Maersk Shipping Company Strategic Management Analysis Essay

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Strategic Management Analysis of Maersk Shipping Company



Maersk Shipping Company is a largest global shipping company operating more than 600 ships, recording more than 23,000 bookings daily and 2.2million containers. Maersk can boast of 14.5% of market shares globally because their vessels arrive at ports every 15 minutes. Established in 1904, Maersk operates in more than 130 countries with over 110,000 employees. The company market capitalization was $27.6 billion at the end of 2015 fiscal year. Maersk facilitates the transportation of 14% of global seaborne containers coupled with Damco and APM Terminals, the company offers infrastructure with global demand for energy and global trade. The company offers different services that include Reefer Cargo, Verified Gross Mass, Special cargo, Dry Cargo, and Routenet. However, Maersk derives 40% of their revenues from container business. Despite the superior market advantages that the company has enjoyed in the last few decades, the global economic recession has affected Maersk profitability. For example, the company has recorded a rise in the employee turnover rate and particularly, Maersk has experienced five notable talent challenges. Out of 400 employees trained in a given year, 20% of them remain with the company after 5 years. A recent business problem facing the shipping industry has also affected Maersk business advantages.



A report by Economist (2016) reveals that the shipping business is presently in crisis. The collapse of Hanjin Shipping has brought a storm of collapse in the shipping industry. After the bankruptcy of Hanjin Shipping, the company ships were stranded at sea. The company left 66 ships carrying goods worth $14.5 billion at sea, and harbors globally. Even the Tokyo refused to allow their ships to enter their ports because of a fear of unpaid services. With stocks out of reach, many British and American retailers voiced their concerned about the problems of the Christmas shopping.



Similarly, out of the 12 biggest shipping companies, 11 of them have announced huge losses in their past quarterly financial reporting and several shipping companies are on the edge of bankruptcy.

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In Japan, NYK Line, Kawasaki Kisen Kaisha, and Mitsui OSK Lines look vulnerable. Some investors are recommending that these companies should merge to avoid the same problems similar to the South Korean Line. Even, France's CMA CGM, which is the third largest carrier records a net loss in September 2016. The Economist (2016) affirms that, the Maersk Line, the industry leader is forecasted to be in red at the end of the 2016 fiscal year having recorded a loss of $107 million within six months between January and June. The cumulative loss can reach $10 billion in the industry at the end of 2016 fiscal year.



According to Niamie, & Germain, (2014), "the shipping business environment is getting more unstable, competition is increasing, profit margins are decreasing, expected service quality is increasing and demand is becoming more uncertain".(p 2). The powerful forces that have affected the industry is as follows: First, there is a crisis in the world trade since 2008 /2009 financial crisis forcing the multinational companies to cut costs by building factories in the local markets. For example, GE (General Electric) manufactures their engine parts at countries that need them rather than shipping the parts from North America. Moreover, there is a gradual decline in the shipping rates because of the competitions. Since 2011, the shipping rates have declined. Moreover, the costs of sending the containers rates from Shanghai to Europe now costs half of what it costs in 2014 affecting the revenue of the Maersk. While the focus of the CEO of Maersk is to ensure that the company revenue continues to grow, however, the goal remains uncertain amidst of the contemporary uncertain market environment. A serious problem that Maersk Oil may face is that their production may be reduced by 50% in 2018 because the license to operate in the Qatar's largest oil field will expire in July 2017.



The company Annual Report (2015) shows that Maersk.....

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Reference


Annual Report (2015). AP Moller-Maersk A/S Annual Report. Maersk Group.

Jadranka, B. Dora, N. Zrinka, S. (2015). Cost Control Policy in Maersk Line. Economic and Social Development: Book of Proceedings: 125-132.

Niamie, O. & Germain, O. (2014). Strategies in Shipping Industry. A Review of "Strategic Management" Papers in Academic Journals:1-30.

The Economist (2016). Profits Overboard. The Economist Newspaper Limited.

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