Intrastate semitruck transportation in Michigan - Research Paper Example

For instance, the construction data for the last semester of year 2009 showed Michigan to have experienced declines in the double-digits (-16.8%) which was reflected in the -6.4% decline of combined trade, transportation and utilities sector (www.bls.gov. 5 February 2010). A related industry to transportation and quarrying is mining and logging which also declined but this decelerated somewhat to only -6.3% over a 12-month period. All the above economic data pertain to number of jobs (in thousands, seasonally adjusted).

What is more worrisome is the unemployment rate in state of Michigan which hovers around 15% (actually 14.6%) which is way above the national average of only 10%. But this is only the local picture for the state itself but there are many other issues to look at such as labor conditions, hiring patterns, economic competitiveness, safety, security, congestion, overall mobility, environmental impact and energy efficiency. Other than the economic factors that impinge on the industry, the one factor that has the greatest impact is deregulation.

This is one factor more than interest rates or overall state of the economy that affects the industry. The entire US trucking industry is a $200 billion business and is highly fragmented. It means the 50 largest companies account for less than 30% of total industry revenues, unlike in other industries where there is an oligopoly or a high concentration of big players such as in the accounting industry (only 4 big players that can dictate prices). Economists call this as C4 or an industry where only 4 big players control more than 60% like US auto manufacturing or the oil industry.

In short, the US trucking industry is over-saturated and lacks the necessary bargaining power with regards to customers and pricing. If we use Porters Five Forces Model then the trucking industry has very weak market power indeed. Of the five