Abstract
For many European postal operators the growth in parcel and express segment does not outweigh letter revenue decline. Postal operators should find new growth drivers. They are actively pursuing growth opportunities in new business areas, mainly in logistics and freight, financial services, digital services and telecommunications, which are the largest sources of global postal revenues after traditional letter post and parcels and express delivery services. Postal operators also invest other markets such as local services or silver economy.When diversifying or entering new markets postal operators should firstly cover incremental costs. Determining incremental costs implies to establish adequate methods to allocate fixed and common costs in the case of multi-product firms. Allocating indirect costs such as overheads and network costs is not an easy task. While some costs can be easily identified and traced to individual product or line of business, there are common costs between historical and new activities that need to be allocated between the different products sold by postal operators.Knowledge of the costs can ensure the compliance with competition law and is a key to success and efficiency in new markets. Postal operators should therefore develop proper allocation cost methodologies. There exist several cost allocation methodologies. This presents the advantages and disadvantages of three different types of cost allocation methods: proportional cost allocation methods; methods based on game theoretical concepts and methods based on the value of the activity.
This paper represents the personal views of the author and should not be taken to represent the position of La Poste.
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Notes
- 1.
Source: Amazon Financial Statements
- 2.
Hybrid mail refers to items that are dispatched in electronic form by the sender and are subsequently printed, packed, sorted and delivered by the postal operator to the recipient. Virtual mail refers to the digitalization (scanning) by the postal operator of a paper-based item dispatched by the sender and its electronic delivery of the item to the recipient (source: Copenhagen Economics (2018)).
- 3.
According to DHL analysis, cross border items are growing at about 20–25% each year.
- 4.
According to OFCOM, Royal Mail retains a very high share of single piece parcels weighing 2 kg or below. OFCOM estimates this was between 80% and 90% of both volumes and revenues in 2017/2018. The market share of DHL in the German parcel market is equal to 45.5% according to the company estimates. The German parcel market is nevertheless characterized by fierce price competition.
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Source: reuters.com
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In 2018, bpost acquired the companies Leen Menken Foodservice Logistics BV, IMEX Global Solutions, LLC, M.A.I.L., Inc., and Anthill BV.
- 7.
Source: www.myaccountingcourse.com
- 8.
Source: universalium.academic.ru
- 9.
Source: businessnewsdaily.com
- 10.
Source: yourarticlelibrary.com
- 11.
Source: universalium.academic.ru
- 12.
Source: www.myaccountingcourse.com
- 13.
Temple Lang and Renda (2009)
- 14.
Average avoidable cost is the average of the variable and fixed costs that could have been avoided if the company had not produced a discrete amount of (extra) output. For a single-product company AAC and the average variable cost (AVC) will be the same, as it is only variable costs that can be avoided. For a multi-product company, AAC includes fixed costs incurred during the period of examination. Long-run average incremental cost is the average of all the (variable and fixed) costs that a company incurs to produce a particular product (European Commission (2009)).
- 15.
Source: www.myabcm.com
- 16.
Source: www.investopedia.com
- 17.
Source: www.investopedia.com
- 18.
Source: www.investopedia.com
- 19.
The equal allocation of non-separable costs rule neglects the contributions of players to the coalitions. However, this rule satisfies three axioms of the Shapley value (efficiency, symmetry and linearity).
- 20.
Source: www.investopedia.com
- 21.
Long-distance telephone call pricing proposed by Billera et al. (1978) was adopted by Cornell University. A community of 18 Swedish agglomerations used the Shapley value to spread the increase in water supply costs. Aadland and Kolpin (1998) show that Shapley value is sometimes used to share the costs of cleaning irrigation channels for ranch groups in the United States.
- 22.
Source: www.myabcm.com
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Arlandis, A. (2020). European Postal Operators’ Diversification Strategies and Implications for Cost Allocation. In: Parcu, P.L., Brennan, T.J., Glass, V. (eds) The Changing Postal Environment. Topics in Regulatory Economics and Policy. Springer, Cham. https://doi.org/10.1007/978-3-030-34532-7_6
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