External and Internal Environments (Maersk)

Generia Simmons
BUS 499 Capstone
Professor Clayton Sinclair
May 5, 2013
Choose the two (2) segments of the general environment that would rank highest in their influence on the corporation you chose. Assess how these segments affect the corporation you chose and the industry in which it operates.
The two segments of the general environment that would have major influence over Maersk would be technological segment and physical environment segment. I chose physical environment segment because Maersk realizes the physical changes that they’ll have to make concerning the physical environment. The need to shift to a low carbon economy is what society and businesses need to focus on due to climate change. Climate changes are the key environmental issue in the Maersk group. It’s possible that this is an issue for all shipping companies and all locomotives as well. The Maersk Group has accomplished an 8% improvement in CO2 efficiency since 2010. In 2007, Maersk oil saw a reduction of 86% in Co2; also in 2007 Maersk line saw a 25% CO2 reduction per container. The improvements are mainly due to Maersk Line's advancement in energy efficiency (Maersk.com). Maersk set a target goal for (2010-2020) to reduce CO2 by 20%. The technological segment of Maersk encompasses many different aspects. For the shipping industry, mobile communication offers the chance to employ new and efficient ways of addressing fleet management, improving communications with vessels, handling delivery times, allowing practical issue resolution and rapid information sharing with customers as well as improving energy productivity. The technological segment will allow Maersk to supply their customers with e-business shipping that is vital to the company’s growth. Maersk just recently signed a 12 year contract with INTTRA, the world’s largest multi-carrier shipping network for ocean shipping. This commitment will allow the companies to increase customer service satisfaction and eliminate costs and drive productivities through the use of e-commerce solutions in the shipping industry
Considering the five (5) forces of competition, choose the two (2) that you estimate are the most significant for the corporation you chose. Evaluate how well the company has addressed these two (2) forces in the recent past.
The five forces of competition are * Threats of new entrants * Bargaining power of suppliers * Bargaining power of buyers * Threat of substitute products * Rivalry among competing firms
The two that I believe are the most significant for Maersk is the bargaining power of buyers and rivalry among competing firms. Maersk handles the bargaining power of buyers by adapting well to new technology. In this world of technology and different gadgets every company is trying to adapt to new technology in their day to day businesses whether it’s by the e-processing of documents or fast data entry companies refuse to be left behind. Maersk is technologically advanced in this field, all their data processing is being done electronically by back office and customers are able to access all information relevant to shipment though dedicated space available on company website. Electronic processes are shipping bills, vessel certificates, freight invoices and bill of lading in encrypted format, payment is done by the customer either electronically or at their local office. Maersk is located practically all over the world, in certain countries it’s probably the only player operating and more than likely their profits are great. Rivalry among competing firms in this industry is very low; However competition is in this industry. The majority of the companies competing are based on efficient operations as well as safety records. Larger companies have their advantages because of their large fleet size and access to most of the major ports; while the smaller ones can transport many unusual cargos through smaller ports. Rivalry will be influenced by the stakes at risk in preserving the market share of regional traffic. The greater the risks are the more intense the rivalry will be to preserve the market share. Rivalry can also be infused by the ability to control operations. Rivalry with competitors can be impacted by the ability of port authorities and port service providers to control the efficiency of port services. Maersk has addressed these concerns by either increasing or lowering their prices, switching to different ports or partnering. Maersk dominates the market due to its wide area coverage, better connectivity, best business practices, and cost controlling measures.
With the same two (2) forces in mind, predict what the company might do to improve its ability to address these forces in the near future.
Maersk has managed to maneuver their businesses in such a way that they get maximum profits for their service. I really don’t think that there is much Maersk need to do to improve its ability to address bargaining with buyers. I do believe that they should stay updated on the different technologies introduced. Maersk needs to make sure that they’re processing documents in a timely matter. One thing that I think needs improving is their prices. The reason many consumers tend to go with a competitor is because the price is lower. I would not say to price match the product, but either offer insurance for free or some type of incentive. Maersk is dealing with competitors by increasing reefer rates, so that they can return to productivity and see a much bigger return. They also took the initiative to negotiate with their customers on what their contracts should look like and how much quantity they want to take. In order for Maersk to remain the #1 shipping carrier it must fight harder to maintain the title of the world’s most reliable carrier. Many customers expect a secure and on time delivery. The challenge for Maersk Line is if two carriers have the same reliability slogan, consumers will begin to look at the price, which would be a dangerous development for Maersk Line - and the shipping industry as a whole. Maersk needs to make sure they are paying attention to the competition and listen to what consumers or saying, whether it’s about reliability or security. In regards to rivalry with competing firms Maersk may want to introduce new strategic plans with very specific initiatives that focuses on building the business more, making investments, retain its existing customers and making alliances.
Assess the external threats affecting this corporation and the opportunities available to the corporation. Give your opinions on how the corporation should deal with the most serious threat and the greatest opportunity. Justify your answer.
The external threats of Maersk are the economic slowdown, rising cost of business, and the changes in negotiations in various countries. The economic slowdown has affected Maersk line because in the past few years as the shipping industry has been hit by overcapacity. I’m not sure that Maersk will see growth in world trade this year simply, as growth in other countries like the United States and Asia make up for the inactive European markets. Rising cost of business affects Maersk due to lower production volumes in its oil business and reduced ownership of Danish oil assets, in addition to modest growth predictions. Though Maersk is seeing higher profits this year because of high freight costs, there are still modest about surpassing their financial results from last year. In order for the corporation to raise profits it needs to focus on making capacity adjustments and docking some ships. The opportunities available for this corporation is to expand their customer base through new services or geographically. Another factor that can be used is making strategic alliances and joint ventures with companies that can improve the weaknesses of the company. New available technological innovation can also propel Maersk even farther above their competitors. Maersk can deal with the serious threat of economic slowdown by carefully monitoring the supply and demand and take ships out if not needed. Because of the lackluster demand for shipping containers, Maersk needs to innovate other ways to get products to other countries, whether it’s by implementing more visibility on the road or air transportation. Maersk needs to make sure that they are able to turn a profit. The greatest opportunity is strategic alliances and joint ventures. I choose this because Maersk joined Sea-land, the largest US carrier in the 1990s due to facing raising costs of providing global coverage. The purpose of the alliance was to share costs of expenses. Maersk also joined the World Ocean Council in July 2011 to support global leadership and collaboration on ocean sustainability. This is building an alliance of companies to create the platform for emerging science-based solutions to the collective ocean environmental challenges facing the ocean business community.
Give your opinion on the corporation's greatest strengths and most significant weaknesses. Choose the strategy or tactic the corporation should select to take maximum advantage of its strengths, and the strategy or tactic the corporation should select to fix its most significant weakness. Justify your choices
In my opinion Maersk has more strengths than weakness. Maersk is known as the largest container ship operator and supply vessel operator in the world. They also operate in over 130 countries, with a workforce of more than 100,000. Maersk is the parent company with several major brands operating in two major industries: shipping, oil and gas. Maersk brands include Maersk Line, APM Terminals, Maersk Oil and Drilling. Maersk built their strengths focusing on their financial strengths, talented employees, approach to sustainability, size and global reach and their drive to continuously innovate new products. Maersk is known as a strong global brand with a reputation as a top industry player. The weaknesses that falter this corporation are their relatively low visibility in road and air transportation and secondly a concern over their fluctuating profit margins. Maersk should use the cost leadership strategy to take advantage of its strength. According to Hitt, Ireland and Hoskisson(2012), “having the low-cost position is valuable to deal with rivals” (p.111). This could possibly be a good move for Maersk if they want to hold off rivals to regroup and gain alliances. To minimize their weakness I believe that the differentiation strategy would work best for the company. In order for them to totally eliminate or improve their weaknesses Maersk will have to come up with another slogan that hinders their competitors from copying. Take for instance Hanjin Shipping; they are now competing with Maersk based on their reliability slogan. Maersk needs to create new for their customers, instead of just solving a problem; the company needs to focus on providing a complete solution to the customers needs.
Determine the company’s resources, capabilities, and core competencies.
The resources for Maersk revolve around the shipping industry, logistics, software, warehouses and road transportation. Their focus is to make sure that products are being delivered on time and that the customer is happy. A division of the Maersk line, Maersk oil capabilities focuses on how they turn marginal fields into commercial successes and are among the best operators of tight difficult reservoirs. Maersk continues to build their asset portfolio through innovation of new technologies that will be able to strengthen their strategic partnerships. Their core competencies are reflected in their horizontal drilling and advanced completion and stimulation technologies. The horizontal drilling was use in the Al Shaheen oil development field in Qatar. The goal was to enhance the field and raise construction by drilling producing and water injection wells and installing a specified number of new build platforms, facilities and pipelines. Maersk team accomplished this by being innovative thinkers and having a qualified staff. Maersk has developed advanced water flooding techniques to maximize oil recovery, in particular in low-permeability fields. They have also made substantial progress with advanced seismic technologies. Maersk Logistics is a worldwide cargo organization delivering integrated logistics solutions to major customers with a focus on consolidation of cargo in the Far East, customs clearance and air freight. Maersk core competencies are based on ship management. Under the U.S. flag fleet includes 45 vessels, and our parent company, the A.P. Moller - Maersk Group operates more than 1,300 oceangoing ships. Our organization has the global reach, innovative skills and R & D resources to operate vessels of all classes, sizes and purposes, for commercial and military customers. Maersk currently operates, manage and maintain a total of 11 government ships.
Analyze the company’s value chain to determine where they can create using the resources, capabilities, and core competencies discussed above.

Reference

www.Maersk.com
Naesby, M. http://www.offshore-mag.com/articles/print/volume-70/issue-9/middle-east/horizontal-drilling-enables-development-of-complex-al-shaheen-field.html
Stempel, Alex Von .http://thecoolstar.com/shippers-question-maersks-claim-that-they-accept-reefer-rate-rises/