Pacific International Lines or PIL as it is commonly known in the market is a container shipping company started by Mr.Y C Chang in 1967. What he started as a 1 ship company is today the 19th biggest container shipping company in terms of TEU capacity & the 8th largest container ship owner. Ambition: Integrated shipping group with a meaningful market share by setting own pace of growth based on the group’s financial strength and human resource capabilities. 2. External Analysis:
In order to formulate a strategic direction for PIL we need to do an analysis of the external factors affecting PIL’s business. 2.1 External Analysis - PFF Analysis
By doing a Porter’s Five Factor analysis (PFF) we come up with the following – a) Competition: There are a number of players in the industry offering almost similar services which makes the competition fierce as switching costs are not high. Freight rates are more or less fixed throughout the industry & containers being standardized offers the customers the ease of switching between different carriers without incurring much costs. On the positive side, there is tremendous potential for growth within the industry. PIL started off by offering services to China, which at that time was a new market. In later years when their competitors started offering similar routes to China, PIL extended their service network to Africa, a market which was till then unexploited. This is a good example for the growth potential within the industry. b) Customers bargaining power: The presence of a number of companies in the market along with the similarity in the product offered by them makes it easy for the customer to flex their bargaining muscle. On the upside, PIL’s in-depth knowledge of their niche markets gives them an advantage over the competition. This along with the fact that PIL is a company which has been around for more than 4 decades now, thereby invoking loyalty, helps them tilt the balance of power slightly towards them. c) Suppliers bargaining power: As is the case within the shipping companies, the competition between the companies providing support to the shipping companies is also very high. This is advantageous to PIL as they can use this as a bargaining tool. d) Barrier for new entrants: The barriers that new companies face to enter the shipping industry is very high. Especially in the container market where the margins are very low & economies of scale play an important part in whether a company floats or sinks. The initial capital requirements to enter the industry are also high as ships are expensive to own & run. The learning curve for new entrants into the market is quiet steep, which will deter many a company without prior knowledge in the field from entering it. e) Substitutes: Although there are many substitutes to the shipping industry like air, road & rail but none of them can match shipping in terms of value as shipping is the most economical mode of transport. Although air transport has taken the big chunk of customers from shipping as far as passengers go, the carriage of cargo by sea has increased by leaps & bounds in the same period.
f) Governments & regulatory authorities: PIL has managed to use the various incentives provided by the Singapore &PRC governments to their advantage. Although these incentives can be used by their competition as well, the fact that PIL was a pioneer in the market on certain routes holds them in good stead till date. Mr.Chang’s insistence on employing well qualified staff as well as registering their vessel with the Singapore registry has helped them gain a favourable image among the regulatory authorities as being a safe operator.
2.2 External Analysis - PESTEL
POLITICAL – As Singapore being the head office for PIL shipping business, we would like to look at the political situation of Singapore. Singapore encourages Business and being a trading hub in the Asia market, it encourages shipping business activities....