Logistic is an essential part of commerce
Logistic is an essential part of commerce everywhere in the globe and as the commerce of a country grows, so does its logistic industry. China is the pioneering country in the continuous logistic market growth where it grew to thesize of USD1.59 trillion and being ranked as the world’s largest logistics market (Investment Promotion). In addition, it’s expected to reach $450 billion (Goh). Although, the Chinese market is the dominant market, studies show weakness in the Chinese logistics market and this creates shining foreign investment opportunities that are encouraged by the state (http://www.china-briefing.com/news/2015/03/20/breaking-news-updated-guidance-catalogue-foreign-investment-industries-released.html).
As the ecommerce industry within China grows, China became a fertile ground for investment in the express sector of logistics. As an owner of a medium sized Logistics company, I would invest in the domestic and international express transportation market that have the most projected growth and profit margin in 2010-2015 (Goh).According to a recent study done by Deloitte, “At an average annual compound growth rate of 45.1%, China has leapt to the largest express delivery market in the world. In the same period, revenue from express delivery business has jumped from RMB40.8 billion to RMB204.5 billion, increasing four times and posting an average annual compound growth rate of 30.8% in seven years.” (Investment Promotion) Express transportation market growth has a positive correlation of the growth with the e-commerce and it’s actually impacted by consumers’ behavior. For instance, the increase in the GDP per capita plays a significant role in the growth of ecommerce industry (Banker). A report by iResearch suggests that e-commerce in china increased from 3.8 billion in 2006 to $27.7 billion in 2008 (Goh).
Investing in such a high growing market with a focus on adding value to the service provided is a deal breaker in the chines express market since the behavior of the Chinese consumer is changing and consumers are changing their priorities. For instance, the Logistics market in general is setting higher requirement for the quality of service like never before in addition to the fact that price is becoming less significant (Goh). New leaders of the express industry will have to do more than delivering goods from one point to another; they will have to offer value added services that give them competitive advantages (Goh). Therefore, It’s important to insure that the new Express segment of the company will offer added value services that differentiate it from other competitors. One of the key differentiators of the new Express company has to be an advancement of the information technology and high quality and reliable service.
Every business enterprise should have a vision that defines how it will be in the future. The vision of the express segment of the business is to expand and become the leading express company in China, In order for my company to move to “value growth” company that’s high profit oriented on a large scale, It has to grow inorganically through post-merger integration and cross-business synergies (Goh). The express segment that the $1 billion will be invested in occupies the same part of value chain (Goh). In such segment, expansion takes place in a horizontal consolidation way that standardizes and reduces the cost of services. Although acquisition has down sides like difference in the visions and colures, it has some advantages, especially in a growth market, like exposing to new sale channels and acquiring resources.
Location wise, newly established express transportation segment should operate in the north and west of China since it’s expected that consumption is growing due to recent large investments in these two regions (Goh). According to the Regional Economy Department of National Development and Reform Commission, In the first three quarters of 2009, retail sales of goods in the west region of china grew 19 percent year- over-year, which is 3.9 percent higher than the nationwide average (Goh). This high expected growth promotes all kind of transportation investments and as the express delivery market is positively correlated with consumption, north and west of China are possibly the ideal regions for investments in express transportation.Works Cited
Banker, Steve. “Chinese E-Commerce Giant Gives More Details about Its Logistics Capabilities in a New IPO Filing.” Forbes. Forbes Magazine, 18 June 2014. Web. 21 Feb. 2016.
Goh, Mui Fong, Chee Wee Gan, and Jian Li. “China 2015: Transportation and Logistics Strategies.” Atkearney. Atkearney, n.d. Web.
Investment Promotion Report of China’s Logistics Industry 2014-2015 Simplified Version. Rep. N.p.: Deloitte Research, 2015. Print.
Yao, Rainy. “Update: Latest Guidance Catalogue for Foreign Investment Industries Released – China Briefing News.” China Briefing News Update Latest Guidance Catalogue for Foreign Investment Industries Released Comments.DezanShira& Associates, 20 Mar. 2015. Web. 21 Feb. 2016.