• Executive Summary This report provides an analysis and recommendation of current issues faced by Singapore-based Meli Marine, a leading container shipping company in the intra-Asian market, weather gain a presence in the Asia-North America trade routes through an acquisition of 16 vessels of Teeh-Sah Holdings. On the surface, this opportunity would expands Meli’s business and diversify it’s operations and provide a protect function against a downturn in intra-Asian market. But, this oppotunity will bring Meli lots of economic risks. It would return Meli to its former less flexible model with owning vessels also. I recommend that Meli giving up this opportunity and keeping going current excellent customer service then gradually into TransPacific Within Asia-NA market, the back haul from NA to Asia nearly empty. Meli need to consider this problem because it’s a huge impact on profit. • Opportunity Cost Meli need to spend lots of time on Asia-NA route if Meli take the acquisition, which could detract Meli managing strong customer relationship, which is Meli’s competitive advantage. Otherwise, Meli need to spend cash and take debt to buy vessels, which will make Meli unable to invest other area listed in “container shipping value chain” such as inland delivery. o PEST Model • Political Container shipping industry is kind of international trade and destined restricted by los of regulation, such as ocean environment law, nation’s imports & exports law. • Economic Fixed cost is high for the container shipping industry such as vessel fees, container fees, and labor of loading and unloading. Variable cost is fuel cost, because the volatility of fuel price, so there is a potential huge impact on industry’s profit. • Social Whatever you do, safe is first. Ocean shipping probably will meet with the pirates that could lead economic loss. •
Variable costs, for a manufacturing company, are those costs that increase or decrease as production increases or decreases. If production increases, then variable costs will increase; if production decreases, variable costs will decrease. For Claire’s Antiques, examples of their variable costs would be manufacturing labor, raw materials, and manufacturing overhead. Examples of manufacturing overhead would be the utilities that are used in the production facility, and the oils and lubricants used in the machinery. Fixed costs in a manufacturing company are those costs that remain constant regardless of the level of production. Examples of fixed costs for Claire’s Antiques are: sales and administrative costs, rent and/or mortgage on the production facility, and depreciation. Semi-variable, or mixed, costs are costs that have both fixed and variable costs. An example of a semi-variable cost could be if Claire’s leases their delivery trucks, and the lease includes a mileage fee. The monthly lease would be considered a fixed costs, but the mileage fee would be a variable cost. (Hofstrand, 2007). In most cases, fixed costs are usually higher than variable costs, and can absorb a great deal of profits. Because of this, some companies may consider converting their fixed costs to variable costs.
Modern piracy has touched nearly every corner of the globe and has increased with globalization. The tentacles of piracy now extend from South America to the South China Sea. The greatest numbers of piracy incidents occur along maritime commercial trade routes. Since China dominates the world’s container shipping industry, the South China Sea has become a hotspot for piracy (Kraska 2011). The prominence of cargo activity increases opportunity for pirates and indisputably triggered the sixty- nine incidents of piracy that were reported in 2009 in the South China Sea (Kraska 2011).
An amazing assortment of goods are moved over the worlds ocean trade routes. Of necessity, the carriers charge for the service they render. These charges vary almost as widely as do the cargoes, for they mirror both the shipowner’s costs and the special conditions prevailing on the trade routes traversed by the ships. Ocean freight rates may be described as the prices charged for the services of water carriers. Each ship operator develops it’s own rates, usually without consultation with the shippers. The charges reflect the cost of providing the carriage, the value of this service to the owner of the goods, the ability of the merchandise to support the expense of transportation, and economic conditions in general. Freight rates truly reflect the working of the laws of supply and demand. In tramp shipping, particularly, it is possible to observe how these factors influence the rise or fall of freight rates from day to day and from cargo to cargo. Tramp ships transport, in shipload (or “full cargo”) lots, commodities which, like coal, grain, ore, and phosphate rock, can be moved in bulk. The fact that usually only one shipper and one commodity are involved simplifies the establishment of a freight rate for this particular movement. To the capital charges of ownership and the expense of administration and overhead must be added the cost of running the ship, handling the cargo, and paying port fees and harbor dues. Against this total is set the number of tons to be hauled, and the resultant figure is what the tramp must charge, per ton of cargo loaded, to break even on the contemplated voyage. If competitive conditions permit, a margin for profit will form part of the quoted rate. If however the prevailing economic climate is unfavorable, the owner has the privilege of retiring the ship to a quit backwater, there to wait until the financial skies are brighter. The tramp operator does not depend upon the longterm goodwill of the shippers, but is free to accept those offers which appear profitable at the moment. When adversity threatens, those charters are accepted which minimize anticipated losses. If there is a choice, the cost of temporary lay-up is contrasted with the loss which continued operation might produce, and the less expensive alternative is selected in a bow to the inevitable made with whatever grace that can be mustered.
The other threat was the political issues in Mexico and Africa were uncertain and problem some as this two places had very important ports for the cruise line industry. The cruise line did not feel safe going to this ports. In addition, with respect to the economic the cruises benefits from their guest.
Grouchier, C & Walton, L. 2013. The maritime world: The Atlantic, Pacific and Indian Ocean World. Vol 2. London & New York.
Investing or venturing into the international market involves critical analysis of the internal and external environment in which the company operates. Usually, a company will decide to venture internationally due to a saturated market or fierce competition in the current country of operation. The demand for a company’s products may have diminished as a result of an economic crisis thus the company will target a foreign market to sustain its sales. In other words, the firms expand internationally to seek new customers for its products. For example, the current Euro zone crisis led to low demand in Europe and many companies extended their businesses to emerging markets where demand was high. A company may also venture in the international market to enhance the cost-effectiveness of its operations especially for manufacturing companies that will benefit from low costs of production in developing world. Global expansion is a long term project as it involves demanding logistics to be successful. Thorough research must be undertaken to ensure that the expansion will create value for share...
More than forty thousand merchant ships, and countless number of smaller coastal craft, ply world oceans which comprise nearly seventy percent of the earth’s surface. Each year approximately ten million containers of cargo, containing raw materials to finished goods are transported by seas. The ships are owned by different states, private companies or individuals and manned by mixture of seafarers from different countries, mixed together from various nationalities. These ships are perhaps the most autonomous entities on earth as rule of law allows frequent change of their allegiance or identity by choosing a flag to suit their requirement.
The authors try to emphasize the importance of new growth dynamics for containerization not just for being a transport unit but also as a supply or commodity chain unit as well. The group of authors also briefly explain that Containerized freight is commonly characterized by the movement of manufactured goods and parts from manufacturing facilities to retail activities with the whole range of distribution activities in between, such as terminals and distribution centers. The way containerized freight is used is a benefit in multiple ways from the space flexibility to movement of goods shown in terms of distribution efficiency. Containerization dynamics has for some time relied on a variety of factors that are noted as being derived volume linked with globalization, the substitution of break-bulk traffic into
The freight rate is the price of the carrier that pays by the charterer or ship owner. Freight rate is compulsory and it is measures by the value of goods, point of destination and the travel distance due to land, air or ocean. Freight rate also include with the custom clearance process. It is demanded by the fluctuation of supply and demand, the bargaining power of shipper, the competitors with other logistic company and the availability or alternative of transport modes (lorry, train and ship) (The Challenges Facing The Maritime Transport Industry,
Different cruise companies spend a lot of money on the modification of the products in order to enhance the number of customers. The underlying industry plays an important role in reducing the unemployment because it provides millions of jobs to the individuals. So that the underlying industry also helps in enhancing the economy of the country. In each and every year, the cruise industry has ordered different ships in order to serve the large number of passengers. The new ships have more value and are expensive more than the 20 billion dollars. New and innovative ships help to increase the number of customers of the underlying industry and help to enhance the profitability of the underlying industry (Giachetti et.al, 2013 p.500). The cruise industry is also one of the best examples of globalization. The new cruise ships help the passengers in providing the best services. The cruise company has increased its ships rapidly in order to serve large number of passengers. Research indicates that from the last 20 years, the annual growth of the cruise industry reaches to 8.5 percent and the cruise industry has total 90 million passengers which have increased in every year due to the innovation and creative designs of the cruise ships. The cruise industry provides the enjoyable experience to the passengers. After the year 2005, the cruise company replaces the old ships from the new one having the new design and structure of the ships. The main purpose for the exchange of new ships is to enhance the number of passengers (Terry 2014
Piracy is the direct threat to maritime security for ship owners. Other crimes such as maritime terrorism and the use of phantom ships are far less common, although still a significant issue. The International Maritime Bureau’s Piracy Reporting Center (IMB-PRC) defines piracy as “an act of boarding or attempting to board any ship with the intent to commit theft or any other crime and with the intent or capability to use force in the furtherance of that act”.
Their main objective is to provides the framework especially for shipping and inside the framework had include the safety, environmental concerns, legal and policy, integration of technical, security of maritime and the efficiency of shipping.
A “Fixed cost” can be defined as “a cost that does not change with an increase or decrease in the amount of goods or services produced or sold”. It is time related.
Maritime security traditionally focuses on maritime disputes, naval competition, Sea lines of communication (SLOCs), War at sea . The modern maritime securities after the cold war and 9/11 have been significantly changing and more complex, which is involving worldwide collaboration and mutual understanding .
Water transport is not flexible because it is restrained within water bodies. The use of containers has becomes the best inter-modal option for water transport whereby goods are placed in containers and transported through truck or rail to the port where it is loaded in to a container ship. Upon arrival to the destination port it is offloaded and transported again by track or rail to the consumer of customes.This helps reduce staffing needs, transit time and damages (Haulk, 1998).