The Impact Of Container Slot Excess Capacity With Regard To Ocean Freights (Dissertation Sample)
THE IMPACT OF CONTAINER SLOT EXCESS CAPACITY WITH REGARD TO OCEAN FREIGHTSsource..
THE IMPACT OF CONTAINER SLOT EXCESS CAPACITY WITH REGARD TO OCEAN FREIGHTS
Marine freight industry has been struggling with excess capacity since the onset of great recession. As global economy recovers to match the demand before the crisis, the growth has been sluggish almost a decade later. To this end, the reduction in global consumption have persisted since the crisis leading to declining demand for ocean freights. However, shipping capacity remains where it was before the crisis while more capacity continue being introduced into the industry leading to more supply than demand. The current paper sough to investigate the impact of the excess slots on the industry
The paper conducted a literature review with the key goal of evaluating literature on the topic. The analysis that literature into marine shipping is expansive but little research existed in the areas of excess capacity in container shipping. The review of literature investigated the causal factors and effects of the excess capacity as well strategies best suited to address the problem.
The research has made use of descriptive research design to undertake the investigation. Further, the study was descriptive in nature while survey research strategy was used to collect data from primary sources and case studies strategy use to analyses the phenomenon in its real-life context.
The paper established that natural monopolistic nature of the industry as well investment in large ships were the key drivers of overcapacity in the industry. Secondly, both the existing and current research are unanimous that job losses, bankruptcy and financial losses, price competition, and domino effects were key negative effects of the problem in the industry. Further, the paper suggest the use of slow steaming, mergers and acquisitions, and withdrawal of existing tonnage as the best approaches to solve the problem
Oceans freights are one of the oldest modes of transport helping to deliver a large volume of goods into different parts of the world. Since medieval times, people have used ships space to transport goods to overseas land over prolonged periods. Traditionally, ships were transporting loads placed strategically to occupy spaces on the ship to maximize the returns. However, the introduction of containers was a key revolution in the industry that largely depends on space utilization to reduce transportation costs and increase returns. Since the introduction of containers, shipping lines have been largely profitable with companies seeking to build bigger and faster cargo ships with the ability to carry thousands of containers. As Sjostrom (2004) observes, shipping lines were achieving vessel optimization through deploying the biggest ship possible and at the highest speed prior to the financial crisis of 2007. The speed of the vessel was essential in delivering the cargo to its destination using the least minimum time possible.
However, the financial bubble in the U.S that resulted in the economic recession of 2007-2009 has had massive negative ramification in the shipping industry. Such have been the case as most of the sectors that rely on shipping liners to transport their cargo are witnessing sluggish growth with consumption remaining low in most parts of the world. Since the financial crisis, sectors such as motor vehicles, heavy machinery, and oil industries that rely heavily on shipping line have seen slumped growth due to reduced (Rodrigues and Vitale 2015). Further, the global economy has been growing slowly reeling from the 2007-2009 recession whose ramifications were being felt greatly with the credit crisis in European countries. The struggling economy implies that people have less disposable income resulting in less demand for products translating into reduced business for shipping liners. At the backdrop of reduced demand for shipping, liners are excess capacity created prior to the great recession as the industry enjoyed rapid growth. However, shipping lines are beginning to feel the excess burden of running huge ships with little demand leading to high maritime cost whereas the competition in the industry is increasing. Such challenges have resulted in the need for the companies to address the impact of excess capacity as the current paper deliberates.
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