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The Role of the Postal and Delivery Sector in a Digital Age

The Role of the Postal and Delivery Sector in a Digital Age

Advances in Regulatory Economics series

Edited by Michael A. Crew and Timothy J. J. Brennan

This volume, the result of the 21st Conference on Postal and Delivery Economics (Ireland, 2013), describes the continuing problem of the decline of the postal sector in the face of electronic competition and offers strategies for the survival of mail services in a digital age.

Chapter 22: Eat or be eaten: the implications of strategic cannibalization and transformation for the United States Postal Service

Adam C. Houck

Subjects: economics and finance, competition policy, public sector economics


History has shown that successful firms routinely cannibalize, exit, and destroy entire lines of business in order to survive. Evidence continues to suggest that companies that endure over the very long term require significant changes, yet only a minority of firms possess the appetite for this scale of change. ëThe real money is in longevity, which means innovation, which means playing offense against oneselfí (Goldstein, 2012). The actions from these firms, while at times difficult to discern in isolation, help signal their strategic intent. Joseph Schumpeterís book Capitalism, Socialism, and Democracy, first published in 1942 (Schumpeter, 1947), showed that innovation can lead to a temporary source of economic market power, that creative destruction is a necessary yet not wholly sufficient condition for long-run success. In the postal industry, operators whose objective is simply to maximize total pieces mailed are faced with mortal challenges in a strategic strike world, where marketers are ever focused on increasing the response rate of direct mail advertising pieces. Consumer marketing has moved toward individualized customer experiences paired with same-and next-day low-cost delivery service offerings. Other niche firms have responded to customer needs and moved to offer these services more quickly than the US Postal Service (USPS). To survive in the competitive product space, USPS must decide in what markets it wants to participate, in what markets it does not, cannibalize and exit some markets, and innovate in new ones.

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