Port of Brisbane Corporation - Essay Example

Port of Brisbane Corporation 2007 Table of Contents Executive Summary Introduction Corporation's Mission Corporation's Strategy SWOT Analysis Competitive Forces Conclusions and Recommendations References Appendix 1 Appendix 2 Executive Summary The Port of Brisbane Corporation is the most rapidly developing participant in the Australian port management industry. Currently, the Port of Brisbane is the largest general cargo port in the region of Queensland with more than 2,600 ships exchanging over 26 million tons of cargo over the Port's wharves annually. The Corporation's success was enabled by several key factors including the multilateral strategy of development implemented since the beginning of the century, highly effective human resource and knowledge management approach, and unique geographic location of the Port. SWAT and Porter analysis demonstrates that the strategy of development adopted by the company for the next two decades is fully in line with the key strengths, opportunities, and competitive forces the Corporation is likely to face in the future. Port of Brisbane Corporation Introduction The Port of Brisbane Corporation is a Government Owned Corporation that manages and controls the operations of the third busiest container port in Australia. First small exports through Brisbane were made during the early years of European settlement, and only in the second half of the 19th century it emerged as the main commercial centre in Australia. During only 35 years from 1850 to 1885 net tonnage through Brisbane grew from 8,128 tons to 690,883 ton. In 1888 the Port started to trade frozen beef adding it to the dominant exports of coal and rural products (POB 2007). World War II became the next major milestone in the Port's development. Disruption of normal maintenance dredging activities made the main channel's depths unsuitable for further exploitation by 1949. Construction of Cairncross Dockyard to meet the demand for ship repair facilities was only the first step in the long series of developments in the Port. As a result, total tonnage through the port reached 2.6 million ton in 1961 (POB 2007). The 1960s were marked by two other developments that had essential impact on further operation of the Port. Firstly, the discovery of the Moonie oil fields led to construction of two large refineries at the mouth of the Brisbane River. Secondly, the growth of containerized exports led to a modification in cargo handling technology: the Brisbane's first container terminal was constructed in the Hamilton Reach of the river in 1969 (POB 2007). The Port of Brisbane Corporation was established as a statutory authority in 1976. In 1994 it was corporatized under the Government Owned Corporation (GOC) Act 1993, and on the 1st of July this year the Port of Brisbane Corporation changed from a statutory to a company GOC, listed with the Australian Securities and Investments Commission. Currently, the PBC is a publicly owned organization that operates on a commercial basis and in a competitive environment and manages Australia's fastest growing container port. The Corporation also leases and manages land for port-related purposes and maintains navigable access to the port for commercial shipping. Currently, the Port of Brisbane is the largest general cargo port in the region of Queensland. Annually, more than 2,600 ships exchange over 26 million tons of cargo over the Port's wharves. The exchange is expected to reach 50 million tons by 2025 (POB 2007). Factors of Success The progress made by the Port of Brisbane over less than a decade is impressive. Rapidly developing infrastructure of the Port provides effective transport networks, logistics options, and ensures convenient location of warehouses and other facilities. Currently, the Port's trade consists of a range of containerized, bulk and break-bulk cargoes: it leads the industry in beef and cotton exports holding approximately 50% of Australia's total market in this section (POB 2007). Financial performance of the Corporation has been on the spectacularly upward trend over the last five years (see Appendix 3). There are several major factors that contribute to the recent success of the Corporation: 1. Readily understandable effective strategy. The PBC's strategy for generating value and ensuring sustainable development of the Port is founded on the clearly stated pillars: Optimization of the Port's efficiency; Promotion of strategic investments in a competitive environment; Adoption of the most advanced and effective planning principles and management systems; Close cooperation that helps ensure a safe and secure port environment. Establishment of world-class infrastructure. Act in accord with the corporate values of the Corporation (POB 2007). The Port of Brisbane Corporation strongly emphasizes the need to pursue sustainable development as a part of its long-term strategy. The Corporation claims to adopt and actively enforce the fundamental principles of sustainable development and encourages new approaches to traditional industrial/port development. Thus, each user and developer of the strategic land resources controlled by the PBC is obliged to observe the principles of sustainable development, and to incorporate best-practice management into all aspects of their operations (POB 2007). 2. Effective human resource management approach. The Port of Brisbane Corporation has exceptionally strong local roots and all key processes of the corporation are standardized. This enables the Corporation's management pay more attention to basic and advanced training for the managerial stuff. The leadership and management training program that has been in place since 2000 is open for any employee. The number of participants has been on the rise since the very beginning: only 13 employees received diplomas in leadership courses in 2001 and more than 230 Corporation staff participated in basic and advanced workshops as part of the new leadership and management development program in 2007 (POB 2007a). Retaining experienced personnel is also emphasized as one of the key priorities in the Port's HRM program: the management perfectly understands the fact that human resources represent the major asset of the company in the modern world. 3. The company pays overwhelming attention to Management Information Systems (MIS) and other highly effective innovations for managing knowledge processes and business performance. The fact that the PBC launched its knowledge management project in 2001, and is planning to further improve the quality of existing practices in the future demonstrates that the company is in line with the global tendency to invest in KM. This type of investment is considered to be one the critical aspects in the process of creation of High Performance Organizations (HPO) (Bogner & Bansal 2007). Harnessing critical knowledge and using it to create a common vision and objectives may be critical for further development of the Corporation. 4. Compliance with the increasingly demanding and strict environmental legislation. The environmental reports of the PBC convincingly demonstrate that the company pays overwhelming attention to every aspect of environmental legislation currently in force in Australia. Construction of a huge perimeter seawall completed in August 2005 illustrated the Corporation's attitude toward the environmental aspects of the Port's activities. The seawall is a huge rock structure, which is placed on top of a layer of geotextile and sand. It is 4.6km long, and made up of about 1.25 million tons of rock, 220,000 square meters of high-strength geotextile, 155,000 square meters of filtration geotextile, and 425,000 cubic meters of sand. The seawall is adjacent to the Moreton Bay Marine Park to the east and south, and the PBC made sure that every stage of construction is continuously monitored by the specialized environmental and ecology representatives to avoid any damage to the seagrass and shorebirds (POB 2007). The importance of so prudent environmental policy should not be underestimated: absence of any serious problems with the government is an essential factor of the Corporation's recent success. 5. Unique geographic position of the Port. Geographic location of the Port of Brisbane is a decisive factor in the enterprise's recently attained status of a key participant in marine trade: the Port is located in proximity to Asian and other international markets. Unlike several other large Australian ports the Port of Brisbane is not landlocked which enables the management to consider unique needs of specific users in designing the port infrastructure. The location of the Port in the area close to the regions of South East Queensland and northern New South Wales that demonstrate the fastest economic growth in the country also contributes significantly to the recent success of the Corporation and offers some very attractive opportunities for the future. 6. Clear, comprehensible strategic planning for the future. SWOT Analysis A SWOT model of analysis relies on the principle that strategy-making efforts must seek to establish the most adequate balance between resources available to the firm and the firm's external situation (Thompson and Strickland 2001). Comprehensive understanding of the promises and deficiencies related to the use of resources and market opportunities/threats are vital for sustainable development of the firm. An effective strategy that ensures sustainable development of the Port must be based on clear understanding of these factors. Strengths Long history of flawless operation led to establishment of stable reliable working relationships within the industry, with local and central governmental Agencies, and with numerous partners that participate in ground-based operations of the Port. As a result, the Corporation has a solid base to rely upon in virtually every aspect of its activities. Unique geographic location provides the Port with substantial competitive advantage over the competitors which none of the rival can achieve. The fastest-growing position among Australian ports and annually increasing revenues ensure strong financial conditions to expand the business. Availability of developed transport infrastructure in the region of the Port's operations. Continuous and increasing attention to improvement of managerial practices and technological aspects of the Port's operations. The Port is an integral part of the region's economic development. Strong environmental awareness continuously demonstrated by the Corporation. Weaknesses The need to meet serious infrastructure demand to keep pace with booming trade and steady demand for land. This challenge has been explicitly highlighted as the top priority in the Port's development over the last several years. Changing economic regulations may have negative effects on the ongoing and future development programs of the Port. Threats The Port of Brisbane Corporation operates mainly in one industry which is port management and control. Although the Corporation's activities are limited to one geographic region of Brisbane, PBC is strongly affected by the forces which affect the industry in which it competes. The Port of Brisbane is located at the mouth of the Brisbane River and adjacent to the Moreton Bay Marine Park, an area of high ecological and conservation value. Although the Corporation emphasizes the fact that it seeks to operate in the most environmentally responsible fashion to limit the impact of its operation in the areas the increasingly strict international and Australian environmental legislation is likely to cause problems for the Corporation. For example, environmental resources management legislation adopted in Australia strongly considers the controversial precautionary principle which it is present in some or other form in more than 120 Australian statutes and hundreds of non-binding policies (Peel 2005). This principle requires that "...environmental goals, having been established, should be pursued in the most cost effective way" (Australian Government 1992, para. 3.5.1). Australian cases of precautionary principle applications to marine management issues demonstrate that it has been successfully applied in a relatively small number of cases. At the same time, the number of cases where it has not been applied despite availability of the required circumstances is also impressive which reasonably suggests that selectivity of courts and authorities in application of the precautionary precaution is observed in Australia. Such situation negatively affects the port management industry in general and the Corporation in particular. Increasing intensity of competition among the Port rivals may potentially reduce the profit margins Security issues which are likely to become increasingly topical in the future may increase the cost of doing business Opportunities Economic and environmental advantages of waterborne transportation. Strong growth in the motor vehicle trade and unprecedented demand for export coal and meat products generates impressive opportunities for further development of the port. Rapid development of Queensland's shipbuilding industry. Competitive Forces The five powers model originally designed as an instrument for identifying opportunities for achievement of sustainable profitability can also be employed to analyze the structure of market and the intensity of completion. This model is based on the assumption that market power is a result of the complex systematic interaction which involves numerous structural and behavioral elements (see Appendix 2, Porter 1980). The forces identified by Porter in this model are: (1) entry of potential competitors; (2) threat of substitution; (3) bargaining power of buyers; (4) bargaining power of supplies; (5) rivalry amongst existing competitors. Suppliers, customers, potential entrants and substitutes are classified as competitors to companies in the industry, but their influence may be different depending on the specific situation or circumstance (Porter 1980). Porter (1980) believes that the smaller are entry barriers in the industry, the more substantial the threat of new competition will be. The Port of Brisbane has few competitors due to the specific nature of the industry and operations so there is probably reason for being more concerned about the efficiency of competition with the existing rivals. The influence of suppliers and substitutes is also close to non-existent for the same reason. Conclusions Current operations of the Port of Brisbane Corporation suggest that it is one of the most dynamically developing organizations in Australia: in 2003 the Corporation's earnings reached a record figure of 203 million dollars (PBC 2007). The strategy of development adopted by the Corporation is fully in line with the potential threats and opportunities the Port is likely to face in the future. Strong consideration of these factors clearly demonstrates that the Corporation's management is perfectly aware that opportunities and threats not only affect PBC's attractiveness, but also must be perceived as the primary indicators of the need for strategic actions. The PBC's strategy for the future does provide the Port with a perfect opportunity to take advantage of the internal strengths and external opportunities. On the one hand, the Corporation has been taking efforts to improve efficiency of the existing management practices via implementation of the newest technological solutions. Enhancement of business processes, improvement of recordkeeping practices with the implementation of an enterprise content management solution, and creation of a solid foundation for comprehensive knowledge management system are listed as the priorities of the enterprise in this field. On the other hand, the PBC is undertaking an expansion project to be ready for the forecasted rapid growth of trades over the next two decades and to relocating the Port's activities away from residential areas. The Corporation's strategy also adequately addresses the main force in the immediate environment that is currently affecting the level of competitive intensity within the industry, namely existing competitors. And even this force should not be overestimated because the Port's unique geographic location gives the Corporation a serious handicap as compared with the competitors. Although extension of the Port's territory and relocation of its activities away from the residential areas is emphasized as the key priority for the next two decades, the Corporation's strategic plan also acknowledges that information is a significant business asset that should not be neglected. It is vital for future growth of the PBC that value is derived from information assets, and that people have access to the right information at the right time when conducting their everyday business. Recommendations The environmental aspect of the Port's operation that seems to play the key role in ensuring sustainability of the Corporation in the long-term perspective is also given serious consideration by the management. The amount of efforts undertaken by the PBC to avoid any damage to the adjacent park and marine environment is impressive. At the same time, this aspect of the Corporation's operations seems to be the main source of instability associated with sustainable future of the Port: the increasingly strict environmental legislation suggests that new unforeseen restrictions may emerge to hamper the dynamics of Brisbane's development. Therefore, this aspect must probably be perceived as the key strategic priority by the Corporation's management. Attracting new technology to manage the Port's operations seems to be another essential component of the strategy and an influential factor in sustainable development of the Corporation. Successful experience of the decision to transfer some operational missions to Dubai international ports management suggests that the importance of this factor should not be underestimated in the future. References Bogner, W. C. & Bansal, P. 2007, 'Knowledge Management as the Basis of Sustained High Performance', Journal of Management Studies, Vol. 44, Issue 1, pp. 165-188. Thompson and Strickland, 2001. Crafting and Executing Strategy: Evaluating Company Resources and Competitive Capabilities. 12th ed. McGraw-Hill: pp. 117 - 129. Peel, J 2005, The Precautionary Principle in Practice: Environmental Decision-Making and Scientific Uncertainty, The Federation Press: Sydney. Port of Brisbane (POB) 2007, "Corporation", retrieved December 31, 2007 from http://www.portbris.com.au/corporation Port of Brisbane Corporation (PBC) 2007, 2005/2006 Annual Report, retrieved December 31 from http://www.portbris.com.au/corporation/publications/annual_reports_06 Port of Brisbane Corporation (PBC) 2007a, 2006/2007 People and Environment Report, retrieved December 31 from http://www.portbris.com.au/corporation/publications/people_and_environment_reports Porter, M. 1980, 'How competitive Forces Shape Strategy', Harvard Business Review Vol. 57, No. 2, pp. 137-45. Rio Declaration on Environment and Development, 1992 [available online at www.unep.org/Documents/Default.aspDocumentID=78&ArticleID=1163] Appendix 1: SWOT outline Strengths Weaknesses - established system of relationships within and outside the industry - unique geographic location - availability of serious financial and human resources - developed transport infrastructure in the region - continuous improvement of managerial practices' efficiency - environmental awareness - the need to meet rapidly increasing infrastructure demand to keep pace with booming trade and steady demand for land - potentially negative effect of the changing economic regulations Opportunities Threats - the fastest-growing position among Australian ports and annually increasing revenues ensure strong financial conditions to expand the business - economic and environmental advantages of waterborne transportation - strong growth in the motor vehicle trade and unprecedented demand for export coal and meat products - rapid development of Queensland's shipbuilding industry - increasing intensity of competition among the Port rivals may potentially reduce the profit margins - increasingly strict environmental legislation - security issues which are steadily becoming more and more topical may affect the cost of doing business Appendix 2: The five forces model (Porter 1980) Appendix 3: 5-Year Economic Performance of the Corporation (POB 2007a) Read More