Going from local to global

• Main Author: Wong, Wei Wen.
• Other Authors: School of Civil and Environmental Engineering
• Format: Final Year Project
• Language: English
• Published: 2012
• Subjects: DRNTU::Engineering::Maritime studies::Maritime management and business
• Online Access: http://hdl.handle.net/10356/49057
• Institution: Nanyang Technological University

Globalization has brought about shippers’ need to transport semi-finished and finished goods all around the world and containers provided the most effective and efficient way to do so. This has placed pressure on the liner shipping industry to provide a global service network that is both reliable and cost effective for the shippers. While these liner shipping companies (LSCs) engage in various forms of strategies to expand their geographical coverage, the real challenge usually lies in sustaining that global status in the long run. The objectives of this research paper seek to firstly identify how LSCs leverage on involvement in the ports and terminals industry, including vertical disintegration, as a growth strategy to sustaining global status and competitiveness. Secondly, it is to identify and analyze the future trends and important factors to be taken into consideration by LSCs when deciding on investments in ports and terminals. Other than internet and library resources, perspectives and knowledge gained through face to face interviews with maritime professionals and LSCs are used to provide a broader and more realistic view. Findings and results show that involvement in the ports and terminals industry is one form of strategy undertaken by many LSCs and highly dependent on negotiation. It is seen to provide a certain level of schedule reliability, cost savings, operational control and an alternate source of revenue, all of which contribute to sustaining of LSCs’ global service network and competitiveness. There are more and more LSCs getting involved by investing in terminal operations to secure dedicated use of berth/terminal and to maximise the benefits. However, there are major considerations and future trends to take in account before the benefits can be achieved. There is a need for LSCs to look at their financial strength, type and sufficiency of volume, alliance (if any), geographical location of investment, accessibility to cheap bunkers and the extent of vertical disintegration as alternate source of income. Analysis shows that the investment in ports and terminals solely for the purpose an additional income stream, that is stable and comparatively lower risk yet not spectacular, will not work for a LSC. There need to be a strategic purpose of building the service network that will aid the LSC’s core business. The lack of terminal capacity coupled with high potential growth in container traffic in some regions may justify the need for investments to sustain LSCs’ global competitiveness. But given the economic outlook, LSCs must also carefully assess the amount of risk, in terms of regional and local political and economic conditions, that they can be exposed to in order to justify sufficient benefits over their high cost of capital. With Daily Maersk and G6 Alliance, a greater involvement by these LSCs in the ports and terminals involved is expected in the future.