Transhipment Hubs

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The case, “The battle of the Asian Transshipment Hubs”, discusses the struggle of PSA (Port of Singapore Authority) against emergent challengers and the consequent strategies adopted in order to handle these offensives.

As far as the port industry is concerned, it consists of import/export gateways and transhipment hubs and they can be owned by the state, privately through a lease agreement or a joint venture with a port operator. Their competitive advantage is derived from their geographic location, transportation infrastructure, price, quality, value-added services and, more recently, from information technologies. The shipping industry, however, is mainly based on providing similar services, allowing the ports to detain the majority of the value created. As a consequence, shipping rates decrease while port charges increase.

Prior to 1999, the Port of Singapore—operated by Port of Singapore Authority (PSA)—was the uncontested “World’s Port of Call”. For example it was the main container hub in the region and the world’s second busiest port in the year 2000. This success is due to their ideal geographic location, high operations efficiency (using sophisticated Management Information Systems), network connectivity and high quality service.

However, following a series of privatization and investment initiatives undertaken by the Malaysian government and a Malaysian tycoon, PSA had to face two new challengers: Port Klang in the 1993 and Port of Tanjung Pelepas (PTP) in 1999. Both were able to improve their capacity to provide enhanced services at extremely competitive prices. As a whole, these entries altered the region’s port dynamics which led to the decline of PSA’s position in the transshipment market.

In the case of PTP, its entry into the scene had a direct and immediate impact on Singapore’s dominant position. In particular, the decision of Maersk to take a 30% stake at PTP, which resulted in the relocation of its hub to Malaysia. At the same...
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