Analysis of Porter Maersk

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Analysis of Porter’s Five Forces for Moller Maersk

(Analysis of Container Line Business)
FIVE FORCES|
1. Threat of New Entrant is High|
2. Threat from Substitute is High|
3. Bargaining Power of Suppliers is Low|
4. Bargaining Power of the Buyers is High|
5. Rivalry Among existing Players is Low|

* Threat of New Entry

Every firm would love to invest in shipping industry due to large profits involved. However this would seem easy but practically it is lot more difficult and virtually impossible to establish in container line business. The problem pertains to large capital investments in form of vessel and container procurements and risk of operating vessels. Even if we take the examples of biggest companies like Maersk and APL we will see that it had taken more than 100 years for these companies to establish themselves today at this top level. While there can be threat from existing companies to expand into new sectors which would lessen the share of company operating in that region. For i.e. Maersk is generally operating in every part of the world, in certain regions it may be the only player operating in that case its profit margins from those operations would be enormous. However this profit can be severely affected if APL or MSC introduce their service in those regions, or the situation can be vice versa. If there are any new potential companies who would intend to jump into this sector with huge capital than other factors like licensing, government rules, regulations, policies are all secondary. Factors| Threat of New Entrance|

| High| Moderate| Low|
Capital Requirement| | | * |
Profit Margin| * | | |
Opportunity of Expansion in new sector| | * | |
Economies of Scale| * | | |
Switching Cost| | * | |
Government Restriction| * | | |

* Threat of Substitution

Substitution factor is foremost important especially when something is going wrong in organization and competitors are waiting to catch that opportunity for their benefit. Substitution threat is the result of change in buyer behavior towards competitor or against company. Substitution may also result because of change in quality of service, increase in freight rates and increase in transit time. From view point of switching costs, buyers are not affected at all due to higher number of suppliers and freight forwarders available in market. While it may affect the company to certain extent as they have to start new search of customer, establish strong relations and educate them on company policies and systems. Switching costs become even more at times of downturn due to decrease in supply of business from customers. Cost factor is primarily responsible for substitution while service specification comes secondary. Factors| Threat of Substitution|

| High| Moderate| Low|
Availability of Substitutes| * | | |
Price, Performance and quality of services of Substitutes| * | | | Switching Cost| | | * |
Cost factor| | * | |

More number of market players are available but they all are dealing in different prices, performance and quality will increase the attractiveness of shipping sector. As the switching cost is high, customer stick to their present seller will increase attractiveness. Cost factor is less important because all players are play a role of defender in market will moderate the attractiveness.

* Supplier Power

Suppliers barely make any difference to companies involved in shipping line business especially who are leading players in this business while it may affect to certain extent to small players who are struggling to establish within the industry. Many supplies are such which are borne directly by customers but arranged by shipping lines like fumigation, pesticide, wooden pallets, container repairs and truck transportation due to corporate contract or link ups of companies with service providers. While there...
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