Deregulation Of Motor Carrier Industry Essay

2192 words - 9 pages

- -Deregulation of the Motor Carrier Industry:A Study of LTL Management Size, Structure, and OrganizationCongress passed the Motor Carrier Act(MCA) of 1980, to introduce greater competitionin the motor carrier industry through significant reductions in entry barriers and price restrictions.While there has been lots of research into the impacts of motor carrier deregulation, little attentionhas been given to the effects of deregulation on management characteristics and structure. Somerecent work, however, looked at changes in size, structure, and organization of railroadmanagement, in response to the resulting deregulation from the passage of the Staggers Rail Actof 1980. That work documented some very specific changes in railroad management, in responseto the new environment. Some of the changes were: a decrease in the size of top executivemanagement teams and greater decentralization of responsibilities; more emphasis placed onmarketing and sales, with less on traditional operations orientation; and more reliance on younger,more educated managers, with less industry experience.Due to the implications of the rail research, there was reason to believe that similarimpacts may have been imposed during the deregulation of the motor carrier industry. To analyzethis effect on motor carrier management characteristics and structure, would be very extensive, soI will focus on the less-than-truckload(LTL) segment of the industry. The LTL segment is anappropriate area because the MCA led to a significant environmental change and upheaval withinthis segment. 1) Before deregulation, the government-sanctioned rate bureaus formed by LTLcarriers, in conjunction with the Interstate Commerce Commissions(ICC) restrictive entry(2)policies, resulted in the absence of effective competition among LTL carriers. Furthermore,LTL, customers, whose shipments ranged from 70 to 10,000 pounds had no feasible alternativesto LTL service. Private carriage was not an option, because many LTL dependent shippers hadshipments that were considered too small and they did not move at regular intervals. The U.S.Postal Service and UPS were not viable competitors, since their shipment size range was toonarrow for the full range of needs required by the LTL. Therefore, the new regulatory regimeprovided LTL carriers with substantial protection from competitive forces.A comprehensive review of the effects of surface freight deregulation confirmed thesignificant impact of deregulation on LTL carriers. This report will examine LTL managementteams, in both the pre- and post- MCA periods, in an attempt to assess changes since theregulatory reform. It will also look at the extent to which management changes influenced theperformance of firms. The highly regulated pre-MCA environment protected carriers fromcompetitive threats by new market entrants, (by virtue of highly restrictive entry policies imposedby the ICC). Furthermore, most pricing decisions were made collectively in rate bureaus...

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