Table of Contents

Progress in the Competitive Agenda in the Postal and Delivery Sector

Progress in the Competitive Agenda in the Postal and Delivery Sector

Advances in Regulatory Economics series

Edited by Michael A. Crew and Paul R. Kleindorfer

Regulation continues to be an important issue in the postal and delivery sector of the global economy. This latest volume of the series covers progress made in the competitive agenda in the industry. It is global in scope and addresses topics of great importance to scholars and practitioners of postal regulation and public sector economics.

Chapter 19: Market Entry and Competitive Strategies in the German B2B Parcel Market

Helmut M. Dietl, Markus Lang, Martin Lutzenberger and Stephan M. Wagner

Subjects: economics and finance, public sector economics


Helmut M. Dietl, Markus Lang, Martin Lutzenberger and Stephan M. Wagner 1 INTRODUCTION The objective of this chapter is to analyze market entry and competitive strategies in the German business-to-business (B2B) parcel market. This analysis is timely, because Red Parcel Post – a potential new entrant into the market – has announced plans to enter the market in the near future (Böhmer and Cremer, 2004; Triangle Management Services, 2006). Several logistics and parcel industry insiders are involved in this new venture, including the former executive board member of Deutsche Post World Net who was responsible for the parcel business, and the former owner of a large road forwarding company. The ownership structure of Red Parcel Post consists of several holding companies held by these industry insiders and several other investors. We describe Red Parcel Post’s business strategy and develop a game-theoretic model to analyze the effect of its market entry on competition, market shares, prices, costs and profits. We use a Cournot model with economies of scale and different cost functions. First, we solve the model analytically to derive qualitative results. In a second step, we simulate market entry and competition by calibrating the model with data from the German B2B market. Our chapter differs from previous work because it takes into account a new parcel delivery system and distribution network – with inherently different cost structures from the established multi-hub-and-spoke networks. In particular, our chapter differs from De Donder et al. (2002) who model the...

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