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Shipping Industry

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by

Meg Rothi

on 12 December 2013

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Transcript of Shipping Industry

Shipping Industry
Shipping Introduction
The modern shipping industry has been evolving since the dawn of floating boats
Unlike any other industry
Transports large quantities of goods globally
Helped foster globalization
Several Major players
These companies have wide ranging strategies.
A.P. Moller-Maersk Group, have integrated a variety of differing shipping services, combined with investments in oil producing and refining projects
Hapag-Lloyd Group, decentralizes decision making processes across the countries where it operates in order to provide specific solutions to customer needs
Industry in a state of transition
Decline of international Trade
Threats of the Industry
Increased oil prices
Global Financial Crisis
Substitutes
More reliable

PLC/DIC Dynamics
Product Life Cycle
Difficult To Determine - Depends On Region
For the US: Maturity
Diffusion of Innovation Curve
Developing Countries: Innovators - Early Adopters
Mature Markets: Late Adopters - Laggards

Industry Technology
Intermodal container
Standardized dimensions allow for ease of use
Steel boxes able to be lifted from ships and placed directly to train/semi-truck
GPS Tracking
Help predict arrival dates
Keep companies against more reliable substitutes
Macroeconomic Implications
on International Trade
Political Risk
Tariffs, embargoes, trade policies
Currency Risk
Currency exchange rates affect trade
Chinese currency is becoming more valuable
Leading to decreased exports to the U.S.
Balance of Trade
Exports - Imports
Suppliers
Oil companies
Largest direct material used in the industry
Ship manufacturers
Some built in house
Many bought second hand and upgraded
Container makers
China International Marine Container Group
Singgamas
Maesrk

Customers
Any Company That Sells Products Abroad
Materials Traders/Producers
Merchandise Companies
Governments
Partner with companies to improve international commerce
Build ports and manage waterways
Materials producers
Because of volume advantage, can handle almost any material: metals, oil, food, plastics, etc

Competitive Market
Requires little marketing
Competition driven by reliability
Recession - 2009-2012
Small and large companies faced losses stemming from price cuts and overcapacity
Large debt loads have led to some bankruptcies
Overseas Shipholding Group - 2012
140 ships - $2.67 billion in debt
Companies restructuring
Focus on lean operations, efficiency and flexibility

Industry
Subsidies
Governments offer financial assistance to domestic companies to export goods
Tariffs
Describe the rates, charges, rules and regulation of their port.
Include port docking fees
Canal/Passages
Vessels must pay to use
Can be extravagant


New Entrants
Supply chain and package suppliers:
DHL, UPS, Fedex
Strong companies with customer focus
With deep pockets, they can target shipping lines for partnership or acquisition
Private Equity
Takeover/restructure companies
Very sophisticated
Consolidate fragmented shipping industry
Not major threat yet, as shipping is risk
y

Substitutes
Air/land transport
More reliable arrival times than shipping
Expensive in comparison
Cannot accommodate irregular sized goods as easily
Railroads
Dominated transportation industry before globalization
Lack intercontinental connection
Means of moving goods from ships

A.P. Moller Maersk Group

Largest shipping line by market share
Management
Founder - Peter Mærsk-Møller: CEO until his death in 1965
Maersk Mc-Kinney, Peter’s second child, became CEO from 1965 - 1993
Chairman from 1965 - 2003 (90 years old)
Current CEO - Michael Pram Rasmussen
Some History
Founded 1904 - Copenhagen, Denmark
Many ships served the US in WWII
After the war, the company reconstituted and began its oil exploration and production business
1993 - takes over Merged with EacBen Container Line Ltd, becoming the world’s largest shipping line
Maersk Financials 2012
$59,036 Million
Increased by 8% from 2011
2,610,223 TEU Capacity
Increased by 4% from 2011
14.7% Market Share
8.8% ROI
8.3% in 2011
Maersk Mission & Vision Statements
Mission
To be the customers’ first choice as a supplier of safe, high quality and reliable offshore vessel services.

Vision
By working with passion and focus on safety and sustainability to create competitive advantages for our customers, and in doing so always live up to our company values.


Maersk Strategies
Gain highest profit margins in the industry
ROIC of no less than 12% by 2016
Improve customer focus
Improve cost performance
Top quartile of the industry for cost efficiency
Improve safety and civic engagement

Maersk Corporate Leadership
Executive Board of 12
Operations, Finances, and Growth
CEO, CFO and CEOs of four main branches that are the focus of investment and growth
Maersk Line
Maersk Oil
APM Terminals
Maersk Drilling
Board of Directors
Supervisory Role

Maersk Strengths & Weaknessess
Strengths
Size
Diversity of Holdings
Triple-E Vessels
Weaknesses
Lack of recognition outside industry
Volatile returns
Slim profit margins
Difficult to manage
Hapag-Lloyd Financials
Revenue
$9.5 Billion
Shipping Capacity
730,016 TEU
Market Share
4.1%
ROI
-1.87%
Hapag-Lloyd Mission
& Vision Statements
Mission
Offer a reliable service and a comprehensive liner network to our customers at all times.
Vision
As a leading liner shipping company it is Hapag-Lloyd’s current and future commitment to protect the environment, provide the highest service quality, and care for employees’ health and safety.

Hapag-Lloyd Leadership & Culture
Global with three regional headquarters in Hamburg, New Jersey and Singapore.
Decentralized-Business Administration, Operations and Sales/Customer Service
Blueprint Principle
Contacts available at 300 locations in 114 countries worldwide

Hapag-Lloyd Strategies
Focus on customer needs
Expanding capacity
Equal proportions of chartered vessels and Company-owned vessels
Productivity and efficiency
Yield management
Ongoing cost control
Financial stability
Hapag-Lloyd
Strengths & Weaknessess
Strengths
Young Fleet
Blueprint Principle
G6 Alliance
Weaknesses
Conservative Investment
No Brand Recognition
American President Liner Background
160 Year experience
1848 Incorporated and made its first trip (Pacific Mail Steamship Co)
1850s Transported thousands from east to west during California’s Gold Rush
1861 used to transport gold to east coast during the Civil War
1866 First mail contract from the U.S. government
1938 Overtaken by the U.S. government in 1938
1950s Sold to Ralph K. Davies
1997 Became whole subsidiary of Neptune Orient Lines
American President
Liner Financials 2012
APL Vision & Mission Statement
Vision
Our vision is to be the best in the world at moving and managing containerized trade, providing a lifeline for the global economy

Mission
To enable trade and create long term-value by delivering strong returns for our shareholders, competitive advantage for our customers, opportunities for our employees, and support our communities

APL Strategies
Reducing Capital Investment
Disposal of vessels, property, and land
Update fleet
24 larger and cleaner burning fuel vessels in operation 2013-2014
Vessels built under 9 year average
Environment Conscious
30% reduction in emission levels by 2015
Planting of 250,000
Logistics
Value added supply chain allows timely deliveries
Acquisitions
APLL-Zhiqin Group China
VASCOR – market leader of logistic for finished automobiles in India

APL Strengths & Weaknesses
Strengths
Industry Pioneer
Sea Witch set record time from China to U.S.
Containerization
Online transactions
Logistics
Weaknesses
Cost of Sales

Industry Success Factors
Integrating IT networks
Better cost tracking
Improved Forecasting
Weather, gas consumption, maintenance, etc
New trade networks in emerging economies
Growing markets will drive growth of the industry
Consolidation of competition
Fragmented industry will consolidate
Companies must grow in size and scope

Maersk Recommendation
Integrate IT functions into their vessels and subsidiaries.

Consolidate management strategies across its holdings

APL Recommendation
Invest in cost-reducing vessels
Improve logistic functionality across its fleet
Demonstrate superior supply chain capabilities

by
Austin Martin
Meg Rothi
Patrick Hesketh
Jacob Rodriguez


Hapag-Lloyd Background
German Based
Formed in 1970 from the merger of Hapag (Hamburg-Amerikanische Paketfahrt-Aktien-Gesellschaft) and Norddeutscher Lloyd (North German Lloyd).
Merged after WWII all but wiped out both companies
Found a niche as a tourism conglomerate, before their divestiture of all business units other than the container line and cruise line in 2008.
As of December 2013, Hapag-Lloyd is considering merging with Cia. Sud Americana de Vapores SA, the largest container shipping line in Latin America, to lower costs and eliminate excess capacity on trade routes.

How it all works
Ships
Containers
Standardized, Intermodal
Freight Brokers
Organize container allocation
Ports
Transfer containers to rail/road carriers
Sea Transport
Perils of the sea…

APL Corporate Leadership
Board of Directors
Twelve members including CEO
9 year maximum terms
Accountability
Attendance during board meetings
Peer reviews
Transparency
Press conferences for release of Q2 and end of year financial statements
Revenue
$9.56 Million
Net Loss
$419 Million
ROI
- 5.09 %
Industry Opportunity & Threats
Opportunities
Emerging Markets
Merger and Acquisition opportunities
Threats
Decreased international trade due to global economic risk
Other transportations options, namely land and air travel
Increased Consolidation

Hapag-Lloyd Recommendation
Increased capacity must be used wisely
Must insure demand is there to use extra capacity
Partner with emerging market companies
Full transcript