Essay on Australia Post Loss 2015

Australia has a completely focused postal market. Australia Post has no restraining infrastructure in the postal market, yet has turned out to be a noteworthy player in the developing business to customer postal market. It is due to its scope of parcel items and its unique services, effective operations, the span of its dissemination networking strength and the way that Australia Post is required, similarly as practicable, to work in a way steady with sound business conduct. The key concentration of Australia Post's business is to help expansive and private venture clients and customers to send packages (Lawrence, Coelli & Kain, 2015). It is in the business interests of Australia Post to develop the interest for package conveyances by proceeding to remain client focused, enhancing new items and benefits and being the supplier of a variety of choice.

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The postal service market in Australia

Business in Australia has often been highly dependent on the mail service before the invention of the internet. The speed and efficiency of the services provided by the various players in the industry were key in determining the success of the nation. It not only signified an efficient part of Australian businesses but a significant player in the countrys social function as it enables communication and interaction among various communities in the country. However, the significant position of mail service in the Australian market has changed. The entry of other ways of communication including social media and email which companies find cheaper and timely have significantly affected the market influence of the mail service. Te volume of mail has dropped by up to twenty-five percent since the peak of these alternative communication services in the country. It means that the role played by various postal courier service providers in Australia has changed and the community opts for the services provided by the internet. Up to ninety percent of the mail sent in the country is by businesses and the government and these too are gradually moving away from mail. The mail service market is dominated by Australia Post which is the main provider of such services in the country.

Australia post loss in 2015

The company experienced a continued decline in its traditional letter business in the year 2015. The losses were up to two hundred and twenty-two million dollars full-year loss. It is a company owned by the government, and the loss indicated the first huge loss for both the government and the company for the past thirty years (Thomsen, 2016). However, the company had recorded profits of up to one hundred and sixteen million dollars in 2014. The volume of addressed letters reduced by 7.3 percent and the ordinary stamped letters decreased by up to 10.3 percent. These decreases led drove the three hundred and eighty-one million dollar loss in the mail business. The losses were blamed on the gradual decline of the use of mail service by the country and the one hundred and ninety million dollar provisions that were made for the job cuts made by the company in June of 2015. The company let go one thousand nine hundred employees who presented more costs for Australia post (Thomsen, 2016).

The diagram below represents the companys performance between the years 2015 and 2016

Source: https://www.businessinsider.com.au/australia-post-is-back-in-the-black-but-says-it-will-still-lose-1-5bn-on-letters-over-5-years-2016-8New pricing strategy for Australia Post

The company developed a new working strategy at the beginning of 2016. On the 4th of January, the company would see regular letters being delivered two days slower than its priority service which was still under its previous delivery timetable (ACCC, 2016). It would continue to deliver letters five days every week, and the company became subject to a community service obligation. It meant that it needed to deliver 94 percent of the letters in the expected time or even higher. The price increase in the mail delivery service was necessary for the company to gain sustainability in the future. However, the government chose to retain the prices of regular stamps at 0.60 dollars, and the seasonal greeting card stamps remained at 0.65 dollars. The price for ordinary letters would increase with that of small letters rising from 0.70 dollars to 1.00 dollar, large letters up to one hundred and twenty-five grams would increase from 1.40 dollars to 2 dollar, and that of large letters weighing between 125g and 250g would increase from 2.10 dollars to 3 dollars (ACCC, 2015).

Letter service Price by 2015 Proposed price

Small letter (BPR) $0.70 $1.00

Large letter up to 125g $1.40 $2.00

Large letter over 125g up to 250g $2.10 $3.00

Source: ACCC decision on Australian Postal Corporation 2015 price notification December 2015

The company applied the economy pricing strategy where it reduced its costs in other operations including marketing and production to ensure that even though the prices increased, the consumers would access the services without strain. The product prices may have increased, but Australia Post ensured that the new price was at a consumer friendly level.

It is clear that the mail market presents a challenge to all the players in its space. The demand for its services is slowly going down with the entry of other faster and cheaper communication avenues into the market. Australia Post is significantly affected by the change, and it is evident in the losses the company continues to incur especially in 2015 which marked its greatest loss yet. The company may continue to experience such instances as people across Australia move towards the use of the internet as an easier and cheaper mode of communication.

References

ACCC (2015). ACCC decision on Australian Postal Corporation 2015 price notification December 2015

ACCC (2016). Assessing cross-subsidy in Australia Post 201415

Lawrence, D., Coelli, T., & Kain, J. (2015). Updated Estimates of Australia Posts Mail Centre and Delivery Centre Cost Elasticities

Thomsen, S. (2016). Australia Post is back in the black, but says it will still lose $1.5bn on letters over 5 years. Business Insider Australia