The Global Container Shipping Industry

The Global Container Shipping IndustryThe globose container transit industry domiciliate be characterized as an oligopoly. More all over, in that respect argon few sellers and the provided go or products are quite similar. It is classical to construe the commercialize building in tercet levels the industry, the conglutinations and the deal level. The merchandise is characterized by world(a)ization. As a result, thither is a exigency to meet customers collects and invest in resources as well as technology. So we give the axe say mention the amplification of the world economy and the world trade. Shipping companies ingest twain choices, arrive at an alliance or the other one is mergers and acquisitions. I will likewise use a graphic explanation to present the trends and how the industry has evolved over the past years. Lastly, this assignment mentions the importance of the oligopolistic characteristics in the ball-shaped container shipping industry.THE patienc eIn the global container shipping industry we could meet collusions which are more(prenominal) commonly known as shipping conferences. We all know that their psyche activity is to fix payload rates in certain routes and ring barriers in the entry of new sign of the zodiacs. Conferences are cartels acting like monopolists, because at that place were substantial scale economies in the industry that led to a splendid number of satisfyings (Marshall,1921). After the abolishment of the anti-monopoly immunity of fr eight-spot conferences (18 October 2008, Regulation 4056/86) and devoted the trend of growing consolidation the market evolves into a more covert market where operational agreements are more important.The market has become more concentrated and the midgetest operators have a market share of less(prenominal) than 1% each. As we throw out observe from table 1 above draw 10 carriers have a market share of 63.5%. Comparing to the market share of top ten carriers in 20 00 which was 49.3% (alphaliner) in that respect is a singular augment in market share as well as in numerate TEUs. Moreover, few libertines nominate most of the market bureau and probably puke influence in a high ground level the market. They squirt set entry barriers and also make agreements on the freight rates. It is very important for firms to cooperate and acting like monopolists. As a result, each firm must be aware of the other players actions. repayable to, this oligopolistic characteristic the industry is more complex and needs to face many a(prenominal) factors. Moreover, the rapidly changing customer requirements, the deployment of ever big container vessels, advances in discipline technology, increasing ambition and intense consolidation.( ) Leading to few firms go forling the high trade routes and to the phenomenon of multi-trade strategic alliances.ALLIANCESWe shag also measure the degree of immersion by analyzing the alliances that have been created over the past years. This is a common expense reduction in oligopolistic markets and of great importance. An alliance helps to obtain greater market shares and hold up more effectively the trade routes as well as the capacity.We piece of tail notice almost quintuplet advantages in the trend of alliances in the global container shipping industry. Furthermore, it rotter serve more efficient wider geographically routes. Secondly, they can plan their vessels in a more global scope. Of course, there is less risk, because risks are shared. They can cite more frequent services to their customers, importation more frequent schedules. Lastly, economies of scale become more visible and there is also an increase in the size of it of the ships. (Ryoo, 2000)It is noteworthy to analyze three of the most important alliances over the past years. Furthermore, these three alliances started with an agreement on collaboration for east-west trades and then extended to north-south services.The f irst alliance we will project is New World confederacy. It includes mainly APL, MOL and HMM. Its overall capacity in TEUs is 1.161.468 and owns 282 vessels. Imagine that in 2000 the capacity of this alliance was 325.487 and the number of vessels 90. As we can see it highly increased its market share and this is very important in oligopolistic markets, because you can influence the market as well as manage more properly the capacity.Another noteworthy alliance is the guanine Alliance. In February 2006, after PO withdrawal the new Grand Alliance formed by Hapag-Lloyd, OOCL, and NYK Line. Its overall capacity in TEUs is 1.187.607 and owns 288 vessels. In 1996 it have only 255.705 TEUs and 72 vessels. Grand alliance manages twelve services in the transpacific trade. Lastly, this alliance has showed the most stable formation comparing to the other two alliances.The greatest alliance is CKYH with main partners Hanjin, Yang Ming, K Line and COSCO. It counts 1.548.508 TEUs and 400 vesse ls. It manages eight services on the Europe Asia route which has the largest capacity in TEUs. Surely, this alliance has a great market share and also is highly competitive.Of course, alliances have a great impact in the market share, but it is vexed to cooperate as the size of the conference increases. They act like monopolists, because they can influence the price. Competition makes baffling to other firms to compete or inscribe in the market. This characteristic is of highly importance in order to start in this tough market where overcapacity and decreasing demand exists nowadays. Firms may examine many reasons why to join an alliance strategic reasons, operational reasons, in order to increase or simplification connectivity to increase or fall capacity, to introduce a new service, to suspend a service, to merge services, to demerge services, to offer slots for charter and to offer slots. (Panayides, 2011)TRADE LEVELWe will examine the trade level of two routes, Black s ea Far eastward and US trade. Moreover, we will focus on the trade lane with port ranges at either end. (Brooks, 2000)In the route Black Sea Far East the top seven firms have a market share of total 89%, so the other firms have only the rest 11%. Surely, there is a very high percent of meanness in this trade route. Moreover, MSC holds 23,15%, Maersk Line 20,33%, CMA-CGM 13,81%, Zim 13,55%, CSAV Norasia 11,64%, Hapag Lloyd 4,99% and K Line 1,53%. (www.dynamar.com) We can shut that a tight oligopoly exists in the trade line of Black Sea Far East. Meaning that the production rises but there is a decrease in price, because the firms possess large shares and acting more like monopolists. Furthermore, it is heavy for new firms to enter this lane.The other trade line that we will examine is US which is more complicated than the previous one. Moreover, the top ten firms hold almost a 65% of the total market share. So we can say again that in trade line exists an oligopoly, but the fi rms are much more and hold less market shares. Maersk Line market share is 15,27%, Evergreen 7,67%, Mediterranean Shg Co 7,20%, Hanjin 6,54%, APL 6,18%, Hapag Lloyd 6,05%, COSCO Container Lines 4,28%, OOCL 4,26%, NYK 4,04% and China Shg C.L 3,90%. A intimately exam of this market shows us that competition is greater, but the market is larger and very attractive to new firms. As a result, if we use expeditiously the oligopolistic characteristics firms will increase their market shares and it will be more difficult for new firms to enter. Of course it is difficult to cooperate efficiently when the size of the group increases, but you can handle more adequate the capacity and the competition something that is very important nowadays.After analyzing these two different trade lines we understand the meaning of the existence of the oligopolistic characteristics. Moreover, capacity can be handled more efficiently and minimize competition by increasing your shares.GRAPHIC EXPLANATION OF THE sizeableness OF OLIGOPOLISTIC CHARACTERISTICS IN THE GLOBAL CONTAINER SHIPPING INDUSTRYI believe a give way explanation can be given by apply a graphic explanation to mention the importance of the oligopolistic characteristics in the global container shipping industry. Moreover, we know from theory that in perfect competition demand curve intersects Marginal Cost curve at the market price P* and it supplies quantity Q*.The firms in this graph are price takers, because there are no entry barriers. Now let see what an oligopolistic firm will do. It will get over quantity to Q0 and at the same beat will increase the price P0 until Marginal Cost equals Marginal Revenue. However, a deadweight loss (consumer and producer) will be created, meaning that the welfare losses to the economy. Lastly, we can observe a surplus to the firm as an oligopoly profit.This result can be represented in the global container shipping industry by selling at greater prices and offering lower service s. Furthermore, smaller containers, gradual service etc as the market becomes more oligopolistic.Secondly, firms may try to increase their market exponent or setting entry barriers. Of course these two result to collusion practices. Moreover, greater concentration can create collusions and reduce coordination costs.However, there are also benefits from the increase in concentration. A firm may increase its profits by taking market power from its rivals. This action can motivate the firm to offer a advance product or service. In shipping industry a better product or service means offering larger containers than other firms or by investing in research and development. Moreover, a firm may invest in order to keep consumers loyal. So the firms can behave more competitively.As the market is acting like an oligopoly, it has resulted in two major trends. First, there has been an increase in container ship sizes. Secondly, there has been an important growth in container throughput. For e xample, seventeen of the top twenty five routes are served with ships exceeding 9000 TEUs. On the other hand, using larger ships you need to make enormous investments in port infrastructure. Lastly, it has reduced the costs of tape transport and local economies have been transformed to global economies.ConclusionThe global container shipping industry is mainly an oligopoly (few players and mainly provide similar services). I try to mention the importance of the oligopolistic characteristics in this market. Moreover, I noticed that big alliances control the majority of the total market share and also high concentration exists even in the trade routes. Highly concentrated markets lead in many occasions to collusions or cartels. It is very dangerous due to anti-trust laws, peculiarly after the abolishment of the anti-monopoly immunity. However, such agreements are very beneficial for the move firms. It is best off to cooperate, but it is very difficult especially when the size of t he group increases. From the graphic explanation we concluded that it is better to produce small quantity and charge prices above marginal cost. Nevertheless, it is up to firms if they are personnel casualty to have negative or positive results. In my opinion, the oligopolistic characteristics in the global container shipping industry lead the market to evolve and become opened to handle the phenomenon of overcapacity and increasing fuel costs.