Allen, Albert J.

Estrada, Joselito K.

Fuentes, Porfirio A.

Muhammad, Safdar

Wang, Haiyuan

English

Research Papers in Economics

An Analysis of Strategic and Performance Changes of Truck 
Carriers in the Agricultural Commodity and Food Markets
Albert J. Allen, Porfirio Fuentes, Joselito Estrada, Safdar Muhammad, and 
Haiyuan Wang
those firms with missing data on any single dimen-
sion were eliminated for that specific year (see Table 
1). The percentage of valid firms used for this study 
ranged from a high of 92 in 1992 to a low of 70 in 
1996.
The cost dimension measures the firm’s cost, 
which includes salaries, wages, taxes, and other 
expenses. The price dimension provides informa-
tion on prices the firm charged for its transportations 
services. The risk dimension provides information 
on how well the firm’s management/owner handled 
its financial capital. The service dimension gives 
information about services provided by the truck 
carrier. The size dimension indicates how the ac-
tions or inactions of a firm’s management affect the 
strategic focus of firms of different sizes. Table 2 
shows how the strategic dimensions were calculated 
for this study.
A strategic-change index was also developed 
for each firm in each year using the sum of yearly 
changes in the absolute values of each of the di-
mensions in Table 2. The strategic-change index 
was computed as the absolute values of changes in 
the standardized scores for individual dimensions. 
The strategic-change index provides an indication 
of how an individual firm changed its position rela-
tive to industry averages, as well as of changes in 
each individual dimension. 
Performances for each firm are measured by 
that firm’s operating ratio. The operating ratio is 
one of the major profitability measures used in the 
transportation sector. The lower the operating-ratio 
figure, the higher the surplus of revenues over ex-
penses. The higher the operating ratio, the greater 
the deficit of revenues to cover operating expenses 
for the firm. The firm’s operating ratio is measured 
by (total operating expenses/total operating rev-
enues)*100. Results from this analysis show the 
percentage of firms changing their strategic posi-
tion in each dimension from year to year as well as 
the average change in the standardized score from 
year to year. For this analysis, an individual firm’s 
strategic change in a dimension is defined by a 
Allen is professor, Fuentes is post-doctoral researcher, 
and Wang is former graduate student, Mississippi State 
University. Estrada is assistant professor, University of Texas 
at Brownsville. Muhammad is research assistant professor, 
Tennessee Sate University.
Trucks play a vital role in the movement of agri-
cultural and food products from production areas 
to consumers and users in the United States. For 
example, trucks normally originate and end the trips 
for products going to markets. Strategic changes 
therefore are vital to the successful operations of 
trucking companies supplying carrier services to 
shippers in this sector, as they serve not only as com-
petitors but in many situations as complementary 
carriers. This delicate balance between competition 
and integration of truck carriers with carriers of 
different modes of transportation provides shippers 
with a highly efficient, low-cost system of trans-
portation (Eriksen et al. 1998). This paper provides 
information on the profitability, performance, and 
patterns of the agricultural and food-market truck 
carrier industry’s strategic changes from 1992 to 
1999.
Data and Methods
We primarily followed the methods developed by 
Feitler (1995) in analyzing this sector of the trucking 
industry in the United States. This research effort 
focuses on determining during which years the most 
firms had the greatest amount of total change and 
which years involved the greatest change in individ-
ual strategic dimensions. The strategic dimensions 
analyzed in this study are price, cost, risk, service, 
and size. For each of these identified dimensions, a 
key financial and/or operating performance measure 
is used as a proxy of the management decisions that 
constitute the essence of strategy. 
Data for the financial and operating performance 
measures were obtained from TTS Blue Book of 
Trucking Companies published by Technical Trans-
portation Services (1992–1999). For this analysis, Allen et al. An Analysis of Strategic and Performance Changes of Truck Carriers   19
change of 0.57 or more on a standardized score in 
any of the dimensions. The value 0.57 represents 
the grand mean of the standard deviations. Results 
also show the overall strategic-change index, 
which combines the strategic changes in each of 
the dimensions. Analysis of variance tests is used to 
indicate in which year-to-year periods the average 
is significantly different.
Results
The results of this study are divided into three 
sections. The first section provides information 
on the changes in the structure and profitability 
performances of the agricultural-commodity and 
food-product carriers in the United States. The 
second section emphasizes the changes in strate-
gic dimensions of the carriers in this sector of the 
transportation industry. The last section provides 
an overview of the overall changes in the strategic-
change index.
Changes  in  Structure  and  Profitability 
Performances 
Table 3 provides information on the structural and 
profitability performance changes of for-hire ag-
ricultural-commodity and food-product carriers in 
the United States from 1992 to 1999.
Number of Firms: The number of firms declined 
from a high of 50 in 1998 to a low of 36 firms in 
1999, a net decrease of 14 firms. This absolute value 
represents the largest year-to-year decline during the 
study period, implying that there was less compe-
tition for shippers’ agricultural and food products 
between 1998 and 1999. This means that shippers in 
the agricultural and food-product markets had fewer 
options from which to choose. In total, there was a 
net decrease of 13 firms over the study period.
Average Number of Employees per Firm: The 
average number of employees declined from 87 in 
1992 to 57 in 1995 and increased from 63 in 1996 to 
87 in 1998 and declined to 71 in 1999. The highest 
Table 1. Actual Firms, Valid Firms, and Percentage of Valid Firms.
Year Actual Firms Valid Firms Percentage of Valid Firms
1992 53 49 92
1993 45 39 87
1994 45 40 89
1995 48 41 85
1996 60 42 70
1997 58 43 74
1998 55 50 91
1999 46 36 78
Table 2. Type of Strategic Change Dimensions and Representative Financial Measures 
Used for Study.
Dimension Representative Financial Measure
Cost Dimension Operating Expenses/Miles
Price Dimension Total Revenues/Total Tons
Risk Dimension Total Debt/Total Equity
Service Dimension Total Salary, Wages and Fringe Benefits/Total Number of Employees
Size Dimension Total Operating Revenues20   March 2004 Journal of Food Distribution Research 35(1)
average number of employees per firm occurred in 
1992 and 1998. These two years also coincide with 
the largest number of firms. In total, the number of 
employees declined from 87 in 1992 to 71 in 1999, 
a net decrease of 16 employees per firm.
Average Total Revenue per Firm: The average 
total revenue per firm was highest in 1998 and low-
est in 1995. In 1998, average revenue per firm was 
almost $10.1 million; in 1995 it was $6.9 million. 
The average total revenue per firm increased from 
$8.9 million in 1992 to $9.6 million 1999, a net 
increase of almost $700,000.
Performance: The operating ratio provides an 
overall assessment of a firm’s profitability in the 
agricultural and food-products market for this 
analysis. Any firm in this sector with an operating 
ratio less than 100 will be taking in more than it is 
spending to provide the necessary transportation 
services to its customers. Trucking firm managers 
like to have the operating ratio as low as possible 
so the firm will have money left over from its op-
erations to invest elsewhere or to reinvest in the 
company. In 1992 the industry was barely profitable, 
with the operating ratios averaging 99 percent. In 
1993 the industry slipped to the break-even level of 
100 percent. After that year the firms in the industry 
improved their profitability levels, with operating 
ratios falling back below 100 percent. In 1999 the 
industry had its highest profitability levels: an op-
erating ratio of 96 percent, meaning that on average 
it cost 96 cents to generate one dollar’s worth of 
transportation services.
Changes in Strategic Dimensions
The strategic dimensions discussed in this section 
include the cost, price, risk, service, and size dimen-
sions (see Table 4). Table 5 shows firm behavior 
for each dimension as measured by the changes in 
a firm’s standardized scores from one year to the 
next. 
Cost: The average industry values for this attri-
Table 3. Industry Means Used for Study.
Year
Number of 
Firms
Number of 
Employees
Revenues
($1000)
Operating 
Ratio %
1992 49 87 8958 99
1993 39 80 7945 100
1994 40 63 7855 97
1995 41 57 6951 99
1996 42 63 7873 99
1997 43 84 9006 97
1998 50 87 10156 97
1999 36 71 9658 96
Table 4. Means and Standard Deviations of Strategic Dimensions.
Cost Price  Risk  Service  Size 
Year Mean SD Mean SD Mean SD Mean SD Mean SD
1992 1.74 2.19 40.98 43.13 0.96 1.76 31.11 10.06 8833
1993 1.43 0.66 37.28 33.39 3.69 17.73 30.54 10.12 7876
1994 7.10 33.08 53.47 57.41 1.81 3.71 53.74 50.21 7855
1995 1.31 0.41 45.41 43.39 7.37 39.42 45.55 19.70 6951
1996 1.35 0.41 55.92 75.97 0.47 5.04 47.05 18.51 7995
1997 1.85 3.29 54.06 44.50 1.60 3.33 49.42 33.04 9006
1998 1.52 1.10 50.16 41.41 1.55 3.08 41.26 13.43 10116Allen et al. An Analysis of Strategic and Performance Changes of Truck Carriers   21
bute show that in 1994 the industry had its highest 
average value, 7.10, while its lowest value occurred 
in 1995 with an average of 1.31. This implies that 
after the high costs incurred in 1994, firms went all-
out to reduce their costs in order to become more 
profitable. In total, industry costs increased from 
1.74 in 1992 to 2.86 in 1999. The ANOVA results 
indicate that the means of year-to-year changes in 
cost are not significantly different (F=1.1108, P= 
0.3557).
The highest average change in firms’ standard-
ized cost-dimension scores from the previous year 
was 0.64 in 1997. That year, almost 18 percent 
of the firms’ standardized cost dimension scores 
changed 0.57 or more. Although 1997 had the larg-
est percentage of firms changing their standardized 
score on this dimension, firms changed on the cost 
dimension each and every year during the study pe-
riod. These results suggest that firms were probing 
for ways to change or lower their costs in order to 
become more competitive in meeting their custom-
ers’ transportation needs.
Price: Results show that the average price per ton 
increased from almost $41 in 1992 to $63 in 1999, 
a net increase of $22 per ton over the entire period. 
These results imply that firms increased prices from 
1992 to 1999 most likely to compensate for the in-
crease in costs over same period. This also means 
that shippers in the agricultural and food-products 
market had to pay higher prices for their transporta-
tion services or find alternative ways of moving their 
products to markets. The ANOVA analysis shows 
that there was no statistically significant difference 
(F= 0.7507, P= 0.6290) in the means of year-to-year 
changes in price during the study period.
Firms changed their prices throughout the study 
period. The greatest changes in the price dimension 
occurred in 1996 and 1997. The average changes 
for those years were 0.58 and 0.54 (15.63 and 
15.29 percent), respectively. These results suggest 
that firms were having difficulty keeping the prices 
they charged their customers at low levels.
Risk: The risk dimension shows two peak years 
during the study—1993 and 1995. The values of the 
risk dimension in those years were 3.69 and 7.37, 
respectively, indicating that truck carriers operating 
in the agricultural and food-products market were 
taking on a large amount of debt to service their 
customers. In comparison, the two lowest points 
for risk occurred in 1996 and 1999, when the risk 
dimension was 0.47 and 0.39, respectively. The 
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922   March 2004 Journal of Food Distribution Research 35(1)
low value of the risk dimension in 1996 follows 
the highest risk levels in the study period, in 1995. 
This suggests that firms were not taking on any 
additional risks, since they had taken on a huge 
amount the previous year. The ANOVA analysis 
indicates that the means of year-to-year changes in 
the risk dimension was not statistically significant 
(F= 0.9502, P= 0.4679).
Focusing on firm behavior as measured by the 
year-to-year change of firms’ standardized scores, 
the risk dimension changed each year, ranging 
from 0.28 in 1999 to 0.63 in 1997, indicating a 
consistent yearly change in this dimension. The 
largest percentage of firms that changed in their 
risk dimension occurred in 1995, with 12 percent 
of the firms making changes in their risk dimen-
sion. In 1999, however, the risk dimension did not 
change. This may imply that firms had learned how 
to keep their risks to a minimum to be competitive 
and successful in delivering transportation services 
to their customers.
Service: The highest value of the service dimen-
sion occurred in 1994, with an average compen-
sation per employee of about $53,740, while the 
lowest compensation was in 1993. Over the study 
period the average compensation per employee rose 
from $31,110 in 1992 to $37,400 in 1999, a net 
increase of $6,290. The ANOVA results indicate 
that means of year-to-year changes in the service 
dimension are statistically significant (F= 4.6772, 
P= 5.13E-05) at the 5% level of significance.
The largest year-to-year changes in the service 
dimension were in 1994, 1998, and 1999. The 
changes in the firms’ average standardized scores in 
those years were 0.88, 0.83, and 0.80, respectively. 
The highest percentage of firms that changed in the 
service dimension was 17.39 percent in 1994 and 
16.67 percent in 1998. These results suggest that 
firms continue to adjust and modify their employee 
compensation levels to maintain or reduce costs so 
that they can recruit, retain, and pay their employees 
well to better serve their customers.
Size: The size dimension indicates that the av-
erage size of the firms in the industry increased 
from $8.8 million in 1992 to almost $9.7 million in 
1999. The ANOVA results indicate that the means of 
year-to-year changes in the size dimension was not 
statistically significant (F= 0.8666, P= 0.5332). 
The year-to-year changes in the size dimension 
ranged from 0.12 in 1997 to 0.56 in 1994. This 
indicates that firms consistently changed their sizes 
during the study period. The percentage of firms that 
changed in this dimension ranged from 0.00 percent 
in 1993 and 1997 to 13.04 percent in 1994.
An Overview of the Strategic-Change Index
The strategic-change indices for all firms in the data 
set indicate that firms did make strategic changes 
throughout the study period (see Table 6). Results 
show that mean strategic-change indices ranged 
from 1.58 in 1993 to 3.20 in 1999, an increase of 
more than 113 percent. These results suggest that 
many firms in the agricultural and food-products 
industry may not have been able to manage their 
strategic dimensions at optimal levels as dictated by 
competitive forces in the market. The ANOVA re-
sults indicate that the means of year-to-year changes 
in the strategic-change index were statistically sig-
nificantly different (F= 2.83753, P= 0.0111444).
Summary
This paper examined the profitability, performance, 
and patterns of strategic changes of truck carriers 
that hauled agricultural and food products for 
compensation during 1992–1999. Five strategic 
dimensions and the operating ratio were used to 
accomplish this objective.
Results from the study show that in 1999 firms 
in the industry had an average operating ratio of 96 
percent. This value means that, on average, it cost 96 
cents to generate one dollar’s worth of transportation 
services in that year. Results indicate that industry 
costs increased steadily over the entire eight-year 
study period, and that costs changed each and every 
year during the study period. These results suggest 
that managers of the carriers were searching for 
Table 6. Strategic-Change Indices.
Year Mean SD
1993 1.58 0.88
1994 2.71 1.78
1995 2.11 1.12
1996 1.63 1.34
1997 2.26 1.29
1998 1.95 1.69
1999 3.20 3.46Allen et al. An Analysis of Strategic and Performance Changes of Truck Carriers   23
ways to lower their costs in order to become more 
competitive in this market.
Another result, based on strategic-change 
indices, indicates that managers used various 
combinations of strategic dimensions to respond 
to industry and/or environmental changes. These 
results suggest that managers of individual firms 
position themselves in the agricultural and food 
markets by matching their internal capabilities to 
their external environment.
References
Eriksen, Ken, J. D. Norton, and P. J. Bertels. 1998. 
Transportation of U.S. Grains: A Modal Share 
Analysis, 1978-95. USDA, AMS, Transportation 
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Feitler, J. N. 1995. “Measuring Firm Strategic 
Change in the Regulated and Deregulated Mo-
tor Carrier Industry: An Eighteen Year Evalua-
tion,” Ph. D. Dissertation, College of Business 
and Management, University of Maryland.
Feitler, J. N., T. M. Corsi, and C. M. Grimm. 1998. 
“Strategic and Performance Changes Among 
LTL Motor Carriers: 1976-1993.” Transporta-
tion Journal 37(4):5–12.
Transportation Technical Services, Inc. 1992–1998. 
TTS Blue Book of Trucking Companies. New 
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Transportation of U.S. Grains: A Modal Share Analysis,

TTS Blue Book of Trucking Companies.

AN ANALYSIS OF STRATEGIC AND PERFORMANCE CHANGES OF TRUCK CARRIERS IN THE AGRICULTURAL COMMODITY AND FOOD MARKETS

AN ANALYSIS OF STRATEGIC AND PERFORMANCE CHANGES OF TRUCK CARRIERS IN THE AGRICULTURAL COMMODITY AND FOOD MARKETS

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