Impact of the Alliance of Maersk and Msc on Freight Rates

Impact of the Alliance of Maersk and Msc on Freight Rates Analysis of the impact of the alliance of Maersk and MSC on freight rates on the Asia-Europe route Yixiang Zhang Content Abstract  (Jump to) 1. Introduction 2. Market share and structure of container shipping market 3. Alliance of Maersk and MSC 4. Impact of freight rate by 2M 5. Conclusions References Abstract The economic crisis took place in 2008 resulting in a great depression in shipping market. The demand in container shipping market declined rapidly and the overcapacity made the freight rate much lower which may not compensate the operation cost of the shipping companies. The three biggest shipping alliances(CKYH Alliance, Grand Alliance and CKYH Alliance) took series of solutions such as decrease of the capacity and in number of services routes to reduce the loss in their best effort. In this recession circumstances, ML(Maersk Line) and MSC(Mediterranean Shipping Company) which were known as 2M formed co-operation agreement on VSA(Vessel Sharing Agreements) on Asia-Europe route and this agreement last for 10 years. ML will devote 1200,000 TEU which counts for 55 percents of its overall capacity in the alliance and MSC is going to devote 900,000 TEU which counts for 45 percents of its overall capacity. Through the co-operation, 2M intended to promote the efficiency of operation and p rovided reliable shipping services to consumers on a lower price by sharing shipping network, infrastructural equipment and provide more straight service lines and the number of ports of call. In this way, other medium or small shipping companies who cannot achieve the economics of scale or better quality services as 2M managed to do will become uncompetitive and then have to exit the market when there is overcapacity in the shipping market. In this strategy, 2M will gain much more market share and consumer loyalty to make more profit although there is monopoly restriction. 1. Introduction With the rapid development of the international economy, the amount of export and import grew fast in the past few years. Shipping companies play essential role in the worldwide trade by providing satisfactory services to consumers. Shipping companies attempt to be more competitive than the others and reduce the risk which is considered high in maritime transportation by co-operate with each other or form an alliance. The ocean shipping industry is among the first to apply alliance to make their profit. Before the demotion of the conference system in 1998 (Shashi Kumar, 1999), maritime transportation market can be regarded as monopoly because the operation of a shipping company is at high risk and governments want to induce more firms involve in maritime transportation. However, with technology improvement and fast growing of shipping industry, the exemption from anti-trust rules was issued by the EU in 2008. Shipping companies have to set up new kinds of alliances to gain advantage and share risk in this dynamic market (Fusillo,2006). It is obvious that in present shipping alliances vessel sharing agreements and slot sharing agreements are widely used. The vessel sharing agreements or â€Å"VSA† can make container companies co-operate with each other to share their space on their container ships to acquire higher capacity to fight their lower capacities in certain trade lanes. The agreements allow for the shipping lines to keep freight costs lower since they do not need to account for empty spaces on their ships (source: http://www.containerquote.com/vessel-sharing-agreement). Slot sharing agreement require a fixed percentage of vessel capacity to be exchanged between the carriers over a given time period. This type of arrangement may be beneficial when two patner companies have vessels deployed on the same route with different departure time schedules (Panayides Wiedmer, 2011). Shipping alliances become a trend especially during the recession when the advantages that alliances can bring to us are clear. Even the top two large liner companies ML and MSC who used to act as â€Å"soloists† also choose to co-operate with each other, which can be regarded as a great move in shipping industry because together they count for nearly 30 percents of the whole market share. The paper aims at analyzing the impact of the alliance of Maersk and MSC on freight rates on the Asia-Europe route step by step as below, Section 2 will give a description of the whole shipping market. Section 3 focuses on ML and MSC alliances about the strategies they use. Section 4 will discuss about how the strategies 2M use will influence the freight rate. 2. Market share and structure of container shipping market This section shows who are the main players in the game and what are the connections between them. Table 1 illustrates the characteristics of top 20 shipping companies including total capacity, vessels operated in the market and actual market share. Table 1 Container fleet characteristics of Top 20 liner shipping companies Operator TEU Ships MS Operator TEU Ships MS 1 ML 2078507 556 15% 11 MOL 383042 99 2.5% 2 MSC 1683723 421 13.3% 12 NYK 365304 95 3% 3 CMA CGM 1096622 384 7.6% 13 OOCL 347988 77 2.4% 4 APL 591306 148 4% 14 Hambrg.sud 336811 108 2.3% 5 Hapag-Lloyd 582520 133 3.4% 15 K Line 324441 80 2.5% 6 Evergreen 567636 156 4.1% 16 Zim 322989 97 2.2% 7 COSCO 512060 134 3.3% 17 Yang Ming 315798 77 2.3% 8 CSAV 502619 135 2.4% 18 Hyundai M.M. 279446 54 2% 9 Hanjin 461087 100 3.2% 19 PIL 231941 127 1.4% 10 CSCL 455328 127 3.3% 20 UASC 206940 52 1.4% Source: Alphaliner.com, as of 28/06/2010 It is clear that ML together with MSC count up for 28.3% market share which is less than the monopoly restriction 30%. New World Alliance whose main partners are APL, MOL and HMM counts for 8.5% market share. Grand Alliance whose main members are NYK, Hapag-Lloyd and OOCL counts for 8.8% market share. CKYH whose main partners are Hanjin, Yang Ming, K Line and COSCO counts for 11.3% market share. In this way, there are four cartels whose market share counts up to 75.6%, which indicates the fact that the container shipping market on the Asia-Europe route is oligopoly. As a result, a decision made by any of these four alliances could bring an enormous influence to the others. That is also the reason why I would like to discuss about the impact on freight rate by 2M, because they have the market power to influence others. 3. Alliance of Maersk and MSC From the above analysis of container shipping market, it is clear to tell that ML and MSC have the top 2 capacity on Asia-Europe route. However, when focusing on the efficiency that both of them perform, the situation changed somehow. Table 2 presents the market share based on the vessels operated in the market. Table 2 Market share in different regions based on number of vessels operated Geo AF ANZ AS CA FE ME MiE ML 26.5% 20.1% 3.5% 19.5% 12.9% 22.3% 18.2% MSC 12.7% 15.4% 5.8% 17.1% 8% 20.7% 23.1% GEO NA NE SA TOTAL MS Delta ML 16.1% 15.4% 13.1% 15.6% 15% 0.57% MSC 11.9% 20.6% 14.1% 13.3% 10.9% 2.39% Abbreviations: AF Africa; ANZ Australia, New Zealand, South Pacific; AS Asia; CA Central America; FE Far East; ME Mediterranean; MiE Middle East; NA North America; NE North Europe; SA South America; MS Market Share; DELTA difference between company’s share of world-fleet minus actual market share. Source: Alphaliner.com, as of 28/06/2010 Depending on Tabke2, it is clear that Delta of both ML and MSC is positive which indicates that their shares of vessels operated in the market are both higher than their actual market share. This phenomenon can be explained in this way. Suppose all the other shipping companies except for ML have their vessels loaded up to 80% on average and ML only can load their ships around 60%, ML need to devote more vessels into the market to keep the same market share with other companies. In this way, it can be inferred that both ML and MSC have not fully taken advantages of their ships in the market. They have to find a way to promote their efficiency of their carriers. From the analysis above, it should be clearly explained that the motivation of ML and MSC the Top 2 giants in the shipping market to become alliance. Shipping alliance indeed brings series of advantages to both of them. The most important agreement between ML and MSC is vessel sharing agreements known as â€Å"VSA† which means that the collaborating companies work together to fulfill demand and also try to fully load their ships. Actually once â€Å"VSA† performing well, ML and MSC could devote some of their ships on another route because fewer ships can fulfill the demand due to the high utilization of container ships. In this way, the operation cost of vessels in the market can be reduced. 4. Impact of freight rate by 2M As discussed above, vessel sharing agreements enable ML and MSC largely promote their ships utilization to reduce the operation cost. It can be imagined that the total cost to provide satisfactory services as before becomes a little bit lower after 2M established. From author’s aspect, 2M can take advantages in two different ways as below: First strategy is to remain the same price as before but provide better services to their consumers. In this way, 2M could gain more consumer loyalty and attract more consumers to accept their services. However, in author’s opinion, other alliances such as New World, Grand Alliance and CKYH will not stay at where they are and do nothing. They may choose to reduce freight rate to attract consumers in order to not lose market share. Somehow to what extent they decide to cut freight rate depends on how well 2M performs and also the loss they are able to bear. Second strategy is to lower the freight rate but remain the same services quality as before. In this way, 2M can attract more consumers with their low price of freight rate. It is illustrated about how it works as below Figure 1. Figure 1 It can be easily inferred that when 2M choose to low their price, their initial supply curve S1 will shift right to S2 and D1 stays the same if no strong fluctuation occurs. So the quantity which can be seen as the number of consumers who choose 2M service increases from Q1 to Q2. In this way, 2M will get more market share to make much more profit when the global economy recovers from the crisis. Furthermore, the second strategy also has large influence on other shipping companies on Asia- Europe route. It will result in the shutting down of some shipping companies on Asia-Europe route whose average variable cost is lower than the freight rate 2M set. In the short run, the shipping companies’ supply curve is their marginal cost curve. If the freight rate is below P1, they have to shut down because the revenue they make cannot compensate their cost which means they are losing money all the time. In this way, 2M will gain this share of market by lower the freight rate. The way it works is illustrated in Figure 2. Figure 2 The second strategy can also force some companies not only shut down but also exit the market in the long run aspect. The way it works is illustrated in Figure 3. Figure 3 From the figure above, if 2M reduce the price below P1, shipping companies whose average total cost is higher than P1 will exit market because they will never take back their initial investment if freight rate continues to stay low. 5. Conclusions As the alliance between ML and MSC has been taken into practice, vessel sharing agreement is vital to improve their service quality and the efficiency of ships operation. So with vessels utilization optimized, together with the economies of scale, 2M is able to reduce their operation cost in a large extent because there is indeed a big gap to be improved which is explained in the analysis of difference of actual market share and total capacity. It has to be clear that high efficiency operation of ships as well as the strategies 2M may use can be regarded as a way of increasing supply in the market, which in turn will make the fright rate on Asia-Europe route drops. References Photis, M.P. Robert, W. (2011). Strategic alliances in container liner shipping. Research in Transportation Economics 32 (2011) 25-38. Shashi Kumar, N. (1999). The US OSRA of 1998: an analysis of its economic impact on carriers, shippers and third parties. In proceedings of the IAME 1999 Halifax conference (pp. 7-29). Halifax, Canada: Centre for International Business Studies, Dalhousie University. Fusillo, M. (2006). Some notes on structure and stability in liner shipping. Maritime Policy Management, 33(5), 463-475.

Becoming a Teacher

Becoming a Teacher Becoming a Teacher Every person has his or her own dreams of becoming somebody when he or she grows up. Some would say they want to be a doctor, engineer, lawyer, accountant, or businessman. In my case, ever since I was a child, I have been nurturing this dream of becoming a teacher. I decided to embark on this noble profession for three main reasons.The first reason can be attributed to my wish to have an impact on people’s lives. Specifically, I wish to become a role model for the youth of today, many of whom are in need of guidance.I believe that I can be a good example and a teacher to every student that I will be teaching in the future. By being a role model, I can help my future students grow and mold them to become better individuals—a feat that, when achieved, can certainly leave me fulfilled. Second, I want to become a teacher for a very simple reason: I want to share knowledge and make a difference in people’s lives. I seek to educate the young ones not only about the sub jects that they have to learn, but also about the realities of the world and the values that they should live out.I also wish to have the chance to help them achieve their goals and dreams in the future. By doing so, I would be able to draw out every student’s potential and help him or her lead a successful life founded on integrity. Third, my passion for and interest in dealing with children prompted me to decide on becoming a teacher.For me, children are just like angels; being around them makes me feel happy and content in life. They are cute, sweet, and adorable. They may be stubborn, hardheaded, and noisy, but these are the qualities that make them a child, so their display of such behavior is only natural.Hence, I, as a teacher, should start teaching children during their formative years so that they will grow up to become principled individuals. These are the reasons why I am very eager and enthusiastic to become a teacher.Teaching is a very challenging profession. Thu s, in order to survive and become a successful and effective teacher, I believe that teachers should possess the following characteristics and skills. First of all, a teacher should have compassion, a trait that entails empathy, kindness, and benevolence.Teachers with compassion possess a genuine desire to help students. Hence, being compassionate is one of the most important traits that a teacher should have. Another quality that is crucial to teachers is dedication. Teaching is not just a profession; it is a commitment that an individual takes due to his or her great intention to help others and pass on the knowledge and skills that he or she has. Teachers should also have confidence in themselves in order to be an effective teacher. They must know what they are doing and have the courage to lead every student to the right path.Strength is also another important trait that teachers should possess in order for students to regard them with respect. Moreover, teachers should exhibit enthusiasm in order to motivate the students to learn and develop. They should also be approachable and have good communication skills in order to prevent misunderstandings or miscommunications with and among their students.Open communication is imperative in a teacher-student relationship so that the teacher will know whether there is development or problem in his or her students.In addition, I also believe that a teacher should demonstrate a good attitude and character to his or her students. They should always be a good example to their students and always show positive feelings and emotions (Glenn, 2001). Finally, the most important personal characteristic that a teacher should have is a lot of patience. Patience is said to be a virtue, a virtue that is very hard to keep and maintain. Being a teacher requires having a lot of patience because of all the responsibilities that he or she has to fulfill, such as making sure that the students learn and develop their skills.Considering this list of the personal characteristics that a teacher should possess in order to become effective, one may perceive the profession as very difficult and complicated to fulfill. However, knowing that the purpose of teachers is to help and change other people’s life for the better does not hinder me to fulfill my dream of becoming a teacher someday. There are different types of schooling in the society nowadays. One of these is special education. Special education is a very different setting compared to a normal school.It is a school or a place where various special and additional services are provided for children or people with disabilities, including blind, deaf, mute, and mentally challenged individuals, among others (Watson, 2003). To stay updated in the field of special education, teachers can attend seminars or taking a special course that directly provides information especially relevant to this field. This may involve taking a course that offers different technique s and strategies in teaching and handling special children.Learning that is based on personal observation could be helpful as well in this field. Keeping one’s passion sounds very easy especially if it is something that a person enjoys doing. Nonetheless, in the field of teaching, it might appear very difficult to keep a teacher’s passion in teaching, for it is said to be a very stressful and difficult career. However, in my opinion, maintaining my passion for teaching is easy. There are a lot of things that I can do in order to maintain my strong will and desire in teaching.Being innovative in my teaching style, combined with a positive attitude towards this profession, would keep me happy and satisfied with this job. Dealing with children, getting to know different students, and gaining love, respect and care from students are also rewarding reasons to be passionate about being a teacher. Building relationships and fostering creativity within my students, which are s ome of many exciting things that I am looking forward to achieve when I become a teacher, would perpetually rekindle my passion for teaching.In addition to this, keeping in mind that the students future lies on my hands would certainly maintain my passion and keenness to be a great teacher and a role model to every student I will have. Indeed, having a career in teaching can be considered as a blessing and an honor to an individual. It is one of the most noble and respected jobs in the world, and its intangible rewards will always arouse the passion that I have always possessed towards teaching.I believe that a great teacher has the responsibility to bring out the best in every student. A teacher should have an open mind, positive attitude, and high expectations everyday as he or she goes to school. This is my educational philosophy. When I become a teacher, I would gladly and proudly become an inspiration to every child. I would like to be an instrument that will make these childre n grow and succeed in their lives. I wish to live a life of service to other people most especially to children.I want to be a teacher to be able to nurture children and instill all the necessary knowledge and values that one should have in order to have a blissful and rewarding life. Teaching will always be my passion, and I will never harbor feelings of regret in choosing this career path. References Glenn, R. E. (2001). Admirable Teaching Traits. Education World. Retrieved January 28, 2009 from http://www. education-world. com/a_curr/curr387. shtml. Watson, S. (2003). What is special education?. About. com. Retrieved January 28, 2009 from http://specialed. about. com/od/idea/a/Special101. htm

Photographic Truth in the Digital Era Essay - 774 Words

Year 3 ‘Individual Study’ Proposal Form Name: Cristina Dan Provisional Working Title: Photographic Truth in the Digital Era Description of the Research Area (this should be no less than 500 words): According to James Brooks, â€Å"the manipulation of meaning to assure an audience would destroy the reality of the work and debase the concept of communication.† The essay will examine how images are used nowadays in media to influence people’s opinions rather than only for artistic purposes. We are constantly surrounded by advertising. The main power of the images is prominent in advertising where experts change images so that they no longer reflect the truth leading to misinterpretation. A strong question is being raised upon this†¦show more content†¦There are also some advantages of images in the advertising area. For example, in some ads and posters the image is hyperbolizing the negative sides of the product so that it could create a positive impact on the consumer. 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German Compound Words Explained With Examples

Mark Twain said the following about the length of German words:â€Å"Some German words are so long that they have a perspective.†Indeed, Germans love their long words. However, in the 1998 Rechtschreibreform, it was strongly recommended to hyphenate these Mammutwà ¶rter (mammoth words) in order to simplify their readability. One notices particularly terminology in science and the media following this trend: Software-Produktionsanleitung, Multimedia- Magazin.When reading these German mammoth words, you will recognize that they are composed of either:Noun noun (der Mà ¼lleimer  / the garbage pail)Adjective noun (die Großeltern  / grandparents)Noun adjective (luftleer  / airless)Verb stem noun (die Waschmaschine  / washing machine)Preposition noun (der Vorort  / suburb)Preposition verb (runterspringen  / to jump down)Adjective adjective (hellblau  / light blue)In some German compound words, the first word serves to describe the second word in more precis e detail, for instance, die Zeitungsindustrie (the newspaper industry.) In other compound words, each of the words are of equal value (der Radiowecker  / the radio-alarm clock.) Other long words have a meaning all of their own that is different from each of the individual words (der Nachtisch  / the dessert.) Important German Compound Rules It is the last word that determines the word type. For example:à ¼ber - preposition, reden-verbà ¼berreden verb (to persuade)The last noun of the compound word determines its gender. For exampledie Kinder das Buch das Kinderbuch (the childrens book)Only the last noun is declined. For example:das Bà ¼gelbrett - die Bà ¼gelbretter (ironing boards)Numbers are always written together. For example:Zweihundertvierundachtzigtausend (284 000)Since the 1998 Rechtschreibreform, verb verb compound words are no longer written together. So for example, kennen lernen  / to get to know. Letter Insertion in German Compounds When composing long German words, you need to sometimes insert a letter or letters. In noun noun compounds you add:-e-When the plural of the first noun adds an –e-.Die Hundehà ¼tte (der Hund - die Hunde)- er-When the first noun is either masc. or neu. and is pluralized with-er-Der Kindergarten (das Kind -die Kinder)-n-When the first noun is feminin and is pluralized –en-Der Birnenbaum  / the pear tree (die Birne - die Birnen)-s-When the first noun ends in either -heit, keit, -ungDie Gesundheitswerbung  / the health ad-s-  For some nouns that end in –s- in the genitive case.Das Sà ¤uglingsgeschrei  / the newborn’s cry (des Sà ¤uglings)In verbstem noun compositions, you add:-e-After many verbs that have a stem ending b, d, g, and t.Der Liegestuhl  / the lounge chair