Transportation: Maersk Line Sea Freight - Case Study Example

Author Note

Introduction

Maersk Line is one of the largest container shipping companies known for its reliable, flexible and efficient logistics and transportation since 1928. They operate 12 million containers every year to deliver goods all across the globe (Churchill & Mikkelsen, 2017). They have a strong global presence and expertise that allow them to be one of the leading choices for the clients. Maersk has 40,000 employees and conduct their operations in 114 countries (Churchill & Mikkelsen, 2017). The company aims to integrate their local skills and knowledge with a strong global network to increase the efficiency of the deliveries.

SWOT Analysis

SWOT analysis is a tool used by an organization to evaluate its internal affairs and external affairs. The analysis highlights approaches that a company can adopt, to retain and attract clients as well as to improve its services and profits for long-term success. The SWOT Analysis is conducted on the internal factors of Maersk Line to gain an understanding about its strengths, weaknesses, opportunities and threats. The analysis would help the organization to improve its internal performances and fight competition in the transportation industry.

Strengths

Strengths refer to the company’s internal competences that help it in improving its performance and conducting efficient deliveries of goods and services.

Brand Image - The strengths of the company include a strong brand image and global presence. Maersk Line enjoys a strong brand image, as it is one of the largest shipping companies operating 600 container ships (Dragon, 2013). Although the company is a Business-to-Business (B2B ) company, they have a visual side with great photos, rich history and story behind their operations.

Location - It has 325 offices covering different parts of the world, which provide them with an opportunity to access clients globally (Dragon, 2013). The availability of great pictures of Maersk Ships and containers increases the employee enthusiasm about working in the industry. The company is investing more towards digital and social aspects, which increases the organization’s brand image.

Technology - The media and trade publications about the story of Maersk Line in social media enable Maersk to acquire a leading position in the shipping industry.

Pricing - Maersk line is managing the world’s largest fleet of 600 containers and it aims to deliver efficient logistics services at minimum operational cost (Dragon, 2013).

Weakness

Weakness of the company refers to the company’s internal attributes that can cause the firm to deliver less valuable and efficient services.

Lower Freight Rates - Maersk Line Company suffers loss of profit due to low freight rates. The operating profit of Maersk line was 5 percentage points more than the average of the competitors.

Lower Fuel Prices - The Company’s position as a leading shipping organization has dropped as compared to its competitors’ because it makes less profit from lower fuel prices.

Maintaining Large Shipping vessels - The company is facing record low freight rates as expansion of global trade has failed to work in accordance with the increase in shipping fleets.

Opportunities

The opportunities refer to those external factors that help the company to grow.

Technological Innovation - The Company enjoys a competitive advantage due to available technological innovation. The increasing digitalization of the entire world forces Maersk to develop new products and services that provide better customer satisfaction and generate new sources of revenue.

Digitalized Services - The Company hired its first Chief Digital Officer, Goken (Churchill & Mikkelsen, 2017). He has been making the necessary transformation in the organization to prepare for its digital journey. The company is making efforts towards experimenting and learning new things, while adapting itself to the digitalized way of working. Digitalization of the operations of the company helps in gaining competitive advantage and ensures long-term survival.

Integrating Major Brands - The digital innovation carried out by the organization helps the company in integrating the five brands of Maersk line are APM Terminals, DAMCO, SVITZER and Maersk Container Industry which enable them to deliver the efficient container logistics service (Churchill & Mikkelsen, 2017). The company coordinates and expands their existing digital capability with their expertise in container and logistics industry. The company has been growing as a digital organization with the involvement of various data scientists, engineers, product developer and managers (Churchill & Mikkelsen, 2017).

Acquisition - The Company expands its market position through organic growth but they benefit more by mergers and acquisitions. The company acquires the new company but continues to buy its existing assets in order to avoid over supply of containers. The over capacity of vessels would increase the cost of maintenance, managing and repairs (Churchill & Mikkelsen, 2017).

Threats

Threats refer to the external factors that pose a risk to the operation and profits of the organization.

Increasing Operational Costs - According to the recent survey conducted by international accountant and shipping consultant Moore Stephens, the company faces the threat of rising container-operating cost (Stephens, 2017).

Increased Maintenance and Repair Cost - It was observed that the costs for repair and maintenance would increase in the upcoming years.

Increased Labor Costs - The increase in the rates of crew wages also posed a threat to the organization. The crew wages occupying the majority of the operational expenses, weigh heavily on the organization when the demand for workforce is high and the supply is low.

Complex Regulatory Compliance - The increasing cost of regulatory compliance also acts as a threat for the organization (Stephens, 2017). Integration of technology with vessels has not been complied with the regulation of the country, which could result in loss of cash flow. The offshore industry facing the biggest challenge of increasing operational costs also poses threat to Maersk Line (Stephens, 2017).

Prioritized List of Strengths and Weaknesses

Based on the above SWOT analysis, the strengths and weaknesses of Maersk Line are highlighted. The strengths and weaknesses represent the positive as well as the negative attributes regarding the internal factors of the company.

Lower Profits - The weakness that the company faces is that its profits are affected by lower freight rates and the company loses its money due to low fuel prices (Malnight, 2014). The company is trying to overcome its weakness by cutting down its operational cost and is focusing more on its core services.

Focusing on Core Competencies - As the company focuses more on their core competencies rather than on providing premium services, they are able to deliver value to their clients effectively. Maersk Line prioritizes the challenge of improving their financial performance in the short term thereby breaking the pattern of uncertainty and rendering more value to their shareholders.

Volatile Business Environment - Identifying the reasons behind the company’s own volatile performance helps in understanding the approaches to be adopted to create value for the shareholders (Malnight, 2014).

Strategies Adopted -The strategy adopted by Maersk Line to improve its weakness and to enjoy a leadership position in the shipping industry has been divided into three phases. The three phases of business strategy has been developed by the CEO of the company (Malnight, 2014). The first phase involves improving the operations by identifying and implementing a number of ways to cut down costs, thereby generating increased revenue. This method of overcoming its weakness is the easiest as the officers of the company are working in a volatile environment and can quickly address operational issues (Malnight, 2014). The second phase of implementing the business strategy involves coordinating and integrating the internal efforts of the organization. The internal control and planning ensure the long-term success of the organization. These strategies are to be implemented to improve the declining performance of the firm and to overcome its weaknesses. The strategy also involves making difficult decisions regarding the structure of the business and selection of projects to be undertaken or halted (Malnight, 2014).

The final phase of the business strategy involves taking those actions that make Maersk Line the best performer in the shipping industry. The company pays more attention to current and probable changes that could influence their performance and focused more on long-term issues (Malnight, 2014). The company prioritizes areas that require immediate action and plan their strategies accordingly. It ensures that the employees of the organization do not only consider their individual responsibilities but also take effective action collectively that would help the business to grow. Identifying the strengths and weaknesses helps the company to implement effective business strategy that ensures the long-term success of the company (Malnight, 2014).

Global Presence - The strength of Maersk Line is that it enjoys the reputation of being one of the largest shipping and container companies in the industry. It restores its global presence by carrying its operations all across 130 countries. The organization aims towards delivering highest level of reliable customer service and focused logistics service. The company makes a continuous effort to strengthen its competitive advantage.

Reasonable Price - The company provides reasonably priced services and enjoys a leadership position in the market by setting benchmark for on time delivery and high level of customer satisfaction. The growing global marine ports and operations provide the company with opportunities to expand and grow its business further (Malnight, 2014).

Readiness to Compete

The Maersk Line has engaged itself in developing new business strategy to implement a companywide change, which would enable the organization to turn their losses into profit and fight competition in the industry. Initially the company aimed on gaining short-term financial results but now they have shifted their focus from an aggressive market growth strategy to an approach of developing with the market. Soren Skou, the CEO of the company has highlighted a number of methods and strategies to reduce their operational costs and generate more revenue (IESE, 2015). The approach includes a shift in the market strategy from delivering unique and differentiated services to their original core products. The strategy would enable the company in improving their operational costs and providing their services to the clients at a reasonable price. A reasonable price would provide the company with a competitive advantage to beat competition in the shipping industry (IESE, 2015).

The company in order to fight competition developed new strategies to manage their work force. The company usually hires managers and executives from within the organization and it recently decided to recruit from outside the organization. The company is better prepared to face the challenges in the industry by recruiting competencies both internally and externally. Cost leadership is one of the important strategies adopted by the organization that ensures its long-term success (IESE, 2015). As the company operates all across the world, it requires the creation of common language and culture that determines focus, simplicity and team work. The company also focuses on digitizing and standardizing the booking systems that would ultimately benefit the firm (IESE, 2015).

The major companies with which Maersk Line is competing are namely, Mediterranean Shipping Company, CMA CGM and China Ocean Shipping Company. The SWOT Analysis conducted on the company conveys that it enjoys a strong brand image and market position, which enables it to compete in the shipping industry. The opportunities to digitalize and technological innovation improve its existing operation also provide the company with a competitive edge. The company faces the problem of lower freight rates and itis making marked improvement to cut down its cost of operation, which increases the overall profits of the company. Maersk Line has also entered into agreement with other shipping and logistics companies. They recycle their vessels that ultimately ensure their financial feasibility, which increases their benefits in the transportation industry (IESE, 2015). Maersk Line invests a huge sum of money and human resource to ensure that they are scraping their containers in accordance to the international standards on workforce conditions and corruption (IESE, 2015). The company also increases its competitive advantage by focusing its attention on avoiding accidents caused due to containers being overweight. Maersk Line ensures the safety of its workforce, vessels and equipment. The company also provides support services to all members of the supply chain (IESE, 2015).

Maersk Line operates in a volatile shipping industry, which is filled with unanticipated events and has a history of providing low value to the shareholders. In order to withstand the competition and to generate profits in the long-term the company is undertaking various business strategies. The company’s main aim behind implementing business strategies is to maintain its leadership and profitability position in the shipping industry (IESE, 2015). The company has the capacity to adjust its network to meet the needs of the changing environment, which has not been yet incorporated by the other shipping companies in the industry. The company is developing new approaches to restore its position as the market leader and provider of services at a reasonable cost. It maintains a strong position by improving the utilization of its network and resources delivering efficient services to the clients (IESE, 2015).

Conclusion

Maersk Line enjoys a good reputation in the shipping industry and the SWOT analysis provides the following conclusion. It has been operating its transportation and logistics services globally with their offices around 130 countries. The company is focusing its attention in making its operations digitalized and social that enables it to enjoy a better market share and improve its internal performances. The company has also been developing new strategies to cut down operational cost and it delivers services of greater value to the clients. The company faces competition from its rivals and the threats of rise in operational cost due to the increase in labor costs. The analysis helps the company to exploit available market opportunities, overcome threats in the industry and improve the weaknesses of the organization by effectively utilizing its strength.