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CanadianMarketAnalysis

DevelopedBy:

MeretheFlatla,GilbertLunde,ThomasRemes,HenrikLysdahlandLasseAlfsvåg.

“ThisreporthasbeencompletedasapartofthebachelorprograminInternationalMarketing,at

SimonFraserUniversity/NorwegianSchoolofManagementBI.Thisdoesnotimplythatthe

methodswhichhavebeenused,thegeneratedresults,ortheconclusiondrawn,havebeenverified

byanyoftheseinstitutions.”

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Memorandum___________________________________________________________________________________

To:KongsbergMaritime

From:MeretheFlatla,GilbertLunde,ThomasRemes,Henrik

Lysdahl&LasseAlfsvåg

Date:May14,2009

Subject:KONGSBERGMARITIME–CANADIANMARKETANALYSIS

___________________________________________________________________________________

AsaresponsetoyourrequestofdevelopingawaytopositionKongsbergMaritime’sproductsbetter,inordertoreach“TheFullPicture”goal,wehavedevelopedthisreport.ThereportincludesanalysesoftheCanadianIndustry,thecompanyandanyotherrelevantfactorsthatwillbeofinterestforexpandingmarketshares.ThereportwillalsogiverecommendationsforfurtherdevelopmentbasedonstrategiesdesignedtofitKM’scurrentpositioninthemarket.

KMhasagoodpositioninthemaritimeindustry,andhasbeenabletomaintainastrongmarketpositionincertainareas.However,therehavebeenindicationsthattheyneedtoimprovetheservicetosomeoftheircustomers.Basedoninterviewsandsecondaryresearch,thisreportwillprovideyouwithinsightaswellasrequiredinformationforpotentialsolutions.

Ifyoufeelsomeinformationislackingorsomethingneededtobeclarified,pleasefeelfreetocontactusatanytime.

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ExecutiveSummary

ThefollowingreporthasbeendevelopedonbehalfofKongsbergMaritime.KMisaleading

providerofmarineelectronicsintheshippingindustry,andthereportanalyseshowKM

canimprovetheircurrentpositionintheCanadianmarket.Thereportisasawholebased

onKMbeingabletoprovidetheircustomers“theFullPicture.”

IntheintroductionofthereportKM’sbackground,theresearchproblemandthereport’s

researchobjectivesarediscussed.Theobjectiveistodeterminewhichfactorswillbe

importanttocompletethereport,withinthesetlimits.Theliteraturereviewsectionofthe

reportisacombinationofacademicmarketingtheoriestodetermineKM’sopportunities

andhowfarKMisintheinternationalizationprocess.Thereportfocusesfurtheronother

industryrelatedissuessuchascompetitorsandpotentialcustomersforKM.Further;the

reportprovidesastrategicproblemdefinitioninadditiontoshorttermandlongtermgoals

forKM.

ResearchMethodology

Inordertoobtaininformationabouttheresearchtopic,exploratoryresearchwas

conductedbasedonprimaryandsecondaryresources.Asapartoftheexploratory

research,qualitativeresearch,intheformofinterviewsandquestionnaires,wascarried

outwithkeypersonnelregardingsupplychainandengineeringofmarineelectronics.

TheseincludedshippingcompanieslocatedinbothEasternandWesternCanadaandthe

ShipConstructionDevelopmentdepartmentofthepublicworksandgovernmentservices

ofCanada.

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Secondarysourceshavebeenusedasamainsourceofinformationtoprovidebothan

overallandin‐depthperspectiveoftheshippingindustryandanyrelatedissues,aswellas

theCanadianmarketasawhole.Thesecondaryresearchprimarilyincludedinformation

obtainedthroughelectronicresources,suchaswebsites,aswellasprintmediaand

academicreports.Secondaryresourceshavealsobeenusedtoobtaindescriptiveresearch

informationrelatedtothetopicathand.

Summaryoffindings

FindingsfromtheprimaryandsecondarydatashowthatthoughKMispresentlycovering

majorpartsofthemarket,theyhavelostandareonthevergeofloosingmoremarket

share.Themarketiscurrentlyexperiencingadownfallinproductionaftera5yearsboom.

Itcanthereforebeassumed,thatmaintainingtheexistingcustomerbaseisvitaltolong

termcompanysurvival.

Thereasonforreductioninmarketsharetracesbacktoonekeycomponent‐theactual

relationshipbetweenKMandtheircustomers.ResearchhasshownthatKMcouldimprove

customerrelationships,andthatinternalcommunicationatKMhasroomforimprovement.

Despitetheseissues,KMcoversmostofthecommercialmarketinBritishColombiaand

Canada,yet,itcangainmoreoverallmarketsharebyattractingnon‐commercialplayers.

KM’scustomersinthecommercialmarketperceiveKMasaleadingbrandofhighquality

marineelectronics.

WhenlookingatKM’scompetitors,itshouldbenotedthattheirtargetmarketsaresplit

betweenthecommercialandthenon‐commercialmarketsuchasthemilitary.

ThestrategysectioninthereportfocusesonvariouswaysKMcanimprovetheircurrent

positionwithexistingcustomersandhowtowinmarketshareinthemilitarysector.

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Recommendations

ForKMtosucceedwiththeproposedstrategy,thereareseveralpointsthatKMwillhaveto

directtheirattentionto.ThesearetherecommendedissuesforKM:

•Identifyandfurtherdevelopopportunitiesforimprovementinsidetheirserviceand

communicationbranch.

•Bepro‐activeingettingformerandpotentialcustomersback.

•CreateastrongerpresenceinVancouverbyrepresentationfromanagent.

•Developaguidelineandastrategyforemployeestofollowwhentheycontactexisting

andpotentialcustomers.

•Lookforapotentialalliancepartnertoprovideabroaderrangeofproducts,packagesand

solutions.

•Developa“FullPicture”solutionwithanalliancepartner.

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Acknowledgements

ThisreporthasbeenpreparedasaconclusionoftheauthorsBachelorDegreeinInternationalMarketing.ThereporthasbeenwrittenandsubmittedatSimonFraserUniversity,asapartoftheauthorsexchangeprogramthroughtheNorwegianSchoolofManagementBI.ThisprojectiswrittenforandincooperationwithKongsbergMaritime,asamarketanalysisforthecompany’scurrentpositionandtheopportunitiestoexpandinBritishColombiaandCanadaoverall.

Theauthorswouldliketoacknowledgekeyindividualsfortheirhelpandcontributionthroughouttheprocessofcreatingthisreport.TheauthorswouldliketorecognizeandthankMr.BobCrockett,forhisinvolvement,knowledgeandoverallguidancethroughouttheproject.Withhisfeedback,ideasandhisoverallinsighthehascontributedtohelpimprovetheprojectinnumerousways.Theauthorswouldalsoliketoacknowledgethemanyresourcefulpeopleinvolvedinthisindustry,usingtheirpersonaltimetosharetheirknowledgewiththeauthorsthroughvariousinterviews,eitherinperson,emailortelephone.

TheteamwouldliketoacknowledgeJuliaNossovaforhercontributionsregardingtheeditingofthisreport.

Finally,theauthorswouldliketothankKongsbergMaritime,fortheopportunitytoconductthismarketanalysis,andallowingustousetheircompanyasabasisforourbachelorproject.

Vancouver,May14,2009

GilbertLunde ThomasRemes

HenrikLysdahl MeretheFlatla

LasseAlfsvåg

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TableofContents

ExecutiveSummary ..................................................................................................................................... 3

Acknowledgements ..................................................................................................................................... 6

TableofContents......................................................................................................................................... 7

Introduction................................................................................................................................................. 9

KongsbergMaritime .................................................................................................................................. 13

MarketBackground ................................................................................................................................... 19

ExistingCustomers..................................................................................................................................... 22

PotentialCustomers .................................................................................................................................. 25

Competitors ............................................................................................................................................... 26

LiteratureReview....................................................................................................................................... 30

Porter’sFiveForces ................................................................................................................................... 34

GAPModel................................................................................................................................................. 37

BusinessCultureinCanada........................................................................................................................ 42

SWOTAnalysis ........................................................................................................................................... 43

StrategicProblemDefinition ..................................................................................................................... 46

Goals .......................................................................................................................................................... 46

KongsbergMaritimeinCanada ................................................................................................................. 48

MarketingMix ........................................................................................................................................... 50

Porter’sGenericStrategies ........................................................................................................................ 53

Strategy...................................................................................................................................................... 54

Strategy#1‐PresenceinVancouver ......................................................................................................... 54

Strategy#2‐ServiceImplementation ....................................................................................................... 56

Strategy3–Strategicalliances .................................................................................................................. 57

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FinancialEstimates .................................................................................................................................... 64

Conclusion&Recommendations............................................................................................................... 69

Discussion .................................................................................................................................................. 71

References ................................................................................................................................................. 73

Appendix.................................................................................................................................................... 77

Contacts ..................................................................................................................................................... 95

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Introduction

Backgroundforresearch

Ourclient,KongsbergMaritime(KM)isasubsidiaryoftheKongsberggroup.KMdelivers

productsandsystemsfordynamicpositioning,navigationandautomationtomerchant

vesselsandoffshoreinstallations.KMalsosuppliesproductsandsystemsforseabed

surveillance,trainingsimulators,andforfishingvesselsandfisheriesresearch(Kongsberg

Maritime,2009).TheKongsbergGroupisaninternationalknowledgebasedcorporation

withmorethan5200employeesin25countries.Kongsbergsupplieshightechnology

systemsandsolutionstocustomersengagedintheoilandgasindustry,themerchant

marineandthedefenseandaerospaceindustries(KongsbergMaritime,2009).KMconsists

ofthreedivisions:oil&gas,shipping&offshoreandsubsea.Inourdiplomaproject,wewill

focusontheshippingandoffshoredivisiononrequestfromKM.OneofKM’slargest

customers,TeekayCorporation,islocatedinVancouverandtheirinterviewwillserveasa

focalpointforthisproject.InadditiontoTeekaywewillalsocontactotherKMcustomers

inCanadasuchasSeaspanLtd,BCFerries,AtlanticTowing,CanshipUglandandSecunda

MarineServices.

Thecompanypridesitselfinofferinganextensiveportfolioofvarioustechnological

componentsusedinships,somethingtheyrefertoas“TheFullPicture,”meaningthatKM

isabletoprovidetheircustomerswithafulllineofmarineelectronics.AproblemforKMis

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thatsomeoftheirproductsarenotpositionedaswellasothers,andtheyare,therefore,not

achievingtheir“FullPicture”goal.

TheresearchislimitedtoincludetheproductssoldfromtheKMCanadasalesofficein

Halifax,NovaScotia.Theseare:

• Altimeters

• CameraSystems

• DynamicPositioningSystems

• HydrographicSystems

• JoystickSystems

• MarineAutomation

• MarineInformationSystems

• NavigationSystems

• ProcessAutomation

• PropulsionControlSystem

• ReferenceSystems

• Sonar,Multibeamandscanning

• TankGaugingSystems

• ThrusterControlSystems

• VoyageDataRecords

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ResearchProblem

OurtaskwillbetodevelopawaytorepositionKM’sproducts,inordertoreach“TheFull

Picture”goal.WewillperformresearchonexistingKMcustomerstomeasurecustomer

satisfactionandidentifynegativeandpositiveexperiences,aswellasidentifysuggestions

forimprovements.Forthisproject,onlyCanadabasedship‐ownerswillbeconsideredas

wearewritingarecommendationfortheKMCanadasalesoffice.Wewillalsoperforma

competitoranalysiswithinthemarineelectronicsindustry.

ResearchObjectives

Inordertosuccessfullyexecutethisdiplomaproject,itisnecessarytodeterminespecific

researchobjectivesandgoals.Bydoingso,thegroundsforactioncanbecorrectly

identified.Theresearchobjectivesincludeobtaininginformationonthefollowing:

• Shippingindustrykeyfactsandfigures,worldwideandCanada.

• ExistingcustomersofKongsbergMaritimeinCanada.

• PotentialnewKongsbergMaritimecustomersinCanada.

• Competitorswithininthemarineelectronicsmarket.

• BackgroundinformationonKongsbergMaritime.

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• InformationonKMproductsandservices.

ResearchLimitations

Thisisanevaluationofmethodologyusedinthesurveycompletionandtheacquiringof

informationsurroundingthecase.Thesectionaimstohighlightthesoundpointsofthe

process,aswellaslookatthepossiblelimitationsthatcouldaffecttheoutcome.

• Allresponseswereretrievedthroughinterviewsconductedbymembersofthe

group,therefore,limitingpossibilityofsamplingerrors.

• Therespondentsinthesurveyallhadsufficientcompetencetoprovidetheresearch

teamwithrelevantanswers.

Pointsthatcanbesubjecttocriticism:

• Priortodesigningthequestiontemplateandsurvey,themembersofthegroupdidnot

haveathoroughunderstandingoftheindustry.

• Thedatasample,althoughofgoodquality,canbeconsideredtoberelativelysmall

evenforaqualitativesurvey.

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• Aninherentproblemwithhavingavoluntaryansweringprocessisthatitcouldleadto

ahomogenoussamplewherepossibilityofoutlierswoulddecline.

KongsbergMaritime

History

KM’shistorydatesbacktothefoundingofAutronicain1957withthefirstalarmsystem

readyin1959.KMhasovertheyearsabsorbedanumberofwell‐knownmaritimeand

offshore‐relatedcompanies,throughyearsofsystematicworktowardsanetwork.Key

eventsinthehistoryofKMare:theworld’sfirstcomputerizedradar/ARPAsystem(1969),

thefirstengineroomsimulator(1978)anddevelopingIntelligentElectronicApplicationin

termsofsoftware,sensorsandinstruments(2008).KMhasthroughtheyearsdeveloped

relationshipswithsimilarorcompetingbusinessestocoverandachieveabetter

understandingofthemarket.Theyareoperatingthroughanumberofdomesticand

internationalsubsidiaries(KongsbergMaritime,2009).

CurrentSituation

KMoperatesinmarketsthatareaffectedbytheturbulenceintheglobaleconomy.The

marketmaybeaffectedbycancelationsandtheriskofdownsizinginfutureoperations.

However,theprospectsfor2009stilllookfine,accordingtotheboardatKM(Kongsberg

Maritime,2009).

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KMoperatesinmarketsthatareindependentofeachotheranddrivenbycompetition.To

maintainastrongmarketposition,KMfocusesonlong‐termperspectivesconcerning

adaptingtochangesinthemarket.

Placement

InCanada,theHalifaxofficecurrentlyhandlessalesandservicesforallKMproductsexcept

simulators,whichishandledattheofficeinSt.Johns’.KongsbergMesotechinVancouver

designsandmanufacturessonarsystemsfortheglobalmarket.Theproductsaresoldto

countriesallovertheworldviaKM“sistercompanies”oragents(JohnGillis,2009).

HalifaxandSt.John’sare“sistercompanies”forCanada.TheHalifaxofficeinteractswithall

KMmanufacturingsitesliketheofficesinVancouver,Trondheim,Horten,Kongsbergand

Aberdeentoacquireproductsandreceivetechnicalsupport.KMconsiderstheorganization

amatrixwithtechnical/manufacturingcompaniesononeaxisandsales/servicessister

companies/agentsineachcountryontheotheraxis.(JohnGillis,2009)

PotentialMarkets

Thisreportwillevaluatenewpotentialmarkets,inadditiontofocusingonbuilding

strongerrelationshipswithcurrentcostumers.

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KMcurrentlyholdsagoodpositioninthemaritimeindustryasawhole,andhasbeenable

tomaintainastrongmarketpositioninspecificareas.However,therehavebeen

indicationsthattheyneedtoimprovetheservicetosomeoftheircustomers.

Products

KMspecializesinmarineelectronics.Theirequipmentissuitableforvariousvesselsthat

include:cargo,bulk,RO‐RO,containerships,cruise,ferries,megayachts,drillingunits,

fishingvessels,FPSOandFPU,liquidgascarriers,navalships,offshoresupportvessels,

researchandsurveyvessels,shuttletankersandtankers(KongsbergMaritime,2009).

SomeoftheproductsKMoffersaredescribedbelow.

Navigationssensors

KMoffersawiderangeofqualitynavigationsensorsfromreputablesuppliersthatcanbe

usedwithintheK‐BridgesystemalsoprovidedbyKM.

K­Bridge

K‐Bridgeisaradarsystemthatprovidessuperiortargettrackingandhasadvanced

navigationintegrationwithamultisensorinput.K‐Bridgecanincludeelectronicchart

functions,automaticnavigationandtracksteeringwheninanintegratedK‐Bridgebridge

system.Thecolordisplaypresentsasquareradarpicture,whichgivesanincreasedactive

displayareaforbettertrafficsurveillance.

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Logbooks

K‐logelectroniclogbooksareelectronicalternativestorecordkeynavigation,engine

watch,portcallsandotheroperationalactivitiesonboardvesselsofallsizes.AllofKM’s

logbooksmeetthespecificreportingrequirementsofIMO,SOLASandflagstates.Theship’s

officersaregivenaneasywaytologallactivitiesonboard.Manuallyinsertedinformationis

automaticallycombinedwithdatarecordedfromvessel’sinstruments.

Navigatorsafetysystems

KM’snavigatorsafetysystem,or“deadmanalarm,”isdesignedtomonitorbridgeactivity

andalertthemasterorotherqualifiedcrewifthebridgebecomesunattended.Thesystem

firstalertstheofficeratwatchthroughlocalalarmindicationatthebridgeunit,andifno

response,thenalertsthemasterorotherqualifiedofficer.Thenavigatorsafetysystem

confirmstotherequirementsofIMOresolutionMCS.128(75)performancestandardsfor

bridgenavigationalwatchalarmsystemandthebridgeclassnotationsforone‐manbridge

operation.(KongsbergMaritime,2009).

VoyageDataRecorder

Voyagedatarecordershavethesamepurposeas“blackboxes”onaircrafts,andcanhelp

investigatorsreviewproceduresandinstructionsamomentaheadofanincidenttoidentify

thecause.(KongsbergMaritime,2009)

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DynamicPositioning–DPsystems

DPsystemsservethepurposekeepingthevesselswithinspecifiedpositions.Thesystems

aredesignedtominimizefuelconsumptionandwear‐and‐tearonpropulsionequipment.

Currentlymorethan1200dynamicpositioningsystemshavebeensuppliedtooilandgas

relatedvessels(KongsbergMaritime,2009).

Thrustercontrols

Thethrustercontrolsystem,K‐Thrust,isanindependentremotecontrolsystemmadefor

electricallydriventhrusters,propulsionunitsandrudders.Theapplicationincludesside

thrusters,azimuththrusters,azimuthsteeringpropulsion,electricmainpropulsionand

rudders(KongsbergMaritime,2009).

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Promotion

KMhasfourpeopleinHalifax,allresponsibleforsales.Theyhavedirectcontactwith

customersandperformdemonstrationsofequipmentuponrequest.KMrepresentatives

attendtradeshowslikeTheInterservice/IndustryTraining,SimulationandEducation

Conference(I/ITSEC),Sea–Airspace,CANSEC,OffshoreEuropeandATEC.Theyalso

attendtechnicalconferenceslike:offshoretechnologyconference,WITSMLpublicseminar

andvendorexhibitionandtheSocietyofExplorationGeophysicistsmeetings(JohnGillis,

KongsbergMaritime,Halifax).KMhasadvertisedinmagazinesforthemaritimeindustry

suchasMarineLog.

MarketNeedsandTrends

KMenjoysagoodpositionwithintheshippingindustry.However,itisreasonableto

assumethatinalong‐termsituationthedownturnintheworldeconomywillcatchupwith

KMandcancreateriskofcancelationsandcutbacks.

AccordingtoareportfromStratfordGlobalIntelligence,theshippingindustryhasbeenhit

hardbythedecliningglobaleconomy.Numbersshowthattheworldtradevaluesforthe

lastquarterof2008havedropped45percentcomparedtothelastquarterof2007.“The

worldTradeOrganizationisnowpredictinga9percentdecreaseintheworldexportby

volumein2009,thelargestcontractionsinceWorldWar2”(StratfordGlobalIntelligence,

2009).

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MarketBackground

WorldwideShippingIndustry

Everyproductevermade,boughtorsoldhasbeenaffectedbyshipping.Therearemany

waystoshipproducts,buttherearethreebasictypesofshipment:byland,airorsea.This

reportfocusesonshippingbysea,asKMspecializesinmanufacturingmarineelectronics

forships.

Merchantshippingisessentialtotheworldeconomy,carryingthebulkofinternational

trade.Thevesselsareexpensive,beingoneofthelargestmanmadevehiclesever.There

areapproximately50.000merchantshipsthatareinvolvedwithinternationaltradeof

everykindofcargo.Theworldfleetisregisteredinover150nationsandmannedby

millionsofpeoplefromallovertheglobe.(Equitymaster,2009)

Therearedifferenttypesofvesselsinthemerchantfleetincluding;

• Containerships,carryingmostoftheworldsmanufacturedgoodsandproducts.

• Bulkcarriers,the“workhorses”ofthefleet,transportingrawmaterialssuchasiron

oreandcoal.

• Tankers,includingtransportcrudeoil,chemicalsandpetroleumproducts.

• FerriesandCruiseships,performingmainlyastransportationforpassengers.

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• Specialistshipssuchasanchorhandlingandsupplyvesselsfortheoffshoreoil

industrysalvagetugs,icebreakersandresearchvessels.

Someofthelargestcontaineroperatorsintheworldare;APM‐Maersk,MediterraneanShg

Co,CMACGMGroup,EvergreenLine,COSCOcontainerLandHanjin/Senator

(Equitymaster,2009).

Theindustryishighlycapital‐intensiveandadequatecashflowsarerequiredforday‐to‐

dayfunctioning.Moreover,expertiseandtechnicalknow‐howalsoserveascriticalfactors.

Sinethenumberofshippingagenciesaregrowing,thereisahighlevelofcompetition.This

cangivecustomersahigherbargainingpower(Equitymaster,2009).

CanadianShippingIndustry

ShippinginCanadahasplayedasignificantroleinthedevelopmentofmodernsocietyfor

centuries,aformofeconomiclifelineforCanadians,especiallyforthefirstsettlers.The

industryprovidedTheOldWorldwiththingssuchasfur,agricultural,forestryandmining

productstomeettheincreasinglevelsofdemand.

IneasternCanada,particularlyintheMaritimes,atraditionbasedonshipbuilding,fishing

andtradeflourishedwiththeshippingindustrygrowinginthe1840’s.SamuelCunardfrom

HalifaxestablishedatransoceanicservicethatdevelopedintotheCunardCompany,once

rankedasfourthamongtheshipowningnationsoftheworld.TheCanadianshipping

industryalsohaditsupsanddowns.Alackofsteelandengineeringskillsservedto

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downsizetheCanadianshipbuildingactivity.The2ndWorldWar,however,gaveCanadian

shippingatemporaryboom(TheCanadianencyclopedia,2009).

TheshippingindustryisimportanttoCanadaduetotheimportanceoftradetothe

economy.In1996,exportswere33.5%andimports29.2%ofGrossDomesticProduct.

Approximatelyonethirdofexportsandoveraquarterofimportsaretransportedbywater.

AlthoughmostofCanadiantradewiththeUSisbylandtransport,shippingisvitaltothe

competivenessofresource‐basedproductsintheglobalmarkets.Someoftheoverseas

nationsCanadatradeswithareJapan,UKandotherwesternEuropeannationssuchas

Norway,makingtheNorthAtlanticandNorthPacificroutethebusiest.

TheshipsandportfacilitiesareefficientlyservingCanadiantrade.Someofthemodern

containerterminalsareessential,specificallythoseinHalifax,Montreal,Vancouverand

PrinceRupert.TheportsofMontrealandVancouverarethelargestandmostprofitable.

In1895,theCanadiangovernmentimplementedtherecommendationonthetaskforceon

deep‐seashippingbyamendingtaxregulations,whichmeansthatthemanagementof

internationalshippingcouldbeconductedinCanadawithoutexposingtheearningsofthe

shippingservicestocorporatetaxuntildistributed.ThislegislationmadeCanada

competitivewithothercountries,asmostshipownersdidnotpaytax,whichhasresulted

inanincreaseinemploymentopportunities.WiththeCanadianshippingindustrygrowing,

anumberofcompanieshavemovedintoCanada,thelargestbeingTeekayCorporation,

foundedin1973.Teekay’scorporateheadofficeislocatedinBermudaandtheir

operationalheadofficeisinVancouver(Teekay,2009).

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ExistingCustomers

TeekayCorporation

Withtheirlargefleet,theyareoneofthemostimportantsuppliersofshippingservicesfor

leadingoilandgascompaniesworldwide.Currently,Teekayhas158vesselsinadditionto

17otherscurrentlyonorder.Thevesselshaveanaveragelifeexpectancyof10years

(Teekay,2009).

TheindustriesinwhichTeekayoperatesare:oil,liquefiedpetroleumgas,andliquefied

naturalgas.Vesselsarelocatedallovertheworld,withofficesinEurope,Australia,Asia,

NorthAmericaandSouthAmerica.Theirfourbusinessunitsare:TeekayTanker,Teekay

NavionShuttletankerandoffshore,TeekayGasservicesandTeekayMarineservices.

(Teekay,2009).

Teekayisthelargestoperatorofmediumsizetankersintheworld.Theyareaworld‐

leadingoperatorofoffshoreloadingshuttletankersandoffercomprehensiveshuttle

tankerservices.Theyalsodeliverinnovativemethodsforstoringandtransferringoffshore

oil,fromfloatingstoragesystemstocomplexexportandtransportationservices.Teekay

transportsmorethan10%oftheworld’sseaborneoil(Teekay,2009).

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SeaspanInternationalLtd.

Startingoutin1898byservicingtheB.Ccoastalcommunities,Seaspanhasgrownintoa

multimillion‐dollaroperationservingthewholeWestCoastofNorthAmerica.Aswellas

providingship‐dockingservicesatPortofVancouver,VictoriaandotherB.Cports,they

alsooperateafleetof64shipsrangingfromflatdeckbargestochemicaltankers(Seaspan,

2009).ThecompanyisownedandoperatedundertheWashingtonMarineGroup,which

alsoownslocalferryandtugboatservicesandthreemajorshipyards:Vancouver

Shipyards,VictoriaShipyardsandVancouverDrydock.(WashingtonMarineGroup,2009)

BCFerries

BCFerriesservesupto47portsalongthecoastofBritishColombia.Theyhavesince2007

added7newstate‐of‐the‐artshipstotheirfleet.BCFerriesAuthorityisanosharecapital

corporationcreatedundertheCoastalFerryAct.BCFerriesroutesandserviceslevelsare

definedinthecostalferryservicescontractbetweentheprovinceofBritishColombiaand

BCFerries.BCFerriesisanindependentregulatorwhoisappointedbytheprovinceof

BritishColombia.BCFerries’soleshareholderistheprovincialgovernmentofBC(BC

Ferries,2009).

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CanshipUglandLtd.

AsajointventurebetweentheNorwegiancompanies,J.J.UglandCompaniesandKnutsen

OASShipping,CanshipUglandLtd.starteditsoperationsin1997.WithheadquartersinSt.

John’s,Newfoundland,thecompanyemploysatotalof380peopleonandoffshoreandhas

9shipsundermanagement,servicingtheoilindustryaroundNewfoundland.Themain

bulkoftheirfleetconsistsofcrudeoiltankersinthe120,000–150,000tonsdeadweight

classandtherestbeingspecializedtugboatsfittedforoperationsdemandingheavylifting

andfirefighting(CanshipUgland,2009).

SecundaMarineServices

Createdin1983asaNovaScotiacompany,SecundaMarineServiceshastodaygrowntheir

fleetto14fulltimevesselsandonetrainingvessel.PerformingoperationsinEastern

Canada,NorthSea,andtheGulfofMexico,theyservicetheoilandgasindustrybyoffering

anchorhandling,platformsupply,cablelay,subseaconstruction,divesupportvesselsand

conversions.J.RayMcDermottacquiredSecundaMarinein2007(SecundaMarine,2009).

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PotentialCustomers

TheCanadianCoastguard

Thefederalgovernment’scivilianfleetoperatestheCanadianCoastguardandprovideskey

maritimeservicestoCanadiansatsea.TheCoastguardisresponsibleforensuringsafeand

accessiblewaterways,itaidstonavigation,icebreaking,environmentalresponseaswellas

searchandrescue.Theyprovideservice24hoursaday,365daysayearthroughout22

centersacrossCanada.CanadianCoastguardoperates114vesselsinadditionto22

helicopters.Theannualoperatingbudgetis$285Million.(CanadianCoastGuard,2009)

TheCanadiannavy

TheCanadiannavyhas3destroyers,12frigates,2supplyships,4submarines,and12

costaldefensevessels.The33vesselsaredividedbetweentheAtlanticandPacificcoasts.

ThehomeportoftheAtlanticfleetliesinHalifax,andthePacificfleetisbasedinEsquimalt,

BC(CanadianNavy,2009).

Nautisol

NautisolisanewcompanybasedinVictoria,BritishColombia.Theirgoalistolaunchtwo

high‐speedferrieswitha90‐minutetraveltimefromVictoriatodowntownVancouver.

Dependingonsufficientsupportandresources,athirdferrymaystretchbetweenNanaimo

anddowntownVancouver.(Nautisol,2009)Nautisolintendstobuildthreenew

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catamaransinVancouver;twoofthemareexpectedfinishedby2010.Thethirdvessel

shouldbedoneby2011(AndrewPetrozzi,2009).

Competitors

KMhasseveralcompetitorsinthemarineelectronicsmarket;thefollowingisabrief

overviewofthemostprominentones.

SperryMarine/NorthropGrumman

SperryMarinewasformedin1997fromthreewell‐knownbrandnamesinthemarine

industry:Sperrymarine,DeccaandC.Plath.SperryMarineisadirectcompetitortoKMand

hasaverysimilarportfoliothatincludes:autopilotandsteeringcontrolsystems,

communicationequipment,ECDIS,intergradednavigationandbridgesystemsand

gyrocompasses.Sperrymarineemploysaround1300people(SperryMarine,2009).Allof

Sperrymarine’sequipmentisgearedtowardslargervessels,themostimportantbeing

gyrocompassesandradars.

NorthropGrummanrevenuesin2007reached$32billionUSD(NorthropGrumman,2009).

Theirmarketissplitbetweenthecommercialandthemilitarysector.Theeconomic

downturnhasmadeitsimpactonSperryMarineandthecommercialsectorhasbeen

downscaled,especiallyconstructionofnewvessels.(AlanAitken,Canadianregional

manager,SperryMarine).

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Customersarecurrentlyrequestingmultifunctiondisplayscapableofperformingmultiple

tasks.AnewproductSperryoffersistheVisionmasterFTTotalwatch,functioningasa

radar,chartradarandECDISamongothers.MostoftheequipmentSperrymanufacturesis

standardized,however,theyalsooffercustomsteeringstandsandbridgeconfigurations.

SomeoftheSperry’slargestcustomersinNorth‐Americaare:theUSNavy,theUS

Coastguard,Chevron,Maersk,CanadianCoastguard,CanadianNavyanddifferentcruise

lines(AlanAitken,SperryMarine,2009).

Sperry’sstrongestsellingpointsareconsideredtobeproductquality,companyethicsand

aglobalservicenetwork.(AlanAitken,SperryMarine,2009)

Sperry’scustomersreceivebothroutinemaintenanceandemergencyrepairs.Someofthe

routinemaintenanceismandatedbyregulatoryagencies,suchasinspectionsofVDR’s

(VoyageDataRecorders)(SperryMarine,2009).

(SeeAppendix2forthetranscriptoftheinterviewwithAlanAtiken)

Radio­Holland

TheNetherlandsbasedcompanyRadio‐Holland,isoneofKM’sdirectcompetitors.Radio‐

Hollanddescribethemselvesas“aleadingsystemhousespecializingininnovative,efficient,

andfunctionalsolutionsinthefieldofsatelliteandradiocommunication,automation,

observationandnavigationsystems”.Radio‐Hollandhasofficesin42differentcities

worldwide.TheCanadianbranchofRadio‐Hollandwasfoundedin1919only3yearsafter

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thecompanywasestablished,andhasitsheadquartersinOntariowithalocalofficein

Vancouver.Thecompanyemploys750peopleinsidetheirCanadianstructure.In2006

Radio‐HollandbecameasubsidiaryofImtechNV.(RadioHolland,2009)

MoreindepthinformationwasconsideredtoosensitivebyRadioHolland.

RutterTechnology

RutterTechnologyprovidesproductsandsupportofworld‐classelectronicstomarine

aviation,aerospace,militaryandsecuritysector.Theproductstheyofferareamixof

electronichardwareandsoftwareengineeredtointegratewellwithothersystems.

RutterTechnologyhasover100customerslocatedworldwide.Theymanufactureproducts

forcargovessels,passengervessels,militaryandenforcementvessels.Theirproductline

includes:voyagedatarecorders,radarsystems,highresolutionradarprocessingand

recordingtechnology,high‐fidelityaudioandhigh‐resolutionvideorecordings.Theirmost

importantproductisthevoyagedatarecorder.RutterTechnology’sheadofficeislocatedin

St.Johns,Canada.(RutterTechnologies,2009)

Shipyards

Shipyardsoftenhaveacentralpositioninpurchasingofproductsforvessels.Theshipyards

providetheship‐ownerswithalternativesandoftenmakearecommendation.

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VancouverandVictoriashipyardsareapartofTheWashingtonMarineGroupthat

providesservicesalongthecoastofthePacificNorthwest.WashingtonMarinealsohasa

ferrybusiness,aswellasatugandbargetransportationcompany.Seaspanisalsoowned

byWashingtonMarineGroup.(WashingtonMarineGroup,2009).Therearethree

shipyardsundertheWashingtonMarineGroup,theseare:

VancouverDry­dockCompanyLtd

Vancouverdry‐dockislocatedattheVancouverharbor.TheyhavetwoLloydsfloatingdry‐

docksandmachinerythatcanhandleshaftsupto18meters.(Vancouverdry‐dock,2009)

VancouvershipyardsCo.Ltd

VancouvershipyardhasbeenindowntownVancouversince1968.Theydorepairs,

maintenance,constructionanddesignofvarioustypesofvessels.Facilitiesfoundat

Vancouvershipyardincludemajorsteelforming,alargefabrication,anassemblyhallanda

20.000feetpaintfacility.Theycandry‐dockmultiplevesselsatthesametimeandcan

performrepairsonthevessels.(Vancouvershipyards,2009)

VictoriashipyardsCo.Ltd

VictoriashipyardisoperatedandownedbyPublicWorksandGovernmentservicesof

Canada.Theshipyardsperformrepairsandcompletevesselconversions.Theyperform

repairsoncruiseships,deepseavesselsandcontainershipsinadditiontotheCanadian

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navy,ferries,tugs,fishingvessels,barges,yachts,andresearchvessels(Victoriashipyards,

2009).

LiteratureReview

Degreeofglobalization

KMisaglobalcompanyandiswellknownintheindustry.Theirtechnologyisshipped

aroundtheworldtotheshipyardswherethevesselsarebuilt.KMhasastrongpositionin

themarketwithofficesin25countriesaroundtheworld.ThreeoftheseareinCanada:

Halifax,St.John’sandVancouver.KMhas,intherecentyears,strengtheneditsposition

internationallybyopeningofficesinIndia,BrazilandChina,allbeingimportantemerging

markets.(KongsbergMaritime,2009).

KMprovideditsproductstotheworldbiggestcruiseship“OasisoftheSeas”andtwoofthe

biggestdrillingrigs“AkerSpitsbergen"and“AkerBarent”.KM’smanufacturinglocations

includeHorten,TrondheimandKongsberginNorway,AberdeenandVancouver

(KongsbergMaritime,2009).

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TheNineStrategicWindows

Bornglobal

Abornglobalcompanyisacompanythatgoesabroademinentlyafterstartup(Rasmussen

E.S,Madsen.T.K,2002).Kongsbergwasestablishedin1814asamanufacturerofweapons

underthenameKongsbergVaabenfabrikk.Kongsberghasthroughthelastdecades

establisheditselfasaninternationalcorporation.Kongsbergreceivedoneofthefirstlarge

exportcontractsinNorwaywhentheysoldKragJørgensenriflestotheUSNavy.Thefirst

navalyardwasestablishedinHortenin1849.(KongsbergMaritime,2009)

Ninewindows

KMcanbeplacedinwindownumber8inSolberg’sninestrategicwindows(Seeappendix

3),toseeknewalliances.Fromastrategicpointofview,KMisinthepositiontogrowand

enhancetheirpositioninthemarket.Thiswillbediscussedfurtherinthestrategysection.

TrendAnalysis

Political

Canadaisafederalstatewith13provincesandterritories.Theparliamentconsistsofthe

HouseofCommonswith310electedmembersandtheSenatewith105chosenbythe

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GovernorGeneral.(Passport,2009).TheheadofstateisQueenElizabethandtheprime

ministersince2006isStevenHarper(ConservativeParty)(Passport.2009).

TheconstitutionofCanadaisthesupremelawinCanadaandconsistsofacombinationof

acts,traditionsandconventions.TheConstitutionActof1867hasinthelateryears

regulateddistributionofpowerbetweenprovincesandthefederalgovernment.The

CanadianCharterofRightsandFreedomsoutlinesthecivilrightsandlibertiesofevery

Canadiancitizen,suchasfreedomofspeech,freedomofreligionandmobility.(Department

ofJustice,Canada,2009)

Politicalrisk

Canada’slargestexportpartnersaretheUSAandEuropeandthelargestimportpartners

aretheUSAandAsiaPacific.However,withtherecessionexportsareindecline.Thereis

sometensionbetweenthedifferentprovincesandthefederalgovernment,butthiswill

howevernothaveabigimpactintheshippingindustry.(Passport,2009)

Economy

CanadaresemblestheUSmarketorientedeconomicsystem,productionpatternsandliving

standards.Almost80%ofCanadianexportseveryyeargototheUS,withCanadabeingone

ofUS’slargestsuppliersofenergy,includingoil,gas,uraniumandelectricity.(CIA,World

factbook,2009)

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ThedownturnintheUSeconomyhasaffectedCanadianexports,withalowerdemandfor

productsandfewershipsleavingfromCanadianports(Passport,2009).Theshipping

industrywillmostlyexperiencetheeffectoftherecessionattheshipyards,wherethe

demandfornewvesselswilldecrease(AlanAitken,SperryMarine).

Tradeagreements

CanadasignedtheNAFTAagreementin1994,anagreementbetweentheNorthAmerican

countriesandEFTAin2008,whichincludescountriessuchasNorway,Iceland,

LichtensteinandSwitzerland(CanadianGovernment,2009).

Sociocultural

Canadaisthesecondlargestcountryintheworld,coveringalmosthalfoftheNorth‐

Americancontinent.Canadahastwoofficiallanguages,EnglishandFrench.Theethnic

groupsinCanadaaredividedwith28%BritishIslesorigin,23%Frenchorigin,15%other

Europeanandmixedbackground,and26%Asian.Thepopulationisapproximately33.5

Million(CIAWorldFactBook,2009).

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Technological

ThereareafewcompaniesthatprovidecompetitiveproductstoKM.Sincethisisavery

internationalmarket,mostofthetechnologyismanufacturedindifferentpartsofthe

world.ThereareafewinternationalcompaniesthatmanufactureproductsinCanada.A

subsidiaryofKM,KongsbergMesotechmanufacturessonar’sfortheworldmarketin

Vancouver.

Porter’sFiveForces

Industrycompetitors

KMhasafewdirectcompetitors,andSperryMarineandRadioHollandareamongthe

largest.ThedemandformarineelectronicsinCanadaismoderate,sincefewship‐owners

arepresentwithheadquartersinthecountryandrelativelyfewshipsarebuilthereona

globalscale.SperryMarinehasafewbigcustomersliketheCanadiannavyandcoastguard,

butKMalsohasarelativelylargemarketshare.Sincecustomersareoftenloyaltotheir

vendors,itcanbedifficulttoattractthewell‐establishedones,withbetterfocusbeing

companiesstartingup,withfewerbusinessrelations.

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Potentialentrants

ItcanbedifficultforKMtoenternewmarketsinCanada,sincemostshippingcompanies

headquartersareoftenlocatedinotherpartsoftheworld,representedthroughagencies

here.MostofKM’scustomersareinternational,thoughafewareCanadiansuchasBC

Ferries.Whenthecustomerisgovernmentownedtheyhavedifferentrulesandregulations

regardingpurchasing.

Substitutes

Theresearchteamdidnotdiscoversubstituteproducts,sincetheproductsaremoreorless

standardizedandmeetspecificrequirementsfornavigationandsafety.

Buyers

Thebuyersintheindustryaresometimestheshipyardsonbehalfoftheircustomers.

Shipyardsusuallymakerecommendationsofvendors,andtheship‐ownermakesa

decision.

Inatypicalbuyingprocessthecustomerasksthreevendorsforarequestonproposal.

Accordingtoourinterviews,usuallypriceislessimportantthanreputationandprevious

experiencewhenselectingavendor.

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Suppliers

Althoughalmostallsoftwareisengineeredinternally,KMisprovidedwithhardwaresuch

asPCB’s,cables,computers,printersanddisplaysfromlocalsuppliersinVancouver,

Horten,Kongsberg,Aberdeen,TrondheimandSeattletotheproductionfacilitiesinthose

areas.Herearesomeexamples:

• Theconsolesusedforoperatorstations,aresuppliedfromacompanycloseto

Horten.

• ManyofthesensorsusedinKMproductsaresuppliedfromcompaniesin

Kongsberg.

• SatellitebasedpositionreferencetechnologyisprovidedbySeatexinTrondheim.

• Pressure/temperature/liquidlevelsensorsareprovidedbyKMAutomationin

Trondheim.

• HiPAPpositionreferencetechnologyisprovidedbyKMSubseainHorten.

• Othercompaniesprovideproductssuchasgyrocompasses,echosoundersand

radios(JohnGillis,KongsbergMaritime).

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Summaryofthefiveforces

KMhasastrongpositioninthemarket.Althoughsomeoftheircustomershave

complainedaboutsomeserviceissues,theyacknowledgeKM’sproductsas“thebestinthe

industry”.Itcanbehardtoexpandinthemarket,inwhichKMisalreadyestablishedin

servingthreeship‐ownersoneachcoastofCanada.

GAPModel

Buyingprocessintheshippingindustry

Thedecisionofwhichvendortochoose,isnotbasedentirelyoncost.Whattheresearch

teamdiscoveredwasthatthemostimportantaspectsinselectingavendorwerepast

experienceaswellasreputationwithintheindustry.Larger,well‐establishedvendorswere

preferred,sinceaneventualbankruptcycancauseproblemsatalaterstage,since

purchasesusuallyrequireanexpectedpartnershipof10+yearsdependingontheproduct.

GapServiceModel

Thegapmodelcanbeusedtoseeifthereareanygapsinexpectedandreceivedservice

betweencustomerandsupplier(Appendix5).TheresearchteamspoketosomeofKM’s

customershereinCanada:Teekay,BCFerriesandSeaspanfromthePacificcoastand

SecundaMarineandCanshipUglandfromtheAtlanticcoast.

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ResearchshowedthatthereisagapbetweentheserviceexperiencedandKM’spromise.

OnecustomerexplainedthattheywishedtohaveamorepersonalcontactwithKMbefore

asale,aswellasabetteraftersalesservice(RajDewan,Seaspan).Anotherindividualfelt

thatsomeprocessescouldbetootime‐consuming,especiallywhenitcomestohavingto

communicatewithdifferentofficesofKMinNorway.Thetwothatwerethehardesttoget

intouchwithareHortenandTrondheim(TerjeRusdal,TeekayCorp).

AccordingtoBCFerries,problemsolvingtooklongeroutsidetheNordicseabasin.They

alsoexperienceda“nocando”attitudefromKMwhentheyneededsupport;whentheyhad

aproblemwithoneoftheirvessels,andhadtotakeitoutofservice,bothpassengersand

BCFerriessuffered.AccordingtoBCFerries,servicewasprovidedbyKMlaterthan3

weeks,whichisconsideredunacceptable(MarkCollins,BCFerries).BCFerrieshasa

serviceteamandhasapolicyofrepairingandperformingmaintenanceontheirownfleet.

BCFerriesinquiredifKMcouldtraintheirservicepersonnel,butunfortunatelytherequest

wasdenied.SecundaMarineexplainedthatlogisticsfromKMcouldtakefrom8‐10weeks,

andhavingshipsoutofserviceforsuchanamountoftimecouldleadtolargeexpenses

(DwayneE.Murphy,SecundaMarine).KMcouldbemoreadaptabletocustomerneedsand

deliverserviceassoonaspossibletoensuregoodreputationandbusinessrelations.

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WhyRelationshipsareImportant

ByrelationshipbuildingKMshouldrecognizethelong‐termvalueofkeepingcustomers.In

marketing,itisaknownfactthatitcostsmoretoattractnewcustomersthantomaintain

existingones.Therearevariouswaystoexecutesuchastrategy,withbothadvantagesand

disadvantages.Today,creatingameaningfulandlong‐termrelationshipthatbothparties

canbenefitfromcanbeakeyfactortosuccess.Creatingrelationshipsbetweenyouand

yourbusinesspartnersisaterrificwaytoaddvalueandenhanceyourbrandposition

againstyourcompetition.

KM’sviewofrelationshipmarketingisthat“networkingtiesitalltogether,”ensuringthat

knowledgeandcompetenceisspreadthroughouttheorganization,addingvalueto

customers.Thesevaluesaredemanding,butnecessarytomeetthechallengesofthe

market.KM’svaluessupplythedriveanddirectiontoimproveconstantly,providing

reliableproductsandresponsiveservicefortheircustomers(KongsbergMaritime,2009).

ResearchshowsthatKM’sactualrelationshipmarketingisnotalignedwiththeirvision,

givingKMroomforimprovement,especiallytowardssmallerbusinesses.

AdvantagesofCloseRelationships

Therearemanyreasonsforchoosingtospendmoreofthecompany’sresourceson

relationshipmarketing,whichincludebotheconomicalandnon‐economicaloutcomes:

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Economical

Costreductions

‐ Costreductionregardingmaintenanceandadaptioncosts.Bydeveloping

cooperationbasedoncoordinatedroutinesregardingservicesanduseof

technology.Youwillinthefutureachievemoretimeefficientprograms.

‐ Reductionofupkeepisalsoafactorthatwillbeinfluencingthecost

reduction.Basedonthecoordinatedserviceroutinesthepersonnelwillhave

betterunderstandingofproductsandroutines.Therebythetimeatthe

repairingdockwilldrop,whichisanimportantfactorfortheshipping

industry.

Crosssales:

‐ Closerelationshipwillresultinsharingcustomerslistaswellasaccessto

othermarkets.

Newandimprovedproducts/services.

‐ Closerelationshipoftenresultinbetteraccesstoinformationfromthe

oppositebusinesspartner.Makingiteasiertocreateoptimalsolutionsfor

bothparts.

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Non­economical

Accesstospecificresources.

‐ Developmentofspecificresourcessuchasbetterunderstandingofcustomers

needs.

Reductionofuncertainty:

‐ Therelationshipwillautomaticallycreatemorewillingnesstosucceedwith

thebusinesspartners,duetothereasonthattheyareeconomically

dependentoneachother.

Strengthenthereputation:

‐ Oftenstrongrelationshipresultsinpositiveachievementsthatwillcreatea

strongerreputation,especiallyinasmallmarketliketheCanadianmarket

(Biong&Nes,2003).

IndividualCustomerRelationships

Thefocusonarelationshipbetweentwobusinesspartnersshouldbeadaptedtothe

differentcustomerneeds.Theyhavedifferentviews,andthereforeexpectdifferent

outcomesofeachrelationship.Accordingtoresearch,KMshouldbelocatedinthe“Long‐

termrelationship”box(Appendix6).OneofKM’scustomersexpressedconcernthatKM

42|P a g e

focusesmoreonshort‐termrevenueratherthanlong‐termrelationships.Theproject

researchfoundthatmostoftheircustomersandpotentialcustomersrequestclose

relationshipswhenconductingpurchaseswithavendor.Itisthereforelogicaland

beneficialthatKMshouldfocusonlong‐termrelationshipsinstead(Appendix6).

BusinessCultureinCanada

Thereisarangeofaspectstoacountryorregion’sbusinessculture,itis,therefore,beyond

thescopeofthisreporttodoanin‐depthinvestigationoftheCanadianbusinesscultureas

awhole.However,certainpartsoftheCanadianculturethatareimperativeforKMand

theirfutureCanadianventurewillbehighlighted.

GeertHofsedesdimensionsonbusinesscultureshowthatCanadacanbefoundrankedhigh

ontheindividualismscale,andthatsuccessisoftenmeasuredbypersonalachievements

(Hofstede,2008).ThisisimportantinformationforKMastheywillbeplanningtoconvince

keydecisionmakersintheindustrythattheirproductsandservicesarebeneficialfortheir

company.

ThemajorityofCanadianshasahighdegreeofindividualismandhasatendencytobeself

confidentandopentodiscussionongeneraltopics.However,theykeeptheirpersonallife

limitedtotheirclosestfamilyandfriendswithrelativelyloosebondswithothers

(Hofstede,2008).

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SWOTAnalysis

TheSWOTanalysisisatooltoprovideuswiththegeneraloverviewofstrengthsand

weaknessesinacompany.Thisanalysiswillprovideuswithinformationthatwillbe

helpfulindecisionsconcerningimprovementsinKM.

Strengths

KMhasastrongdedicationtoprovidinginnovativeandreliablemarineelectronicsthat

ensureoptimaloperationatsea.Byutilizingandintegratingtheirtechnology,experience

andcompetenceinpositioning,hydroacoustics,communication,control,navigation,

simulation,andautomation,KMaimstogivetheircustomers“TheFullPicture”.

KM’svisionofsharingknowledgeandinformationwithcustomers,givesthemthe

opportunitytoprovidetheirclientswiththemostefficientsolutions.Thisvisionisbuilton

theirphilosophyofnetworkingandcreatingalliances.

KMisamarketleaderindynamicpositioningsystems,automationandsurveillance

systems,processautomation,satellitenavigationandhydroacoustics.Themostimportant

marketsarecountrieswithlargecoastlinesandbusyharbors,whichmeansCanadaisa

suitablemarket,withtheopportunityforfurtherexpansion(KongsbergMaritime,2009).

Weaknesses

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OnecompanymentionedthroughtheinterviewsthatKM’sstoragedepotsoutsideof

EuropeandNorthAmericacouldhavebetterstoragecapacityforspareparts.Therewasa

voicedconcernespeciallyabouttheBrazilandSingaporelocations,astheKMemployees

wereperceivedas“moody”,thishavingapossibleeffectonlogisticsanddeliverytime.

ThecombinationofhighdemandandhighqualityofproductsthatKMoffershasresulted

inpremiumpricepoints.Althoughpremiumpricingcanhaveanegativeeffectinthe

evaluationprocessofproductpurchasing,offeringoutstandingservicescancompensate

forit.

ResearchshowsthatKM’slargestcustomer,TeekayconsidersKM’sserviceassufficient,

howeverthesatisfactionlevelwaslowerinsmallercompanies.Specificcomplaintswere

regardingfollow‐upproceduresandKM’swillingnesstocooperate.Pacificcoastcustomers

explainedthattheyweremorelikelytoexpectlessservicefromKM,comparedto

customersontheAtlanticcoast.

Forvariousservices,customercontactisacrucialissue;theprovidermustbeinface‐to‐

facecontactwiththecustomer.Closecontactsuggestsalocalpresenceintheforeign

marketandcustomization(Bradley,2004).

Opportunities

Byutilizingandintegratingalltheirproducts,KMaimstoprovidetheircustomers“TheFull

Picture”.Thisideayieldsprofessionalsolutionsandglobalservicesthatmakeadifference

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enablingyoutostayaheadofthecompetition.Thisconceptmayinthefutureprovidetheir

customerswithtechnologyandservicesthatareuniquetoeachsituation.Itwillmakeit

easierforbothKMandcustomerstoplanfuturebusiness.

KM’sglobalreputationconcerningmarineelectronicsisadirectresultofyearsof

consistentengineering,developing“stateoftheart”technology.Theirdevotedwork

towardsdevelopmentoftechnologyhaspaidoffandgiventhemachancetobecomethe

marketleaderincertainareas.Withagoodreputationitiseasiertoacquirenewcustomers

andbuildlonglastingrelationships.

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Threats

KM’stechnologyis“stateoftheart”,howeveritispossibleforcompetitorstocopyitor

furtherdevelopit,therefore,KMhastoprovidetheircustomerswithservicesandpackages

thecompetitionlacks.

AnotherthreatforKMasacompanyisthechangesinglobaleconomy.KMisdependenton

longperspectiveplanningandstrategydevelopmenttopreventnegativeoutcomes

(Bradley,2004).

StrategicProblemDefinition

“HowcanKongsbergMaritimeimprovetheircurrentpositionintheindustry,inadditionto

conqueringnewmarkets,resultinginKMoffering“theFullPicture.”

Goals

Short‐termgoalsareneededtoreachlong‐termgoals.Short‐termgoalsarereachable

within12months.SuggestionsforKMare:

• Identifyopportunitiestoimprovecommunicationsbothinsidethecompanyand

withclients.

• Rethinkandimprovethecurrentafter‐salesservice.

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• ImprovecustomerrelationsinthePacificcoastofCanadabyestablishinganoffice,

possiblythroughanagent.

Long‐termgoalsarereachableafteraperiodof12months.SuggestionsforKMare:

• Developareputationasacompanywithsuperiorcommunicationandservice.

• Deliveranidealsolutiontowhattheclientsregardas“TheFullPicture”.

‐Verticalaswellashorizontalpackages.

• CapturenewcustomersinthePacificcoast.

KeySuccessFactors

• Improverelationshipswithexistingcustomers.

• Performquickerafter‐salesserviceandadaptmoretocustomer’swayofdoing

business.

• AchievebetterreputationinthePacificcoastmarket.

CompanySpecificAdvantages

• Advancedhigh‐qualityproducts.

• Worldwidereputation.

• In‐depthindustryknowledge.

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• Humancapital.

StrategicGAPAnalysis

Whencomparingkeysuccessfactorsandcompanyspecificqualities,onestrategicgap

emerges:KMneedstodevelopadeeperunderstandingoftheircustomer’sneedsonthe

Pacificcoast.

KongsbergMaritimeinCanada

KMneedstoidentifytheirtargetmarketsinordertoreachtheirdesiredcustomers.This

sectionwillidentifythesemarkets.

Primarymarket

TheprimarymarketsforKMareexistingcustomers,sincetheyarecurrentlyfamiliarwith

KM’sproductline.KM’sexistingcustomerswillexperiencechangesinservicequickerthan

newones.Repeatpurchasesbyexistingcustomersareimportanttomaintainingthe

marketshare,inadditiontoupgradingtheirproductline.

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Secondarymarket

KM’ssecondarymarketsarenewcustomerscurrentlyusingcompetitiveproducts,or

customersintheprocessofpurchasingequipmentfornewvessels.Toachieveastronger

positioninthemarketandgainahighermarketKMneedstoreachnewship‐owners.

EstimatingtheDemand

InordertoestimatethedemandforKM’sproductsandservicesinCanada,primaryand

secondarysourceshavebeenused.Bysummingupthefleetsizeofexistingcustomersand

potentialcustomers,itispossibletoestimatethenumbervesselsthatareinuseandshow

ifthereisademandfornewequipmentandrepairs.Theproductshavedifferentlife

expectancy,soitisimpossibletodoarealisticcalculation,however,thesefigurestellus

allowustolooselyestimatethesizeofthemarket.

BCFerries:40vessels

Seaspan:64vessels

AtlanticTowing:4vesselsand16tugs

SecundaMarine:15vessels

CanshipUgland:9vessels

Nautisol:3vessels

CanadianNavy:29vessels

CanadianCoastguard:114vessels

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Teekayoperates158vessels,butpurchasesarenotmadeinCanada,andtherefore,arenot

includedinthisestimate.Lookingatthesenumbers,itispossibletoclaimthatKMhasthe

opportunityofdoublingthenumberofvesselswiththeirproductswithintheCanadian

market.

MarketingMix

Asuccessfulmarketingentrydependsonawell‐developedmarketingmix.Themarketing

mixisbasedontheclassic4P’swithsomechangestobetteradapttotheB2Bmarket.In

theconsumermarket,the4P’sare:promotion,price,placementandproduct.Wewillfocus

onthe“TheTrue4P’sofB2Bmarketing”(Evancar,2009).

• Prospect:Thecustomer’sneedthatcreatesanopportunity.

• Promise:Thefaculty/intimacyargumentforwhyyouaresuperior.

• Product:Deliveringthepromisedproduct/service.

• Position:Thesumofadvantagesthatiscreatedoveryourcompetitionbydoingthe

threeotherP’swithexcellence(TheCornucopiaGroup,2009).

Prospect

Theshippingindustrycreatesaneedforthecustomerstohavetop‐notchequipmentwhen

theyareatsea.Theindustryisglobal,andalldowntimeonvesselisexpensivefortheship‐

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owner.Theneedforreliableservicesandhighqualityproductsarethereforecrucial

aspectsofselectingavendor.Understandingthecustomer’sneedsisanimportantfactorto

succeedinanybusiness.ThemarketKMoperatesinhasvariouscompetitorsoffering

similarproductsandservices.Awaytodifferentiateandbecometheclearchoiceinthe

marketisthroughadaptingindividualservicestoeachcustomer.Offeringcustom‐made

servicescreatesauniquebuyingreason,whichwillsuitKM’svisionofcommittingtothe

customer’sneeds,aswellasadjustingtotheCanadianmarket.

Promise

Tosucceed,KMmustkeepthepromisestheypromote.Bydoingthis,thecompanywill

buildareputationasreliableanddependable,animportantfactorintheshippingbusiness.

OnKM’swebsitetheystate:

“Webelieveinqualityinallaspectsofourbehaviors,andwillstrivetoconsistentlyproduce

reliablesolutions.”

“Wecommitourselves­tothecustomer’sneedsandtheorganization’saims.”

“Wetakepersonalresponsibilityforcustomerissuesandensurefollowup.”

“Wearethereforourcustomers.”(KongsbergMaritime,2009).

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Theseareallgoodvaluesforacompany;however,someofthemarenotfulfilledas

promised.Byperformingcontinuouspromotionthroughtradeshows,events,conferences

anddirectsales,KMcanenhancetheirreputation.

Product

KMprovidestechnologyequipmentforvesselsincargoandpassengersboats,withawide

rangeofmarineelectroniccomponentsandparts.AccordingtoKM,thismakesitpossible

tooffer“TheFullPicture”totheircustomers.CombiningKM’sproductswiththeirexpertise

willsavecustomerstimeandmoney,sincetheythenareconnectedtofewervendors.The

vesselswillbefullyequippedwithproductsthatfunctionwelltogetherandarefamiliarin

caseofrepairsorupgrade.

Position

Bypositioningthecompanyasaproviderofqualityproductsfrom“TheFullPicture”

programwithlong‐termservicegoals,KMwillbeabletocreatealingeringrelationship

thatwillhavepositiveeffectonthecooperationbetweenthebusinesspartnersandthe

developmentofnewtechnology.Theoptionofstrategicpartnersandmoreagenciesto

managelocalissueswillhelpthecompany’s’visibilityinthemarket,especiallywhen

consideringsmallercustomersseekingface‐to‐facemeetings.

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Porter’sGenericStrategies

Acompanypositionsitselfbyleveragingitsstrengths.Porterhasarguedthatacompany’s

strengthfallsintooneofthetwocategories:costadvantageordifferentiation.Byapplying

thesestrengthsinabroadornarrowscoop,youwillgetthreegenericstrategiesasaresult:

costleadership,differentiationorfocus(QuickMBA,2009).

Withcostleadershipstrategy,thecompanycanselltheirproductsatpremiumprice

gainingahigherprofitthanitscompetitors;theycanalsoselltheirproductswithalower

margintoconqueralargermarketshare.(QuickMBA,2009)

Withdifferentiationstrategythecompanyoffersaproductwithuniqueattributesvaluable

tothecustomer.Auniqueandvaluedproductthecompanycanbesoldatpricepremium.

(QuickMBA,2009)

KMfollows,andshouldcontinuefollowingdifferentiationstrategy,sincethecompanyhas

thestrengthsrequired.Someofthestrengthsneededforthisstrategyare:strongresearch

skills,highlycreativeandskilledproductdevelopmentdepartment,astrongsalesteamand

agoodreputationfortechnicalquality.KMismorefittedtobeinthiscategorythanina

costleadershipstrategy.

Tomaintaincurrentmarketposition,KMneedstofocusonitscurrentreputationinthe

industry.Byenrichingtheserviceexperience,KMcanachievebetterloyaltyamongtheir

customersandreceivethebenefitsofmaintainingtheirmarketshare.Toachievethis,KM

54|P a g e

canbenefitfromhavingadeeperunderstandingoftechnology,exceptionalsales

representationandinternationalexperienceinacompetitivemarket.

Strategy

Introduction

ResearchshowsthatKM’sgreatestopportunityforimprovementliesintheirapproachto

service.ArecommendedstrategyforKMisaplanofactionconsistingof3mainpoints

aimedtoprovidethedegreeofserviceandproductofferingthatKM’scustomersprefer.

KM’scustomerscommentedonthelackofface‐to‐facedealing,andhow,whenpresent,it

helpedtoestablishsomeoftheinterpersonaltrustthatisavitalpartofbusinessdealing.

ThisreportwillthereforefirstoflookatincreasingvisibilityinVancouver,coveringthe

regions.Itwillbefollowedbyindepthlookatimplementingcertainserviceguidelinesto

helpestablishbetterconnections.ThelastpointforKMwillbesearchingforanalliance.

ThesepointsarealltieduptoKM’swishtoprovidethe“FullPicture”.

Strategy#1­PresenceinVancouver

KMhasabroadrangeofcustomers.Long‐termcustomers,suchasTeekay,canbe

categorizesasmostloyal.Theyaremostcosteffectivetokeepastheyprovideasteady

55|P a g e

sourceofincome.SinceTeekayisdeeplyinvolvedwithKM,itwouldbecostprohibitivefor

acompetitortostealtheclient.However,KMalsohassmallerorlessinvolvedcustomers

knownascommoditybuyers.Theseclientswilloftenchangesupplierwithlesshesitationif

thesuppliercanofferthemabetterormoreconvenientdeal.KMneedsastablestrategyto

attractbothkindsofcustomerstomaintaintheircurrentpositioninthemarket.(Das

Narayandas,2005)

WhenmarketingtoacustomerinaB2Benvironment,itisoftenhardertosegmentthe

market,asbusinessesoftenhavemoreuniqueneedsandpreferences.(DasNarayandas,

2005).

Asresearchshows,customersinthePacificregionstatedthatcommunicationwithKM

couldattimesbedifficult,andsomeformercustomersactuallyfeltignored.

OursolutiontotheseclaimswouldbetoestablishourownagentintheVancouverarea.

Thiswillhelptoenforcetheaccessibilityforsupportandprovideanopportunitytostart

reestablishingKM’simageasasuperiorserviceproviderinB.Cwithapresencethat

potentialcustomerswouldnotice.

Someoftheagent’sdutieswouldbetoprovideKMwithafaceinthecitieslikeVancouver,

VictoriaandSeattle.Itwouldalsoestablishamoredirectcommunicationschanneltothe

majorofficesinCanadaaswellasNorway.Lastly,theagentwouldprovidemore

comprehensiveafter‐salesproductinformationandpersonalfollowupserviceasthiswas

statedasadealbreakerinformerKMdealings.

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Strategy#2­ServiceImplementation

Increasefrequencyofcommunicationandchoiceofmedium

Byhiringagents,itispossibleforKMtoachievebettercommunicationwithsmaller

companiesaswellasthemoreestablishedones.Someofthedissatisfactionconcerningthe

relationshipbetweenKMandtheirbusinesspartnersisalackofface‐to‐facemeetings.By

increasingthelevelofcommunicationandadoptingamorepersonalapproach,KMwill

lowertheriskofmisunderstandingsandcreateasettingwherethecustomersfeelmore

appreciated.ThiswasoftenmentionedasKM’s“achillesheel”.

Createafeedbackchannelforcustomers

Communicationandfeedbackfromcustomersareimportant,andshouldbehighly

prioritizedwhendevelopingstrategies.Theagentsmayusetheiradvantageasthelink

betweenthetwopartiestohandlethefeedbackfromcustomers.Thiswaythefeedbackwill

bemorerepresentative,asthecustomerswillnotbeindirectcontactwithKM,and

thereforehaveachancetospeakmoreopenly.Arepresentativeforbothcompanieswill

alsohaveadeeperunderstandingofbothsidesandwill,therefore,haveachanceto

presentproblemproperly.

Anotherwayofimprovingthefeedbackchannelsmaybetocreatebetterwebsitelayout

wherecustomerscanshareortakepartinproblemsolutions.Eachcustomerhasdifferent

needs,andtheseshouldbehandledrespectfully.Bylaunchingawebsitelayoutwhere

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customerscansharetheirexperiences,youalsocreateaneasywayforthecustomersto

reachappropriatecompanypersonnelandexpresstheirneeds,perceptionsandcomplaints

(Kotler&Keller,12.ED,p.160).Apositiveoutcomefromthistoolisthatitenablesafeeling

ofinclusionandcaretowardsthecompany,whichcancreatemoreloyalcustomers,aswell

asdevelopingmoresuitablesolutionsforbothparties.

Internalmarketing

InternalMarketingfocusesonorganizationalcultureandvalues,animportantpartofthe

strategyinordertocreatemorededicatedandpassionatepersonnel.Thisisalsoapartof

organizationalstrategythathelpstostrengthencompetitiveadvantages.Bytrainingthe

stafftoachievebettercommunicationskillsandunderstandingofcustomer’svalues,KM

canimprovetheirpositionasaserviceprovider.Inthisindustry,thefocusonserviceand

personalrelationshipsismostimportant,sincetheproductsarecanbeinterchangeable.

Strategy3–Strategicalliances

Selling“TheFullPicture”

AproblemthisreportaddressesistoinvestigatehowKMcouldbetterofferthe“TheFull

Picture”totheirexistingcustomers.KMexplainedthattheirproductsarelogically

combined,howeversomeofthemhaveabettermarketingpositionthanothers.Inother

58|P a g e

words,someoftheproductsdonotsellaswellastheyshould,leavingKMshortof

achievingthisgoal.

ResearchhasshownthatKM’sclientsdidnotperceiveTFPinthewaythatKMenvisioned.

AreoccurringstatementwasthatKM’sfullpackagewasahorizontallineofproductsthat

wasrelativelyautonomousfromeachothercomparedtowhattheclientsreferredtoasa

preferredpackagedeal.Thetrendinourresearchwasthattheclientswerelookingfor

verticalsystems,toptobottom,thathadbeenfullyintegratedinterfaces.Asmentionedby

multipleinterviewees,thisespeciallyconcernedthedifferentialpositioningandreference

systems,power,generatorsandpropulsion.IfKMcoulddeliversuchaverticalpackage

throughanalliancewithathirdparty,itwouldopenuptheopportunitytotieengine

monitoring,engineconditionmonitoringandothersystemsmoreflawlesslyintoTFP.

IntroductionforCooperation

AnalternativeforKMistoimprovetheirpositionintheCanadianmarketthrougha

strategicalliancewithacompanyservingshipswithothercomponents.Throughsucha

measure,thegapbetweenKM’svisionof“TheFullPicture”,andwhattheclientsactually

envisionedasa“FullPicture”couldvanish.

Asystemthatparticularlywasmentionedinseveralinterviews,concentratedonthe

claimedinterfacingproblemsbetweenDynamicPositioning/Referencesystemsand

Propulsion/Generators.Theresearchteamhaslookedintocompaniessuitablefortherole

59|P a g e

ofalliancepartnerswithKMtoprovideastartingpointinsuchaprocess.Outofthe

existingcompaniesthataregettingpositivereviewsoftheirpackagesSiemensappearsto

beoneofthebetterexamples(Siemens,2009).

Potentialpartners

TheidealcooperationforKMiswithanothercompanythathassimilarvaluesandgoals,no

directlycompetingproducts,andanidealgeographicdistance.Leadingcompaniesinthe

fieldofenginesandpropulsionthatcouldbesuitableforKMtocooperatewithare:

MANDiesel

MANDieselisamongthetopsuppliersintheworldformedium/largedieselengines,

generators,superchargersandCPpropellerswith7,000employeesworldwide(MAN

Diesel,2009).AccordingtoanestimatebyWärtsiläAS,MANDieselhasamarketshareof

24%ofthemediumand81%ofthelowspeedenginemarketin2008(Wärtsilä,2009).

WärtsiläAS

WärtsiläisadirectcompetitortoMANDieselwith18,800employees’worldwide,net

revenueof$7,26billionin2008,andcurrentlyaimsforagreenprofile.Accordingtotheir

ownestimatetheyhaveamarketshareof37%ofthemediumand15%ofthelowspeed

enginemarketsrespectively(Wärtsilä,2009).

60|P a g e

MAK

SituatedinHamburg,Germany,MAKwasacquiredbyCaterpillarInc.in1997(MAK,2009)

andisconsideredthethirdlargestsupplierofmediumspeeddieselenginesforships

worldwide,withanestimated23%ofthetotalmarketshare(Wärtsilä,2009).

Allthecompaniesconsideredcould,tovaryingdegrees,fulfillwhatisrecommendedfor

KM.However,Wärtsiläprobablyisthebestpotentialpartner,sincetheycoverbothlow

andmediumspeedenginesinawidevarietyofsizes,aswellasfocusingonenvironmental

sustainability.Theyhavealsoactivelyvoicedinterestinapartnershipthatcanallowthem

tooffermorecompletepackagestocustomers.

“FullPicture”Competitors

ApotentialpartnershiptowardsaverticalfullpackagewillputKMinapositionwherethey

couldcompetedirectlywithfullsolutioncompanies.Threecompaniesthatareprominent

basedonourresearchare:

Converteam

Converteamprovidecustomizedsolutionstoconvertelectricalenergythroughoptimum

applicationoftechnology.Theyofferdriveandautomationpackagesthatinterfacewith

andintegratewithmechanicalsystemsandnavalarchitecture(Converteam,2009).

61|P a g e

MitsubishiHeavyIndustries

ConsideredamajorcompetitorbyWärtsiläAS,MitsubishiHeavyIndustriesdeliversalarge

rangeofproductsfromelectronicsystemstopropulsionenginesaswellas

underwater/camerasystemsthatcompetedirectlywithKM’sproducts(Mitsubishi,2009).

SiemensMarineSolutions

SiemensMarineSolutionsdeliversfullelectronicsystemandenginepackagesforboth

electronicanddieselengines(Siemens,2009).

ApproachinganAlliance

KMshouldfirstsetupsomeshort‐termgoalswhenapproachinganalliance.Inthisreport

itisrecommendedthatKMdecideonwhowouldbetheiridealco‐operationalpartner.

Moreoverinitiatedialogtoestablishthegroundrulesinthepartnershipandalsorunatrial

periodarenecessary.Asalong‐termstrategytheyshouldlookintoanalliancewherethey

sharetechnology,serviceexperienceandindustryknowledgetoreachthegoalasthebest

integratedfullsysteminthemarket.

WithregardstoWärtsiläitwouldleadtoanexpandedmarketaccessastheyhaveastrong

presenceonallcontinents.Thecooperationcanpotentiallyinvolveoptimizinginterfacing,

simplifiedservicedealsordevelopingnewandimprovedproducts/services.Ultimately

62|P a g e

providingKMwiththeabilitytodeliverwhattheircustomersintheCanadianmarket

perceiveasthe“FullPicture”.CooperationcouldbelimitedtotheCanadianmarketfirstas

atrialmarket,butifsuccessful,canthenbeappliedtoothermarkets,asitisaglobal

marketsphere.

Sincebothcompaniesinthepartnershipdonothaveanycompetitiveproducts,itmakes

theriskofspilloverratherlowandallowsamovementtothecontractualagreements.

Theroleoftrustplaysalargepartincontractualdealing,whereaddeddetailingcan

increasesuspicionandlessenthevalueofhumaninteraction.Thereisacorrelation

betweenpersonaltrustandcorporatetrustinsideanalliance,whichsuggeststhatKMmust

improvetheircurrentaftersalesserviceforsuchanalliancetoworksuccessfully.

Wärtsilä

TheindustryconventionMaritechwasheldduringthetimeoftheteams’finalresearch.A

lowerlevelrepresentativefromWärtsiläMontrealinformedtheteamthateventhoughhe

couldnotprovideconclusiveanswers,Wärtsiläconsidereditself“abroadmindedcompany

openforsuggestions”andiscertainsomeonewillfurtherdiscussaproposalfor

cooperationwithKMifrequested.

Asalong‐termstrategy,KMcouldconsidertocombinerespectiveserviceofferstotheir

package,creatingapresenceinmostoftherelevantareasoftheworld.Aquotefromoneof

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theresearchintervieweeswasthatthecompanyLipsWaterjets,ownedbyWärtsiläcould

beconsidereda“matchmadeinheaven”ifeveralliedwithKM.

Conclusion

Theconclusionisthattheshort‐termgoalforKMshouldbetoestablishapresencein

Vancouver,VictoriaandSeattlethroughanagentinBC,preferablyinVancouver.A

proactiveapproachshouldbetakentowardsbuildingpersonalrelationshipsthatwould

strengthenestablishedconnectionswhilewearingdownresistanceofpotentialclients.KM

shouldalsolookforapartnertoprovidetheactual“FullPicture.”

Inalong‐termperspective,KMshouldaimatbuildingtheirreputationasthenumberone

serviceproviderintheareaandtheindustry.Inadditiontheyshouldalsoaimatbecoming

amajorproviderofintegratedsystemsthatcanpowershipsfromtoptobottom

seamlessly.Finally,ifsuccessful,beabletoworktogetherwiththeirpartnerstohavea

presenceallovertheworld.

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FinancialEstimates

ToestablishasuccessfulanalysisoftheCanadianmarket,thefinancialriskofthe

expansionhastobeasclearandasspecificaspossible.SinceKMalreadyhasanestablished

positioninCanada,thisresultsinapositiveimpactonourfinancialmodel.Someofthe

majorcostsofenteringanentirelynewmarketcanbeavoidedsinceamajorityofthe

competencefromtheofficeinHalifaxcanbeappliedinsettingupanofficeinBCwithan

agent‐representingKM.

Fixedcosts

Establishingagenciesandofficesinnewcitieswilladdfixedcoststothebudget.Itis

recommendedtoopenanofficeinVancouver,withanagenthandlingsalesandservicein

theregion.HerearepriceestimatesforsettingupanofficeindowntownVancouver:

Startupcosts:

• Furniture $6000

• Officesupplies $6000

• Decorations $1000

• Deposit $1500

65|P a g e

RunningcostsNumbersarebasedonaveragesintherespectivecategories:

• Averagesalaryforasalesrepresentativeisapproximately$50,000annually

(CanadaVisa,2009.)

• Anaverageofficelocationcosts$2500–3000permonth(Craigslist,2009)

• Assumedofficesupplycostsof$100permonth.

• Utilitiessuchashydro,phone,internet,insurance$150eachmonth(Novus.ca,2009

andBCHydro,2009)

Variablecosts

Forvariablecosts,tripsbetweenVancouver–Victoriaisamajorcostposting.Aroundtrip

isestimatedat$268(harbor‐air.ca)plusdrivingexpensesandwouldlikelybemade

between2–5timesperyeardependingontheprogressingettingB.Cferriesbackasa

customer.Apartfromthat,mostofthecustomersinB.Carelocatedatwalkingordriving

distancefromadowntownoffice.

Income

OurprojectiondoesnotincludearevenuemodelforBCaswewillmainlyfocuson

rebuildingKM’sserviceimagefirst.Butwebelievethatoursuggestedstrategywillre‐open

theB.Cmarket,whichwillinturnprovideKMwithamorelong‐termsourceofincome.

66|P a g e

Annualestimatedincome

Time­rangebetweenupgrades

• Softwareupgradesaredoneeveryyear

• Navigationsystemsareupgradedevery4thyear

• DPsystemsareupgradedevery8thyear.

• Radarsareupgradedevery10thyear

Estimatedupgradescostforeachproduct

Wehaveestimateda5%upgradecoastonKM’sproducts.The5%isestimatedbasedon

minimumpriceofKM’sproducts($300.000).

Short­termcategory

• Lessthan12months.

• Newproductssoldtocustomers(Thefullpicture,aswellassingleproducts).

• Smallserviceprojectssameyear.

Long­termcategory

• Morethan12months.

• Fullservices.

67|P a g e

• Futuresales.

Totalcostforanagent

Salary 50000

Furniture 6000

Officesupplies 6000

Decorations 1000

Deposit 1500

Rent 36000

Utilities 1800

Officesupplies 1200

Total $103500

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Company: NumberOfVesselsBCFerries 40Seaspan 64Pacificcoasttotal: 104Nautisol 3BCFerries Short‐term Long‐term

$150,000 $450,000 Seaspan Short‐term Long‐term

$90,000 $870,000 Nautisol Short‐term Long‐term

$1,200,000 $600,000Total:$1,440,000 $1,923,000

WithoutNatisolasacustomer Short‐term Long‐term

$240,000 $1,320,000 WithoutBCFerriesandNautisolascustomers: Short‐term Long‐term

$90,000 $870,000 WithoutBCFerriesasacustomer: Short‐term Long‐term

$1,290,000 $1,470,000

ThesefiguresarebasedonaminimumincomeofplacinganagentinVancouver.Thecostof

thisisestimatedtobe$103.000annually.

• IfKMachievesbothNautisolandBCFerriesascustomers,theestimatedincomeof

thefirstyearwillbe$1.440000.

• IfKMachievesBCFerriesback,butdoesnotsignNautisolasacustomer.The

incomeisestimatedtobe$240.000.

• IfKMfailswithbothNautisolandBCFerriesasacustomertheywillearn$90.000.

69|P a g e

• IfKMgetsNautisol,butlooseBCFerries.Theywillhaveanestimatedincomeof

$1.290000.

Conclusion&Recommendations

Thisreporthascompletelybeendevelopedfromthedefinedresearchproblem:

“HowcanKongsbergMaritimepositiontheirproductsbettertobeabletoprovidetheir

customerswiththeFullPicture.”

Forthereporttoprovideacorrectansweroftheresearchproblem,informationwas

collectedfromvarioussources,including,interviews,andelectronic,printedandacademic

sources.Combinedwithrelevanttheoriesfrominternationalmarketing,KMwasanalyzed

forthetopicathand.

Afteranalyzingthecollecteddata,aSWOTanalysiswasconductedtodetermineKM’sgoals

andtospecifyanddeterminethestrategicproblemdefinition:

“HowcanKongsbergMaritimeimprovetheircurrentpositionintheindustry,inadditionto

conquernewmarkets,resultinginKMoffering“theFullPicture.”

TheSPDwasfurtherdefinedthroughacombinationofkeysuccessfactor,firmspecific

advantagesandaGAPanalysis.

70|P a g e

ThereportthenfocusesonthevariouscoursesofactionthatareproposedtoKM.The

recommendedstrategyforKMisestablishingastrategicalliancewithacompanywhowill

supplementKM’sproductlinewithmechanicalproducts,whichcanresultinKMoffering

theircustomerstheirvisionofthe“FullPicture.”ThecompanythatisfoundtosuitKMbest

isWärtsilä.Thecompanyisofsubstantialsize,withinternationalexperienceandtopofthe

linemechanicalproducts.ThiscooperationcouldbelimitedtotheCanadianmarketatfirst,

andifsuccessful,beimplementedasapartofKM’sworldwidesolution.

ForKMtosucceedwiththeproposedstrategy,thereareseveralkeyaspectsthatwill

requireKM’sattention.Thefollowingisrecommended:

TheresearchwasperformedwiththegoaloffindingasolutiontoofferwhatKMcalls“The

FullPicture”.Duringtheanalysisofthematerial,itbecameevidentthattheunderlying

concernsamongcustomerswereKM’scustomersupportandfollowuproutines.Several

strategieswereconsidered,howeverwerecommendthisthree‐stepstrategytobringKM

totheirdesiredpositioninaeffectivemanner.Thestrategyentitlesfirstestablishinga

presenceinVancouverandtheborderingcitiesthroughanagent,combinedwithapro‐

activeapproachtothecustomers,withfrequentvisitsandfollow‐ups.Thisaddressesthe

mostcommonclientconcerns.

Secondlyitwillberecommendedtomakeaservicestatementinsidethecompanyaimedat

improvingtheservicevisionandcommunicationbothoutwardsandbetweenKM

branches.ThirdlyKMshouldstartlookingforapotentialpartnerinthemarketof

generators,propulsionandpropellersinordertoaddressthe“TheFullPicture”goal.Asa

71|P a g e

partofstep3inthestrategyincludesthecompanyprofileofWärtsilä,acompanywitha

suitableprofileforapotentialpartnership.Wärtsilä’sproductlineisaperfectfit,andthey

havealsomentionedinterestinpartneringupwithothercompanies.

Discussion

Thisreporthasbeendevelopedbyusingresourcesavailablethedeterminedtimeframe.

ThefollowingsectionisthecriticismaswellassuggestionsforfurtherresearchforKM.

Criticism

Thisreporthadlimitationsregardingtheprocessofgatheringdata.Severalbarriershave

occurredduringthemakingofthisreport,however,thesehavebeenovercome.

Informationneededwasnotavailablethroughtraditionalresources,theresearchteamhad

tomeetvariousemployeesintheindustry.DatafromKM’scustomerswastimeconsuming,

butapprehendedwhileKM’scompetitorsinformedthattheinquiriesweretoosensitive.

VariousshipyardsintheVancouverandVictoriaareawerecontacted,however,noneof

theseprovidedanyresponse.

DuetothegeographicaldimensionofCanada,theabilitytoreachallofKM’scustomerswas

challenging.Thismadepartsofthereportrelyonphoneandemailinterviews.Thiscaused

72|P a g e

problemsinthesenseofshortanswersanddifficultiesreachingtheappropriate

employees.

However,KM’scustomerslocatedinBC,weremorethanwillingtomeetandprovided

usefulandindepthinformationtothisreport.

Suggestionsforfurtherstudies

Thisreporthasconductedresearchessentialforthetaskathand,andforthecompleteness

ofthereport.ThealternativesforfurtherstudiesaresubjectsthatKMcanlookintoand

learnmoreabout.

Pacificcoastmarket

Lookintothepacificcoastmarketandseeifthereispotentialforfurtherexpansion

totheUS.ThereareafewimportantportslikeSeattleandSanFranciscoonthewest

coastwithtraffictoandfromAsia.

Strategicalliance

Lookintotheoptionofanalliancewithamanufacturerinthepacificcoastto

improvetheservicetothecustomersbasedonthePacificcoast.Lookintooptions

regardingwhotheperfectalliancewouldbeandthecostsofgoingintoanalliance.

73|P a g e

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TheCanadianencyclopedia(2009),ShippingIndustry,retrievedfromApril2009:http://www.thecanadianencyclopedia.com/index.cfm?PgNm=TCE&Params=A1ARTA0007364

Vancouverdrydock(2009),homepage,retrievedfromMay2009,http://www.vcrdrydock.com/

Vancouvershipyards(2009),homepage,retrievedfromMay2009,http://www.vanship.com/

Victoriashipyards(2009),homepage,retrievedfromMay2009;http://www.vicship.com/

Vigen,HansIvar,managingdirectorCanshipUgland,interviewoveremail

WashingtonMarineGroup(2009),homepage,retrievedfromApril2009:http://www.washingtonmarinegroup.com/.

WärtsiläAS(2009),homepage,retrievedfromApril2009http://www.wartsila.com/,en,investors,0,generalcontent,CC5BBBB1‐FE6E‐4E4E‐8A20‐778298FD5796,73482228‐74E5‐4348‐B3FE‐599F6BA0169F,,6100.htm

WärtsiläAS(2009)homepage,retrievedfromApril2009,(http://www.wartsila.com/Wartsila/global/docs/en/press/media_publications/annual_reports/Wartsila_Annual_Report_2008_EN.pdf

WärtsiläAS(2009)homepage,retrievedfromApril2009http://www.wartsila.com/,en,investors,0,generalcontent,CC5BBBB1‐FE6E‐4E4E‐8A20‐778298FD5796,73482228‐74E5‐4348‐B3FE‐599F6BA0169F,,6100.htm

Worldfactbook(2009),Canada,retrievedfrom2009:https://www.cia.gov/library/publications/the‐world‐factbook/geos/ca.html#Econ

77|P a g e

Appendix

Appendix1

SecundaMarine­InterviewwithDwayneMurphy

Mr.MurphystartedoffbyexplainingpurchasingroutinesandhisviewregardingKM’s

products.UsuallyKMisfamiliarwiththeirequipmentontheirfleet,andhasan

understandingofSecunda’sneeds.KMusuallyprovidesrecommendationsonorderswhen

performingrepairsormaintenance.Regardingafewspecificproducts,Secundasearches

forneededproductsatleast3to4timesaweek.Duringthisprocesstheyusuallyconsider

previousordersfromtheircurrentvendor.

Whensearchingfornewvendors,thefinaldecisionisbasedoncompanyreputation,price

anddeliverytime.Iftheproductsarenotfromtheoriginalmanufacturer,Secunda

normallyrequiresthreeoffers.SecundadoesthisbysendingoutRFQ’stothreeseparate

distributors,andoneoftheseisfinallychosen.

Mr.Murphy’sviewsonKM’sproducts,isthattheyhavestateofthearttechnology,and

competewellintheindustry.MostofSecunda’spurchasesfromKMarebasedmainlyon

dynamicpositioningandjoysticksystems.HestatedthattherearenomissinglinksinKM’s

productline.

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Mr.MurphyinformsthatSecunda’spreviousexperienceswithKMhavebeensatisfactory;

especiallytheirservicerepairspeoplewhowerewelledtrained.

CanshipUgland­CorrenspondancewithLloydButton&HansIvarVigen

CorrespondencewithbothMr.ButtonandMr.Vigenwasconductedbyemail.Thegroup

feltthatMr.Button’sresponsewasvagueandratherweak,andthereforecontactedMr.

Vigentoprovidedeeperinsight.TheyinformedthatCanshipUglandhasknownKMfor

morethan25yearsandaregenerallysatisfiedwiththeirexperiencewithKM.Weare

informedthattheyfeelthatKMdeliversgoodandreliableproductsandbuyspareparts

continuously.Mr.VigenexplainedthatCanshipUglandiscurrentlyusingnumerous

productsfromKM.However,theircontrolsystemsarecurrentlyprovidedfromRolls

Royce,whichcouldbeprovidedfromKMinthefuture.CanshipUglandstartedtheir

businesswithKMin1980whentheystartedusingdynamicpositioningsystems.

HansIvarVigen&LloydButtonagreethattheyaresatisfiedwiththecurrentservice

providedfromKM,however,theydofeelKMareexpensive.

Teekay­InterviewwithTerjeRusdal,DirectorofTendering&ProjectsandPerAbrahamsen,SiteManager

WheninterviewingMr.RusdalandMr.Abrahamsen,tworepresentativesfromTeekay’s

officeinStavanger,Norwaywerepresentonconferenceall.Thissectionisthereforebased

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oncommentsfromfourrepresentativesfromTeekay.

OurteamwastoldthatTeekaychosevendorsbasedon“habit”andpreviousexperience.To

beconsideredasavendor,yourcompanyhastobeon“makerslist”.Thisisalistofvendors

thatcansupplyproductsfornewbuildsandrebuilds.Usuallytheshipyardwillconsiderthe

optionsandmakearecommendationtotheship‐owner.Thepurchasesareusuallymadea

yearinadvance.

Teekayfoundfollow‐upfromthevendorespeciallyimportant.Fewervendorswerealso

preferred,sincefewerpointsofcontactleadstobetterefficiency,productpackagedeals

andproductcompatibility.

WhenaskinghowpurchasesatTeekayweredone,theysaidthattheshipyardgathers

offersfromvendorsautonomously,offeringaminimumofthreeapprovedvendors.Extra

vendorscanbeprovidedifrequested,butthiscostsmore.Theshipyardarranges

transportationoftheproducts,usuallybytrain,shiportrailers.Ifashipneedsan

emergencyrepair,productsaretransportedbyplanetotherequestedlocation.Theteam

wastoldthatTeekayhashadpositiveexperienceswithKMregardingtransportationof

products,anddeliverieswerealwaysontime.Teekayordersproductsthoughttheiroffices

inStavanger,Houston,GlasgowandSingapore.

TeekayusesmostofKM’sproductlineexceptcamerasystemsandaltimeters.Theproduct

linecoversmostofTeekaysneeds,howevertheysuggestedthatKMcouldimprovethe

dynamicpositioninginterfacebetweenthrustercontrolsandtheengine.Convertimewas

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mentionedasacompetitorthatprovidedthissolution.

WhenenquiringaresponseonpersonalexperiencewithKMproductsandservice,Teekay

mentionedthatKM’sdynamicpositioningandreferencesystemswere“worldclass”,and

thattheyoffer10yearsofsupportafterdiscontinuingaproductline.Teekaygenerally

expressedthatKMdoeseverythingintheirpowertosatisfytheirneeds,andaregoodat

followinguptheircustomers.

Howevertheymentionedsomeradarproblems.KMhastheirlogoonsub‐firmsradarandit

malfunctions.TheseradarsarecurrentlybeingphasedoutfromTeekay’svessels.Another

suggestedareaofimprovementwasthattheserviceexperiencewaspooreroutsidethe

NorthSeabasinthanwithin.TeekaymentionedthatKMcouldimproveinternal

communicationwithinregionalofficesinNorway.AfinalrequestfromTeekaywasthatKM

couldimprovetheirlogisticsofsparepartsthroughouttheworld,especiallyinBrazil,

possiblybyincreasingtheirstoragecapacityattheselocations.

Seaspan­InterviewwithRajDewan,TechnicalManager

SeaspanisoneofKM’slargestcustomersinCanadawhoarelocatedinVancouver.The

teamhadameetingwithRajDewan,whoistheManagerofSeaspan,withfocusonthe

technicalaspectsofthecompany.

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RajinformedthatSeaspanhasnumerouswaysoffindingproducts.However,akeyaspect

wasexperience.RajexplainedthatSeaspanwouldoftendecidevendorsfrompersonal

experiencewithequipment.Butinaddition,Sespanalsosubscribetotechnicalmagazines,

surfedtheInternetandattendtradeshows.Anotherwaytheyfoundproductswasthrough

fellowpeers,socalledwordofmouthandofcoursetraditionalmarketing.

WhenSeaspanbuysnewequipment,itisoftenbecausetheyarereplacingdamagedgoods

orbuyingpartsfornewships.Theirpolicywhenbuyingproductsistofindgood,reliable

products,hopefullywithagoodvolumediscount.Seaspankeepstheirfleetsuniform;they

feelthismakesiteasierandcheapertotransfercrewfromshiptoship.

WhenSeaspanchoosesavendor,thedecisionifoftenbasedonacombinationof

experience,vendor’shistory,price,quality,aftersalesserviceandmaybethemost

importantrelationship.Rajstressesthefactthatagoodfundamentalrelationshipbetween

vendorandcustomerishighlyappreciatedinSeaspan.Seaspanoftencontactedwhatthey

perceivedasthebestvendorinthemarketandthevendorthattheyfeeltheyhavethebest

relationshipandnarroweditdowntowhichvendortheyfeelprovidesthebestproductand

service.

TheproductsSeaspancurrentlyseeasessentialfromKMaremarineautomation,

navigation,clustercontrolandvoyagedatarecorders.Mainengine,remotecontrolsand

alarmmonitoringareproductsthatSeaspancouldinthefutureseeprovidedtothemfrom

KM.SeaspanacknowledgesthattheyfeelKongsbergshouldlookintodelivering

mechanicalproductsinadditiontotheirelectronics.

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SeaspancurrentlyusemarineelectronicsprovidedfromKMbecausetheyhaveworked

withKMbefore,hadgoodexperienceandexperiencedgoodaftersalesservice.

SeaspanarecurrentlysatisfiedwithKM’sservice,theonlyconcernsRajinformsaboutis

thatKMhaveproblemswhendealingintheFarEast,especiallyregardingthelogistics.He

alsofeelsthatKMisslightlyexpensiveandthatKMkeepsanimpersonalrelationshipwith

Seaspan.RajfeelsthatKMhasroomtoimproveonoperatingvessels.Herecommendsthat

KMdealmorewiththeircustomersonafrequentbasis,atleastonceayear.

BCFerries­InterviewwithMarkCollins,VicePresidentEngineering

MarkCollinsexplainedthatthemostimportantthingwhenselectingamongthevendors

wastheirownpreviousexperience,howeverpriceanddeliverytimewerealsoimportant

criteria.BCferrieshas$3,5billiondollarsofassets,andfewervendorsareeasiertodeal

with.Furtherhesaidthatpotentialvendorsshouldbeonthe“equipmentvendorlist”,and

usuallythetoptwooftheseareselected.Thecontractswithvendorsaresignedtwoyears

inadvance.Thelongevityoftheproviderisveryimportant,sincetherewillbeanafter

salesserviceperiodofthevesselsfor20+years.

BCFerriescurrentlyhavehas40ships,whicharetakenoutforservice3weeksevery4th

year.Mr.Collinsemphasizedtheimportanceonadecentrelationshipwiththevendorto

getyouthroughbadtimes,notif,butwhensomethingbreaksdownaferry.

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Inapurchaseprocess,engineersdeterminetheneedforproducts,whilesupplyhandles

orderingoftheseproducts.Regardingexpensivepurchases,BCFerriesissuesacompetitive

requestforproposals.TheproductsareusuallydeliveredfromEurope,butalsofromthe

US,andarriveincontainersinRichmond.BCFerriesusesmarineelectronicsfromSAM

electronics,onlyonevesselisequippedwithproductsfromKM,thisbeing“Northern

Adventure”.Thevesselcamewithautomationsystems,VDRandfiredetectionsystemspre‐

installed.

WhenaskingMr.CollinsaboutKM,hestatedthattheymanufacturefirstclassequipment.

HoweverBCFerrieshasexperiencedsomeserviceissues.Whenequipmentneededrepairs,

BCFerrieshadtoputpressureonKMinorderforatechniciantoshowup.Thetechnician

showedupafterthreeweeks,noturgentenough.Mr.CollinsstatedthatheexperiencedKM

asacompanywith“nocando”attitude,andmentionedSperryasapartnerwithexcellent

service.

Furtheron,hewentintomoredetail.WhentheVDRneededannualservice,KMwouldnot

trainBCferries’serviceteamtodothis,sincetheyhaveahabitofmaintainingtheirown

fleet,withoutdependingonthirdparties.Lasttime,VDRwaspurchasedfromNovaScotia

basedRutterswhohada“cando”attitude.RutterprovidedthesoftwareCDfortheVDR

uponrequest;ittookKMayeartodothis.Mr.CollinssuggestedthatKMshouldbecome

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moreadaptabletoBCFerrieswayofdoingthings,andnot“theKongsbergway”ifthey

wishedtodobusinesswiththeminthefuture.

WhendiscussingvendorsingeneralwithMr.Collins,heexplainedthatsomevendorstend

tomakemistakeswithorders,whileothervendorsalwaysgetitright.Regardingservicehe

explainedthattherewasadiscussionofresponsibilitywhenequipmentbreaks,anda

furtherquestionofmoneyandpayment.SincesomanypeopleareaffectedwhenBC

Ferriesaretakenoutofservice,includingthepassengersandtheprovincialgovernmentof

BC,BCFerriesprimaryconcernisthattheferryisrepairedASAP,andthediscussionon

paymentandresponsibilitywillbetakenafterwards.

Whenaskingaboutfinancingonpurchases,Mr.Collinsexplainedthatdownpaymentsare

usually15‐20%inadvance,75%withinshipping,and5%afterequipmentisinstalledand

approved.BCFerrieshasbond‐issues,andneedstoraise$150’‐200’ayeartoupgradethe

fleet.

Nautisol­InterviewwithDonStein,CEO

DonSteinisfounderofthenewVictoriabasedcompanyNautisol.Mr.Steininformedthe

teamthathewillbesoonfinishedwithestablishingthefinancialcontractsneededto

furtherdevelophisgoalofdevelopingandlaunchinghighspeedpassengerferryservice

betweenVictoriaandVancouver.

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Whenaskedifhehaddecidedwhichvendorwouldprovidehisferrieswithmarine

electronics,DonSteinexplainedthattherehewouldonlyconsiderKM’sproducts.Mr.

SteinexplainedfurtherthathehadworkedwithKMbeforeandwashighlysatisfiedwith

hispreviousexperiences.LastlyheaddedthatcooperationbetweenKMandLipsWaterjets

wouldbeconsidereda“matchmadeinheaven,”forDonSteinandNautisol.

Appendix2

SperryMarine–EmailQ&AwithAlanAitken,RegionalManagerQ:WhatkindofproductsdoesSperryMarineoffer?

A:Weareamanufacturerofmarinenavigationequipmentforthe

commercialshippingindustryandvariousnaviesoftheworld.Our

productsaregearedtowardslargervesselsandwespecializeinanumber

ofareas,mostnotablygyrocompassesandradars.Takealookatour

websiteformoreinformationonourproductsandhistory.

Q:Whichisthemostimportantmarket?Arethereanynew

developmentswithinmarineelectronics?

A:Ourbusinessisprettymuchevenlysplitbetweenthecommercial

sectorandthemilitary,althoughcurrenteconomicconditionshavehurt

someareasofthecommercialsector,specificallynewvessel

construction.Themostnotablenewdevelopmentintheindustryisamove

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towards"multifunctiondisplays"wherebyonepieceofequipmentisnow

abletodomanythings.InourcasewehaveintroducedVisionmasterFT

TotalwatchwhichfunctionsasRadar,ChartRadar,ECDIS,aswellas

manyotherthings.Lotsofgoodinformationonourwebsite.

Q:Areyourproductsstandardizedorcustomized?

A:Ourfullproductlineisonthewebsite.Ninetyninepercentof

ourproductisstandardizedhoweverwedooffercustomsteeringstands

andbridgeconfigurations.

Q:WhicharethemostimportantshippingportsinNorthAmerica?

A:InCanada,Halifax,Montreal,andVancouver.IntheUS,Los

Angeles,SanDiego,Seattle,Miami,NewYork,Bostonandtheremaybea

fewontheGreatLakes.

Q:WhoareyourmostimportantcustomersinNorthAmerica?

A:USNavy,USCoastGuard,Chevron,Maersk,anumberofcruise

Lines,CanadianandUSCoastGuard,CanadianNavy,

Q:HowdoescustomersfinancepurchasesfromSperry?

A:Prettymucheverythingispaidwithin30‐90daysfrominvoice

87|P a g e

datealthoughverylargeprojectssuchasnewshipconstructionhave

whatarecalled"milestonepayments"wherebymoneyisreleasedafter

variousstagesofthetotalprojecthavebeencompleted,essentiallya

partpayment.

Q:WhatareSperry’sstrongestsellingpointsinthisbusiness?

A:Productquality,companyethics,andaworldwideservice

network.

Q:WhyshouldcustomerschooseSperryasvendor?

A:Probablybecauseofthethreeitemsabove.Sperryiswellknown

andhasanexcellentreputationwithintheindustry.

Q:Haveyouexperiencedalowerdemandforyourproductsafterthedownturninthe

economy?

A:Sofarthedownturnonlyseemstobehurtingnew

construction,retrofitworkcontinuestobestrong.

Q:Howoftendoesshippingcompaniesperformmaintenancedoneontheirelectronic

equipment?

A:Thereisroutinemaintenanceandemergencyrepairs.Someroutine

maintenanceismandatedbyregulatoryagencies,suchasinspectionsof

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VDR's,VoyageDataRecorders.Aswithcars,somevesselsareinbetter

statesofrepairthanothers.Someareusingjunkequipmentandsomeare

usingthebestavailable.

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CanadianCoastGuard–TelephoneInterviewwithSamRyan,ManagerElectronicsandInformatics

TheinterviewwithSamRyanwasconductedbyphone.Mr.Ryanexplainedfromthe

beginningthathisanswerswouldbelimitedsincesomeinformationisconsideredtoo

sensitivefortheCanadianCoastguardtoexpose.WhenspeakingwithMr.Ryan,he

explainedthattheCanadianCoastGuardhassimilarproceduresasKM’scurrentcustomers

whentheyaresearchingforvendorsofmarineelectronics.

HeinformedthatTheCCbuysnewequipmentiftheircurrentequipmentisdamagedor

needstobechangedduetomeetregulatorydemands.Acombinationoftechnicaland

financialattributeswouldbetwocriteria’sthattheCCweighwhenchoosingavendor.

Mr.RyanstatedthatheknowaboutKMandknewoftheirreputation.Theykeeptheirfleet

uniformedtomakeiteasierforcrewtoworkonthevariousships.Whichalsomeansthatif

KM’smarketsharewouldincreasegreatlyifchosenasanewvendorofmarineelectronics

bytheCC.

AcriterionthatdifferentiatestheCCfromKM’scurrentcustomersisthattheCCprefer

productwith“civilianapplication,”whichbasicallymeansthatproductsapplicableforthe

civilianpublicwouldbehighlyconsidered.

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HealsostatedthatfornewvendorstoestablishthemselvesintheCC,traditionalmarketing

wouldbeconsiderednormal.Facetofacemeetingswithdetailedinformationwouldmake

iteasierfortheCCtoswitchvendors.

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Appendix3

92|P a g e

Appendix4

Porter`sfiveforces

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Appendix5

GAPServiceModel

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Appendix6

TheBusinessTransactionModel

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Contacts

KongsbergMaritime261BrownlowavHalifax,NSB3B1T5Tel.24h/day+4781535535

JohnGillis,GeneralManagerTel. +1(902)468‐2268Fax +1(902)468‐2217Cell. +1(902)489‐2109john.gillis@kongsberg.com

SecundaMarineServicesLtd1CanalStreetP.O.Box605Dartmouth,NovaScotiaCanadaB2Y‐2W1

DwayneSmithers,PresidentTel. +1(902)465‐3400x144dwaynes@secunda.com

ChrisPitts,Sales&CharteringTel. +1(902)465‐3400Cell: +1(902)456‐5348ctpitts@mcdermott.com

DwayneE.Murphydemurphy@mcdermott.com

SperryMarine

1‐1000WindmillRoadDartmouth,N.S.B3B1L7

AlanAitken,CanadianRegionalManagerTel. +1(902)468‐9479Fax. +1(902)468‐9480Cell. +1(902)233‐7225alan.aitken@sperry.ngc.com

96|P a g e

CanshipUglandP.O.Box8274,Sta.A1289TopsailRoadSt.John's,NFLDA1B3N4

HansIvarVigen,ManagingDirectorUglandMarineServicesASTel. +4737292600Fax: +4737044722hv@jjuc.no

LloydButton,VesselSuperintendentTel. +1(709)782‐3333x339lbutton@canship.com

TeekayShippingSuite2000Bentall5550BurrardStreetVancouver,BCV6C2K2Canada

TerjeRusdal,DirectorTendering&ProjectsTel. +1(604)683‐3529terje.rusdal@teekay.comPerAbrahamsen,SiteManagerper.abrahamsen@teekay.com

SeaspanLtd.2600‐200GranvilleStreetVancouver,BCV6C1S4

RajDewan,TechnicalManagerTel. +1(604‐482‐8777)rdewan@seaspan.com

97|P a g e

AtlanticTowingLtd.99WyseRd.Suite1150Dartmouth,NSB3A4N5

SeanLeet,CommercialDirectorTel. +1(902)494‐5400x5404,leet.sean@atlantow.com

WallaceFletcher,PurchasingManagerTel. +1(506)648‐2750.

CanadianCoastguard­FisheriesandOceansCanada200KentSt.7S036Ottawa,ONK1A0E6

SamRyan,ManagerElectronicsandInformaticsTel. +1(613)998‐17773Sam.Ryan@dfo‐mpo.gc.ca

BCFerries1112FortStreetVictoria,BCCanadaV8V4V2

MarkCollins,VicePresidentEngineeringTel. +1(250)381‐1401mark.collins@bcferries.com