Esade Cover Letter

To reverse the deterioration of the postal service, the government should raise the price of postage stamps. This solution will no doubt prove effective, since the price increase will generate larger revenues and will also reduce the volume of mail, thereby eliminating the strain on the existing system and contributing to improved morale.”

The statement treats about a solution to reverse the deterioration of the postal service by raising the price of postage stamps. The argument guarantee that by rasing those charges, the effects will be:

a decrease in volume regarding the mail and a larger amount of revenues.

Two reason could explain the crisis being faced by the postage service:

No enought customers to sustain good revenue

Difficulty to compete with the arrival of new technology

In order for this solution to be efficient, the volume of mail, even after decreasing, have to be sufficient to sustain good revenues whithin the new price margin. But, as we know, for instance, in revenue management in hospitality industry, increasing the price of your product or service will directly impact on your occupancy (volume of customers). And, in a time were your volume of order is too small to sustain your business, it has been proved and applied that it is well advise to decrease the price of your product in order to increase your volume of demand and maximize your revenue. In our case, by increasing prices of postage stamps, the volume of mail could decrease too much and as the postal service is already facing a crisis, the game plan would disturbed even harder the postage service.

Also, it is important to determine clearly why the postage servive is facing a deterioration in order to act directly on the root of the problem. As we know, the postage industry have some trouble to compete with web mail as they are faster and most of all free. But the postage can't be replace for lots of services as for example, transportation of packages, recommandated letters, transportation of materials from supplier to customer... So, it would be interesting to develop the section of the postage service that can not be replace by the arrival of new technologies and connection systems.