Case 8 Meli Marine
Case #8 Meli Marine
Abstract
In this analysis of the case Meli Marine, the current CEO David Tian is trying to decide if an expansion to TS vessels would be the right move when trying to rebuild the Meli financial state. This case will discuss many factors that will play into the final decision.
Introduction
Shipping Industry
The shipping industry provides the links required for global commerce, making international trade possible. This industry is comprised of four segments: container shipping, roll-on roll-off (used for vehicles), industrial of bulk shipping for commodities (steel, grain, etc.) and tanker shipping (gas, oil and chemicals). Container shipping is used for consumer goods, food products, industrial machinery, intermediate goods, etc. The first shipping container came into use in 1956, this provided shipper with a standardized steel box that kept goods sealed and secured. These products were “intermodal”, which means that they could easily be unloaded and transferred between ship, rail and truck (Hamermesh 2012).
Challenges of the Shipping Industry The industry has endured dramatic swings in profitability and dealing the weaker competitors who failed in the industry. For Meli Marine, keeping their customer relationships and costs under control which took cautious efforts from management. Managing variable costs became difficult. The container carriers were exposed to fuel prices, known as “bunker costs” which could be 20-40% of cash operating costs and fluctuated with the price of crude oil. Firms attempted to apply the “bunker adjustment factor” when oil prices rose, however, a lag was present between the oil price movements and the catch-up by carrier. Competition meant that carriers were never able to pass on the full costs. Fixed costs were also high, averaging about half of the total cost structure. The shipping industry was asset-intensive and vessel expenses, including maintenance and financing, were significant. Capacity
Abstract
In this analysis of the case Meli Marine, the current CEO David Tian is trying to decide if an expansion to TS vessels would be the right move when trying to rebuild the Meli financial state. This case will discuss many factors that will play into the final decision.
Introduction
Shipping Industry
The shipping industry provides the links required for global commerce, making international trade possible. This industry is comprised of four segments: container shipping, roll-on roll-off (used for vehicles), industrial of bulk shipping for commodities (steel, grain, etc.) and tanker shipping (gas, oil and chemicals). Container shipping is used for consumer goods, food products, industrial machinery, intermediate goods, etc. The first shipping container came into use in 1956, this provided shipper with a standardized steel box that kept goods sealed and secured. These products were “intermodal”, which means that they could easily be unloaded and transferred between ship, rail and truck (Hamermesh 2012).
Challenges of the Shipping Industry The industry has endured dramatic swings in profitability and dealing the weaker competitors who failed in the industry. For Meli Marine, keeping their customer relationships and costs under control which took cautious efforts from management. Managing variable costs became difficult. The container carriers were exposed to fuel prices, known as “bunker costs” which could be 20-40% of cash operating costs and fluctuated with the price of crude oil. Firms attempted to apply the “bunker adjustment factor” when oil prices rose, however, a lag was present between the oil price movements and the catch-up by carrier. Competition meant that carriers were never able to pass on the full costs. Fixed costs were also high, averaging about half of the total cost structure. The shipping industry was asset-intensive and vessel expenses, including maintenance and financing, were significant. Capacity
References: Damodaran, R. (2013, September 24). Meli Marine Case Presentation. Retrieved December 3, 2014, from https://prezi.com/cd4qx9ucu28d/meli-marine-case-presentation-team-7/ Hamermesh, R., & Yong, S. (2012). Meli Marine. Harvard Business School, (4426).