Oligopoly Market Structure

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Oligopoly Market Structure: A study on A.P. Moller-Maersk

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A study onA.P. Moller-Maersk

Transcript of Oligopoly Market Structure

Page 1: Oligopoly Market Structure

Oligopoly Market Structure:

A study on

A.P. Moller-Maersk

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Report on:Oligopoly Market Structure:

A study on A.P. Moller-Maersk

Submitted ToMd. Razib Alam

LecturerDepartment Of Marketing

University Of Dhaka

Submitted ByMd. Shariful Islam Bhuiyan

Roll No: 253Section: B11TH Batch

Department of Marketing, University of Dhaka

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Date of SubmissionJuly 12, 2006

July 12, 2006

Md. Razib AlamLecturerDepartment of MarketingUniversity of DhakaDhaka

Subject: Submission of report on “Oligopoly Market Structure:

Dear Sir:

My report is on “Oligopoly Market Structure: A STUDY On Communication-2” that you have: assigned me as part of the Microeconomics course. I have tried to follow the instructions and suggestions that you have given in every aspects of our study.

This report assists in making an insight into the idea, the technique of

providing most wanted sms services and and about the host company

–. Communication-2.

I tried to make the term paper with relevent information and hqave also

submitted in due time. thank you for choosing me for working on this

topic.

Sincerely yours,

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Ummul Wara AdritaRoll No: 082Sec: B11th Batch

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ACKNOWLODGEMENT

I am truly thankful to our course teacher, Md. Razib Alam, Lecturer, Department of

Marketing, University of Dhaka. Without whose heartfelt supervision and suggestions it

was extremely difficult for me to prepare the report.

The success of this project work depends on the contribution of number of people

especially those who take the time to share their thoughtful guidance and suggestions to

improve the report’s contents. I want to thank and convey my heartiest gratitude to the

manager of Communication-2, Mrwho enthusiastically helped me in preparation of the

report.

I am also thankful to all concerned who shared information and opinions with me regarding my question.

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Contents

Page

Letter of Transmittal --------------------------------------- iiiAcknowledgement --------------------------------------- ivExecutive Summary --------------------------------------- ix

PART - I

I Introduction

1.1. Background of the Report -------------------------------------- 011.2 Objective of the Report -------------------------------------- 01

1.2.1 Broad Objective -------------------------------------- 011.2.2 Specific Objective -------------------------------------- 02

PART - II

II Methodology

2.1 Primary Data -------------------------------------- 022.2 Secondary Data -------------------------------------- 02

PART - III

III Literature Review ------------------------------------- 03

PART - IV

IV Organizational Part

4.1 History of Instigation -------------------------------------- 044.2 Expansion -------------------------------------- 044.3 Continuous Growth -------------------------------------- 044.4 Management -------------------------------------- 054.5 Vision & Mission -------------------------------------- 054.6 Business Area of Maersk Group -------------------------------------- 06

4.6.1 Shipping -------------------------------------- 064.6.2 Oil & Gas -------------------------------------- 064.6.3 Maersk AIR -------------------------------------- 064.6.4 APM Terminal -------------------------------------- 06

4.7 Shipping Activity -------------------------------------- 064.7.1 MAERSK SEA LAND -------------------------------------- 064.7.2 MAERSK TANKERS -------------------------------------- 074.7.3 MAERSK GAS CARRIERS -------------------------------------- 07

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4.7.4 MAERSK CAR CARRIERS ------------------------------------- 084.7.5 Maersk Supply Service ------------------------------------- 084.7.6 Maersk Brokers ------------------------------------- 084.7.7 Maersk Logistics ------------------------------------- 08

4.8 SWOT Analysis ------------------------------------- 094.8.1 Strength ------------------------------------- 094.8.2 Weakness ------------------------------------- 104.8.3 Opportunities ------------------------------------- 104.8.4 Threats ------------------------------------- 11

4.9 The Porter’s Five Forces Models ------------------------------------- 114.9.1 Rivalry ------------------------------------- 124.9.2 Threat of Substitutes ------------------------------------- 134.9.3 Buyer Power ------------------------------------- 134.9.4 Supplier Power ------------------------------------- 144.9.5 Threat of Entry ------------------------------------- 14

4.10 Value Chain Analysis ------------------------------------- 154.10.1 Primary Activities ------------------------------------- 154.10.2 Support Activities ------------------------------------- 16

PART - V

V Findings ------------------------------------- 17

PART - VI

VI Limitation of The Report ------------------------------------- 17

PART - VII

VII Conclusion & Recommendation ------------------------------------- 17

PART - VIII

VIII Appended Part ------------------------------------- 20

List Figures Page

Figure 1: SWOT Analysis Figure ------------------------------ 09

Figure 2: Porter’s Five Forces Model ------------------------------ 12

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.

Executive Summary

A.P.Moller – Maersk, which is doing its business in oligopoly, market structure. As a multinational shipping line and being the largest shipping company of the world, A.P.Moller – Maersk has been already practicing good management all over its operation. Our objective is to get an idea about oligopoly market structure through the company A.P.Moller – Maersk. So we also have to know vision and mission, business area, different models related to A.P.Moller – Maersk.

Its vision and mission is to create opportunities in global commerce. It has a big business area like shipping, oil & gas, MAERSK AIR. The shipping business includes MAERSK SEALAND, MAERSK TANKERS, MAERSK GAS CARRIER, MAERSK CAR CARRIER, MAERSK SUPPLY CARRIER etc. Here also a SWOT analysis.

It is understandable that A.P.Moller – Maersk are compatible to handle any sort of trouble to threat them. Here are few models, by analyzing, these models tries to find out some strategies of company.

From the above discussion, we have seen that in any business, Maersk has been successful in managing its position by developing and implementing structured policies and procedures in several sea tours. Still the observation tells that Maersk needs to improve itself in certain areas to face upcoming challenges.

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1. INTRODUCTION

There are different markets structures are in place. Every market structure is different

from one another. Each has its own characteristics and the product, the consumer and the

producer of product of that specific structure are different and they act according to that

market structure. There are actually four kinds of market structure in place, which are

given below:

1. Pure competition2. Pure monopoly3. Monopolistic competition4. Oligopoly market structure

As a student of the department of marketing it is very important to know about all this different structure given and know how this system actually works in reality

1.1Background of the Report:

We are required to conduct a survey on any kind of market structure among four. I

have decided to conduct a survey on Oligopoly market structure based on company:

A. P. Moller-Maersk. So I have conducted this survey “Oligopoly Market Structure: a

study on A. P. Moller-Maersk”.

1.2 Objectives:

The objective of the report can be divided into two parts:

1.2.1 Broad Objective:

Get an idea about the Oligopoly Market structure through the company A. P. Moller-

maersk.

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1.2.2 Specific Objective:

To know about the vision and mission

To know about the business area

Study different models and relate those with A.P. Moller-Maersk.

Finally recommend how to improve those strategies.

2. METHODOLOGY

Two types of data sources are used for the study:

Primary source

Secondary source

2.1 Primary Data:

The report has been developed by taking some exclusive interviews with several persons of Maersk

Bangladesh Limited. I am very thankful to the respective authority of Maersk Logistics Bangladesh

Limited for helping me by giving their important time and support. I have used both structured and

unstructured interviews to collect data. Also, data has been collected through the website of Maersk. I tried

to gather the following types of data to construct the report:

What is A.P. Moller-Maersk?

What are Maersk’s different businesses?

What is their core business and position in the industry?

Different model analysis of Maersk.

Recommendations through analyzing the models.

2.2 Secondary Data:

To construct our research report, I have also taken help of various secondary sources like publication on

Shipping, Board of Investment, and also searched through the intranet & internet for various pertinent

information which has definitely enriched the research findings.

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3. LITERETURE REVIEW

Extensive literature survey has been done to gather theoretical knowledge for the research

problem. The literature survey includes the academic journals, reports and books published.

There are some definition about oligopoly market structure. these are:

1. A market captured by a few large producers of a homogeneous or differentiated product is Oligopoly market. . (page no.-467, Book-Economics, writer-Campbell R. McConnell, Stanley L. Brue)

2.A market structure in which a few firms sell either a standardized or differentiated product ,into which entry is difficult, in which firm has limited control over over product price because of mutual interdependence, is oligopoly market.(page no.-G-17,Book-Economics, writer-Campbell R. McConnell, Stanley L. Brue )

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4. ORGANIZATION PART

4.1 HISTORY OF THE INSTIGATION

It all began in the Danish town of Svendborg in 1904, when 28-year-old Arnold Peter Møller together with his father, Captain Peter Mærsk Møller, established A/S Dampskibsselskabet Svendborg (the Steamship Company Svendborg) and bought a second-hand steamer of 2,200 tons deadweight, which was named "SVENDBORG". The company had its first office in A.P. Møller's childhood home, "VILLA ANNA", in Svendborg. Eight years later, A.P. Møller established Dampskibsselskabet af 1912, A/S (the Steamship Company of 1912). In 2003 the two companies merged under the name of A.P. Møller - Mærsk A/

4.2 EXPANSION

As early as 1914, the foundation of Maersk Broker was a reality, and the years 1917-18 saw the

establishment of the Odense Steel Shipyard, which in 1959 expanded further and moved to the

new yard at Lindø.

In 1928, under the name of Maersk Line, A.P. Møller established a cargo liner service linking the

USA and the Far East. Today, these activities continue under the name Maersk Sealand, now

one of the largest liner shipping companies in the world.

The year 1928 also marked the beginning of the tanker business, as five tankers were added to

the fleet, which at that point counted 35 vessels.

4.3 CONTINUOUS GROWTH

Throughout its existence, the A.P. Møller-Maersk Group has continued to expand its operations,

which also includes numerous industrial companies such as Mærsk Container Industry,

Roulunds, DISA, and Rosti. Mærsk Data has offered IT services for more than 30 years and now

runs subsidiaries worldwide.

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In some cases, the many oil activities have given birth to even more activities. One such example

is Maersk Supply Service whose 50 supply vessels are committed to serving the offshore oil and

gas industry at sea.

And since 1972, Maersk Contractors have operated a fleet of modern drilling rigs and mobile

production units.

4.4 MANAGEMENT

On the death of the 88-year-old A.P. Møller in 1965, his son Mærsk Mc-Kinney Møller assumed

the leadership of the A.P. Moller - Maersk Group and took over the senior responsibility for the

day-to-day management of A.P. Møller, including the chairmanship of the boards of the two Ship

owning Companies.

In 1993, Mærsk Mc-Kinney Møller withdrew from the daily management and handed over the

senior management responsibility to Jess Søderberg. Knud E. Stubkjær, Kjeld Fjeldgaard and

Tommy Thomsen assist Mr. Søderberg in this function. Mr. Møller continues as Chairman of the

Ship owning Companies.

4.5 VISION & MISSION

Vision of A.P. Moller - Maersk Group is:

“To create opportunities in global commerce”

Mission of A.P. Moller - Maersk Group is to fulfill our vision by:

Truly understanding the clients and their business

Offering second-to-none transportation solutions

Being profitable - and delivering sustainable, profitable growth

Continuously reducing costs and increasing efficiency

Offering colleagues personal growth and a motivating place to work

Being innovative

Being good corporate citizens

4.6 BUSINESS AREA OF A.P. MOLLER-MAERSK GROUP

The work that was started by A.P. Møller in 1904 has developed into a major international

enterprise with activities covering diverse areas as shipping, oil drilling, shipbuilding, aviation,

industry, retail and IT services. Below are the main business areas of A.P. Moller-Maersk Group.

4.6.1 SHIPPING

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The company has been in shipping since 1904 and has developed into one of the largest

shipping companies in the world.

Today these activities cover liner shipping including Supply Chain Management, operation and

management of container terminals, transportation of crude oil, refined products and liquefied

gases, support to the offshore oil industry and operation of drilling rigs as well as ship broking

activities.

4.6.2 OIL & GAS

The A.P. Moller - Maersk Group has been involved in the oil and gas industry since 1962 when

ship-owner A.P. Møller was awarded the concession for exploration and production for oil and

gas in Denmark.

Mærsk Oil and Gas is involved in the direct research, exploration and production of oil and gas,

while other Maersk companies are engaged in maintaining, servicing, and securing these

activities. Offshore as well as onshore and in Denmark as well as internationally.

4.6.3 MAERSK AIR:

The Maersk Air Group of companies is engaged in European scheduled airline services and

charter airline operations. Other activities are aircraft leasing and purchase and sale of aircraft, air

cargo sales agency, contracted aircraft operation for parcel carriers, aircraft ground handling and

passenger handling as well as air cargo terminal operation.

4.6.4 APM TERMINALS

APM Terminals, which was established as an independent organization in 2001, has operations

in more than 30 ports all over the world, generating an annual throughput of about 18.5 million

TEU.

4.7 SHIPPING ACTIVITIES IN THE A.P. MOLLER-MAERSK GROUP

Following business units are the main shipping concern in A.P. Moller-Maersk Group:

4.7.1 MAERSK SEALAND

As early as 1928 A.P. Møller established a cargo liner service under the name of Maersk Line,

linking the USA and the Far East. In 1956 ocean-borne containerization was introduced with the

shipment of a Sea-Land container from Port Newark, New Jersey, to Houston, Texas. Today,

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Maersk Sealand is one of the largest liner shipping companies in the world-serving customers all

over the globe.

More than 250 container vessels and 800,000 containers ensure a reliable and comprehensive

worldwide coverage. Maersk Sealand's feeder vessels, as well as its trucks and dedicated trains,

allow a unique concept of door-to-door services.

Advanced EDP systems ensure timely availability of cargo documents and provide customers

with accurate round-the-clock, on-line information on the position of any given container

anywhere in the world.

Maersk Sealand serves its customers through a network of its own offices and container

terminals in more than 100 countries, which secure consistently excellent service to customers in

all corners of the world.

4.7.2 MAERSK TANKERS

In 1928, A.P. Møller received its first tankers. Today, Maersk Tankers offers flexible, individual

solutions for the transportation of crude oil and refined products with one of the world's largest,

most modern and advanced fleet of tankers. Maersk Tankers participates in leading pool co-

operations within the Very Large Crude Carriers and Coated Aframax and Handy-size product

carrier segments.

In total, Maersk Tankers and its partners operate a fleet of more than 100 vessels with

deadweight of approximately 17,000,000 tons. Contact with customers around the clock is

maintained through offices in Copenhagen, London, New York, Houston, Singapore, Tokyo and

Seoul.

Modern double-hulled supertankers of 300,000 dead weight transport crude oil from the oil

producers to terminals and refineries in Asia, USA and Europe.

The product carriers vary from 30,000 to 110,000 ton capacity and transport refined oil products

to customers worldwide

4.7.3 MAERSK GAS CARRIERS

A.P.Moller received its first gas carrier in 1972. Today, the fleet operated by Maersk Gas Carriers

has grown to 45 semi-refrigerated vessels ranging from 8,000 cubic meters to 22,000 cubic

meters. The fleet consists of technically advanced carriers with stainless steel tanks and

chemical/ethylene capabilities as well as more conventional LPG carriers.

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Maersk Gas Carriers is also the owner of 4 fully refrigerated vessels of 35,000 cubic meters.

The gas fleet operates all over the globe.

4.7.4 MAERSK CAR CARRIERS

The A.P. Møller fleet also includes several Pure Car Truck Carriers with variable deck height and

strengths, suitable for transportation of cars as well as high and heavy rolling material. The

capacities of these vessels vary from 2,500 to 5,500 cars.

4.7.5 MAERSK SUPPLY SERVICE

The fleet serving the offshore oil and gas industry at sea includes more than 50 supply vessels

with various specialties. Platform Supply Vessels handle the transportation of all necessary

equipment to offshore platforms and drilling rigs. Multipurpose Support Vessels, which have

engines of up to 23,500 BHP, can install production units; tow drilling rigs, crane vessels, and

pipe lay barges. With special equipment the vessels can, furthermore, work as fire-fighting

vessels and assist in combating oil pollution.

Other vessels are equipped for laying sub sea cables. The assignments vary from smaller coast

systems to intercontinental sub sea cable systems.

The vessels operate all over the world, engaged in various tasks.

4.7.6 MAERSK BROKER

As early as 1914 separate ship broking activities were established and today Maersk Broker KS

is among the leading international broking houses. Activities include chartering of container

vessels, bulk carriers and tankers, sale and purchase of second-hand vessels, contracting of new

buildings, as well as project-oriented business involving sale and purchase of ships in

combination with period employment and/or financing. Maersk Broker also undertakes ship's

agency work in Danish ports.

Ship broking services are offered on a worldwide basis. Besides the European offices in

Copenhagen, London and Athens, Maersk Broker focuses strongly on Far Eastern business with

own offices in Tokyo, Seoul, Beijing, Hong Kong, Shanghai and Singapore, operating jointly in

their local markets under the name of Maersk Broker Asia.

4.7.7 MAERSK LOGISTICS

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Maersk Logistics is represented through a network of more than 200 offices worldwide operating

in some 70 countries, offering Supply Chain Management solutions from manufacturer through to

retailer. Services offered include container stuffing and consolidation, documentation services,

airfreight services, as well as warehousing and distribution. Advanced information technology is

used to manage supply chains as well as in providing information

To find the competition for Maersk the study had analyze its present situation through few

models. This models help to find the genuine strategic position of A.P. Moller-Maersk. Also the

models would help whether there’s scope to improve their strategies to cope with the current flow.

4.8 SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning

process. Environmental factors internal to the firm usually can be classified as strengths (S) or

weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats

(T). Such an analysis of the strategic environment is referred to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources and

capabilities to the competitive environment in which it operates. As such, it is instrumental in

strategy formulation and selection. The following diagram shows how a SWOT analysis fits into

an environmental scan:

SWOT Analysis Framework

Environmental Scan

          / \           

Internal Analysis       External Analysis

/ \                  / \

Strengths   Weaknesses       Opportunities   Threats

|

SWOT Matrix

Now let’s find the SWOT for A.P. Moller-Maersk.

4.8.1 Strengths

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A firm's strengths are its resources and capabilities that can be used as a basis for developing a

competitive advantage. Strengths of Maersk include:

Strong brand names: From 1904 Maersk has a strong brand name in the industry. The

brand reflects quality and reputation.

Good reputation among customers: Maersk has its own customer service worldwide with

highly efficient educated workforce.

Cost advantages from proprietary know-how: By using their own manufactured vessel at

their own shipyard they have cost advantages.

Exclusively own port: Own port at Malaysia provide Maersk a genuine advantage.

Favorable access to distribution networks: Through their own logistic units Maersk have

favorable access to distribution network.

Huge diversified business: As Maersk has huge diversified business it has the advantage

of recover loss of any unit by others.

Number of representations: about 325 offices in more than 100 countries.

4.8.2 Weaknesses

The absence of certain strengths may be viewed as a weakness. Following may be considered

weaknesses of Maersk:

High cost structure: In shipping there is a high cost structure of Maersk. If there’s any

sudden change in this sector there’s a risk of great loss.

Plagued with internal operational problem: Maersk has their service center at Manila and

Bombay for saving expenses. But as they are out of mainstream there’s mistake happens

quite regularly.

Lack of access to key small shipper: Maersk always go for the big accounts. They don’t

have any strategy to attract the small shippers.

4.8.3 Opportunities

The external environmental analysis may reveal certain new opportunities for profit and growth.

Some examples of such opportunities include:

Unfulfilled customer need: Maersk has its own route depends on cost effectiveness. They

can use some small vessel to carry cargo in short distance within short time.

Arrival of new technologies: As Maersk have their own shipyard they might go for finding

new technologies to manufacture more efficient vessels.

Alliance or joint venture: Maersk may go for alliance or joint venture with some other

established companies.

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Removal of international shortfalls: Maersk don’t have feeder vessel services in the

countries where sea width is not sufficient for mother vessel. Instead of using others

feeder vessel Maersk may use their own feeder vessel which would be cost effective.

Attracting small account: In the exporting countries like Bangladesh, India, China and

Indonesia there’s some shipper who have some open cargo where Maersk can do

business.

4.8.4 Threats

Changes in the external environmental also may present threats to the firm. Some examples of

such threats include:

Increasing intensity of competition among the industry rivals.

Slowdown of market growth: Due to current war situation globally the cargo movement

slowdown.

New regulations: New regulations are imposing after September 11 in different ports of

US and Europe which create some difficulties in the shipping business.

Growing bargaining power of customer: Day by day the bargaining powers are increasing

because of the intensive competition in the

4.9 The Porter’s Five Forces Model:

Porter identified five competitive forces that shape every single industry and market. These forces

help to analyze everything from the intensity of competition to the profitability and attractiveness

of an industry.

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4.9.1Rivalry

If rivalry among firms in an industry is low, the industry is considered to be disciplined. When a

rival acts in a way that elicits a counter-response by other firms, rivalry intensifies. In pursuing an

advantage over its rivals, a firm can choose from several competitive moves:

Changing prices - raising or lowering prices to gain a temporary advantage.

Improving product differentiation - improving features, implementing innovations in the

manufacturing process and in the product itself.

Creatively using channels of distribution - using vertical integration or using a distribution channel

that is novel to the industry.

Exploiting relationships with suppliers -

The intensity of rivalry for shipping industry in Bangladesh is influenced by the following industry

characteristics:

o A larger number of firms increase rivalry because more firms must compete for the same

customers and resources. In Bangladesh there are around twenty shipping companies exists

and the firms have similar market share and it leading to a struggle for market leadership.

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o Slow market growth causes firms to fight for market share. In Bangladesh the main

commodity that used by shipping is garment or related items. As the garment industry is also

in a poor condition, firms are not able to improve revenues simply because of the low

expanding market.

o High fixed costs result in an economy of scale effect that increases rivalry. Total costs of

shipping are mostly fixed costs; the firm must produce near capacity to attain the lowest unit

costs. Since the firm must sell this large quantity leads to a fight for market share and results

in increased rivalry.

o High storage costs products cause a producer to sell goods as soon as possible. Here it’s

really expensive to store container empty at the port or a ship sail mostly empty.

o Low switching costs increases rivalry. Here a customer can freely switch from one product

to another so there is a greater struggle to capture customers.

o Low levels of product differentiation are associated with higher levels of rivalry. Brand

identification, on the other hand, tends to constrain rivalry.

o High exit barriers place a high cost on abandoning the product. The firm must compete.

Here high exit barriers cause a firm to remain in an industry, even when the venture is not

profitable. A common exit barrier is asset specificity.

4.9.2 Threat of Substitutes

In Porter's model, substitute products refer to products in other industries. To the economist, a

threat of substitutes exists when a product's demand is affected by the price change of a

substitute product. A product's price elasticity is affected by substitute products - as more

substitutes become available, the demand becomes more elastic since customers have more

alternatives. A close substitute product constrains the ability of firms in an industry to raise prices.

The competition engendered by a Threat of Substitute comes from products outside the industry.

In this case, there is no close substitute of shipping industry. Only substitute is air cargo industry.

But in sense price it is never a genuine substitute, which might make a thread.

4.9.3 Buyer Power

The power of buyers is the impact that customers have on a industry. In general, when buyer

power is strong, under such market conditions, the buyer sets the price.

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In shipping industry there are two types of buyer exists. One is individual shipper who directly

contact with the shipping line and another is logistic company. Logistic companies are regular

customer and have huge purchase. So in some cases those have power.

6.9.4 Supplier Power

This industry requires containers, ocean-going vessel from supplies. This requirement leads to

buyer-supplier relationships between the industry and the firms that provide it the such items.

Suppliers, if powerful, can exert an influence on the producing industry, such as selling raw

materials at a high price to capture some of the industry's profits. But for Maersk they are in

advantage because they have a very good backward linkage. Say Maersk produces their own

container and through their own shipyard they produce their own vessels.

4.9.5 Barriers to Entry / Threat of Entry

It is not only incumbent rivals that pose a threat to firms in an industry; the possibility that new

firms may enter the industry also affects competition. In theory, any firm should be able to enter

and exit a market, and if free entry and exit exists, then profits always should be nominal. In

reality, however, industries possess characteristics that protect the high profit levels of firms in the

market and inhibit additional rivals from entering the market. These are barriers to entry.

Barriers to entry are unique industry characteristics that define the industry. Barriers reduce the

rate of entry of new firms, thus maintaining a level of profits for those already in the industry.

From a strategic perspective, barriers can be created or exploited to enhance a firm's competitive

advantage. Barriers to entry arise from several sources for shipping:

Asset specificity inhibits entry into an industry. Asset specificity is the extent to which the

firm's assets can be utilized. This industry requires highly specialized technology or plants

and equipment which make potential entrants reluctant to commit to acquiring specialized

assets that cannot be sold or converted into other uses if the venture fails. Asset specificity

provides a barrier to entry for two reasons: First, when firms already hold specialized assets

they fiercely resist efforts by others from taking their market share. New entrants can

anticipate aggressive rivalry. The second reason is that potential entrants are reluctant to

make investments in highly specialized assets.

Organizational (Internal) Economies of Scale. The most cost efficient level of production is

termed Minimum Efficient Scale (MES). This is the point at which unit costs are at minimum -

i.e., the most cost efficient level of production. Here as the biggest shipping line MES for

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Maersk in the industry is known, then we can determine the amount of market share

necessary for low cost entry or cost parity with rivals

4.10 Value Chain Analysis

The value chain is a systematic approach to examining the development of competitive

advantage. It was created by M. E. Porter in his book, Competitive Advantage (1980). The chain

consists of a series of activities that create and build value. They culminate in the total value

delivered by an organization. The 'margin' depicted in the diagram is the same as added value.

The organization is split into 'primary activities' and 'support activities.'

6.10.1 Primary Activities

Inbound Logistics

Involve relationships with suppliers and include all the activities required to receive, store, and

disseminate inputs. For Maersk as they use their own supply source are in competitive

advantage.

Operations

Are all the activities required to transform inputs into outputs. Maersk has a genuine advantage

here as they are using their own facilities everywhere with high-tech.

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Outbound Logistics

Maersk has also advantage here as they are using supply chain management.

Marketing and Sales

Activities inform buyers about products and services induce buyers to purchase them, and

facilitate their purchase. Through a strong sales & marketing team Maersk is doing it efficiently.

Service

Maersk with their customer service team and highest level of customer support must get some

advantage here.

6.10.2 Support Activities

Procurement

This function is responsible for all purchasing of goods, services and materials. The aim is to

secure the lowest possible price for purchases of the highest possible quality. Maersk has huge

advantage here by using their in house purchasing.

Technology Development

Technology is an important source of competitive advantage. Companies need to innovate to

reduce costs and to protect and sustain competitive advantage. This could include production

technology, Internet marketing activities, lean manufacturing, Customer Relationship

Management (CRM), and many other technological developments. Maersk is getting this

advantage.

Human Resource Management (HRM)

Employees are an expensive and vital resource. An organization would manage recruitment and

selection, training and development, and rewards and remuneration. The mission and objectives

of the organization would be driving force behind the HRM strategy. HRM is Maersk is really

competitive one.

Firm Infrastructure

This activity includes and is driven by corporate or strategic planning. It includes the Management

Information System (MIS) and other mechanisms for planning and control such as the accounting

department. Also by using TQM Maersk achieved the advantage.

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5. FINDINGSThrough this report,

we have got our required objective, the findings of our report. The findings include:

Vision and Mission of A.P. Moller-Maersk.

The business area of A.P. Moller-Maersk.

Elaboration of model, relate to the A.P. Moller-Maersk

6. LIMITATION OF THE REPORT

The study was not free from limitations. I had to face a number of problems in preparing

the report:

Firstly, there was lack of sufficient money for collecting data.

Secondly, I had to face some unwanted situation that hampered the objective

investigation like reference groups’ unhelpful attitude.

Thirdly, I have not got enough time, which hampered the related processes to some

extent. The time was not enough to prepare a formal and long business report.

Fourthly, financial bindings were another drawback in preparing the report.

7. CONCLUSION & RECOMENDATION

Conclusion

Start’s A.P. Moller Maersk’s journey with a non engine ship in the year 1904, now after hundred

years of it’s journey, it has not only become the biggest shipping company in the world but also in

maintaining the leading position where ever A.P. Moller Maersk had kept it’s step. Company’s

Chairman’s view is not to be second in any sector. It’s really appreciable that the company’s

management skills which took the company in this position. Current in highly competitive

business world A.P. Moller Maersk never falls in danger so that they have never to think twice.

So far it is understandable that A.P. Moller Maersk is compatible to handle any sort of trouble to

threat them. After that the study tries to find out some comments on their strategies which come

through analyzing through few models. Finally the study tries to provide some recommendations

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which might be helpful for them to stick them in the leading position in the competitive field of

shipping.

Recommendations

From the above discussion, we have seen that in many cases, Maersk has been successful in

managing its position by developing and implementing structured policies and procedures in

several sectors. Still the observation tells that Maersk needs to improve itself in certain areas to

face the upcoming challenges. Following are some recommendation in this regard:

More emphasis on marketing: Although Maersk has made significant improvement with their

overall performance in terms of their revenue and output turnover, still they need to take some

measures in order to achieve long term sustainability with their performance. The specific

measures that could be to taken are – emphasis more on marketing. As there are some shipping

companies like APL, P&O who are very close competitor of Maersk so any less concentration

would make a step backward.

Improvement of Security Measures: From the analysis we have found that Maersk has been

able to reduce the rate of accidents by developing and implementing various international

standard security measures. Since decreased number of accidents appeared to be the most

significant reason of increased productivity, this lowering rate has improved Maersk overall.

Besides this, accidents have multiple affects on other working conditions like smooth operation

etc, it seems that there is more scope for Maersk to ensure 100% security.

More concentration on forward or backward linkage: It has been found that Maersk has been

very caring about their distribution channels. Since there’s a head to head competition within the

industry, Maersk should take some advance steps. Still they are not using custom brokerage. It

seems that now they should concentrate on customs brokerage as a part of forward or backward

linkages.

Grievance Handling Procedure: It has been seen that Maersk follows a strict grievance

handling procedures and as a result the ratio of grievance cases resolved has been increased at

a satisfactory level. But it seems that Maersk should be more careful in dealing with the sensitive

grievance cases as it’s directly related with the reputation of the organization. And mostly the

customers switch due to this reason.

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Training program for all employees: So far we found that Maersk has a huge investment for

training. Their MISE and other programs are mostly for management people. But the general

employees like customer service people should get some special training to be educated handing

the customers in the finest way. As this type of service business customer handling is a prime job.

Maersk should be more concentrated in this sort of low level employee training.

8. APENDDED PART

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8.1 Appendix

8.2 Bibliography

1. www.maersk.com

2. Muman Resource Management (Decenzo/Robbins)

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