Maersk Line and the Future Container Shipping - Case Study Example

? Maersk Line and the Future Container Shipping The dilemmas facing the new CEO of Maersk Line include, dealing with issues related to a sluggish economy that affects the container rates. The new CEO further has to deal with the problem of an ever-increasing fuel prices and rectifying trade routes that impacts negatively in terms of the company meeting the cost required to introduce the large and costly container ships. The other pertinent issues that the new CEO face involves assessing the company’s business strategy and whether it is headed in the right direction in terms of adapting to the slow market as the global trade picks up. In terms of achieving the milestone of becoming a sustainable leader in the business of container shipping, the new CEO is also faced with the dilemma of implementing such an initiative in a commoditized industry. On this end, much depends on how Maersk Line implements business strategy that would ensure efficient use of resources at their disposal to effect a sustainable change (Ferrulli 2005, p.26). The new business model that Maersk Line intends to implement is appropriate in terms of the company’s position as a leader in the shipping business. Compared to competitors, Maersk Line is in ideal position to capitalize on its stature as a world leader in container shipping to increase its clientele. In addition, the company deals in the shipment of various goods and this provides a competitive edge compared to other companies that specializes in the shipment of goods from one line. The company also boasts of an edge over competitors in regard to its extensive network globally and essential in improving the company’s sales across the globe. In terms of modernization, the company boasts of modern vessels compared to competitor’s vessels and this is important in enhancing the shipment of sensitive cargo. The strategy of focusing on long term contracts is essential in terms of maintaining a significant number of clients that deals in large shipment globally such as Nike and Walmart. The existence of extra add-value services as offered by Maersk Line is very essential in terms enhancing customer satisfaction, often disappointed with delays in the delivery of goods. In this sense, despite Maersk Line improving its competitiveness in container shipping, the challenges that still exist in the container shipping business require the company to adopt other business strategies significant in resolving the identified challenges (Slack & Fremont 2009, p.23). Differentiation as a business strategy is important in terms of improving a company’s advantage over competitors in the same line of business. This is important in attracting and maintaining previous customers or clients that a company serves, and the main features of differentiating involves reviewing a company’s available human skill, the techniques used to provide services to customers and brand name incapable of duplication by competitors, without incurring extra costs and risks. In addition, differentiation as a strategy entails setting out predetermined measures ideal in producing or delivering services to customers in a way that customers view as different (Slack & Fremont 2009, p.26). As a result, the strategies that Maersk Line intends to implement should target unique needs of the customers and in a way that provides Maersk Line a competitive edge. The current trend in container shipping business is hyper-competitive and adopting a formidable business strategy in terms of differentiation is necessary. Companies often compete by either adopting a low price strategy or implementing an efficient differentiation strategy that improves sales. In essence, differentiation as a marketing tool is important for any company’s survival in a competitive global market. While Maersk Line intends to address the challenges, it has identified in the container shipping industry to improve its competitiveness, it is also important to look at issues such as performance gap, as felt by customers in the container shipping industry (Slack & Fremont 2009, p.30). This is important in terms of positioning the company to meet the customer’s unique needs or preference. In addition, it is important to provide insight to the customers in regard to adopting a different strategy contrary to the strategies adopted by other competitors in the same line of business. Maersk Line as part of their differentiation strategy, have decided to focus on reliability, simplicity and environmental impact to improve its position as a sustainability leader in the container shipping industry (Slack & Fremont 2009, p. 34). As recognized by Maersk Line, unreliability is a problem that continues to impact negatively in the shipment of containers across national borders. The container shipping business, accounts for a significant quantity of manufactured goods to the destinations where they are sold. However, the logistics of how goods are transport from port A to B still presents a problem for shipping companies. In essence, the nature of the business entails a combination of transportation modes for goods to reach their destinations. As a result, most companies rely on inter modal transport to facilitate the movement of goods from one location to the final destination. The other issues that the industry need to deal with include shortages of containers that vary in terms of their use, complications related to customs and documentation clearance, and compliance in regard to the maritime laws. These problems further increase the delays in the shipment of containers from port to port and across national borders. In addition, operatives in the container shipping business are faced with a challenge in terms of managing insurance and taking liability for goods shipped through the supply chain. This results in a cumbersome business engagement since, companies engage in paying for ancillary services, which increases the overhead costs for transporting a container. The complexity of network route further creates problem in terms of affecting the service provided to customers such as the frequency of departure, as served by different ports. However, on a stand -alone basis, Maersk Line has the advantage of a larger service network compared to competitors, but the company has to deal with counter strategy from competitors forming alliances to provide efficient services to customers. Important to note however, among the operatives in the container shipping business is the problem of reliability in terms of service delivery because of bad weather, congestion and knock-on effects resulting from delays at previous ports (Kotlarich 2006). Reliable services in this sense, entails a considerable number of vessels to dock at major ports on a frequent basis. Furthermore, the fear among customers concerning delays results in situations where customers themselves book additional capacity on the vessels thus making capacity planning and efficiency operations within the port more difficult. This affects negatively on asset utilization and enhancing reliability within the container shipping industry (Pallis, De Langen & Notteboom 2008, p. 215). As a differentiated strategy, Maersk Line intention to enhance reliability is achievable in terms of the position the company holds as a leader in on-time delivery of shipments. Improving delivery require Maersk Line to expand its route to regions that the demand for shipment of goods is high at the present. This would help in minimizing the delays in the delivery of containers to customers on time. It is important for Maersk Line to improve reliability since this helps in reducing the buffers that impacts on customer’s supply chain. On the other hand, the intention of Maersk Line to improve its reliability to averagely 95% would provide the company with a competitive advantage because, customers are attracted to companies providing efficient services that reduce additional costs and risks (Kampf 2007, p. 41). However, for the company to undertake such an initiative to improve service delivery to customers would entail additional costs in terms of introducing new fleets on the identified routes. As part of a branch in the A.P Moller-Maersk Group, Maersk Line can solicit funds from other businesses within the conglomerate to facilitate the improvement of the company’s reliability in container shipment with a long-term aim of improving revenues to support the conglomerate (Pallis, De Langen & Notteboom 2008, p. 223). Furthermore, engaging in partnership with terminal operatives is important in terms of dealing with problems related to inefficiencies and delays at the port. On the other hand, the company’s engagement in minimizing the complexity involved in shipping customer’s goods is essential in terms of improving the company’s reputation in the container shipping industry. In addition to the shipment of goods, numerous paper works is required to facilitate the transportation of the goods across national borders. As a strategy, more customers are attracted to companies they view to offer efficient services without further delays for both the company and to customers. Such a process of minimizing paper work is possible by digitizing the process and helps in providing customers with first-hand information regarding prices, schedules and notifications in the event of a delay. Since the company deals with large key clients on long-term contracts, simplifying the purchasing process requires an efficiently coordinated system to avoid confusion in the paper work processing as adopted by Maersk Line (Mikkelsen & Jacobsen 2013). In regard to implementing a sustainability strategy, the customers, shareholders and other stakeholders in the container shipping industry, will improve their business relations with the company and in turn, improve the company’s profitability. A sustainability strategy would enable Maersk Line to become more accountable, responsible and transparent while dealing with customers and other major stakeholders in the container shipping industry. In such an industry, it is important for Maersk Line to address issues related adopting a sustainability strategy relative to the opportunities that accompany such a strategy. Implementing a sustainability strategy requires an approach that focuses on a triple-bottom- line model that focuses on the society, profit and the environment. Further, a major component in relation to a sustainability strategy is the perception of the stakeholders about the company’s value and corporate culture. According to the strategy that Maersk Line intends to focus on, involves an integrated process that is ideal in decommoditizing the container business. In this sense, differentiation is anticipated to improve price premiums for the company because of customers relating to the need to improve environmental performance and transparency as emphasized by Maersk Line. In terms of reducing the carbon footprint, Maersk emphasizes its social corporate responsibility to reduce greenhouse emissions that affect negatively on the global climate (McCormack & Edwards 2011, p.38). In essence, such a strategy plays a role in improving relationship with customers since lobbying for a reduction in carbon emission continues to impact negatively on companies relying more on heavy fuels to transport goods across national borders. In reducing greenhouse emissions, Maersk Line intends to introduce slow steaming as a strategy to effect operational changes. However, such a strategy may affect the company in terms of reducing the speed and extra costs in adding other vessels to meet the schedule and delivery of containers on time. In terms of making technical changes to the vessels, Maersk faces a hurdle since they can only dock in a few selected terminals (Reinhardt, Casadesus-Masanell & Nellemann 2012, p.11). The new business model adopted by Maersk Line can achieve its goals if the resources at the company’s disposal are utilized efficiently. The company has a strong customer base and improving reliability regarding how the company provides services to its customers, plays a role in fostering the relationship between the company and customers attracted to an efficient service delivery. Digitizing the process of paper work that is required to facilitate the shipment of containers to customer’s destination is essential in an industry where the process of shipping containers across national borders continues to become more complex. Expanding operations on busy routes in Asia, Europe and North America is essential in minimizing the delays resulting from fewer vessels in busy routes for the container shipping business. While competitors are forming alliances to improve the delivery of service, Maersk Line needs to capitalize on its advantage as the largest stand alone in terms of service network to improve its customer base across the globe. In addition, engaging in selling the sustainability strategy to customers and other major stakeholders would assist in advancing the sustainability strategies adopted by Maersk Line. Further, the company already has an investment plan to improve the existing fleet and minimize on energy consumption (Maersk 2008). The plan helps to minimize additional costs that would been used to improve the existing fleet. In essence, the differentiation strategy planned by Maersk Line is significant in providing the company an advantage over competitors. The company singles out de-commoditization in the container business and is an issue that has an influence on the decisions that customers take. Simplicity on the other hand, reduces the tedious process involved in paper work and other regulatory procedures, eliminating delays that often affect both the customer and the shipping company in terms of extra costs and other risks. While other companies depend on alliances to improve their network services, the differentiation strategy identified by Maersk already has all the resources at its disposal to provide an efficient service delivery (Maersk 2013). In conclusion, the CEO of Maersk Line is faced with a strategic choice of adopting a sustainable approach to its operations as a measure of establishing a sufficient value that can also be shared with the customers of the company. However, such a choice reflects on a dilemma whether as part of differentiating itself, the strategy could help the company maintain an advantage over competitor. In addition, the company is faced with a choice of determining how it will utilize resources to effect the changes in a manner that is cost effective for both the company and its customers. The decision that the CEO needs to take should take into consideration of the company’s ability to implement the identified changes related to sustainability in way that does not strain the company’s resources. References Ferrulli, G. 2005. Maersk changes the game. Journal of Commerce, Vol. 6 Issue 34, p26. Kampf, C. 2007. Corporate social responsibility: Walmart, Maersk and the cultural bounds of representation in corporate web site. Corporate Communications An International Journal, Vol. 12(1): pp. 41-57. Kotlarich, M. 2006.Maersk Line Announces Fuel Switch for Vessels Calling California; Pilot.Initiative is Part of Company's Continuous Development and Evaluation of Environmentally Responsible Operation. Business Wire, Viewed Oct. 24, 2013. < http://www.businesswire.com/news/home/20060526005406/en/Maersk-Line-Announces-Fuel-Switch-Vessels-Calling> Maersk, 2008. Maersk Line reorganizes to drive new strategy. Maersk, Viewed 23 Oct, 2013 Maersk, 2013. Sustainability Report 2012. Cool Gray,Viewed 23 Oct, 2013 McCormack, F.and Edwards, F.L., 2011. Greener Transport Mitigates Climate Change. Public Manager, Vol. 40(1): pp.37-41. Mikkelsen, O. & Jacobsen, S. 2013. Maersk Line sees shipping overcapacity for five years. Reuters. Viewed 23 Oct, 2013, Pallis, A., De Langen, P.W. and Notteboom, T. 2008. Concession Agreements and Market Entry in the Container Terminal Industry. Maritime Economics & Logistics, Vol. 10(3): pp. 209-228. Reinhardt, F.L., Casadesus-Masanell, R. and Nellemann, F. 2012. Maersk Line and the Future of Container Shipping. Harvard Business School Case 712-449, Slack, B. & Fremont, A. 2009. Fifty years of organizational change in container shipping: regional shift and the role of family firms. GeoJournal, Vol. 74(1): pp. 23-34. Read More