Economic
The shipbuilding and repair services industry faces impacts from global economic development, changes in economic growth patterns and expectations of increasing and/or decreasing growth in the future (Kakatkar, 2009, pg9). The industry’s main driving force is economic growth because sea is the main source of exportation and importation of goods and services across countries and continents (Nam Sung et al., 2009, pg2). Global shipping freight rates rose in 2013 to their highest level in more than 18 months. The measure, known as the Baltic Dry Index, is seen as a key indicator of global economic growth. The index tracks how much it costs for ships to carry dry-bulk commodities such as iron ore and coal. In reference to shipbuilding being a cyclical industry, Bloomberg Businessweek says “When the global economy is booming and trade is healthy, shippers scramble to meet demand with more and bigger ships. But the time it takes to build them is just long enough, in many cases, for booms to end and global trade to sputter. As more and more new vessels come online, the glut exacerbates the collapse in shipping prices, the industry scales back, companies go out of business, and the process begins again…” (NPR.org, 2013).
An image of a feedback loop depicts how economic conditions influence the demand for ships. As can be seen from the loop, if the world economy improves, then the desired shipping capacity increases as there is more economic activity across the global such as exportation and importation leading to the desire for more ships for transportation purposes. When the desired shipping capacity increases, the gap between the current shipping capacity and the desired shipping capacity also increases which in turn leads to an increased order rate for building ships. Once the order rate goes up, shipbuilding increases which in turn reduces the order rate as more and more orders are completed. Completed orders also increase the current shipping capacity which in turn decreases the gap between desired and current shipping capacity (Nam Sung et al., 2009, pg2).

Fig1. Economic conditions and its influence on the shipbuilding industry
Albeit the shipbuilding industry having a big experience on how to overcome peaks and slumps of economy, the current global crisis hit the shipbuilding industry rather brutally. With such a deterioration, the world’s shipbuilding industry is certainly among the sectors worst affected by the financial and economic crisis. It can have the most painful impact on many ship building countries of the world due to the biggest overcapacity of shipyards ever seen and far greater supply of the fleet than required by the market (Mickeviciene, 2009, pg201). Due to the high level of economic activity in recent years, trade has also increased leading to greater demand for shipbuilding. In addition, the increase in demand for oil has also led to a rise in demand for ships to transport the oil. In the current economic conditions, the movement of business to low-cost areas where economic growth is increasing has also created greater demand for shipbuilding. Also, the fluctuations in the exchange rate in recent years led to higher profits for shipbuilders where the currency exchange rate went up. However, due to the present economic recession the demand for ships is lower than before (Nam Sung et al., 2009, pg6).

References
NPR.org, (2013). Why Is The Global Shipbuilding Business Struggling?. [online] Available at: http://www.npr.org/blogs/parallels/2013/09/17/223321602/why-is-the-global-shipbuilding-business-struggling [Accessed 6 Apr. 2015].
Rima Mickeviciene (2011). Global Shipbuilding Competition: Trends and Challenges for Europe, The Economic Geography of Globalization, Prof. Piotr Pachura (Ed.), ISBN: 978-953-307-502-0, InTech, Available from: http://www.intechopen.com/books/the-economic-geography-of-globalization/global-shipbuilding-competitiontrends-and-challenges-for-europe
Nam Sung, A., Samuel, N., Mahasuwan, P., Pupipat, P. and Shanna, Z. (2009). [online] Available at: http://www.systemdynamics.org/conferences/2010/proceed/papers/P1104.pdf [Accessed 4 Apr. 2015].
Kakatkar, A. (2009). [online] Available at: https://www.scribd.com/doc/21286720/Global-Shipbuilding-Industries#scribd [Accessed 11 Apr. 2015].

Technology
The shipbuilding industry relies heavily on the latest and most innovated technology to complete its job. If it weren’t for the existence of modern technology, ship building would be extremely labour intensive and time consuming. As confidence in technology grew, industry cultures began to soften toward new and better ways of employing technology for the purposes of increasing quality, shortening production cycles and lowering costs. (Anon, 2004, pg7)
However, the issue with technology is providing the right training, research and development to recruit a smart workforce that is able to utilise the available technology to the highest standards in order to easily adapt to innovation and changes instead of fighting it. It is theorised that the current aging workforce will be difficult to retrain and replace, there is a risk that the industry might lose an entire generation of skilled workforce experience in the next 15 years. The combination of recruiting quality skilled workers and replacing near pension workers to become accustomed to the newest and latest technology will be a major challenge for the ship building industry. (Anon, 2004, pg9)
The level of the technology is one of the most important factors influencing the cost competitiveness, especially for large enterprises. As technology simplifies the complex production process, it could reduce ship construction time and cost. Based on the casual loop diagram below, investment in process innovation and technology not only reduces the cost of production but also increases the product attractiveness. Technological innovation becomes the source of competitive advantage and helps them gain higher market share, revenue and profit (Nam Sung et al., 2009, pg15).

Competitive advantage is temporary and may not last forever unless ship builders work towards staying one step ahead of their competitors. This can be done through investment in the emerging technology which will in the long run yield greater revenues for the firms. Countries who are advanced in technology compete with countries who aren’t. They reap the rewards of producing a larger number of ships although their technological costs are very high. Countries who are not modernised with technology benefit from low cost labour costs (Nam Sung et al., 2009, pg18).

References
Anon, (2004). [online] Available at: https://attachment.fbsbx.com/file_download.php?id=758783047575192&eid=ASuV2rpZsBRAf4X0xA6kHSSMKdOu74qJkxWFwpwztX-oswsnah3SsOVAWwZBqjcx7K0&inline=1&ext=1428296745&hash=ASsyM3rLt9P8zccJ [Accessed 8 Apr. 2015].
Mickeviciene, R. (2015). [online] Available at: https://attachment.fbsbx.com/file_download.php?id=625259317618495&eid=ASt2h6R4iGbVhy1eNSFgrITNxG12w5C8fx8qWburd523GMiXsw2nlX0fEjhH5VJ7Nos&inline=1&ext=1428287481&hash=ASuz3dwEjsgBMoj0 [Accessed 5 Apr. 2015].
Nam Sung, A., Samuel, N., Mahasuwan, P., Pupipat, P. and Shanna, Z. (2015). [online] Available at: http://www.systemdynamics.org/conferences/2010/proceed/papers/P1104.pdf [Accessed 4 Apr. 2015].