constraints and uncertainties
SWOT
Strategic alternatives
Recommendations
Customer analysi s Competito r analysi s Market com p etion a n al ysis Environme n tal anal ysis 7 S model 4 P’s Financial a n alysis
Chapter 3: The Research
3.6 Data collection methods
The data collected and used in this research will include both primary and secondary data.
Primary data is data specifically gathered to answer the research questions. Secondary data is data that is already used for its initial purpose.
The secondary data will be abstracted from literature, market research documents, statistical bureaus, internal reports of A Logistics and so one. Primary data will be gathered through interviews, databases and conversations.
Next Chapter
In the next chapter, the first part of the SWOT analysis will be conducted namely the external
analysis.
Chapter 4: External analysis
Position in the research
External analysis
Internal analysis
Opportunities, threats, trends, and strategic uncertainty
Strategic strengths, weaknesses, problems, constraints and uncertainties
SWOT
Strategic alternatives
Recommendations
Chapter 4: External analysis
CHAPTER 4 External analysis
In this chapter, the following question will be answered:
- What are the opportunities and threats A Logistics, which A Logistics is facing or will be faced with?
The question will be answered by performing an external analysis. The external analysis will consist of a customer analysis, a competitor’s analysis, a market competition analysis and an environmental analysis. Through these four analyses the opportunities and threats concerning customers, competitors, degree of competition and environment will be researched.
4.1 Customer analysis
1The first part of the external analysis will be a customer analysis. The customers are analyzed with the goal to find out;
- Who are the (key account) customers of A Logistics
- What are the relevant strategies of the key account customers (concerning Eastern Europe)
- Who are the possible (new) customers in Eastern Europe - How are the customers contacted
- What are the customers needs and finally
- Customer development
Segmentation:
Within A Logistics current customer are mainly segmented in size. The accounts are classified, in five classifications.
Key-accounts: > 1.000.000 euro per account or > 500 orders per account A-Accounts: > 250.000 euro per account or > 250 orders per account B-Accounts: > 50.000 euro per account or > 100 orders per account C-Accounts: > 25.000 euro per account or > 50 orders per account D-Accounts: < 25.000 euro per account or < 50 orders per account
Based on this classification a visit frequency is determined.
Concerning KPI’s and reports the customers are segmented according to industry; automotive, consumer electronics etc. This deviation is made because; the different industries have
different needs and characteristics.
Segmentation new customers:
Concerning possible customers, multiple segmentations are being made. When a possible new
customer contacts A Logistics, the RFQ’s (Request for Quotation) is being handled based on
country. This means that when a German customer asks for quotation in the Netherlands, he
cannot be attended to. The German customer will have to contact the A Logistics subsidiary in
Germany. The meaning of this is that A Logistics wants to make that sure that not different
Chapter 4: External analysis
quotations are being given to the customer. In the past, it happened that a customer asked for quotation at different A Logistics subsidiaries and got different quotations.
When a RFQ fulfils one of the following characteristics, the RFQ is being handled centrally by the headquarter;
1. Expected turnover more than 3 million Euro
2. When the logistic processes concern more than pure transport 3. When more than two countries are involved
4. When it concerns more (potential) strategic customers
The RFQ’s, which are handled by headquarters’, are being managed by an RFQ manager. The RFQ manager informs the Tender Assessment committee (TAC) concerning all new incoming RFQ’s. TAC consists of; the Corporate Director Marketing and Sales and the Corporate Director Operations. TAC decides whether A Logistics will offer on a certain RFQ. In order to make this decision certain things are looked at; the branch of industry, size of the project and own references. Based on a strengths and weaknesses analysis concerning the RFQ the success rate of the RFQ is determined. When the outcome is negative, no offer is made, and the client is informed by letter. For this entire path, an account manager or sales manager is appointed, he is responsible for the entire path.
Customer Contact:
Each account gets its own manager; he is responsible for the account. The tasks of a (key) account managers are focused on maintaining, managing and where possible expanding current customers. The managerial tasks of an account manager can be divided into in commercial and operational activities. Operational activities are keeping contact with the customer and for instance the planning department of A Logistics. If there are (large) problems, the customer contacts the (key) account manager, who will solve the problem within A Logistics.
When we look at the East European subsidiaries, you see that most customers are large international companies. They are mostly classified a key account.
Current Customers:
A Logistics has currently about 3500 customers. The largest group customers are automotive customers. Largest means those who generate the most turnover for A Logistics.
A Logistics, has a top 45 of customers, this is made based on generated turnover by the
customer. Automotive companies dominate this top 45. In the top 10, the first eight companies are automotive companies. The top 10 is shown in Appendix I; these customers are of course key accounts.
High tech and retail customer are also represented multiple times within the top 45 of A
Logistics customers.
Chapter 4: External analysis
- T (106)
The Slovakia offices customers are mostly general customers of the A Logistics Holding.
Customers are often existing customers opening new capacities at Slovakia. The customer are also not local (Eastern Europe) companies.
The large customers of the A Logistics offices in Eastern Europe are multinationals.
The Poland office says it largest customers are Automotive, TE, IK and until recently P. The customers are western companies from or companies owned or founded by western companies.
Lithuania says that it has large worldwide companies (also private) as customers. The customers are Swedish, Latvian or Russian companies.
The Czech Republic main customer’s are high tech and automotive customers. Mainly all customers are (part of) western European/global companies. A limited number are companies, which (from the past) are local.
The customers of A Logistics are mainly western European and global automotive companies.
In appendix II, a short overview of the top 10 customers is given. Described are for instance their locations in Europe and their strategy, when the information was available. The customer often has multiple subsidiaries in Europe, and/or supplier and customers are located in multiple countries. A Logistics, transport products from suppliers to plants, inbound logistics. Transport from the plant to the customer, outbound logistics and also between plants.
Six of the top ten customers have production locations in Eastern Europe. In addition, A has a service centre in Poland but no production location. Also seven have locations in Eastern Europe.
J states that:
- The importance of Asia and E. Europe increases
- Establishing engineering centres in Eastern Europe (interiors)
The strategy of the automotive department states explicitly that they see growth opportunities in existing and new customer market share growth in North America, Europe and Latin America
Also V and S, explicitly name Eastern Europe in their strategy. S sees the enlarged Europe as one of its main markets in which has potential for long term growth. V, states that one of it major challenges is to extend services to new customers in Eastern Europe. L doesn’t mention Eastern Europe but states that ‘In Europe, we see growth in our seating, electronics and cockpit businesses’. F states that; ‘Our established markets in North America and Europe are highly competitive. We expect the growth in these mature markets to be in revenue rather than sales volume. In the next 10 years, these markets are projected to account for 65 percent of our automotive revenue growth.’ Looking at N, you see that they invest in their existing plants. In Spain, ‘investments will be made for production’.
Another remarkable point is that nine out of ten companies have great interests in Asia. Many
Chapter 4: External analysis
Venture of A Logistics. With this Joint Venture, transportation in and between Asia and Europe can be offered by A Logistics.
Customer needs:
The customer’s needs are very different depending on the industry. The chemical companies find safety very important, and have other demands than for instance an automotive customer.
Chemical companies find, ISO norms for driver as well as trailer, ADR certified driver, no curtain trailer and so one very important. They want to minimize the risks of accidents and other malfunctions. Automotive is a very JIT oriented industry; the goods have to be delivered fast, reliable and so one. The automotive customer is also focused on constant improvement, higher efficiency, to enhance quality and lower costs. The Mega-trailer makes it possible to transport high volumes and to enhance capacity.
Recently, price was oft the reason why customers were lost by A Logistics. Price is very important; a company cannot make it with only a high quality. Also tenders, on whom A Logistics offered, encountered the same problem. The reasons why these did not work out was mainly costs (price). The customers of A Logistics are very price driven. The transport
company has to have a good quality and a low price.
A Logistics tries to improve continuously. With large customers targets are set for a couple of years, for instance, a 2% decrease in transport costs each year. This can be realized by using other material, other charters, optimize routings and so one. A Logistics finds it very important to bond with the customer, to build up a relation with the customer.
When looking at the customer need of Eastern European subsidiaries the following can be said.
All countries report the need of pure transport, transport from A to B. Three out of four countries also report a need of warehousing. Slovakia also reports a need of internal transport.
The main need is therefore transport followed by warehousing.
Another way to determine customer needs it to look at the following to issues:
- What makes a customer choose A Logistics - What makes A Logistics loose customers
According to the Eastern European offices there are multiple reasons why customers choose A Logistics. Slovakia did not answer this question because their customers are mainly general A Logistics customer and therefore this information is not known. The other offices mention:
- Good name / relation / reputation
- Large Network (only the Czech Republic) - Availability / right place right time
- Price (only by Lithuania)
Chapter 4: External analysis
Looking at the answer one can conclude that following aspects are important for the customers:
- good name / reputation / relation - availability
- price
(New) customers in Eastern Europe
As mentioned under ‘current customers’ are the customer of A Logistics mainly western European and global automotive companies. Due to the enlargement of the EU the markets in Eastern Europe opened up. A Logistics is an international logistic provider with international transport. To see what kind of customers there are present in these countries you can therefore look at the large (importing and exporting) industries. In appendix III, the top three import and export commodities are represented and discussed. The main item is that the automotive industry is the largest industry in the countries Poland, Czech Republic, Slovakia, Hungary and Slovenia.
In Estonia and Latvia the wood and furniture industry are large exporting industries. The problem with wood is that it depends on its forms and size if this is something A Logistics can forward. In Estonia also motor vehicles are exported, so the automotive industry is for Estonia, a relative large exporting industry.
Lithuania exports different kinds of oils and also motor vehicles. The oil industry and automotive industry are therefore important exporting industries.
Looking at import, the automotive industry is represented in the top three of all countries except Latvia and Lithuania.
Because A Logistics is not able to transport finished cars, trucks or buses, this outbound traffic isn’t interesting. This kind of transport is done by a few specified firms which makes market entry extremely difficult. As mentioned is the oil industry also represented in import and export top three’s. The problem with this is, that A Logistics doesn’t offer this product and this would mean major investment because it has to be transported in an other kind of trailer.
The (new) customers in Eastern Europe are also of the same industry as the existing one, automotive and automotive related companies.
Customer developments:
Looking at the branches in which the customers are located, multiple developments can be seen.
Automotive
- The automotive industry is since a couple of years a very large investor in some Eastern European countries.
- The automotive industry has got into rough wetter mainly through the bad economical situation in Europe. This lead to a decrease is sales, and an increase in competition.
- Constant improvement.
- Very price driven
As mentioned before, the automotive industry has gone through some bad wetter due to the recession. Many automotive companies have relocated or opened new plants in Eastern Europe.
The offices in Eastern Europe also have their opinion about developments.
The Czech Republic, Slovakia and Lithuania all think that the automotive will increase. The
Chapter 4: External analysis
Beer is according to Poland not interesting because it is too heavy for transport in a mega- trailer. Also is expected that the market will move further east, towards for instance, Romania, Russia and so one even to Asia.
An important development within the automotive industry is Asia. This market is becoming increasingly important. When you look at Appendix II, in which an overview of the customers is given, also the Asia aspect is represented. When the formation was available, there is a part of the table named Asia. There and sometimes under ‘strategy’ the plans and comments of the companies are represented concerning Asia. When you look at the automotive customers, the first eight customers, they all have plans in Asia. They all recognize Asia a fast/the-fastest growing market. The question now is, will the plants in (Eastern) Europe disappear and be replaced in Asia. When the automotive companies opened new plants in Eastern Europe, this did not lead to a massive closure of plants in West-Europe. Of course some were closed or became smaller because production shifting to the new plants. The automotive customers moved to Eastern Europe mainly to save costs. The wages (labour costs) are much lower in Eastern Europe than in West Europe and this made them move or open subsidiaries in Eastern Europe. In appendix IV, the labour costs and labour costs development in Eastern Europe are discussed. There are different expert opinions about the labour costs development in Eastern Europe but they have one thing in comment: they all predict that it rises.
Some companies like for instance Nissan, invest heavily in their West-European plants. The chance that these factories will be closed to move to Asia is not that large. Also that factories of other automotive customers will be closed in favour off Asia is not that large I think. Of course will this happen to some, but multiple companies have recently invested in European plants. They have opened new plants (many in Eastern Europe) and invested in existing plants (Eastern and West Europe). It is not logical to invest in something, which will be closed on short time. The cost of these investments will first have to be recovered. The second question that arises than, is how long will it take to recover the investments. This is something, which is difficult to predict, this depends for instance on the height of the investment. Fact is that Europe still is a very important market for the Automotive Industry. Even though it might become relatively unimportant to Asia, there are still customer here and as long as that will be, companies will sell there products. Of course another possibility is to produce the cars in Asia and transport them to Europe. If this happens will depend on multiple things like:
- Development of labour costs in (Eastern Europe) Europe and Asia - Transport costs from Asia to Europe
- Public opinion, do customers who drive European or national cars still want to drive them when they are fully produced in Asia?
- Legislation and government interference; when Europe makes import expensive and
offers benefits for plants located in Europe, this will influence the locations of the
plants
Chapter 4: External analysis
4.2 Competitor analysis
2A large company like A Logistics has multiple competitors. Competitors are very important to look at. This competitor analysis has a goal to answer following questions:
- Who are A Logistics’ main competitors
- What are the strategies of these main competitors (concerning Eastern Europe)
Segmentation of competitors:
Within A Logistics, there is no segmentation of competitors. The competitors are not listed.
Purely based on experience the employees of for instance sales now what the large competitors are. There are also not specific characteristics which make is possible to decide whether a company is a (potential) competitor or not. According to the sales department, any company that is able to drive the same route as A Logistics is a (potential) competitor. Large competitors for instance are Vos Logistics, Rynart, Frans Maas and so one. What the largest competitor is depends on which customers or which routes you look at. When it concerns current customers, the account manager know what other logistic companies also serve the customer and
sometimes which companies offered on the same tender.
The competitors:
To make a comparison one could use the list made by the “NLD& logistieke krant”. This lists the top 150 of logistic providers in the Netherlands. This list is based on the number of
employees of the company is the Netherlands. The top ten is represented appendix V. The question of course is; how reliable is this information? The companies provide the data their selves. This data cannot always be checked from the outside.
Looking at the top ten, you can see that all these companies serve automotive companies. Also most of the other industries A Logistics serves, the companies also serve. Also the kinds of networks are not exclusive. They all have a European or even worldwide distribution network.
When you look at the developments the logistic companies went through the last couple of years, a few things stand out.
- Companies are increasing there span of services, it not pure transport from A tot B.
- Certification becomes more and more important. ISO norm, - Companies have started up subsidiaries in Eastern Europe.
- Development in material, for instance Mega trailer
The new EU countries know a very large group of self drivers in the logistic branch. Most of the time there were a hand full large firms, often state owned, and many one man companies.
May of these state owned companies have been privatized lately or sold to large investors.
There are still some companies, in which the state has a large interest, but this number is declining.
In order to find out whom the competitors in and to Eastern Europe are, the offices there and the department in B concerning Eastern Europe were asked. In the end, a list with 15 large competitors was created.
- LKW Walter
Chapter 4: External analysis
- Hungario Camion - Vos
- DFDS - Schenker - Smidbersky - CS Cargo - Schnellecke - DHL - PEKAES - GEFCO - Raben - M&W
- PJ International Of the these three companies almost none information was found - Unitrans therefore they will not be discussed further.
Competitors are international operating logistic companies, which offer more than pure transport, and able to serve A Logistics’ main markets: automotive, high tech and retail.
Evaluating competitors:
Two of A Logistics main competitors will be especially highlighted. When we look at the entire market, so the countries A Logistics is operating in, the customers and the products, there are a few main competitors. Two of them are mentioned frequently at headquarters’, namely Vos logistics and Frans Maas. In Appendix VI, these companies are shortly described.
Described are their products, their network, their locations and strategy.
Looking at the comparison a few things can be seen. Vos logistics and Frans Maas are large companies than A Logistics, they have more employees and more turnover.
Concerning products specialization, Vos logistics has all the specialization that A Logistics has, and even a few more. Automotive; which is the most important group for A Logistics, both companies, Vos and Frans Maas, have specialized in. They both have the same of even larger distribution network than A Logistics. The six kinds of network A Logistics has, five of those Vos and Frans Maas also have. Air cargo is also offered by Frans Maas but not by Vos logistics. Air transport is not used much within A Logistics before C logistic. Vos logistics uses fewer locations to reach the same market. Frans Maas has much more locations in many countries, namely in every European country except Austria. Both companies are still
developing in Eastern Europe.
A Logistics does not stand out in anything looking at the things mentioned above. Not in size,
in kind of network, specialization and so one. These companies are (able to) provide the same
general services A Logistics provides. How this is with specific services is hard to say, because
Chapter 4: External analysis
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