11 Greek Maritime Cluster Research Results Shipbuilding SWOT AnalysisPresentation Transcript
KATERINA VOUTSINA & THODORIS PELAGIDIS & GEORGIOS DAFNOSThe Greek Shipbuilding Industry asa trigger of nationalcompetitiveness
The concept of clusteringThe concept of clustering has become a centralconcept for analyzing the competitiveness of nations,industries and firms.A cluster is defined as `a population ofgeographically concentrated and mutually relatedbusiness units, associations and public (private)organizations centered around a distinctiveeconomic specialization’.
Agglomeration economiesFirms cluster together because of the presence of: a large labour pool inside the cluster. The presence of such a labour poolreduces search costs. Furthermore, such a labour pool allows for theexistence of specific training and education programmes, which upgradethe quality of the labour pool. suppliers and customers in a cluster. A location in the proximity ofsuppliers and customers offers cost advantage s because of low transportcosts. Proximity also enables closer monitoring and frequent face-to-facecontacts. `knowledge spillovers’ in clusters. Knowledge spills over easier and morerapidly locally, because of frequent interaction and because developmentsare easy detected locallyThe notion of sustainable competitive advantage
Maritime ClustersMaritime activities, such as shipping, shipbuildingand port and maritime services, geographicallyconcentrated
TRENDS IN THE GREEK MARITIME CLUSTER
The Greek Maritime Cluster(Icana et al, 2009)
Greek maritime cluster competitivenessWithin the European Union, the Greek maritime cluster(which includes shipping as well as all related andsupporting industries) ranks-6th in terms of the value added that it generates in thenational economy, and-5th in terms of providing employment, despite the factthat Greece controls the largest fleet in the world.Moreover, Greece only manages to produce 3% of the totalvalue added in the region, whereas countries such as theUK, Italy, Germany and Norway produce substantiallymorePolicy Research Corporation, 2008
Reasons for the low value addedFirst, industries relating to and supporting theshipping cluster are small in Greece.Second, the shipping cluster itself has a small valueadded relative to its size.Greece’s productivity, while being lower overall, ismuch more concentrated in shipping, whereas thevalue added in Norway and Germany is moredispersed in seaports, marine equipment andshipbuilding.
The European shipbuilding industry
Share turnover in repair and newbuilding byEuropean countries in 2007
Shipbuilding industry is strongly export orientedin all regionsSouth Korea: in 1990, about 15% of its production valuewas destined for the domestic market and 85% wasexport. Since 1995, the latter has increased to more than99%.China: In 2007, the exports of newbuildings accountedfor 81 percent of total production, while the inflow of neworders was already 89 percent of foreign origin.Japan: While in 1971, domestic shipbuilding new ordersin Japan surpassed export order for the first time in tenyears, in 2004 the share of export new orders was 99%(9.75 million GT).http://ec.europa.eu/enterprise/sectors/maritime/files/fn97616_ecorys_final_report_on_shipbuilding_competitiveness_en.
Europe vs. Asia Europe clearly shows higher labour costs in comparison to its Asiancompetitors, although low labour cost competition is mainly focused onChina and emerging shipbuilding nations. Korea and Japan do not havesignificantly lower labour costs and have even higher labour costs thansome European countries (such as Romania). Due to its specialization in the high value added segment of the marketlabour costs are less of an issue in shipbuilding in Europe. Although R&D is important for shipbuilding in Europe which focuseson relatively complex, high value ships, expenditure on R&D in Europeand Korea shows that all countries have a R&D ratio below 1% Urgent need of specialized workforce
Global Shipping Industry (I)CESA Shipyards Activity (Source: CESA)
Global Shipping Industry (I)EU-27 Shipyards Activity (Source: CESA)
Global Shipping Industry (II)Chinese Shipyards Activity (Source CESA)
Global Shipping Industry (III)JPN Shipyards Activity (Source CESA)
Global Shipping Industry (III)South Korean Shipyards Activity (Source CESA)
Global Shipping Industry (III)World Shipyards Activity (Source CESA)
Shipping Capacity per Region 1991-2012Shipbuilding Facing New Challenges
Shipbuilding Industry in crisis
World Orderbook by Area
World Orderbook by Ship Types
Dry Cargo Freight Indices in Crisis 2005-2011
Too Many Ships Chasing Too Few Cargoes
Foreign Governments’ response to crisis
Greek shipbuilding industry in crisisthe global financial crisisintense competition it faced from countries of low labourcost.Introvert instead of extrovertattempt to re-enter international markets: Greekshipyards went through a series of structural changeswhich mainly included: privatizations, programmatic agreements with the Greek state, technological and organizational modernization.Yet, despite these changes, the expected conditions thatwould gradually lead the Greek shipbuilding industry tothe hoped-for state of profitability have been met.
Greek shipbuilding industry: s.w.o.t. analysisSTRENGTHS• superiority of geographicallocation• lengthy experience and highlycoherent network-comparative advantage in thebuilding of ferry boats snd cruiseboats- the big size of the GreekshippingWEAKNESSES• cost levels (wage levels)• access to skilled labour• access to finance (financial crisisand lack of confidence ofinvestors and banks regarding theshipbuilding industry)• Low productivity (organizationalrigidities,• lack of a coherent governmentalpolicy and strategy to supportshipbuildingOPPORTUNITIES• new segments- move towardsbuilding vessels not easily built inlow-labour-cost countries• many SMEs under-exploited• prospects of specialization ongreen shipbuilding• European funded programmes andactions that support innovation«LeaderSHIP 2015» ή το«Seaborne 2020»• enhanced requirements regardingshipping standardsTHREATS• Greek shipowners are not willingto change the flag under whichthey operate• price competition• financial crisis• strikes• limited national or Europeanfunds
Business StrategiesSafeguarding the low cost productionVs.Specialization and innovation strategies
Skaramagkas (Hellenic Shipyards S.A.)shipyard caseHellenic Shipyards S.A.: is the largest shipyard in Greeceand one of the largest in the area of the easternMediterranean.there has been a significant drop-off in both repairs andnew shipbuildingthe work of the shipyard is primarily based on theconstruction and renovation of ships within theframework of the equipment programme of the GreekNavy, and railway car construction under agreementsconcluded with the Hellenic RailwaysOrganisation (OSE) and the Athens-Piraeus ElectricRailway Authority (ISAP).secondary activities include ship repairs for the merchantmarine and the recent construction of three car ferries.
Skaramagkas (Hellenic Shipyards S.A.)shipyard caseParadox:Since its privatization, the shipyard underwent throughan extensive restructuring. Investing heavily in state-of-the-art technology and infrastructure, it aspired tostrengthen its competitive position worldwide andbecome a leader in technology and service provision.Yet, in September 2010, the Greek governmentacknowledged the total debt of 1.321 billion Euros toHellenic Shipyards S.A. and 75.1% of the Greek shipyard’shares have been transferred to Abu Dhabi MAR LLC.Paradox and Possibilities of resurgence?