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Europe’s postal market

Liberalisation and economic crisis as a challenge and opportunity


The market environment in Austrian Post’s historically grown core markets i. e. communications, logistics and retail continues to change. Preparations for the liberalisation of the letter mail market in 2011 and the global economic crisis pose new challenges to postal companies. However, these developments offer Austrian Post in particular the opportunity to further develop its business successfully.

■ In the communications market, cyclical changes are usually noticeable very quickly. However, as part of the communications market, the letter mail market typically demonstrates a lower level of dependency. The significant differences in the per capita volume of letter mail in the specific national markets can be attributed to the economic performance, particularly the infrastructure, as well as the different traditions in communications behaviour.

■ The overall economic development is a decisive influencing factor in the logistics market. In particular, the subdued mood in the industrial sector has a significant impact on the express mail market. The integrators on the global market e. g. UPS, FedEx and DHL have all been forced to repeatedly revise their forecasts downwards in the light of the pronounced economic downturn. Customers change from express delivery services (air cargo) in favour of less expensive road transport. However, the sluggish development of the B2B parcels business at present is counteracted by growth in parcels sent by e-commerce providers to private customers.

■ Changes have also been identifi ed in the retail segment (branch network) as a consequence of the financial crisis. These developments primarily impact the fi nancial services industry. The aversion to risk taking and the accompanying focus on more conservative forms of investment open up interesting future perspectives for financial service providers with a strong foothold in the retail banking segment, for example postal banks.

Business model and strategy

The business strategy of the Austrian Post Group is based on achieving two main goals:

■ The ongoing further enhancement of enterprise value by expanding the geographical outreach of the business model and the upstream and downstream orientation of the value chain, with the underlying purpose of safeguarding the company’s long-term competitiveness and
■ ensuring the nationwide provision of high quality services to the Austrian population.

High volume business: efficiency and customer orientation
Similar to other postal companies, Austrian Post’s core operations represent a traditionally high volume, mass business subject to the laws and principles governing such activities. Based on a strong brand, this consists of
■ a good price-performance ratio,
■ ongoing optimisation to ensure market-driven cost structures and
■ continuing further development of the business model in the light of changing customer requirements.

In accordance with this fundamental understanding, the efficient structuring of all corporate processes and the systematic expansion of the company’s customer orientation comprise the main elements of Austrian Post’s corporate management.

Top performance as the yardstick
Austrian Post orients its operations to the leading market positions, which the company traditionally has on the Austrian market, but which also comprise corresponding responsibilities and challenges for the future. The top priority and decisive success factor is achieving top-notch performance for our customers.

Outstanding performance as a success factor
■ Nationwide customer proximity
■ Retention of customer confi dence and loyalty
■ Effi cient networks
■ Synergies among submarkets
■ Ongoing extension of the value chain
■ Increasing internationalisation

Three strategic approaches
The core strategy of Austrian Post is based on three main strategic approaches which are reflected to varying extents in the business operations of each of the three divisions:
1. Optimisation of the core business and greater customer focus
Austrian Post is continually striving to optimise its performance, being fully aware of the challenges posed by a liberalised market, which are
manifested in other countries in the form of aggressive competition featuring “low-cost policies”.

In the past few years, the company and its employees have demonstrated a high level of flexibility in the implementation of the required steps, and will continue on this successful path in the future. This approach will not only help Austrian Post to live up to customer expectations with respect to reliability and competence, but also fulfil the increasing demands on profitability, which is required to ensure the nationwide
provision of high quality postal services on behalf of the Austrian population.

A key focal point of Austrian Post’s further strategic development is the timely adaptation of structures tailored to the changing market and competitive environment. The improvement of processes and the efficient management of resources comprise just a few of the optimisation measures designed to achieve this goal. Furthermore, Austrian Post is also placing emphasis on the evaluation of innovative business
and operating models. In the light of the upcoming liberalisation of the letter mail market in 2011, greater importance is being attached to such new concepts, for example the postal partner offices (Post.Partner) in the branch network or the cooperation with reliable partners in delivering mail items.

2. Extension of the value chain and specialisation in profi table niche markets
The high level of confidence customers have in Austrian Post as their long-term partner is the basis for systematic further development
of an attractive and comprehensive portfolio of services. Austrian Post has launched specialised services in recent years such as address management, geomarketing, document printing, digitalisation and mailroom management, in an effort to serve as a single provider offering complete services, particularly to its business customers. Austrian Post is continuing to develop new solutions – ranging from
multi-channel dialogue marketing and cooperative advertising in the letter mail segment to temperature-controlled pharmaceutical logistics or a comprehensive, European-wide combined freight system in the parcels segment.

3. Internationalisation and positioning as a local integrator
Austrian Post exploits synergies in its domestic market, for example the joint delivery of parcels and letters in rural areas. At the same time, it
is also focusing on the transfer of know-how, trust and customer orientation within the context of its international activities. Numerous successful expansion steps in South Eastern Europe, Eastern Europe and Western Europe confirm the effectiveness of this strategy. Since the internationalisation drive of Austrian Post was first initiated in the year 2001, the share of total revenues generated outside of Austria
could be increased to 30% thanks to its diversification and growth-oriented acquisitions.

The acquired companies are systematically being further developed by exploiting market dynamics. Examples are the development of special B2C logistics featuring parcel shops in South Eastern and Eastern Europe, the further development of sales companies abroad or various investment projects targeting existing facilities and subsidiaries. In this regard, several logistics centres in Slovakia, Croatia and Germany (meiller direct and trans-o-fl ex) have been newly constructed, modernised or expanded. This approach not only enables Austrian Post to establish a stronger foothold in local markets, but increases its attractiveness as a partner for international customers and logistics companies. Following a series of acquisitions carried out in recent years, the top priority is now the networking and integration of these companies in terms of their service offering and logistics.

Austrian Post focuses on three different aspects in terms of the acquisitions it carries out. The particular acquisition should enable Austrian Post to occupy attractive niche markets, the potential acquisition must be located in a growing market, and finally, the acquisition must provide the basis for further upgrading existing competencies in the Austrian Post Group.

Mail Division

Business operations

The Mail Division encompasses three business areas, namely Letter Mail, Infomail and Media Post. The division’s core business consists of the acceptance, sorting and delivery of letters, postcards, addressed and unaddressed direct mail items, newspapers and regional media. The delivery staff, comprising 11,300 people, deliver mail every day to a total of 3.9m house holds and companies. This range of services is
complemented by new business services along the value chain for business and advertising mail (e. g. analysis, consulting and planning, address and data management, mailroom services, intelligent scanning and response management).

Market environment and trends
On balance, the market environment for letter mail, ranging from letter, addressed mail items to magazines, is markedly stable. The decline in mail volumes and the corresponding substitution of letters by electronic information are compensated by new communications requirements and the development of new service offerings.

The letter mail market is being shaped by the following trends:
■ The increasing use of electronic communications leads to a slight but ongoing decline each year in letter mail volumes.
■ However, new forms of communication also open up new opportunities and perspectives, in particular if a dialogue with the target group is to be established (e. g. absentee voting, customer identification for online banking).
■ New services along the value chain of the information fl ow are created (e. g. scanning and printing services).
■ For many companies and sectors, direct communication with the end customer have become absolutely indispensable. For this reason, the application of target group specific addressing and dialogue approaches in advertising is increasing.

Strategy

Continuity in the core business
The core business of Austrian Post in the Letter Mail business area consists of the delivery of addressed, partially addressed
and unaddressed mail items. In this business area, Austrian Post primarily relies on efficient logistics and sustainable customer value.
Austrian Post adds impetus to the business activity in stable markets by means of customised branch solutions. At the same time, further efficiency improvements in the sorting and delivery process support the company’s preparations for the full-scale liberalisation of the postal sector. Austrian Post not only aims to maintain but also to strengthen and expand its market position.

Direct marketing: alternative services and regional expansion
The integration of alternative models in the delivery process serves as the basis for optimising delivery processes and quality. Austrian Post will continue to pursue this course in the future. The success of this approach has been clearly demonstrated by feibra Austria, the leading
alternative provider of delivery services for unaddressed direct mail items. Accord ingly, Austrian Post is pushing ahead with its efforts to acquire market leading companies in South Eastern Europe and Eastern Europe which provide alternative postal delivery services.

Expansion of the value chain
In addition to the acceptance, sorting and delivery of postal items, Austrian Post offers an extensive range of new services in the fields of production, address and response management as well as business process out sourcing. These services are made possible by the Austrian
Post subsidiaries, meiller direct (full service provider for direct marketing), Scanpoint (specialist for scanning solutions) and D2D (printing, enveloping and data transfer services), as well as the expansion of sorting centres. The portfolio of services ranges from address management, target group planning, printing and enveloping mail items to the digitalised internal distribution of postal items for customers.

In the meantime, Austrian Post can now offer all services along the value chain of physical information exchange “under one roof”, and develops individual, tailor-made customer solutions.

Process optimisation in logistics
Logistics services represent the core business of Austrian Post. Potential efficiency improvements are being continuously identified and implemented in respect to the distribution, sorting and transport of goods. In 2008, the focus was on optimising and improving indoor
and outdoor processes by means of new time values and sorting desks, a change in the pre-sorting process in Vienna, the integration of parcel delivery services in the Letter Mail business area and the initial use of environmentally-compatible gas-driven vehicles.

Highlights 2008

Ongoing efficiency improvements in logistics processes
Austrian Post once again succeeded in raising efficiency in 2008, which is reflected in higher sales productivity, the reduction in full-time employees through new time values for indoor and outdoor work, and process optimisation using new sorting belts, optimised route planning and state-of-the-art information technology.

Change in the pre-sorting process in Vienna
The pre-sorting work in Vienna previously carried out at 21 locations was moved to the Vienna Letter Centre. Since September 2008, this unique facility in terms of size, encompassing an area of more than 7,000 m2, has been sorting more than 1.25m mail items daily according to the respective postal districts.

Expanded scope of services due to new acquisitions
Austrian Post is represented in Hungary through its subsidiary feibra Hungary. In addition, a 100% stake in Cont-Média Kft, the number two
provider for unaddressed direct mail items, was acquired, thus expanding Austrian Post’s outreach to Western Hungary. The shareholding acquired in D2D (direct to document) together with Raiffeisen Informatik GmbH also enables Austrian Post to offer printing, enveloping
and data transfer services.

Parcel & Logistics Division

Business operations
The Parcel & Logistics Division of Austrian Post is already represented in ten countries with its own subsidiaries. With the exception of Austria, the service offering focuses on business customers. However, the boundaries between the private and business customer segments are becoming increasingly blurred. Austrian Post relies on nationwide services and a preferably strong market position as the basis for offering customers’ effi cient logistics and additional services tailored to the needs of the respective market.

Europe-wide service via EURODIS
Standardised parcel and pallet transport and delivery services throughout Europe are provided by EURODIS network, of which the Austrian Post subsidiary trans-o-fl ex was one of the founding shareholders. EURODIS relies on the area-wide logistics networks of several partners. The Parcels & Logistics Division of Austrian Post, with more than 4,000 employees at 163 locations supported by delivery staff and longdistance lorry drivers, is the leading partner of this European network.

Market environment and trends
The parcel and logistics market in 2008 was characterised by increasing volumes, a development which was hardly slowed down by the rapid economic downturn at the end of the year. Stagnating business and ongoing intense competition are expected in 2009.
The most important trends:

■ The development of international business will continue to lead to the transfer of production operations to low-wage countries. The resulting increase in trade and transport volumes, also from South Eastern and Eastern Europe, will open up new opportunities for logistics service providers which have established a foothold in these markets.
■ Demand on companies to increase the profit contribution from logistics operations above and beyond cost-cutting measures is continually rising.
■ Dynamic development of the Internet-based mail order business.
■ It is becoming increasingly important to limit security risks in transporting goods.
■ Political decision makers, senders and recipients of mail items are attaching greater importance to “green” solutions in the logistics sector.
■ The quality of the IT technology in use has increasingly emerged as a decisive success factor for transparency and efficiency and value-added customer service.

Strategy


“We link our customers to their own customers and strive to ensure that our logistics chain offers real added value to senders and recipients”. With the development of this vision, Austrian Post initiated a strategic development process in the Parcel & Logistics Division in 2008 designed to focus even more intensively on the needs of customers and the service offering. This vision has been elaborated by the following core strategic targets and supported by the development of appropriate measures:

■ Profi table growth over market trends
■ Increase in productivity and quality
■ Optimal combination of services and costs
■ Responsibility for protecting the environment

As a result, the Parcel & Logistics Division has been equipped with a strategic framework ensuring a goaloriented and value-enhancing further development. In addition, all subsidiaries of the Parcel & Logistics Division offer so-called “combined freight” services, i. e. the joint pick-up, transport and delivery of parcels and pallets. Accordingly, Austrian Post is one of the very few logistics companies which are capable of
processing parcels and pallets together, providing a considerable competitive advantage and the basis for further strengthening its position in the individual markets. Austrian Post’s strong positioning in providing logistics services for the pharmaceutical sector ensures the success of this business model and the basis for further expansion.

Highlights 2008


Restructuring and B2B expansion in Austria
The restructuring of the parcels business on Austrian Post’s domestic market was completed in 2008. A sorting centre was relocated and eight parcel delivery bases were merged. Towards the end of the year, the company aligned its operations in accordance with a new production plan, which not only offers customers shorter delivery times but also an extension of sorting centre deadlines for accepting
parcels for next day delivery. The expansion of the B2B business has been successful, leading to a dramatic rise in parcel volumes, and the integrated letter mail and parcel delivery service has also produced positive results. The Internet mail order business continues to develop dynamically.

Brand expansion of trans-o-flex
All the companies in the trans-o-fl ex Group (including the speciality logistics company trans-o-fl ex Thermo med) now operate under the joint brand name trans-o-fl ex Logistics Group. Austrian Post will more intensively exploit its experience in providing combined freight services, and also apply its logistics software in South Eastern and Eastern Europe.

Expansion of temperature-controlled transport
In 2008, Austrian Post entered the market for tem perature-controlled transport of goods in the Benelux countries. Austrian Post is already successful in the German market with its subsidiary Thermo med and in Austria with Scherübl Transport. As a consequence, the Group will be able to provide services for a majority of the most important European pharmaceutical producer and customer markets in the future.

New sorting centres in Slovakia and Croatia
The strategic investments of Austrian Post in South Eastern and Eastern Europe have generated increasing parcel delivery volumes. For this reason, construction has begun on new central postal sorting centres in both countries, along with three regional sorting centres in Slovakia.

Successful integration
In addition to the integration in the Austrian Post Group of the subsidiaries in Serbia, Montenegro and Hungary acquired in 2007, the basis for the merger of the two subsidiaries Road Parcel and Merland Expressz in Hungary was established. Since the beginning of 2009, Hungarian customers can now ship parcels and pallets by using a single service provider.

Market entry in Bosnia and Herzegovina
24VIP Logistics Services, which specialises in the transport and delivery of parcels and individually packaged goods in the B2B segment, has been part of the Austrian Post Group since October 2008. It enables the Austrian Post Group to offer services throughout Serbia, Croatia and Bosnia and Herzegovina.


Branch Network Division


Business operations
The Branch Network Division of Austrian Post offers high-quality products and services to its customers throughout Austria in the fields of banking, postal and communications services.

With a total of more than 1,500 company-operated branches and third-party operated outlets, 400 other postal service points and close to 5,000 employees, the branch network ensures both customer proximity and the best possible access to infrastructure and communications.

The results achieved in 2008 speak for themselves: about 67 million customer visits, 560 million letters and parcels mailed in the branch network, approximately 900,000 PSK banking customers, around 10.3 million cash deposits, 127,000 mobile telephones sold and roughly 73,000 contracted Internet connections. Austrian Post serves its customers each and every day.

Market environment and market trends


The branch network of Austrian Post ranks among the largest private customer networks in the country. Moreover, Austrian Post has a leading position in selling telecommunications products (mobile and fixed line telephony), and operates one of the largest banking networks in Austria in cooperation with PSK Bank.

The market environment is being impacted by numerous competitors in different fields, for example banks or specialised retailers for communications and office products.

In the telecommunications sector, one of the market trends is the sale of additional applications to complement fixed-line services (“one-stop shop”), in particular ADSL connections, to enable people to watch TV (e. g. aonTV). In the mobile telephony segment, the trend is towards promoting mobility, also in the case of Internet use, for example based on A1 applications such as mobile surfing combined with free hardware telecommunications products are relatively dependent on the overall economic climate.

In the current financial market environment, the trend in banking services is currently on secure investment products such as savings books and funds, as well as simple and quick financing products. In this regard, PSK Bank is positioning itself as a bank with secure and simple financial products featuring a good priceperformance ratio.

Strategy


Branch network: Standardisation and customer service promise
The Branch Network Division was subject to a reorientation and reorganisation of its business operations in 2008. This redimensioning
process was designed to adapt more quickly and systematically to changed customer needs, optimally configure the postal branches to market requirements and create a more streamlined organisation to provide even more support to sales efforts.

Promotion of banking services
At present, more than 500 financial consultants of PSK Bank in the postal branches and 60 mobile consultants provide customers with competent advisory services regarding financial issues. The aim is to attract an even larger number of customers, who will potentially
decide to purchase high quality financial products such as insurance policies or investment products in addition to standard products. At the same time, innovative and easily understandable products with an attractive price-performance ratio are continually being developed to attract retail customers.

KMU-Postdienstleistungen im Filialnetz
Seit 2007 steht die optimale Betreuung der kleinen und mittelständischen Unternehmen im Mittelpunkt der Aktivitäten. Ziel ist es, den Kunden aus
dem umfangreichen Leistungs- und Serviceportfolio der Österreichischen Post AG die jeweils optimale Versandform anzubieten. Dafür wurden österreichweit mehr als 300 „Postdienstleistungs-Kompetenzentren“ – Filialstandorte mit speziell ausgebildeten Verkaufsberatern – ausgebaut.

SME postal services in the branch network
Since 2007, a top priority has been to provide optimal customer-care services to small and mediumsized enterprises, with the purpose of offering customers the optimal mailing solution in each case from Austrian Post’s extensive portfolio of products and services. More than 300 “postal service competence centres”, namely branch offices with specially trained sales consultants, have been expanded throughout Austria.

Securing a nationwide branch network
At present, Austrian Post is offering its entire range of services at 1,500 company owned and third party operated outlets, and 400 additional postal service points are at the disposal of customers. The postal market will strongly change due to the upcoming liberalisation of the European postal sector as of 2011. Austrian Post has to respond quickly to this challenge. Austrian Post is committed to providing universal
postal services throughout the country. Therefore, a focal point of its efforts is the expansion of alternative operating models in the branch network.

In particular, the concept of the Post.Partner (postal partner offices) has proven its value. Customers appreciate the longer opening hours which exist at most locations, the infrastructure of municipalities is maintained, the postal partner offices profit from increased revenue and higher customer frequency, and Austrian Post strengthens its profitability by converting unprofi table branch offices into postal partner offices.

Highlights 2008


Sales mobilisation programme
In cooperation with PSK Bank, Austrian Post launched a sales mobilisation drive in 2008 to increase active sales in its branch offices. This employee development programme, the largest ever initiated in the branch network, is designed to optimise processes and strengthen sales competencies. The success of the sales mobilisation programme has been clearly demonstrated by the participating branch offices.

Ongoing modernisation of post offices
Austrian Post is continually optimising its network by renovating and modernising its network of post offices. Each year, about 50 post offices are completely being expanded and modernised. About EUR 10m was invested in 2008 alone. 70 financial consulting rooms and 32 SME advisory areas were constructed or upgraded in line with the latest standards in furnishings and equipment. In order to further increase the availability of its product offering Austrian Post has also installed self-service machines as well as expanding the opening hours of its branch offices. Simultaneously, targeted investments in the ongoing training and continuing education of employees in the banking sector and
sales people for telecommunications products have massively increased their consulting capabilities.

Communications and retail products – successful communication and expanded product line
In 2008, Austrian Post’s successful cooperation with its business partner and market leader Telekom Austria was further expanded. Consequently, the number of Internet connections sold in the branch network increased to about 73,000. The branch net work of Austrian Post ranks among the most important sales and distribution channels of the mobile phone provider mobilkom austria/A1. In 2008, Austrian Post once again achieved an increase in the sales of A1 contract mobile phones and initial registrations for mobile telephony services de spite a highly competitive market, thus considerably outperforming overall market growth.

Focus on philatelic products
In the field of philately, the year 2008 was exceptional in many ways. For one thing, significantly more stamps were issued than in previous years, due to UEFA EURO 2008™ and the Vienna International Postal Stamp Exhibition (WIPA). In addition, Austrian Post issued technically sophisticated stamps on a lenticular basis (including the world’s first 3D stamp), and also an embroidered commemorative stamp featuring
the gentian flower, which was awarded the distinction of being the most remarkable stamp issue in 2008.
Moreover, Austrian Post was entered into the Guinness Book of World Records for the world’s quickest printing of a postage stamp. Printing commenced immediately after the end of the soccer championship match at UEFA EURO 2008™ on June 29, 2008, and required precisely 1 hour and 25 minutes. On the same night, this stamp was already sold at 12:41 a.m. in the philately shop in Vienna.


Mission Statement


Stability, value creation and visibility

Our top priority is the sustainable maintenance and enhancement of enterprise value in the interests of all stakeholders. Our aspiration is to ensure the nationwide provision of high quality postal services to the entire population. As a local integrator
in our markets, our corporate behaviour focuses on promoting the ongoing further development of the company as the basis for fulfilling customer requirements.

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