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Port Services Corporation (SAOG) is registered as a public joint stock Company in the Sultanate of Oman established vide Royal Decree '46/76' issued on 17 November 1976 and registered at the Commercial Register of the Ministry of Commerce and Industry under Commercial Registration No.1/07167/0. The Company undertakes the management and operation of Port Sultan Qaboos under a concession agreement entered into with the Government of the Sultanate of Oman on 17 November 1976 for a period of thirty years which expired on 16 November 2006. The Agreement had been extended with the same conditions until 31 December 2006. The draft agreement between the Government and the Company granting the concession to manage and operate the Port for a further period of 6 years effective from 1 January 2007 ending on 31 December 2012 has already been finalized and the same shall be signed by the Government and the Company in due course. The draft agreement provides for the calculation of franchise fee on the same formula as in the previous agreement.
Port Services is an Oman based company that operates and manages Port Sultan Qaboos This port is located in strategic geographic location in the north of Oman at Oman Sea and the entrance to the Arabian Gulf and it is designed and equipped with the highest and latest technology. The company services include container terminal services, break bulk services, cruise services and anchorage services. It provides port facilities such as infrastructure, berthing, cranes, backup yard and real estate facilities. The company primarily operates in Oman, where it is headquartered in Muscat and employs around 684 people. The company recorded revenues of OMR25.8 million (approximately $67.2 million) in the fiscal year ended December 2008. Its net profit was OMR7.7 million (approximately $20.1 million) in fiscal 2008.
Port services corporation has made very clear objective for the business operations and those objectives are:
Commitment to the development of Oman socially, and concern the environment by adopting pollution control.
Maintain a safe place of work with a high standards and provided with an inspiring working atmosphere to the employees.
Provide efficient and reliable service with their partners in business.
Achieve a substantial profit growth to the company and shareholders.
PSC Strategic Plan
Containers port has grown significantly in the recent years around the globe and in this area specifically due to the developments requirements of the countries in this area. There has been even significant growth in the investment in the terminal facilities in the region to handle the growth. The shipping lines also converted the straight port calls to transhipment flows because of the exploration of the huge vessels on the major trade lanes. To support demand increasing the port services corporation has right equipment, expertise and infrastructure. The current strategic plan of the Port Services Corporation is to increase the port capacity, expand common cargo terminal and increase the operational capacity by development of working teams and structure of facilities and equipments to the highest standards.
The Success Factors
The critical success factors of the Port Services Corporation.
The staff corporations and engagement.
Retention of the existing customers and attract new customers.
Development of new customers to fill the capacity.
Optimum utilisation of the cost and efficiency of the services provided.
External and Internal Environment analysis
"The key drivers of change are environmental factors that are likely to have a high impact on the success or failure of strategy" (Whittington, Johnson and Scholes, 2008).
To evaluate the port services corporation current strategy, we should knew how to Analyse external and internal environment to reach to some certain objective to be used as mission statement to enhance the productivity.
Many factors responsible of the change in strategy taken by stakeholders. One of those is the external environment and this factor influences on the decision taken by stakeholder.
To understand the influence of macro environment adapting PESTAL analysis is a useful method.
Oman is blessed nation under the leadership of His Majesty Sultan Qaboos which has a stable and balanced government under his leadership.
Oman has a government which encourages foreigners investors as well as local to come ahead and invest in this country.
Oman expected political stability to continue because of the wise vision of His Majesty with regard to dealing with neighbouring countries and the international.
As most of the countries in the middle east Oman's economy is also largely based on petroleum and gases. By year 2009 the government generated contributed revenue to approx 74% to 88%. Even though have no jumped back to the previous years levels still it is above the budgeted levels which has given the government lot of comfort in continuing with the development plans
As a vision the country wants to reduce it's over dependency on oil and gas so the government wants to give lot of focus on the development of the industrial sectors.
The government has initiated lot of new projects with respect to expansion of infrastructure and roads to develop the economic growth of the country.
As most of the companies the international trade was very badly affected by the financial crisis that had begun in the last quarter of the Year 2008 which resulted in severe credit crunch in the market.
The economy of Oman has benefited because of the reason that the world oil prices has been higher than the price budgeted by Oman government.
The higher oil price has provided the Oman Government with the leverage to continue their investment into the infrastructure projects.
Oman's popularity has also grown as a tourist destination
Oman government has also given lot of stress on e-government and this has been a great success after the launch of the new national system of electronic web.
It is seen that Oman is the lest affected in the Middle east during the financial crisis that has hit the world and it is rated 16th in ranking of the lest affected globally. ( retrieve from: Oman daily news paper, dated 23rd March 09).
Omanisation has been on priority in all the policies initiated in the country The Corporation management attaches due importance to attracting, developing and retaining specialized human resources which is capable of dealing with the sophisticated handling equipment and the advanced computerization system with a view to provide good standard of services to its customers.
Government has encouraged the formations of Unions for the employees legally.
Due to the above set policies it is seen that maximum workforce in the country is young.
The government also had a social security classification that provides pensions, survivorship and disability and to Omani employee.
In October 2006 Oman has also agreed on the confirmation of the FTA (Free Trade Agreement) with the United States of America.
Oman is giving lot of emphasis on privatisation and this had attracted lot of investors into the country creating lot of new avenues for the youths of the country.
There has been huge expansion of transportation technology, investing in airports and ports buts Oman a major transhipment hub due to its strategic location on the world map.
Many of the biggest telecommunication companies have ventured into Oman which has provided better and latest business communication with the world.
The long-term plan of 'Oman incentive Vision 2020' development has laid emphasis on the requirement for the Oman's economy to spread through the process of industrialisation, privatisation and Omanisation (all Omani).
In Oman the majority of industrial estate areas are placed near to the coast for the reason of easy transportation of goods. There is always a danger of populating the coral reserves of the sea and the government has taken up most care to safeguard the coral reserves of the country.
The government is also promoting the free zone area next to the port along with a package of incentives and they are in discussions with the authorities of Jebel Ali Free Zone in Dubai for the partnership.
Oman government has been promoting the private investment and is very friendly in terms of the laws. The laws enforced are very friendly with fewer restrictions to encourage the foreign investors so that they do not face any problems to come to Oman and invest. Oman government doesn't have a kind of written structure or anti-discrimination laws.
Generally the visas can be obtain, but there are some categories which may require planning for non-Gulf countries (GCC) citizens.
Industry market characteristics (Key Drivers)
Despite the global economic downturn the industries in Oman has shown growth in the Yr 2009 and is expected to show further growth in the Yr 2010 . It is expected that more transhipments volumes will be routed through Port Services Corporation which will increase volumes of the port resulting in growth. Further to that in the last GCC summit a proposal was put forward for a railway project through the GCC countries and once this is initiated we will see a large reduction of volumes shipped to the upper gulf which makes the location of Port Services Corporation in Oman very important.
There are some circumstances that may affect the port business in Oman which is listed as followed:
The construction has shown declined in the new industries in Oman.
The downturn of the global economy continues through this year.
Companies organize long term loan facilities
The lending of bank loans with high interest rates
The government increases its spending on industrial and projects related to tourism to further income diversification
Analysis of Competitors
Analysing the competitors within the same business industry will bring the business forward to stage were opportunities may increase to bring new customers to the company. "Understanding of the competitive environment is a critical ingredient of a successful strategy". (M.Grrant, 2008). To well understand your customers, you need to listen to their requirement and expectation to achieve your strategy.
The government of Oman has release a new project to set up a port in Duqm which is a very lightly populated area along the coast of Arabian Sea and the Indian Ocean that make this area a very strategic place for building industrial area and attract new investors. There is also a project setting up a port in Sohar which is a joint venture between Port of Rotterdam and Sultanate of Oman. Sohar and Salalah free trade zones are another add value for export industries. The new industrial port and the development of the gas-based industries in Sohar will help utilise Sohar's demographic profile and Port city of Sohar is the single largest industrial investment.
Analysis of strategic portfolio
Port Services Corporation emerged as the major transhipment hub of the world in the Year 2008 - 2009. The development of the port infrastructure has been completed and the superstructure will be completed in the Yr 2010. PSC expected to increase its market share and compete other companies in the area with the same business.
Stakeholder influences is to put the company as positioned to take full potential market share and to grow further in the coming years with the increase of opportunities and competitors.
Close contact with the authorities concerned for useful project development and adopt the new technology and innovation for developing the company services.
To create funds and to transfer the port a safe place to work. Emphasis on training & procurement of new well advanced tools for the next new generation ships.
Most of customers like Mediterranean shipping company, Maersk Line and American President line causal entire throughput of the container terminal
Port Services Corporation has a chance to reinvest the incentive of the trading of big development projects of the area to target the market and can start unique policies for some of the services.
As the Port Services Corporation has big support from the government with regard to the distant vision plan can have plans for good plans for expansion and investment.
As there are many new upcoming projects they have an opportunity to get into long term contracts to ship and supply the equipment and materials required by these new international companies who are coming to Oman.
As they have the ability to handle the transit there is an opportunity to have transit services for all the ship passing through the region.
The framework of five forces
For better understanding of competitive that affect the nature of an organization or industry is implementing this framework. The result of this analysis shows the threats that PSC is facing.
Threat of entry: threat is low because PSC in market from 1976, that time it was the only company operating in the country and has developed since that time also this port is the main port in the country and it is supported by the government and build a high reputation with its main customers.
Threat of substitutes: this can affect demand for services and make customers select others choices or competitors due to facilities, cost or any other offers. The threat of substitutes is high because the number of ports increased in the area. The existing ports in the south of Oman (Salalah Port) and the plans to set up a new port in the east coast of Oman (Al Duqum Port) will also affect the business of the Port Services Corporation.
Power of suppliers: comparing market share the power of suppliers is highe. If we see wider range of customers are seeking this kind of facilities. PSC has taken the initiative to store containers in block/stack for large volume importers for easy and fast delivery at no additional cost. Some companies like SAUD BAHWAN GROUP and PASFR (Public Authority for stores and food reserves) have opted for this facility.
Power of buyers: because there are number of choices the buyers power is higher and it is difficult to convince the customers by competitors with the same product or services in the same palace which also completion become high. PSC has taken the initiatives to organize deliveries at night time for importers without charging overtime. Few companies have come forward to avail this facility also encourages consignees to take direct delivery of cargo using their own labour and truck and offers 25% rebate on shore handling charges on general cargo.
Extent of competition: The Government of Oman has been constructing new ports and still there is lack of clarity of the role of each port and hence we cannot quantify the impact due to competition..
Analysis the findings of external environment
With the steep rise in the oil prices the local economies got a huge boost leading to huge investments in the infrastructure projects. This has also led to an increase in the imports in most of the countries in the Middle east leading to an increase of approx: 12% in the container shipments into the region. This has triggered lot on investments in the developments of ports to handle this kind of increase in the business. The year 2008 saw the shipping lines struggling with not only the increase in fuel prices but also with the freight rates which went up by 15%. One another problem seen was the increase of pirates in the Gulf of Aden which forced the Navy to increase their patrolling in the region and some customers tried to avoid this route because of this risk, on other side insurance prices for shipments to the area went up and that is affect the company's cost. The main difficulties mostly political due to the non constancy in the area.
By the last quarter of year 2008 the financial crisis appeared and came the cash crunch. This affected the global trade very badly and the Port service's is still resettling the credit crunch faced during that period. As the world is slowly getting out of the financial crisis so is the Port Service's Corporation coming out of the unpredictable period of the global economy. The management will be closely monitoring the effect of the economic slowdown and will initiate counter measures to overcome the situation.
Port service's corporation is located at a very strategic position in the Middle East. It is located at one of the busiest sea route (East West route) for oil & goods trading in the Arabian Gulf, India & China.
The team of Port Service's corporation is competent and motivated to maintain the top position among the international companies like Meresk & Sealand.
The ability of the port to go ahead with any huge expansion of the port in future without any problems.
There is a lack of the international reputation so need to improve globally the awareness highlighting the market.
Findings of internal environment analysis
After doing the analysis of the Port Services Corporation we reach a conclusion that the company has a very competent team having an expertise to handle the sea cargo business professionally. In the recession period the company needs to control the costs and create high demand to compensate the loss that might creep up during this period. The analysis of the opportunities has highlighted the future upcoming projects which can lead to new business contracts. The company need to add up some new partnership contracts with some of the big international companies which may bring up the reputation of the company globally.
The organization Drivers of change
As an organisation there could be many drivers which could influence and lead to some organisational changes as such services are closely linked to the local and global economic situations. So any crisis in the local or global economy could trigger an organisational change. Other than the local and global economic crisis even the government, market, cost & capital related issues also could drive the change is organisational structures. The major driver influencing the Port Services Corporation's strategic plans now is the recession and it could impact the results of the company. This could even impact the long term vision of the company as well. The company may be forced to plan diversification responding to the market situations as the company is in expansion stage and investments involved are huge.
There could be many strategic plans put in place by the Port Services Corporation to take on the increasing market potential. The company might use the right strategy with regard to the philosophy of the company which could be based on the corporate strategies for a long term benefits of the company.
The proposed strategy could be implemented in two phases. The first phase could be by using the Organic development strategy and the second could be by having strategic alliance.
As we have mentioned earlier Port Services Corporation has plans to improve the basic core capabilities and improve the skills of the employees to maintain its current services to the customer and also to be prepared to handle the new technologies that would be installed in the future. For this to become a reality the company needs to give primary emphasis to the training of the work force and latest advanced technology needs to be installed immediately. As a policy the company need to give emphasis to hiring the local skilled manpower as they are cheaper than getting the skilled manpower from the nations. Hiring the local manpower will not only reduce the cost but also be in line with the company's mission. Looking ahead at the new global challenge that could arise due to the lack of manpower the company needs to focus in this area also. The company need to use the critical success factors as examples and need to plan a new long term vision to overcome these new challenges.
As part of the globalisation and cost reductions the Port Services Corporation could think of getting into alliance with other ports operated in the area to share some resources which common to both, sharing some manpower which could bring down the cost or even sharing some activities which may be common to both. Such alliance could strengthen both the companies in terms of skills and developing strategies which could help both to face the challenges of the new market. The company could have a strategic alliance as a leading partner in the market.
The key factors for a successful alliance with other ports Companies are:
Clear strategic purpose.
Alliance benefits and expectations.
Evaluation of Proposed Strategy
The proposed strategies can be rated using three factors:
In the first section of the proposed strategies it is suggested to make changes in the core policies so as it is an elaborate process it will take time. Hence it is the most important thing to run with. The second strategy proposed suits as it suggests keeping focus on the market leader and to learn from their experiences and then implement the good practices. Such a move will help to develop a planned market attack and will help in understanding the market better.
Once the proposed strategy is implemented the returns are going to be very good by expecting payback period and high ROCHE ultimately resulting in a good profitability but we need to have a financial projection which should be safe and without much risk because we have an excellent gearing and liquidity at Port Services Corporation. Added to this we might need to have a sensitivity analysis to understand the nature of cash flow in the next 5 years and also the factors which could influence the cash flow of the company which may ultimately affect the company's overall performances. Under any circumstances the Port Services Corporation has plans which shows them heading to an inspired future and also the geographical factors are very motivating.
The implementation of the suggested strategies will support in increasing the cash flow into the company which will in turn help in planning a good forecast and finally getting a good feasibility for the company. The company has a high possible competences and may select to support employee skills and manpower competence.
The government of the Sultanate of Oman is determined with regard to the plans of developing new ports around the regions of Oman. In spite of the global financial crisis the government has not withdrawn or slowed down with the plans of construction of the commercial port at Duqm which will be given dry docking and basic shipment services. Port Services Corporation also has plans of expansion once its completed, will develop its capacity to 3.48 million twenty-foot equivalent units (TEUs), up from the port's current capacity of 1.9 million (TEUs).
As mentioned above Port Services Corporation is to proceed with plans to put growth on the acceleration path with an aim of getting a new customer like China Shipping , American President Line and Mediterranean shipping company. Along with this they also plan to go ahead with the expenditure of development which will help them in predicting difference and capacity crunch. Apart from these the company will also look into reducing the operational cost and at the same time increase efficiency. the In additional, the company may continue to maximize efficiency and minimize operational cost. The also know that even though it is recession time it is also the best time to go ahead with the expansion plans and investing on the new equipments because when the market comes back to normalcy Port Services Corporation will be ready to take on the new challenges of the market. The will also be ahead of the competition in terms of the infrastructure and equipments
Both proposed strategic can be selected in phases by using organic development or strategic alliances. The two proposed strategies are suitable for Port Services Corporation to settle in as analysed in the assessment of the proposed strategy section.