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Kristian j sund competition

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Slides from presentation at the International Congress on Postal History: Multidisciplinary and Diachronic Perspectives - Prato, Italy, June 15th 2019. To cite the underlying paper: SUND, K.J. (2019), FROM COOPERATION TO COMPETITION: CHANGING DOMINANT LOGICS AND LEGITIMIZATION IN LIBERALIZING INDUSTRIES, IN Rendtorff, J. D. Handbook on Business Legitimacy, Berlin: Springer

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Kristian j sund competition

  1. 1. Dr. Kristian J. Sund Associate Professor of Strategy and Organization Department of Social Sciences and Business Roskilde University, Denmark The coral in RUC's seal Liberalization and Emergent Competitive Strategy in the Nordic Postal Market at the Start of the New Century
  2. 2. My postal journey…
  3. 3. Early days of Nordic Posts King Christian IV created a first postal system in Denmark/Norway, soon copied by Sweden/Finland. There were 9 postal routed between Copenhagen and other major cities, such as Hamburg, in Germany.
  4. 4. Delivery and network innovations Postal riders – express mail (1640s) Expansion of number of post offices / routes Local delivery (Copenhagen 1806) Post trains (1856) House numbers (1859) Post codes (1967) Service innovations Passenger traffic on postal coaches (ca. 1660s) Goods transport (ca. 1670s) News (and later newspaper) deliveries Stamp (1851) Mail box (1850s)
  5. 5. Political Economic Technological Environmental Legal Social Digital substitution Internet e-Mail, SMS Economic recession ("crisis") Liberalization
  6. 6. Global downturn in mail 1.00 1.25 1.50 1.75 2.00 2.25 2.50 2.75 3.00 3.25 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Index(1970=1.00) FiscalYear Figure2 Gross Domestic Product(GDP)and Total Mail VolumeGrowth Fiscal Years1970- 2009 GDP (Chained to 2005 Dollars) Total All Mail
  7. 7. Nordic Area Source: PostNord annual report 2018
  8. 8. How did postal operators perceive these changes, and how did the institutional environment change?
  9. 9. Institutionalization Organizations compete and adapt to the demands and values of their environment, society, and of internal groups. Institutionalization occurs as actions are repeated. Institutional environments reward organizations for adopting acceptable practices and structures. Without this acceptance, organizations can be driven out of business. (Social legitimacy)
  10. 10. Institutional Theory (DiMaggio & Powell) An organization is institutionalized by the following contexts: 1. Technical, Economic, or Physical e.g. production and exchange of goods in a market 2. Social, Cultural, Legal, or Political e.g. conforming to norms, values, rules, and beliefs upheld by society.
  11. 11. Institutional Pressures Coercive: Pressure to conform that comes from the government in the form of rules or laws. Normative: Pressure from cultural expectations. Mimetic: The desire of one organization to look like another. Usually used as a response to uncertainty.
  12. 12. Institutional Logics Mindsets, cognitive frames and mental models configuring thought and systems. behavioral symbolic Organization invested with meaning
  13. 13. Logics of Action (DiMaggio) • Logics of action exist as a cognitive frame at the level of the individual actor, but logics become shared through socialization processes and daily action within the organization, or across organizations. Logics of action mostly operate in a taken-for-granted fashion, but critically manifest themselves when individuals have to explain and justify their actions. • Bettis and Prahalad (1995) suggest that what focuses attention at the strategic level in the organization, is a dominant logic. Logics of action at various levels of the organization must fit within the dominant logic. • Only large environmental disturbances have the potential to create a mismatch between the dominant logic and the external reality.
  14. 14. Dominant Logic Logics of action Logics of action Logics of action Logics of action Coercive Dominant Logic Logics of action Logics of action Logics of action Logics of action External shocks
  15. 15. Figure 1: Changing Landscape Exerting Pressure on the Postal Industry (a) Technology (b) Market (c) Regulatory (Bogers, Sund & Villarroel, 2015)
  16. 16. Cooperation before 2000 • Market-oriented reforms were gradually introduced by all four Nordic governments. • The telecommunications arms of all Nordic posts were divested, liberalized and privatized. • Before, and in a period of some years after, the first postal directive (European Commission 1997) all the postal companies would cooperate in the letter distribution. “I think before the year 2000 and before the second postal directive, everyone was business friends. So if you were sending a letter from Norway to Stockholm it was very natural that Swedish Post and Norway Post cooperated and had a supply chain that smoothly linked together.” CSO, Norway Post
  17. 17. Logic of Cooperation • Legitimized a number of strategic actions during the 1990s. – posts focused internally on increasing the efficiency of their own operations, through investments in automation equipment and the reduction of the workforce. – posts all invested resources in experimenting with new digital technologies as a way of diversifying their businesses. – continued to seek cooperation opportunities with each other, for example through the creation of joint ventures.
  18. 18. • The four Nordic postal companies in 1999 decided to join forces (one last time), in the international parcels distribution segment. They created a joint venture company, PNL (Pan Nordic Logistics), to jointly capture the European and global inbound volumes to the Nordics. • They defined the large global logistics companies (such as UPS, TNT, DHL and DB Schenker) as their main and common competitors
  19. 19. Early 2000s: Liberalization and the Emerging Logics of Competition • The internal focus did not yet clash with the dominant logic of cooperation in the strategic group. The spectre of competition was already there and the intention of becoming competitive was there as well, but interestingly there was a reluctance to publicly name the other Nordic posts as potential competitors. In official documents, such as the annual report, future competitors were by Norway Post defined as being “major international logistics and communications companies” “We saw that competition at some point in time was coming in Europe following the liberalisation. However we know today that this development took much longer than most participants in the market anticipated.” CEO, Norway Post
  20. 20. • Similarly, Finland Post recognized that competition would come, but not from the Nordic neighbours, their historical cooperation partners… “National posts are forming alliances and expanding well outside their domestic markets. Acquisitions by Deutsche Post AG in Germany, for example, targeted the global operators Danza and DHL as well as the Nordic company ASG. The Dutch Post operates as a global logistics company through TNT, a company it owns. The Posts in Britain and France are also actively seeking new international partners.” Finland Post Annual Report, 2000, p.9
  21. 21. • In June of 2007, the former Finland Post (Posti in Finnish) rebranded the corporation to the new name Itella. • This was to create a brand name around what was perceived as the new core business, namely intelligent logistics, combining the traditional capabilities in the movement, sorting and storage of mail, parcels and goods, with the more recently developed know-how in IT. • A renewed Posti logo was maintained for the postal consumer market in Finland.
  22. 22. PNL: Cooperation vs Competition • Globalization meant that more customers might seek a pan-Nordic logistics partner. • Itella decided to withdraw from the joint venture and instead cooperate with DHL. “I think it fell apart because the companies started to think about the future and their own strategies. Especially Swedish Post was starting to think they were the biggest in the Nordics and felt accordingly that they should be in the driver seat.” -CEO, Itella
  23. 23. • In 2001 Swedish Post also left the PNL joint venture to undertake a Nordic franchise for the DPD parcels system (owned by the French Post) • By 2008, Norway Post bought out the remaining Danish Post shares. “(. . .) I would say that the relationship was becoming cooler and cooler.” CSO, Norway Post
  24. 24. Competition in the Letter Market • Norway Post in 2002 expanded its letter business into Sweden by acquiring an entrepreneurial venture named Citymail. • This was the beginning of building a new business model as challenger to the incumbent player in the traditional core letter mail market in Sweden. • Norway Post’s strategic intent was to establish a market leader position in the Nordic letter mail market with distribution networks in all the Scandinavian countries. • Based on this strategy Norway Post also created a new company, Bring Citymail Denmark. The assumption was that there could only be one surviving challenger in each market.
  25. 25. April 1, 2008: the Surprise Merger • The immediate reaction of top management in those companies was one of disbelief. • This did not seem a legitimate action, so Norway Post and Itella both appealed to the European Commission. “The merger happened on the 1st of April, so we actually thought it was an April fool’s joke. But then we understood that they really would merge, so that was a bit of a shock!” CSO, Norway Post “For us it came as a big surprise. We were not expecting this, because the process went quite rapidly.” CEO, Itella
  26. 26. Logics of Competition • After the merger there were now three Nordic postal companies all competing in the logistics segment, and growing their market presence through strategic acquisitions, but not, as expected for almost ten years, competing very much in the mail segment. • By the early 2010s, all three operators (PostNord, Norway Post and Itella) explicitly identified each other as direct competitors. • For example, PostNord in their 2013 annual report indicate “national postal operators in Norway and Finland” as direct competitors in the area of logistics.
  27. 27.  There is a story of emerging shared logics of competitive action in TMTs and across organizations, as these organizations learn how to compete.  Strong mimetic pressures  Dominant logics: Cooperation (pre-2000s) Transition (early 2000s) Competition (late 2000s) Changing Logics
  28. 28. Today’s competitive landscape
  29. 29. Thank you!

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