This case study examines the relationship between long-range planning and economic performance in the motor freight industry. The researchers analyzed data from 498 motor carriers. They found no relationship between a carrier's size, level of planning commitment, and economic outcomes. Carriers that engaged in sophisticated planning did not perform better financially than those that did not plan. The industry faces many constraints like regulation and union control that limit the impact of strategic planning. Therefore, long-range planning may not be necessary or beneficial for all motor carriers given the stable nature of the industry and restricted opportunities for strategic decision making.

1. LONG-RANGE PLANNING IS
NOT FOR ALL
CASE STUDY
By H. Jack Shapiro and Ernest A. Kallman

2. CASE SUMMARY
• Since the past few decades, management researches have strongly
encouraged business firms to plan for their future.
• Most of us think that long-term planning increases the company’s
chance of survival and success, in the long run.
• Most managers and executives know this is so – they do not have to
perform lengthy and costly research on planning to support this fact.
• The research scholars did research study in motor freight industry to
find out if long range planning is necessary for all.

3. • They also wanted to know if there are any boundary conditions to
differentiate between those companies which have to plan
continuously, plan occasionally and those which need not plan at all.
• If there are any such conditions, many questions related to the
variables of boundary conditions can be raised.
• The answers to these questions would point the industry towards
more efficient and effective use of scarce materials.
• Researchers examined the planning practices, economic performance
and planning functions of about 500 class 1 motor carriers.
• They did so, by mailing the questionnaire to the participants, which
were mostly answered by the corporate presidents and top level
executives.

4. • From the “Trines Blue Book of the Trucking Industry”, Economic
performance data, carrier size, commodities handled, geographic area
and other general information about the respondents were gathered.
• Data from Trines were used to calculate growth rate of economic
performance indicators over a ten-year period (1965-1974).
• The measures of business success used were:
1. Gross operating revenue
2. Net earnings before taxes
3. Earnings to revenue ratio
4. Return on shareholder’s investment
5. Return on total investment
• The aim of this questionnaire was to determine the commitment of
the carriers to the long term planning.

5. • The questionnaire had 3 parts.
Part 1 – Comprised of 5 definitions of planning, out of which the
respondent had to choose the one that most closely matches his style.
Part 2 – Asked about the year from which the respondent started to
use the strategy.
Part 3 – Had 15 questions relating to different aspects of long-term
planning; there were responses for each, in decreasing frequency of their
occurrence.
• The completed questionnaire allowed the researchers to categorize the
carriers according to their commitment level.
• Based on the score, they allotted the carriers in 5 different groups with
group 1 having only non-planners and group 2 through 5 having planners in
the increasing order of their commitment to long-range planning.

6. • Of the 886 firms polled, replies were from 498 companies (56.2%).
• Of the 498, 20 were unusable. 93 respondents did not give complete
economic data for the full 10 years.
• 385 completed with full economic data, out of which 298 started
planning in or before 1965 and others started in the year 1966
through 1974.
• 298 companies which started before 1965 constituted large
homogeneous group and were the basis for this study.
• The data collected were found to be sufficient to answer the
previously posed questions by answering these four basic questions:
Question 1 – Is there any relationship between the size of the
firm, its commitment to long-range planning and its economic
performance?

7. Question 2 – Does the geographic area of operation has any
bearing on the economic performance of a carrier relative to it
commitment to planning?
Question 3 – Does the carrier handles general commodities or it
is a specialized carrier? Does the amount of planning depend on the
kind of freight handled?
Question 4 – Does the length of time taken by the carrier affects
the planning function?
• The result of the study indicated that there is neither any relationship
between a carrier’s size, planning commitment and economic
performance nor it affects the carrier’s profitability.
• The sophisticated planners and the non-planners performed equally
well.

8. • The profitability of planners and non-planners were same, in the
cases of large, medium and small carriers.
• The planning function, the kind of commodity handled and the
geographic areas not appeared to have any bearing with the carrier’s
profitability.
• The firm’s productivity was not affected by the length of time taken
by the carrier for planning.
• Carrier who planned for more than 10 years did no better
economically than those who had planned for 5 years.
• Since long-term planning did not aid the carrier for greater
profitability, it called for an explanation.

9. • The main reason for establishing long-term planning function is to
deal with uncertainties which the firm may face in future.
• Greater the uncertainties, more sophisticated the planning and lesser
the uncertainties, fewer the alternative strategies used.
• If the external environment of the motor carrier has fewer
uncertainties and limited strategic alternatives, then it does not need
a long-term planning function and so, planning system is not need to
guide in decision making.
• Organizational and environmental realities influence a motor carrier
and make it extremely difficult to effectively plan, on a long-term
basis.

10. Constraint 1 – Regulation by the Interstate Commerce
Commission (ICC). Under this, specific effects of the Motor Carrier Act
reflected in three major areas:
1. Rights to serve specific territories for specific commodities.
2. Rates charged for the services rendered.
3. Financing of regulated carriers.
Impacts of this regulation:
Expansion of the territory served, route travelled and acquisition
of another carrier were under the control of ICC, thereby making the
major areas of strategic planning not to be under the control of the
carriers.

11. Constraint 2 – Labor intensity of the industry.
• According to “Trucking trends”, in 1973, 61.5% of the revenue went
for wages and fringes, a large extent of which was controlled by the
Teamsters Union.
• This limits the control of the carrier organization over a large portion
of its cash flow, in the long run.
Constraint 3 – Transportation costs which include truck and
other equipment costs, fuel costs and road taxes.
• Motor carriers cannot control the price increase of fuel and road tax.
• Inflationary trends constraints the management’s ability to control
such costs.

12. • Long-term planning does not affect the carrier’s economic
performance due to the following reasons:
Reason 1 – The profit of the industry is generally low since the
rates are regulated.
The major strategic area of price setting is not fully available to
the motor carriers, which is the reason for the low profit profile.
Reason 2 – Since the industry is composed of many family
related firms, their objective do not include maximizing economic
performance.
Rather, the owners had other advantages which were dependent
on, or negatively affect the variables involved in maximizing the
economic performance.

13. Reason 3 – The Research and Development (R&D) function is not
fertile motor freight industry, as its only product was service.
Attempts to develop material handling equipment, more
functional terminal facilities and innovative use of computers and
communication devices were not likely to make any dramatic effect on
the firm’s long-term position.
Instead of R&D, the firm has been more concerned with lobbying
efforts.

14. CONCLUSION
• Motor industry is static. It does not change much from year to year in
terms of financial performance and managerial approaches.
• Planning opportunities are limited in this industry as it is highly
dependent on:
a) The state of economy.
b) The economic health of its major customers.
c)The co-operation of the regulatory agencies and the Teamsters
union.

15. • It would be extremely difficult to define boundary conditions, if any,
that differentiates companies according to their need for planning.
• The reason being the closeness of the industry to the environmental
influences which affects the ability of the management in the area of
strategic planning.
• Carriers, who are economically successful are performing well
because of management attributes, which go beyond planning
functions.
• Short-range planning has greater impact on motor carriers due to
high direct costs on day-to-day operations.

16. A final thought by the researchers
• For the motor carrier, who does not use planning is that he should
examine very closely if he should start long-term planning or not.
• Carriers who are planning and doing well can try to get similar results
with lower cost and effort in the planning area
• For successful non-planners, researchers did not suggest any move
towards formalized planning.