Corporate Strategy – Meli Marine case study

Topics: Containerization, Cargo, Strategic management Pages: 16 (1834 words) Published: August 10, 2014
Giovanni Costa Corporate Strategy - Individual Assignment 7th International MBA Part Time

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Corporate Strategy - Meli Marine case study

Giovanni Costa

Giovanni Costa Corporate Strategy - Individual Assignment 7th International MBA Part Time

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1) Container shipping industry has consolidated over last years from over 100 carriers to just 15

global players accounting today for roughly 80% of volume, mostly concentrated in Asia-Europe

and Asia-North America shipping lanes (see exhibit 1 for details about volume growth over

2002-2012 decade).

Entering trans-oceanic container shipping market for a regional established company relatively

small compared to its main competitors (e.g. Meli Marine with respect to competition, see

exhibit 2 for details) is a strategic decision that needs to take into account many factors. In

particular, aspects affecting attractiveness of container shipping industry will be explored trough

following Porter's five forces analysis:

 New entrants: - One of the most significant barriers to enter the trans-oceanic container shipping

market (e.g Asia-North America and Asia-Europe) is for sure the large initial

investment needed to acquire big-size vessels fleet. The average size of container

shipping vessel had reached 10,000 TEUi as of 2007 and is continuously growing

driven by top players race to improve their per-container profit figure. The shipping

industry is heavily asset-intensive and its fixed costs (e.g. fleet ownership,

maintenance and insurance costs, terminal charge and overhead) account for roughly

half of total costs structure.

Super-sized vessels fleet implies, of course, large initial investment as well as lager

fixed costs that need to be compensated by optimal utilization of increased capacity.

- In fact, only top players already well established in major ports of Asia, Europe and

North America can profitably leverage on economies of scale and mitigate

imbalanced loading factor over trans-continental routes, due to current trend of

western companies continuously relocating their production in Asia. By contrary, a

company based in Asia, with no presence in other regions of the world, would be

initially strongly penalized of asymmetrical capacity utilization on busiest trans-

oceanic shipping lanes.

 Buyers: - Customer's base of the industry is basically composed by freight forwarders and

retailers. As of 2007 nearly 60% of volume shipment over transoceanic routes was

driven by freight forwarder and major retailers (e.g. Wal-Mart, Target). Such a

Giovanni Costa Corporate Strategy - Individual Assignment 7th International MBA Part Time

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concentration of the demand and high competition among many operators offering

undifferentiated cargo service put big retailers and freight forwarder in a strong

position when negotiating with vessels operators.

- Switching cost from one operator to the other is very low, contributing of course to

further enhance the bargaining power of major customers in front of vessels operators

when negotiating contracts conditions and prices.

 Suppliers: - Bargaining power of vessel operators versus suppliers would instead improve in case

of expanding to the transoceanic shipping market because of increased size of the

company. Better contracts conditions and prices could be negotiated in example with

fuel suppliers, maintenance service providers or terminal operators.

- By contrary, a side effect of expanding option could be the reduction of bargaining

power versus major container carriers reluctant to offer 'feeder' service for their extra

tonnage capacity to regional companies perceived as competitors in some of their

served transoceanic routes.

 Substitutes: - As of today container shipping industry for global trade service relies almost totally

on seaborne...
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