Port Market of Far East Asia: Fastest Growing in the World - Essay Example

Port Management Table of Contents Introduction 3 Question 3 Port Market of Far East Asia: Fastest Growing in the World 3 Generation Change in Port of Shanghai 4 Role Played By Global Terminal Operators in Port of Shanghai 5 Question 2 6 Porter’s Five Forces Analysis 6 SWOT Analysis of Port of Hong Kong 8 Marketing Mix of the Port: 7 Ps 9 Question 3 11 Budgeting Procedure and Objective in Port Business 11 Assumptions and Timetable in Budgeting of Port Business 12 Conclusion 13 References 14 Introduction In this contemporary scenario, development is one of the most vital prospects in any domain including the business world. Contextually, the development of port sector will also be vital to discuss. It would be significant to mention that in almost all the nations of the world, the sea route is one of the major means of communication through which trades (import and export) are conducted efficiently. Hence, countries invest substantially towards the development of the same. This can be better comprehended from the example of Ports Sector in China, which has seen rapid growth in the recent past (especially in the last two decades). This might be owing to the development approach of the government of the nation’s towards this particular sector (Chou & et. al., 2003). Contextually, this particular essay will ensure a thorough discussion about why the Far East Asia port market is one of the fastest growing ones in the world along with analysing various factors that contribute in making the market a faster growing one. Question 1 Port Market of Far East Asia: Fastest Growing in the World Observably, East Asia is regarded as one of the fastest growing port sectors of the world, which is largely owing to the export growth strategies persisting within this particular region of the world. The port industry in this particular region of the world has seen substantial changes over the years and it has developed to the maximum level. History depicts that this particular sector had seen noteworthy neo liberal changes that acted as a major aspect towards the development of port sector in the East Asia region. Notably, Asia is amid the major renowned regions of the world in terms of international trade owing to the continuous economic development from the 80s to the modern day scenario. With continuous economic growth in the Far East Asian regions, people became quite concern towards earning a better life for themselves, which further encouraged them towards developing manufacturing and production systems. This depicts the first postulate of production factors. However, as per the second postulate, people belonging to this region were not quite capable of conducting every work efficiently in earlier days, which further resulted in trade amid various regions. With the emergence of trade in this sector, the demands for container port services have increased rapidly. Observably, the combine capacity of Far East Asian ports in terms of handling volumes is recorded to be 107 TEUs, which is again expected to rise in between 254 million TEUs and 306 million TUEs by the year 2015. It has been noted that the ports in this particular region possess major ‘transhipment hubs’ that assures reduction in costs while distributing the containers along with just in time cargo delivery. This can be regarded as the other major reason for seamless performance of the ports in this region further resulting in maximum growth over the years (Chou & et. al., 2003). Generation Change in Port of Shanghai Over the years, various ports in the far eastern regions have developed themselves in terms of performing quality operations, which further impacted the overall port market of these regions in a favourable manner altogether. Contextually, several generations of growth and changes have been witnessed in various ports of these regions. One such renowned port in the Far East Asia is the port of Shanghai. It is regarded as one of the biggest and most reputed ports of the world in terms of its scale of operation and its reputation of being the busiest in the Far Eastern region of Asia. It has contributed a major part towards the overall devolvement of the port market of the Far East Asian region. The history of the port had its roots with the Yuan dynasty, but it officially got renowned in world geography from the year 1297 AD. The port eventually became an international centre of trade when it became a treaty port in the year 1842. With the passage of time and the initiation of the 20th century, this particular port has become one of the largest and the biggest ports in the region of Far East Asia. Notably, in this particular development of the port as a global hub, the economic and the trade policies of the region along with the infrastructural development of Shanghai city has played a major part. With the initiation of the 21st century, the port became quite developed and enhanced further with the construction of Donghai Bridge in the year 2005, which enabled the port to be interlinked with the Hangzhou Bay (China Ports, 2012). Role Played By Global Terminal Operators in Port of Shanghai Global terminal operators are the companies who are involved in the operations of international ports with the intention of establishing any port service globally. Observably, these operators are amid the major contributors with regard to the development of any particular port. Contextually, the global port terminals have made major contributions in developing the business of the Port of Shanghai. The Shanghai International Port Group (SIPG) is the global terminal operator, which works in collaboration with the Shanghai port. Inaugurated in the year 2003, the operator is the only global operator working with Shanghai port. It has contributed up to a major extent with regard to the deliverance of quality services and performing effective functions such cargo handling for both domestic as well as international route. The operator also deals with the operations of manufacturing as well as maintaining the containers, leasing the same and most vitally offering quality services to the international passengers. It can be affirmed that proper, effective and quality functions performed by the operators certainly worked in favour of the growth as well as the development of the Shanghai Port (World Port Source, 2014). Question 2 The Port of Hong Kong is one of the renowned and the most developed ports in the Far East Asian region. It is located in the South China Sea. This particular port mainly involves in the trade of manufacturing products and raw materials. The port is one of the busiest ones in the world and operates in three categories that include shipping movements, passenger carriers and cargo handling (The Port of Hong Kong, 2013). In order to gather an in-depth understanding about the competitiveness of this particular port along with depicting its position in the global port industry, it will be crucial to gather a brief idea about the operations of the port using SWOT and Porter five forces analysis. Porter’s Five Forces Analysis Bargaining Power of the Buyers: Similar to that of other industry sector, customers hold the prime position in the port industry of Hong Kong. However, it has been noted that since the number of players operating in this particular sector is quite less as compared to other industry sector, customers are left with limited number of options to choose from. This particular aspect further depicts the buyers’ bargaining power to be quite low in this particular sector (GovHK, 2014; Merk & Li, 2013). Bargaining Power of the Suppliers: The suppliers in this particular industry play a decisive role, as they are the ultimate source from which the services for the customers are obtained. In this particular sector, it can be apparently observed there lays the existence of large along with small suppliers who provide their respective services. However, as the large suppliers i.e. the huge ship providers are small in number with less of chances of substitution owing to their economies of scale, their bargaining power is quite high within the industry. On the other hand, small suppliers’ bargaining power tends to be minimal in terms of economies of scale and high substitution option. Hence, in a collective manner, the suppliers’ bargaining power can be depicted as a moderate one in this particular sector (GovHK, 2014; Merk & Li, 2013). Threat of New Entrants: It has been noted that in this particular industry, the cost of operations of business are quite high for companies as the operational scale remains quite high and often requires complying various rules along with regulations that set by the respective governments. Again, the set up costs of this particular business is also quite high, which is again not easily affordable by many. In this regard, the port of Hong Kong will not face much threat as the chances of emerging new entrants in this particular sector are quite low (GovHK, 2014; Merk & Li, 2013). Threat of Substitutes: Observably, waterways can be substituted by other communication modes that include airways, railways and roadways. The Hong Kong Port might face the threat of various substitute modes that are easily accessible for building effective communication with diverse people. However, it will be crucial to mention that trade relations of the region are usually conducted with such countries with which it has better communication channel in terms of waterways. This further make people bound to select waterways over other means of communication for their trade convenience (GovHK, 2014; Merk & Li, 2013). Hence, the threat concerning alternatives for Hong Kong Port can be duly considered as a moderate one. Threat of Rivalry: There are various ports and harbours that operate in the region of Hong Kong. However, as per the aspects of economies of scale and the regions of operations, Victoria Harbour is viewed as one of the major competitors in the Hong Kong port industry. The company operates on a very large scale and it is located in the South China Sea, which is also the hub of operations of the Port of Hong Kong. Apart from this, the competition amid the players in this particular sector is quite moderate as the number of major players is less in the port industry of Hong Kong (Merk & Li., 2013). SWOT Analysis of Port of Hong Kong Strengths: One of the major strengths of the Port of Hong Kong is its scale of operations, which is quite large. Observably, the port is one of the busiest in Hong Kong and it operates in all three categories that entail shipping movements, passenger carriage and cargo handling among others. The port also holds the reputation of being the busiest in several occasions during the period ranging from 1987-2004. In terms of strengths, it can be affirmed that the port possesses nine terminals that have a combined handling capacity of more than 18 million units. The other strength of the port also includes the operations of high-speed crafts for passengers including jetfoils and catamarans that carried in excess of 17 million passengers in the year 2001. A huge number of government fleets also operate from this particular port, which further depicts its comprehensive presence in all numerous domains (City University of Hong Kong, 2011). Weaknesses: The port is deemed to be inadequate with regards to its multimodal inland network, which is quite weak. Furthermore, as per the international port standards, the port of Hong Kong also deemed to be inappropriate as per the deep-water domain. A high level of governmental redundancy is another weakness of this particular port. Additionally, lack of innovation and competitiveness in the operational environment of the port is also deemed to be inappropriate up to an extent (City University of Hong Kong, 2011). Opportunities: The opportunity of making global expansion is one of the prime aspects for any business. The Port of Hong Kong has enhanced opportunities to collaborate with other ports of the world to expand and flourish its business globally. It can be apparently observed that Hong Kong has one of the biggest manufacturing regions of the world, which further catches the attention of people from various nations of the world to conduct trade at large. Thus, it can be affirmed that Port of Hong Kong has the opportunity to take maximum advantage of this particular aspect (City University of Hong Kong, 2011). Threats: The increasing costs relating to cross border trade has become one of the major threats for the Port of Hong Kong. Furthermore, the economic downturn in the year 2008 affected the operations of the port as trade activities had declined from that period. This might pose certain thereat on the growth of the Port of Hong Kong. Apart from these, the emergence of new players in the industry might be also a potential threat for the port in the long run (City University of Hong Kong, 2011). Marketing Mix of the Port: 7 Ps Promotion: Promotion is one of the decisive aspects of the Port of Hong Kong. The business of the port promotes itself as one of the premier providers of waterways services in the shipping industry of Hong Kong. The company usually takes the help of print along with digital media while promoting its business product/services that include passengers’ carriage and cargo handling among others. In addition, the business of the port also maintains a proper Public Relation (PR) team, which ensures proper promotion of the services of the business to the ultimate customers (Hong Port Development Council, 2013). Price: Pricing strategy is one of the prime tools, which is applied by companies to gain superior competitive position in the business markets wherein they operates. In this regard, the pricing strategy of Port of Hong Kong mainly takes into concern the prevailing economic conditions. Moreover, the pricing tactics of the Port of Hong Kong also takes into concern the goods that are passed or handled through the port, the time taken by a ship in the port and other charges of the port. Wages and repair costs are also concerned while setting the price of its services by the business (Hong Port Development Council, 2013). Product: The product in port business is the services that are being offered to the customers. The services in this regard will be the gateways that are provided by the port of Hong Kong for goods as well as passengers while transferring the same from ship to the shore (Hong Port Development Council, 2013). Place: The port of Hong Kong is in the South China Sea. Observably, nine containers of the port are located in between the areas of ‘Kwai Chung’, ‘Stonecutters Island’ and the ‘Tsing Yi’. These are the three areas through which the port operates most of its business including cargo handling, passenger transfer and shipping movements among others (The Port of Hong Kong, 2013). People: The port holds an effective set of workforce who works towards delivering quality services to the potential customers. These people ensure that the services are provided to the customers in a cost efficient and effective manner along with assuring the completion of the allotted tasks within the stipulated period. This also adds to the competitiveness of the port (Hong Port Development Council, 2013). Physical Evidence: Over the years, the port has developed considerably in terms of facility and infrastructure that it provides to the customers. Furthermore, spacious infrastructure of the port along with the presence of nine terminals further enables the port to operate on a large scale through delivering services to both domestic and international customers (Hong Port Development Council, 2013). Process: The port follows a structured and a systematic process in its operations where it provides services to approximately 410 containers per week, which is again increasing with each passing year. With its strong service process, the port provides service to customers in excess of 520 destinations of the world (Hong Port Development Council, 2013). Question 3 Budgeting Procedure and Objective in Port Business Budgeting is one of the most vital components of the operations of any sort of business. Contextually, its importance is also prevalent in the port business or the port sector of the world. Several noteworthy procedures are being involved and ought to be considered while preparing budget for the business operations of ports. Contextually, the procedure for proper budgeting include review of the revenues projected by the staff along with the review of the expenses that might occur with regard to attain the goals along with the objectives of the port. These factors should be considered while developing the preliminary budgets of the ports. After the approval of the preliminary budget from the concerned authority, the subsequent procedure will include a budget workshop, which will intend to make the budget transparent to the public after which decision will be made regarding the making of the final budget. The primary objective of the formation of a port budget is to depict or project the future revenues along with the expenditures of the business. It will certainly ascertain a particular direction of the overall business in the future operational years through considering various aspects associated with the same (Christopher, 2009). Assumptions and Timetable in Budgeting of Port Business While forming a budget for a port business, initially, the concerned authorities depict expected revenues and their source in the business. A few of the revenue sources of any port business might include rail, finance, and revenues from marines operations among others. There also lay certain non-operating sources that include taxes, property sale and income from interests among others. In the subsequent stage, assumptions are also made with regard to the uses or the expenses of the revenue earned that further entails public affairs expense, information technology expenses, security expenses and other operational expenses. A balance of the earnings and expenses are shown in a port budget with the intention of ultimately gaining benefits for the overall business. Timetable for forming a budget is categorised into several significant phases. In the first phase of budget formation, the concerned authority provides the structure to be followed while depicting the budget. In the next phase, the budgeting department depicts the past experiences of the port with regard to accounting and its results. In the subsequent phase, a summary of the preliminary budget is presented in front of the concerned authorities. In the following stages, the preliminary budget will be reviewed and analysed for further consideration. In the next stage, the preliminary budget will be passed for the preparation of the final budget of the business. In most of the scenarios, this chain of process generally gets involved in the formation of a budget flow throughout the year (Port of Seattle, 2013; Christopher, 2009). Conclusion As per the above analysis and discussion, it can be affirmed that continuous development in the modern day trade sector along with the reduction of trade barriers amid various nations of the world had major contribution towards the development of port sector especially in the Far Eastern region of Asian continent. This aspect was further justified with the development and growth of the Port of Shanghai. The analysis of this essay also depicts the competitiveness of the overall port industry with the assistance of an example i.e. The Port of Hong Kong. Hence, from the overall analysis, it can be concluded that like any business sector, the port business sector also undergoes through various significant operational procedures while performing their respective operations in a comprehensive and effective manner altogether. References Chou, C-C. & et. al., 2003. Competitiveness Analysis of Major Ports in Eastern Asia. Journal of the Eastern Asia Society for Transportation Studies, Vol.5, pp. 682-697. China Ports, 2012. General Overview of Shanghai Port. Home. [Online] Available at: http://www.chinaports.com.cn/general-overview-of-shanghai-port/ [Accessed March 10, 2014]. Christopher, K., 2009. Port Security Management. CRC Press. City University of Hong Kong, 2011. Hong Kong and Shanghai Ports: Challenges, Opportunities and Global Competitiveness. Working Paper. [Online] Available at: http://www.cityu.edu.hk/slw/HKCMT/Doc/Working_Paper_4_-_Shanghai_-_Final_(v4).pdf [Accessed March 10, 2014]. GovHK, 2014. Hong Kong: The Facts. The Port. [Online] Available at: http://www.gov.hk/en/about/abouthk/factsheets/docs/port.pdf [Accessed March 10, 2014]. Hong Port Development Council, 2013. Hong Kong Port Facilities. The Port of Hong Kong. [Online] Available at: http://www.pdc.gov.hk/eng/facilities/port.htm [Accessed March 10, 2014]. Merk, O. & Li, J., 2013. The Competitiveness of Global Port-Cities: The case of Hong Kong – China. OECD, pp. 1-53. Port of Seattle, 2013. Budget and Business Plan. Home. [Online] Available at: http://www.portseattle.org/About/FinancialInfo/Budget/Documents/2013/19_2013_F_Budget_Business_Plan_entire_book.pdf [Accessed March 10, 2014]. The Port of Hong Kong, 2013. Handbook and Directory. Home. [Online] Available at: http://www.mardep.gov.hk/en/publication/pdf/porthk.pdf [Accessed March 10, 2014]. World Port Source, 2014. Port of Shanghai. Port Commerce. Home. [Online] Available at: http://www.worldportsource.com/ports/ commerce/CHN_Port_of_Shanghai_411.php [Accessed March 10, 2014]. Read More