Corporate Strategy – Meli Marine Case Study

1629 words - 7 pages

Giovanni Costa Corporate Strategy - Individual Assignment 7th International MBA Part Time
1
Corporate Strategy - Meli Marine case study
Giovanni Costa

Giovanni Costa Corporate Strategy - Individual Assignment 7th International MBA Part Time
2
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
3
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...

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