Navigating Horizons - Catalyst Maritime Trend Study 2010
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Navigating Horizons - Catalyst Maritime Trend Study 2010

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Maritime industries have long represented a market of commodities and global competition, full of twists and turns due to its titanic size and the long tail of stakeholders fighting day to day for a ...

Maritime industries have long represented a market of commodities and global competition, full of twists and turns due to its titanic size and the long tail of stakeholders fighting day to day for a piece of an uncertain sized pie.

But when the market is pulling for deeper logistical solutions and legislation bodies require still more stringent compliance standards, the only way forward seems to be a focus on sustaining competitiveness by sound strategic focus, new technologies, and innovation in all possible shapes.

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Navigating Horizons - Catalyst Maritime Trend Study 2010 Navigating Horizons - Catalyst Maritime Trend Study 2010 Presentation Transcript

  • NAVIGATING HORIZONS Version 1.00 Catalyst │Maritime Trend Study 2010 ©
  • INTRODUCTION Background / Prologue / Highlights (2-5) INDUSTRY CHARACTERISTICS The inertia imperative / characteristics (6-14) TREND STUDY Wake-up call / Platform thinking / Eastern hotspots / Apples and oranges / Carbon gamble / Safe shipping (15-34) OPPORTUNITY DISCOVERY Niche princes / Process innovators / Globalizers / Integrators / Adaptors / First movers / Epilogue (35-44) Catalyst │Maritime Trend Study 2010 © 2
  • BACKGROUND Over the years, Catalyst has been engaged with a broad range of international clients in the maritime industries, working on an even wider pool of projects. Most projects have comprised elements of market analysis, business development, innovation and strategic planning. The study is neither exhaustive nor definitive. Change seldom is. It is a snapshot of our most notable experience with a group of industries that we see facing a number of exciting changes in the horizon. We invite you to navigate freely through the presentation, trusting you will be entertained and inspired to explore new future growth avenues. Catalyst │Maritime Trend Study 2010 © 3
  • OPENING If the owner is king, where does that leave the customer? Maritime industries have long represented a market of commodities and global competition, full of twists and turns due to its titanic size and the long tail of stakeholders fighting day to day for a piece of an uncertain sized pie. But when the market is pulling for deeper logistical solutions and legislation bodies require still more stringent compliance standards, the only way forward seems to be a focus on sustaining competitiveness by sound strategic focus, new technologies, and innovation in all possible shapes. The call for new business and market development has never been louder. Catalyst │Maritime Trend Study 2010 © 4
  • HIGHLIGHTS – a brief synopsis The maritime industries are made complex by their titanic size, the significant number of stakeholders involved, and the correlation with world trade levels. However, their complexity should not become an excuse to address diverse customer segments alike. A number of key trends reveal a rising group of specialized players that serve latent customer needs and form strategic partnerships. Others exploit digitalization to enable transparency and efficiency gains. And new innovators look towards growing legislation and emerging markets. Navigating these new horizons requires a change in focus. 2009 separated the wheat from the calf in this highly fragmented industry, but now leading companies are fine-tuning, sometimes even redefining, their strategic focus. Management of change and new growth is thriving. Catalyst │Maritime Trend Study 2010 © 5
  • INTRODUCTION Background / Prologue / Highlights (2-5) INDUSTRY CHARACTERISTICS The inertia imperative / characteristics (6-14) TREND STUDY Wake-up call / Platform thinking / Eastern hotspots / Apples and oranges / Carbon gamble / Safe shipping (15-34) OPPORTUNITY DISCOVERY Niche princes / Process innovators / Globalizers / Integrators / Adaptors / First movers / Epilogue (35-44) Catalyst │Maritime Trend Study 2010 © 6
  • Industry characteristics │ Introduction Shipping is the product of world trade, typified by its global width as well as its depth of influence across industries. Though processes are simple and demand-driven, the result is restricted strategic agility. • Commodity shipping is fragmented and characterized by fierce price competition • Short-term speculation runs in parallel with long-term stable growth • Numerous customer segments are catered to by each industry player THE INERTIA IMPERATIVE Catalyst │Maritime Trend Study 2010 © 7
  • Industry characteristics │ Drivers GDP MEANS TON-MILES There’s a positive linear correlation between GDP and ton-miles. A steady growth in production headed by emerging markets, by default leads to a proportional growth in shipping. Exhibit: Development of G20 GDP relative to cargo growth, index 1999 145 Notes: • The index graph highlights the close relationship 140 between the growth of major economies (G20) 135 and ton-miles. 130 125 • It reveals that the relative distance of goods 120 shipped is increasing slightly 115 110 • Finally it points to the fact that shipping in general 105 is growing relative to the general economy, 100 regardless of the growing share of service industries. 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 G20 GDP Cargo ton-miles Cargo tons Source : EIU, UNSTATS, Fearnley Review (Various Issues), Clarkson, Catalyst analysis Catalyst │Maritime Trend Study 2010 © 8
  • Industry characteristics │ Size BIG, BIGGER The collective value of the maritime industry is a stunning USD1,3 trillion. It spans multiple value chains and markets, whose bread-and-butter primarily depend on world trade levels. Exhibit: Estimated breakdown of maritime industries 2009 Notes: • The pie chart breaks down the largest marine Ports Other industries, revealing that shipping and transport Shipbuilding services amount to only 41% of all maritime ≈ USD 417 billion industries excluding maritime tourism Marine fishing Shipping & (USD268bn). transport • The ‘Other’ category representing 12% of the Marine market includes smaller industries such as cruise, equipment R&D, IT, commerce, etc. Seafood Offshore processing oil & gas Source : Douglas-Westwood (2007) excl. private yachting & marine tourism Catalyst │Maritime Trend Study 2010 © 9
  • Industry characteristics │ Diversity DIVERSE BUSINESS LOGICS Vessel types are many and cargo types plenty. Each combination often represents yet another business logic. For multi-segment players this means that one size never fits all. Exhibit: Snapshot of the shipping segments Notes: Shipping Bulk Dry Grain Tank Forrestry • The chart serves to highlight the significant Coal amount of segments that occur from a breakdown Liner Celluar Pig Iron of categories. MPP Tweendeckers Crude Oil • The graph does not distingush between e.g. ship Generel Cargo Product Oil owners and charterers, long/short/spot, regions Gas operated or niche industries such as special Specialized Heavy Lift Chemical Ro-Ro cargo. Reefer Projects • Most of these sub-segments have their own Offshore Platform Supply business logics, which emphazises that e.g. Windmill Supply service providers should cater to each segment Passenger Ferry Anchor Handling differently. Cruise Subsea Cables Source : Catalyst analysis Catalyst │Maritime Trend Study 2010 © 10
  • Industry characteristics │ Globalization GLOCAL BUSINESS Trade is often global, but the business remains local. Upon winning the cargo, the game changes to an array of local requirements and opportunities. Until the next call, when they change again. Exhibit: Average no. of employees per select company office, 2010 Notes: Inchcape (Port Agency) • The chart illustrates the average number of 255 Offices employees per office location for four major players in different value chains. MSC (Liner) • The chart demonstrates that the requirement for 441 Offices local presence depend on position in the value chain. – As an equipment manufacturer Wärtsilä TeeKay (Wet) does not need the same presence as Inchcape, 25 Offices who make it a key part of their value proposition. Wärtsilä (Equipment) • In contrast, other players reduce local presence 57 Offices as they come to realize that their business is dependent, or that they are able to better exploit 0 100 200 300 400 the scope of partnerships. Source : Company websites Catalyst │Maritime Trend Study 2010 © 11
  • Industry characteristics │ Complexity TOO MANY CHEFS Simple maritime business processes are complicated by the large pool of stakeholders involved, which gear up complexity and reverse the level of transparency and efficiency. Exhibit: Conceptual mapping of stakeholders involved in voyage operations Notes: Cargo Owner/ Vessel Operator/ • The chart aims to break down a voyage from Freight Forwarder Broker Vessel Owner fixture to final settlement. It highlights the significant amount of dependencies between various stakeholders, which complicate voyage operations. Vessel/ Voyage Port Cargo Voyage Port Cargo Voyage Voyage Cargo Fixture Planning Operation Loading Operation Operation Discharge Reporting Settlement • The broker and the port agent take key role in orchestrating the different stakeholders. Terminal Port Port Ship Inspectors Operator Authorities Agent Suppliers Source : Catalyst Analysis Catalyst │Maritime Trend Study 2010 © 12
  • Industry characteristics │ Fragmentation A VERY LONG TAIL Volatility, low entry barriers and numerous market segments. The result? – A significant fragmentation of the industry and its players alike, complicating standards, innovation, and sales. Exhibit: Distribution of operators controlling different no. of chemical tankers # Vessels / Operator Notes: 50+ • The graph illustrates the significant fragmentation of operators in the chemical tankers segment. 49-40 39-30 • Half of the segment controls just a single vessel. 29-20 • The picture is evident across many shipping 19-10 segments, which inhibit e.g. efficient sales 9-5 activities for players catering to these fragmented 4-3 segments. 2 1 0 50 100 150 200 250 300 350 400 # Operators Source : Fairplay 2010 Catalyst │Maritime Trend Study 2010 © 13
  • Industry characteristics │ Conclusion UNCERTAIN CERTAINTY The relationship between world trade and shipping fuels short-term speculation but also ensures long-term equilibrium SHIPPING, AND Although shipping by itself represents an enormous market, the collective size of the maritime industries is much greater BUSINESS MODELING Everyone’s different due to vessels, markets and cargos. Differentiation requires recognition of each segment’s uniqueness LOCAL EVERYWHERE Depending on customer segment and position in the value chains, maritime industries require significant local knowledge ANTHILL OF PLAYERS The complexity is driven, not by the business processes, but by the pool of different stakeholders involved in operations MOM & DAD The result of low entry barriers is a predominant pool of family businesses, which distinguish and complicate industry development Catalyst │Maritime Trend Study 2010 © 14
  • INTRODUCTION Background / Prologue / Highlights (2-5) INDUSTRY CHARACTERISTICS The inertia imperative / characteristics (6-14) TREND STUDY Wake-up call / Platform thinking / Eastern hotspots / Apples and oranges / Carbon gamble / Safe shipping (15-34) OPPORTUNITY DISCOVERY Niche princes / Process innovators / Globalizers / Integrators / Adaptors / First movers / Epilogue (35-44) Catalyst │Maritime Trend Study 2010 © 15
  • Trend study │ Wake-up call A tough period with over capacity and declining freight rates has led a wave of core business focus and cash management. Clever outsourcing partners will find ways to provide flexibility and overhead savings. • Third party service providers facilitate owners’ overhead reductions • Professionalized procurement practices lead to supplier price pressure • Several M&A opportunities is calling for accelerated consolidation WAKE-UP CALL Catalyst │Maritime Trend Study 2010 © 16
  • Trend study │ Wake-up call SIZE MATTERS Big players will become better at exploiting scale and financial strength. Professional procurement will replace outdated supplier contracts, which may increase downstream price pressure and consolidation. Exhibit: Growth in market shares for major liner companies, 2000-2008 Notes: Top 5 carriers 35% • The graph highlights the significant consolidation happening in the liner market. Top 10 carriers 22% • Top 5 liner companies controlled a 43% market share in 2008, making it the most consolidated major shipping segment. Top 11-25 carriers -2% • High growth companies are MSC growing their market share from 4,3% in 2000 to 12% in Top 26-50 carriers -48% 2010 and CMA CGM growing from 2,3% in 2000 to 7,9% in 2008 Top 51-100 carriers -49% • In the same period, the world TEU capacity grew from 4,5 million to more than 12 million. Source : AXS Alphaliner (2008), Catalyst analysis Catalyst │Maritime Trend Study 2010 © 17
  • Trend study │ Wake-up call LEAN MACHINES The economic downturn facilitated severe cost-cutting among owners and operators, affecting players across the value chains. Business process redesign is a differentiating discipline. Exhibit: Summary of Maersk Line strategic initiatives late 2008 Notes: Productivity increase • Maersk Line is the leading liner company in the world, serving customers all over the globe. - Staff reductions focusing on sales/employee and other drastic overhead cost reductions • The Maersk Line fleet comprises more than 500 vessels and a number of containers Competitiveness corresponding to more than 1,9m TEU and - Re-focus on high-profit routes (Far East Asia), securing return representing a 16,3% market share. freight, avoiding delays and fuel cost savings • In 2009, the group-level ‘Project One’ cut costs by USD2bn, focusing primarily on liner. Customer orientation - A change of focus from speed to regularity enabling fuel • Maersk Line turned a USD-995m gross loss to a savings, accessibility and improved customer satisfaction USD1,23bn gross profit between 1st half 2009-10. Source : Maersk annual report (2009), Lorange (2009) Catalyst │Maritime Trend Study 2010 © 18
  • Trend study │ Platform thinking While captains connect their vessels online, service providers will be busy building and maintaining a growing base of digital platforms that offers global scale, locally and at sea. • Data, information and instruments are digitalizing fast and online • New business models are evolving around digital information assets • Data & decision modeling drive transparency and process management PLATFORM THINKING Catalyst │Maritime Trend Study 2010 © 19
  • Trend study │ Platform thinking #REFERENCE ! The digitalization of information challenges the broker and his spreadsheet. The new face of competition lies in managing the digital information asset, improving processes and coping with transparency. Exhibit: Examples of shipping functions being digitalized Notes: Chartering Voyage Estimator, Cargo Demurrage Real Time Risk exposure, • The table is an indicative set of examples of Schedule, Fixture Notes, COA Processing of claims … traditional shipping activities, which can now be carried out digitally by various systems. Operations Vessel & Port Schedule, Voyage Pooling Vessel Performance, Pool mgt, Laytime Calculations, Bunker Financial Statements, mgt, Time Charter … Allocation of Pool Revenues .. • In addition to efficiency gains, the digitalization wave opens up opportunities for new business Financials Tracking, processing , Auditing … Data Service Data Capturing, Disbursement Accounts, Data platforms … models based on the digital information assets that many players now possess. Planning Job Planning, Cargo Matching … Procurement Procurement Platforms, RFQ,… Trading Monitoring, Report Compliance Remote Engine performance, Fuel Confirmation, Invoicing … Consumption … Monitoring Source : Catalyst analysis Catalyst │Maritime Trend Study 2010 © 20
  • Trend study │ Platform thinking SPACE SHIPS Today’s vessels are no longer solitary whales. The rapid growth in broadband access enables shore-based stakeholders to access information directly and to manage the optimization of vessel performance. Exhibit: VSAT operators and penetration 6000 70 Notes: # Operators # Vessels • The graph highlights the trend in broadband 5000 60 connections on vessels, which reveal a 50 penetration growth that is expected to accelerate 4000 even further in the coming years. 40 3000 30 • It should be noted that the graph only depicts 2000 active vessels for the VSAT technology, which is 20 currently considered high-end. Thus the 1000 10 incorporation of other Internet technologies would reveal a much greater penetration of connected 0 0 vessels. 2002 2003 2004 2005 2006 2007 Active vessels VSAT operators Source : Comsys report (2009) Catalyst │Maritime Trend Study 2010 © 21
  • Trend study │ Eastern hotspots Entire supply chains continue to move East, creating new global strategic trade hubs. In response, ship builders, owners and commodity traders are relocating group operations to enjoy closer proximity. • Intra-Asia trade represents the single largest global trade volume • The number of port calls yields big business beyond shipping itself • Far East Asia is quickly becoming the strategic shipping location EASTERN HOTSPOTS Catalyst │Maritime Trend Study 2010 © 22
  • Trend study │ Eastern hotspots NON-STOP ASIA As GDP levels grow, emerging markets will gradually shift from producers to consumers. The result will be still larger intra-Asia trade as well as discharge of finished goods. Exhibit: Regional Trade Comparison, 2009 Notes: • Far East (FE) intra-regional trade alone amounts N. America to 12% of the world’s total. -Europe 3.3 FE- N. America Intra-regional Intra-regional • Trade between FE, the Middle East and India N. America Far East 3.4 regions amounts to 12,5% of the world’s total. 2.7 3.2 MEI - FE 8.7 2.9 2.6 Europe - MEI N. America – S. America Europe – 9.1 3.2 • From 1994 -2004 the intraregional trade in Asia S. America 3.4 grew 417%, which is approximately 30% more 6.4 FE- S. America than the world average growth in this period. Europe - FE FE - Australia Unit: Hundred Million Tonnes traded in either direction (total) Source : Clarkson Catalyst │Maritime Trend Study 2010 © 23
  • Trend study │ Eastern hotspots DEAR MR. PRESIDENT A significant share of the world economy is controlled by governments, especially in the East. Navies, NGOs and government-owned companies call for a careful re-thinking of maritime value propositions and sales strategies. Exhibit: State-owned share of Top 10 oil enterprises in major economies, 2010 Notes: European Union • There is a significant correlation between BRIC countries/Middle East and state-control of natural USA resources as opposed to the Western countries. Middle East • The correlation is also present for coal, although Russia less significant. India Brazil China State-owned Enterprises Public Enterprises Source : OneSource, company websites and Catalyst analysis Catalyst │Maritime Trend Study 2010 © 24
  • Trend study │ Apples and oranges Segmentation and specialization is the new array of competition. Leading companies will intensify their parallel search for core capabilities and attractive market niches to finally kill the commodity tiger. • Cargo types and legislative diversity across markets drive differentiation • The integrated shipping companies are accompanied by specialized players • High-end segments such as offshore pose new market opportunities APPLES AND ORANGES Catalyst │Maritime Trend Study 2010 © 25
  • Trend study │ Apples and oranges COAST GUARD, COME IN The chronic difference in legislation across regions will drive specialized operators to seek cost advantages by targeting specific market segments with barely compliant fleets. Exhibit: Complexity of Regulation Notes: “It is well known that the current legal regime • Global shipping is primarily regulated by UN governing the international carriage of goods agencies. IMO and ILO are examples of these. by sea is characterized by complexity, a • Flagstates will regulate issues not regulated by UN – resulting in uneven competitive terms for lack of uniformity and a failure to take fleets of different flagstates. As a result, many fleets operate under ‘flags of convenience’. into account modern developments in, • The unevenness will be particularly apparent for and requirements of, the industry due to the intra-regional trade, which does not neccesarily age of the existing conventions.” involve IMO regulations. • The Rotterdam Rules aim to unify the international - The United Nations Commission on International Trade Law regulations for carriage of goods by sea. So far this convention has been signed by 15 states. Source : UNCITRAL Catalyst │Maritime Trend Study 2010 © 26
  • Trend study │ Apples and oranges BUSINESS CLASS Not all cargo owners will settle for travelling coach. A new wave of specialized players will seek to break with commodity margins through differentiated value propositions that meet latent segment needs and require more special competencies. Exhibit: Dimensions of specialization in value chains, industries and markets Notes: • The chart conceptualizes possible high-level dimensions of specialization; i.e. a fully integrated shipping company would encompass all dimensions, whereas the red lines indicate a “TCC example” highly specialized company (TCC) only chartering The Containership Company, p. 41 liners between US & FE and with limited ops. • The more specialized a company is, the deeper solutions it can provide for its core segments through e.g. cost advantages, bespoke services or horizontal integration of value-add services. • Several other dimensions of specialization exist such as vessel size, high/low-end, long/short, etc. Source : Catalyst analysis Catalyst │Maritime Trend Study 2010 © 27
  • Trend study │ Carbon gamble Future premiums on carbon emissions hold the power to alter shipping altogether. Whether an opportunity or a risk, leading companies are taking decisive action to prepare their fleets for a new competitive edge. • IMO and cargo owners are defining a new competitive regime • Fuel costs and CO2, NOX and SOX emissions are risk managed • Shipping denotes a new high-growth segment to green innovation companies CARBON GAMBLE Catalyst │Maritime Trend Study 2010 © 28
  • Trend study │ Carbon gamble ANCHORS AWEIGH The barriers to business are growing as IMO gains stronger international foothold and cargo owners pull still greater compliance standards. Do-it-smarter companies will invest in obliging and efficient processes. Exhibit: MARPOL timeline for reductions of SOx, NOx, CO2 and bio-invasion Notes: Bio-invasion • The chart highlights the signifcant emission Reduction 100% 90% NOx reduction requirements set by MARPOL. 80% SOx • In order to comply with the standards, many fleets 70% are required to carry significant investments in 60% upgrading fleet equipment and engines. 50% 40% 30% 20% 10% 0% CO2 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source : MARPOL Catalyst │Maritime Trend Study 2010 © 29
  • Trend study │ Carbon gamble GREEN IS THE NEW BLUE A fast-growing range of green innovations targeted at ship owners is defining a new industry niche with tremendous potential. It serves to both limit the risks of emissions and to cut fuel costs. Exhibit: Market forecasts for green shipping technologies, 2010-2016 Notes: 16 • Catalyst has forecasted the market sizes for Billion USD 14 shipping equipment within three select green 12 technologies. 10 • Supporting the MARPOL timeline for emission 8 reductions, this graph highlights the future 6 importance of shipping to green technology 4 providers. 2 - 2010 2011 2012 2013 2014 2015 2016 Heat Recovery Ballast Water treatment Scrubbers Source : Catalyst analysis Catalyst │Maritime Trend Study 2010 © 30
  • Trend study │ Safe shipping Insurance premiums in terms of investments in various security measures are on the rise. Hazardous cargo represents a significant business risk, but also an opportunity to differentiate through TMSA ratings. • Significant future security investments; especially among Western fleets • Active risk management of cargo and environmental protection • High-end fleets will differentiate through safety investments SAFE SHIPPING Catalyst │Maritime Trend Study 2010 © 31
  • Trend study │ Safe shipping PRICING LIFEBUOYS The cost of safety is becoming a known factor in the industry. As a result, the industry will invest heavily in state-of-the- art safety systems, which unite cargo and environmental protection. Exhibit: US Administration on recent BP accident Notes: “The way safety is measured is generally • Although not a shipping accident per se, the BP offshore disaster in the Mexocan Gulf is the latest around worker injuries and days away from example of failure to recognize the potential work, and that measure of safety is severity of accidents involving casualities and environmental disasters at sea. irrelevant when you are looking at the • The trend to address risk management proactively likelihood that a facility like an oil refinery was highlighted, when one of the world’s largest could explode. This is comparable to saying enterprises, BP, was in jeopardy of going down. that an airline is safe because the pilots and mechanics haven’t been injured.” David Michaels, assistant secretary of labor for occupational safety and health Source : NY Times, 13 July 2010 Catalyst │Maritime Trend Study 2010 © 32
  • Trend study │ Safe shipping SWIMMING LESSONS Interest organizations are driving a new ambitious safety regime, which will require significant future investments in security such as crew training, vessel safeguard systems and sea patrols. Exhibit: Amendments to IMO Safety Convention SOLAS Notes: 7 50 • Investments in security and crew training are 45 expected to rise significantly in the coming years, 6 40 which is supported by the rising complexity of IMO 5 35 safety regulations. 4 30 25 • At the same time, TMSA ratings have become a 3 20 differentiating discipline, which serve as a 2 15 competitive edge in some high-end segments. 10 1 5 0 0 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Amendments per year Accumulated Amendments Source : IMO Catalyst │Maritime Trend Study 2010 © 33
  • Trend study│ Conclusion CONCIERGE SERVICES The future will bring specialized players, who provide vertical and bespoke solutions to customers and competitors COLLISION AVOIDANCE Fighting externalities will change to managing risk proactively based on green and safe innovations E-SHIPPING Digitalization of data and services will translate into widespread efficiency gains and development of new core competencies WALL STREET The dynamics of the maritime industries call for a new set of management competencies focused on change and progress EXPEDIA A combination of shorter lead times, IT and management will drive transparency, simpler processes and lower industry complexity JACKIE CHAN The industry is more demand-driven than ever before. Asia, especially China, will establish itself as the trade hub of the decade Catalyst │Maritime Trend Study 2010 © 34
  • INTRODUCTION Background / Prologue / Highlights (2-5) INDUSTRY CHARACTERISTICS The inertia imperative / characteristics (6-14) TREND STUDY Wake-up call / Platform thinking / Eastern hotspots / Apples and oranges / Carbon gamble / Safe shipping (15-34) OPPORTUNITY DISCOVERY Niche princes / Process innovators / Globalizers / Integrators / Adaptors / First movers / Epilogue (35-44) Catalyst │Maritime Trend Study 2010 © 35
  • Opportunity discovery │ Case studies introduction The future role model of the industry isn’t one but many. The horizons suggest several promising positions to take. In concert they characterize an industry growing in both speed, strategic focus, and customer orientation. • Specialized players will offer higher value add to select customer segments • The increasing pace of legislation and competition provide room for innovators • Global integration of the industry will facilitate new business development OPPORTUNITY DISCOVERY Catalyst │Maritime Trend Study 2010 © 36
  • Opportunity Discovery │ Case study NICHE PRINCES Players successful in identifying attractive specialized positions in the value chains will gain market share. They compete on strategic customer understanding and narrow, industry-leading services. Exhibit: DA Desk case study DA DESK has quickly grown to be the leading Company description: DA-Desk is the largest independent provider of port provider of port cost management services. cost management services to the shipping industry. Focused on port disbursement control, DA-Desk Starting of with handling disbursement offers effective process management, early error accounts, DA DESK today offers a fully detection and a near paperless workflow. With more than 80 customers DA-Desk handles 80,000 port integrated chartering, operations, calls annually financials and port disbursement system. The value proposition is clear and a good example of growth through horizontal integration. Source : Company website; The maritime executive Catalyst │Maritime Trend Study 2010 © 37
  • Opportunity Discovery │ Case study PROCESS INNOVATORS Foresight and speed is key for these service & equipment providers. Their success is decided by a lasting ability to drive legislation and cargo owners, and by providing cost and risk reductions. Exhibit: Aalborg Industries case study Company profile: In 2010, an EU Directive specified that fuel with Aalborg Industries is at the forefront of green a maximum sulphur content of 0.1% can be innovation and able to assist ship owners to meet the new emission and ballast water requirements. used when in port or at anchorage, and in order With respect to environmental and operational to be compliant, Low Sulphur Fuel Oil needs to enhancements, Aalborg Industries provides a range of green solutions to support customers in building be used. Aalborg Industries has developed and operating their commercial fleet to the highest burner upgrading kits to ensure that safe standard for low environmental impact. operation can be maintained and that boiler plants remain in compliance with the classification society requirements. Source : The Maritime Executive Catalyst │Maritime Trend Study 2010 © 38
  • Opportunity Discovery │ Case study GLOBALIZERS To be truly global in shipping, one must be local. The long tail of the industry offers great opportunities for those, who succeed in providing the market with an intelligent platform of scope and scale. Exhibit: Inchcape Shipping Services case study Inchcape Shipping Services to acquire Global Company profile: Inchcape Shipping Services is the world's leading Marine Travel: “We see strong scope for using marine services provider. Through its proprietary the ISS network to build on GMT’s current network of some 255 offices employing over 3,800 people across 63 countries, ISS provides its office footprint. We share many common customers with an unparalleled global resource customers with GMT and have no doubt that delivered locally and tailored to each customer's individual needs. bringing together the services of the (crew) travel provider and the agent providing marine husbandry services, will lead to a stronger value proposition and increase the strategic partnership value to our customers.” Source : The Maritime Executive; Quote by CCO Jon Corner Catalyst │Maritime Trend Study 2010 © 39
  • Opportunity Discovery │ Case study INTEGRATORS The integrated shipping company is not dead. The demand for one-stop solutions, portfolio risk management and several M&A openings offer new space for conglomerates that match scale with focused management of each division. Exhibit: A. P. Moeller Maersk case study Company profile: The A.P. Moller - Maersk Group is a worldwide The Maersk Group includes liner, logistics, conglomerate. It operates in some 130 countries terminals, tanker and offshore supply, oil & gas, and have a workforce of some 115,000 employees. In addition to owning one of the world’s largest retail and technology. “For all these shipping shipping companies, the Group is involved in a wide range of activities in the energy, logistics, retail and activities, with their unique business models, manufacturing industries there is a built-in commodity element (with a heavy cost focus) versus a niche element (with a strong service focus).” Source : Company website; Lorange (2009) Catalyst │Maritime Trend Study 2010 © 40
  • Opportunity Discovery │ Case study ADAPTORS The grasshoppers of the industry bypass the inertia imperative thanks to limited balance sheets. They jump from one latent segment to the next, exploiting volatility and low barriers to operate. Exhibit: TCC case study TCC "Company of the Year" Finalist Company profile: The Containership Company (TCC) was founded in TCC is honored to be short-listed as one of just 2009 by Jakob Tolstrup-Møller and Captain Franck Kayser, who both have a long history in container 4 finalists for "Company of the Year" by Lloyds shipping. The first sailing left Taicang port close to List Global Awards 2010. The award is for the Shanghai, on 17th April. In September 2010 Ningbo will be added to the service portfolio providing a shipping firm that best adapted to the direct service to Los Angeles. The business model conditions in 2009 by trimming costs, is focused on simplicity and transparency. proving nimble in negotiations with partners and generally finding creative solutions to prepare the business for a more robust market. Source : Lloyds Catalyst │Maritime Trend Study 2010 © 41
  • Opportunity Discovery │ Case study FIRST MOVERS Fast and agile market developers are able to exploit the delay in commoditization of new market openings. With high growth emerging economies in Asia, and eventually Africa, the potential is great. Exhibit: Seaspan case study As with its first-mover advantage in China’s Company profile: Seaspan Corporation charters containerships exploding container market, serious financial pursuant to long-term, fixed-rate time charters to problems facing Germany’s container ship major liner companies. It currently owns a large modern fully contracted fleet of 68 vessels that are owning companies will “play into the hands” of entered into long-term contracts. All vessels are Seaspan, one of the world’s largest non-German deployed on fixed rate charters to take advantage of the stable cash flow and high utilization rates that container ship owners, its chief executive says. are associated with long-term time charters. “We prefer to go for new ships, because there are certain advantages to going for your own ship design. We’re looking at opportunities and we’re quite bullish.” Mr Wang tells FT. Source : Financial Times, 16 August 2010 Catalyst │Maritime Trend Study 2010 © 41
  • Opportunity Discovery │ Conclusion NEW MARGINS New business development will become the channel to sustaining profitability, as traditional markets commoditize further SUCCESSION TO THE THRONE The customer will finally be king, as specialized players dive deeper into the value creation of their clients HOLDING HANDS Horizontal rather than vertical integration enables a new wave of strategic partnerships with clients, suppliers and competitors STRATEGIZING As players begin to leverage their lean operations, management will require a change focus towards new growth avenues MANDATORY CREATIVITY The time is over when shipping could ignore R&D. Senior executives are, and should be, frantic about innovation NAVIGATING HORIZONS The changing landscape entails an ongoing opportunistic mapping of internal strengths and new market opportunities Catalyst │Maritime Trend Study 2010 © 43
  • CLOSING Inertia is deadly, but is it dead? The collective size of the maritime industries may appear so gigantic that some people don’t observe its movements. Instead they choose to focus on nurturing status quo – the operations, the fleets, and the current market positions. However, quick change of focus from latitude to altitude reveals some remarkable new horizons: Markets defined by segment, not commodity; Shipping companies with no ships; Digital voyage management, etc. To navigate the new horizons successfully, requires a determined management of change. This begins with management accepting change. Catalyst │Maritime Trend Study 2010 © 44
  • ABOUT CATALYST Catalyst is an international management consulting firm focusing on strategy, innovation and change. The company was founded in Copenhagen in 2001 with the ambition to create a different consulting offering. - An offering based on growth-driven business model innovation, go-to-market strategies, and strong client involvement. Catalyst caters to a wide range of international companies, primarily within the maritime, energy, and green technology industries. For more information, please contact us directly by e-mail or phone. info@catalyst.dk or +45 3543 3277. Catalyst │Maritime Trend Study 2010 © 45
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