Changing External Environment of a Maritime Organization - Case Study Example

An Organization Must Operate In, And Be Responsible To, A Number Of Different External Environments: A Case Study Of A Maritime Organization Summary Organizations never function in a vacuum – they are constantly working under the restraints of an external environment that they cannot ignore. Shipbrokers form a very old institution of the shipping industry, providing their services to the Charterers and the Ship-owners. The ship broking industry has been witness to the changes in the technological, financial and economic paradigms that have occurred in the past half-century. The rapid change in technology and in the mindsets of the customer’s ushered in an era when may ship owners and Charterers derided the ship broking intermediaries as redundant, and decided to foray into the trading solo. The changed perception was brought by direct and fast communication links, direct access to industry information, and ease of electronic transactions that globalization provided. (Martin Stopford, 2000). However, as is evident by the fact that there are 1,500 competitive broking firms of a reasonable size employing 6,000 brokers around the world, of which 600 are based around London, (Peter Kitching, 2002) - the business of ship broking is still flourishing and moving ahead with confidence. This paper explores, through a literature survey, the changing external environment of a ship broking organization, and how the shipbrokers continue their commitment towards progress. It also gives an overview of the external environmental factors that present both opportunities and threats to ship broking organizations, and suggests strategies to utilize the environmental changes towards its benefits. Introduction A ship broking firm acts as an intermediary between the contracting parties – the ship owners and the Charterers, and the Buyers and the sellers. The range of services broadly includes, Dry-cargo Chartering, Tanker Chartering, Sale and Purchase, Projects, Logistics, and Containers and Ship Management. They might also provide comprehensive and supportive freighting service for clients who want to skip the complexities of chartering. In addition to commercial advice and analysis on loading and discharging logistics, shipbrokers also offer services like Freight Management, Forward Planning and Risk Management. They are available with assistance and support during the negotiation and fixing process, and draw up custom pro-forma documentation to protect the clients interests. Shipbrokers also provide post-fixture support and assistance, with documentation and exchanges right up to the completion of the voyage and settlement of all outstanding matter. (Charterhouse Shipbroking Company, http://www.shipbroker.co.uk/sitemap.html). Hence, a shipbroker provides a bundle of services, thus enabling the parties to concentrate on their core competencies without getting entangled into the mesh of documentations and legalities. Like any other organization, a ship broking organization too has to operate in an external environment that not only provides it with resources and gives feedback information on its performance, but also moderates and affects its survivability. This external environment is made up of numerous entities – the government regulations, financial and monetary policies, competitors, politico-legal scene of the region or country, and customers – to name just a few. This is further complicated by the ecological concerns, the culture, and the attitude of the customers.(Khan, A, 2001) Organizations have to operate from specific locations, utilize the services of suppliers and employees, and produce a product or service according to the existing regulations of the industry and the country. As such, they are a part of an overall larger socio-political-economical system – Fig1: The ship broking organization takes inputs from the external environment in the form of information, research, and market analysis, and provides its services to the clients, who are also a part of the external environment. Literature Review: Changing External Environment of Ship Broking Organizations Ship Broking organizations act as intermediaries between the Ship Owners and the Charterers, and between the buyers and the sellers. (Howe Robinson, http://www.shipbroking.com/whatis/fs_whatis.htm). The brokers deal with principals, clients and vessels on a global level – and provide expert knowledge to the contracting parties. Their expertise lies in their ability to tap in the local nuances, the market sentiments, and decipher the complexities of the shipping environment. (Martin Stopford, 2000). Peter Kitching, Chairman of the Baltic Exchange (A regulatory body that provides a forum for shipping information to be circulated amongst its member shipping companies and brokers), has postulated that the brokerage business is faced with a rapidly changing environment due to “…globalization and competition, and threats caused by developments in technology and communication” (Peter Kitching, 2002). However, he believes that there is future to ship broking, as it makes sense for the shipowners and charters to outsource this part of the operations to experts, and concentrate on their own core competencies. Even now, the personalized service that the brokers provide cannot be replaced with the impersonal electronic transactions. Further, brokers are also able to provide their services more cost-effectively and efficiently than the Charteres themselves could ever hope to do. (Peter Kitching, 2002). Clarkson Asia, a ship broker established in Singapore in 1995, states that better accounting practices, corporate governance and bank overview, and resolving the problems of bad debts and insolvent financial institutions, will help the ship broking business in the Asian region. (News & Trends, Alexander’s Gas and Oil Connections’) CharterHouse, a ship broking company, has invested heavily in the latest computer hardware and shipping software, thus enabling it to work competitively and efficiently in shipping markets worldwide.(Charterhouse Shipbroking Company, http://www.shipbroker.co.uk/sitemap.html). Similarly, maritime organizations including shipbrokers are increasingly recognizing the importance of, and the need to, protect and enhance their skill base, and replenish it through the education system, as a vital element of remaining competitive.(Topics in Port and Maritime Consultancy: Education & Skills, 2005.) An Overview of The External Environment, Threats and Opportunities for a Ship Broking Organization The external environment is segregated into two parts – microenvironment and the macro environment. The microenvironment comprises of the organization’s supplier, competitors, customers, intermediaries and associates. For a Ship Broking Organization, both the Charteres and the ship owners form its clientele. Its suppliers and associates are mostly information providing services like The Baltic Exchange, and it’s bankers and guarantors. The trend to eliminate intermediaries so as to enable fast-track negotiations, indicates that there is a palpable threat to the very survival of the ship broking industry. Demographic Technological Economic Physical Ecological Political Social Legal Cultural Macro Environment Fig2.: The External Environment Of an Organization (Global Business Environment, 2003) The macro environment consists of the demographic, economic, political, legal, technological, socio-cultural, and the natural /ecological factors. ((Philip Kotler, 2000). The economic growth, socio-political environment, and the legal or ecological factors don’t always directly affect a ship broking firm, but, they can do it indirectly by changing the volume of world trade, NTBs imposed by countries, and other legal or financial regulations imposed to curb the functionality of the shipping industry per se. (Khan, A, 2001). However, it is the technological environment that is posing the greatest threats. With electronic commerce sneaking in even in the shipping industry, the shipbrokers have to prevent themselves from becoming redundant, and extol their value adding ability. These external factors determine the investment and the innovation that they should make in its operations, as well as dictate the amount of profits that can be harnessed by it. Ship broking organizations are rapidly updating their operations – they are investing in communication technologies and IT, and assimilating higher level of market research analysis abilities. This way, they continue to provide value to the customers, and have also tuned the communication technology to reap benefits for themselves. Conclusion A Ship broking organization has an added responsibility towards the external environmental constraints – by the fact that such an organization has to interact with not only domestic or immediate local environment, but also with subjects from different nations and cultures. The increasing globalization and opening up of channels of communication through electronic media and the Internet, have made the externals environment very dynamic and vibrant. Organizations have to make their MIS sensitive enough to timely gauge the rapid changes that are continuously happening in the environment – a fact equally applicable also to a Ship Broker, Port Operator, Ship-Owner, Ship Repairing Organization, Ship Builder, Marine Training Firm – or, any other Maritime organization. Ship broking firms are nevertheless poised to continue their success run, as they have shown initiative in adopting new technology, exploring the vast Asian Markets, and affecting a stance of ‘knowledge expert’. Reference List 1. Philip Kotler, 2000, Scanning the Marketing Environment, in Marketing Management, pp. 135-152, Prentice-Hall of India Pvt. Ltd., India. 2. Global Business Environment, in Management Paper 1, pp. 1-2, Brilliant Tutorials Pvt. Ltd., India.2003. 3. Khan, A, 2001, Business Environment, in Strategic Management, Venkateshwara Publications, India. 4. Howe Robinson Shipbrokers, http://www.shipbroking.com/whatis/fs_whatis.htm 5. Martin Stopford, 2000, in E Commerce: Implications, Opportunities and Threats for the shipping business. pg 17, online at http://64.233.179.104/search?q=cache:Xr3UkKX29WcJ:www.ebusinessforum.gr/index.php%3Fop%3Dmodload%26modname%3DDownloads%26pageid%3D1598+shipbroking+industry+%2B+opportunities+and+threats&hl=en&gl=in&ct=clnk&cd=2&client=firefox-a, accessed on 5th March 2006. 6. Peter Kitching, Chairman of the Baltic Exchange, to the Hong Kong and Australian shipping communities, October 2002, online at http://www.stroudgate.net/aps/articles/007.html, accessed on 5th march 2006. 7. Baltic Exchange, at www.balticexchange.com., accessed on 4th march 2006. 8. Financial reform also needed for a sound shipbroking future, in News and trends: E & SE Asia, Aug. 6, 1998, at Alexander’s Gas and Oil Connections http://www.gasandoil.com/goc/news/nts84081.htm, accessed on 4th March 2006. 9. Charterhouse Shipbrokin Company, http://www.shipbroker.co.uk/sitemap.html) 10. Topics in Port and Maritime Consultancy: Education & Skills, at Fisher Associates, http://www.fisherassoc.co.uk/project.asp?c=36, accessed on 5th march 2006. Read More