Container Shipping Is A Major Industry Today Commerce Essay

Container shipping is a major industry today. The past fifty years have seen the expansion of shipping containers as the most important way of sea carrying sea freight transport. These containers which are not unpacked at any point during their journey all have the same standard design. This type of standard design allows fast and easy handling of containers at ports. The standard design also makes the work easier for port terminals and shipping operators.

Because container shipping services are increasing, ports have new problems. All over the world, port managements spend large amount of money in developing their technology in order to handle the large number of containers. However, containerized ports such as Ajman port have challenges with the increase in traffic and development in technology.

The world market is developing, so ports have to put extra effort to survive in this competitive market. Ports compete in many ways: oceanic carrier and short sea freight, land-based routes (rail and truck freight), transhipment time, and quick turnover.

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The aim of this Graduation Project is to assess port management standards and theories and compare them to the standards used my competitors, evaluate the technology used by Ajman port, interpret the market situation, and assess the technology introduced by HAJT and how it will help the company in cost reduction and effective allocation of resources. The results will then be applied to the performance of Ajman port. Because of the strong global competition, it is important that ports are effective, well-organized and prepared with the latest technologies. The technology used by khalifa Port as stated in (GULF, 2012) is the best example for latest equipment and machinery. Such technology can allow Ajman Port to service a large number of containerized vessels. Ajman is in a good location since it is between the Eastern and the Western hemisphere. It can increase its volume of trade and profit if it can provide enough and efficient facilities for large scale operations. The research helps us to understand about the current level of effectiveness of Ajman port and gives recommendations to improve its performance.

STATEMENT OF PROBLEM

Q: What is the impact of local economic changes on port management of Ajman port?

Q: What is the future analysis of Ajman port?

Q: How can Ajman Port become more competitive in the local and international Market?

The essence of my study will revolve around these two questions. To further elaborate this concept it can be sub divided into the following questions.

SUB QUESTIONS

1. What are the strong and weak points of Ajman port (Strengths and Weaknesses)?

2. In what area could Ajman Port invest so to improve its performance and efficiency?

3. Do the other ports directly or indirectly affect the performance of Ajman port?

4. Who are the direct competitors of Ajman Port?

LITERATURE REVIEW

UAE INTERACT (2009) in their article “Jebel Ali port voted best seaport in the middle east” wrote that Jebel Ali port has again been voted as the best seaport in the middle east for the 15th consecutive year in the AFSCA awards (INTERACT, 2012). Hong- kong based cargo news Asia voted for the best performing companies in Asia transport and supply chain sector for various categories. The award is considered the most prestigious award for freight and logistics services providers. The team of Jebel Ali port was very much honoured receiving this great award. This Also sends a message to all other ports in the middle- east that Jebel Ali port is a very tough competitor indeed offering the best cargo services to its customers all over the world. Ajman port will have to work very hard in order to compete with this Giant seaport of UAE. The Jebel Ali port uses the latest technology equipment to meet the needs of local and international transportation (CHAIN, 2006). Therefore, Ajman port will have to employ the latest technology as well in order to compete with the local and regional competitors of the GCC.

“Jebel Ali to contribute twenty per cent to Dubai’s economy” (INTERACT, 2012) the author states that Jebel Ali will contribute around one fifth of Dh 300 billion economy of Dubai. There are around 6700 companies based on the Jebel Ali free zone and employ around 170000 people. This gives an idea about the employment opportunities created by Jebel Ali free zone. They cater to around 12.82% of the Dubai’s total work force. About 61% of the companies in the Jebel Ali free zone are in the machinery and equipment sector, and 18% in the consumer goods sector. This shows that Jebel Ali has specifically targeted the machinery and equipment sector for trading activities.

METHODLOGY

My paper will look at the port management industry in the UAE and will assess Ajman Port’s strengths and weaknesses in that industry. The kind of research required for this project is going to be qualitative research. The qualitative research will totally be based upon the primary data collected from the pot industry. Surveys and questionnaires will be used to gather the data and test the hypothesis. Ïwill focus on the business environment of the containerized ports and I will also assess the General Cargo terminal and warehouse facility plus how HAJT has incorporated new technology into these systems. The RO-RO facility introduced by HAJT will also be analysed. I will do an industry analysis using Porters’ five forces model. Then, I will talk about the findings from the interviews that were done with Ajman Port personnel. The information from the interview will help to assess Ajman’s own strengths and weaknesses. I will then conduct a SWOT (Strength, Weakness, Opportunities and Threats) analysis for Ajman port using the information I got from the interviews and the information on opportunities and threats that I got from the literature review.

SWOT ANALYSIS

Strengths of Ajman Port

It is a part of group of Hutchison Ajman International Terminals that has presence in more than 26 countries and has 52 ports in these countries.

It consists of large warehousing facilities that make storing large number of containers and cargo easy.

The port contains numerous offices and buildings that can be rented out by agents and shipping lines making access easy.

There are separate ship docks for repair on the port making it tranquil for the ship captains and crew to fix their ships and equipment.

The facility of cargo consolidation and deconsolidation exist at this port.

Weaknesses of Ajman Port:

Ajman Ports lack sophisticated technology that is present on larger ports like Jebel Ali and Khorfakkan.

The customer base of Ajman port is very small as compared to its competitors and in regards with its size.

Ajman port does not possess enough forklifts or cranes in order to manage excess containers and cargo.

Opportunities for Ajman Port:

It should capitalize more on its Free Zone project that exist to provide shipping companies a 100% tax free environment.

The Cost reductions scheme of HAJT through introduction of new equipment can be beneficial.

With the latest trend in Information Technology and sophisticated equipment, Ajman port can increase its efficiency by utilizing this technology.

There still exists a room for expansion for Ajman Port in terms of operations and infrastructure.

Threats to Ajman Port:

There are strong competitors like King Abdul Aziz Port in Dammam and the port of Jebel Ali that threaten it.

Emergence of the new Competitors such as the New port project In Qatar can cause a lot of problems.

Investment made by Khalifa Port to improve technology as stated in (GULF, 2012) can cause a lot of problems for Ajman port in the local market.

PORTER’S FIVE FORCES MODEL

The Porter five forces analysis of Jebel Ali is as follows.

EXISTING RIVALRY

Jebel Ali port has a lot of existing rivals in both the local and domestic industry. Khalifa Port of Abu Dhabi seems to be an ultimate competitor for Jebel Ali in the domestic UAE market. But when looking at the overall competitors in the middle- east there exist many strong competitors such as King Abdul Aziz port (Saudi Arabia), Shuwaikh Port (Kuwait), Jeddah Seaport (Saudi Arabia), Mina Salman Port (Bahrain) and Port Of Salalah (Oman). All these ports are well established in their respective countries.

THREAT OF NEW ENTRANTS

Jebel Ali seaport does not face any significant threats from the side of competitors because it is already a very established port. It has been awarded for the best port of the middle- east fifteen times. And it has around 6700 companies situated on the port. And this makes it a very strong company for its competitors.

Bargaining power of Suppliers

The bargaining power of the shipping companies varies from country to country. It all depends upon the number of suppliers and the size of suppliers in the industry. As there are many ports in the UAE therefore the bargaining power of suppliers is higher with The Jebel Port.

Bargaining Power of Customers

The bargaining power of customers is limited with respect to the Jebel Port because the port is very much established and has a lot of brand loyalty in the area of Dubai. It also contributes 20% of its funds to the GDP of Dubai which clearly proves that the port has a lot of influence on the economy and on the customers.

Threats from Substitutes

There are no significant threats for Jebel Port in the UAE except for Port Khalifa. With the commencement of commercial operations at Khalifa Port’s unique semi-automated container terminal, the dynamics of the port industry can change a little. Therefore, Jemel Port will have to be very much aware about the strategies employed by Khalifa Port. On the other hand international competitors like Jeddah Seaport, King Abdul Aziz port and the Shuwaikh Port can be potential threats.

PORTER’S five forces Model.

SHUWAIKH PORT

SHUWAIKH Port Kuwait has been witnessing recent growth in the TEU’s over the years. The TEU’s handled have doubled since 2000 (CHAIN, 2006) (AECOM, 2012). The Kuwaiti port is planning an investment strategy for the accommodation of future growth because they seem to have no anxiety about the future.

Existing Rivalry

The Rivalry for Shuwaikh Port basically resides in the international market. This is because it is the market leader in the domestic market. The Jeddah Seaport, Khalifa Port, Jemel port, King Abdul Aziz Port Salalah Port compete with Shuwaikh port In the international Market.

THREATS FROM NEW ENTRANTS

The market for ports is already very saturated in the international market, but Shuwaikh port is dominating the domestic market in the port industry. Qatar is planning a new port Project in Doha which can be a big problem for Shuwaikh Port in the future. (AECOM, 2012) states, “Specialists from AECOM’s industry leading global transportation and program management practices have been functioning with our local design professionals on this new-fangled port facility project ever since 2010.” And this clearly depicts that Qatar is all set to enter the market with its new port Plan.

Bargaining Power of SUPPLIERS

The bargaining power of suppliers in the Kuwait market is relatively higher. This is because the switching costs for Shuwaikh are high in the domestic market. The number of ports operating in Kuwait is lower as compared to other countries. Therefore the Suppliers have a lot of say in the market.

Bargaining Power of Customers

Looking at the TEU’s handled doubling in the market since 2000, it can be inferred that more and more customers prefer Shuwaikh Port for their cargo and container services. Shuwaikh port has the required brand loyalty in the market so the bargaining power of the customers is not very high.

Threat From Substitutes

Threats from substitutes don’t really exist for Shuwaikh because the company has been expanding its operations over time. Secondly Shuwaikh has a natural market for containerized product imports to Iraq which are expected to increase further with more rapid growth.

In the article by Arabian Supply Chain (2006) it is stated, “Kuwaiti port is planning an investment plan to stimulate future growth,” which proves that Kuwaiti market is all set to expand its operations to a higher level.

PORTER’S FIVE FORCES ANALYSIS (JEDDAH ISLAMIC SEAPORT)

JEDDAH Islamic seaport is a very established sea port of Saudi Arabia and. It handles around two thirds of countries total import traffic (CHAIN, 2006). It is the largest principal port in the middle-east outside of Dubai.

EXISTING RIVALRY

It has many local competitors. Some of the best include Dammam port and Dhuba port. The rest of its competitors are international and competes a lot with Jebel port and Khalifa port. Shuwaikh Port is another possible competitor in the middle-est.

Threat from New Entrants

There are no significant threats from new entrants in the local industry. But on the regional level the New Port Project (AECOM, 2012) of Qatar can be a big problem. The latest technology to be introduced by Port Khalifa as stated in (GULF, 2012)can also pose threats to Jeddah Seaport.

Bargaining Power of Suppliers

The bargaining power of suppliers in the region is low because too many suppliers exist in the market is Saudi Arabia. Therefore, the Switching costs of Suppliers are expected to be low for Jeddah seaport.

Bargaining power of customers

The bargaining power of customers is also very high. Customers have a lot of choice in Saudi Arabia because a lot of port companies are operating in diversified areas. Therefore the switching costs for customers are expected to be low.

Threat from Substitutes

Substitutes cannot pose a big threat to Jeddah seaport on the local level because the port is very much established and controls around two third of country’s total import traffic. Therefore the company is very much established.

PORTER’S FIVE FORCES ANALYSIS. (AJMAN PORT)

The Porter’s five forces analysis for Ajman port is as follows

EXISTING RIVALRY

Many rivals exist for Ajman port in the UAE as well as the middle-east. Jebel Port and Khalifa port are the biggest competitors of Ajman. Currently they dominate the market and are in a good market position.

THREAT FROM NEW ENTRANTS

There are no known new entrants planning to enter right now in the seaport industry in UAE. But, Khalifa Port is planning a very heavy investment in latest state of the art technology and is investing around $7.2 billion on their new project. This can cause a lot of competition in the local market and may result in heavy losses for some competitors.

BARGAINING POWERE OF SUPPLIERS

The bargaining power of Suppliers is expected to be low. This is because many ports exist in the UAE so there are many suppliers to cater to these ports. When the number of suppliers increases their bargaining power decreases and the customers gets an advantage in terms of choice. Ajman port has a chance to choose best suppliers for their work.

BARGAINING POWER OF CUSTOMERS

Buying power of customers is expected to be high because the customers of Ajman port have a lot of other ports to choose from. Therefore, Ajman port will have to compromise on the prices in order to compete in this competitive environment.

BARRIERS TO ENTRY

The competitor ports such as Jebel port and Khalifa Port use the latest technology to cater to its customers as stated in (GULF, 2012). The technology requires very heavy investment to come into this business. Therefore the barriers to entry are considerably high. Ajman port will also have to invest in latest technology equipment to compete with its rival firms.

COMPETITIVE RIVALRY

There are a lot of local and international competitors for Ajman Port and the competition is very intense. The switching costs are also very high which makes the industry extremely competitive to survive in. Local Competitors like Port Fujairah, Port Khalifa and Jebel Port are very well placed in the market.

COMPARISON BETWEEN DIFFERENT PORTS ACCORDING TO PORTER’S FIVE FORCES ANALYSIS

The comparison between different ports tells us that the Jebel port is very much established in the UAE and the JEDDAH seaport is very much established in Saudi Arabia. The Shuwaikh Port of Kuwait is also expanding its operations rapidly, and is exploring new trading options as stated in (CHAIN, 2006). The porter’s analysis of Ajman port looks weak as compared to some of the best ports available in the middle-east. It will have to make many improvements in its outlook in order to compete in this intense market. The company should be ready to face the un- anticipated economic changes and changing market dynamics over time.

CONCUSION

The analysis tells us that Ajman port will have to focus a lot on technology, customers, location, storage capacity, suppliers, trading routes and Infrastructure. If the Ajman port managed to address these issues then it can definitely position itself high in the market. the literature review tell us that Jebel Ali Port can act has a very dangerous competitor for Ajman port in the future because it is a highly rated sea port of UAE and called by many as the jewel in the crown Middle-East as stated in (CHAIN, 2006). The research thesis will focus on the ways Ajman port can improve its position as compared to that of its competitors. How it can overcome the weaknesses and how it can improvise on the opportunities provided will also be thoroughly addressed in the research paper.