Service Business Analysis
Market Description Industry: Trucking, except local Establishments that are primarily engaged in furnishing “over-the-road” trucking services or trucking and storage services for freight generally weighing more than 100 pounds.
Such operations are principally outside a single municipality, group of contiguous municipalities, or municipality and its suburban areas.
4.3.1 Competition and Buying Patterns
Although there are major players in each of the commercial carrier market segments, the market remains highly fragmented.
According to the Dallas Yellow Pages, there are numerous companies providing different kinds of the trucking services. Major competitors for Mike’s Trucking are those companies who have comparable truck fleets and are also targeting the food industry.
Market research shows that customers in the food industry are price sensitive, and they value on-time deliveries, special handling capabilities, and less-than-truckload orders.
Customer referrals and carrier’s reputation are believed to strongly influence the buying decision.
4.3.2 Financial Risks and Contingencies
The company recognises that it is subject to both market and industry risks. The two primary risks to the company are:
Industry concentration risk: The company is mainly focused on food industry businesses in the United States. This position is favourable since the industry is fairly stable.
Any slow down in the food production would have negative repercussions for Mike’s Trucking. To mitigate this risk, the company is looking at diversifying its trucking business to include other industries as well.
Operational risk: Mike’s Trucking recognises the fact that there is an inherent risk in transporting cargo. Any damage to cargo may undermine the profitable of the company. To reduce this risk, the company maintains all necessary insurance.
4.3.3 Business Participants
Trucking
With some $344 billion in 1998 revenues, the trucking (or motor carrier) business claimed 79% of the U.S. commercial freight transportation market. This total was divided among two sectors: private carriage and for hire.
Private carriers
Although private carriers comprise the largest component of the motor-carrier industry, financial information isn’t available for them. However, the industry is estimated to provide services valued at some $200 billion annually (or 58% of motor carrier revenues in 1998).
The American Trucking Association (ATA) estimates that there are more than three million trucks operated by private fleets transporting 3.5 billion tons of freight annually.
For-hire carriers
The for-hire category generated $144 billion in 1998, or 42% of the industry total. Of that $144 billion, some $105 billion (73% of the sector’s business) came from truckload shipments, and $39 billion (27%) was from less-than-truckload and package/express delivery.
Truckload (TL). The national for-hire truckload segment had total revenues of $65 billion in 1998. The TL sector has historically been mostly privately owned, with the exception of the top ten publicly-owned companies (For this reason, we focused on the LTL sector in this survey).
Schneider National Carriers was the largest TL operator, with revenues of $2.8 billion in 1998, followed by J.B. Hunt Transport Services ($1.8 billion), and the Landstar family of truckload-carriers ($1.3 billion). Of the 50,000 truck load carriers, perhaps 95% had annual revenues of less than $1 million.
Less-than-truckload (LTL). The ATA estimates that the less-than-truckload market garnered $20 billion in 1998. Of this amount, the fast-growing regional segment accounted for slightly more than the national market.
The largest national LTL carrier was Roadway Express Inc., with $2.32 billion in LTL revenues in 1998; the company’s total revenue of $2.55 billion includes TL freight. Yellow Freight System (a unit of Yellow Corporation) was close behind, with $2.25 billion (out of $2.46 billion total).
Consolidated Freightways Corporation was third, with $1.95 billion in LTL revenues. In the regional LTL market, Con-Way Transportation (a unit of CNF Transportation Inc.) was the largest player, with $1.5 billion in LTL revenue in 1998.
Second place belonged to US Freightways, whose family of five carriers generated some 41.4 billion in LTL revenue. American Freightways Corporation was third, with $928 million in less-than-truckload revenues.
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