Volume 5, Issue 4, December 2019, Page: 74-81
Gaining Competitive Advantage at Sea: An Overview of Shipping Lines’ Strategic Decisions
Enrico D’agostini, Department of International Logistics, Tongmyong University, Busan, Korea
Hyung-Sik Nam, Department of Shipping Management, Korea Maritime and Ocean University, Busan, Korea
Seog-Hwan Kang, Department of Shipping Management, Korea Maritime and Ocean University, Busan, Korea
Received: Oct. 4, 2019;       Accepted: Oct. 24, 2019;       Published: Oct. 31, 2019
DOI: 10.11648/j.ijtet.20190504.12      View  19      Downloads  13
The liner shipping sector has significantly changed in recent years. Largest shipping lines have expanded their business scope becoming global carriers and a recent wave of industry consolidation has profoundly modified the market structure and, consequently, the business models followed by liners. This, coupled with weak market fundamentals, generally poor balance sheets, and ordering of increasingly larger container vessels, has led each shipping line to follow a specific dominant strategy aimed at increasing market shares, margins and creating value for costumers. This article proposes an overview of the main market strategies pursued by the largest shipping lines. Through an analysis of major container lines strategies, the study aims at identifying what are the preferred strategies to gain competitive advantage. Particularly, the concept of diversification (product and geographical diversification), modes of diversification (internal and external), differentiation and concentration are comprehensively discussed and applied to the liner shipping industry. Furthermore, it tries explaining what are the most significant similarities and differences in market strategies in relation to the size of each shipping line. The review of our analysis suggests that 1) all shipping lines follow a hybrid strategic model with more than one individual strategy pursued 2) larger shipping lines prefer to diversify or differentiate 2) mid-sized shipping and smaller lines tend to pursue market concentration.
Shipping Lines, Strategy, Diversification, Differentiation, Concentration
To cite this article
Enrico D’agostini, Hyung-Sik Nam, Seog-Hwan Kang, Gaining Competitive Advantage at Sea: An Overview of Shipping Lines’ Strategic Decisions, International Journal of Transportation Engineering and Technology. Vol. 5, No. 4, 2019, pp. 74-81. doi: 10.11648/j.ijtet.20190504.12
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
UNCTAD., (2018). Review of Maritime Transport. New York, United Nation Publications.
Porter, M. E., (1985). The Competitive Advantage: Creating and Sustaining Superior Performance. NY: Free Press.
Porter, M. E., (1980). Competitive Strategy. New York: Free Press.
Espino-Rodriguez, T., & Chun-Lai, P., (2014). Activity Outsourcing and Competitive Strategy in the Hotel Industry. The Moderator Role of Asset Specificity. International Journal of Hospitality Management, Vol. 42, pp. 9–19.
Hilman, H., & Warokka, A. (2011). Malaysian Based Manufacturing Firms' Strategic Sourcing: A Test of Transaction Cost Economics Theory and Resource Based View. Journal of Outsourcing & Organizational Information Management, pp. 1-10.
Fremont, A., (2007). Global Maritime Networks: The Case of Maersk. Journal of Transport Geography, Vol. 15, pp. 431-442.
Hitt, M. A., Hoskisson, R. E., Ireland, R. D., (1994). A mid–range Theory of the Interactive Effects of International and Product Diversification on Innovation and Performance. Journal of Management, Vol. 20, pp. 297–327.
Ansoff, I. H., (1957). Strategies for Diversification. Harvard Business Review, Vol. 35, No. 5, pp. 114-115.
Kamien, M. I., & Schwartz, N. L., (1975). Market Structures and Innovation: A Survey. Journal of Economic Literature, Vol. 13, No. 1, pp. 1-37.
Christensen, H. K., & Montgomery, C. A., (1981). Corporate Economic Performance: Diversification Strategy versus Market Structure. Strategic Management Journal, Vol. 2, pp. 327-44.
Kor, Y. Y., & Leblebici, H., (2005). How Do Interdependencies among Human-Capital Deployment, Development, and Diversification Strategies Affect Firms’ Financial Performance? Strategic Management Journal, Vol. 26, No. 10, pp. 967–985.
Lamont, O. A. & Polk, C., (2002). Does Diversification Destroy Value? Evidence from the Industry Shocks. Journal of Financial Economics, Vol. 63, No. 1, pp. 51-57.
Davis, P. S., Robinson, R. B., Pearce, J. A., Dan Park, S. H., (1992). Business Unit Relatedness and Performance: A look at the Pulp and Paper Industry. Strategic Management Journal, Vol. 13, pp. 349-361.
Doukas, J. A., & Kan, O. B., (2006). Does Global Diversification Destroy Firm Value? Journal in International Business Studies, Vol. 37, No. 3, pp. 352-371.
Hyland, D., (2003). The Effect of Diversification on Firm Value: A Pre–and Post–Diversification Analysis. Studies in Economics and Finance, Vol. 21, No. 2, pp. 22-39.
Deng, S., & Elyasiani, E., (2008). Geographic Diversification, Bank Holding Company Value and Risk. Journal of Money, Credit and Banking, Vol. 40 No. 6, pp. 1217-38.
Hughes, J. P., Lang, L., Mester, L. J., Moon, C. G., (1996). Safety in Numbers? Geographic Diversification and Bank Insolvency Risks. Working paper No. 96-14.
Goetz, M., & Laeven, L., (2013). Identifying the Valuation Effects and Agency Costs of Corporate Diversification: Evidence from the Geographic Diversification of U.S. Banks. Review of Financial Studies, Vol. 26, No. 7, pp. 1787-1823.
Hinlo, J. E., & Arranguez, G. I. S., (2017). Export Geographical Diversification and Economic Growth among ASEAN Countries. MPRA Paper 81333, University Library of Munich, Germany.
Dai, J., (2013). Efficient Geographical Diversification of Export Trade: The Case Study of China. In: Bian F., Xie Y., Cui X., Zeng Y. (eds). Geo-Informatics in Resource Management and Sustainable Ecosystem. GRMSE 2013. Communications in Computer and Information Science, vol 399. Springer, Berlin, Heidelberg.
Cieślik, J., Kaciak, E., Welsh, D. H. B. (2012). The Impact of Geographic Diversification on Export Performance of Small and Medium-Sized Enterprises (SMEs). Journal of International Entrepreneurship, Vol. 10, No. 1, pp. 70-93.
Boehe, D. M., & Jimenez, A., (2016). How Does the Geographic Export Diversification–Performance Relationship Vary at Different Levels of Export Intensity? International Business Review, Vol. 25, Issue 6, pp. 1262-1272.
Eichholtz, P. M. A., Hoesli, M., MacGregor, B. D., Nanthakumaran, N., (1995). Real estate Portfolio Diversification by Property Type and Region. Journal of Property Finance, Vol. 6 No. 3, pp. 39-59.
Amit, R., & Livnat, J., (1988). Diversification Strategies, Business Cycles and Economic Performance. Strategic Management Journal, Vol. 9, No. 2, pp. 99–110.
Montgomery C. A., (1994). Corporate Diversification. Journal of Economic Perspectives, Vol. 8, pp. 163–178.
Stern, I., & Henderson, A. D., (2004). Within–Business Diversification in Technology–Intensive Industries. Strategic Management Journal, Vol. 25, pp. 487–505.
Mayer, M., & Whittington, R., (2003). Diversification in Context: A Cross–National and Cross–Temporal Extension. Strategic Management Journal, Vol. 24, No. 8, pp. 773–781.
Palmer, D., & Barber, M., (2001). Challengers, Elites and Owning Families: A Social Class Theory of Corporate Acquisitions in the 1960s. Administrative Science Quarterly, Vol. 46, pp. 87–120.
Grossmann, V., 2007). Firm Size and Diversification: Multiproduct Firms in Asymmetric Oligopoly. International Journal of Industrial Organization, Vol. 25, pp. 51–67.
Miller, D. J., (2006). Technological Diversity, Related Diversification, and Firm Performance. Strategic Management Journal, Vol. 27, pp. 601–619.
Panayides, P. M., & Wiedmer, R., (2011). Strategic Alliance in Container Liner Shipping. Research in transportation Economics, Vol. 32, pp. 25-38.
Oswald, J., Ghobadian, A. O, Regan, N., Antcliff, V., (2013). Dynamic Capabilities in a Sixth Generation Family Firm: Entrepreneurship and the Bibby Line. Business History, Vol. 55, No. 6, pp. 910-941.
Clarkson Shipping Intelligence Network, (2019). Retrieved from https://sin.clarksons.net/.
Alphaliner top 100, 2019. Retrieved from https://alphaliner.axsmarine.com/PublicTop100/.
Villalonga, B., & McGahan, A. M., (2005). The Choice among Acquisitions, Alliances and Divestitures. Strategic Management Journal, Vol. 26, pp. 1183–1208.
Rumelt, R. P., (1974). Strategy, Structure, and Economic Performance. Cambridge MA: Harvard University Press.
Cariou, P. (2007). Liner Shipping Strategies: An Overview. International Journal of Ocean Systems Management, Vol. 1, pp. 1–9.
Dupin, C. (2017). HMM to Receive Support from South Korean Government. Retrieved from https://www.freightwaves.com/news/hmm-to-receive-support-from-south-korean-government.
Carbone, V., Stone, M.A., (2005), Growth and Relational Strategies Used by the European Logistics Service Providers: Rationale and Outcomes. Transportation Research Part E, Vol. 41, pp. 495–510.
Top 10 Shipping Lines Control Almost 90% of The Deep Sea Market, (2019). Retrieved from https://www.marineinsight.com/shipping-news/top10-shipping-lines-control-almost-90-deep-sea-market/.
Ward, R., (2017). Maersk Gets Green Light on Hamburg Süd Takeover. Retrieved from https://www.joc.com/maritime-news/container-lines/hamburg-sud/maersk-gets-green-light-hamburg-sud-takeover_20170925.html.
Maersk Line, MSC and HMM Enter Strategic Cooperation, (2016). Retrieved from https://worldmaritimenews.com/archives/208399/maersk-line-msc-and-hmm-enter-strategic-cooperation/.
Wan Hai Lines, K Line and PIL Join Forces on Transpacific, (2016). Retrieved from https://worldmaritimenews.com/archives/190358/wan-hai-lines-k-line-and-pil-join-forces-on-transpacific/.
Baker, J. (2018). Zim Enters Strategic Co-operation with Maersk and MSC. Retrieved from https://lloydslist.maritimeintelligence.informa.com/LL1123471/Zim-enters-strategic-cooperation-with-Maersk-and-MSC.
Merriam Webster on Line Dictionary, (2019). Retrieved from https://www.merriam webster.com/dictionary/commoditize.
Juga, J., Pekkarinen, S., Kilpala, H., (2008). Strategic Positioning of Logistics Service Providers. International Journal of Logistics Research and Applications: A Leading Journal of Supply Chain Management, Vol. 11, No. 6, pp. 443-455.
Lorange, P. (2001). Strategic Re-Thinking in Shipping Companies. Maritime Policy & Management, Vol. 28, No. 1, pp. 23-32.
Gadhia, H. K., Kotzab, H., Prockl, G., (2011). Levels of Internationalization in the Container Shipping Industry: An Assessment of the Port Networks of the Large Container Shipping Companies. Journal of Transport Geography, Vol. 19, pp. 1431–1442.
Notteboom, T., & Rodrigue, J. P., (2012). The Corporate Geography of Global Terminal Operators. Maritime Policy & Management, Vol. 39, No. 3, pp. 249-279.
Barnard, B. (2017). Maersk Group Sells Oil and Gas Business. Retrieved from https://www.joc.com/maritime-news/container-lines/maersk-line/maersk-group-sells-oil-and-gas-business_20170821.html.
Reuters, (2018). Reshaped Maersk Looking to Compete Directly with UPS, Fedex. Retrieved from https://www.joc.com/maritime-news/container-lines/hamburg-sud/maersk-gets-green-light-hamburg-sud-takeover_20170925.html.
Gronholt-Pedersen, J., Nielsen E. G., (2018). Maersk to Merge Damco, Ocean Product Units. Retrieved from https://www.reuters.com/article/us-maersk-strategy/maersk-to-merge-damco-ocean-product-units-idUSKCN1LZ0YO.
APM Terminal, (2019). Retrieved from https://www.apmterminals.com/en/about/our-company.
Lloyd’s List, (2018). 100 Ports. Maritime Intelligence Informa. Retrieved from https://transportationstore.informa.com/wp-content/uploads/woocommerce_uploads/2018/09/LL-Top-Ports-sampler.pdf.
Paris, C., (2019). CMA CGM Pursues $1.65 Billion Deal for Ceva Logistics. Retrieved from https://www.wsj.com/articles/cma-cgm-launches-1-billion-takeover-offer-for-ceva-logistics-11549980384.
CMA-CGM, (2019). Retrieved from CMA-CGM, 2019. Retrieved from https://www.cmacgm-group.com/en/group/at-a-glance/terminals.
Cosco, (2019). Retrieved from https://ports.coscoshipping.com/en/Businesses/Portfolio/#GreaterChinaTerminals.
Knowler, G. (2018). Hapag-Lloyd Goes against Global Carriers' Terminal-Owning Strategy. Retrieved from https://www.joc.com/port-news/hapag-lloyd-rejects-global-carriers-terminal-owning-strategy_20180222.html.
Niamie’, O., Germain, O., (2014). Strategies in Shipping Industry A Review of “Strategic Management Papers” in Academic Journals, Esg UQAM.
Yang Ming Line, n. d. Yang Ming Line (2019). Retrieved from https://www.joc.com/maritime-news/container-lines/yang-ming-line. Accesses on 2 September 2019.
Hyudai M. M., (2019). Retrieved from http://www.hmm21.com/cms/company/engn/container/introduction/index.jsp.
PIL, (2019). Retrieved from https://www.pilship.com/en-our-service-network-pil-pacific-international-lines/112.html.
ZIM, (2019). Retrieved from https://www.zim.com/schedules/trades.
Panayides, P. M., (2013). Competitive Strategies and Organizational Performance in Ship Management. Maritime Policy and Management, Vol. 30, No. 2, pp. 123-140.
Markides, V., Holweg, M. (2006). On the Diversification of International Freight Forwarders. A UK Perspective. International Journal of Physical Distribution & Logistics Management, Vol. 36, No. 5, pp. 336-359.
Browse journals by subject