Norfolk Southern Railway Competition
Now Viewing Norfolk Southern Railway's competition in: Railroads (primary)
Call Preparation Questions
Customers, Marketing, Pricing, Competition
How dependent is the company on its largest customers? - Railroads may depend highly on a few large shippers.
What challenges and opportunities does differential pricing create for the company? - The industry norm is to charge customers based on their willingness to pay. Each product or commodity has its own price.
How many “captive line” customers does the company service? - Some commodity customers have no other choice but to use a single railroad to transport product. Captive customers typically pay more than non-captive shippers.
How have rising prices affected relationships with customers? - Prices have steadily declined since deregulation, but have climbed in recent years due to capacity constraints and rising infrastructure costs.
How important is the Internet in servicing customers? - Some large Class I railroads require customers to order services online.
Competitive Landscape
Demand is driven by sales of bulk commodities and other items best transported by rail. The profitability of individual companies depends on operating efficiently and controlling maintenance expenses. Large companies have advantages in owning systems that connect numerous markets and enable them to serve national customers. Small companies can compete effectively by serving local markets.
Business Challenges
CRITICAL ISSUES
High Capital Spending - Freight railroads require significant capital to maintain their systems. About two-thirds of Class I capital commitments go toward maintaining or replacing existing infrastructure. The remaining third goes toward capacity expansion projects. To build new tracks cost about $2 million per mile; new freight cars cost anywhere between $70,000 and $260,000, according to the Association of American Railroads.
Vulnerability to Government Regulation and Litigation - Differential pricing practices, critical commodity routes with no alternate transportation choices, and a highly consolidated industry create a climate ripe for lawsuits and instigate calls for renewed railroad regulation. Shareholders are pressuring railroads to increase fees to seek relief from capacity constraints and higher infrastructure costs. Railroads must carefully seek ways to increase shipping fees without encouraging supplier lawsuits or calls for regulation.
Industries Where Norfolk Southern Railway Competes
- Transportation Services
- Railroads
- Freight Railroads(primary)
- Railroads
