Cf Motorfreight in 1992

1.HOW ATTRACTIVE IS THE LTL TRUCKING BUSINESS IN THE 1990S? WHAT IS THE LONG TERM PROFIT POTENTIAL?

U.S. LTL Market Overview 1991

The LTL market, with a total turnover of $16 billion, amounted to approximately 10% of the gross revenues in the U.S. trucking industry in 1991. The three big firms Yellow, Roadway and CMF had the largest shares in the LTL market which was broken down into the long-haul and regional segment. After liberalizing entry into the industry by the Motor Carrier Act of 1980 the continuously growing market had been flooded by new entrants, fighting existing carriers market shares1. Market definition: Less-than-truckload (LTL) freight are shipments represented by a single freight bill weighing less than 10,000 pounds (Yoffie, p. 2).

Forces influencing competition and profitability of the LTL market in the 1990s

Rivalry is high and is likely to remain high or even increase as niche opportunities are getting rare.

Even though the LTL market in the U.S. doesn’t show any sign of stagnation in the 1990s due to the overall growing industries and demand for freight being transported, which would decrease rivalry, the factors increasing it are more dominant: as new industry regulations lead to many new firms entering the market at the same time, price cutting was a natural response. Low product differentiation (the same transport routes being offered by various competitors) makes it easy for customers to switch firm, with price becoming the main basis for competition. This fuels price wars and lets profit drop even more for competing firms. Actions to remain profitable within the LTL industry is to find a niche market, such as over night delivery, or to increase operational efficiency by adopting newer technologies to differentiate from other carriers.

Power of Byers is high and will remain high as price wars continue.

Shippers, viewing carriers as necessary evils2, are very price sensitive and demand high quality service at a low cost as freight...