The world is constantly changing, particularly in booming industries such as logistics. Globalisation, increased outsourcing, customers’ demand for global coverage and integrated services are just a few examples of how the external environment affects logistics companies. Based on an external audit for logistics companies with focus on competitive forces, the thesis answers three main questions, which step-by-step answer the main question of how logistics companies should react to the changes in the external environment.
Firstly, based on market estimates about future growth rates of the industry it is assessed whether a growth strategy is a feasible grand strategy for logistics companies. The outcome is that the logistics industry is booming and therefore a growth strategy is feasible.
Secondly, it is assessed whether mergers and acquisitions (M&A) are a feasible growth option by conducting an event study of logistics M&A transactions for the past decade. The results show that it can not be proven that logistics M&A destroy value for the acquirer and in some cases it can even be proven that they enhance the value of the acquirer. Therefore, it can be concluded that M&A are a feasible growth option for logistics companies.
Thirdly, the main challenges for logistics companies from the external environment and the implications for their M&A strategy are discussed. The largest challenges within the industry include the rise of BRIC countries and the integration of freight forwarding and contract logistics. An expansion to China for example is mainly done organically due to the lack of suitable takeover targets, while the combination of freight forwarding and contract logistics is often done through M&A. Capital markets react positively to an integration of the two industries and strategic reasons support this combination too. Shipping lines and railway companies are expanding into logistics competing with logistics companies for the business as well as in M&A tenders. A key in the logistics industry is to get direct access to customers. Shipping lines and railways expanding into logistics and freight forwarders expanding into contract logistics are examples of securing access to customers to realise cross-selling potentials.
Table of Contents
1 Introduction
1.1 Problem description and aims
1.2 Structure and methodology
2 Theoretical background
2.1 Strategic planning
2.1.1 Strategic management process
2.1.2 External vs. internal factors
2.2 External audit
2.2.1 External forces
2.2.2 Competitive analysis
2.3 Growth strategies
2.3.1 Organic growth
2.3.2 Mergers & Acquisitions
2.3.2.1 Forces for M&A
2.3.2.2 Motives for M&A
2.3.3 Organic growth vs. M&A
3 Logistics market
3.1 Market overview
3.1.1 Sub-industries
3.1.2 Modal split
3.2 Shipping lines
3.3 Ports and port operators
3.4 Air carriers and air ports
3.5 Intra-European transport
3.5.1 Road transportation
3.5.2 Rail transportation
3.5.3 Inland shipping
3.6 Freight forwarding
3.7 Contract logistics
3.8 Historical M&A activity
4 External audit for logistics companies
4.1 Economic forces
4.2 Social, cultural, demographic and environmental forces
4.3 Political, legal and governmental forces
4.4 Technological forces
4.5 Competitive forces
4.5.1 Shipping lines
4.5.2 Ports and port operators
4.5.3 Air carriers and air ports
4.5.4 Intra-European transport
4.5.4.1 Road transportation
4.5.4.2 Rail transportation
4.5.4.3 Inland shipping
4.5.5 Freight forwarding
4.5.6 Contract logistics
5 Implications for the M&A strategy of logistics companies
5.1 Is a growth strategy feasible?
5.2 Are logistics M&A value enhancing?
5.2.1 Event study for logistics M&A
5.2.1.1 Methodology
5.2.1.2 Results
5.2.2 Long-term effects of logistics M&A
5.3 Main external forces for logistics companies
5.4 Implications on M&A strategy from developments in related industries
5.4.1 Shipping lines
5.4.2 Ports and port operators
5.4.3 Air carriers and air ports
5.4.4 Intra-European transport
5.4.4.1 Road transportation
5.4.4.2 Rail transportation
5.4.4.3 Inland shipping
5.5 Implications on M&A strategy from developments within the logistics industry
5.5.1 Rise of BRIC countries
5.5.2 Integration of freight forwarding (FF) and contract logistics (CL)
5.5.2.1 Positioning of logistics companies
5.5.2.2 Profitability of different segments
5.5.2.3 The rationale of integrating FF and CL
5.5.2.4 Attractiveness of the combined industry
5.5.2.5 Empirical research on the combination of FF and CL
5.6 Summary
6 Conclusion
Objectives and Research Focus
The primary objective of this thesis is to examine how European logistics companies can respond to dynamic external environmental changes, such as globalization and increased outsourcing, by adopting effective growth and M&A strategies. The research aims to clarify whether external conditions support expansion, whether M&A are value-enhancing, and what specific strategic implications arise from these environmental forces.
- Analysis of external forces (economic, social, political, and technological) affecting the logistics industry.
- Evaluation of the feasibility of growth strategies, specifically distinguishing between organic growth and M&A.
- Assessment of the logistics market structure, including sub-industries like freight forwarding and contract logistics.
- Investigation into the value-enhancing potential of M&A for logistics companies through event studies.
- Development of strategic implications for industry decision-makers, focusing on the convergence of freight forwarding and contract logistics.
Excerpt from the Book
3.6 Freight forwarding
Freight forwarders act as intermediaries and organise the transport of freight for their customers, typically utilising sub-contractors to actually transport the freight. It is essentially a brokerage with an asset-light structure. The following figure describes the business model of freight forwarders.
Freight forwarders usually outsource transport operations to sub-contractors. Forwarders generally do not own aircraft or ships (therefore subcontracting the companies mentioned in the industries described above), while chartering aircraft to ensure a base level of capacity in peak seasons may occur. In road transport, different models exist. Forwarders may subcontract transport to agents (e.g. Panalpina), have their own network of depots and subcontract transport to truck owners (e.g. DSV, Kühne + Nagel) or own their network and fleet of trucks (e.g. Schenker).
In contrast to asset owners (e.g. container shipping lines, airlines, trucking companies), freight forwarders (in their original sense as an asset-light business) are independent of freight rates as changes are passed on to their customers. They usually earn their profit for the services rendered and not as a mark-up on the transportation service itself. While for example a 10% increase in freight rates, all else being equal, would result into an EBIT improvement by 100% for a container shipping company, it would not affect a freight forwarder’s EBIT.
Freight forwarders consolidate shipments from various customers and deliver larger consignments to the asset owners. This way, they optimise the volume and weight of the consolidated shipment and achieve lower costs than a customer would achieve individually. The ability to consolidate and efficiently use sub-contractors depend on the size and scope of the freight forwarder’s network, sector knowledge and its IT capabilities. Freight forwarders with IT systems that can organise and track shipments are also able to offer standardised time-definite products (delivery of goods at a specified time), a service that is important for just-in-time deliveries. Freight forwarders are usually also offering services such as documentation and customs brokerage and in some cases value-added services such as quality control, order preparation, packaging or labelling. Traditional freight forwarders are increasingly offering complex logistics solutions driving them to expand into contract logistics.
Chapter Summary
1 Introduction: This chapter defines the core problem regarding external environmental changes and outlines the methodology for the thesis.
2 Theoretical background: This section provides the strategic framework, focusing on strategic management processes and growth strategies (organic vs. M&A).
3 Logistics market: An introduction to the main participants of the logistics industry, detailing freight forwarding, contract logistics, and related sectors.
4 External audit for logistics companies: An analysis of external drivers including economic, social, political, and technological forces impacting the industry.
5 Implications for the M&A strategy of logistics companies: This central chapter evaluates growth feasibility, conducts event studies on M&A, and explores the integration of freight forwarding and contract logistics.
6 Conclusion: A final synthesis that summarizes the impact of external forces and the strategic necessity for logistics companies to adapt via integration and competitive differentiation.
Keywords
Logistics, Freight Forwarding, Contract Logistics, Mergers & Acquisitions, Strategic Planning, External Audit, Supply Chain, Globalisation, Market Consolidation, Porter's Five Forces, Event Study, BRIC Countries, Outsourcing, Asset-Light Model, Synergies.
Frequently Asked Questions
What is the core focus of this thesis?
This thesis examines the key challenges posed by the external environment to European logistics companies and how these companies can formulate M&A strategies to maintain a competitive advantage.
What are the central thematic fields?
The work covers strategic management, the logistics market structure, external audit factors, growth strategies (organic vs. M&A), and the strategic integration of freight forwarding and contract logistics.
What is the primary research goal?
The goal is to determine if an expansion/growth strategy is supported by external market conditions and to analyze whether M&A activities in the logistics sector create value for the acquiring company.
Which scientific methods are applied?
The author utilizes secondary research from market studies and annual reports for the market analysis and employs an empirical event study to analyze the financial performance and value impact of 97 selected M&A transactions.
What topics are discussed in the main section?
The main section covers an extensive external audit of the logistics market, the competitive forces in related industries, and detailed implications for corporate M&A strategies, including the rationale for integrating different logistics services.
Which keywords characterize this work?
Key terms include Logistics, Mergers & Acquisitions, Strategic Management, Globalisation, and Contract Logistics.
Why is the integration of freight forwarding and contract logistics highlighted?
The thesis argues that this convergence is a strategic response to customer demands for integrated ("one-stop-shop") logistics solutions and serves as a necessary counter-measure against new market entrants.
What are the findings regarding M&A in the logistics industry?
The study concludes that M&A are generally value-enhancing for acquirers in the logistics sector and serve as a feasible and important growth strategy, especially when moving toward integrated logistics solutions.
- Quote paper
- Hannes Mungenast (Author), 2008, Key challenges for European logistics companies and implications for their M&A strategy, Munich, GRIN Verlag, https://www.grin.com/document/229999
