Master Degree Project in Logistics and Transport Management Intermodal Rad-rail Transport Business Models in Sweden and Germany A comparison of an intermodal transport company in the two markets Daniel Jelcic and Karolis Vizgaitis Supervisor: Jonas Flodén Master Degree Project No. 2014:55 Graduate School Abstract The thesis investigated how the intermodal rail-road transport business model is influenced by external factors in two countries. For the analysis TX Logistik was chosen as an illustrative case and its business models in Germany and Sweden were examined. The competition with intermodal companies and trucking, policy and society, infrastructure and innovation, and demand were taken into account as external factors. After conduction of two interviews with TX Logistik representatives from Sweden and Germany, the description and analysis of TX Logistik business model in these two countries were made, according to Osterwalder’s business model’s canvas. It was identified that the company uses a subcontractor business model. The comparison of the German and Swedish intermodal transport markets in terms of the mentioned external factors was also done. Finally, the business models’ adaptations in the German and Swedish markets were analyzed. It was found out that the policy, demand and intramodal competition influenced the strategy and, consequently, the business models, significantly. However, there are some areas for improvement. The company should establish partnerships with other institutions in order to achieve promising innovations for the reduction of transport time. This would improve the value proposition and strengthen a competitive position against all-road transport. The governments, on other hand, should review their policy regarding regulation, certification and also fees for the usage of infrastructure. Keywords Intermodal Freight Transport, Business Models, Osterwalder, External Factors, Deregulation, Rail Freight Transport, TX Logistik, Germany, Sweden ii Acknowledgements This report is the result of our master thesis that we completed during our last semester at the School of Business, Economics and Law – University of Gothenburg. The researchers would like to acknowledge everyone who has contributed with knowledge and personal experience in order for this thesis to be written. Firstly, the researchers would like to thank our supervisor, Johan Flodén, for the feedback and help given throughout the process. Also, a gratitude to Johan Woxenius at the School of Business, Economics and Law – University of Gothenburg, who took his time to help us. Second of all, the researchers are grateful for TX Logistik’s participation and their corporation throughout the thesis. Huge thanks to Thomas Andersson, Jörg Nowaczyk and Per Zachrisson. Finally, the researchers would like to express appreciation to their families and girlfriends for their encouraging and help during the project. Without the help from abovementioned people, this thesis would not have been possible to write. Gothenburg, 5th of June 2014 ___________________ ____________________ Daniel Jelcic Karolis Vizgaitis iii Abbreviations 3PL Third Party Logistics AEG Germany’s National Railway Act B2B Business to Business B2C Business to Consumer BNetzA Federal Network Agency CRM Customer Relationship Manegement DB Deutsche Bahn EBA The Federal Railway Authority in Germany ECTS European Train Control System ERTMS Europe Rail Traffic Management System ESR Europe Shippers Railway EU European Union GDP General Domestic Product ICT Information and communication technology IT Information technology LSP Logistics Service Provider LTL Less-than-truckload SJ Swedish State Railways STP Specific Transmission Module TEU Twenty-foot Equivalent Unit TCE Transaction Cost Economies Trafikverket Swedish Transport Administration Transportstyrelsen Swedish Transport Agency TL Truck load TX TX Logistik USA United States of America UK United Kingdom iv Table of Contents 1 Introduction .......................................................................................................................................... 1 1.1 Background .................................................................................................................................... 1 1.1.1 Deregulation ........................................................................................................................... 1 1.2 Problem Description ...................................................................................................................... 2 1.3 Purpose .......................................................................................................................................... 2 1.4 Research Questions ....................................................................................................................... 2 1.5 Delimitations ................................................................................................................................. 3 1.6 Disposition ..................................................................................................................................... 3 2 Theoretical Framework ........................................................................................................................ 5 2.1 The Interpretation and Key Characteristics of Models ................................................................. 5 2.2 Models of Transport ...................................................................................................................... 7 2.3 Business Model Concept ............................................................................................................... 7 2.4 Business Model and the Strategy .................................................................................................. 9 2.5 Business Model Lifecycle ............................................................................................................. 10 2.6 Business Models’ Environment and Usage ................................................................................. 10 2.7 Business Models’ Comparison to Scientific Models and Recipes ................................................ 11 2.8 Osterwalder’s Business Model .................................................................................................... 12 2.8.1 The Nine Building Blocks ...................................................................................................... 12 2.8.2 Pillar 1: Product .................................................................................................................... 13 2.8.3 Pillar 2: Customer Interface .................................................................................................. 15 2.8.4 Pillar 3: Infrastructure Management .................................................................................... 17 2.8.5 Pillar 4: Financial Aspects ..................................................................................................... 18 2.9 Intermodal Transport in the Literature ....................................................................................... 19 2.10 External Factors ......................................................................................................................... 19 2.10.1 Railway Market Deregulation and Competition ................................................................. 20 2.10.2 Policy and Society as External Factors ................................................................................ 21 2.10.3 Innovation and Infrastructure as External Factors ............................................................. 23 2.10.4 Demand as External Factor .................................................................................................... 24 2.10.5 Truck and Rail Competition ................................................................................................ 25 2.11 Intermodal Rail-Road Business Models ..................................................................................... 26 2.11.1 Operator-3PL Model ........................................................................................................... 27 2.11.2 Anchor Customer Model .................................................................................................... 28 2.11.3 Agent Model ....................................................................................................................... 28 v 2.11.4 3PL Model ........................................................................................................................... 29 2.11.5 The Subcontractor Model................................................................................................... 29 2.11.6 The Complete Transport Company Model ......................................................................... 30 2.11.7 The Own Account Transport Model ................................................................................... 31 2.11.8 The Local Cooperation Model ............................................................................................ 31 3 Methodology ...................................................................................................................................... 33 3.1 Research Strategy ........................................................................................................................ 33 3.2 Research Design .........................................................................................................................