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Meli marine case analysis
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1) Problem Statement 5) Decision Criteria
2) Core Objectives 6) Recommendations
3) Situational Analysis 7) Risk Mitigation
4) Alternatives 8) Alignment with
Objectives
Our plan
To grow and maintain Meli Marine’s position as a
leading container carrier in the face of increasing
competitor intensity, cascading effects and low
returns on vessel operations.
Meli’s Conflict
1. Grow business
2. Reduce risk
3. Increase profits
What is our goal?
While maintaining high touch, responsive customer
service
• Strong customer relations
• Leader in on-time delivery
• Specialized containers
• Capabilities in logs and
transhipments
• Flexible cost structure
• No presence outside of Intra-Asia
• Higher costs
• Higher prices
• Well-priced ships for sale that provide
economies of scale
• Fast growing terminal operations and
Shipment Origination sectors
• Trans-pacific volume
opportunities and growth
• Cascading
• Upward cost pressure from commodity
prices and regulation
• Competitors operate terminals
• Global trade imbalance
• Dependant on niche clients
Competitive Landscape
Revenue $8B $32B $102B $35B $28B
ROIC 9% 50% 3% 25% 34%
CAGR 11% 10% 7% 11% 7%
Players Manufacturers
Meli Marine
Evergreen
Other
Maersk
Meli Marine
All Players Maersk
Evergreen
Wan Hai
Yang Ming
Tee-Sah
Maersk
Meli Marine
Notes Customer service and
Billing
80% Revenues from
Top 15 firms
Terminal Charges are
20% of cost for carrier
Where do we compete?
What choices do we have to make?
• Buy
• Don’t buy
• Buy and lease
Ships
• Intra-Asia
• Asia-North America
• Asia-Europe
• Niche
• Combo
Markets
• Current
• Focus on shipment origination
• Expand into terminal operations
• Partnership with Evergreen
Operations
What options do we have?
Profitability/Growth Potential
Alignment with Core Competencies
Ease of Implementation (Feasibility)
Competitor Landscape
What are we basing our decisions off of?
Buy Ships & Expand to Trans-Pacific
Buy Ships & Focus on Intra-Asia
Don’t Buy Ships & Partner with Evergreen
Don’t Buy Ships & Focus on Shipment Origination
Which options seemed the most feasible?
Great upside, but quite risky
• Gain a larger percent of current
customer business
• Significant volume opportunities and
rapid growth
• Diversification of markets
• Interfere with competitor profit pool
• Difficult to maintain strong customer
relations in North America
• High possibility for inefficient backhaul
• Greater fixed costs
• Uncompetitive long-haul boat capacities
• Downturn in global trade
Pros Cons
Safe bet, but too passive
• Lower VC per container
• More stable rates on a per TEU-
kilometer basis
• Significant share at each port
• Greater ability to compete with larger
boats
• Increase in capacity
• Increased impact and threat of
cascading
• Missing out on significant volume
opportunities & rapid growth
• Lack of diversification
• Higher fixed costs
Pros Cons
Potential to grow the business non-organically, but become highly reliant
• Gain a larger percent of current
customer business
• Instant access to more customers
• Significant volume opportunities
and rapid growth
• Diversification of markets
• Loss of autonomy
• Conflicting company cultures
• Reliant on a successful deal
Pros Cons
Focuses on strengths, but neglects core business
• Leverages customer loyalty
• Reinforces key competencies &
builds stronger relationships
• High return on capital employed
• Quality of service may not be scalable
• No risk mitigation of cascading
Pros Cons
Arriving at Recommendations • Recognize the inherent strengths, opportunities, challenges • Develop a plan that optimizes profitability and growth potential
Plan of Action • Invest in vessels and lease idle capacity • Continue to grow business in Asia • Slowly pursue NA market • Grow shipment origination
How we’re going to win
Rationale
Rationale
Rationale
Shipment origination provides high available returns as well as synergistically grows our
customer base for vessel operations
Rationale
1. Finance purchase of 16 vessels
2. Establish relationships with NA customers
1. Further development of shipping origination and
acquisition of customers in Asia market
2. Phased-in entry to NA
3. Leasing of idle capacity
1. Monitor & evaluate NA operations for
profitability and quality
What’s our plan moving forward?
• Cascading: Compete using & time efficiency
• Freight Forwarding: Critical growth step for managing customer relationships
• Offer Lower Prices: Focus on relationship management. Offer freight
forwarding & container specialization
• Hedge against fuel prices
• Lease idle capacity
• Grow customer base via shipment origination
• Allocation of ships [size] based on customer needs (urgency, perishables etc.)
• Focus on core competencies & sustain customer loyalty
What do we need to be aware of?
Risk Mitigation Strategy
Why does our plan work?
Grow Business Reduce risk Increase
profitability
• Defends against cascading
• Diversifies and grows revenue streams
• Invests in higher ROIC activities
• Improves VC per container
• Gradual market entry reduces implementation risk