Analysis of Shipping Industry

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|Question No. | |Page | | | | | |1 |Critically assess the key drivers of the Shipping Industry. |1 | | | | | |2 |To what extent are firms in the Shipping Industry likely to achieve what Hitt et al., |6 | | |describes as above average returns? | | | | | |

Introduction

Shipping is the primary means of international transportation of any essential raw material or finished goods. There are three main segments consisting of bulk carrriers, specialised cargo shipping as well as container shipping. This industry is fundamental to trade, globalisation and economic growth of a country.

In this case, we will be looking at the key drivers of the Shipping Industry and what are the factors that will influence this industry. After that, we shall look at how shipping firms going to achieve an above average returns and lastly we will critically evaluate the prospect of this industry.

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General Environment Analysis

Key drivers are the key forces that will drive and shape changes of the industry in relation to the policy area or aspects of the future. While some key drivers cannot be influenced by human means, it will be more important to prepare and respond to the forces. With this in mind, understanding of the external environment is essential, which is also critical to a firm’s survival and success.

External environment is divided into three areas which are general, industry and competitor environments. I will be focusing on the general environment to assess the key drivers for this industry as the objective of this is to identify opportunities and threats. Opportunity is a condition if exploited, will help a company to achieve strategic competitiveness while threat will hinder a company’s effort to achieve strategic competitiveness.

General environment composed of six segments, they are demographic, economic, political/legal, sociocultural, technological and global. Based on the case study, I have identified the segments that create the opportunities and threats of the Shipping Industry in the table below:

|Segments of General Environment |Opportunity |Threats |Remarks | |Economic Segment | | |- Global economic growth | |√ |- From 1980, economic growth in East Asia increased foreign direct investment that resulted in| | | | |greater dispersion of production across countries and regions, thus increased the demand for | | | | |shipping. (Source: Kulwant Singh et al., 2010, Pg 110) | | | | |...
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