Dealing with uncertainty in the container shipping market - PowerPoint Presentation Example

Slide 2 Maersk is an international Danish shipping company that deals in container shipping amongst others. The company has come from far to become one of the leading ship container operator. Maersk began has maintained its specialty in container shipping line, managing to rise steadily in the period after 1996. Its operations currently cover more than 135 countries. Among the services it provides include container logistics, services and forwarding. It operates a number of Maersk lines and runs as s conglomerate.

Slide 3 Maersk is one the major players in the shipping industry. By volume and revenue, Maersk is the leading shipping company in the industry. It is important to understand that the shipping industry depends so much in global trade, so does Maersk. The industry remains stable as long as global trade volumes are stable. Any fluctuation in the global trade volumes would affect the industry directly, either positively or negatively. In fact, the last global recession did affect operations of the industry.

It is also important to note that the shipping industry continues to offer the cheapest means for transportation of various products. Slide 4 A PESTEL analysis reveals that the industry is affected as follows. Political environment is the most volatile in international trade on which Maersk relies. Sanctions on various countries mean we can no longer deliver same volumes as before. Economic environment is quite manageable since the rules of the game are clear. The only concern is competition.

Social environment only affect a small segment of Maersk target group while technology has remained easily adaptable. Environmental issues are a rising concern while legal environment has not been much of a challenge. Slide 5 Impact uncertainly matrix is such that political environment poses a serious threat with a high uncertainty and high level of impact on the business. Technological and social environments also pose medium uncertainty for the company although the level of impact from technology would be high in any inadaptable eventuality.

Slide 6 The scenario cross from the business environment factors’ interaction would most likely result to the following outcomes. The political environment is highly uncertain and its impacts are likely to affect the business adversely. This is because it dictates whether to engage in business with other countries or not. The company can counter economic environment, therefore it has a moderate impact on the company operations. It is lowly uncertain for the company. Social environment is affected with emerging preferences among the youth.

That is in regard to modes of delivery where many youth prefer air deliveries. However, that segment constitutes a very insignificant proportion of the company’s segment and returns. Technological environment has been changing but the company has managed to adjust to changes. Although it is likely to have a high impact on the organization, its uncertainty is moderate for the business. Environmental factor is an emerging issue in maritime business, but the company has out in extra precautions to avoid disasters.

It is lowly uncertain its impact is low since the company does not invest heavily in shipping risky products such as crude oil. Anything else is insurable and environmentally manageable. Legal environment is largely undeterminable since many countries keep revising their import regulations policies. Slide 7 The worst case scenario for that Maersk may face is high political uncertainty. It is important to realize that the political environment is responsible for approval and regulations of what sort of goods are trading at the world market.

Although the market is free, it is only free to the extent to which one is engaging in buying and selling. However, it is not free to sanctions that may be imposed on countries with which Maersk may have large volume of trade. In the event that such sanctions are imposed, Maersk has no powers to make adjustments in the short run to counter such a move. Such changes in political environment are disastrous for the company. That is especially so because they also cause other ripple effects. Slide 8 Some of the examples in the worst-case scenario could include economic restrictions probably on Russia, Syria or Iran.

Such restriction would impact negatively on the operations of the company. In fact, continued global politics standoff and escalations may make some importers resolve to airfreight. That is because airfreight delivery takes a relatively shorter time, thereby reducing risks. Slide 9 The best-case scenario for Maersk would be low uncertainty in economic environment and moderate impact on operations. It should be understood that not all the factors in the external environment operate in isolation.

It is in that regard that the best-case scenario will be seen to be one that stands out strongly as in the event of a worst-case scenario in the industry. Low economic uncertainty would work I favour of Maersk particularly if high political uncertainty prevails. This is because the company would be in a position take advantage of its sheer market size and maximize of shipping line as smaller shipping companies find it unprofitable and unsustainable to conduct business as usual. That is also particularly so since Maersk’s competitors are also regionally based.

Any shift in trade volumes may make their less expansive networks unprofitable and consequently unsustainable. Extended economic sanctions may make small competitors suspend shipping activities, which Maersk can exploit. Slide 10 In the above scenarios, the most appropriate response has to do with competitive and pricing strategy. The worst-case scenario has a number of indirect financial consequences for Maersk. To begin with, the company would have to pay for employees rendered jobless by reduced trade volumes.

Even measures that can possibly mitigate the situation would come with financial implications such as additional insurance cost. Investment in large, medium and smaller shipping vessels would also cost the company in the short run. During such low shipping seasons, the company may also have to lower shipping costs to remain attractive. In such an incident, it can only hope to benefit from economies of scales. Slide 11 In the best-case scenario, the company should also adopt competitive and pricing strategy that best maximizes the opportunity.

For instance, the business should insure the most probable risks on which they have no control. The company would also incur heavily by trying to set aside emergency funds for operations during high political uncertainty period. It would also cost the company additional finances to increase advertisement of its shipping activities. Such increased advertisement would be in a bid to grab a bigger share of the reduced container shipping market. Slide 12 In short, it is observable that a lot of uncertainty exists in container shipping as a global trade.

Whenever there is relative global peace, the relative stability results in improved container shipping. Increased container shipping is usually a pointer for improved trade amongst nations. Even so, it is important to note that various environmental factors affect container shipping in different ways. Any change in such factors would affect the business operations. Bibliography Burnson, P., 2012. Ocean Freight: Container shipping’s “rate uncertainty” has impact on futures market. Retrieved from www.

logisticsmgmt.com/view/container_shippings_rate_uncertainty_has_impact_on_fut ures_market/oceanfreight Holbrook, T.R., 2012. Territoriality and Tangibility After Transocean, Emory Law Journal, 61, 5, pp. 1087-1121. Jephson, C., and Morgen, H., 2014. Creating Global Opportunities: Maersk Line in Containerisation 1973-2013. Cambridge: Cambridge University Press. McCalla, R.J., Brian S., and Claude C., 2004. "Dealing With Globalisation At The Regional And Local Level: The Case Of Contemporary Containerization.

" Canadian Geographer 48.4: 473-487. Wu, W., 2012. Capacity utilization and its determinants for a container shipping line: theory and evidence, Applied Economics, 44, 27, pp. 3491-3502.