Shipping Industry Analysis: A.P Mollar-Maersk

rapture Industry analytic thinking A.P Mollar-MaerskThe global shipbuilding effort has changed in the last two decades, the demand and tag on of goods in the world-wide market, that m whatsoever sectors in the market of shipbuilding in force. The trans air of goods in bulk so-and-so that be institutionalizeed by large commercial cargo ships. Shipping attention is a huge labor that requires a lot of skilled and cheap labour. Shipping persistence requires expensive investments. In the 1960s in Europe were dominant in this industry. Globalization and free trade attain opened up opportunities for brand- spic-and-span life to the rapture industry.T present are many factors that in a flash or indirectly affects to the present sidereal day companies such as government policies, regulations, laws, competition, technology, international organizations, institutions of world trade, minimum wage, accidents, luck, violence, safety, labour, supplies, etc. So for any partnership to survive they induce to plan the st regularizegies accordingly to overcome those factors. moreover in practice it is virtu bothy inconceivable to consider alone these various factors. T here are accepted mildews want Michael Porter five forces that match to the external factors to the environments of ecstasy industry. As a managing consultant of A P Mollar-Maersk shipping order I found that, in roughly of the countries the government is providing enormous support to promote foreign trade for the economic developing, as soundly as my personal experience in shipping industry under A P Mollar-Maersk group gave me thrust to explore more about the shipping industry. Here I analysed the social clubs A P Mollar- Maersk growth and present situation using Porters five force model.The five forces determine industry favorableness because they influence the prices, bes, and required investment of firms in an industry the elements of return on investment. buyer power influen ces the prices that firms tush charge, for example, as does the menace of substitution. The power of buyers raft as well as influence appeal and investment, because powerful buyers demand costly armed service. The negotiate power of providers determines the costs of raw materials and former(a) inputs. The intensity of rivalry influences prices as well as the costs of competing. The threat of entry, places a limit on prices, and shapes the investment required to determine entrants.INTRODUCTIONShipping is the primary means of international transportation of any essential raw material or washed-up goods. There are three main segments consisting of bulk carriers, specialised cargo shipping as well as container shipping. This industry is fundamental to trade, globalisation and economic growth of a hoidenish. Out of the shipping industry A.P Mollar-Maersk group became the worlds largest container ship operator.About the familiarityThe A P Moller Maersk group is the largest con tainer ship operator and add together vessel operator in the world since 1996.Maersk Line offers a truly global network of containerization and ope set out providing shipping solutions for cargo trades and exports. Maersk Line India is the pathing Container Shipping Line in the region with footprints across 16 offices and close to 400 employees covering all major locations and cargo hubs. Maersks activities are organised in distinguishable business segments, they are container shipping and related activities, A P Mollar closing, tankers, offshore and other shipping activities.Maersk realized its foothold in India on August 6, 1990 and has since expanded its operations in the business across the supply chain. Maersk Line India carries cargo to and from all major Indian ports. Maersk Line India major exports include Garments and Apparel from Tirupur, Mumbai and crude Delhi Cotton from Mumbai, Tuticorin and Gujarat Iron and Steel from Kolkata, Mumbai and New Delhi and auto prod ucts from Mumbai, Chennai and Ludhiana.Container shipping activities is the largest business area for Maersk groups, providing half of the groups revenue in 2008. Since 1996, Maersk is the largest container shipping company in the world. Maersk Line operates over 550 vessels and has a capacity of 2.2 million TEU (Twenty-foot tantamount(predicate) Units).2. Analysis of Porters Five Forces for Shipping IndustryPorters five forces is a framework for analysis of industry and development of business strategy, it also determines the competitive intensity and attraction of a market. Attractiveness is referred to boilers suit profitability of industry plot unattractiveness drives d testify profitability. This model implies that profitability or return should be constant across firms and industries besides studies have affirmed that divers(prenominal) industries can have different levels of profitability collect to their varied structure. The model can be used by organizations to dev elop edge over rivals. Conventionally, this as well asl is used to post whether new products, service or businesses have the potential to be profi prorogue.2.1 ATTRACTIVENESS FOR SHIPPING INDUSTRIESGovernment of most of the countries are liberal towards the licensing and development of shipping business. Major part of the countries economic profit depart be evolved from the shipping business. So the threat of new entrance is high, further as the profit margin is high, the attractiveness is also high. Many competitors are available in the market and they provide perfect substitution in terms of serve, clog rates etc, but the resources are also easily available. So the attractiveness is also high. Suppliers are more in this field and the available facility is very less so the cost is high, which collapses suppliers in weak and buyers in strong position. So the industry attractiveness is low in this case. The negotiate power of buyer is high and potentiality of business is hig h then many buyers give be there in the market. This will increase the attractiveness. Existing players are many, but constant technological development and updated services and facilities will increase the attractiveness.3. Threat of New EntryEvery person would like to do business in shipping industry repayable to large profits regard in it. It whitethorn seem easy, but practically it is more difficult and virtually impossible to set up in container business business. The main problem involves in the large capital investments in the form of vessel, operational risk of a vessel and the container availability. In the case of Maersk, we can understand that it had taken more than 100 geezerhood to establish themselves to reach at the top level. Still there can be threat from animate companies like APL and MSC to expand into new sectors which will reduce the package of the company operating in that region. Maersk is generally operating in every part of the world. In certain reg ions it whitethorn be the only(prenominal) player operating, in such case its profit margins from those operations would be huge. But the profit can be severely affected, if APL or MSC introduce their service in those regions. If there are any new potential companies who would like to jump into this sector with huge capital then other factors like licensing, government rules, regulations, policies are all secondary.Capital requirement is high.Profit margin is high.Chance of expansion into new sector is less. switch over cost is less.Government restriction is less.Capital requirement of the shipping industry is very large, so the threat from the new entrants is less. As the capital is very large the profit is also too high in shipping industry. Because all exporters and importers know the best mode of transport their goods is the shipping bank line. Switching cost of the guest is high because of the lack of experience of the new entrants. Most of the countries main economy evolves from the shipping industry. So the government will give full support for the new entry.So overall threat for the new entry is high.4. Threat of electrical switchSubstitution threat is also an important factor oddly when something is going wrong in an organization. Competitors are waiting to catch that opportunity for their benefit. Substitution threat is the pull up stakes of change in buyer behaviour towards competitor or against company. Substitution may also turn out because of change in reference of service, increase in freight rates and increase in pass time. From view point of switching costs, buyers are not affected at all out-of-pocket to higher(prenominal)(prenominal) come in of suppliers and freight forwarders available in market. While it may affect the company to certain outcome as they have to start new search of customer, establish strong relations and educate them on company policies and systems. Switching costs change by reversal even more at times of down turn out-of-pocket to decrease in supply of business from customers. damage factor is primarily responsible for substitution while service specification comes secondary.In case ascribable to the delay of service or quality become poor and at the said(prenominal) time the wagon rates are also similar, then the customers will switch on to the new substitutes wagon. If the oil price crude oil/diesel oil shoots up then the company is forced to increase their delivery charges. Due to the increased rates in shipping and delayed measure to reach the destination on time, customers will go for the substitutes like airline, wagon or even trucks for certain limited destinations. If the airline or wagon goods train can almost cost the similar rates of the shipping companies but can reach on time then customers will think for such substitutes.Substitution threat will be major problem for a reputed company like Maersk. If any service or the goods are not delivered in a proper manner then th e customer authority on company will go down. In this present world people wont via media for any thing. If they are not satisfied by the service they will jump to other substitutes who can give soften rates and services.Availability of the substitutes is high.Price of substitutes is high.Quality and performance of the substitutes is high.Switching cost is high. be factor is less.More number of market players is available, but they all are dealing in different prices, performance and quality will increase the attractiveness of shipping sector. As the switching cost is high, customer stick to their present seller will increase attractiveness. constitute factor is less important because all players will play a role of defender in market will moderate the attractiveness.So overall threat of substitutes is high.5. Bargaining Power of SupplierSuppliers barely make any difference to companies involved in shipping line business, especially who are leading players like Maersk in this bu siness. While it may affect to certain extent to small players like Five star shipping company, Varun Shipping company etc. who are struggling to establish within the industry. Many suppliers are such which are borne directly by customers but arranged by shipping lines like pesticide, wooden pallets, container repairs and truck transportation due to corporate contract or link ups of companies with service providers. While there are cases when these same services are borne by shipping lines but then these charges are included in freight rate which would be higher if the suppliers were not arranged by company. Maersk supply service expects a lower resoluteness than in 2010 due to lower contract coverage and weaker spot market rates than at the commence of 2010.Another supply which is related to loading of containers on third party vessels is very important here because this is the only supply where shipping lines have to face the bargaining of suppliers. Not all shipping lines own t he vessel and therefore they hire the service of other companies, to load their containers for different destinations. Maersk is the largest container operator in Kandla port. But its own vessels are not operating from Kandla due to drift problem and therefore they hire the services of third party feeder vessels to load its containers till JNPT Jawaharlal Nehru port in Mumbai, from where Maersk mother vessels are operating across continents. In this case Maersk may have to pay extra money if demanded by ship operators. While this is not the case with MSC Mediterranean Shipping Company which has its own small vessels operating from Kandla to different disconnect locations. But if we move to location like JNPT port in Mumbai, the situation is totally different. Maersk vessels are the biggest here operating among other carriers and those small carriers are using slot on Maersk vessels for transporting their cargo. There are other supplies like loading/ unloading of containers from vess el ie, movement of containers to CFS (container freight station) and vessel towing which are provided by port authorized suppliers and companies. Port authority charges fixed amount towards these handling from shipping lines and shipping company charges the same from customers after adding their profit margin.Number of the suppliers is high.Price factor of the suppliers is high.Profit of the supplier is less.Switching cost of the supplier is high.Operating cost is high.So overall power of suppliers are low.6. Bargaining Power of BuyerBuyer is one of the strongest factors in shipping line business. Buyers may be in form of importer or exporter, modify agent, freight forwarder or manufacturer of goods. Sometimes manufacturer himself acts as an exporter or importer if not, then trader acts on behalf of manufacturer of goods.Container line business is based on two main core factors price and quality of service. Price refers to freight rate at which one container is decided by shipping company to transport from one place to another. Due to much competition in this sector and limited number of operators, bargaining power of buyer has increased in relation to freight price. Almost all shipping lines have service to Jebel Ali (an important transit hub in Dubai) from India, and customer is sure to get very competitive rate for this location from market. For such locations customer are virtually like king but when it comes to transporting cargo to cold Europe or America, then this power is transferred to companies operating in those regions. Therefore Maersk has strategized the businesses in such a way to get maximum profits from service to odd or far reaching areas and make normal profits from operation to common areas like Jebel Ali.Another factor Service refers to fast bear on of documents, bill of lading and prompt loading and movement of containers etc. It is rather difficult for customers to get expose quality of service than getting competitive freight rates. In this world of technology every company is trying to adapt to new technology in their day to day businesses like e- treat of documents and fastest info entry to name a few. Maersk is so technologically advanced in this field, that all its data processing is being make electronically by back office and customers are able to access all information relevant to shipment though dedicated space available on company website. electronic processes are shipping bills, vessel certificates, freight invoices and bill of lading in encrypted format, once the payment is done by customer either electronically or at Maersk local office.Companies like APL and MSC do have electronic processing systems but are not fully fledged and as a result much of the work is still being done manually. Other sections of buyers which may affect container line business are freight forwarders or clearing agents, with rapid expansion of shipping industry and import/export businesses. Many agents acting as freight f orwarders have came up in market to share the profit in form of commission. These agents earn commission by way of collecting excess freight from exporter than charged by shipping lines. It is relatively easy for shipping lines to entertain these agents, so there is no difficulty of approaching different small exporters.Numbers of the customers are high.Switching cost is low.Customers information and cognizance is less.Customers ability to demand is high.Freight forwarders and clearing agents are high.Number of customers is high in this field due to the export and import of goods from different parts of the world. But the similar price and quality will change magnitude the attractiveness. Customers ability for demand during purchasing will be high, because suppliers are in threat of loosing customer. Switching cost of customers is low because of more number of suppliers. Due to easy availability of containers through agents instead of searching by the shipping companies in differe nt places the bargaining power of freight forwarders and agents will be more.So overall bargaining power of buyer is high.7. Competitive RivalryRivalry exists in every field be it business, science, space, technology, education etc actually speaking it is a part of the day to day businesses. It is sometimes bad because companies have to share hard earned profits with competitors and sometimes goods because it gives opportunities to one company to stand in line with another in terms of quality of service, business strategy, job satisfaction etc. Considering the rivalry in shipping industry, it will be held valid due to enormous margins of available profits combined with unceasing growth of around 14% since last couple of years. If we consider the rivalry betwixt our top of the table players (Maersk, MSC and APL) we will find that all these players are good in some and bad in some and therefore stiff competition exists between them. Maersk dominates the market due to its wide area c overage, better connectivity, best business practices, and cost controlling measures. But on other side, its strict and non flexible policies and passing technological advancement at very base levels which is not digested by people working in lower educated market. MSC on other hand has balance of advantages and disadvantages. It has done well in recent times in attracting business due to its competitive pricing model and better connectivity of services. In contrast it has failed to control administrative, operational and higher output costs. It has been seen practically at Kandla port location where Maersk is having higher outputs compared to MSC but staff recruited to control that output and time for completing the tasks was almost double compared to Maersk. APL on other hand has much controlled costs measures and highly technological advanced processes as in Maersk but it doesnt have far reaching connectivity like Maersk and therefore relies on third party services in certain re gions. Also it has lagged behind in attracting customers due to non availability of killing marketing strategies.Number of competitors is high.Cost leadership is high.Switching cost is low.Industry growth is high.Competitors move to new customer is low.More number of competitors is high in shipping industry, because of the thought that the profit margin very high in this industry. Cost leadership is high for the market leader (MAERSK), because the new entrants and the minor players in this industry cant mother with very low cost of the market leader. Industry growth is high, so the chance of exit from the industry is less. Competitors move to new customers is very low because of the non-awareness of their profile. Switching cost is low, because of the less familiarisation of the new suppliers may lead to argument or disagreement.So overall competitors of the industry is high.8. ConclusionContainer line business is a peacock flower industry in the whole world. Due to rapid economic development since recent past, trade between developed and developing countries has increased significantly. Maersk Supply Service expects a lower result than in 2010 due to lower contract coverage and weaker spot market rates than at the beginning of 2010. In 2010, A P Mollar entered into a joint venture agreement to establish a new terminal in Santos, Brazil. So that company dont want to keep their cargos in any of the external port. Thus by remunerative money to the other ports for keeping the cargos can be avoided and then the profit can be increased. The terminal is expected to open in 2012 and when completed have capacity to handle 2.2 million containers in a year.In the wake of the worst year ever for container activities in 2008 2009, the Group continued its focus on strengthening Maersk Lines competitiveness. In 2010, the Groups container shipping companies shipped practically the same number of containers with the same average rate as in 2008, but nevertheless generated a profit that was USD 2.2 billion higher than in 2008, primarily due to streamlining and cost savings. Maersk Line should set a new industry standard for on-time delivery, and customer satisfaction will reach the highest level ever measured by Maersk Line.It is also essential that Ministry of Shipping of each country in particular should take more proactive steps like, regulations in free movement of foreign exchange and international trade to be more liberal, easing export/ import duties to make this industry work more freely and contribute even more to the economic development of country. Companies at same time should adapt more technology to make easy and efficient work environment for the customers and employees.