Strategies of marketing management in container transportation the case of OOCL (Vietnam) co.,ltd

MBA Thesis Report Dec 2006 MMCVFB Intake 6 Written by Tran Phuoc Hiep P age i CONTENTS ACKNOWLEDGEMENT . ABBREVIATIONS V CHAPTER 1: INTRODUCTION 1 1.1 INTRODUCTION 1 1.2. PROBLEM STATEMENT 1 1.3 RATIONAL OF RESEARCH 2 1.4 RESEARCH METHODOLOGY 2 1.5 THE SCOPE AND LIMITATION OF RESEARCH 4 1.5.1 Scope of study 4 1.5.2 Limitation 5 CHAPTER 2: LITERATURE REVIEW 6 2.1 LITERATURE REVIEW ON SERVICES MARKETING AND MANAGEMENT 6 2.1.1 Definition of services 6 2.1.2 Characteristics of services 6 2.1.3 Classification of the Service 7 2.1.4 What is Services Marketing 8 2.2 LITERATURE REVIEW ON SHIPPING SERVICE AND TRANSPORTATION MARKETING 8 2.2.1 Definition of shipping service and containerized transportation 8 2.2.2 What is transportation marketing 9 2.3 LITERATURE REVIEW ON MARKETING STRATEGY AND MARKETING MIX 9 2.3.1 Marketing strategy 9 2.3.2 Developing marketing strategy 10 2.3.3 Targeting a market 11 2.3.4 Strategic Marketing with marketing mix 11 2.3.5 Logical steps in strategic marketing planning 12 2.3.6 SWOT analysis 12 CHAPTER 3: OVERVIEW OF CURRENT SHIPPING MARKET AND MARKETING STRATEGY FOR OOCL (VIETNAM) CO., LTD 14 3.1 WORLD SHIPPING SERVICE HIGHLIGHTS 14 3.2 VIETNAM ECONOMY REVIEW 18 3.2.1 Gross Domestic Product (GDP) 18 3.2.2 Foreign Direct Investment 18 3.2.3 Overview on Vietnam Import Export activities 20 3.3 INTRODUCTION OF OOCL GROUP AND OOCL (VIETNAM) 24 3.4 OVERVIEW OF VIETNAM’S CURRENT SHIPPING MARKET AND OOCL POSITION 26 3.4.1 Overview of Vietnam containerized market 26 3.4.2 Transpacific Trade (TPT) 28 3.4.3 Asia Europe Trade (AET) 31 3.4.4 Intra Asia Trade (IAT) 34 3.4.5 Australian Trade (AUT) and others 36 3.4.6 OOCL (Vietnam) sales performance 36 CHAPTER 4: RESULTS AND DISCUSSION OF CUSTOMERS’ SURVEY 40 4.1 METHODOLOGY 40 4.2 RESULTS OF SURVEY AND DISCUSSION ON FINDINGS 41 MBA Thesis Report Dec 2006 MMCVFB Intake 6 Written by Tran Phuoc Hiep P age ii 4.2.1 Customers’ preference on shipping service 41 4.2.2 Customers’ satisfaction on OOCL service 43 4.2.2.1 Sample profile 43 4.2.2.2 Evaluation on OOCL services 44 4.2.3 Open-ended questions 48 4.3 SWOT ANALYSIS ON OOCL (VIETNAM) 49 4.3.1 Strengths 49 4.3.2 Weaknesses 50 4.3.3 Opportunities 51 4.3.4 Threats 52 CHAPTER 5: CONCLUSION AND RECOMMENDATION ON EXTENDED MARKETING MIX FOR OOCL (VIETNAM) 53 5.1 TARGET FOR OOCL (VIETNAM) IN NEXT 5 YEARS 53 5.2 EXPANDED MARKETING MIX FOR OOCL (VIETNAM) 54 5.2.1 Product 54 5.2.1.1 Short haul vessel service 54 5.2.1.2 Long haul vessel services 55 5.2.2 Price 60 5.2.2.1 In long haul service 60 5.2.2.2 In short haul service 61 5.2.3 Place – Distribution 61 5.2.4 Promotion 62 5.2.5 People 63 5.2.5.1 Short training at work 63 5.2.5.2 Outside training 65 5.2.6 Physical evidence 65 5.2.7 Process 65 CONCLUSION 68 APPENDICES 69 MBA Thesis Report Dec 2006 MMCVFB Intake 6 Written by Tran Phuoc Hiep P age iii LIST OF TABLES Table 1 - Evolution of carriers operated fleet and market share year 2000 - 2006 17 Table 2 - GDP growth by year 18 Table 3 - Foreign Direct Investment by country & counted up to 20 December 2005. 19 Table 4 - Top Commodities Import Y2005 with associated value 20 Table 5 - Top Commodities Export Y2005 with associated value 21 Table 6 - Top countries import from 2000 to 2005 with associated value 22 Table 7 - Top countries export from 2000 to 2005 with associated value 23 Table 8 - Vietnam overall market volume and OOCL volume year 2005 27 Table 9 - Carriers volume and relative market share ex Vietnam to the United State, year 2005 vs year 2004 29 Table 10 - Top commodities of market vs OOCL share in first half 2005 vs first half 2006 30 Table 11 - Y2005 Vietnam market volume of FEFC members to Eastern Europe (TEU) 32 Table 12 - Y2005 Vietnam market volume of FEFC members to Mediterranean area (TEU) 33 Table 13 - Year 2005 IADA member lifting from Vietnam 35 Table 14 - Lifting review of OOCL (Vietnam) Y2005 Vs Y2004 36 Table 15 - OOCL (Vietnam) review on revenue in year 2005 vs 2004 37 Table 16 - Target for OOCL (Vietnam) to year 2010 53 Table 17 - The increase level for each trade year after year from 2005 to 2010 54 MBA Thesis Report Dec 2006 MMCVFB Intake 6 Written by Tran Phuoc Hiep P age iv LIST OF FIGURES Figure 1 - GPD growth year 2000 to year 2005 18 Figure 2 - Top Ten Foreign Direct Investment countries with associated value 19 Figure 3 - Top Commodities Import Y2005 with associated value 21 Figure 4 - Top Commodities Export Y2005 with associated value 22 Figure 5 - Top countries import from 2000 to 2005 with associated value 23 Figure 6 - Top countries export from 2000 to 2005 with associated value 24 Figure 7 - Organization chart of OOCL (Vietnam) 25 Figure 8 - Service coverage of OOCL (Vietnam) 26 Figure 9 - Total Vietnam volume year 2005 27 Figure 10 - OOCL (Vietnam) lifting review by trade year 2005 37 Figure 11 - OOCL (Vietnam) lifting review year 2005 vs year 2004 37 Figure 12 - OOCL (Vietnam) revenue review by trade year 2005 38 Figure 13 - Long haul customers sample 41 Figure 14 - Short haul customers sample 42 Figure 15 - Freight control ratio of OOCL vs market 44 Figure 16 - Customer satisfaction toward OOCL long haul service 45 Figure 17 - Customer satisfaction toward OOCL short haul service 46 Figure 18 - Performance of different departments in long haul service 46 Figure 19 - Performance of different departments in short haul service 47 Figure 20 - Area need improvement first – long haul 47 Figure 21 - Areas need improvement – short haul 48 Figure 22 - SCX (South China Express) service 55 Figure 23 - PNX (Pacific North Express) service 56 Figure 24 - AEX (Asia East Coast Express) service 56 Figure 25 - EU1 (Europe 1) service Figure 26 - EU2 (Europe 2) service 58 Figure 27 - EUM (Europe Mediteranian) service 58 Figure 28 - Loop A (Australia) service 59 Figure 29 - Loop B (Australia) service 59 Figure 30 - Shipment life-cycle 66 Figure 31 - Business Process Flow Overview within OOCL 67 MBA Thesis Report Dec 2006 MMCVFB Intake 6 Written by Tran Phuoc Hiep P age v ABBREVIATIONS OOCL: Orient Overseas Container Line TEU: Twenty feet Equivalent Unit FEU: Forty feet Equivalent Unit TPT: Transpacific Trade AET: Asia Europe Trade AUT: Australian Trade IAT: Intra Asia Trade TSA: Transpacific Stabilization Agreement FEFC: Far East Freight Conference AADA: Asia Australia Discussion Agreement IADA: Intra Asia Discussion Agreement WTO: World Trade Organization ASEAN: Association of South East Asia Nation NAFTA: North America Free Trade Area EU: Europe Union APEC: Asia Pacific Economic Co-operation SWOT: Strengths, Weaknesses, Opportunities, Threats GDP: Gross Domestic Product MBA Thesis Report Dec 2006 MMCVFB Intake 6 Written by Tran Phuoc Hiep P age 1 CHAPTER 1: INTRODUCTION 1.1 Introduction The world’s markets nowadays have become increasingly “globalization”. To a large extent, this reflects the fact that all countries are adjusting to strong trade exchange pressures. These pressures are derived from international and regional trade agreements, such as the World Trade Organization (WTO), the North American Free Trade Agreement (NAFTA). There is also the development of other trading blocks like the European Union (EU), the Association of South East Asian Nations (ASEAN), the Asia Pacific Economic Co-operation (APEC), and the growth of Intra Asian Trade. These trade policy initiatives have a common objective to open up new trading opportunities and integrate countries into global economy. The global economic integration relies upon efficiency and philosophy of logistics and supply chain management. Shipping industry in general and containerized transportation in particular plays a very important role in the logistics world. It is indispensable in the supply chain management process. With the long history of shipping industry, since 19 th century for cargo and passenger transportation and then developed to containerized transportation in late 1950s, containerized transportation nowadays proves to be the most economic and safety transportation mode. It now occupies more than 90% of total cargo volume transported worldwide 1 . 1.2. Problem Statement Nowadays, Vietnam becomes a manufacturing and processing place of many foreign companies due to low labor costs, natural resources and attractive investment environment. Beside that, in the past ten years, Vietnam’s economy has achieved its vision of sustainable and high quality growth of GDP which is around 8% yearly. These elements have raised the import – export demands in the country and this is resulted to fast growth of shipping industry in general and containerized transportation in particular. Currently, most of the shipping lines have been present in Vietnam market, about 32 lines. However, most of carriers currently don’t have a specific marketing strategy for Vietnam market or they just base on the marketing strategy from head quarter because: 1 http://wikipedia.org/containerizedtransportation MBA Thesis Report Dec 2006 MMCVFB Intake 6 Written by Tran Phuoc Hiep P age 2 - Vietnam is a new and small market for containerized transportation, majority of Vietnamese exporters are selling under FOB basic which leave the shipping control to consignee side. - The government is still controlling on maritime transportation, so most of carriers operating under agent contract or joint venture, resulted to some self-constraints in carriers’ investment. With the prospect of joining WTO, Vietnam market will be fully open for all service industries including maritime service, carriers will invest heavily in Vietnam and the market supply will increase significantly over the demand. Therefore, a specific marketing strategy of carrier for local Vietnam market is the vital need for carriers’ development. 1.3 Rational of research The research is to concentrate on analyzing marketing information and OOCL services details and then giving suggestion on marketing strategy for OOCL (Vietnam) Co., Ltd in Vietnam market. The objective of the research, first of all, is to put the knowledge acquired in school into a business practice. Specially, by applying the newest knowledge and methodology in services marketing, both in terms of strategy setting and working experience, the research aims at finding a proper marketing strategy for OOCL (Vietnam) Co., Ltd. The research is prepared for the company management to take into consideration the marketing mix to improve OOCL (Vietnam) position, achieving challenge target for OOCL (Vietnam). 1.4 Research Methodology The research is prepared basing on the combination of literature guidance, secondary data analysis and field interview. Specifically, the methodology includes: - Reviewing the literature as a guideline to have an optimal approach to the research objective. MBA Thesis Report Dec 2006 MMCVFB Intake 6 Written by Tran Phuoc Hiep P age 3 - Secondary data obtained from company finance report and shipping line conferences were analyzed in order to have an overview of shipping industry worldwide and Vietnam in particular. - Primary data was collected from direct interview with customers and specialist in this field. Running SPSS program to analyze the data. Transfer the results into comment and conclusion of the correlation between factors. - SWOT analyses method. - Finally, based on all the results acquired from previous steps together with corporation overall strategy, an extended marketing mix for the company OOCL (Vietnam) Co., Ltd. is recommended. MBA Thesis Report Dec 2006 MMCVFB Intake 6 Written by Tran Phuoc Hiep P age 4 1.5 The scope and limitation of research 1.5.1 Scope of study The study focuses mainly on containerized transportation in Ho Chi Minh market. Study customers’ behaviors, expectation and demand on company’s services. Provide recommendations and solutions to assist with the company marketing strategy and development orientation. Objectives of the study OOCL Vietnam introduction and internal analysis, basing on secondary data reference Review of relevant Literature Redefine corporate objectives Marketing survey as primary data collection Generating marketing strategy options Analysis of data findings (SPSS) and SWOT analysis Business environment and external analysis, basing on secondary data reference Conclusion and recommendation MBA Thesis Report Dec 2006 MMCVFB Intake 6 Written by Tran Phuoc Hiep P age 5 1.5.2 Limitation The study just purely looks into containerized transportation (a factor among logistics and supply chain management) and the marketing strategy for OOCL (Vietnam) Co., Ltd It could not expound fully the role of containerized transportation in logistics management because of time limitation. Beside that my knowledge is limited that may affect on result of study, therefore, the study would mention on some main aspects and routes of the carriers only, and it is synoptically. However, the thesis is a cornerstone for my further study in the field and I believe that my suggestions are useful for the company in developing its presence in Vietnam market for the next 10 years. [...]... some point, container ships will be constrained in size only by the Straits of Malacca, one of the world's busiest shipping lanes 2.2.2 What is transportation marketing Transportation marketing1 0 is an effective marketing tool to manage the industry and to solve the following issues: - To study the overall market of the transportation services - To identify the need of quality and quantity of the transportation. .. research forum of 14 major container shipping lines serving the trade from/to ports and inland points in the U.S to destinations throughout Asia Members include: American President Lines, Ltd CMA-CGM China Shipping (*) COSCO Container Lines, Ltd Evergreen Marine Corp (Taiwan), Ltd Hanjin Shipping Co., Ltd Hapag Lloyd Container Linie Hyundai Merchant Marine Co., Ltd Kawasaki Kisen Kaisha, Ltd (K Line) Mitsui... primary industry (extraction such as mining and fishing) The tertiary sector of industry involves the provision of services to other businesses as well as final consumers Services may involve the transport, distribution and sale of goods from producer to a consumer as may happen in wholesaling and retailing, or may involve the provision of a service, such as in pest control or entertainment The goods... halt over the past 18 months It is now on the rising slope again, an interesting trend as it has been listed on the HKSE in June 2005 Korean carriers Hanjin Shipping (including Senator Linie) and Hyundai Merchant Marine have suffered of the post-1997 financial crisis They were at the time the shipping divisions of heavily indebted chaebols, which had to slash expenses The result is that new building programs... transformed in the process of providing the service, as happens in the restaurant industry However the focus is on people interacting with people and serving the customer rather than transforming physical goods For the last 20 years there has been a substantial shift from the other two industry sectors to the Tertiary Sector in industrialised countries 5 Lovelock, C.H and Wright, L.K., “ Principles of Service... manufacturers to take into account the cultural context of the business In other words, it is accepted that service is more culture-sensitive than any other sectors ever realized and studied.6 2.1.3 Classification of the Services7 The service sector or the service industry, is one of the three main industrial categories of a developed economy, the others being the secondary industry (manufacturing and primary... Introduction of OOCL group and OOCL (Vietnam) Orient Overseas Container Line (OOCL) is a wholly owned subsidiary of Orient Overseas (International) Limited (OOIL), a public company (0316) listed on the Hong Kong Stock Exchange OOCL is one of the world's largest international container transportation, and is one of Hong Kong's most recognized global brands, providing customers the containerized transportation. .. encompassing Asia, Europe, North America and Australia OOCL is well respected in the industry with a reputation for providing customer-focused solutions, a quality through excellence approach and continual innovation OOCL pioneered transportation coverage of China and is an industry leader in information technology19 The founder of OOCL, the late C Y Tung, dreamed of creating the first international Chinese... planning this includes an external and internal audit - Where do we want to go? – Formulating objectives relating to the strategy hierarchy, resulting in a hierarchy of objectives - How are we going to get there ? – Deciding the vehicle of strategy, this normally includes the product/ market mix According to Stern16, a strategic marketing planning should include the following steps: - To determine company... been minimal They are at least still there, which is not the case of independent compatriot Choyang Line, which disappeared in 2001 Hongkong based carrier Orient Overseas Container Line (OOCL) increase 4 rank from 16th to 12th with market share increase 0.6% OOCL choose the strategy of “organic Written by Tran Phuoc Hiep Page 15 MBA Thesis Report Dec 2006 MMCVFB Intake 6 growth” within their internal . Classification of the Services 7 The service sector or the service industry, is one of the three main industrial categories of a developed economy, the others being the secondary industry (manufacturing. raised the import – export demands in the country and this is resulted to fast growth of shipping industry in general and containerized transportation in particular. Currently, most of the shipping. applying the newest knowledge and methodology in services marketing, both in terms of strategy setting and working experience, the research aims at finding a proper marketing strategy for OOCL (Vietnam)