Royal Mail and Competitive Pressure

We’re following Royal Mail as one of our research firms over the next six months and two articles in the news this week provide some terrific business studies insights into the competitive pressures facing the firm.

Royal Mail has just announced its latest half-year financial results - the first to be made public since the Coalition government confirmed that it is to proceed with the privatisation of Royal Mail. The numbers do not make impressive reading, particularly the poor performance of the Letters division.

Royal Mail has revealed a 72% plunge in half-year profits after its letters business slumped into the red. A continued decline in the number of letters posted in Britain saw the letters division report losses of £66 million in the six months to September 26 against £48 million profits a year earlier. It is clear that something significant and permanent is happening to the core letter product. Households and businesses alike are simply finding much better alternatives to “snail mail”. Royal Mail said the average postbag is now at a level not seen since the mid 1990s, with letter volumes falling to around 68 million a day - a drop of 16 million in the past five years.

The traditional market for letters is in long-term decline. And another problem for Royal Mail. Their key business customers are generally not satisfied with the service provided.

As this article in the Independent explainsMore than four-fifths of UK online firms are critical of the Royal Mail, and accuse the service of “stifling” the development of their businesses. Internet companies said they wanted the postal operator to improve its service standards in five crucial areas, including notification of the time or day of delivery and better weekend deliveries, according to a major survey of more than 600 online businesses by eBay, the internet auction giant.

Two really useful articles that hep students understand the external environment facing Royal Mail as it prepares to undergo the process of privatisation.