A STUDY OF COMPETITION IN THE U.S.

FREIGHT RAILROAD INDUSTRY AND ANALYSIS OF PROPOSALS THAT MIGHT ENHANCE COMPETITION

Revised Final Report

Laurits R. Christensen Associates, Inc. Madison, WI

November 2009

INTRODUCTION This report presents the findings of an independent study of the competitive state of the U.S. freight railroad industry performed by the study team assembled by Christensen Associates and commissioned by the U.S. Surface Transportation Board (STB). In conducting this study, the Christensen Associates study team has received cooperation from the STB and numerous railroad industry stakeholders including railroads, various shipper group organizations, numerous individual shippers, government organizations, academics, and other stakeholders. The study team also assembled an Advisory Panel with representatives from a broad cross section of industries, groups, and stakeholders. While valuable insights and assistance were obtained by the study team from these various groups, no individual, government agency, railroad, shipper, or any other industry stakeholder has influenced the findings of this study. The findings presented and conclusions reached in this report are the professional judgments and opinions of the Christensen Associates railroad study team. The U.S. freight railroad industry has undergone a remarkable transformation since 1980 when Congress passed The Staggers Rail Act. In the decades preceding the passage of this seminal act, railroads suffered traffic losses that led to widespread insolvencies. The deregulation of the railroad industry ushered in increased market flexibility, competitive and differential rates for rail service, and a climate open to innovation. In the years following the passage of The Staggers Act, the railroad industry experienced dramatic reductions in costs and increased productivity, which yielded

higher returns for carriers and lower inflation-adjusted rates for shippers. Thus both railroads and their customers benefited from regulatory reform. Literature review A DYNAMIC COMPETITIVE ANALYSIS MODEL FOR A GLOBAL MINING FIRM

by

HENDRIK L BRUMMER

JUNE 2005

1.1 INTRODUCTION AND BACKGROUND Globalization has established new dynamics in many well-established industries. This has been the case in the automotive, communications, clothing, electronic, home appliance, photographic, steel, and virtually every other industry around the world (Hill 1994:5- 11). This also applies to the global mining industry, because it has undergone considerable upheaval in recent times; in fact, during the past decade it has seen some of the greatest changes in its history. Commodity and other price fluctuations, exchange rate fluctuations, regulatory influences, global opportunities, global competition, mergers, takeovers, strategic alliances, restructuring and even a departure from the business scene are some of the critical issues that mining firms currently have to face on an ever-increasing scale. Amidst this complex environment, the struggle to create a sustainable competitive advantage has become a common denominator for many mining firms (Skirrow 2000:1).

The need for these firms to become and remain competitive in such dynamic circumstances is understandable. It is, however, a fact that competitiveness is not a natural property of an organization. Becoming and remaining competitive requires a conscious and continuous design for competitive advantage (Dean 1995). This also applies to firms active in the global mining industry.