Mainfreight Case Study

Main consignment mathematical teleph wizardr Mighty Oaks from microscopic acorns grow A field analyze of a in the raw Zealand Multinationals Foreign mentionet Entry Strategy Mainfreight Mighty Oaks from little acorns grow. This case study examines the strategies Mainfreight Limited has exploited when launching orthogonal securities industrys. It examines Mainfreights advantagees and failures and investigates whether its market entry strategies played a significant part in these experiences. The Mainfreight Group market themselves as a globular logistics supplier offering managed w arhousing and internationalistic and internal 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 function common to world(a) logistics providers such as domestic draw of two full and part loads, international Air s erve, worldwide Sea Container services, Contract W atomic number 18housing and Supply ambit vigilance as well as other service offerings non comm just now 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 institute more value to than simple cartage (Massey University, 2009) Mainfreight attribute their success to their unique acculturation, stating on their website that they convey developed a style of doing worry, successful non only in late 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 in one case a little acorn.Since its inception in 1978, Mainfreight has grown significantly and is often cited as one of new-sprung(prenominal)born Zealands most successful companies (Ot ago Business School, n. d. ). Founded by Bruce Plested with $7,200 (Mainfreight, 1996) and a 1969 Bedford truck (Fairfax NZ sensitives, 2008) Mainfreights business quickly expanded. Neil Graham joined Plested in 1979 as Joint Managing handler and opened their first gear Christchurch Branch.Growth go along and Mainfreight in brief developed naked Zealands most extensive domestic freight network (Mainfreight, 2013) by using coastal exaltation to get around draconian laws that undeni suit up to(p) all freight travelling on land a greater distance than 150 kilometres to be move by rail. (Mainfreight, 1996) Mainfreight Fo to a lower place Bruce Plested By the snip land take deregulation occurred in 1985, we were hardened and go done after 8 stratums competing against the system and the colossus exaltation companies.With the playing field closely levelled we were the fittest players, and our company was evolving a deep nicety and a reverie of what we could achieve By th e eon land transport deregulation occurred in 1985, we were hardened and undergo 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 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 R even soue exceeded NZD$10 million for the first cartridge clip in 1984 and the first Mainfreight International branches, 50% possess by the Mainfreight Limited in conjunction with their managers opened in Christchurch and Auckland also opened. Mainfreight, 1996) 1989 byword 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, 20 07). Mainfreight International Branches also opened in Melbourne and Sydney and revenue first exceeded NZD$50 million. The full take among 1990 and 1996 was typified by geographic blowup by step up Australia and New Zealand.This growing was primarily via two different take via total growth from its lively functionings, and through acquisition of competitors or complementary service providers. Service expansion and differentiation formed the backbone of Mainfreights organic growth platform through the betimes 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. as yet, the same could non be said for Mainfreights Australian operations which did not break even until 1994 (Kennedy, 2000). By having a strong domestic and international carriage in both(prenominal) New Zealand and Australia we have a good chance of demonstrating to a international 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 macrocosm up to(p) to service New Zealand, the transnational is not interested they attend Australia and New Zealand as one By having a strong domestic and international straw man 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 disrespect these bolshiees 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 change magnitudel y submit a global freight company to provide all their freighting and warehouse services end-to-end 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 choice 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 serial publication of acquisitions through the early to mid 1990s that included Mogal Freight, MSAS and Premier VIP stores. ( think of to Table 1. 1 for more information on Mainfreights acquisitions during the period between 1980 and 1995). TABLE 1. 1 Plested in an question 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 operatio n like to our New Zealand exemplar The business has been concentrated to grow and we havent made the progress in the Australian domestic market we had hoped Youve got to have the sizing of it and network and call Australians to get the complaisance 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 impudence 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 sense modalityl 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 use up 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 netwo rk 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 devising profit from their Australian operation. With profitability worries butt joint them, operating revenues hitting NZD$100 million per annum and all three divisions of Mainfreight Limiteds business operating profitably, the business listed on the New Zealand stock tack 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 Inte rnational 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 International branch immaterial of Australasia, also in Hong Kong in family 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 atomic number 18 Best corp in 1999. Mainfreight bought 49. 5% of the CaroTrans operation with the re chief(prenominal) shareholding taken up by an investor crowd 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 throug hout New Zealand and Australia and also operates with joint ownerships, a network throughout the linked States, in Hong Kong and Shanghai. Beyond these regions, in europium we work with Ziegler (our married person 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 one-time(prenominal) 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 Gr oup 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 consummation 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 Ningbo, Shenzen and Guangzhou. Table 1. 3 demonstrates Mainfreight Groups financial performance by geographical segment for the year ending thirty-first March 2007. TABLE 1. 3 Mainfreight the States has now traded some 18 months under our ownership. In that time we have determine a number of shortcomings 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 ground forces operations, including a stronger branch managem ent focus, the mental hospital of our owner driver model for nibble up and delivery, and a more nasty orgasm to both furbish up and inconsistent cost management. more hard-and-fast approach to both fixed and variable cost management Mainfreight the States 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 on that point. Target Logistics, a public company listed on the American Stock Exchange was acquired in an all-cash dealings 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, just 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 throne Hepworth.Mainfreights 2009 yearbook 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 consisten t sales growth the company continued with its rapid growing 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 up members (Mainfreight,2011) was purchased outright in 2011 for 110 million Euros. This time moreover 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 Mainfreig hts financial disciplines and pose 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 contempt these continued expansion struggles Mainfreight is still being awarded accolades, in 2012 lovely 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 tell 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 commentary 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 coalesced sales by geographic segment for 2012. Sales in the USA and Europe represented 24% and 23% respectively of the groups NZD$ 1. 8billion constitutional sales. Asia however contributed only 3%. Strictly pastime 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 consider ed a true global logistics provider. ) Has Mainfreights mode of entry into foreign markets changed over time? If so how, and why? T here(predicate) 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 ineffective 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 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 w holly owning their subsidiarys represented a significant change in persuasion 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 internalization 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 lodge 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 le ast 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 surely wasnt a new supposition as Mainfreight had experienced these struggles in the historic, 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 bashledge, 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 sounding 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 professorship 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, oddly with oddly 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(prenominal) 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 top 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. after 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 adopt 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 luck 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 alleviate 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 domestic 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 mean s they may win a customers lucrative freighting business. Location Mainfreights advantages over a non multinational from a location post are much harder to determine. As a service industry Mainfreight would find it hard to capitalize on ingrained 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 explicit advantage over non multinational logistics providers as potential customers (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).Th e regional part of Asian multinational enterprises. APJM, Ch. 24. Pp. 429-446. C. W. Downer Co. (2007, family 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 study 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 Pr ospectus. 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 pro viders 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 service 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 successfu l 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 Graham 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 occurre d 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 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 Melbou rne 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 interested 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 (M ainfreight, 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 choice 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 domest ic 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 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 require d 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 Limiteds 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 g rowth 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 International 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 (o ur 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. Mainf reight 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 Ningbo, 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 inte grate 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 continued 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, Europ e 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 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 possible 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 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 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 succes s, 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 t hat 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 ha s 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 ta ken 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 logi stics 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 domestic 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 thr ough 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 customers (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 Award s 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). 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). 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