Change strategy and management organization of Shipping Company as respond to severe market conditions

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Change strategy and management organization of Shipping Company as respond to severe market conditions

Table of Content

Introduction

I. Literature Review

II. Methodology

Research philosophy

Research design

Limitations

Research Ethics

Conclusion

III. Influence of the global economic crisis on Shipping Industry

Relations between marine transportation, trade and the finance

The future Indexes. Shipping and Trade

Effects on container shipping volumes of the container and port throughput

Disbalance between the Supply and demand

IV. The strategies of shipping lines operators

Dynamics, conducting the navigable industry of the liner

Reaction of the navigable industry to recession

V. Approach for market strategy of Precious Shipping P.C.L.

The company of PSL characteristic

Financial performance

Leverage, Liquidity and Coverage

Risk facrors in company's activity

Operating risk

Financial risk

Market risk

Capability replacement and expancion risk

Effect of the Global Financial Crisis

Formation of crisis management strategy by PSL

New ship building contracts

Future Fleet Rejuvenation plan

Discussion of Findings

Conclusions and Recommendations

Sources

Appendix 1 Glossary of terms

Appendix 2 PSL's corporate structure

Introduction

Background of the problem:

Shipping Companies are essential parts of the world transport system. They work in competition with other transport industries like railroad, aviation, car transport and others as well as inside industry competition is very high. From market information we may conclude that shipping companies actively performing in various trades facing presently very unfavorable conditions - very pessimistic stance of freight markets which is supported by strong competition of oversupplied tonnage in front of reduced demand.

The results of the shipping company performance are influenced by various, not always favorable, factors internal and external environment, there is the problem of updating the outdated fleet, which affects the cost of voyages and lowers financial performance of shipping companies. A number of features are peculiar to the shipping companies, which can negatively influence efficiency of internal business processes if not to accept special measures. The shipping company is the service organization, and unlike the manufacturer of an industrial output, it cannot use such simple and effective forms of the control as quality control, finished goods random inspections etc. that complicates the control of all aspects of quality of made services. It can be under pressure from outside more flexible small carriers that even more complicates work in the competitive markets. The difficult and bulky organizational structure peculiar to the big shipping company, can lead to insufficient functional (horizontal) interaction, an ambiguity of authority and responsibility.

Last year world economic crisis just strengthens mentioned competition in the industry and for sufficiently big number of shipping companies now is the time to decide: to shut down all operations or to change whole strategy and organization in order to survive in this very volatile world.

In pursuing the main research aim, I intend to analyze the following issues:

What external economical factors are affecting global transportation in general and shipping companies performance particularly

How internal organizational structure should be modified in case of company's

trading pattern change.

Research question

How strategy and trading pattern should be changed in order to improve competitiveness

of shipping company.

What changes should be implemented in organizational structure of the management in order to meet challenges of volatile shipping market and improve sustainability of the company.

Expected contribution of the Diploma Project:

Working in a market economy and competition, shipping companies must strive to ensure a high degree of customer satisfaction, to the high efficiency of internal business processes and profitability. In addition, the development of the shipping companies corresponds to economic, technical and technological problems that require continuous improvement in its organizational structure and the search for new innovative forms of governance.

Research of external and internal factors complicating the effective functioning of the shipping company, restructuring of organizational concepts and the principles which are together with mentioned factors influencing for work of the shipping company, establishing system for quantative evaluation of management performance based on balanced scorecard concept, can be used for changing strategy and in practical activities of the shipping companies.

I. Literature Review

There are several theories and theoretical effects which could be applied in research:

Porter, M.E. "Five Competitive Forces” is a framework for the industry analysis and business strategy development. It consists of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace.

M. Porter noticed that the considerable volume of the information which is inaccessible is necessary for carrying out of research of activity of competitors. Therefore, the offered by Porter information system where all data about competitors unites in 4 basic elements, can be applied to activity of the shipping company:

1) Purposes on the future. The knowledge of the purposes and problems gives the chance to predict, how much shipping company is satisfied by the today's position and financial results;

2) Current strategy which can be obvious or hidden;

3) Offers (production of the shipping company). Each shipping company works according to certain circumstances in which it is;

4) Possibilities and actions of the competitors which analysis finishes process of diagnostics of activity of competitors.

During the competition analysis in the local market are defined:

* basic competitors (information on competitors, thus it is expedient to define weak and strengths of competitors, their possible strategy, industrial, financial possibilities, etc.);

* degree of intensity of a competition;

* conditions at which the competition can amplify. Intensity of a competition can increase on a measure:

- Growth of quantity of the competing companies, alignments their financial, industrial and other possibilities;

- Stabilisation of demand or its slow growth;

- Realisation by one or several competitors of a policy of strengthening or expansion of the positions.

Among competitors of one market it is possible to allocate so-called «strategic groups of competitors» which represent the companies taking similar positions in the market. The more them in group, the more strongly a competition. As a rule, in the local charter market it is possible to allocate some strategic groups.

The analysis of the stated approaches to research of activity of competitors allows to formulate some general provisions adapted for working conditions of the shipping companies:

* technique of research of activity of competitors should assume presence of preparatory procedures, such as information gathering, a choice of competitors, an establishment of the purposes of competitors;

* analytical part of a technique should include blocks which describe various aspects of activity of competitors: current strategy, strong and weaknesses, possible reactions, a market share, financial stability.

Hence, it is recommended to spend discussions, exchanges of opinions. Opinions of the clients playing a role of experts in the analysis are thus especially important. Therefore on the basis of the analysis of the competitive environment it is necessary to define, what will be reciprocal initiatives of the companies-competitors.

Thus, it is offered to understand sphere of competitive interaction of subjects of the enterprise activity operating in one local market as the competitive environment of the shipping company, taking into account number of the companies, existing barriers of an input and an exit, tendencies of change of volumes of demand, requirements of clients. Thus the competitive environment is subject to essential influence of other economic, social, geopolitical, international factors of an external environment. Strengthening or easing of a position of the shipping company results from change of a market situation, formation or loss of competitive advantages, influence of other factors. To survive and successfully to compete in the charter market, the shipping company should make constantly the analysis of elements of the competitive environment within the limits of the local charter market where it is necessary to consider a conjuncture, input barriers in the market, barriers of an exit from the market, competitors, requirements of clients, a rating of the shipping company. Results of such analysis will allow обоснованно to form strategy and company tactics in the concrete market.

W. Chan Kim and Renee Mauborgne. “Blue Ocean Strategy” - this theory is based on one important question “why should somebody compete in overcrowded industry, where companies fight each other in front of reducing slice of demand (Red Ocean), instead of creating new market (Blue Ocean) where competition is irrelevant?”

Authors of this concept suggest to perceive the market as two oceans - red and blue. Red ocean symbolises known industries for the today which borders are defined, and game rules all are known. At red ocean the competition in process of which toughening of possibilities of reception of profit becomes ever less reigns.

Blue ocean are untouched sites of the market which give the chance unlimited growth and high profits. Blue ocean are branches not existing yet where the competition threatens nobody as game rules only should be formulated.

In total thirty years ago was not investment funds, cellular telephones, biotechnologies, house videorecorders, snowboards, coffee houses, etc. we always have a possibility to create new industry, instead of to go in cycles in competitive struggle in the existing markets. The researches of 108 organisations spent by authors, have shown that 86 % from them preferred to develop at red oceans of already generated market space, and only 14 % have been aimed at creation of blue oceans. However these of 14 % of the companies have received 61 % of total profit, and numerous army of soldiers of red ocean - only 39 %.

Authors underline that the main difference of strategy of blue ocean that its adherents do not aspire to overtake competitors. Authors give tools which call into question the basic assumptions which underlie strategy of very many companies. As a rule, the enterprises consider the branch through a prism of the standard strategic groups (for example, luxe-class cars, economic models), take identical figures for a basis and aspire to be allocated in the strategic group. They also are focused on the same group of clients; equally define a spectrum of products offered by their branch and services; as a reality accept orientation to the functional or emotional appeal of a product accepted in branch. Strategy of blue ocean is aimed at inducing the companies to be pulled out from red ocean of a competition by creation for itself such market niche where it is possible not to be afraid of competitors.

The majority of the companies is spent by many forces for fight with competitors, floating at bloody red oceans. Thus around immense spaces of blue oceans, free from a competition and possessing in improbable potential for growth where also it is necessary to float. It is pleasant, what authors not only advise to apply this strategy, but also answer on question "how to do it?". In "Blue Ocean Strategy" - the different view on a competition is stated. It is the unique concept focusing listeners on the creative concept of business dealing.

In other words, at "blue oceans" the prospect of reception is concluded by the company of the greatest profit. And competitors there and at all are not present - as the company which has created "blue ocean", is in it the first and, for a long time, unique. It is important to notice that "blue ocean" is not measured by industry or the concrete company is, more likely, a strategic step, the advantageous decision of the company for its market situation.

Robert Kaplan and David Norton. “The balanced scorecard: translating strategy into action”

Perspective system of new generation became Balanced Scorecard - result of long-term works in which head were Robert Kaplan, professor Harvard Business School, and David Norton, the founder and the president of company Balanced Scorecard Collaborative. The hypothesis for the first time has been put in a basis of their researches that for a successful management of the modern enterprise of one financial data already insufficiently and consequently the new, more "balanced" approach is required.

This principle is realised by system Balanced Scorecard considering four "prospects" (Perspectives) of the organisation: traditional financial (Financial) indicators and factors which expressly or by implication influence them, - success of work with clients (Customer), an optimality of internal business processes (Internal Process) and the general competence of the personnel of the company of the area (Learning and Growth/Employees). Collected together, these prospects collected together give a complete picture of current strategy of the enterprise and its dynamics. If necessary additional sets of own working out, for example "Ecology" and others can be entered and used.

Periodic measurements of considered indicators provide a feedback and corresponding regulation of actions of the organization. Degree of achievement of the purposes, efficiency of business processes and work of all company, its divisions and each employee is thus defined by values so-called "key indicators of productivity" (Key Performance Indicators, KPI). If they are connected with system of motivation of workers it is expected that the last will be daily interested in achievement by the company of the established purposes. Thus, Balanced Scorecard become original framework for transfer of strategy of the organization in a set of the operational purposes defining behaviour of the company and, hence, its financial well-being.

II. Methodology

Research philosophy

The philosophy for my research will be both quantitative and qualitative. In other words data collected will be numeral as well as non-numeral. Secondary quantitative data will be collected such as figures and indices of the industry and the company, analysing their financial performance and comparing numbers. Regarding secondary non-numeral data, I will start off from searching information from electronic data-bases, industry magazines and newspapers, journals, company's financial statements and websites. In order to back up my findings, the academic literature will be used. However, the research will be mainly based on the experiences of the company used as an example rather then on the literature due to its shortage specifically orientated on the particular industry.

The aim of research is to apply theoretical framework for strategy change and organizational restructuring of shipping companies. The research will consist of two parts:

Quantative analysis. This part of research will cover analysis of various statistic data, industry analysis, market condition reports and forecasts. The purpose of this analysis is to understand present situation in shipping transport industry, future possible developments and economic consistency of shipping companies competing on the market with reducing demand.

Qualitative analysis. This analysis will cover case study research of the shipping company which have exercised its own approach for strategy implementation as reaction to global economic crisis in general and stagnation of the shipping industry in particular and what benefits and challenges the transition process did bring to the company.

Research design

The research will be based on the exploratory case study. My key intent will be to analyse performance of the industry and the company itself before and during economic crisis followed by investigating leadership and managerial techniques used by the company to overcome the crisis times and stay competitive and successful. The research will use secondary sources to map the critical factors and core competencies. Furthermore, primary data will be collected.

Limitations

One of the possible limitations might be lack of objective information given from the company due to the official secret. The other major limitation is the lack of the theoretical material due to the fact that this field was not studied deeply.

Research Ethics

I will make sure that all the sources are reliable and the information is up to date. Secondly, regarding the primary data collected, confidentiality will be strictly kept.

Conclusion

In conclusion, so far I have faced the lack of the theoretical material narrowed to this particular industry and I can assume this is due to the small number of players in the field. However, as I have researched a lot about the company, got reliable and important information. I strongly believe that the research is manageable in terms of the time frame and it is also of a big interest of me.

III. Influence of the global economic crisis on Shipping Industry

Relations between marine transportation, trade and the finance

Communications between the financial industry and marine shipping are very old. Consigners have an old tradition of interaction with the financial industry as financing has been obliged to build vessels and to purchase the trading consignment while softening of the risks connected with shipping, has led to creation of system of insurance. The traditional role of the financial industry was more passive, supplying the capital and minimising risk when the necessary. This capital often came back money as soon as trip has been finished, and the consignment is sold. The finance was used to strengthen possibilities of the international transportation. Nevertheless, last decade these relations became sharper because they have been inverted. Really, transportation became avaricious to strengthen financial possibilities for following reasons:

* Transport methods and terminals are very capital-intensive. The essential performance levels, brought containerization, have led much more to quantity of the capital-intensive industry depending on financing not only for acquisition of marine assets, but also and for actions. Amortisation of investments tends to take place on longer spaces of time meaning more of direct sharing and oversights of financial firms.

* Financial firms are more involved in the property and operation of the various types of transport of assets connected with use. With growth of international trade shipping and port actions became more and more the favourable industry if not always from the point of view of a rate of return then it is final from the point of view of volume of this returning. It has drawn attention of financial firms, such as hanks, assurance companies and even pension funds, seeing transportation assets, such as port terminals, as an investment part of a class of a diverse global portfolio. It has supplied capital considerable quantities to develop connected with use of various types of transport assets and increase in their value of "stain". Global financial firms also looked at possibilities, big enough to adapt extensive quantities of the capital at their order, and terminals represented an asset class which has satisfied well to scale of this distribution.

* Financing of the international transactions. With growth of international trade of the bargain between commercial actors became more and more difficult and assured of financing. The main form is known as the letter of credit which is the document manufactured by a financial institution which supplies the promise of payment for commercial transaction, meaning that it can be expiated, if certain conditions are satisfied. Credit letters dated are mainly used for bargains between actors, such as the buyer and the seller, in the various countries. The big business banks usually finance approximately 90 % of all global commercial transactions.

* Shipping derivatives. Within last decade the marine industry and the port industry has been more and more bound with a moneyed interest. High variability in the navigable markets illustrated by sharp fluctuations and sudden changes, has supported occurrence and capital market growth at freight shipping. Difficult financial products and derivatives have been developed to support growth in shipping. Sending derivatives have been developed to operate risks, occurring from fluctuations in freight rates, the prices of bunker fuel, the prices for a vessel, the prices for a waste, interest rates, and exchange rates, more effectively, in cheaper and more flexible manner. The navigable market does now the wide use of management methods by risk and the tools involving trading houses, the power companies just as investment houses and the funds using to the technician of hedging. Risks if coping effectively, can stabilize cash flows, with positive consequences for business.

Till the end of 2008 these problems essentially benefited the marine industry and the industry of ports as capital great sums became accessible to set of the various types of transport of improvements connected with use, such as new generation of container ships, development of new and more advanced services of the terminal of port all over the world to support the strategy focused on export (as it is illustrated by those in East Asia) just as internal ports to the best access the regional markets (for example in the North America and Europe). The perverted consequence was that transportation became more and more apprehended exclusively from financial prospect, especially since a considerable quantity of interested persons, and the person, making decisions, occurred from a financial sector as is rejected from transportation sector. Terminals became a payroll department of a product of a global portfolio of the asset which work was often noticed from the point of view of the price to income relations. Other perverted effect consisted that limiting assets have arrived to be apprehended as a liquid, the perception encouraged with active sharing of set of financial firms so that limiting assets for sale (or the lease) could with readiness find the buyer. The problem consists that financial considerations can pass fast as horizon - usually a short time while the various types of transport of assets connected with use have planning and operational horizon which can easily capture decade even for its "most changeable" elements, namely, vessels and some decades for its "less changeable" elements namely, a limiting infrastructure. Variability which characterizes the financial markets, got in the marine navigable industry and as the economic has flowed under credit flooding under the low interest together with asset inflation so that has made industries of port and shipping.

The future Indexes. Shipping and Trade

Baltic Dry Index (BDI) - an average cost estimation to send raw materials (such as coal, iron ore, cement and grains) in a number of shipping routes and the size of a vessel. It - thus the indicator of the cost paid to send raw materials in the global markets and the important component of source expenses. Also, an index consider as a leading indicator (forward looking) activity as it involves the events which are taking place at earlier stages of global commodity chains. High BDI - the sign of difficult navigable delivery and, possibly, will create inflationary pressure along systems of deliveries. Sudden and sharp decrease BDI, possibly, will predict recession as manufacturers have essentially reduced the consigners of departure of a request that it is essential to reduce their rates.

Between the middle 2005 and the middle 2008 BDI dews the factor approximately 5.5 times, reflecting a wave in global trade and expectations of additional growth. The navigable industry more and more faced to the limited additional ability which has increased rates. The index has reached a maximum in the spring 2008 as China reserved considerable quantities of consumer goods in preparation for Olympic Games. Subsequently, BDI has reflected that complete developed recession and have collapsed on 94 % between July and December 2008 (Figure 1). Never before such sharp correction was not observed, a sign that marine shipping and global trade has been resulted in inactivity. Then, BDI, corrected to reach the level reflecting estimations before a bubble.

Figure 1 - Baltic Dry Index (monthly Value)

Crash of the global shipping observed in BDI, grows out of two consecutive storm:

* the credit Storm: In fall of 2008 freezing of the credit meant that some financial transactions in international trade could not any more, it was cleared under normal conditions. For example, terms to receive the letter of credit became much more strict, some financial institutions, refusing to observe letters dated of the credit manufactured by foreign banks and other, simply refusing to manufacture credit to their clients which as perceive, were in danger. Therefore, volumes of trade which carry out container carriage, have started to go down abruptly because bargains could not be cleared. The credit drawing facility was thus a time explanation in crash of marine shipping as some bargains between developed and developing countries have been apprehended as dangerous and could not be financed, at least in terms, dealers have been accustomed to. Weakness of a financial sector, especially in the developing countries, which steels the important dealers, has made crash. However, it was the time condition reflecting sudden change in the global financial industry as it has absorbed the new validity, the evaluated risk and has supplied financing accordingly. There are signs on the end of spring 2009 that this storm was complete.

* the Macroeconomic storm. Following descending pressure upon marine shipping is connected with decrease in an aggregate demand which is standard macroeconomic effect of recession. Serious falling of consumption in an arch of the North America and Europe possibly to proceed before consumption are more in synchronism with the income contrary to debt accumulation. Already, the production of durable goods reflects collapsing demand (Figure 2), with for example car sales decreasing for 37 % between spring 2008 and 2009.



Figure 2 - Production of Durable Consumer Goods, United States, 1990-2009 (2002 = 100)

There are many forecasts made about expected restoration of economy with its connected growth in consumption, but this arch of forecasts constantly revised downwards. The probability of analysts which did not expect the greatest financial and economic correction since Great Depression, asks to place the limited value in their expectations about a potential choice of time and returning scale)-. It is possible to assume however that 2010-12 could note the basis of a macroeconomic storm.

Effects on container shipping volumes of the container and port throughput

Container shipping companies grew fast for many years, ordering more and more container ships with higher capacities. With the globalization expanding distance between sites of production and the consumer markets, the request on sea freight grew in double figures annually. Shipping companies assumed that this tendency will bear in the foreseeable future.

Global container throughput has raised 12.6 % in 2007, 7.4 % in 2008, only 4.1 % in Q4 2008 and it is expected to the further slowing down to 3.1 % in 2009. Asia-Europe trades, which were the most essential sources of the income for container lines in 2007 as volumes have extended on more than 20 %, and freight rates have flied up, have been hardly struck. According to ELAA, the European Association of Affairs of the Liner, cargo volumes from Asia decreased to Europe on 11 % in the last quarter 2008, in comparison with the same period in 2007. Going east volumes decreased on 16 %. It has arrived completely unexpected which tends to prove the thesis of change of a paradigm. In the December 2007, still existing Far East Cargo Conference (FEFC) has predicted 19 %-s' growth on 2008. Container shipping from Asia to Europe have decreased further for 17 % in January 2009 while going east shipping were on 23 % more low.

Volume decrease has made clear impact on throughput numbers in main container ports of Europe, Asia and the North America.

There is well established statistical connection between growth of gross national product and container volumes. However, the current economic climate has made the short-term forecast rather unreliable. Short-term relations GDP/general cargo relationship is being undermined. The falling consumer confidence as think, stars in it by means of what costs reduce as falling of reliance irrespective of actual riches. The intuition and feeling of a gut play more roles, in a near-term outlook predicting than ever before.

While principal causes for crisis become clear (the previous sections), they - unpredictable times, especially see as there is no consent in the industry on how long slowing down will last. At conference TOC Asia in the beginning of March 2009, Dr. Sun Jia-kang, the Operating director of Container Lines COSCO, has foretold that the economic leaves crisis gradually in 2009, and will recover step by step in 2010. Other shipping lines see that the further aggravation of market conditions during 2009, with first signs recover) - only to the middle 2010. Drewry expects that the growth factor will fall sharply to all routes in 2009. Its forecasts presented in March 2009, show following expected transport losses for a year 2009 (Table 1).

Table 1 - Expected Changes in Container Volumes between 2008 and 2009

Route	Eastbound	Westbound
Europe - Far East	-6.5%	-6.8%
Mediterranean - Far East	-8.4%	-7.1%
Transpacific	10.0%	-4.1%
Intra-Asia	-4.9%	-4.8%

Drewry expects that the growth factor in 2010 will be possibly stable or is a little negative. In 2011 restoration as expect, will begin.

For longer term there is a main point: volumes will come back to a linear line of the forecast in some years or there will be step change downwards in volumes? Drewry, apparently, believes that volumes in the end will come back to a linear line of the forecast though in much slower growth walk. In March 2009, Drewry has revised its forecasts on 2007-2013 made in September 2008 from cumulative annual number of growth of 8.7 % only to 2.7 %. In absolute terms it means that the total of the complete containers sent on the international trading routes, would reach approximately 160 million TEU in 2013 instead of 225 million TEU which was expected earlier.

Notteboom and Rodrig (2009) identified two possible scenarios about development containerization in a maturity phase (Figure 3).



Figure 3 - World Container Movement 1980-2008 and Potential Prospects of Growth for 2015

The first scenario involves proceeding growth of international trade on the norm similar to volume that took place last decade. It simply extrapolation of last tendencies of growth. This scenario accepts doubling of container movement between 2005 and 2015. The second scenario would entail behind itself a divergence way where container volumes, even after current global recession, will never reach peak numbers of growth of last decade again. This scenario requires, that motive forces behind a push to globalisation which prevailed until recently, have been withdrawn aside, for example as a result of protectionism (especially to China), more a high bid for energy and re-structuring production to more regional basis. In the light of forces recessionary * which were developed in 2008, the third scenario in which global container shipping is included into a phase of depression with real transport decrease can be considered. Already, changes in the movement of port observed in the beginning 2009, underline that designing, possibly, will be very optimistical and that the depression scenario cannot be excluded.

Disbalance between the Supply and demand

Basis of global trade in commodities, sea transport - possibly most incorporated industry. Typical commercial transaction can easily involve suppliers of the goods and services from 20 various countries. As an example: the container which made in China and has been filled in with the goods from Nepal, is exported through port to India; port the concessioner from Dubaji operates, using the elevating cranes collected in Malaysia and the software, developed in Belgium: the container ship constructed in republic of Korea, belongs to German investment fund which the company placed in Cyprus which the Danish carrier operates operates, signalled in Panama certified by a classification society from the United States, and was the crewman with the Philippine citizens, applying global agreements of employment from the International organisation of work: The forwarding agent in port belongs to the Norwegian network, while the freight forwarder - the Swiss and Company of Protection and Compensation of a vessel from the United Kingdom: in a way to the Netherlands, the vessel struggles with pirates near to coast Somalia, instalments of the channel of payments to Egypt, and fuel of bunkers in Spain: it carries out global rules IVIО to avoid an oil spillage in France.

To understand, what companies and the countries will be mainly mentioned by an economic crisis, to, the recession which is in great demand for shipping services, will mention, we represent below that short review where some sectors of the industry are possessed also their global importance, as to a share in the market.

Together, 20 leading carriers explain approximately 70 percent of the complete container ability developed (Table 2).

Table 2 - Twenty five leading shipping companies in January 2009

Rank Company	Ships	TEU	Market share TEU	Combined market share TEU	Order book TEU	Order book TEU as per cent of fleet	Order book ships	Average fleet	Average vessel size order book
1. Maersk Line	440	1772545	12.4%	12.4%	304489	17%	56	4029	5437
2. Mediterranean Shipping Co SA	423	1463162	10.3%	22.7%	490766	34%	47	3459	10442
3. CMA CGM SA	290	883818	6.2%	28.9%	600904	68%	69	3048	8709
4. Evergreen Line	182	630229	4.4%	33.3%	0	0%	0	3463	na
5. Hapag-Lloyd AG	132	496724	3.5%	36.8%	122500	25%	14	3763	8750
6. Cosco Container Lines Ltd	154	491481	3.4%	40.2%	444752	90%	59	3191	7538
7. APL Ltd	129	474453	3.3%	43.5%	132232	28%	17	3678	7778
8. China Shipping Container Lines Co Ltd	119	420562	2.9%	46.5%	167596	40%	23	3534	7287
9. Mitsui OSK Lines Ltd	107	376501	2.6%	49.1%	109410	29%	19	3519	5758
10. Orient Overseas Container Line Ltd	93	365240	2.6%	51.7%	128912	35%	20	3927	6446
11. NYK Line	82	356512	2.5%	54.2%	84600	24%	16	4348	5288
12. Hanjin Shipping Co Ltd	78	350274	2.5%	56.6%	240495	69%	26	4491	9250
13. Kawasaki Kisen Kaisha Ltd	99	310251	2.2%	58.8%	167356	54%	35	3134	4782
14. Yang Ming Marine Transport Corp	84	304564	2.1%	61.0%	178809	59%	29	3626	6166
15. Zim Integrated Shipping Services Ltd	82	251747	1.8%	62.7%	289010	115%	40	3070	7225
16. Hyundai Merchant Marine Co Ltd	58	245323	1.7%	64.4%	34400	14%	4	4230	8600
17. Hamburg Sud.Dampfschifffahrts-Ges.KG	78	239585	1.7%	66.1%	100470	42%	18	3072	5582
18. Pacific International Lines Pte Ltd	80	159337	1.1%	67.2%	69308	43%	22	1992	3150
19. United Arab Shipping Co (SAG)	47	152864	1.1%	68.3%	145728	95%	15	3252	9715
20. Compania Sud Americana de Vapores	57	144481	1.0%	69.3%	131739	91%	21	2535	6273
21. Wan Hai Lines Ltd	72	127545	0.9%	70.2%	51324	40%	18	1771	2851
22. CSAV NORASIA	31	126692	0.9%	71.1%	0	0%	0	4087	na
23. Islamic Republic of Iran Shipping Lines	45	92191	0.6%	71.7%	47080	51%	16	2049	2943
24. MISC Berhad	27	89731	0.6%	72.4%	0	0%	0	3323	na
25. Safmarine Container Lines NV	51	87583	0.6%	73.0%	9634	11%	6	1717	1606
Subtotal Top 25 carriers	3040	10413395	73%	73%	4051514	39%	590	3425	6867
All others	6384	3853368	27%	27%	2172727	56%	770	604	2822
World TOTAL	9424	14266763	100%	100%	6224241	44%	1360	1514	4577

Four of the best of 10 carriers base in Europe - including three greatest companies - and six base in Asia. Operators tend to freight the big proportion of the courts which often belong to "non-working" holders. The property of container ships is less concentrated than its operation. Three greatest holders of container ships "operate" holders, that is carriers, especially Maersk, MSC and Evergreen, accompanied by two non-working holders from Germany. The greatest non-working holder now - C-P Offen, operating 90 courts with total capacity 355 000 TEU for February 2009. In Europe, the property and operation of courts tends to be more split between the various companies than in Asia where the companies own rather big proportion of their fleet which operate. Among developing economy main holders of container ships base in China accompanied by the Taiwan Area of China, Singapore, republic of Korea, Hong Kong (China), Malaysia, Turkey, the United Arab Emirates, and Islamic republic of Iran.

The control of world fleet of dry dry-cargo ships holders from developing economy includes China with fleet dwt on 42 973 m., accompanied by republic of Korea, Hong Kong (China), the Taiwan Area of China, Turkey, India, Singapore, Islamic republic of Iran, the United Arab Emirates, Vietnam, Croatia and Thailand.

Marine shipping has benefited by prevailing growth in movement and in particular from almost unlimited delivery of the credit for construction of new courts. The table 3 shows a hook of the order for main ships classes as it stood July, 1st 2008 how the world economic crisis has started to be developed. Vessels and complete load-carrying capacity of a vessel on the order then in comparison with total of courts and complete complete load-carrying capacity of a vessel in service in that date. This comparison confirms register size in particular for dry-cargo ships and container ships, with orders concerning all new such classes of ship accordingly 67.6 % and 53.2 % of existing ability.

Table 3 - Vessels on the order and in service July, 1st 2008 by main class of a vessel

Class of ship	№ Vessels on The order	Total dwt (1,000 tons)	Total № Vessels in World fleet	Total dwt in world fleet (1,000 tons)	Relation vessels On the order to Vessels in World fleet	Ratio dwt on order to total dwt of world fleet
Tankers	2 956	193 652	11 525	404 891	25.6 %	47.8 %
Dry-cargo ships	3118	271 713	7 357	401 949	42.4 %	67.6 %
Container ships	1451	82 185	4 475	154 396	32.4 %	53.2 %
Universal dry-cargo vessels	1714	22 095	17 756	105 101	9.6 %	21.0 %

For cellular container ships level of additional ability, which has been planned to be added, can be equally illustrated number of courts and abilities TEU for each size of a vessel. The cellular register of the container ship for August, 1st 2008 was expected increase in 36 % among courts and 67 % in carrying over expressed to ability among TEUs (14.7 % equivalent to compound growth rate a year). Besides, the great number of additions on fleet as expected, will occur in classes of a vessel to capacities more than 5 000 TEU.

The economic crisis faces to navigable sector with double threat. The first is stated by the essential decrease which is in great demand as a result of serious sharp recession in global trade, certified all over the world. Not all goods and all classes of ship feel this sharp recession in the same proportions. Very seriously mentioned all classes of dry-cargo ships and the majority of classes of cellular container ships. Tankers and in specific VLCCs very much were in demand until recently, but other types of the tanker and classes had a rough trip to the beginning 2009.

The second threat arrives from the holders of a vessel on a large scale ordering new vessels for whom they trusted when orders have been placed that there will be a big request. Ease from which vessel financing was possible to second half of 2008 and low interest rates, has induced many to enter into investments for which the request was unsubstantiated. But prevailing tone was at this time one of on the optimism based on belief that world trade will continue to grow without softening. This optimism got in the forecast of the future navigable volumes and their basic factor of growth.

By September 2009 operators of a line of the container have overestimated a market situation and have presented the owner of measures to reduce ability, including delay deliver dates of the ordered courts, returning the diplomaed vessels to their holders and cancelling, when the possible new building orders. A cellular hut of designing of fleet of the container ship, based on fleet in service September, first 2009 and the revised register in the same date. It underlines that the greatest changes in complete ability are observed for courts more low 5 000 TEU.

Comparison of the expected data on January, 1st 2010 (based on fleet on September, 1st 2009) with the data on August, 1st 2008 shows degree of the complete control which has been carried out by holders of the container ship and container operators of a line. The total of courts by January, 1st 2012 as expect, will decrease 437 while ability TEU will be 1 476 425 TEU less. Though they - significant reductions, fleet should grow still on 24 % in ability TEU during the two-year period on January, 1st 2010 till January, 1st 2012. Without the further strong reduction among courts and ability TEU of fleet, can be a few doubts that serious surplus of capacities remains the big problem for the navigable industry of the container even if volumes of trade which carry out container carriage, would come back with moderate growth over levels 2008.

IV. The strategies of shipping lines operators

During last decades shipping lines and incurably sick operators have cut out the strategy of the enterprise under a premise of strong growth in the container trade fed with process of globalisation and large-scale acceptance of the container. The international container throughput of port has increased from 36 million TEU in 1980 to more than to 500 million TEU in 2008. World increase containerization was result of interaction of factors macroeconomic, microeconomic and focused on a policy. World trade has been facilitated through removal of trade barriers and liberalisation and cancellation of the state control of the markets. Market liberalisation also has shown to increase logistics development all over the world. The international systems of deliveries became difficult, and logistics models develop continuously as a result of influences and factors, such as mass adjustment in reply to a product and a market segmentation, poor industrial methods and the connected changes in expenses. Shipping lines and incurably sick operators have benefited very much by these events. However, the economic crisis, apparently, stirs up main principles of an estimation and the investment policy of shipping lines and incurably sick operators and their wider participation in chains of creation of value. Following sections will discuss key factors and strategy which underlie the industry and degree, to which company now overestimate the strategy.

Dynamics, conducting the navigable industry of the liner

Notteboom (2004) supplies the extensive short review of dynamics behind navigable business of the liner. This section summarises main results. As a whole, container ships have always a little underperformed financially in comparison with other players in logistics industries. Weaker work can be connected with a combination of capital-intensive operation and the high risks connected with incomes. Shipping remains very capital-intensive industry where some assets belong, and other are leased, and there is a wide variability in the cost bases (Streams, 2000). Lines compete for a share in the market, and ability tends to be added as additional loops (that is in the big pieces). As soon as the big and expensive networks are adjusted, pressure goes to fill in vessels with the freight. To supply the consignment, shipping lines have agreed about long-term contracts with consigners. Lines recognize that they should take any price, it is offered in the market. This acceptance, in turn, has led to intensive concentration on expenses.

About 1990 great attention it is devoted to larger, more economic by fuel of courts, and it has really made essential cost reductions for TEU the supplied ability (see for example. Drewry, 2001 and Cullinane, etc., 1999). However, this centre of carriers on the sizes of a vessel did not lead to more stable environment of the market. Consecutive rounds of expansions of scale at a rate of a vessel have reduced crack expenses in container branches, but carriers did not reap complete privileges of economies of scale in the sea (compare. Lim, 1998). Unpredictable business cycles on main trading lanes have led time and again to changeable cargo warranties to shipping lines. Addition post-panamax ability has given the short-term competitive superiority to the early engine, putting pressure upon followers in the market to modernize their container fleet and to prevent serious inconvenience of an unit cost. The return result in the end also has hurt carrier which has begun a vessel upscaling around.

Shipping lines also rely on organizational increases in scale. Horizontal integration into liner shipping is included into three forms: commercial agreements, such as liner conferences (which out of the law in Europe since October 2008), operating agreements (for example, agreements on division of a vessel, the agreement on crack chartering, consortia and the strategic unions) and company amalgamations and acquisitions. Economic rationality for company amalgamations and acquisitions is introduced into the purposes to measure, growth, an economies of scale, a share in the market and the market power. Other promptings for company amalgamations and acquisitions in liner shipping concern receptions of instant access to the markets and distributive networks, access reception to new technologies or a diversifying. Acquisitions typically show some traps, is final in very international marine industry: the cultural distinctions, the overestimated combined actions and the acquisition cost. However, acquisitions make sense in the liner sending as the marine industry ripened, and barriers to access are rather high (because of investment required volumes and development of client base).

Cooperation between carriers serves as means to supply economies of scale, to reach critical weight on the scale of operation and to extend a high level of the risk connected with investments in courts (Ryoo and Thanopoulou, 1999 and Weak, etc., 2002). Carriers consider weight of the market as one of the most effective weapon in the permission with trading environment which is characterised by intensive pressure of an estimation. The unions supply its easy access of participants to larger to quantity of loops or services with relative cheap significances and allow them to divide terminals, to co-operate in many areas in the sea and ashore, thus reaching savings of expenses in the end.

In the navigable industry already in the power of the big courts, merges of the companies/acquisitions and the strategic unions the potential cost-saving, in the sea still kept, becomes smaller and pressure to find that the cost-saving grows in other place. Internal logistics - one of the most vital areas, still left to reduce costs. Besides cost and income considerations, force of a demand pull of the market - main motive power for carriers to unite their services along system of deliveries (Weak, etc., 1996). Only with several exceptions, however, management of pure services of logistics is made by branches which divide the same company of mother as a shipping line, but work irrespective of navigable actions of the liner and as that also send the consignment on lines of the competitor (the Loader, 2002). Some shipping lines, such as Line Maersk have gone far enough in through services and have united logistical packages. Other shipping lines adhere to navigable business and try to increase network integration through structural or special coordination with independent internal transport operators and service providers of logistics. The last group of shipping lines combines strategy of perfect investments in key actions of support (for example services of agency or centres value of distribution) with the conclusion a subcontract of less critical services. Shipping lines at all do not own the internal transport equipment. Carriers face some important barriers further to improve internal logistics (Notteboom, 2002). For example, carriers have very few rooms to increase incomes from internal logistics because of competition to a trading choice of carriage. However, in the country and container logistics make the important scope to shipping lines. Lines which are successful in achievement of profit of cost from cleverer management of internal and container logistics, can supply the important advantage of a cost-saving. Besides, because it is difficult to make, it, possibly, will be a viable method to differentiate business from competitors.

Reaction of the navigable industry to recession

Container lines have to some extent adapted the strategy to cope with recent essential fall of volumes.

First of all, shipping lines also have adapted the complete strategy of expansion. Prior to the beginning of 2008 shipyards still very much tried to satisfy a request on new and big vessels. However, this development has stayed. Because of decrease in rates of economic growth, the big surplus of cargo capacity has appeared especially on Europe-Asia and routes Crossing Pacific ocean. As shipyards still finished numerous orders from the previous years, complete capacities of a crack in the market will continue to be lifted to 2012. In the end of 2008, many shipping lines have started to postpone orders, and the senior vessels have been introduced service in considerable quantities. In the end of summer 2008, the prices of the share of leading South Korean ship builders have fallen among a wave of new cancellations of a building and messages of some yards, trying to revise the price and delivery dates for new buildings. In the middle of April 2009 the international preserved fleet totaled approximately 1.3 million TEU or 10.4 % of world container fleet (the Trade Journal, 2009). Total capacity in the Far East - the European trade has fallen to 21 % between October 2008 and March 2009. It corresponds to pure withdrawal of 19 services of the liner on trade, keeping only 45 services between the Europe/median and the Far East in March 2009 (Table 4). Line Maersk has suspended some main loops, such as AE8 and services AE5. The new World Union has taken out 25 % of the ability while group CKHY has reduced ability approximately from 24 %. Senator Lines has terminated all its actions since February 2009.