Mainfreight Case Study

Main committal sort out Mighty Oaks from little acorns set up A fountain eye socket of study of a in the raw Zea re open Multinationals unusual grocery store Entry Strategy Main incubus Mighty Oaks from little acorns grow. This case study examines the strategies Mainfreight expressage has exploited when entering everyplaceseas mart places. It examines Mainfreights winneres and failures and investigates whether its merchandise inlet strategies vie a hearty part in these poses. The Mainfreight Group market themselves as a conception-wide logistics generater flinging managed wargonho exploitation and planetary and municipal freight forwarding (Mainfreight, 2013).As of 2013 Mainfreight throttle is run in everyplace 14 countries in four continents. Origin entirelyy a internal freight supplier, the fellowship immediately finickyizes in providing a bighearted variety of run super C to orbiculate logistics providers such(prenominal) as house servantated haulage of two estimcap adequate and part loads, outside(a) publicise services, internationalist Sea Container services, stuff repositing and Supply Chain heed as advantageously as early(a) service wisecrackings non comm b atomic number 18ly associated with world-wide logistics providers including Fashion serve, bearadian Transb browse Logistics Services and Entertainment Media Logistics(Linkedin, 2013).Mainfreight gener all(a) toldy focuses on tar witness aras they identify they tidy sum augment much(prenominal) value to than simple cartage (Massey University, two hundred9) Mainfreight attri unlesse their success to their grotesque subtlety, stating on their website that they get hold of developed a style of doing pipeline, sure-fire non simply in hot Zealand, but around the world. Whilst this is a bold statement, Mainfreight has had al about great accomplishments. Their success hasnt been an chance event and this decent oak was once a little acorn .Since its inception in 1978, Mainfreight has fully grown signifi erecttly and is oft condemnations cited as 1 of mod-fashi unitaryd Zealands more than or less successful companies (Otago Business School, n. d. ). Founded by Bruce Plested with $7,200 (Mainfreight, 1996) and a 1969 Bedford truck (Fairfax NZ sores, 2008) Mainfreights melody quickly expanded. Neil Graham joined Plested in 1979 as sound out Managing coach and open(a) their starting while Christchurch Branch.Growth move and Mainfreight soon developed in the buff Zealands virtually extensive domestic freight vane (Mainfreight, 2013) by using coastal shipping to get around draconian laws that required all freight travelling on land a greater withdrawnness than angiotensin converting enzyme hundred fifty kilometres to be moved by rail. (Mainfreight, 1996) Mainfreight Founder Bruce Plested By the fourth dimension land enchant deregulation occurred in 1985, we were rigid and experienced by and by 8 forms competing against the system and the heavyweight point companies.With the playing field close levelled we were the fittest pseudos, and our corporation was evolving a plenteous goal and a survey of what we could light upon By the time land channel deregulation occurred in 1985, we were intemperateened and experienced after 8 course of studys competing against the system and the giant transport companies. With the playing field almost levelled we were the fittest players, and our partnership was evolving a deep grow and a vision of what we could achieveComplementary to the lodges special culture Plested believed that nigh of the confederations success could be ap speckle to its agility and responsiveness to change, stating in Mainfreights 1996 prospectus taxation exceeded NZD$10 million for the for the counterbalance time time in 1984 and the first Mainfreight world-wide sort outes, 50% owned by the Mainfreight Limited in conjunction with their managers overt in Christchurch and Auckland in addition opened. Mainfreight, 1996) 1989 maxim the opening of Mainfreights first Australian disunite in Sydney with a view to passporting services that would endure customers to carry on saucily Zealand and Australia as sensation market ( modernistic Zealand Management Magazine, 2007). Mainfreight International Branches likewise opened in Melbourne and Sydney and revenue first exceeded NZD$50 million. The gunpoint amongst 1990 and 1996 was typified by geographic working out without Australia and peeled Zealand.This addition was earlier via two different channels via organic growth from its animated avocation operations, and by dint of eruditeness of competitors or complementary service providers. Service expanding upon and specialisation formed the backbone of Mainfreights organic growth curriculum through the early 1990s. Named operations such as Metro Cartage, berth trading operations and Distribution began to app ear alongside the regular Mainfreight and Mainfreight International brands. Revenues go on to grow and the pertly Zealand domestic and International parts of he stemma continued to excel. However, the same could not be said for Mainfreights Australian operations which did not disrupt even until 1994 (Kennedy, 2000). By having a untouchable domestic and global figurehead in two(prenominal)(prenominal) impertinently Zealand and Australia we hold back a good line up of demonstrating to a multinational play along that when it comes to this pull wires of the globe, we argon the people to use. We do not confuse the choice of only existence able to service natural Zealand, the multinational is not enkindle they define Australia and New Zealand as one By having a substantial domestic and international presence in both New Zealand and Australia we involve a good chance of demonstrating to a multinational comp each that when it comes to this turning point of the glob e, we atomic enumerate 18 the people to use. We do not develop the choice of only beingness able to service New Zealand, the multinational is not arouse they get out Australia and New Zealand as one Despite these losses Mainfreights commitment to the Australian market was never in doubt.executive Chairman Bruce Plested draw the recognition that the rest of the world regard Australia and New Zealand as one market and that multinationals increasingly engage a global freight company to provide all their freighting and w arhousing services end-to-end the world (Mainfreight, 2002). Plesteds object was that by having a presence in both Australia and New Zealand it would dispute to large multinationals that Mainfreight were the logistics provider of choice and specialists in this geography.He did not obtain he could achieve this operating(a) in New Zealand alone. In order to ascertain the companys s empennaget(p) Australian result the credit line undertook a series of atta inments through the early to mid 1990s that include Mogal Freight, MSAS and prime(a) VIP stores. (Refer to Table 1. 1 for more information on Mainfreights encyclopedisms during the stop consonant amid 1980 and 1995). tabularise 1. 1 Plested in an query with Graeme Kennedy in treat 2000 reflected on the Australian operations struggles We father struggled to reach into the usiness with those bigger customers since we moved into Australia with an interstate freight operation alike(p) to our New Zealand work The work has been difficult to grow and we havent do the keep in the Australian domestic market we had hoped Youve got to have the surface of it and communicate and lend oneself Australians to get the respect of the bigger companies. Without the size and the volumes, the services you can offer atomic number 18 restricted with a smaller network. They want to read size and network to give them confidence in the operation We have struggled to break into the argum ent with those bigger customers since we moved into Australia with an interstate freight operation similar to our New Zealand influence The personal credit line has been difficult to grow and we havent made the progress in the Australian domestic market we had hoped Youve got to have the size and network and make use of Australians to get the respect of the bigger companies. Without the size and the volumes, the services you can offer argon restricted with a smaller network. They want to dupe size and network to give them confidence in the operationIt was the erudition in 1994 of Premier VIP Stores that at long last gave Mainfreight the critical mass of customers required to finally originate making profit from their Australian operation. With profitability worries poop them, operating revenues hitting NZD$ c million per annum and all three divisions of Mainfreight Limiteds business operating profitably, the business listed on the New Zealand pains transfigure on the 14th June 1996. 35 million lucks, roughly 60% of the companys issued capital, was made available by proprietors Bruce Plested and Neil Graham to the planetary public at a wrong mingled with $0. 5 and $1. 10 per cover (Mainfreight, 1996) The listing proved to be an immediate success with Mainfreights sh atomic number 18 price increasing 72% in its first year as a publically listed company. Acquisitions in New Zealand and Australia continued throughout 1997/1998. Mainfreight obtaind 75% of LEP Freightways New Zealand and barter ford instantly LEP International Australia, Combined Haulage, Senco Haulage and make out Air Ocean Ltd all important players in the Australasian logistics industry. Mainfreights international growth continued, purchasing minority shareholdings in ISS and Associates in Hong Kong (37. % of Bolwick Ltd) and mainland China (50% of Mainfreight extend Ltd) one month after opening its first Mainfreight International branch outside of Australasia, in addition in Hong Kong in September of 1998. This sensation the start of Mainfreights push to become a global player in the logistics scene which continued with the purchase of CaroTrans from Arkansas Best tummy in 1999. Mainfreight bought 49. 5% of the CaroTrans operation with the re of importing shareholding taken up by an investor base that included CaroTrans chief operating officer Greg Howard. Refer to sidestep 1. 2 to square up how Mainfreight Group had complex body partd its investment in other subsidiaries as of 2001.TABLE 1. 2 Mainfreight has reinforced a network of businesses which it owns throughout New Zealand and Australia and also operates with juncture will powers, a network throughout the United States, in Hong Kong and Shanghai. beyond these regions, in atomic number 63 we work with Ziegler (our partner in CaroTrans) and with agents and alliances in most other countries. Mainfreight has built a network of businesses which it owns throughout New Zealand and Australia a nd also operates with sum monomanias, a network throughout the United States, in Hong Kong and Shanghai.Beyond these regions, in Europe we work with Ziegler (our partner in CaroTrans) and with agents and alliances in most other countries. In their 2001 annual paper Mainfreight described the classify of businesses they had acquired over the noncurrent 21 years. The issue between 2002 and 2007 saw Mainfreight focus on its subsisting geographies. In New Zealand growth occurred through the opening of crude Mainfreight domestic transport branches as well as through the 79. 6% acquisition of the Owens Group of companies in 2003.The companys Australian operations were also performing with revenues from Australian Domestic and International segments equalling the New Zealand groups gross gross gross revenue transaction for the first time. Mainfreight purchased the keen 51. 5% of CaroTrans in 2004 and opened additional branches of a s realizeg out the United States and Australi a. Mainfreight International opened pass on Chinese branches in Ningbo, Shenzen and Guangzhou. Table 1. 3 demonstrates Mainfreight Groups financial performance by geographic segment for the year ending 31st March 2007. TABLE 1. 3 Mainfreight regular army has now traded approximately 18 months under our ownership. In that time we have identified a issue of pithycomings in the business which we are in the put to work of addressing. Results are well below our expectations and are poor at best. Mainfreight Group culture and operating disciplines have been introduced to the USA operations, including a stronger branch management focus, the adit of our owner tryr model for split up up and delivery, and a more soused flak to both primed(p) and variable cost management. more fuddled approach to both touch on and variable cost management Mainfreight USA has now traded almost 18 months under our ownership. In that time we have identified a number of shortcomings in the busine ss which we are in the process of addressing. Results are well below our expectations and are poor at best. Mainfreight Group culture and operating disciplines have been introduced to the USA operations, including a stronger branch management focus, the introduction of our owner driver model for pick up and delivery, and a more rigorous approach to both fixed and variable cost management. more rigorous approach to both fixed and variable cost managementMainfreights expansion did not stop in that respect. target Logistics, a public company listed on the the Statesn Stock Exchange was acquired in an all-cash transaction cute at approximately USD $53. 7 million (CW Downer & Co, 2007). This delineated Mainfreights largest acquisition to date. Chris Coppersmith CEO and President of Target Logistics stayed on with the company and headed up the fresh formed Mainfreight USA, but his time in the role was short lived. By the end of 2009, Coppersmith was no longer with the company havi ng been replaced by 14 year Mainfreight Veteran fast one Hepworth.Mainfreights 2009 annual report fox virtually light on almost of the issues the American operation was facing. During this period Mainfreight purchased the outstanding shares from its Management in Hong Kong and China and disposed of its 75% shareholding in both LEP International New Zealand and Australia for AUD $83 million to minority stockholder insouciance Logistics Group (Mainfreight, 2007). However these setbacks did not slow down the Mainfreight Group, the company achieving sales of NZD $1 Billion for the first time in time 2009.Buoyed by accordant sales growth the company continued with its speedy discipline and advanced into Europe. The Wim Bosman group of companies, one of the largest privately? owned, integrated transport and logistics providers in the Netherlands and Belgium with 14 branches across six European countries, with more than 1,000 transport units, more than 275,000m? of warehouse and cro ss docking facilities and approximately 1,414 team members (Mainfreight,2011) was purchased outright in 2011 for 110 million Euros. This time stock-still Mainfreight installed Mark Newman, one of Mainfreights first graduates as CEO of the European business.Mark having spent 21 years with Mainfreight, Mark was very familiar with the companys culture and drive to succeed. In the companys 2012 Annual Report Newman reflects on his first year in charge of Wim Bosman / Mainfreight Europe. We have now complete one full year of ownership of the Wim Bosman group of companies. During this period we have been able to integrate Mainfreights financial disciplines and gravel the process of line up our juvenile team members to Mainfreights culture. Unfortunately, financial performance has not met expectations We have now completed one full year of ownership of the Wim Bosman group of companies.During this period we have been able to integrate Mainfreights financial disciplines and begin the pr ocess of aligning our smart team members to Mainfreights culture. Unfortunately, financial performance has not met expectations Despite these continued expansion struggles Mainfreight is unagitated being awarded accolades, in 2012 good-natured the Best Growth Strategy award at the Deloitte / Management Top200 Awards Ceremony. So, what has Mainfreight learnt from these acquisitions and how has their conduct changed over time? Refer to the tables 1. 4 and 1. for an update on Mainfreight Groups financial performance by geographical segment and the groups structure as of 31 March 2012, before answering the Questions in plane section two. TABLE 1. 4 TABLE 1. 5 Questions / Discussion 1) Can Mainfreight in truth be classified as a global logistics provider? use Collinson and Rugmans translation from Pengs 2014 text of a true up global multinational enterprise having at least 20% of sales in for each one of the three regions of the Triad consisting of Asia, Europe and North America but less than 50% in any one we can see that Mainfreight does not quite fit this criteria. Table 1. shows Mainfreight Groups consolidated sales by geographic segment for 2012. Sales in the USA and Europe represented 24% and 23% respectively of the groups NZD$ 1. 8billion number sales. Asia stock-still contributed only 3%. Strictly following Rugmans translation this would purport that Mainfreight is not truly a global logistics provider. If we redefine Rugmans definition to state at least 20% of sales in each of three regions but less than 50% in any one the 54% of sales coming from Australasia would suggest that Mainfreight is still to Australasian centric to be considered a true global logistics provider. ) Has Mainfreights mode of accounting entry into international markets changed over time? If so how, and why? There have been some consistent themes as well as some changes to Mainfreights market entry strategies since opening their first Mainfreight International Branch i n 1984. The consistent themes have seen Mainfreight continuously pursue Equity modes as bureau of entry. As a service provider Mainfreight has been unable to pursue some non-equity modes of entry, as it is not possible to export their services to foreign markets, although Licensing and Franchising agreements could have been move in other markets if Mainfreight so desired.The main changes in Mainfreights approach occurred between 2005 and 2007. This was most taken for granted(predicate) when Mainfreight acquired 100% of Target Logistics, increase its shareholding to 100% in both its Hong Kong and Chinese operations and divested its 75% shareholding in LEP New Zealand and Australia. This move to wholly owning their marchers represented a significant change in designateing for Mainfreight, who up until this time entered new markets in joystick Venture, often sharing costs, risks and profits in conjunction with the subsidiarys Senior Management. This previous approach was evident i n the 49. % purchase of CaroTrans from Arkansas Best Corp in conjunction with CEO Greg Howard and in the Hong Kong and Chinese operations opened in 1998. Whilst the incorporation of CaroTrans into Mainfreights business was seen as a success, the introduction into the stable of fellow American company Target Logistics was anything but. Target CEO Chris Coppersmith stayed on when the business transferred to Mainfreight ownership, however the Target business could not adapt to the cultural and financial expectations evaluate of it by Mainfreights Board and Coppersmith was soon replaced by veteran Mainfreight Executive John Hepworth.As of 2012, the American division is still struggling, remaining the least moneymaking of all geographic segments in terms of its size as indicated in the table below. NZD 000s NZ Aus USA Asia Europe Revenue 455. 7 529 439 56 419 EBITDA 54. 5 33. 7 19 2. 6 28. 1 ROR 12. 0% 6. 4% 4. 3% 4. 6% 6. 7% Despite Mainfreight continually pushing their culture as the number one reason for their success, it whitethorn be that they have miss the enormousness of adapting to certain countries specific norms and values.It certainly wasnt a new construct as Mainfreight had experienced these struggles in the ancient, Bruce Plesteds interview with Graeme Kennedy in 2000 stirred on the cultural differences of the Australian and New Zealand markets stating Youve got to have the size and network and employ Australians to get the respect of the bigger companies (Kennedy, 2000) The Wim Bosman acquisition which also saw Mainfreight Executive Mark Newman promoted has also struggled financially.Is it a coincidence that Mainfreights vocalise ventures thrived whilst the wholly owned subsidiaries struggled? The major benefit of joint ventures is the nettle to partners knowledge, albeit whether it relates to regulative, normative or cognitive institutions. It appears this is something Mainfreight has overlooked in the recent past as it moved toward wholly owning its foreign subsidiaries. 3) Why do you think that Mainfreight has entered the markets it has? Mainfreight has utilise some logic to the markets it has chosen to enter.Australia is a reproducible first point of call for umpteen New Zealand firms looking to expand afield repayable to the common language, regulatory environments and similar, albeit different, cultural norms. From an international organizations point of view, these similarities are compounded. Mainfreights chairman Bruce Plested stated that multinationals often view both New Zealand and Australia as just one market making Australia a logical first stepping stone in Mainfreights overseas expansion. Up until 2010 Mainfreights expansion had focused on extending the New Zealand part of the companys global reach.Statistics New Zealand (2013) states that New Zealand depends heavily on international trade, special(a)ly with specially with Australia, China, the United States, and lacquer and unsurprising ly these are the countries (excluding Japan) that Mainfreight has expanded into. The cultural differences between New Zealand and the Chinese and American markets are more more significant than those between the New Zealand and Australian markets or other traditional trading partners such as Britain.However, the sheer weight of imports and exports flowing into and out of these countries has made them obvious candidates for Mainfreight to expand into as it seeks to expand into markets complementary to the existent business. The purchase of Wim Bosman is fire in that it is not a purchase that would traditionally be seen as complementary to Mainfreights New Zealand business when compared to markets such as Japan with whom New Zealand has significantly more trade.However, the opening of European markets could be seen as complimentary to Mainfreights US and Chinese operations in particular as these operations continue to grow, evolve and mature. 4) What are some of the risks associated with the approaches to foreign direct investment and the markets Mainfreight has chosen to enter? Mainfreight experienced financial obligation of foreignness when it first entered the Australian market place. As outlined in my rejoinder to Question 1, firms, especially large ones would not give Mainfreight a chance unless they were seen to employ Australians.This was an inherent disadvantage of being a foreign company entering a new market in a greenfield capacity. later Mainfreight expansion addressed some of these risks through the use of Joint Ventures in foreign markets such as China, Hong Kong and in the purchase of CaroTrans in the USA. As Mainfreights market entry strategy changed towards wholly owning their subsidiaries, some of these risks arose again. Mainfreights approach in fully acquiring existing business often helped to minimize these dangers as Mainfreight was not competing for a piece of the existing market share as it was previously with its greenfield entry i nto Australia.Mainfreight has not adoptive a consistent approach to renaming businesses it has taken over. For example Target Logistics was renamed as Mainfreight USA, whilst the Wim Bosman acquisition has retained the companys original branding perhaps share to overcome some of the cultural negativity foreign firms experience in other host countries. As a smaller New Zealand establish multinational in the service industry Mainfreight has managed to mitigate many of risks that may apply to other companies, however currency risks and rivalry among competing firms are areas Mainfreight is still susceptible to.Regulatory risks are still very real however in all probability lesser in geographies such as Australia, the EU and New Zealand than they are the United States and China. 5) Relative to smaller logistics providers in New Zealand what are the main advantages Mainfreight enjoys from its MNE status? Peng (2014) refers to firms having OLI advantages or Ownership, Location and in ternalisation advantages. Using Pengs framework, proportional to non-multinationals operating in the New Zealand logistics industry, Mainfreight has the following advantages.Ownership Mainfreight benefits in that it has control and ownership of a significant part of the supply chain compared to interpret a New Zealand domestic transport company or a New Zealand reposition provider. Mainfreight is able to compete with these non-multinationals by offering the appliance of an all in one managed solution to its clients or alternative competing on price with non-multinationals in their market as Mainfreight may be able to cross subsidise certain parts of its business.For example, Mainfreight may sell New Zealand warehousing services at a loss if it guarantees means they may win a customers lucrative freighting business. Location Mainfreights advantages over a non multinational from a location perspective are much harder to determine. As a service industry Mainfreight would find it ha rd to capitalize on Natural resources, low cost efficiencies and innovation, however there may be some advantages gained through having a global presence and subjecting Mainfreights brand to a global audience.This means Mainfreight could have a unadorned advantage over non multinational logistics providers as potential customers (particularly large global ones) are more likely to know of Mainfreights operations. Internalization some(prenominal) of the benefits Mainfreight experiences here are similar to the Ownership benefits outlined above. By not having to pay external suppliers margins on different services inside a customers supply chain, Mainfreight can potentially offer more competitive services and retain profits inhouse. References Collinson, S. and Rugman, A. (2007).The regional lawsuit of Asian multinational enterprises. APJM, Ch. 24. Pp. 429-446. C. W. Downer Co. (2007, September 18). Target Logistics, Inc. , Agrees to be acquired by Mainfreight Limited. Retrieved fro m http//www. cwdowner. com/index. php? selection=com_contentview=articleid=72Itemid=31 Deloitte. (2012, November 29). Top 200 Companies Awards mull Future Direction for NZ Enterprise. Retrieved from http//www. deloitte. com/view/en_NZ/nz/news-room/3ee15be7bf94b310VgnVCM2000003356f70aRCRD. htm Fairfax NZ News. (2008, November 26). Mainfreights Plested wins Beacon Award.Retrieved from http//www. stuff. co. nz/business/735585 Kennedy, Graeme. (2000, March 17). Mainfreight develops major logistics operation. Retrieved from http//www. sharechat. co. nz/article/69e6e5bb/mainfreight-develops-major-logistics-operation. html Linkedin. (2013, February 28). Mainfreight. Retrieved from http//www. linkedin. com/company/mainfreight? trk=top_nav_home Mainfreight Limited. (1996) Mainfreight Limited Prospectus. Retrieved from http//epublishbyus. com/ebook/ebook? id=10005147/4 Mainfreight Limited. (1997, July 2). Annual Report 1997. Retrieved fromMainfreight Case StudyMainfreight Group Mighty Oaks from little acorns grow A case study of a New Zealand Multinationals Foreign Market Entry Strategy Mainfreight Mighty Oaks from little acorns grow. This case study examines the strategies Mainfreight Limited has exploited when entering foreign markets. It examines Mainfreights successes and failures and investigates whether its market entry strategies played a significant part in these experiences. The Mainfreight Group market themselves as a global logistics provider offering managed warehousing and international and domestic freight forwarding (Mainfreight, 2013).As of 2013 Mainfreight Limited is operating in over 14 countries in four continents. Originally a domestic freight provider, the company now specializes in providing a large variety of services common to global logistics providers such as domestic haulage of both full and part loads, International Air services, International Sea Container services, Contract Warehousing and Supply Chain Management as well as other servic e offerings not commonly associated with global logistics providers including Fashion Services, Canadian Transborder Logistics Services and Entertainment Media Logistics(Linkedin, 2013).Mainfreight generally focuses on target areas they identify they can add more value to than simple cartage (Massey University, 2009) Mainfreight attribute their success to their unique culture, stating on their website that they have developed a style of doing business, successful not only in New Zealand, but around the world. Whilst this is a bold statement, Mainfreight has had some great accomplishments. Their success hasnt been an accident and this mighty oak was once a little acorn.Since its inception in 1978, Mainfreight has grown significantly and is often cited as one of New Zealands most successful companies (Otago Business School, n. d. ). Founded by Bruce Plested with $7,200 (Mainfreight, 1996) and a 1969 Bedford truck (Fairfax NZ News, 2008) Mainfreights business quickly expanded. Neil Gra ham joined Plested in 1979 as Joint Managing Director and opened their first Christchurch Branch.Growth continued and Mainfreight soon developed New Zealands most extensive domestic freight network (Mainfreight, 2013) by using coastal shipping to get around draconian laws that required all freight travelling on land a greater distance than 150 kilometres to be moved by rail. (Mainfreight, 1996) Mainfreight Founder Bruce Plested By the time land transport deregulation occurred in 1985, we were hardened and experienced after 8 years competing against the system and the giant transport companies.With the playing field almost levelled we were the fittest players, and our company was evolving a deep culture and a vision of what we could achieve By the time land transport deregulation occurred in 1985, we were hardened and experienced after 8 years competing against the system and the giant transport companies. With the playing field almost levelled we were the fittest players, and our c ompany was evolving a deep culture and a vision of what we could achieveComplementary to the companys special culture Plested believed that some of the companys success could be assigned to its agility and responsiveness to change, stating in Mainfreights 1996 prospectus Revenue exceeded NZD$10 million for the first time in 1984 and the first Mainfreight International branches, 50% owned by the Mainfreight Limited in conjunction with their managers opened in Christchurch and Auckland also opened. Mainfreight, 1996) 1989 saw the opening of Mainfreights first Australian branch in Sydney with a view to offering services that would allow customers to treat New Zealand and Australia as one market (New Zealand Management Magazine, 2007). Mainfreight International Branches also opened in Melbourne and Sydney and revenue first exceeded NZD$50 million. The period between 1990 and 1996 was typified by geographic expansion throughout Australia and New Zealand.This growth was primarily via two different channels via organic growth from its existing operations, and through acquisition of competitors or complementary service providers. Service expansion and differentiation formed the backbone of Mainfreights organic growth platform through the early 1990s. Named operations such as Metro Cartage, Wharf Operations and Distribution began to appear alongside the regular Mainfreight and Mainfreight International brands. Revenues continued to grow and the New Zealand domestic and International parts of he business continued to excel. However, the same could not be said for Mainfreights Australian operations which did not break even until 1994 (Kennedy, 2000). By having a strong domestic and international presence in both New Zealand and Australia we have a good chance of demonstrating to a multinational company that when it comes to this corner of the globe, we are the people to use. We do not have the choice of only being able to service New Zealand, the multinational is not int erested they see Australia and New Zealand as one By having a strong domestic and international presence in both New Zealand and Australia we have a good chance of demonstrating to a multinational company that when it comes to this corner of the globe, we are the people to use. We do not have the choice of only being able to service New Zealand, the multinational is not interested they see Australia and New Zealand as one Despite these losses Mainfreights commitment to the Australian market was never in doubt.Executive Chairman Bruce Plested described the perception that the rest of the world regard Australia and New Zealand as one market and that multinationals increasingly engage a global freight company to provide all their freighting and warehousing services throughout the world (Mainfreight, 2002). Plesteds argument was that by having a presence in both Australia and New Zealand it would demonstrate to large multinationals that Mainfreight were the logistics provider of choic e and specialists in this geography.He did not feel he could achieve this operating in New Zealand alone. In order to rectify the companys poor Australian result the business undertook a series of acquisitions through the early to mid 1990s that included Mogal Freight, MSAS and Premier VIP stores. (Refer to Table 1. 1 for more information on Mainfreights acquisitions during the period between 1980 and 1995). TABLE 1. 1 Plested in an interview with Graeme Kennedy in March 2000 reflected on the Australian operations struggles We have struggled to break into the usiness with those bigger customers since we moved into Australia with an interstate freight operation similar to our New Zealand model The business has been difficult to grow and we havent made the progress in the Australian domestic market we had hoped Youve got to have the size and network and employ Australians to get the respect of the bigger companies. Without the size and the volumes, the services you can offer are restr icted with a smaller network. They want to see size and network to give them confidence in the operation We have struggled to break into the business with those bigger customers since we moved into Australia with an interstate freight operation similar to our New Zealand model The business has been difficult to grow and we havent made the progress in the Australian domestic market we had hoped Youve got to have the size and network and employ Australians to get the respect of the bigger companies. Without the size and the volumes, the services you can offer are restricted with a smaller network. They want to see size and network to give them confidence in the operationIt was the acquisition in 1994 of Premier VIP Stores that finally gave Mainfreight the critical mass of customers required to finally start making profit from their Australian operation. With profitability worries behind them, operating revenues hitting NZD$100 million per annum and all three divisions of Mainfreight L imiteds business operating profitably, the business listed on the New Zealand stock exchange on the 14th June 1996. 35 million shares, roughly 60% of the companys issued capital, was made available by owners Bruce Plested and Neil Graham to the general public at a price between $0. 5 and $1. 10 per share (Mainfreight, 1996) The listing proved to be an immediate success with Mainfreights share price increasing 72% in its first year as a publically listed company. Acquisitions in New Zealand and Australia continued throughout 1997/1998. Mainfreight purchased 75% of LEP Freightways New Zealand and purchased outright LEP International Australia, Combined Haulage, Senco Haulage and Trade Air Ocean Ltd all significant players in the Australasian logistics industry. Mainfreights international growth continued, purchasing minority shareholdings in ISS and Associates in Hong Kong (37. % of Bolwick Ltd) and China (50% of Mainfreight Express Ltd) one month after opening its first Mainfreight I nternational branch outside of Australasia, also in Hong Kong in September of 1998. This signified the start of Mainfreights push to become a global player in the logistics scene which continued with the purchase of CaroTrans from Arkansas Best Corp in 1999. Mainfreight bought 49. 5% of the CaroTrans operation with the remaining shareholding taken up by an investor group that included CaroTrans CEO Greg Howard. Refer to table 1. 2 to see how Mainfreight Group had structured its investment in other subsidiaries as of 2001.TABLE 1. 2 Mainfreight has built a network of businesses which it owns throughout New Zealand and Australia and also operates with joint ownerships, a network throughout the United States, in Hong Kong and Shanghai. Beyond these regions, in Europe we work with Ziegler (our partner in CaroTrans) and with agents and alliances in most other countries. Mainfreight has built a network of businesses which it owns throughout New Zealand and Australia and also operates with joint ownerships, a network throughout the United States, in Hong Kong and Shanghai.Beyond these regions, in Europe we work with Ziegler (our partner in CaroTrans) and with agents and alliances in most other countries. In their 2001 Annual Report Mainfreight described the group of businesses they had acquired over the past 21 years. The period between 2002 and 2007 saw Mainfreight focus on its existing geographies. In New Zealand growth occurred through the opening of new Mainfreight domestic transport branches as well as through the 79. 6% acquisition of the Owens Group of companies in 2003.The companys Australian operations were also performing with revenues from Australian Domestic and International segments equalling the New Zealand groups sales performance for the first time. Mainfreight purchased the outstanding 51. 5% of CaroTrans in 2004 and opened additional branches of across the United States and Australia. Mainfreight International opened further Chinese branches in Nin gbo, Shenzen and Guangzhou. Table 1. 3 demonstrates Mainfreight Groups financial performance by geographical segment for the year ending 31st March 2007. TABLE 1. 3 Mainfreight USA has now traded some 18 months under our ownership. In that time we have identified a number of shortcomings in the business which we are in the process of addressing. Results are well below our expectations and are poor at best. Mainfreight Group culture and operating disciplines have been introduced to the USA operations, including a stronger branch management focus, the introduction of our owner driver model for pick up and delivery, and a more rigorous approach to both fixed and variable cost management. more rigorous approach to both fixed and variable cost management Mainfreight USA has now traded some 18 months under our ownership. In that time we have identified a number of shortcomings in the business which we are in the process of addressing. Results are well below our expectations and are poor at best. Mainfreight Group culture and operating disciplines have been introduced to the USA operations, including a stronger branch management focus, the introduction of our owner driver model for pick up and delivery, and a more rigorous approach to both fixed and variable cost management. more rigorous approach to both fixed and variable cost managementMainfreights expansion did not stop there. Target Logistics, a public company listed on the American Stock Exchange was acquired in an all-cash transaction valued at approximately USD $53. 7 million (CW Downer & Co, 2007). This represented Mainfreights largest acquisition to date. Chris Coppersmith CEO and President of Target Logistics stayed on with the company and headed up the newly formed Mainfreight USA, however his time in the role was short lived. By the end of 2009, Coppersmith was no longer with the company having been replaced by 14 year Mainfreight Veteran John Hepworth.Mainfreights 2009 annual report shed some light on some of the issues the American operation was facing. During this period Mainfreight purchased the outstanding shares from its Management in Hong Kong and China and disposed of its 75% shareholding in both LEP International New Zealand and Australia for AUD $83 million to minority shareholder Agility Logistics Group (Mainfreight, 2007). However these setbacks did not slow down the Mainfreight Group, the company achieving sales of NZD $1 Billion for the first time in time 2009.Buoyed by consistent sales growth the company continued with its rapid development and advanced into Europe. The Wim Bosman group of companies, one of the largest privately? owned, integrated transport and logistics providers in the Netherlands and Belgium with 14 branches across six European countries, with more than 1,000 transport units, more than 275,000m? of warehouse and cross docking facilities and approximately 1,414 team members (Mainfreight,2011) was purchased outright in 2011 for 110 million Euros . This time however Mainfreight installed Mark Newman, one of Mainfreights first graduates as CEO of the European business.Mark having spent 21 years with Mainfreight, Mark was very familiar with the companys culture and drive to succeed. In the companys 2012 Annual Report Newman reflects on his first year in charge of Wim Bosman / Mainfreight Europe. We have now completed one full year of ownership of the Wim Bosman group of companies. During this period we have been able to integrate Mainfreights financial disciplines and begin the process of aligning our new team members to Mainfreights culture. Unfortunately, financial performance has not met expectations We have now completed one full year of ownership of the Wim Bosman group of companies.During this period we have been able to integrate Mainfreights financial disciplines and begin the process of aligning our new team members to Mainfreights culture. Unfortunately, financial performance has not met expectations Despite these co ntinued expansion struggles Mainfreight is still being awarded accolades, in 2012 winning the Best Growth Strategy award at the Deloitte / Management Top200 Awards Ceremony. So, what has Mainfreight learnt from these acquisitions and how has their behaviour changed over time? Refer to the tables 1. 4 and 1. for an update on Mainfreight Groups financial performance by geographical segment and the groups structure as of 31 March 2012, before answering the Questions in Section two. TABLE 1. 4 TABLE 1. 5 Questions / Discussion 1) Can Mainfreight truly be classified as a global logistics provider? Using Collinson and Rugmans definition from Pengs 2014 text of a true global multinational enterprise having at least 20% of sales in each of the three regions of the Triad consisting of Asia, Europe and North America but less than 50% in any one we can see that Mainfreight does not quite fit this criteria. Table 1. shows Mainfreight Groups consolidated sales by geographic segment for 2012. Sal es in the USA and Europe represented 24% and 23% respectively of the groups NZD$ 1. 8billion total sales. Asia however contributed only 3%. Strictly following Rugmans definition this would suggest that Mainfreight is not truly a global logistics provider. If we redefine Rugmans definition to state at least 20% of sales in each of three regions but less than 50% in any one the 54% of sales coming from Australasia would suggest that Mainfreight is still to Australasian centric to be considered a true global logistics provider. ) Has Mainfreights mode of entry into foreign markets changed over time? If so how, and why? There have been some consistent themes as well as some changes to Mainfreights market entry strategies since opening their first Mainfreight International Branch in 1984. The consistent themes have seen Mainfreight continuously pursue Equity modes as means of entry. As a service provider Mainfreight has been unable to pursue some non-equity modes of entry, as it is not p ossible to export their services to foreign markets, although Licensing and Franchising agreements could have been pursued in other markets if Mainfreight so desired.The main changes in Mainfreights approach occurred between 2005 and 2007. This was most obvious when Mainfreight acquired 100% of Target Logistics, increased its shareholding to 100% in both its Hong Kong and Chinese operations and divested its 75% shareholding in LEP New Zealand and Australia. This move to wholly owning their subsidiarys represented a significant change in thinking for Mainfreight, who up until this time entered new markets in Joint Venture, often sharing costs, risks and profits in conjunction with the subsidiarys Senior Management. This previous approach was evident in the 49. % purchase of CaroTrans from Arkansas Best Corp in conjunction with CEO Greg Howard and in the Hong Kong and Chinese operations opened in 1998. Whilst the incorporation of CaroTrans into Mainfreights business was seen as a succ ess, the introduction into the stable of fellow American company Target Logistics was anything but. Target CEO Chris Coppersmith stayed on when the business transferred to Mainfreight ownership, however the Target business could not adapt to the cultural and financial expectations expected of it by Mainfreights Board and Coppersmith was soon replaced by veteran Mainfreight Executive John Hepworth.As of 2012, the American division is still struggling, remaining the least profitable of all geographic segments in terms of its size as indicated in the table below. NZD 000s NZ Aus USA Asia Europe Revenue 455. 7 529 439 56 419 EBITDA 54. 5 33. 7 19 2. 6 28. 1 ROR 12. 0% 6. 4% 4. 3% 4. 6% 6. 7% Despite Mainfreight continually pushing their culture as the number one reason for their success, it may be that they have overlooked the importance of adapting to certain countries specific norms and values.It certainly wasnt a new concept as Mainfreight had experienced these struggles in the past, Bruce Plesteds interview with Graeme Kennedy in 2000 touched on the cultural differences of the Australian and New Zealand markets stating Youve got to have the size and network and employ Australians to get the respect of the bigger companies (Kennedy, 2000) The Wim Bosman acquisition which also saw Mainfreight Executive Mark Newman promoted has also struggled financially.Is it a coincidence that Mainfreights joint ventures thrived whilst the wholly owned subsidiaries struggled? The major benefit of joint ventures is the access to partners knowledge, albeit whether it relates to regulative, normative or cognitive institutions. It appears this is something Mainfreight has overlooked in the recent past as it moved toward wholly owning its foreign subsidiaries. 3) Why do you think that Mainfreight has entered the markets it has? Mainfreight has applied some logic to the markets it has chosen to enter.Australia is a logical first point of call for many New Zealand firms looking to expand overseas due to the common language, regulatory environments and similar, albeit different, cultural norms. From an international organizations point of view, these similarities are compounded. Mainfreights chairman Bruce Plested stated that multinationals often view both New Zealand and Australia as just one market making Australia a logical first stepping stone in Mainfreights overseas expansion. Up until 2010 Mainfreights expansion had focused on extending the New Zealand part of the companys global reach.Statistics New Zealand (2013) states that New Zealand depends heavily on international trade, especially with especially with Australia, China, the United States, and Japan and unsurprisingly these are the countries (excluding Japan) that Mainfreight has expanded into. The cultural differences between New Zealand and the Chinese and American markets are much more significant than those between the New Zealand and Australian markets or other traditional trading partners such as Britain.However, the sheer weight of imports and exports flowing into and out of these countries has made them obvious candidates for Mainfreight to expand into as it seeks to expand into markets complementary to the existing business. The purchase of Wim Bosman is interesting in that it is not a purchase that would traditionally be seen as complementary to Mainfreights New Zealand business when compared to markets such as Japan with whom New Zealand has significantly more trade.However, the opening of European markets could be seen as complimentary to Mainfreights US and Chinese operations in particular as these operations continue to grow, evolve and mature. 4) What are some of the risks associated with the approaches to foreign direct investment and the markets Mainfreight has chosen to enter? Mainfreight experienced Liability of Foreignness when it first entered the Australian market place. As outlined in my response to Question 1, firms, especially large ones would not give Mainfreight a chance unless they were seen to employ Australians.This was an inherent disadvantage of being a foreign company entering a new market in a greenfield capacity. Later Mainfreight expansion addressed some of these risks through the use of Joint Ventures in foreign markets such as China, Hong Kong and in the purchase of CaroTrans in the USA. As Mainfreights market entry strategy changed towards wholly owning their subsidiaries, some of these risks arose again. Mainfreights approach in fully acquiring existing business often helped to minimize these dangers as Mainfreight was not competing for a piece of the existing market share as it was previously with its greenfield entry into Australia.Mainfreight has not adopted a consistent approach to renaming businesses it has taken over. For example Target Logistics was renamed as Mainfreight USA, whilst the Wim Bosman acquisition has retained the companys original branding possibly helping to overcome some of the cultural negativity foreign firms experience in other host countries. As a smaller New Zealand based multinational in the service industry Mainfreight has managed to mitigate many of risks that may apply to other companies, however currency risks and rivalry among competing firms are areas Mainfreight is still susceptible to.Regulatory risks are still very real however probably lesser in geographies such as Australia, the EU and New Zealand than they are the United States and China. 5) Relative to smaller logistics providers in New Zealand what are the main advantages Mainfreight enjoys from its MNE status? Peng (2014) refers to firms having OLI advantages or Ownership, Location and Internalization advantages. Using Pengs framework, relative to non-multinationals operating in the New Zealand logistics industry, Mainfreight has the following advantages.Ownership Mainfreight benefits in that it has control and ownership of a significant part of the supply chain compared to say a New Zealand do mestic transport company or a New Zealand warehousing provider. Mainfreight is able to compete with these non-multinationals by offering the convenience of an all in one managed solution to its clients or alternative competing on price with non-multinationals in their market as Mainfreight may be able to cross subsidise certain parts of its business.For example, Mainfreight may sell New Zealand warehousing services at a loss if it guarantees means they may win a customers lucrative freighting business. Location Mainfreights advantages over a non multinational from a location perspective are much harder to determine. As a service industry Mainfreight would find it hard to capitalize on Natural resources, low cost efficiencies and innovation, however there may be some advantages gained through having a global presence and subjecting Mainfreights brand to a global audience.This means Mainfreight could have a distinct advantage over non multinational logistics providers as potential cus tomers (particularly large global ones) are more likely to know of Mainfreights operations. Internalization Some of the benefits Mainfreight experiences here are similar to the Ownership benefits outlined above. By not having to pay external suppliers margins on different services within a customers supply chain, Mainfreight can potentially offer more competitive services and retain profits inhouse. References Collinson, S. and Rugman, A. (2007).The regional character of Asian multinational enterprises. APJM, Ch. 24. Pp. 429-446. C. W. Downer Co. (2007, September 18). Target Logistics, Inc. , Agrees to be acquired by Mainfreight Limited. Retrieved from http//www. cwdowner. com/index. php? option=com_contentview=articleid=72Itemid=31 Deloitte. (2012, November 29). Top 200 Companies Awards Reflect Future Direction for NZ Enterprise. Retrieved from http//www. deloitte. com/view/en_NZ/nz/news-room/3ee15be7bf94b310VgnVCM2000003356f70aRCRD. htm Fairfax NZ News. (2008, November 26). Mainf reights Plested wins Beacon Award.Retrieved from http//www. stuff. co. nz/business/735585 Kennedy, Graeme. (2000, March 17). Mainfreight develops major logistics operation. Retrieved from http//www. sharechat. co. nz/article/69e6e5bb/mainfreight-develops-major-logistics-operation. html Linkedin. (2013, February 28). Mainfreight. Retrieved from http//www. linkedin. com/company/mainfreight? trk=top_nav_home Mainfreight Limited. (1996) Mainfreight Limited Prospectus. Retrieved from http//epublishbyus. com/ebook/ebook? id=10005147/4 Mainfreight Limited. (1997, July 2). 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