Container Line Mergers and Acquisitions †MyAssignmenthelp.com

Question: Discuss about the Container Line Mergers and Acquisitions. Answer: Introduction Erosion of shipping rate resulted in issues within container shipping industry. Numerous shipping companies resulted in losses in 2016. Lack of sustainable profit levels result in increased industry consolidation that serves as a vital trend in mergers and acquisitions (Adamopoulos 2017). Container shipping industry is segmented and consolidation might facilitate careers to generate economies of scale. The objective of this paper is to analyze the operational and managerial characteristics of the container liner sector through explain the case of NYK-MOL-K.Line. Moreover, the trends towards concentration in the market-place via the process of mergers acquisitions are explained through taking the example of this company in this paper. Operational and Managerial Characteristics of the Container Liner Sector Container line is a service industry that offers cargo transportation of international trade. Operations of shipping are categorized into sectors: Bulk shipping which offers services majorly regarding raw materials transportation that includes coal, crude oil, grain and iron ore (Alexandrou, Gounopoulos and Thomas 2014). Liner shipping that offers services in transportation of semi-final and final products like manufacturing product, computers and consumer products. Considering these two operations of container line sector it is observed that Japanese lines such as Kawasaki Kisen Kaisha(K Line), NipponYusenKabushiki Kaisha(NYK), and Mitsui O.S.K. Lines (MOL) are jointly going to operate being Ocean Network Express (Cosco 2017). The major trends in the containership industry that resulted in such merger are a general concern in the long term financial health of steamship lines. Such joint venture is deemed to generate sixth biggest carrier by size along with overall capacity of around 1.4 million along with control of around 7% market share. Stakes within the joint venture are segmented by carrier size, in which NYK attains fleet capacity of 592,000 TEU and K line with MOL wit around 31% each that has capacities of around 358,000 and 491,000 TEUs (David 2003). Through this acquisition, through such type of international alliance extreme scale benefits can be attained. This is made sure through proper management of highly frequent service, lesser transit times, broader port coverage and decreased slot costs. Acquisition has also ensured proper management of the merged shipping companies through maintaining a stringer bargaining situation for negotiating with container depots, terminal operators along with inland transportation carriers (Lau 2015). From the merger of NYK-MOL-K.Line, three Japanese companies ensured better management of their business operations through making greater efforts in cutting costs and with business restructuring. However, there are certain limits regarding the aspects that can be individually attained. After the merger, these companies intended to improve its business operations as these companies were dealing with issues regarding citing low prices, sluggish cargo demand along with trade capacity over supply (Lee and Song 2015). Such merger is deemed to facilitate companies in better management of their business operations, for the joint venture company is anticipated to generate certain synergy impact through using best practices conducted by three companies. Through attaining advantage of scale merit of vessel fleet that is around 1.4 million TEUs, the merged companies can seek rapid stabilization of financial performance (Luo, Fan and Wilson 2014). Kawasaki Kisen Kaisha(K Line), NipponYusenKabushiki Kaisha(NYK), and Mitsui O.S.K. Lines (MOL) integrated their container operations. This merger is deemed to ensure technological advancements in ship construction and design along with ensuring economies of scale for bigger ships that can promote trade, specifically that of developing country through making goods transportation economical over long distances (Notebook, Parola, Satta and Pallis 2017). Such merger is deemed to facilitate Ocean Network Express in better addressing consumer needs through offering superior quality competitive services by consolidation and improvement of three companies within international network along with service structures. Operational cooperation of such merger is explained below as: Terminal contracts and joint terminals Joint mainliner services Joint purchase or ship ownership Joint purchase or container usage Joint container depots Jointly managed container nd equipment pools Joint EDI systems Trends towards Concentration in the Market-Place via Mergers Acquisitions Merger of NYK-MOL-K.Line explained trends within the marketplace that is attained through merger and acquisitions. These three companies were cooperating in services or products through agreements of vessel sharing along with alliance scheme (Pallis, Notteboom and De Langen 2015). The major trends in the containership industry that resulted in such merger are a general concern in the long term financial health of steamship lines. Shippers observed a trend that attaining more choices are healthy for the sector and facilitates in balancing out requirements of supply chain. The shipping companies in the recent years consider carrying out an incessant drive for cutting costs by deployment of bigger ships (Luo, Fan and Wilson 2014). Moreover, containers are simply carried by particular cellular container ships among which are capable to carry around 5000 TEUs (Papanikolaou 2015). Shipping industry has invested huge amounts for addressing the technological needs. Advanced container termina ls stocked with effective quaky cranes has been developed along with efficient operational forms encompassing privatization implemented for increasing shipping operations of NYK-MOL-K.Line (Luo, Fan and Wilson 2014). Regularity and service frequency that are two imperatives associated with liner shipping in alignment with deploying huge container ships might result in decreased capacity use for individual carriers. From the case of NYK-MOL-K.Line it is evident that shipping liners are greatly focused on resource sharing and alliances rather than getting involved in merger and acquisition (Stopford 2009). It is also gathered that, activity of merger and acquisition is attaining momentum in shipping terminals sector for the investors are greatly focused on strategic purchasing options. Recent trends in merger and acquisition in shipping industry has drastically increased as numerous nations are focused on developing better and associated infrastructure. Port congestion because of bigger ships along with increase in shipping mergers served as a concern that is greatly impacting terminal businesses. Within ship owning spectrum the recent trends regarding increased capital intensive strategies are int ended to capture economies of scale along with decreasing costs and financial risks (Alexandria, Giannopoulos and Thomas 2014). A combination of numerous trends is deemed to be transformed within the shipping sector over years. Regulatory changes along with larger vessels use, financial crisis along with high competition has resulted in container shipping organizations to reveal different collaboration ways from alliances which offers them increased security since (Alexandrou, Gounopoulos and Thomas 2014). Such merger is deemed to facilitate companies in better management of their business operations, for the joint venture company is anticipated to generate certain synergy impact through using best practices conducted by three companies. Through attaining advantage of scale merit of vessel fleet that is around 1.4 million TEUs, the merged companies can seek rapid stabilization of financial performance (Luo, Fan and Wilson 2014). Conclusion The objective of this paper is to analyze the operational and managerial characteristics of the container liner sector through explain the case of NYK-MOL-K.Line. It is gathered from the paper that from the merger of NYK-MOL-K.Line, three Japanese companies ensured better management of their business operations through making greater efforts in cutting costs and with business restructuring. However, there are certain limits regarding the aspects that can be individually attained. It was also gathered that Liner shipping that such merger offers services in transportation of semi-final and final products like manufacturing product, computers and consumer products. After the merger, these companies intended to improve its business operations as these companies were dealing with issues regarding citing low prices, sluggish cargo demand along with trade capacity over supply. References Adamopoulos, A., 2017. Classification societies put to the test by complex boxship design. Lloyds List 26.9.17. Accessed 02.10..17. Alexandrou, G., Gounopoulos, D. and Thomas, H.M., 2014. 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