Globalization is a concept which has gained significant popularity in the business arena. Every organization wishes to expand beyond its national borders so as to serve the global market as well as gain more revenues. So is the case with companies operating in the maritime industry. In order to grab more market share, build long term relationships in the industry and establish sound image at international level, shipping companies are making use of several strategies. Mergers, acquisitions and alliances are common strategic options employed by the maritime industry to achieve long term objectives (ClilT, 1990). In the given scenario, M-Connect, being a major maritime company wish to enhance its position in its own market by focusing on increasing horizontal integration while keeping the competition in view. We would suggest that M-Connect shipping make use of the strategic option of merger to achieve its long term strategic goals. Various researchers and authors have presented their definitions of merger. According to Coyle (2000), mergers occur when two organizations of almost the same size and capabilities decide to combine their resources into one unit so as to gain maximum benefits from financial and operational perspectives.
Maritime companies find merger a good option to increase horizontal integration. Horizontal integration is known to offer maritime companies a number of advantages such as economies of scale and economies of scope. Over the past decade, the maritime industry has witnessed a lot of changes due to the integration of trade market and changing patterns of customers’ demands (Brooks, 2000). Maritime logistics has basically undergone major structural change. Horizontal integration is usually adopted by shipping lines, services offering logistics, in land carriers, rails companies, port or terminal operators etc. Operations in maritime industry are all interdependent on each other and work more like a network-therefore, horizontal integration sometimes takes the form of a necessity which can be achieved using several strategies including mergers (Altuntaş, Göçer, 2014).
Target Market of M-Connect
M-Connect shipping is a medium sized company which serves a large number of online customers and those interested in having big orders delivered on regular basis. The trend of online customers making their purchases through various websites such as Amazon or eBay are growing rapidly with time which means that apart from established shipping companies, these online retailers are usually in search of partners to make the delivery of ordered items timely and efficient. The target market of M-Connect also includes importers and exporters or businesses which are into manufacturing various kinds of goods or even clearing agents.
M-Connect can get into mergers with terminal operators or in land carriers in order to ensure that it keeps its customers on priority and fulfils its promises without any delays. So if M-Connect merge with local postal company, it can benefit financially as well as enhance its reputation and image in the maritime industry.
It is very clear that M-Connect wishes to expand its business geographically meaning, it had decided to grab more of the market share by having its presence in less developed or even developed regions. By merging with local carriers or logistics companies, M-Connect can gain benefits of synergy which is based on the concept of increasing performance by utilizing resources of two units.
Marketing Mix for M-Connect
Marketing mix for maritime companies is composed of 7 P’s namely product, pricing, placement, promotion, people, processes and physical evidence. According to Smith (n.d.), there is another P which has become an important part of marketing mix for shipping companies. It is called paperless.
Product
The product in the marketing mix of Connect-M could be the finished product which is aimed at reaching the customers. M-Connect carries products which are delivered to customers safely and securely through postal companies with which it undergoes merger. Liner or tramp services can also be regarded as core products of M-Connect. Sometimes, the real assets of the shipping companies that is the ships or containers can also act as products. Focusing on strengthening these products can help M-Connect develop and sustain its competitive advantage.
Pricing
Prices by maritime companies are set as per the market trends. Defining pricing is a crucial task because if the competitors set up low prices while offering timely delivery and quality, then it is obvious that customers would tend to avail their services. M-Connect usually document prices while keeping into consideration the type of business it owned as in freight or tramp. In some cases, M-Connect can set up price by getting into a negotiation with the charterers. In case M-Connect wish to hire containers from other shipping companies, it has to set up rates accordingly.
Placement
Maritime companies make sure that they ensure the availability of products to the dry ports within the given time frame. Since M-Connect has decided to enter into foreign markets using the strategic option of merger, it would reach international ports before promised time and by availing the services of inland carriers, it will satisfy its customers.
Promotion
Marketing efforts are equally important in maritime industry as they are in other industries. Like all shipping companies, M-Connect will make use of advertisement campaigns so as to communicate its customers and competitors about the services it offers while highlighting how merging is helping the company achieve its short term and long term objectives. Brochures are distributed to the customers, latest developments are made available on the company’s website and information is also shared using informal interaction of shipping dealers. Shipping forums are also present on the web where reputations and services of various maritime companies are highlighted and discussed in detail. Shipping press also exist whose platform M-Connect can use to inform its customers about its mergers with inland carriers and its geographical expansion plans. A very important aspect of marketing for shipping companies such as M-Connect is to attract and retain its customers. The industry is already saturated and customers have limited options available. By establishing strong relationships with the customers, M-Connect can surely succeed in the industry. Customer retention can be done by making the delivery service fast and efficient, offering competitive freight rates, dealing politely with the customers, having strong bonding with charterers, fulfilling the regulations of various geographical ports etc.
People
The human resource employed by M-Connect must be trained well so that they assist M-Connect in developing and maintaining competitive edge. People who work on shore must be trained about the M-Connect’s products and services so that they can deal with the customers directly. When the employees will be able to deal with customers in a polite and friendly manner, customers would feel pleased and they might show willingness to do business with M-Connect. Maritime industry is different from other industries-the knowledge and skill that employees in this industry require are technical (Notteboom, 2004). Moreover, knowledge of logistics and supply chain management is also considered compulsory for all employees so that they understand how the industry works and how they can become an asset for M-Connect shipping company. Ship crew must also be equipped with special trainings so as to deal with customers and port companies in regions where the company wishes to carry its operations. Off shore employees and inland carriers are also trained to perform their duties in the best possible way.
Processes
A sound system of integrated procedures is essential for the success of any maritime company. The equipment and software required to carry out daily operations for M-Connect must be advanced and user friendly. Processes also include the legal documentation required for carrying out shipping operations and agreements. The execution of charters also falls in the same category of processes. Negotiations and port regulations are also part of processes in maritime industry. Execution of journey of ship with safety by applying the international standards of safety is also mandatory. Designing and implementation of customer handling programs is also essential so as to retain the customer focused orientation.
Physical Evidence
Physical evidence in case of M-Connect would be the physical condition of the ships and the containers and the technology employed for its functioning. The safety equipments such as locks and chains also complement its physical state. The state of containers also speaks of physical evidence.
Paperless
Paper works is usually associated to inefficiency. In shipping business, M-Connect has to sign up deals with customers and partners which although require paper work but their processing is done in electronic format. The payment records, payroll system, safety systems are all carried out in a paperless manner at M-Connect so as to enhance efficiency of processes as well as stay up to date with the latest technology and innovation in the maritime industry.
SWOT Analysis for M-Connect
It is important to understand the external opportunities and threats present for M-Connect in the external environment as well as its internal capabilities and weaknesses.
Strengths
M-Connect is one of the reliable maritime companies which aim to deliver consignments of customers through its transport system before time. The ships and containers of M-Connect are of superior quality. The ship crew as well as on shore staff is well trained about their job responsibilities. M-Connect will establish strong relationship with online retailers and being customer focused, it will attract and retain more customers. The technical equipments and procedures are well integrated so as to provide a strong competitive edge to M-Connect and assists in fulfilling is mission and objectives. Merger with inland carrier has enhanced horizontal integration for M-Connect. Logistics and supply chain advancements have pulled in more revenues for M-Connect.
Weaknesses
M-Connect has undergone merger with inland carrier but it needs to put in more effort to build up synergy. Customer handling system is not up to date which is one reason that explains the hard time M-Connect is facing in order to build long term relationship with its customers. M-Connect do not invest much in research and development activities that is why its systems are not as advanced as of its competitors. A thorough understanding of the geographical areas where it plans to expand is not available with M-Connect which is one of its prime weaknesses.
Opportunities
Merger with inland carrier has proved to be a great opportunity for M-Connect to achieve its objectives. By combining the capabilities and knowledge possessed by the two merging companies, the logistics and supply chain systems will improve and customers’ consignment would be delivered to them before the given time frame. By expanding operations from national to international ports, M-Connect will be able to build brand equity and gather a complete understanding of shipping laws and regulations which are implemented at global level. Upgrades in terms of technology and innovation can be done during the merging and business expansion activity so as to operate at a better level in the world of competition. Doing right negotiations with charterers can also be a great business learning opportunity for M-Connect. Ensuring safety and keeping a track on ship’s performance and routes can also ensure timely delivery of consignments.
Threats
There are already established maritime companies such as Maersk which have been in the industry for a long time and have established their brand very strongly. Competing with maritime giants is not easy as M-Connects lacks resources and capabilities. However, by building upon its strengths and grabbing opportunities as mentioned, it can overcome the threat by competition. The barriers to entry in maritime industry are less which can pose a threat for M-Connect. Transystems. (2011) mentions the threat shipping companies experience due to increasing fuel prices in the international economy.
Porter Five Forces Model
We can also make use of porter five forces model to understand the external environment in which M-Connect shipping will be operating. According to Porter (1980), the five forces model allows a company to explore various strategic options so that it can sustain competitive advantage.
Threat of New Entrants
As there are no strict laws or other legal requirements which restrict new maritime companies from entering into the market so it can be a threat for M-Connect. However, big maritime companies like Maersk already exists therefore, new entrants might have to invest in a huge capital in the maritime industry to stay in competition.
Threat of Substitutes
Since a number of global maritime companies are operating successfully in the industry so there is a high possibility that if customers are not satisfied with the delivery services of a shipping company, they might switch to another which means threat of substitutes is higher (Gao, Yoshida, 2013). M-Connect had to pursue customer retention strategies so as to prevent its customers from switching to substitutes.
Bargaining Power of Suppliers
There are several suppliers in the maritime industry whose bargaining power does not affect the revenues and operational activities of larger shipping companies. However, acquiring suppliers and maintain long term relationships with them can be a challenging for new or medium sized companies. M-Connect is not a very old company and is still in the struggling phase therefore, it must establish good relationships with its suppliers. Considering the merger and business expansion strategy, suppliers can be different for different port locations.
Bargaining Power of Buyers
The buyers in case of M-Connect are more and due to presence of a lager number of maritime companies, their switching cost is low which means customer oritented strategies can help M-Connect grab more market share.
Competitive Rivalry
Maersk is the market leader in maritime industry but in less developed countries, its service is viewed as expensive. Technological advancement is sometimes not accessible to less educated businessmen therefore; they prefer to work with shipping companies with simple technologies and control measures. This can be an opportunity for M-Connect to focus closely on its target market in the highly competitive maritime industry.
PESTEL Analysis for M-Connect
Another strategic model known as PESTEL will also be discussed in this section so as to get an overview of the external environment where M-Connect would function.
Political Factors
Political environment has a strong influence on the routine operations and long term strategies of maritime companies including M-Connect. Due to globalization, standard rules and legislations have been applied on all companies in the maritime industry and for a shipping company to function successfully across international borders, compliance must be exhibited. Political condition of geographic areas where M-Connect has planned to expand its operations into is also significant. In case of political instability in a region, businesses will be affected and customers’ attitudes will also undergo changes which must be realized and strategies should be defined and redefined accordingly (Rao, Rao, Sivaramakrishna, 2008). In maritime industry, laws regarding ports and logistics are also affected when there is political instability. Labor laws have also undergone positive changes which are again influenced by political conditions of various international and national sea ports.
Economic Factors
As mentioned, labor laws have faced improvement meaning providing more benefits to the working class. This has created more job opportunities for the unemployed and skillful class. Taxation laws have also become less stringent in the shipping industry which means trade opportunities have become vast for companies who wish to expand their operations into other countries and regions. Ports which are less popular also offer less strict regulations and negotiable rates which can be viewed by M-Connect as a chance to develop and maintain long term relationships. Freight rates are affected by economic circumstances-this signifies that when economic markets are stable worldwide, then shipping companies can generate good revenues and vice versa.
Social Factors
Social factors which are important in understanding the external environment of M-Connect are usually based on the nature and expertise of the employees working in the maritime industry. Labor legislations have stressed upon providing increased wages to employees which has led more people join the industry (Grech, Horberry, Koester, 2008). The crew members of the ship belong to various regions and possess different values which must be integrated so that the overall strategic goals of M-Connect can be met with success. Trainings are also provided to crew members and those working on the technical side so that they are able to deal with the latest technological systems as well as benefit from the innovative trends of the industry.
Technological Factors
We understand that technology advancement in all industries is an ongoing process-so the is case with maritime industry where new and improved systems are continuously implemented so that the efficiency of the ships can be enhanced and customers’ needs and requirements are fulfilled. M-Connect is a middle sized company and is trying to improve its technical processes so as to maintain competitive advantage in the presence of giants like Maersk.
Environmental Factors
In the global world, the issue of environmental protection is gaining hype. In maritime industry, concerns related to the protection of sea life are at priority. Emission of oil from containers and poor quality engines installed in ships can damage the sea life. M-Connect will ensure that it plays its role in the protection of ecosystem.
Legal Factors
Laws related to environmental protection, labor rights, ports and taxation are usually given ample significance in the industry and all maritime companies including M-Connect must ensure compliance.
References
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Brooks, M. R. (2000). Sea Change in Liner Shipping: Regulation and Managerial Decision-Making in a Global Industry. Oxford: Pergamon Press.
ClilT, B. (1990). The Essence of Strategic Management. Prentice Hall.
Coyle, B (2000). Mergers and Acquisitions. London: Glenlake Publishing Company, Ltd. p2-3.
Gao, Z., Yoshida, S.. (2013). Analysis on Industrial Structure and Competitive Strategies in Liner Shipping Industry. Journal of Management and Strategy. 4 (4), p12-20.
Grech, M.R., Horberry, T.J., Koester, T. (2008). Human Factors in the Maritime Domain. Boca Raton, FL: Taylor & Francis Group. p6-24.
Notteboom, T. (2004). Container shipping and ports: An overview. Review of Network Eco-nomics, 3(2), 86-106.
Porter, M. E. (1980). Competitive Strategy. The Free Press.
Rao, C.A., Rao, B.P., Sivaramakrishna, K. (2008). Strategic Management and Business Policy. New Dehli: Excel Books. p133-167.
Smith,S. (n.d.). Applying the Eight P's of the Marketing Mix in the Service Industry. Available: http://smallbusiness.chron.com/applying-eight-ps-marketing-mix-service-industry-58585.html. Last accessed 30th Dec 2015.
Transystems. (2011). Transportation Activity Index. Available: http://www.transystems.com/Home/News-Press/Transportation-Activity-Index/Archive/February-15-2011.aspx. Last accessed 29th Dec 2015.
