1.0 History
Maersk as a company was established in 1904, and it was in this year that the company was labeled Maersk Group, with the objective of offering shipping services.The company was a beginning of an idea by two people, who included Peter Maersk and his blood son, Peter Moller. Initially, being a family business, the company bought its first five tankers in 1928.Mr. Moller initiated and oversaw the global expansion of Maersk Group into the global markets, with U.S. being its first international subsidiary. Larsen& Mortensen (2011 affirms that, ‘This was followed by penetration into the United Kingdom, Thailand, Indonesia and Hong Kong. After the passing on of Moller, Mckinney took over the executive position in the management of the company commencing his role as from 1965 (p. 37).’ He served as the CEO of the company for 38 years up to July of 1993. Having exited in 1993, Jess Soderberg was chosen to succeed him,but McKinney took over the position of chairman on the boardd. As chairman, he served in the position for another ten years up to the year 2003 whereby he was 90 years of age. His position was later taken by Michael Rasmussen and McKinney still served as one of the owners in the management and the board chairman to the Odense Steel Shipyard until death.
The headquarters of the company is located in Copenhagen. The primary goal of the firm is in the shipping, transportation, and energy business sectors. Rambulll (2015) prnounces that, ‘The company has operation network in more than 130 countries, with some 121,000 employees in its global arena. The company’s shipping service line involves services such as international service of containers, repairing and manufacturing of containers, activities of forwarding and logistics, and inland transportation’. Other activities include tankers, APM terminals, offshore and many other activities related to the shipping sector. They also have the energy sector, which performs such activities as products of oil and gas, crude oil, drilling for petroleum activities, land rig operations, and activities of supply vessels along with the ferry services. Also, they undertake handling of supply vessels, door to door transportation (in Europe), shipyards and many other activities in retailing and others. The firm is world-renowned to be one of the largest and leading companies in the shipping sector; however, its business nature is much diversified.
2.0 Situational Analysis
The shipping operations of the companyhave transformed in the last years, regarding the demand and supply. The company has invested heavily in its operations with no limitation to the skilled and cheap labor force. According to United States Department of State (2011),“Globalization and free trade have opened a lot of opportunities for thenew extension in the market operations in the shipping and oil sector. There are several aspects that impact the company either directly or indirectly”. These factors are stated laws, regulations, competitions, technology, the globally related companies, accidents, and hazard, violence, and employment supplies. These are the aspects that the company has to incorporate so that its strategic plan becomes successful so that it overshadows the stipulated factors.
Besides, the state support in offering big assistance to enhance international commerce for the economic growth, and also the experience in the operations and management offers a force to explore more regarding the shipping sector. The influence of the customers also impacts the cost and investments of the company. This is because the bargaining power of the suppliers affects the prices and also the competition costs. If the loopholes are factored in by the management of the company, then a continually profitable enterprise will be created.
2.1 General External Environmental
These involve all the factors that are not regulated by the company, internally. These factors are determined and regulated by the independent aspects of the market, but their presence influences the way in which the company operates. The factors include political/legal, social, and economic.
2.1.1 Political/ legal
Ramboll (2015) APMM is a multinational company that operates across various jurisdictions that have adiverse business and legal requirements. Thus, it becomes very important for the company to emphasize on the analysis of the different requirements to ascertain that its operations are well in line with the needs of such states. Consequently, this part forecasts on the political and legal issues affecting Maersk not only in the U.S. but also globally keeping in mindthe operations across borders. The shipping and oil and gas industries in the global context are strongly influenced by the political and legal factors. The various tax laws and duties, lead to higher business expenditures for the companies in the shipping industry. From the domestic view, the political conditions of Denmark appear to be very stable. The system is democratic, where; various political parties represent themselves in the parliament at a time (United States Department of State, 2011).
2.1.2 Socio-cultural
Social and cultural factors refer to interactional as well as behavioral systems of people. Indeed, these systems are particularly important in business because they determine the preferences, needs, and exposure to the customers. For a globally acting company such as APMM, these two aspects are fundamentally vital but equally complex. For the company, the social and cultural factors are essentially diverse because they operate in different countries across the world. This implies that the culture exhibited in one country is not the same as the one in a different country. This makes it complicated to act in such a diverse scenario.
Significantly, cultural orientation shapes the demand structure and routines in such amanner that some countries will order products, which are in line with their orientation.
2.1.3 Technology
In the tremendously shifting technological environment, business is crucially dependent on it to adhere and maintain its competitive edge. Importantly, companies are seeking to keep research and development at pareto ensure efficiency and process effectiveness. In the global arena, the need and use for technology becomes even more competitive because the players are not only many but also robust in research and development Now, this bring in the question of how Maersk has positioned itself in the technological realm as far as business is concerned.
2.1.4 Demographic
The demographic aspects of a company focus on the attributes of its member with aparticulate interest in the employees. Regarding this, it is clear that the number, age range, and social status of the working team are very important. The age range helps to determine the energy of the team at work, the number of employees affects the overall output per unit time, and the social status speaks of diversity at work. This becomes an indication that the company cannot ignore some of these aspects when it comes to a question whether it can maintain profitability going forward.
2.1.4 Economic
There are various prevalent global economic issues encountered in the process of business operations. Some of these include tariffs and taxes charged on businesses while operating. Accordign to Oil shipments to South Africa on Maersk tankers, it is noted that in a global arena, the economic factors become diverse such that the company must be well endowed to ensure that it accommodates such diversity and remains profitable in the process. This is the situation in which Maersk finds itself because it operated in different countries of sovereign economic jurisdictions. With such diversity and jurisdictional disparities, the company incurs different operational costs that it must research on and determine before establishing its services in any given region.
3.0Industry Analysis
Essentially, every company operates within an industry of many other companies with similar and complementing interests. In accordance to this, the company must fast track its position in the industry, particularly when it comes to the question of competition among the players. When conducting an industrial analysis, therefore, it is crucial to use a typically tested and practical model to ensure that the results are beneficial, accurate, and relevant. An example of those models is the use of Porter’s Five Forces. The model incorporates five different factors in the analysis of the industry as discussed onwards.
Figure 1: Five factor Model (Ramboll, 2015).
3.1Threats to New Entrants
The company experiences a very minimal threat occasioned by new entrants in the industry. In principle, new entrants include firms that aim to explore the shipping services and invest in it to make profits. Whereas such entrants would be able to pose competition by reducing the price of services below that of the much-established ones, Maersk has an advantage over them. First, the company has a better position regarding the issue of economies of scale.
The company is effectively capable of attaining cost advantage over the other competing firms by using the large quantities transported and route organization to ensure that shipping towards the same direction can be shipped probably using one vessel at the same time rather than doing it at different times thus increasing the cost of operation. Also, the technological experience the company has gained makes it difficult to be subdued by the new entries in the business. Also, such companies require high capital to start off the business such that the chances for expansion remain low especially with the existence of the much bigger companies such as Maersk.
3.2 Threats of Substitution
In business, the threats that are as a result of substitutes in the business platform are crucial. Substitution becomes even more significant when it comes to circumstances in which a company is in a crisis.In such times, substitution might influence the attitude of the customertowards the company in question. Such situations occur when there are negative transformations in the company’s freight tendencies such as time used, the cost of shipping, and the number of forwarders operating in the market. In the case of Maersk, there is a high stake to its shipping services because of the nature of the industry. In case customers are mishandled or dissatisfied, there are high chances of getting to a different service provider. Now, what makes it very volatile is the fact that such competitive rivals are available and at thedisposal of the company. Importantly, also, the quality of performance for these companies is equally high, and the switching cost is low. This is an indication that the company must remain vigilant to ensure it satisfies the needs of the customers at all times.
3.3 Suppliers
The effect of suppliers on the business in the shipping sector is dependent on the size of the company. In this case, the impacts of suppliers on Maersk is very minimal and nearly insignificant as compared to other smaller companies, for example, Varun and Five Star Shipping companies. When it comes to Maersk, the suppliers are most probably seeking to have a chance to supply to the company bearing in minds its size and ability to provide huge tenders that could make even bigger profits as compared to those secured for smaller companies. Besides, their operating cost is relatively high while the profit margin accruing about Maersk is essentially low. This implies that the suppliers power is low and nearly insignificant.
3.4 Buyers
These include the importers, exporters, and forwarders operating globally. In essence, the number of customers about the competition in the industry is low. This is an indication that Maersk must work to gain and keep the already earned customers. In addition to this, the switching cost for the customers is low and hence poses a great danger to Maersk. Since the customer’s demand is high and the customer information is less, it is evident that the bargaining power of the customers is high. In that regard, therefore, Maersk must be flexible while dealing with customers in all aspects of their needs.
3.5 Competitive Rivalry
In the shipping industry, the number of service providers is essentially very high. Hence, this leads to a situation in which customer can switch from one provider to another according to the services given. Also, the cost leadership is high whereas the industrial growth is also rising over time. The ability of competitors to move to thenew customer based is critically low such that the overall competition scenario is intense.
4.0 Competitive Environment Analysis
The analysis of competitors is one of the components of strategic analysis because theformulation of strategy should be about the rivals’ stipulation. To attain control in an effective manner, companies must be involved in thecounter-strategic measure. Counter-strategic measures involve all actions that enable a company to subdue another one by its stipulated strategy. It becomes evident that the prosperity of businessregarding profitability cannot be realized in case the company ignores the actions and steps taken by its competitors.
According to Jephson & Morgen (2014), ‘The debate must commence from the question as to who are the main competitors of Maersk. In regards to this, Svitzer Company is one of the primary competitors to the company. It offers shipping services in Denmark with awealth of experience in the business having been conceived in 1833. DONG Energy is also one of the top competitors especially in the case of Maersk oil portfolio. Switzer is known for its specification strategy whereby in concentrates on intensifying business operations within regions and also expanding(p. 368)’. The company has already acquired Transmar Servicos Maritimos in its quest to expands investment and size.
5.0 Strategic Analysis
5.1 Key Success Factors
In her work, Monica (2016) explains that, ‘Crucial success factors in Moller-Maersk can be described as predominant factors affecting the ability of the company to lead the global shipping market». The ability to achieve a competitive edge in the market is partly determined by the willingness and ability to identify the key success factors of a company. Some of these factors may include diversity in investment, service line, use of sustainable strategic thinking, and advancement in technology.
Moller-Maersk has various key success factors in its operations. First, the company has invested heavily in technology and infrastructure. This implies that various portfolios can competitively offer services with high efficiency and low cost. Also, the company takes pride in a well organized and extensive supply and distribution all over the world. This is coupled with a dense network globally to serve different regions around the world. Maersk works to create a brand byhonesty and accountability. Besides, the employees or rather the human resource cannot be ignored in this case. Indeed, the company has invested heavily to ensure that the employees work in astandard environment of safety, and their salaries are within the standard stipulations.
5.2 Strategies
Company’s strategies refer to the specific lines of actions that a company takes to ensure that their set objectives are achieved (Niamié& Germain, 2014). The strategies are based on sound analysis of the company’s performance to identify the envisaged gaps. Understandably, the strategies are formulated about different aspects of the business including profitability, competition, and sustainability among others.
5.2.1 Segment
Segmentation is performed both bythemarket and business investments. Jephson& Morgen (2014) asserts that, ‘Maersk has segmented its business operations to attain diversity in a manner that they incorporate Maersk Line, Maersk Oil, and Maersk Drilling and much more (p. 86). Also, it has segmented its target market about the contents. This aids the firm to attain a state of globalization because it operates as an MNE. Moller-Maersk key competencies would refer to the crucial abilities that are specific to the company and those that are not mirrored extensively in the market. There exist various ways that are applied to distinguish the company from its competitors in the market.
6.0Performance Appraisal
Maersk is one of the most successful international corporations, with high rates of proceeds, nd as can be seen from thetable below, their growth is profits have been tremendous over the years, and they have undergone a growth in the proceeds and is reflected in their financial statements.
The primary objective of the financial analysis is to offer an empirical assessment of the performance of Maersk. Precisely, the examination is by four important features affecting the market value to business. The analysis examines theperformance of Maersk in liquidity, profitability, leverage and activity in the last half a decade.
Figure 2: Financal Perfomance (Jephson& Morgen, 2014, p. 128)
7.0External Analysis- Opportunities and Threats
The external environment includes factors that are not within the company’s inner realms. They include positive aspects that present opportunities in the market and also negative ones that may lead to loss of revenue or profits.
8.0 Strategy Selection
In theselection of its strategy, the company has been seeking to become a premium conglomerate shipping business. In their work, Larsen& Mortensen (2011) state that, ‘The objective is to achieve this by increasing the level of performance to a top-quartile output regarding all business segmentations. It seeks to focus its efforts on active portfolio management, performance monitoring, and allocating capital in a disciplined manner (p. 74)’. The strategy selection is also based on optimizing the business operations, reducing the overall cost of doing business and developing top performance. To reduce the cost of doing business, it has been imperative for the company to embrace cost leadership within its managerial structure. For quite a long time, it has been focusing on diversifying its services but lost control in the profitability of its ventures across the different portfolios. All these issues are making it compulsory for the company to think of the cost leadership strategy (Niamie & Germain, 2014)
8.1 Capabilities
Niamié& Germain (2014) notes that, ‘The company has the capability in expand and increase its investment in each of its investment portfolios. In this regard, it has been working to expand its fleet to maintain its first position as far as shipping is concerned. Indeed, this is aimed to reinforce the company’s market advantage’. Based on this capability the company eyes some mature key projects and seeks to acquire other companies as part of their opportunistic investment strategy. This is coupled with the decision to create multiport expansion. Further, the company’s capability to expand also allows them to explore new and huge shipping fleets all around the world. In addition to expansion capability, the company also has proficient and enough human resource bases. Further, it capitalizes on using state-of-the-art technology to facilitate is operations while maintaining efficiency and sustainable operations. Various studies have found that the companies can reduce the cost with the help of sustainability in operations such as reducing waste (Greve& Schaumburg, 2007)).
9.0 Conclusion
Having conducted a thorough analysis of the company, it is evident that the Moller-Maersk occupies a strong position in the market regarding its strategy and financial capability. The company is forging forward to create a premium kind of a conglomerate which will provide shipping services to a wider market segment. This is geared towards increasing the value of the company to the stakeholders and even attracts more customers.
Significantly, it is evident that the strategies applied by the company are based on its core values that include humbleness, uprightness, and constant care among others. In addition to this, the company is highly interested in technological improvement as well as sustainable development. As a result, it is destined for more growth with little negative impact on the environment.
References
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Jephson, C., & Morgen, H. (n.d.). Epilogue. Maersk Line in Containerisation 1973–2013 Creating Global Opportunities, 362-381.
Larsen, T., & Mortensen, F. (2011). The Danish shipping magnate: Mærsk Mc-Kinney Møller - a personal portrait in interviews. Copenhagen: Gyldendal Business.
Mærsk-Møller, H., & Jørgensen, B. N. (2010). Experiences Initiating Software Product Line Engineering in Small Teams with Pulse. Software Engineering.
Monica, S. (2016). Maersk to Offer Employees Anytime, Anywhere Learning with Cornerstone OnDemand. Retrieved May 15, 2016, fromhttp://finance.yahoo.com/news/maersk-offer-employees-anytime-anywhere-080100735.html
Niamié, O., & Germain, O. (2014). Strategies in Shipping Industry A Review of “Strategic Management” Papers in Academic Journals. Université du Québec ESG-UQAM.
Oil shipments to South Africa on Maersk tankers: The role of A.P. Møller of Denmark: Survey. (1985). Amsterdam, the Netherlands: Shipping Research Bureau.
Ramboll. (2015). Maersk Oil Esia-16 Environmental And Social Impact Statement – Dan. Retrieved from; http://www.ens.dk/sites/ens.dk/files/undergrund-forsyning/olie-gas/miljoe/offentliggoerelser/Aktuelle-offentliggorelser/VVM_dan_2015/vvm_redegoerelse_esis_dan_engelsk_version.pdf
United States Department of State. (2011). Denmark. Country Reports on Human Rights Practices for 2011. Retrieved from; http://www.state.gov/documents/organization/186556.pdf Yahoo Finance. (2016). Maersk Moller. Retrieved from; http://finance.yahoo.com/q?s=MAERSK-B.CO
