In an article from 1960 on the myopia of certain companies regarding the adopted marketing strategies, Theodore Levitt makes direct references to the situation of the railway sector. There is a paragraph which should make us think when we stumble upon the lack of reaction of the railway sector and, most of all, of the vector with the most significant impact in the sector, politics: “The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today because the need was filled by others (cars, trucks, airplanes, even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was that they were railroad-oriented instead of transportation-oriented, they were product-oriented instead of customer-oriented”.
Indeed, many things did change from the publication of the article and the process for the liberalization of railway transport markets radically changed the direction of most operators, either freight or passengers. Competition has grown and with it, the efficiency and quality of services. Nevertheless, looking at the situation of a specific segment of railway operators, the example of Levitt is very up-to-date. The lack of vision and of a coherent and efficient management, the lack of investments in modern rolling stock, serving political and social interests to the detriment of commercial interest have had a strong impact on market shares and the profitability of railway state-owned companies in Eastern Europe. Although the region did develop as regional hub, favoured by the strategic position of main Europe-Asia trade routes, the state-owned operators have not managed to integrate in the logistics transport chain. To tell the truth, neither the condition of the railway infrastructure, nor the current global financial situation helped them. Now, we wait for privatisation, and with the new owners, for a new vision and strategy. We will see to what extent the correction of the myopia through state separation can be done rapidly, 100%, as the market demands it to rejoin competition for new customers.
by Cristina Trifon
Head of Business Development & Strategic Alliances
Club Feroviar
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