Power relations and market transformation in the transport sector: the example of the courier services industry

Journal of Transport Geography 8 (2000) 237±247

www.elsevier.com/locate/jtrangeo

Power relations and market transformation in the transport sector: the example of the courier services industry Michael Taylor a,*, Alan Hallsworth b a b

Department of Geography, University of Portsmouth, Portsmouth, UK Department of Geography, Sta€ordshire University, Sta€ordshire, UK

Abstract The courier services industry has developed rapidly in the last three decades. Formed in national niche markets, private sector corporations have grown to challenge one another and now to challenge deregulated state mail monopolies. In this paper we propose a Ôcircuits of powerÕ framework to theorise the diversity, complexity and speed of this change. The framework derives from the work of Clegg (cf. Clegg, S., 1989. Frameworks of Power. Sage, London) and combines di€erent conceptualisations of power to unpack the complex relationships of power and domination that have shaped the sectorÕs growth. Ó 2000 Elsevier Science Ltd. All rights reserved. Keywords: Power; Circuits of power; Regulation; Niche markets; Courier industry

1. Introduction In this paper, we examine the roots of one of the most dynamic of transport sectors ± the courier services industry. It is beyond the scope of this paper to trace every developmental facet of the industry to date; rather we choose to o€er what we believe is a wider conceptual framework for the understanding of a massively complex sector. Whilst we show that throughout its history this part of the transport sector has always been profoundly a€ected by issues of postal service regulation we do so to show just how many facets of the global economy impinge on its activities. Furthermore, minute details of change are dicult to catalogue when the industry is the fastest growing element of transportation and is central to processes of time±space compression (Harvey, 1992). Indeed, as exemplars of globalisation, just-in-time operations and lean production, the companies in the sector also have key status as transnational corporations (Vernon, 1977; Rugman, 1981; Caves, 1982; Taylor and Thrift, 1982, 1986; Casson and associates, 1986; Dunning, 1989; Dicken, 1992, 1999). Equally, the sector is a business service (Allen, 1988; Daniels et al., 1989; Marshall and Wood, 1995) that is increasingly time-sensitive (Stalk and Hout, 1990) and highly competitive (Stopford and Strange, 1991): all *

Corresponding author.

within a structure dominated by large ®rms and increasing concentration. Indeed, there is heavy usage of technological innovation (Hepworth, 1989; Warf, 1989; DHL, 1999) by the ®rms in the sector ± some technologies (including e-mail) being both an inherent threat to, and an opportunity for, them. The histories of the major players in this industry also demonstrate intensifying competition in the international arena, not only among themselves but also between themselves and government-owned postal and telecommunications organisations that increasingly are being squeezed, corporatised and privatised as a result of neo-liberal domestic policies. The bases of power on which competition has been founded have constantly shifted in the courier industry adding additional complexity to an already complex situation. To theorise this complexity we believe that a strong case can be made for the adoption of Ôcircuits of powerÕ as a conceptual framework, and that this framework has the scope to embrace the diversity, complexity and speed of change in sectors such as the courier industry. Here, new enterprises grew in niche transport markets to enter a global fray. They embraced new technologies to serve newly emerging demands in what would now be labelled a global information economy that necessitated information exchange in real time. They have chased monopolies and confronted regulation. These are complex issues to build into a single explanatory framework.

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We structure the paper in four parts: a brief description of the key players and their origins; a discussion of their interaction and convergence; an analysis of their confrontation with regulated state postal monopolies; and an interpretation of these complex changes within a circuits-of-power framework. 2. Couriers: their corporate origins A key part of our analysis is to trace how the courier industry developed from diverse beginnings and from di€erent corporate motivations. The key players in the industry have very di€erent origins and very di€erent backgrounds. They carry with them the legacies of both their founders and the eras within which they were founded (Stinchcome, 1965). As a consequence, they have distinctive corporate cultures that have signi®cantly shaped their strategic thinking ± a concept explored in the corporate sector in general by Schoenberger (1996) and Chandler (1990). These characteristics have combined with the pace of change in the sector to produce distinctive trajectories of corporate development. The most prominent player in the courier industry, certainly the one with the longest history, is United Parcel Services (UPS). UPS was founded in 1907 in Seattle as a bicycle-based courier service. Over many decades, it set up a ÔshadowÕ post oce and concentrated on delivering ground-based parcels of a weight above the limit reserved by law for the US Postal Service. Through time it strengthened its advantage by setting up collection points across the US that have become as familiar as those of its US Postal Service rival. It is still strongly associated with the Teamsters Union and its structure is of employee-ownership. This removes it from the key pressures of the stock market ± though it has a Triple-A debt rating that means that on strategic matters a long-term perspective can always be taken. That UPS is heavily unionised should come as no surprise since its formative years were the golden age of unionisation in the US. The union perspective is not negligible in our power analysis: unions can be powerful forces in themselves, or statutory powers can be enacted to enfeeble them. It can also be suggested that UPSÕ legendary devotion to ecient systems-driven operations also harks back to the formalised, unionised and routinised style of organisation typical of the Fordist era when it gained its ®rst-mover advantages (Perrow, 1990; Zukin and Dimaggio, 1990). The UPS drivers always carry their cash in the same hand and must always step down from the familiar brown and gold truck in the same way (right foot ®rst). Even the company now recognises that the formalised nature of its work practices has brought con¯ict in overseas operations. (Wall St. Journal (1994)

reported this ÔPrussian cultureÕ and that the companyÕs ban on beards had annoyed workers in Germany and Spain.) The need for greater ¯exibility in international working practices is now recognised (Kindelberger, 1988; UPS, 1998). UPS is the great monolith of the courier sector ± one subsequently to be disturbed by new rivals such as FDX (FedEx until January 1997). FDX is UPSÕ greatest rival and a much more recent arrival in the courier business. Frederick W. Smith set up the company, created as Federal Express (FedEx), in April 1973 in Memphis, Tennessee. As noted by EPISTEME (1993): ``[Smith] created a business that did not exist at the time: night express courier services (for this he used the inheritance he had obtained from his father, who was the founder of the Dixie Greyhound coach company . . . [He] was the ®rst to propose the pickup and delivery of envelopes and light documents within a guaranteed period of 24 h. To provide this service, he came up with an innovative organisational method based on three key concepts: · Air transport by night. · Hub and spokes: a central platform for assembling and distributing documents. · Parcel tracking: computerised monitoring of parcels in real time.'' (p. 37). This was a niche that o€ered potential growth but did not threaten UPSÕ ground-based operations. The corporation also set out with a very di€erent culture. In particular, it is neither unionised nor employee-owned and has argued to be treated di€erently to its larger rival UPS under US labour regulation. FedEx shipments were originally transported in small Dassault Falcons which had a cargo capacity of 6200 lb. Vitally, these capacities were just below the limits covered by the US Civil Aeronautics Board. FedEx persistently lobbied the US Congress for a bill allowing them to use bigger jets. In November 1977, a Federal Bill was passed which totally deregulated the US air freight industry, and almost immediately FedEx acquired 10 second-hand Boeing 727s. It is clear that market deregulation was a key factor allowing FedEx to expand within an e€ective cost base developing out of a highly specialised niche with a huge market potential that emerged just at that time as a result of processes of economic internationalisation. The change was, for FedEx, the most dramatic part of a full-scale Federal Airline Deregulation Act (see also Chou, 1993, p. 36; Graham, 1993). The rules of the air transport game had been changed in a way that e€ectively created a new industry and one in which FedEx (previously lossmaking) was automatically the leader. Later, in 1987,

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FedEx succeeded in winning authorisation from the US Department of Transportation for a US-to-Japan express delivery service. Under the terms of the agreement between the US and Japanese governments, only one carrier from each country was to be given this right, granting FedEx a near monopoly. Air express parcel services on a global stage was now FedExÕs niche. However, with the acquisition of Caliber in 1997 FedEx, renamed FDX Corporation, has moved beyond this niche directly to confront UPSÕ ground-based operations. Two other companies are central to the development of the international courier sector ± DHL and TNT. DHL, founded in 1969, grew from a business-related perception of the inherently geographical notion of time±space compression. The three corporate founders (Dalsay, Hillblom and Lynn) set up in the business of ¯ying ahead with documents relating to sea shipments. Arriving before the vessels, they could complete customs clearance and other related paperwork and save clients two or three days on berth-time and ship turnaround. From this base, they set up a ÔleanÕ operation focusing on time-sensitive, low-weight, high-value goods ± especially documents. Here, then, in contrast to its competitors, was a company growing in an entirely di€erent niche and trading on organisational innovation much more than new technology, deregulation and ®rst-mover advantages to make money from the accelerating internationalisation of business and trade. TNT is again a very di€erent company, and the only one of the four originating outside the US. It began in 1947 as Thomas Nationwide Transport, an orthodox trucking company in Australia. There it had bene®ted from deregulation, in this case of the trucking industry (BTE, 1984) but, with links to a domestic airline (Ansett) and with no small hint of useful political connections, it grew to dominate the small Australian domestic market (Rimmer and Taylor, 1984). To expand further, however, TNT had a very di€erent set of conditions to deal with compared to UPS, FDX or DHL. It had to move into foreign markets and confront directly the ®rst-mover advantages of entrenched rivals in the private sector (mainly in the US) and in the public sector (especially in Europe). TNT is of interest in this analysis primarily because of the way that change within the industry and the confrontation that the ®rm encountered forced it into restructuring. The company may have started out as an Australian-based enterprise that tried to break into Europe and North America, but its failures in these ventures resulted in it being taken over by one of the state-owned postal organisations against whom it had sought to compete in Europe: the Dutch postal and telecommunications enterprise that has itself been privatised.

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3. Co-evolution, convergence and concentration It is clear from the recent histories of the major corporate players in the courier industry, together with the experiences of the other enterprises and organisations that have become caught up with them, that the development of the sector is characterised by co-evolution, convergence and concentration. Increasingly, the large courier corporations are coming to resemble one another ± a form of isomorphism ± as they strive for leadership in a globalising information economy, driven by time±space compression, real-time needs, lean production, distribution management and the threats and opportunities of e-commerce. These processes of change can be identi®ed in the nature and range of the services they o€er, their strategies of internationalisation and the technologies they employ. As FedEx, FDX Corporation had concentrated on the fast airborne express market when it had been ®rst set up, probably frightened o€ from direct confrontation in ground-based operations by the power of UPS. FedEx was so successful however that, in 1982, UPS itself had to extend its transport services into air express delivery (through UPS Next Day). In other words, UPS was driven to change by its customers and by its rivals. Because it did change, UPS remains the biggest courier company and currently employs 330,000 people, has revenues approaching US$ 25 billion, and serves 200 countries. But then in 1997 FedEx itself began to move beyond its niche and, by buying Caliber System to create FDX Corporation, it shifted into ground-based operations in the US and so into direct competition with UPS on UPSÕ traditional turf. As it was put by UPS: ``. . . this FedEx acquisition eliminates any doubt about FedEx operating in the same industry as UPS . . . [but there seems to be] . . . no intention of fully integrating [the new capabilities] to o€er one seamless service.'' (UPS, 1997). It is, however, possible that this non-integration of capabilities in the new FDX Corporation was intentional and based on the hard lessons learned by FedEx when it tried to expand into Europe in the mid-1980s. In a less confrontational way, the same service convergence can be identi®ed in DHLÕs recent trajectory. DHL is primarily concentrated on air express operations and has sought ®nancial and strategic investors to support its growth, which has been in excess of 16% a year (DHL, 1998). Since 1990, these partners have included Japan Airlines, Lufthansa Cargo and The Nissho Iwai Corporation. In March 1998, this pattern of alliances took a new turn when it was announced that Deutsche Post AG (DP) was to take a 22.5% share holding in DHL International. DP has developed a Europe-wide,

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road-based parcel delivery network. After corporatisation in 1994 (DP is to be ¯oated on the stock market in 2000), DP began developing its parcel network beyond Germany in Austria, Belgium, Poland and Switzerland. Its acquisitions in 1999 alone saw it extend its coverage into Spain, Portugal, Italy, France, Ireland and the UK. The bene®t for DHL is access to the most extensive network of ground-based operations in Europe. The bene®t for DP is access to an international air express network in Europe, Asia and North America (Deutsche Post, 1998). Just as UPS and FedEx began to converge in their US operations, so all the major players in the courier industry began to internationalise with varying degrees of success to capitalise on globalising demand. As UPS extended its sphere of operations within the US, DHL was also growing within its niche to be the worldÕs largest international air express network (DHL, 1999). UPS found it necessary to embark on a similar globalisation strategy and, according to company reports, began to do so in the mid-1980s. Its expansion by acquisition, into Europe in particular, was accompanied by the imposition of that UPS ÔPrussianÕ culture. That imposition of corporate culture turned out to be somewhat less than productive, and only after 11 years did UPSÕ international operations move into pro®t. FedEx began to internationalise at the same time, extensively in Europe and principally through take-over. This was a noticeable departure from its early growth strategy when it had grown in a 10-year time frame to US$ 1 billion turnover without making an acquisition. These changes may also have coincided with a desire to expand the size range of freight carried since the justin-time systems of its clients demanded higher weight carriage. EPISTEME (1993) suggested that at that time FedEx, ``. . . could o€er a Ôglobal serviceÕ, ranging from the transport of 20-g documents to the transport of several tonnes of freight'' (p. 39). This move was strongly reinforced by the purchase of the Flying Tigers network with its apparent access to Japan (though the transfer of landing rights was delayed). FedEx expanded to cover express courier services within the US, international express courier services, freight and logistics. Yet, all markets are not the same and FedEx was soon announcing (May 1992) a retrenchment plan (announced as playing to its strengths in integrated airbased services). Whilst FedExÕs turnover had increased its pro®ts had declined constantly: the ratio of ``operating result to turnover'' (EPISTEME, 1993) fell from approximately 10% in 1980 to 5% in 1990 and to 0.3% in 1992. Six thousand of 9200 jobs in Europe were shed. Also, when, ``Federal Express pulled out of Europe, it was unable to resell a large number of the enterprises it had acquired since 1984 as most of these had been fully integrated into the courier company'' (EPISTEME, 1993, p. 42). This, as we suggest above,

may explain its reluctance to rapidly and fully integrate its latest acquisitions. TNT, in contrast had been forced to confront the problems of internationalisation when it moved into the US and Europe. In Europe, and especially in the UK, TNT su€ered as badly as FedEx. The company tried within a very compressed time frame to establish a shadow post oce for parcels in the UK much the same as UPS had created over many decades in the US. In the UK, however, the Postal Service has an advanced network of properties in all sizes of settlement and the public is accustomed to this being the ®rst stop for posting letters and many parcels. Only with a fully privatised Postal Service that was forced to o€er pick-up facilities to all comers could TNT have had the collection service to compete. Such a system has not yet emerged and received a further setback in December 1998 when it was announced by government that the Post Oce was not to be fully privatised. TNT had to abandon its plans and move o€ in a di€erent direction, in fact to link up in 1992 with just the type of organisation ± a state-run postal system, GD Express Worldwide (GD-EW) ± that it had sought to compete with. Very clearly, time is a very signi®cant dimension in business strategy formulation and implementation, and both UPSÕ and TNTÕs experience in moving o€shore show that failing to appreciate local culture, local competitors and local foibles can hit balance sheets very badly. As these major courier corporations expanded and internationalised through the 1980s and 1990s through numerous small take-overs, acquisitions, alliances and new ventures, a consistent theme has been the rapid adoption of new technologies. Certainty of delivery has been as important as transport technology itself in the drive to gain a competitive edge in the courier industry. FedEx was the ®rst of the large companies to move into parcel tracking technologies using bar codes, optical scanners and on-board computers. Now, increasingly more sophisticated tracking technologies using e-mail, electronic data interchange (EDI) and more re®ned uses of the Internet are common to all the major players in the courier industry. The courier companies are all positioning themselves to realise the business potential of e-commerce. This positioning appears to be taking on two forms: o€ering e-commerce services involving alliances with software providers; and hooking up with major e-commerce businesses to provide them with the logistics support they need to assemble materials and parts, warehouse and deliver product, and to service the guarantee provisions that are essential to e-commerce. DHL, for example, now o€ers what it calls a Ôtotal ful®lmentÕ solution for e-commerce business ± from warehouse to customs clearance at destination. According to DHL, the service

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``. . . is designed to cater for active e-commerce websites, online entrepreneurs and Internet developers, consultants and webmasters needing fast, reliable worldwide delivery from their websites.'' (DHL, 1999). Through a combination of information technologies coupled with physical transport services, the courier corporations are also o€ering other businesses complete logistics solutions associated with e-commerce. Thus, FDX is linked in to serve the computing ®rm, Dell, and UPS is allied with IBM to support IBMÕs engineers in the ®eld with sophisticated parts delivery systems and return guarantee services working within very tight time constraints. The four major players in the sector are now dominant in the sense that they are fully integrated across all transport media. Indeed, EPISTEME (1993) bestowed on them the label ``integrators'' to re¯ect this. For example, they compete on land with dedicated haulage ®rms and in air transport with specialist air freight ± all of which (with ongoing restructurings and mergers) blurs the boundaries of sectoral de®nitions and makes it dicult to ascribe exact market shares. For example, whilst they compete across all sectors, the big four also co-ordinate the operations of many smaller courier ®rms as subcontractors. At the time of writing, UPS was employing 330,000 people, down from a peak of 336,000 in 1996. FDX now employs 180,000 (including contractors) and DHL has a worldwide employment of 55,000. The Europe-based group to which TNT now belongs employs 100,000. All these companies operate in 200 or more countries. However, these rankings and indicators are temporary and transient because, as the large private sector couriers have expanded beyond their original niches within which they had been able to shelter from the heavily regulated environment of postal and telecommunications services, they have had to engage directly with those state-owned monopolies. This new competition is again bringing radical shifts in the courier industry. 4. Challenging the state postal monopolies When TNT ®rst put its head above the parapet and challenged the UK Post Oce it failed because the regulatory environment was against it. That regulatory environment is now changing as governments adopt increasingly neo-liberal economic policies and begin to view formerly loss-making state-provided services as commercial opportunities rather than public service obligations. Governments have been both prompted and pushed into adopting these views by ®scal necessity, EU convergence criteria, shifting demand (especially among commercial service users), the economic pressures of

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globalisation and the blurring of service divides that has resulted from the adoption of new technologies. Phones, fax, e-mail, EDI and other Internet-based services are cutting into traditional mail services while private sector marketing methods are pushing huge volumes of unaddressed mail into postal systems. The chosen ground for the attack on the postal monopolies by the courier companies is the issue of crosssubsidy. Most major governments hold to the concept of universal service provision for basic postal services within their territories, maintaining reserved services operated usually by state-owned postal and telecommunications organisations. The complaint of the private sector couriers is that these monopoly mail services are being used to cross-subsidise other and newer services that their state-owned competitors are introducing in a bid to generate greater commercial revenues. In the US, UPS has been challenging the ``unfair'' practices of the US Postal Service for a number of years. In 1997, the CEO of UPS complained that: ``The Postal Service can undercut competitors because it pays no taxes; has access to unlimited government credit at rock-bottom rates; enjoys a protected monopoly of ®rst-class mail; and is not accountable to anti-trust laws, vehicle licensing fees, zoning regulations and a host of other requirements that cost private business billions a year . . . [T]he Postal Service is using revenue from its monopoly on letter mail to subsidize its products that compete with UPS and other companies. The Postal Service is also developing new products and services in numerous sectors of the economy, including retailing, ®nancial services and marketing that undermine free enterprise and competition.'' (UPS, 1997). More recently he has maintained that: ``The Postal Service has engaged in direct predatory competition by using revenues from its ®rst-class monopoly customers and taking advantage of its government status to undercut the prices of its private sector counterparts.'' (UPS, 1999). As this competition in the US intensi®es, UPS now talks of going ``head to head'' with the Postal Service, and the Postal Service talks of going head to head with UPS. It is signi®cant that UPS now sees itself and other private sector couriers as counterparts of the US Postal Service. Indeed, the distinction between public and private sector courier operations has become signi®cantly more complex in recent years. In Canada, for example, a more intense con¯ict has arisen. Canada Post Corporation (CPC) became a Crown Corporation in 1981 ± a

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corporatised state entity operating reserved mail services. To turn round its loss making services, in 1994 it bought a private sector courier operator, the US-owned Purolator Corporation. UPS, FedEx, DHL and a host of small courier ®rms in Canada vigorously protested CPCÕs purchase of Purolator. The CPC justi®ed the purchase as, `` . . . a proactive move to meet the global challenge and to protect each of our positions in the face of a growing threat from large American multi-national competitors . . .'' (extract, CPC, 1994). The private sector couriers accused CPC/Purolator of cross-subsidy and aggressive competition that was, to all intents and purposes, predatory. The 1996 Mandate Review in Canada found support for these views. Cross-subsidy was identi®ed as arising from both unintentional misallocation of costs (for which there was no penalty) and through CPCÕs use of PurolatorÕs network to leverage cost savings by ®lling PurolatorÕs spare air capacity with its own packages (Mandate Review, 1996). The Canadian government did not see things the same way, and chose to see a corporatised organisation trying to pay its way and attempting to maintain a healthy, a€ordable letter mail service (see Hallsworth and Taylor, 1999). Increasingly, therefore, the di€erence between corporatised state organisations and private sector courier is ambiguous while the regulatory regime that so strongly a€ects the courier sector is patently at odds with neoliberal policies. In Europe, the same ambiguity is emerging rapidly as the regulatory environment shifts and creates turmoil in public sector/private sector relationships in the courier sector. The cases of DP and the TNT Post Group demonstrate this ambiguity. As in Canada, the need in the EU is to make postal services more commercial. In 1992, the European Commission issued a Green Paper on the Development of the Single Market in Postal Services which outlined the CommissionÕs proposals for liberalising postal services while ÔreservingÕ basic postal services as national postal service monopolies (European Commission, 1994). The Commission also upheld the Ôuniversal serviceÕ concept to ensure that all addresses within the EU receive a postal service. DP, however, has moved more quickly than the EU. This state entity with over 270,000 employees was, in e€ect, corporatised in 1994 and is to be fully privatised in 2000. Like CPC it has a monopoly on letter mail, though this will be slimmed in comparison with other European states by 2004. 1 At the same time, DP has moved rapidly and aggressively into express courier

1 In Germany after 2004 in the area of addressed mail Infopost over 50 g and letters over 200 g will be open for conveyance by all enterprises. This will be a greater degree of liberalisation than in either France or the Netherlands, for example (Deutsche Post, 1998).

services and other private sector activities. It has built by acquisition an extensive ground-based parcel service throughout Europe and has extended those operations into North and Latin America. It has also taken a 25% stake in DHL International (part of DHL Worldwide) to extend its operations into air express services on a global scale. Beyond the courier industry, it has acquired an extensive holding and a co-operation agreement with Postbank in Germany, taking it into ®nancial services (Deutsche Post, 1998). In Europe as in the US, there are complaints about the anti-competitive behaviour of DP which is now to be probed by the European Commission (The Economist, 1999a). ``United Parcel Services (UPS) . . . ®rst complained to the commission in 1994 that DP was sti¯ing competition in parcels by using proceeds from its letters monopoly. The commission was reluctant to handle such a hot potato, but after repeated complaints from DPÕs competitors, and the threat of legal action by UPS, it has at last reacted.'' (p. 72). Like USPS, DP defends itself by claiming the need to provide an universal service, but its rivals say DP needs the huge investments it has made in non-letter business to provide enough work for the 33 state-of-the-art sorting centres it has built. It would seem that the arguments over cross-subsidy in Canada are about to be aired once more but, with German reluctance to provide information, the outcome will almost certainly be ambiguous (The Economist, 1999a). In a similar vein to DP, TNT Post Group is now a privatised state enterprise operating ÔreservedÕ mail services for the Dutch government while operating extensive express courier service and logistics businesses. The emergence of this group in the 1990s shows very clearly the intertwining of public and private sector interests in a shifting regulatory environment and the ambiguity this brings to the operations and the economics of the courier industry. The original Australian-owned TNT foundered in the fractured, strongly regulated and unsophisticated European courier market of the 1980s (along with FedEx) and, in retreating, was forced dramatically to restructure in 1992. This restructuring involved becoming part of GD-EW in which CPC, and four European postal administrations (including the Dutch) collaborated. In 1996, Dutch interests in the form of Royal PTT Post took over GD-EW and, with KPN, acquired TNT in a successful public bid for its shares. This created a government-owned enterprise Royal PTT Nederland NV. Then in the latter part of June 1998, this enterprise was de-merged to create a telecommunications business (Royal KPN NV) and also the TNT Post Group focused on mail, express courier and logistics business.

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Clearly, the market mechanisms of merger, take-over and restructuring, coupled with economic internationalisation pressures, and neo-liberal (or more realistically, pseudo-liberal) deregulation, are creating a new quasicompetitive courier/mail industry. It can be suggested that, while concentration and convergence typi®ed the private sector courier corporations in the 1980s and early 1990s, the late 1990s have seen the ®rst signs of convergence between public sector and private sector enterprises in this sector as the regulatory environment has changed. 5. The courier industry: a theoretical approach We have thus far outlined the nature and form of growth in the courier service sector and the wider context of that change. The question now is how to theorise this change? What the discussion to this point has demonstrated is that a wide range of interrelated in¯uences has shaped the sector and that the interplay of these in¯uences has shifted signi®cantly through the 1980s and 1990s. First, there have been the pressures and potentials of a new era of ¯exible production (Piore and Sabel, 1984). This has heightened demand for reduced costs (both of inventory and logistics) (Estall, 1985; Sayer, 1986) and for systems to support just-in-time and lean production. It has heightened requirements for improved quality and for more rapid response times to cope with changes in demand. Here for the ®rst time were the opportunities for specialised express courier services ± new niches in a rapidly changing economic landscape. Second, there were the capabilities of new technologies, not just in physical transportation, but in bar codes, IT and the Internet, that could be combined into the sophisticated communication, EDI and consignment tracking systems that the courier companies needed. Third, and all too easily overlooked, are the new organisational forms that were developed by the courier companies, in particular the hub and spoke systems that FedEx pioneered. These organisational innovations yielded ®rst-mover advantages that helped once-small specialised courier ®rms to develop into global operations (Chandler, 1990). More recently, organisational innovation has also allowed courier corporations to become the logistics partners of time-sensitive producers (such as Dell), co-ordinating their inputs, performing (and tracking) deliveries, supplying parts for repairs and providing the return systems to operationalise guarantees. Fourth have been the pressures and opportunities of internationalisation and economic globalisation. These have further intensi®ed the demand for logistical support in production chain management taking nationally honed courier and logistics systems onto an international stage. Fifth have been the pressures and limitations of regulation. It was

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national regulation of postal services that created, in the face of shifting transport and communications technologies, the niches within which the major courier corporations ®rst grew. It has been shifts in national regulatory environments that have made state-owned postal monopolies increasingly cost and competition conscious. And it has been these shifts in regulatory environments that have brought the corporatised and privatised monopoly mail service providers into head-on con¯ict with the private sector courier corporations. These ®ve sets of forces have each had a similar e€ect; they have empowered some enterprises and disempowered others. They have allowed some to grow while they have thwarted others. We contend that it is only by coming to grips with the issue of power ± with dominance, subordination, con¯ict and resistance ± that we can theorise the massive change so evident in the courier industry and being experienced throughout the economies of the developed and developing world. Here we build on the views of Clegg (1987, 1989) who has argued that power and inequality in economies can be viewed as working simultaneously within a number of overlapping circuits. We argue that only by understanding the different forms that power can assume, and interpreting these within complexly interwoven circuits of dominance and subordination, can we fully theorise the radical changes that have occurred in the courier industry in the past two decades. 5.1. Power Power has been described by Giddens (1976) as an Ôelemental conceptÕ though at the same time it has always been slippery. Until recently, it has been tangential rather than central to most writing in economic geography, though its in¯uence has always been pervasive. Thus, for example, for Sayer and Walker (1992) power is an additional and derived factor: ``[o]wnership is not the root of all economic power . . . Economic power derives also from our positions in the technical and social divisions of labor . . . [whilst] . . . mainstream economics persists in overextending its atomized, undersocialized exchange view of the economy and remains hopelessly blind to class and other relations of domination'' (p. 268). Here the pre-occupation is with bases of power ± power is a commodity to be acquired and involving a degree of intentionality (Wrong, 1995). McDowell (1997) adopted a somewhat di€erent view of power focusing on discourses ± on controlling narratives of empowerment that channel relationships. Drawing on Foucault, she maintains that ``. . . power relations [are] complex and unstable, part of the social construction itself . . . rather than . . . a social and political system in which a repressed group is dominated for the bene®t of the oppressors'' (pp. 287±288).

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But, it is Allen (1997) who has recently been at the forefront in making the issue of power more central in economic geography. We concur that ÔpowerÕ in economic geography, ``. . . is under-theorised, with little attention paid to either the di€erent modes of power ± domination is di€erent from authority, which is di€erent from coercion which is di€erent from seduction, and so forth ± or the di€erent conceptions of power as a capacity or as a practice, for example'' (Allen, 1997, p. 59). In this work he identi®es three broad theorisations of power: (1) a loosely based realist account of power; (2) network notions of power; and (3) power as regulation and control at the workplace (Foucauldian power). These views of power overlap strongly, the ®rst two, for example, emphasising power as relationship. Allen goes on to focus on the important implications of spatiality for power, yet it is at this point that we depart from his approach. On the three theorisations, Allen (1997) deems ``no one approach . . . preferable'' (p. 59) but implies that di€erent models might be applied in di€erent situations, though the spatialisation of power might synthesise them as ``overlapping modes of power'' (p. 66). Here we extend the tripartite approach to power in the manner suggested ®rst by Taylor (1995) building on the seminal work of Clegg (1989, 1991) (also see Taylor, 1996; Hallsworth and Taylor, 1996). Again three theorisations of power are recognised but (leaving aside for the moment explicit issues of spatiality) we regard it as essential to see them as interrelated, overlapping and interacting. In this way, a dynamic is created: di€erent modes of power collide and periodically destabilise and re-stabilise the economic system. We contend that the recent history of the courier industry illustrates speci®c instances of the dynamic intertwining of circuits of power, as they have been labelled by Clegg (1989). 5.2. Circuits of power Under the early conceptualisations of Clegg, power can be interpreted in three quite distinct ways in relation to the functioning of the business enterprise. First, power can be regarded as a commodity: Something to be owned, acquired and possessed. It is the ability of ÔA to make B do something that B would not otherwise doÕ (Dahl, 1957). It is the power that comes from socially constructed hierarchies and bureaucracies and their control of resources ± from HobbesÕ monarchy and WeberÕs bureaucracy. It is the ÔtechnicalÕ and ÔpositionalÕ power of the resource-dependence school of thought within management science (Pfe€er, 1981, 1992), and it is the control of ÔmoneyÕ and ÔauthorityÕ that Benson (1975) saw as pivotal to a political economy view of the business organisation. It is the power associated with tolerated inequality, but tolerated only so

long as the majority of individuals and enterprises can continue to generate wealth for themselves. For Clegg (1989), commodi®ed power is exercised and played out in day-to-day interactions and constitutes a causal circuit of power. Against the backdrop of temporarily stabilised framework of social relations (involving a particular regime of accumulation, a particular regime of legitimation, and an established sphere of domestic order), di€erent agents (individuals, enterprises, institutions and governments) undertake the business of wealth creation/accumulation. They establish time-speci®c buyer±supplier relationships ± all comprising the Ôstanding conditionsÕ of that time with reasonably predictable accumulation outcomes. The inequality in this circuit of power generates intensifying pressures and discontent which are, in e€ect, the slowly germinating seeds of its own destruction. Second, power can be interpreted as relationships: The strategicality of interaction, the strategies embedded in actions. This is power exercised periodically. It is power expressed as socially constructed rules of meaning and membership ± accepted ways of doing business that are codi®ed both formally (in law and regulation, Clark, 1992) and informally (in a social mode of economic regulation, Marsden, 1992; Jessop, 1993). It is a Machiavellian view of power concerned with creating regimes of legitimation. To all intents and purposes, these rules create structures of social obligation ± obligatory passage points (Callon, 1986) ± that generate conformity, isomorphism, stability and knowable risk in the relationships of wealth creation. For Clegg (1989) this regulation of relationships created a dispositional circuit of power that stabilises capital±labour±state relationships but also has the capacity massively to change them. As the relationships in this circuit are socially constructed, they will di€er from one social and cultural context to another (Clegg, 1990). They may, for example, lead to the promulgation of Ôsystem formingÕ or Ôsystem guidingÕ regulation (Christopherson, 1993). But, as Gertler (1997) has shown so clearly, when an enterprise created and fostered in one regulatory regime begins to operate in the territory of a di€erent regime, buyer±supplier relationships (and the processes of the causal circuit of power) can easily become strained or break down. Also, because they are socially constructed, the relationships of the dispositional circuit are fragile and open to political and ideological manipulation. This manipulation can be identi®ed in recent times in the imposition of the primitive monetarism of ÔThatcherismÕ and ÔReganomicsÕ, or the more subtle assaults of the WTO and the attempt to create a multilateral agreement on investment (MAI) to protect TNC investments from discrimination or appropriation by national host governments. Third, power can be conceptualised as discipline: The discipline of work regimes as conceived by Foucault. In

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a Schumpeterian sense of creative destruction, technology can both build and destroy work regimes and regimes of accumulation. Equally, managerial innovation can empower some forms of enterprise and disempower others. The exercise of power in this form has been only too evident in the rise of US managerialism in the 20th century (Chandler, 1990; Taylor, 1999). It was evident in the emergence of Fordism/Taylorism, ¯exible production, and in the more recent emergence of the information economy and Ôsoft capitalismÕ in the last decades of the century (Thrift, 1998). This is CleggÕs (1989) facilitative circuit of power, capable of bringing seismic shifts to economic systems. It combines with the dispositional circuit to create Ôa ®eld of forcesÕ within which the day-to-day relationships of the causal circuit are embedded. These three modes of power do not, and cannot, exist independently of one another. They operate simultaneously, though they may be exercised discontinuously. In the late 1970s and early 1980s, the private sector courier corporations grew in separate small niches and UPS capitalised on its ®rst mover advantages. FedEx was marginally viable whilst DHL was embryonic and TNT was essentially a trucking company. Demand for fast courier services was small and unsophisticated. Economic systems in the developed world were largely Fordist and economies were strongly regulated. Here was a dynamically stable system of power relationships, but a system that was reaching the limits of its sustainability (Piore and Sabel, 1984). Brie¯y put, ®rst came the disturbance of work regimes and the disciplines of production (in the facilitative circuit) with a shift to ¯exibility and lean production. Day-to-day buyer±supplier relationships began to be recon®gured (the causal circuit) as producers grappled to manage supply chains and to ®nd a new dynamic equilibrium to reduce the risks of accumulation. A result was new and burgeoning demand for the services of the courier corporations waiting in their separate niches. That demand grew exponentially as internationalisation pressures (in the facilitative circuit) further destabilised day-to-day inter®rm relationships; through de-industrialisation and the new international division of labour (NIDL). Among the courier corporations these stimuli initiated processes of concentration and convergence and also the head-to-head competition that they had hitherto avoided through the adoption of niche strategies. Thus, pressures began to build in the causal circuit of power relations. Through convergence, the ``rules of meaning and membership'' in the courier sector were being challenged from within. But, just as these pressures for change in the dispositional circuit mounted in the courier sector, the Ôreal regulationÕ that constrained inter®rm relationships was itself shifted radically as governments adopted neo-liberal, deregulationist poli-

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cies. In other words, pressures were triggered in the causal and facilitative circuits of power that brought radical change in the dispositional circuit of power as it impacted on the courier service industry. In a new regulatory environment, the cosy monopolies of state-owned mail services were stripped of their certainty. The rules and obligatory passage points that had protected them were under siege. Further shifts in the facilitative circuit of power, in the shape of new forms of management and new IT and Internet technologies, again destabilised day-to-day relationships and brought the state postal monopolies into direct competition with the courier corporations, now under a regime of somewhat lighter regulation. What we see now is the private courier corporations and the privatised mail monopolies struggling to ®nd a new stability to ensure successful accumulation. To do so, they acquire and dispose of assets at an increasing pace, they form alliances, and they manoeuvre to gain commercial advantage. In this point and counterpoint, the distinction between public and private enterprises is blurring, regulation is being challenged, new working and organisational practices are being developed, and all this is taking place within an increasingly globalised sphere of activities. In short, all three circuits of power as they apply to the courier industry are increasingly unstable. In what form stability will be re-established is hard to predict ± but so-called minimally regulated gigantism might be one resolution. It is certainly evident in the courier industry and it is only too clear in the oil industry, the mining industry, chemicals production, the vehicle industry, brewing, insurance and banking (see The Economist, 1999b,c). 6. Conclusion In recent decades, the speed of growth of companies in the courier service industry has been phenomenal. Here is an industry at the very heart of economic change and time±space compression ± a business service pivotal to globalisation, supply chain management and e-commerce. The histories of the larger enterprises show very clearly that the trajectory of change in the sector has resulted from the dynamics of complex power relations between enterprises and organisations. This is based on power derived from the market, from management, from technology and from regulation. By casting this complexity within a circuits-of-power framework, it is possible to interpret the dynamics of these power plays as stabilising and destabilising mechanisms that simultaneously feed o€ and confound one another. Internationally, what has been created in the courier industry is a spiral of concentration and corporate convergence that has now enmeshed the formerly state-owned postal monopolies, forcing the pace of deregulation. The pace

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of change seems to be quickening whilst at the same time the boundaries between enterprises, sectors and governments is blurring. No resolution or stabilisation of this quickening spiral of change is immediately apparent but we suggest that to understand the complex power plays within that spiral gives a signi®cant insight into the processes themselves.

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