Microeconomics: IB Economics

Contrary to my assessment that the regulator has been lenient with the Royal Mail because of the circumstances surrounding its under-performance, Nils Pratley argues that even given these conditions, this decision of the regulator is pitifully weak.

I'm not sure whether this, or his article completely changes my mind but it does provide a degree of balance, and did get me thinking. If, as he argues, it's likely to be associated with a change in its Universal Service Obligation, which is long overdue, he thinks that there should have been a harsher sanction. I'm still not sure I agree in relation to today's sanction. However, I'm more in agreement with the idea that future regulation of five-day delivery should be stringent. 

The bottom line is that the market for letters is, fundamentally, a sunset market, and I think the bigger picture is trying to ensure a managed decline of this part of the Royal Mail's portfolio. 

This is a fascinating article for Business Management students who should think about the nature of the challenges faced by Royal Mail. You might think about internal and external factors that have meant that the firm's business model has changed.

Equally, think about all of the elementary tools that you might use to analyse this problem: STEEPLE analysis, Lewin's Force Field model and so on. A chance to put theory into practice. 

The Royal Mail is struggling - for all sorts of reasons, and a good student would be able to identify many of them - and has asked the government if it can stop delivering letters on Saturdays.

You might ask what the point of this is: but it's self-evidently designed to reduce costs, although one wonders what this means for the salaries of postal workers in the longer-term.

Assuming it does reduce costs - how might you use the information in the passage to show how the company might move from loss-making to making a profit again, and might you also think about the shutdown point in this context too.