Shipping Industry

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1. The shipping industry structure will be explained via the 5 competitive forces of Porter: THREAT OF NEW ENTRANTS |
New entrants face entry barriers such as:  Large financial resources required to invest in a container terminal or in a shipping line. There is a big time lag between the investment (buying cranes, ordering vessels) and the start of operations.  Conferences among shipping lines will determine the price and other conditions of the market.  Vertical integration between terminals operators, shipping lines and vessel manufacturers.  Horizontal integration between shipping, logistics and trucking companies to provide door to door services. While less investment is required to set up a small trucking company, the economies of scale of big operators can set market prices and decrease the final margins.  Shipping lines require a strong coverage worldwide through own offices or third party agencies.  Fierce competition, especially in hubs (Hong Kong) or key import and export ports (Yantian).  Skilled labour is required to operate cranes and other specialized equipment, navigate ships, etc.  Strict regulations have to be followed to operate in international waters and call certain ports.  Government regulations may require to have local partners in order to operate in the country or will provide some subsidies to national operators to keep them operating in the market.  Terminal operators have a strong network with local government which influences the way regulations are set up to operate locally. | THREAT OF SUBSTITUTE PRODUCTS |

 Mid-stream operations are a substitute for container terminals, as vessels do not perform docking in order to load/unload containers.  Barges substitute truck moves when river flows allow them to reach more inland locations. Similarly, train services substitute truck moves as they displace containers closer to producers (export) or final consumers (import).  Air or Sea-Air options are substitutes of moving...
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