Performance and Competition of Logistics Service Providers in Hungary

Abstract

The bankruptcy of a fast-growing logistics provider claiming to have aremarkable market share can seriously shock the customers and thebusiness community. On choosing the next provider, they will pay moreattention to company size, growth and corporate performance indicators.Do they affect one another and, if yes, to what extent? Is there a direct oran inverse effect? What is the ‘measure of competition’ in the logisticsservice providing sector?It is widely discussed whether time-based competition and through it theenhancement of market concentration has favourable or adverse effects onthe profitability, productivity and efficiency of companies. Severalresearchers have found a positive relationship between marketconcentration and profitability as well as efficiency. However, boththeoretical and empirical research confirms that, on markets with moderatetechnological development and innovation (e.g. logistics), where lots ofplayers are involved in the activities and competition works efficiently, themargin approaches zero. In such cases, the price–cost margin can indicatethe strength of competition relatively well.The statement that can be found in international literature and that can beobserved in the Hungarian practice as well – that is, along with the increaseof competition, the price–cost margin decreases – is backed up by theanalyses carried out in database. The connection between the concentrationof the class, the price–cost margin and profitability can be proved. Thecorrelation between price–cost margin and profitability indicators in highlyconcentrated classes is even stronger. Based on the calculations with the2001–2006 figures of companies belonging to the economic sector andhaving double-entry book-keeping, we could rather say that productivitycan be increased by enhancing market share, and not that market share canbe enhanced by increasing productivity.