Change strategy and management organization of Shipping Company as respond to severe market conditions

Content

Introduction 6
Part 1. Management as object of research 8
1.1. Economic bases of change management 8
1.2. The analysis of researches in the field of management of the companies. 12
1.3. Features of strategy of Blue Ocean 16
Part 2. Features of management shipping company 21
2.1. Management organisation of Shipping Company 21
2.2. Modern shipping and management 28
2. 3. Working out of strategy for NYK on the basis of the SWOT-analysis 31
Conclusion 34
Bibliography 36
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Content

Introduction 6
Part 1. Management as object of research 8
1.1. Economic bases of change management 8
1.2. The analysis of researches in the field of management of the companies. 12
1.3. Features of strategy of Blue Ocean 16
Part 2. Features of management shipping company 21
2.1. Management organisation of Shipping Company 21
2.2. Modern shipping and management 28
2. 3. Working out of strategy for NYK on the basis of the SWOT-analysis 31
Conclusion 34
Bibliography 36

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The metaphor of red and Blue Oceans describes the market universe11. "Red Oceans" are all the industries in existence today—the known market space. In the Red Oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to grab a greater share of product or service demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities or niche, and cutthroat competition turns the Red Ocean bloody. Hence, the term "Red Oceans".
"Blue Oceans", in contrast, denote all the industries not in existence today—the unknown market space, untainted by competition. In Blue Oceans, demand is created rather than fought over. There is ample opportunity for growth that isboth profitable and rapid. In Blue Oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue Ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored.
The corner-stone of Blue Ocean Strategy is 'Value Innovation'. A Blue Ocean is created when a company achieves value innovation that creates value simultaneously for both the buyer and the company. The "innovation" (in product, service, or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market. The authors criticize Michael Porter's idea that successful business are either low-cost providers or niche-players. Instead, they propose finding value that crosses conventional market segmentation and offering value "and" lower cost.
This idea was originally proposed by Prof. Charles W. L. Hill from Michigan State University in 1988. Prof. Hill claimed that Porter's model was flawed because differentiation can be a means for firms to achieve low cost. Prof. Hill proposed that a combination of differentiation and low cost may be necessary for firms to achieve a sustainable competitive advantage.
Many others have proposed similar strategies. For example, Swedish professors Jonas Ridderstråle and Kjell Nordström in their 1999 book "Funky Business" follow a similar line of reasoning. For example, "competing factors" in Blue Ocean Strategy are similar to the definition of "finite and infinite dimensions" in "Funky Business". Just as Blue Ocean Strategy claims that a Red Ocean Strategy does not guarantee success, "Funky Business" explained that "Competitive Strategy is the route to nowhere". "Funky Business" argues that firms need to create "Sensational Strategies". Just like Blue Ocean Strategy, a Sensational Strategy is about "playing a different game" according to Ridderstrale and Nordstrom. Ridderstrale and Nordstrom also claim that the aim of companies is to create temporary monopolies. Kim and Mauborgne explain that the aim of companies is to create Blue Oceans, that will eventually turn red. This is the same idea expressed in the form of an analogy. Ridderstråle and Nordström also claimed in 1999 that "in the slow-growth 1990s overcapacity is the norm in most businesses". Kim and Mauborgne claim that Blue Ocean strategy make sense in a world that supply exceeds demand.
1.3. Features of strategy of Blue Ocean
V.Chan Kim, R.Moborn's book "Strategy of Blue Ocean" became result of research more than thirty industries for last hundred years. Analyzing the data, researchers have found out a certain sequence of strategic thinking which preceded creation of the new market or the industry. It also has been named by strategy of Blue Ocean. The logic of this strategy differs from traditional models which concentrate attention on struggle in the existing market space named the author by Red Ocean.
Red Oceans represent all branches existing now - known market space. At Red Oceans of border of branch are accurately defined and are not challenged, and competition rules are absolutely clear. According to these rules, the companies try to surpass each other to acquire the right to satisfy as it is possible the most part of available demand. In process of competition toughening in such market of prospect of growth and reception of profit at the company become more and more doubtful. Novelties turn to consumer goods, and the growing competition paints waters of this business ocean in blood-red colour.
It is necessary to carry all branches which now does not exist, - unknown market space to Blue Oceans, free from a competition. At Blue Oceans demand is created, instead of is a subject of fierce struggle. Here there are enough possibilities for company development, for increase in profit and fast rates of increase12.
Probably, most important feature of strategy of Blue Ocean is that it rejects a fundamental principle of traditional strategy: between advantages and the price there should be a compromise. According to this thesis, the company can or offers users products more valuable to them under higher price, or create comprehensible decisions on the advantages at lower price. I.e. strategy is reduced to maneuvering between unique advantages and the low price. But so far as concerns Blue Oceans, the facts surprise: the successful companies offer products not only excellent, but also cheaper.
Cutting expenses and at the same time becoming more attractive to consumers, the company can achieve sharp increase in value both for itself, and for the clients. As value for the buyer develops of advantages of a product and its price, and value for the company - from a parity of expenses and the price, strategy of Blue Ocean is formed only when all actions of the company on which advantages of a product depend, the price and costs, are correctly co-ordinated. It also is the general system approach which transforms creation of Blue Oceans into stable strategy which unites all spectrum of functional and operational activity of firm.
The competition is the important factor. But, concentrating exclusively on it, theorists, heads and advisers ignore two prominent aspects of strategy. The first is connected with search and development of the markets where the competition is insignificant or is absent at all, - Blue Oceans, and the second - with use and protection of Blue Oceans.
The competition in the markets does not allow to keep high economic efficiency. To keep it it is possible, only having created Blue Ocean - free from contenders market space.
It is obvious that in the long term Blue Oceans become the basic source of economic growth. The potential of the majority of recognised segments of the market - Red Oceans - is gradually reduced. Technological achievements only increase productivity of branch, allowing suppliers to create is unprecedented a wide spectrum of the goods and services. And as trading barriers between the states and regions collapse, and the information on products and the prices becomes instantly accessible to all globe, the specialised markets and monopolists-heavyweights will disappear.
Kim and Mauborgne studied about one hundred fifty positions made from 1880-2000 in more than thirty industries and closely examined the relevant business players in each13 . They analyzed the winning business players as well as the less successful competitors. Studied industries included hotels, cinemas, retail stores, airlines, energy, computers, broadcasting, construction, automotive and steel. They searched for convergence among the more and less successful players. Divergence across the two groups was also studied to discover the common factors leading to strong growth and the key differences separating those winners from the mere survivors and the losers. Kim and Mauborgne defined a consistent and common pattern across all the seemingly idiosyncratic success stories and first called it value innovation, and then Blue Ocean Strategy.
Kim and Mauborgne argue that traditional competition-based strategies (Red Ocean strategies) while necessary, are not sufficient to sustain high performance. Companies need to go beyond competing. To seize new profit and growth opportunities they also need to create Blue Oceans.
The authors argue that competition based strategies assume that an industry’s structural conditions are given and that firms are forced to compete within them, an assumption based on what academics call the structuralist view, or environmental determinism. To sustain themselves in the marketplace, practitioners of Red Ocean strategy focus on building advantages over the competition, usually by assessing what competitors do and striving to do it better. Here, grabbing a bigger share of the market is seen as a zero-sum game in which one company’s gain is achieved at another company’s loss. Hence, competition, the supply side of the equation, becomes the defining variable of strategy. Here, cost and value are seen as trade-offs and a firm chooses a distinctive cost or differentiation position. Because the total profit level of the industry is also determined exogenously by structural factors, firms principally seek to capture and redistribute wealth instead of creating wealth. They focus on dividing up the Red Ocean, where growth is increasingly limited.
Blue Ocean strategy, on the other hand, is based on the view that market boundaries and industry structure are not given and can be reconstructed by the actions and beliefs of industry players. This is what the authors call “reconstructionist view”. Assuming that structure and market boundaries exist only in managers’ minds, practitioners who hold this view do not let existing market structures limit their thinking. To them, extra demand is out there, largely untapped. The crux of the problem is how to create it. This, in turn, requires a shift of attention from supply to demand, from a focus on competing to a focus on value innovation—that is, the creation of innovative value to unlock new demand. This is achieved via the simultaneous pursuit of differentiation and low-cost. As market structure is changed by breaking the value/cost tradeoff, so are the rules of the game. Competition in the old game is therefore rendered irrelevant. By expanding the demand side of the economy new wealth is created. Such a strategy therefore allows firms to largely play a non–zero-sum game, with high payoff possibilities.
Blue Ocean Strategy has introduced a number of practical tools, methodologies and frameworks to formulate and execute Blue Ocean Strategies, attempting to make creation of Blue Oceans a systematic, repeatable process. Some of these are listed below; "Additional tools/methodologies/frameworks for strategy formulation"14
The six paths framework
The sequence of Blue Ocean Strategy
Buyer Utility map
Buyer experience cycle
The profit model of Blue Ocean Strategy
Price corridor of the mass model
Four Step Visualizing Strategy Process
Pioneer-Migrator Settler Map
Three tiers of noncustomers framework
Leaning against the researches, authors have described six ways of creation of «Blue Ocean».
The first way: to consider as competitors not only representatives of the branch, but also the companies working in alternative branches. For example, cinema and restaurants — absolutely different kinds of business. However for visitors Saturday evening they represent equivalent possibilities of pleasant pastime.
The second way: to reject alternative «the low prices or high quality» and to understand that besides the price and quality influences a choice of clients. The Texas company Curves has created the «blue ocean», having united advantages of visiting of the fitness centre and house employment on training apparatus. Its fitness centres are conveniently located, deprived any luxury and are inexpensive. But the main thing that does their attractive to the women hesitating of the figure, — in them is not present curious men.
The third way: to consider a chain of buyers. Not always the one who makes the decision on purchase, is the end user of a product. Usually pharmaceutical companies are guided in the strategy by the doctors who are writing out a medicine, instead of on patients. Company Novo Nordisk from Denmark, making insulin, has broken this rule, having made the product convenient for patients. She has created the device for the injections, similar to a pen. In it the necessary dose of a medicine already contains, and the patient needs to press the button only.
The fourth way: to offer additional products and the services having value for the buyer. So, the Hungarian company NABI, the manufacturer of trip buses, has found out that the city bears the greatest expenses not so much because of the bus price, how many because of its repair and service. She has developed the easy bus from fibreglass which does not require a corrosion-resistant coating, and its repair manages much more cheaply.
The fifth way: to combine functional and emotional appeal of the goods to buyers. In one branches the competition goes basically for functional utility of the goods, to others — for feelings of buyers. But it is possible to arrive, as firm Swatch which has transformed manufacture of hours from functionally focused branch into the legislator of a youth fashion.
The sixth way: to peer in tomorrow and to see possibilities for creation of "blue ocean». Authors cite as an example CNN, estimated importance of globalisation and the first round-the-clock worldnet which has based in the answer of news.
While co-authors, Professor Kim and Affiliate Professor Mauborgne, propose approaches to finding uncontested market space, at the present there are few if any success stories of companies that applied their theories. This hole in their data persists despite the publication of Value Innovation concepts since 1997. A critical question is whether this book and its related ideas are "descriptive" rather than "prescriptive."
The research process followed by the authors has been criticized on several grounds. No control group was used. There is no way to know how many companies exploiting a Blue Ocean strategy concept failed. The theory therefore does not meet the falsifiability criteria in practice. A deductive process was not followed. The examples in the book are selected to "tell a winning story".
A whole chapter of the book explaining what the authors call "Tipping Point Leadership" is based on a conclusion that the drop in crime in New York city was caused by a change in policies, actions, and leadership. However, according to the book Freakonomics, crime rates dropped due to an increase in abortion rates several years earlier. Crime rates fell simultaneously in cities other than New York that had not applied what the authors call Tipping Point Leadership.
Brand and communication are taken for granted and do not represent a key for success. Kim and Maubourgne take the marketing of a value innovation as a given, assuming the marketing success will come as a matter of course.
The book only presents a snaphot overview of 3 industries: automobiles, computers and movie theaters.
It is argued that rather than a theory, Blue Ocean Strategy is an extremely successful attempt to brand a set of already existing concepts and frameworks with a highly "sticky" idea. The Blue Ocean/Red Ocean analogy is a powerful and memorable metaphor, which is responsible for its popularity. This metaphor can be powerful enough to stimulate people to action. However, the concepts behind the Blue Ocean Strategy (such as the competing factors, the consumer cycle, non-customers, etc.) are not new. Many of these tools are also used by Six Sigma practitioners and proposed by other management gurus.
Part 2. Features of management shipping company
2.1. Management organisation of Shipping Company
The shipping companies are the major components of a transport complex of the country. They are compelled to work in the conditions of a competition to other domestic and foreign companies, to the carriers using other types of transport. At the same time, results of work of the navigable company are influenced numerous not always by favorable factors internal and an environment, sharply there is a problem of updating of out-of-date fleet that affects profitability of flights and lowers industry-financial indicators of work of the navigable companies.
Shipping is the big and difficult industry which includes a wide variety of the companies and the organisations, such, as the transport companies, suppliers to a chain of deliveries, suppliers a support service, the sea organisations, associations sea and importers / exporters. Because of an intensive competition, economic globalisation, speed of change, technological development and international trade expansion, the complete approach to executive administrative skills is more and more necessary.
A number of features are peculiar to the large and average shipping companies, which in the set can negatively influence efficiency of internal business processes if not to accept special measures. The navigable company is the service organisation, and unlike the manufacturer of an industrial output, it cannot use such simple and effective forms of the control as Quality Department, finished goods random inspections etc. that complicates the control of all aspects of quality of made services. It can be under pressure from outside more flexible small carriers that even more complicates work in the competitive markets. The difficult and bulky organizational structure peculiar to the big navigable company, can lead to insufficient functional (horizontal) interaction, an illegibility of powers and responsibility.
Lloyd’s Register offers new service – the analysis of lacks of the human factor, Human Element Gap Analysis (HEGA)15. The analysis should help ship-owners and operators of courts with definition and correction of lacks of work of a command, being based on an estimation of interaction of the person and system, in this case – a vessel.
Lloyd has tried to approach to a question of the human factor and safety on the other hand – the person, it not a potential source of errors, and the integral component of system the person-vessel. Lloyd's new edition, a management «the Human element became a service basis: the best practice for operators of courts». The management explains scales and importance of the human factor in 11 areas of management of courts and ship operations. The management offers operators 4 levels of an estimation of their activity and a way to efficiency increase. An overall objective of all this business, increase of safety of operation of courts. The management is not adhered to Lloyd's concrete requirements or other classification society, and can be used in work of any operator of any courts. Lloyd offers a management through the site online sale.
But, working in the conditions of market economy and a competition, the shipping company should aspire to maintenance of high degree of satisfaction of clients, to high efficiency of internal business processes and profitability. Besides it, in development of the navigable company there are the economic, technical and technological problems demanding constant perfection of its organizational structure and search of new progressive forms of government. Existing organizational structures of a control system in the navigable companies were issued in the course of transition from command-administrative to market economy. As a rule, such transition was carried out only on the basis of a private experience and not always considered positive results of scientific researches.
In the shipping organisation take part set of the parties with an especial legal status. Undoubtedly, central figure in navigation is the ship-owner irrespective of, it is the proprietor of a sea-craft or not.
The proprietor of a vessel is understood as the subject of the property right, the person which carries out concerning a vessel of competence of the proprietor.
For example, in Russia vessels can be in the property16: