Example research essay topic: Irwin Mcgraw Hill General Accounting Office - 1,539 words

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... areas. Hungry new competitors are baying at the door. Deregulation The intensity of competition among postal services will depend largely on the extent of deregulation.

Governments generally are supporting state monopolies less, and the postal monopoly is no exception. They realize that a monopoly limits a postal operator's incentive to be efficient, and that competition will be distorted as long as an operator can subsidize its deregulated business segments with profits earned in protected segments. Governments have also begun to acknowledge the correlation between business success and the degree of independence a postal operator enjoys from regulatory and political bodies, and from civil service obligations such as lifetime employment guarantees and inflated retirement benefits. In Europe, publicly traded companies such as PTT Post in the Netherlands achieve the highest return on sales among postal operators, while state-owned post offices such as those in Spain, Austria, and Greece have been unprofitable for years. (Bot et al. 93) As a result, some countries, including Sweden and Finland, have abolished their postal monopolies, and others want to confine the monopoly to fewer services.

The European Union places a weight limit of 350 g on letters that the post office alone may handle. So far, only Denmark (which has a limit of 250 g) and Germany (which has a limit of 200 g on regular mail and 50 g on addressed mass mailings) have crossed this threshold. Big changes are thus still to come. (Bot et al. 94) On top of this, and in line with deregulation in telecommunications, European and national regulators are thinking about opening up downstream access to postal networks. Competitors would be allowed to inject letters into the "last mile" of a regional distribution network for a charge of "cost plus" (about half of today's production cost), although in order to maintain the scale economics of distribution, postal operators might preserve the exclusive right to deliver mail. Such arrangements would enable new competitors to enter the market without having to make huge investments or suffer delivery-cost disadvantages, but still allow for differentiated tariff structures and value-added services such as storage or print and mail (whereby a company takes on the printing as well as the distribution of, say, a mailshot). Competitors would themselves perform other network activities such as collection, sorting, and transportation, possibly at lower cost. (Bot et al. 94) The net result of these developments is that up to 90 percent of an incumbent postal operator's business is in danger.

Financial and business communications will be simultaneously the victim of electronic alternatives and the target of competitors attracted by the large volumes that go from one sender to many recipients. Advertising and other mass mailings will be targeted by low-cost and specialist operators (although here too, volumes will eventually be hit by electronic alternatives). And goods distribution business will be vulnerable to private operators that have highly effective tailored networks and can offer value-added logistics services. The only area in which incumbents will retain the advantage is the "many-to-many" segment, where the need to make a large number of pick-ups per kilometer and to run an extensive network favor the monopoly holder But while deregulation will usher in better and cheaper services, it could also be accompanied by deteriorating service in remote areas, financial trouble for incumbent operators, and job losses.

Lower personnel costs and more flexible working hours mean that private operators in some deregulated segments enjoy cost advantages of 30 to 40 percent, posing a serious threat to the existing service. There is also the matter of public opinion. Post office closures are unpopular - so much so that when news spread in France that the government intended to rationalize postal services, it was forced to promise that it would not close a single post office. Governments are therefore likely to want to proceed carefully. But whatever the pace of deregulation (and it will vary by country), competitors are waiting to snap up business. (Bot et al. 95) Objectives The question at hand is, in relation to the budget dilemmas and fluctuating profits it has experienced over the past twenty years, is it in the best interest of the Postal Service, as well as the United States economy, to remain a monopoly or to create competition by privatization? There are many factors the government must consider in making this decision, and many positive and negative affects of each.

Privatization has many advantages. If the Postal Service is made private, more private companies that provide the service of delivering residential mail will arise, creating a competitive market. With numerous competitors in the market, each private company will run more efficiently, cutting costs and resulting in lower prices for services provided to the general public. Another benefit to privatization is that it will allow the small problems that are often overlooked by the government to be corrected.

For example, book-keeping policies would be improved, as well as banking techniques by alluring the companies to select banks that provide them with the lowest interest rates on loans and the highest interest rates on their accounts. A second example of a problem that will be corrected by privatization is the problem of receipts from consumer purchases being submitted sometimes days after the transaction date. Therefore, the money made on these transactions remains out of circulation for a few days at a time. Talk of privatization includes the mention of improving this method so that the receipts are submitted the same day as the transaction, enabling the money to be utilized and invested more efficiently and quickly. On the other side of this issue, privatization of the Postal Service will have its downside.

For example, more resources will have to be put to use if more private firms are in existence, including employees, mail trucks, and airplanes. Over the years, the Postal Service has been experiencing a large profit that may be disrupted by a sudden change in the market. Analysis Based upon the information I have reviewed, my analysis is that the general public will benefit from the privatization of the Postal Service. Just by studying the benefits of a competitive market versus a monopolistic market, it is evident that competition provides the public with more of a say in how their money is being spent when purchasing goods and services. It also provides lower costs for these goods and services being purchased. Although I do think that privatization of the Postal Service would decrease the cost of services provided to the public, I do not see this happening in the near future.

When studying the financial history of the Postal Service, we can see that it was not always a profitable market. However, we can also see that over the years it has become one of the most profitable businesses in the United States. By correcting some of its most prominent problems and cutting back its costs the Postal Service has increased its profits significantly. And it plans to increase its revenue by $ 4. 2 billion by the year 2005. (web) The United States government is really reaping the benefits of these profits. Had the Postal Service continued its downfall that was present twenty years ago, I think privatization would have already occurred. However, with the dramatic increase in revenue and the current profitable status of the Postal Service, I dont believe it would be in the best interest of the government to allow it to become private.

Summary In summary, the debate over the privatization of the United States Postal Service has been ongoing over the past twenty years. However, it is not an issue known to many in the general public. There are both pros and cons involved with both sides of this issue, both in respect to the public and the government. Because the Postal Service is now one of the most profitable businesses in the country, it is an asset to the United States government to have control over its operation and profits. The $ 60 billion+ revenue that the Postal Service is currently bringing in puts them in 12 th place on the Fortune 500 list and 33 rd on the Fortune Global 500. A recent study in 2000 showed that domestic direct mail sales were at an all time high of over $ 500 billion. (web) It is speculated that, since the United States Postal Service is currently doing so well, it may be in the best interest of everyone to keep it as a monopoly and avoid privatization.

Bibliography: Bot, Bernard L. , Girardin, Pierre A. , Book J. H. Is There a Future for the Postman. The McKinsey Quarterly, No. 4, 1997 Bergstrom, T. , Miller J. H. Experiments with Economic Principles: Microeconomics, 2 nd Edition.

Irwin/McGraw Hill, 2000 Sharp, A. , Register, C. , Grimes, P. , Ray, M. Economics of Social Issues. Irwin-McGraw-Hill, 2004 < web > United States. General Accounting Office, Changes in the U. S. Postal Services cash management practices.

Report. U. S. General Accounting Office, Washington, 2000 United States. General Accounting Office, Changes needed in the U. S.

Postal Services rural carrier pay systems. Report. The U. S.

General Accounting Office, Washington, 2000 U. S. Postal Service Financials. Homepage, 2004 < web financials>

Research essay sample on Irwin Mcgraw Hill General Accounting Office