Hanjin is a transporting company based in Korea. It started as a container line merchandising mediate Korea and Middle East. It bit by bit increased its trading countries and started merchandising its container ships on all major trade paths of the universe ( Hanjin transportation, 2010 ). It merged with Korea Transporting Corporation in 1988 to organize Hanjin Shipping co., Ltd. In 1997 it acquired bulk involvement in DSR-Senator Line to do its grade as a major container transporting line. As of day of the month Hanjin Shipping is Korea ‘s largest bearer that operates some 60 line drive and stampers services transporting over 100 million dozenss of lading yearly all over the universe ( Hanjin transportation, 2010 ).
Beginning: Hanjin, 2010.
As see from the above chart 77 % of Hanjin ‘s net incomes is from its container concern and rest 23 % comprise majority gross. Hanjin presently operates more than 200 ships all around the universe, out of which about 50 % are container ships and the remainder are bulk bearers, petroleum oiler, LPG and LNG ships. Hanjin is ranked 9th in the container ship market with 96 ships and capacity of 427,720 TEU. ( Hanjin transportation, 2010 ) Hanjin Shipping has a comprehensive planetary concern web with three regional central offices, 200 abroad subdivision offices, and 30 local corporations. Hanjin is besides runing 12 container terminuss around the universe with 5 terminuss in Korea 3 terminuss in USA. Hanjin has a sum of 4003 employees working onboard and ashore. It has about 24 subordinate companies around the universe. It is besides affiliated with logistics IT specialist Cyber Logitec, and Hanjin Shipping Management ( Hanjin transportation, 2010 ).
Beginning: Hanjin, 2010
Hanjin ‘s container trading paths are shown in diagram below
Hanjin Container Trade paths
Beginning: Hanjin, 2010
Beginning: Hanjin, 2010
Hanjin ends are ‘to become a prime logistics company which is recognized and trusted by the planetary community ‘. ( Hanjin transportation, 2010, p.1 ) Hanjin posted gross of 9,356 billion Korean won and a net income of 320 billion Korean won for the twelvemonth 2008. Hanjin is now embarking into different markets other than transporting. It has developed its information engineering solutions to alter the company into a 3rd party logistics supplier ( Hanjin transportation, 2010 ). Hanjin ‘s mission is to ‘become one of the taking planetary transportation and logistics company ‘ ( Hanjin transportation, 2010, p.1 ).
Beginning: Hanjin, 2010.
Porter 5 forces Theory
Porter ‘s 5 Forces provides a model that theoretical accounts an industry as being influenced by five forces. It assesses the administrations specific environment and assumes that some industries are more attractive that others with more net income potency by sing the five forces as mentioned below ( Porter, 1997 ).
Beginning: Porter, 1997
Porters 5 forces can be used for development of concern determinations, selling schemes and be aftering. Directors can utilize this analysis to develop an border over their rivals. As per Porter ( 1997, p.1 ) ‘awareness of these forces can assist a company interest out a place in its industry that is less vulnerable to assail ‘. To derive a competitory advantage concern has to concentrate on a broader position. The porter 5 forces will give the analysis of the external forces impacting the company.
Why Hanjin
Hanjin Company is a turning company which has proved to be successful over the old ages. It is a good illustration, how it has grown from a little company in 1977 to a taking transportation company in 2010. Transporting by nature is a extremely competitory market. Hence it is really of import for a company to understand its external factors to prolong in this extremely capital intensive industry. We will analyze the external environment of Hanjin utilizing the porter five forces theory and subsequently see the variegation scheme used by the company to turn in transportation and logistics markets.
Hanjin Porter 5 forces
Hanjin external environment is analysed utilizing the porter 5 forces theoretical account. By utilizing the porter 5 forces the companies ‘ analysis of its failing and strengths in the concern environment can be done. This will besides give a good sight into what are Hanjin ‘s menaces and who are the chief rivals.
Menace of New entrant: – Moderate menace
The planetary trade is of all time increasing, ensuing in addition of net incomes and bend over. As per estimations transporting trade is traveling to increase by 8.5 % by volume ( Bonney, 2010 ). This addition in lading flow is likely to pull new entrants particularly from the fast developing states such as China and India ( Threat – Yes ).
Hanjin faces a menace from authorities assisted container lines. Many states across the universe have transporting lines operated by the authoritiess. This is chiefly due to two grounds, high hard currency flows and as a affair of pride or 2nd line of defense mechanism in instance of war. Governments in developing states will desire to come in into container markets to do the most of the chances. Governments such as China, India or Malaysia have their ain container lines. They can come in the markets in a large manner and affect the trade in the markets. ( Threat – Yes )
Container transportation is by nature a high capital intensive industry. The fixed costs of a company and the assets required to run a transportation line are really immense. Furthermore the logistic support required to run a planetary market is besides big. These factors act as a hindrance to entry for the rivals. ( Threat – No )
The current market state of affairs where cargo rates have seen an all clip low. Most of the line drive companies are runing at minimal costs or sometimes at a loss. Hence the current economic conditions will discourage new entrants in the market. ( Threat – No )
Hanjin has a moderate menace of new entrants majorly because of the high cost involved in runing a transportation company and due to economic sciences of graduated table. Their chief menace will be companies operated by authoritiess from developing states such as SCI or COSCO.
Menace of Substitutes: Low menace
Ocean conveyance is the cheapest agencies of conveyance. Almost 90 % of goods are being transported by sea. More over it is really hard to travel good which are really big in volume or heavy goods. Hence in the close hereafter it is improbable that any alternate agencies of conveyances will be a menace to Hanjin. Air conveyance can take up a little portion of the market with the new lading planes being used. But it is barely traveling to do a difference in footings of lading volume. ( Threat – No )
Many companies are puting up their fabrication units where they have a large market portion. Companies such as Toyota or Honda have set up their workss in developed states such as USA and developing states such as India. This will ensue in less trade for these finished goods. ( Threat – Yes )
In contrary to the above point there has been a displacement of fabricating goods from Europe and Americas to Far East. This has resulted in improved trade from Far East to Europe and Americas. Hence there will be a lessening of replacements for transporting as the western universe has no other option than import manufactured goods from Far East. ( Threat – No )
Hanjin has a low menace of replacements as there is barely any option for sea conveyance. As compared to other manners of conveyance, conveyance by sea is the cheapest agencies.
Dickering power of Supplier – Low menace
Suppliers for Hanjin are from all around the universe. Hanjin is non trusting on any one provider to back up its concern. Suppliers for Hanjin scope from container trucking company to bunker bringing to proviso provider etc. As Hanjin is a planetary company with trade paths all around the universe it is really improbable that provider can overmaster Hanjin. Hanjin has started its ain logistics solutions which will help their container operations, hence they have to trust less on providers. ( Threat – No )
Supplier is usually based and trading in fixed locations. Even if the provider company becomes large in a certain portion of the universe E.g. Port in India, Hanjin has the option of jumping the port in India and switch its trade someplace else. ( Threat – No )
Hanjin faces a low menace from supplier power due the very nature of the concern. Suppliers usually have geographically fixed location and Hanjin is merchandising all over the universe. The lone topographic point where Hanjin have to be careful is in ports such as Singapore, Hong Kong and New York where terminal operators may hold the power due to strategic location of the port and congestion in the port. Hanjin has their presence in the logistics market ; in states such as USA they have their ain logistics division. They besides own some container terminuss across the universe which will besides add to the strengths of the company.
Dickering power of Buyer – Moderate to High menace
The varying size and diverseness of purchasers indicates that the purchaser ‘s power is low. There may be instances where large purchasers in certain countries pose a menace but that is limited to that port. E.g. Private ports in UK such as Felixstowe. ( Threat – No )
There are some shippers which have a considerable portion of market, but for these shippers it is non easy to take over a transportation company due to the high operating cost of running a transportation company. ( Threat – No )
Hanjin faces a menace from purchasers which have a considerable trade with them. It is really easy to exchange trade mediate transportation companies due to low exchanging cost. Hence Hanjin may lose from these purchasers. ( Threat – Yes )
If Hanjin does non hold good dealingss or trades with the purchasers the they can exchange to different line drive companies easy. Hanjin faces a moderate to high menace from the purchaser due to easy exchanging option for the purchaser
Industry rivals: Rivalry among bing houses – High menace
Concentration of markets: As seen from the list below the difference between top 10 container lines transporting capacity is non much. Hence there is ferocious competition mediate all the container lines. Hanjin is ranked 9th in the universe with companies like MOL, NYK and OOCL non far manner behind. ( Hanjin Shipping, 2010 ). More over there is really less barriers for entry. Hence competition among container lines is really intense which will ensue in schemes such as low cost and distinction. ( Threat- YES )
Beginning: Hanjin, 2010.
Industry consolidation: There has been a tendency in the industry where amalgamations and acquisitions are used as a agency to remain in the market. Companies such as Maersk or APL can amalgamation with large transportation and in a manner cut down competition mediate transportation companies. ( Threat- YES )
High concentration on major trade paths: Trade paths are more or less defined and new entrants to the markets such as authorities owned bearers will run off with low cargo rates on major trade paths. Hanjin besides has major container lines such has MOL, NYK and OOCL which have a capacity to increase their frequence on the trade paths on which Hanjin ships are providing. ( Threat- YES )
As per IMF ( 2010 ) World GDP is set to increase by 2.9 % for the following twelvemonth. This is chiefly due to increase in GDP because of the emerging economic systems such as China, India and Brazil. Sea- borne trade is traveling to increase from Far East due to this. This addition in sea-borne trade will cut down the competition mediate container lines. ( Threat – No )
Current over capacity of ships. Hanjin will confront the brunt of current over capacity in the supply of ships as seen from the tabular array below. Currently there is a 2.9 % excess of ships ( UNCTAD, 2008 ). This will ensue in intense competition among container lines, ensuing in schemes such as cost film editing. This factor will earnestly halter Hanjin ‘s concern and Hanjin may confront losingss. ( Threat – Yes )
Beginning: UNCTAD, 2009
Hanjin faces tough competition from its challengers particularly during times of recession where most of the major bearers will utilize cost film editing scheme. Current over capacity of ships is the immediate menace to Hanjin. Hanjin has a strong clasp in trade paths from Korea to other parts of the universe, but it will confront tough competition from MOL, NYK lines for other trade paths from Far East to Europe and Americas.
Diversification scheme theory
Diversification scheme is chiefly used to make value or wealth in surplus of what houses earn with the current apparatus. The house grows by diversifying into new concern by developing new merchandises for new markets. Diversification is a growing scheme which requires both merchandise and market development. There are four dimensions of variegation scheme
New industries for variegation should be selected where favourable conditions are present or can be created.
Diversification is most likely to win when the company extends its ain concern into new sectors.
Internal development of new concern has more opportunities of prolonging than acquisition of a new or large company.
Diversification into new concern should be in such a manner that there are common purchasers, channels and providers.
Internal Diversification: Internal variegation facilitates a transportation of accomplishments and resources that is rather hard to carry through when geting an independent house with its ain history and manner of operating. It is used to achieve a coveted market place on an international graduated table.
Diversification should take to a synergy consequence. This means benefits gained when assets complement each other. E.g. ‘the value of the combined house after acquisition should be greater than the value of the two houses prior to acquisition ‘ ( Georgia province university, 2010, p.10 ).
Related variegation: It can be defined as corporate development beyond current merchandises and markets, but within the capablenesss or the value web of organisation.
Diversification of the company is chiefly used to fulfill certain ends of the company
Growth – Company may desire to travel from their nucleus concern and venture into something different. This is usually because direction wants to venture into new concern, but in such instances portion holders are non satisfied. To turn the easiest option sought by the direction is to get companies, and in most instances it tends to destruct stockholder values. ( Georgia province university, 2010 ).
Risk – Diversification reduces hazards and the discrepancy of net incomes flows
Spreading – Does non usually make value for stockholders
Net income – ‘For variegation to make stockholder value, the act of conveying different concern under common owner-ship must somehow increase their profitableness ‘. ( Georgia province university, 2010, p.23 ).
Hanjin Diversification scheme
Hanjin transportation started as a container line and since so has diversified its portfolio runing from transporting containers to Bulk transportation and late it has ventured into new concern. ( Hanjin Shipping, 2010 ).
As a portion of their mid-term and long term aims till 2017 is to concentrate on it nucleus concern, the container concern and spread out its majority and terminal concern. ( Hanjin Shipping, 2010 ). Hanjin will seek to put more into 3PL ( Third party logistics ), ship pace concern and renewable energy concern. Hanjin will besides put in ship chartering concern and offshore natural resources development concern. ( Hanjin Shipping, 2010 ). Hanjin has over the old ages used its variegation scheme to increase the growing of the company.
Amalgamations and confederations – Initially started as a container line Hanjin went on to unify with companies to increase its presence in the container concern. It merged with Korea transporting corp. in 1988 and in 1997 acquired bulk involvement in DSR-senator lines. This acquisition gave a encouragement to Hanjin ‘s container concern. In 2001 Hanjin made a strategic move of traveling in confederation with CKYH, which gave Hanjin entree to major container trade paths of the universe. Hanjin went on to purchase new and large container ships to size upto 7500 TEU ‘s. They used the amalgamations as a portion of their variegation scheme ( Hanjin Shipping, 2010 ).
New terminuss – As a scheme to diversify Hanjin started opening up its container terminuss all over the universe. Information technology opened up its first container terminus in Long Beach USA. It maintained its policy of diversifying over the old ages and presently have 13 container terminuss situated all around the universe and 3 new terminuss coming by 2012. ( Hanjin Shipping, 2010 ).
LNG and Bulk- Hanjin besides invested in its majority transportation which helped Hanjin to gain net incomes during the roar clip in 2007 when Dry majority transporting cargo rates reached an all clip high. As a portion of its internal variegation scheme it ventured into the new and emerging LNG market. It presently owns 4 LNG ships and some petroleum and merchandise oilers. ( Hanjin Shipping, 2010 ).
3PL ( Third party Logistics ) – Hanjin ‘s variegation of its concern portfolio chief stay is its 3PL concern. This concern will work in concurrence with its nucleus container transportation concern. Hanjin will do its grade into planetary logistics in Europe, and Korea. It besides has programs to travel in joint venture with Chinese Logisticss Corporation and coup d’etat of little logistics companies. Hanjin Shipping has continued to upgrade its solutions so that it can run into client demands related to cargo aggregation, bringing, terminals, air conveyance etc. If required Hanjin Shipping will be able to increase its service capacity and, organize strategic confederations with their spouses. As a scheme to diversify they have tried to make a synergy consequence by developing into transporting logistics. ( Hanjin Shipping, 2010 ).
Ship Repair Yard Business – Hanjin has a joint venture with Shunhe Shipping Co., Ltd. to construct a ship fix pace in China. Once the pace is completed it will assist Hanjin to better its net incomes by vouching fix infinite and service for its ain fleet every bit good as to other companies. ( Hanjin Shipping, 2010 ).
Renewable energy business- Hanjin Shipping has invested in renewable energy company. This investing will assist the company to lend itself in the supply and commercialisation of the green equipment ( Hanjin Shipping, 2010 ).
Hanjin has used related and internal variegation scheme to turn in transporting concern. They have tried to increase the stockholders wealth by embarking into logistics concern and seeking to make a synergy consequence. The fact that Hanjin has given dividends to its portion holders for 10years in row besides gives indicant of Hanjin doing good net incomes in its concern. ( Hanjin Shipping, 2010 ).
Decision
The usage of Porter ‘s 5 forces helps to place the company ‘s competitory position in the market. It helps to place the external factors that will impact the company ‘s profitableness and its place in the market. The forces besides identify the strengths of the company and the menaces posed by the company from its rivals, supplies, purchasers etc.
Transportation by its nature is a really competitory industry and analysis of porter forces suggests that Hanjin has the biggest menaces from its rivals. Hanjin does non confront a large menace from other factors in the industry i.e. from providers, purchasers or new entrants. This is chiefly due to the fact that transporting industry is a extremely capital intensive industry. Large capital investings act as a major barrier for entry into the market which will impact Hanjins concern. The growing in universe trade will go on and new entrants will be attracted towards transportation, Economics of graduated table may play an of import portion to capture higher market portion and may besides move as barriers to entry.
Hanjin has a developed a diversified concern portfolio with its nucleus concern as container transportation. Hanjin has used related variegation as their chief stay for over the old ages which have helped them turn as a company. They have shared their hazard by embarking in different markets in transporting. This helped them to successfully support their place even during the economic lag in container market. By get downing their ain logistics company and their ain container terminuss worldwide, Hanjin has reduced the bargaining power of purchasers and providers in ports. Its 3PL concern is traveling to be Hanjins chief stay for future and would be a net income devising concern.
Due to the economic down bend in 2008, following few old ages are traveling to be hard for container industry. Hanjin ‘s chief concern is container transit and related activities. As a recommendation Hanjin would hold been better off to diversify more into Dry majority or Oil markets to give more stableness to its nucleus concern.
