International Maritime Business. Comparison of the German and the Greek maritime clusters

Term Paper 2014 18 Pages

Business economics - Business Management, Corporate Governance


Table of Contents

List of Abbreviations

List of Figures

1. Introduction

2. German shipping firms
2.1 Market-Focus
2.2 Finance
2.3 Organizations and Management
2.4 Business Model
2.5 Human Resource Management
2.6 Fleet

3. Greek shipping firms
3.1 Market-Focus
3.2 Finance
3.3 Organizations and Management
3.4 Business Model
3.5 Human Resource Management
3.6 Fleet

4. Contrast
4.1 Different Businesses
4.2 Shared Challenges

5. Conclusion

6. Sources

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

List of Figures

Figure (1): Development in the German merchant Fleet (VDR 2014, 38)

Figure (2): Greek Fleet Age Development (Petrofin 2013)

1. Introduction

The two major European players in the global shipping market, namely the German and the Greek shipping firms, are currently facing several enormous challenges. The impact of global economic downturn, the crisis in the main shipping sectors and the changes in the pattern of world trade all profoundly affect the maritime transport industry (De Monie, Rodrigue und Notteboom 2011). However the Greek shipping companies seem to manage their businesses in the crisis more successfully than their German competitors. Therefore a report on the differences and similarities among shipping firms in the German and the Greek maritime clusters is of high interest. Even though both players focus on different segments in the maritime markets, that have different rules and conditions, the main parameters and aspects of their businesses will be compared. The focus of this report lies on market, financial, organizational, management and human resources related issues. Since these issues mainly touch strategic management decisions, this report will not go to deeply into the operational aspects of the businesses such as using Key Performance Indicators (KPI´s) or other methods and applications that would serve these types of issues. The use of KPI´s would also demand the same source of their collection to have an objective analysis, but since both players operate on different markets, only a small proportion of their KPI´s would be comparable. Furthermore this paper will focus purely on companies that operate ships. Hence, ports, hinterland-logistics, education- or administration-facilities belonging to the maritime cluster will not be taken into account. After the German and Greek shipping firms have been compared, the report will highlight aspects that differentiate the particular maritime clusters and conclude with similar short prospects both players likely will face in the future.

2. German shipping firms

2.1 Market-Focus

The majority of German shipping firms operate in the field of liner-services. German Companies dominate the global liner-market by approximately 30 percent, running round about 1600 Container-Vessels with approx. 5 million TEU (VDR 2014, 9). Compared to this, the much smaller German bulk- (ca. 400 vessels; 4% market-share) and tanker-fleet (ca. 450 vessels; 3,7% market-share) is of minor interest for the further analysis in this paper (VDR 2014, 10,11). Therefore this report will focus only on the container-business concerning German shipping firms from this point on.

2.2 Finance

Since the 1970´s, the model of a German limited partnership, commonly known by its acronym KG (Kommanditgesellschaft), played a major role in German ship finance. Especially in the liner-business KG models have been used to raise private equity for acquiring assets as single projects. KG funds are tax-driven structures that acquire funds from private investors participating in single-purpose companies and leveraged by bank loans. The KG structure has been exempted from corporate tax and thus considered to be a cheaper source of financing than banks (UNCTAD 2014, 79). The economic and financial crisis from 2008 with its impact on the maritime sector has lead to a liquidity-crisis in the KG system and many German projects have been collapsing since then. As a result many investors have lost faith in the traditional KG financing model for shipping investments and are therefore seeking complementary or alternative modes and sources of ship financing (KPMG 2012, 6). The majority of KG-investors does not come from the shipping-industry itself and is not interested in the actual operations of the ships. Their investment horizon is typically between three and seven years and they long for more or less fixed returns from the beginning (UNCTAD 2014, 82). This approach has a direct impact on the management of the assets. This will be analyzed in the next chapter of this report.

2.3 Organizations and Management

Due to the financial structure of the dominant KG-market, German shipping firms have been bound to organizational parameters that go along with these systems. Since the KG-system founded several single-purpose companies that are linked to a mother-company, issues of additional administration and management got rather complex. Such a structure requires several additional asset-managers who are restricted in their competencies as they depend on voting of the shareholders for major decisions. This makes the management of a KG-fleet quite inflexible and time-consuming compared to companies that have direct influence on their vessels. The KG-system naturally attracts shareholders that have not been involved in shipping themselves. Shipping has commonly been seen as an investment aiming for a constant rate of return rather than a self-fulfilling business. From this follows that also many German shipping-managers originally come from different industries, mainly from the banking sector (E.R. Schifffahrt 2014). The advantage from this practice is that these former outsiders hold a different mindset and the companies may benefit from this outside perspective. The problem that comes along with the outsiders is that they lack experience of shipping in general and especially of shipping operations. This can lead to difficulties and misunderstandings between the managers and the crews of the ships for example. This aspect is underlined by the mindset of many managers, who concern the assets as service providers to the companies and not the other way round (Hammonia Reederei 2014).

2.4 Business Model

The business model of German shipping firms is directly linked to the commonly used KG-system. Since shareholders invest in assets to receive preferable constant rates of return, the managers are keen to charter their vessels for fixed rates in long time charters and shipping pools. Since the assets are bond to the time charter contracts, managers are rarely able to participate in the cyclical periods of busts and booms in the maritime transport market, by selling the assets on highs (UNCTAD 2014, 68). On the other hand they share lower risks of struggling on the market when rates are low and the operational expenses (OPEX) can hardly be covered. Liner-services require a relatively large body of personnel including very specific tasks and responsibilities. Since expenses for personnel are rather costly and rates in liner-shipping quite inflexible, the companies highly depend on the global market. If the companies do not have sufficient liquid funds available, even short crises can threaten the core of these businesses. From this follows, that the management of human resources is important for the German liner-service providers.

2.5 Human Resource Management

The leading companies in liner-shipping have their own manning agencies (e.g. Hamburg Süd, Rickmers, Peter Döhle, Claus-Peter Offen, etc.). Their fleets need a huge pool of personnel to keep the vessels in business. Especially in the liner-business a single vessel serves hundreds or even thousands of customers in a single voyage due to the high number of containers onboard. Since most of these customers are companies themselves, a high percentage of them requires a social, safe and “green” kind of service to meet the rising social and environmental awareness of the public. Additionally the Maritime Labour Convention (MLC 2006) has set strict regulations concerning recruiting and crewing. Due to these conditions, the leading companies are keen to meet the regulations and demands by their customers and they do not want to rely on third party crewing agencies (Columbia Shipmanagement 2014). The benefit of running own manning services is that these liner-service providers can offer career-opportunities for their employees on a long-term basis and at the same save the cost of recruiting new employees on a regular basis. As an example one of these companies underlines these issues by saying “Our objective is to create long term value for our clients by building a strategic partnership so that human resources can be developed in a quality conscious and cost effective way” (Reederei Claus-Peter Offen 2014).



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Hamburg School of Business Administration gGmbH – Maritime School
international maritime business comparison german greek

Title: International Maritime Business. Comparison of the German and the Greek maritime clusters