SHMIOJ World Maritime University Orient Overseas Container Line Paper i need a excellent work with a grade of A+, and my professor told me that i should no

SHMIOJ World Maritime University Orient Overseas Container Line Paper i need a excellent work with a grade of A+, and my professor told me that i should not just steak to the case study i am also entitled to use some other articles, needs a table of content in the work and also the references. pls follow the instructions in the assignment i mean the format everything thanks. WORLD
L1J1 MARITIME
UNIVERSITY
WM
Submission
•
•
•
•
•
•
•
•
•
Submissions of the assignment shall be made electronically via the Turnitin inbox
on the course page.
The submission title should be the course module code.
The submission is anonymous use neither your name nor student number on
your work
Submitted assignments will be scanned for plagiarism by the programme Turnitin
and the results reported to the assessor.
Submit as a Word document
The time of submission will be recorded and reported to the assessor.
Assignments submitted after the deadline will be marked down in accordance with
academic policy.
Use the Assignment Template and follow instructions regarding front sheet and
font (Anal 11 pt. or Times New Roman 12 pt., and 1.5 line spacing, but the List of
References should have single line spacing). Use the APA format for referencing.
Maximum number of words, excluding the title page, table of content, and list of
references; 3000 words. Words in excess of the limit will not be assessed.
The WMU Reference Guide to Assessments and Examinations (available from
the Study tool menu at the Academic portal) must be taken into consideration for
all assignments. Submitted work will be assessed on the basis of the WMU
marking descriptors applicable to assignments.
—
Date assignment given
Assignment submission deadline
Target date for release of grades
Given by
SHMIOJ
3 May 2019
25 June 2019
17 July 2018
Dr. Satya Sahoo
Shipping Management
Individual Assignment Feedback
ID No.
Mark:___________
Criteria
Performance
Outetandng
Very Good
Good
Pasa
Poor-Failise
Structure
Quality ofthe argument
Ccrnceptual anatsis Iframework
Applicatbnto the real world
Original’y
Reference to literature
Writing style! presentation
Note: The mark shown is povisknal subjectk the final approiL The assessment of pertormance level
againsteach of the assignment criteria are usedto be indkateforyour benet&
General Comments:
Subject code
Subject
Credits fEC)
WM
j{
WORLD
MARITIME
UNIVERSITY
Individual Assignment
SHM1O1
Shipping Management
6 EC (of 8EC)
Task: Answer all questions.
Topic: Orient Overseas Container Line (OOCL): Sailing Through Choppy Waters
Task: You are required to read the enclosed case and reading the material and produce a report
with the following points in mind. The lecture slides and the databases provided at the classroom
could be used for a better analysis.
1. Describe the structure and operations in the liner shipping industry in general and
explain the characteristics features of OOCL within the liner sector.
2. Identify the sources of risk for a container liner company and develop risk
management strategies to mitigate those identified risks with the reference to the
OOCL case.
3.
Develop a strategic plan to increase the market share for OOCL in next five years.
HKJ 045
Asia Case
Research Centre
THE UNIVERSITY OF HONG KONG
ALl FARHOOMAND
ORIENT OVERSEAS CONTAINER LINE (OOCL):
SAILING THROUGH CHOPPY WATERS
Introduction
As the extended Tung family gathered for a traditional Chinese New Year dinner early in
February 2013, Tung Chee Chen allowed himself to feel quietly satisfied. As joint owner,
Chairman and Chief Executive ofOOlL Holdings (“OOIL”), he had enjoyed watching revenues
at QOIL increase during 2012. Unlike many ofhis competitors, he’d only had one year of losses
recently. Among his close family were his brother, a previous chairman and retired senior
politician; two nephews, both executive board members; and his brother-in-law, also an
executive board member. Although ownership of OOIL remained in the family, it was listed on
the Hong Kong Stock Exchange and was well established and respected, both within the
territory and in the many countries where it operated.
Yet there were also concerns in his head. The economic recovery in the West was slow and
stuttering and there was widespread agreement that even China’s growth rate would slow.
Would OOIL, a mid-sized shipper, ever be competitive against the mega carriers? Would
protectionist pressures reduce the demand for international transport? And thinking long term,
what would be the effect of shifting populations, manufacturing patterns, technological
advancement and climate change on his company? Could Tung retain the competitive edge of
his iconic brand? Moreover, how best could he devise a succession plan?
Industry background
The shipping industry was split into ‘dry bulk’ (the movement of raw, loose commodities such
as coal, iron ore and corn), ‘tanker’ (liquid fuels such as crude oil, gasoline and natural gas) and
‘containerized’. The concept of containerization —the packing of goods into standardized boxes
had been used since the industrial revolution. However, the steel fabricated boxes that were
so familiar at modern docks had only been in use since the mid-1950s due to entrenched
opposition from regulators and unions in the West. It was only the Vietnam War that finally
—
Dr lint Sunimerx prepared i/us case under the supeni.cion of Professor A/i Farhoomaiid for class discussion Tins case is not
intended to show effective or ineffective handling of decision or husinesc procesces
0 2013 hi’ The Asia Case Research Centre, l’he (JniverxiiU of Hong Kong Ao part of tins publication may he reproduced or
ransmitied in anefârnt or by ant’ means electronic, niechanical, photocopying, recording, or othent’isc (including 11w internet)
without the permission of The (Jnit’ersity of Hong Kong.
1/cf 133 545C
This document is authorized for educator review use only by SATYA SAHOO, HE OTHER until Mar 2019, Copying or posting is an infringement of copyright. Permissions@hbsp,harvard.edu or
617.783,7860
4P
141545C
Orient Overseas Container Line (OOCL): Sailing Through Choppy Waters
established the container as a worldwide standard for shipping.’ Containers greatly simplified
and sped up loading and unloading operations. They also allowed simpler intermodal transport,
thus resulting in significant cost savings. Containers tended to be used for manufactured or
high value goods rather than raw materials, and demand for containerized transportation
reflected different sectors of the economy through dry bulk shipments. As a result, benchmark
indices for the costs of dry bulk and container transportation were watched closely for insight
F
into economic health.
Adb
Many shipping companies also operated their own ports, storage or land transportation
companies. Decisions about when to scrap and renew ships allowed operators some flexibility
with cash flows. Larger ships were more efficient for fuel, human resources and dock operations.
fuel costs could be reduced by sailing slower, if there was less demand for capacity. Another
way to manage commitments was through chartering rather than owning vessels: chartered
ships could accommodate demand surges or delays in between new vessel deliveries, without
increasing the size of the balance sheet.
,
Climate change offered threats (in the form of greater number of storms and rising sea levels)
and opportunities (for example reduced arctic ice opening shipping lanes). Environmental
regulation was generally light in comparison with many industries, partially because much of
the time at sea was outside any national reach. However, voluntary codes of practice were in
place to counter public concern about emissions from typically high-sulfur fuel.
History of the Orient Overseas Container Line
Early years
6
lung Chao Yung’s story fits many of the stereotyes of a self-made man. Born in 1911 and
becoming an apprentice seaman at the age of 17, by 1936 he had his own company. By the
early I 940s his ships were sailing between China and the western United States. His companies
relocated to Hong Kong during the Sino-Japan War, then to Taiwan as the Communists took
power in the People’s Republic of China (“PRC”) in 1947. His ships were sailing to Europe
and across the Atlantic to the Eastern US in the late 40s under the “Orient Overseas Line”
banner.
Profiting from warfare was another corporate fairy tale. Once the Pacific War had ended, lung
C Y’s companies bought 54 decommissioned transport ships from the US government. At the
start of the Korean War, the company became the main ocean carrier between the US and Korea.
During the Suez crisis in 1956, shipping on the Asia to Europe route was diverted around the
longer Cape of Good Hope route, causing a shipping boom. Then with the start of the Vietnam
War, the USagain needed trans-Pacific cargo transport, accelerating the acceptance of
containerized transportation.
Container shipping
c,Q
lung re-launched his company as Orient Overseas Container Line (“OOCL”) in 1969, and in
1972 it became the first independent Asian shipping line to carry containers from Asia to New
York. Containerized cargo had taken a long time to become accepted, but by 1969 the
convenience of loading and transfer to road and rail was eroding demand for traditional loose
packed storage. Container shipping was about to enter a boom period, and OOCL was well
placed to take advantage of customer demand.
Levinson, M., 2006. The Box Princedon University Press.
2
This document is authorized for educator review use only by SATYA SAHOO, HE OTHER until Mar 2019. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or
617.783.7860
141545C
Orient Overseas Container Line (OOCL): Sailing Through Choppy Waters
Another first came in 1971 when OOCL launched its first purpose-built container vessel
a capacity of 1.200 TEU.2 Commissioning its own ships gave OOCL the opportunity to use
more efficient transportation compared with the pre-used and adapted vessels it had previously
owned.
A listing of Orient Overseas Container (Holdings) Limited (“OOC(H)L”), which owned OOCL
and other smaller companies, on the Hong Kong Stock Exchange (“RKSE”) in 1973, and a
‘
spate of foreign acquisitions, ensured that the company grew rapidly.
Non-container shipping
Despite the company’s stated concentration on container shipping, the company was involved
in other shipping sectors as well. Tanker and bulk operations continued, though worries about
the oil crisis in the ‘70s meant operations were patchy and in 1974, there were worries about
new pipelines. Tung bought the largest supertanker ever built, the “Seawise Giant” in 1981 for
hr
the transport of crude oil.3
f
The North Sea off-shore oil and gas industry was also attractive. By 1983, the company owned
three semi-submersible drilling rigs with two more under construction, and the business
“contributed significantly” to the group’s overall performance.4
Adding to the legend was a piece of popular culture. In 1972, a cruise ship owned by OOCL,
formerly the “RMS Queen Elizabeth”, sunk in Hong Kong’s Victoria Harbor, where it was used
as a part of the set for the James Bond movie “The Man with the Golden Gun”.
J
Property
No Chinese tycoon is complete without a substantial property business. In 1982, the company
bought property interests in New York City, Sydney and Singapore (the “Tung Centre”); by the
following year, the first two were fully let. More in line with its other operations, the company
also had interests in terminals and ports in several locations around the world.
Marine Insurance
4
In 1982 OOIL bought a London-based insurance group, “Scottish Lion Insurance Co Ltd”,
which was held until 1987.
Passing through the generations
lung Chao Yung passed away in 1981, handing Chairmanship over to his oldest son lung Chee
Hwa. OOC(H)L leant hundreds of millions of dollars to the “lung Private Group”, a collection
of private companies controlled by lung C H. In addition there was extensive borrowing in
1982, in a combination of ordinary, preference and deferred shares. In 1983 the company
renamed itself Orient Overseas (Holdings) Ltd (“OO(H)L”), the dropping of the word
‘Container” possibly demonstrating its diversification strategy and showing lung C H’s stamp
of authority.
4
12
The TEU isa measure of container capacitY, equal to a standard eight foot wide by eight and a half feet high construction with a
length of 20 feet Today, the predominant container length is 40 feet, each aith a capacity of 2 TEU, ad the largest vessels
have a capacity of oer 18.000 TEU.
Unfortunately the Seawise Giant was struck and sunk by missiles launched from an Iraqi warplane in the Strait of Honnuz in
1988
(tOIL, 2003. Annual Report
3
This document is authorized for educator review use only by SATYA SAHOO, HE OTHER until Mar 2019. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or
617.783.7860
“
14/545C
Orient Overseas Container Line (OOCL): Sailing Through Choppy Waters
The Tung Private Group, flirtation with bankruptcy and capital injection
The Tung Private Group consisted of 33 companies, all in shipping industries, all that had
received unsecured loans from OO(H)L. All except six of the loans were at zero interest rate,
and all except one had no specific repayment date. No detailed description of the loans had
been made in previous annual reports.5
The crisis became public when OO(H)L missed a debt repayment in September 1985, putting
it into technical default. In a letter to shareholders on 22 November 19$5, Tung cited an
exceptional loss on the sale of vessels of US$39.2M and an extraordinary provision of
US$165M in respect of loans made to the Tung Private Group.t He went on to say:
In the course of 1985 the OOHL Group’s financial position seriously worsened
principally as a consequence ofthe rapid deterioration in thefinancial position
of the Tung Private Group, with which the OOHL Group is closely associated
andfrom whom substantial amounts were owing.
Working capital was provided by a USSI5OM loan from the Hongkong and Shanghai Banking
Corporation (“HSBC”) to allow operations to continue, some directors were replaced and
Hambro Pacific Limited, financial advisors, were brought in to organize restructuring.
Henry Fok Ying Tung stepped in to organize an equity injection, presumably with money from
the PRC via a Liberian company “Treelane Co Ltd”.9 The shares of OO(H)L were suspended
for a year, and in 1987 the company was again re-launched, listing on the HKSE (ticker 316
HK) as a holding company for 65% of OOCL and other smaller ventures.9 The remaining 35%
of OOCL and various remnants of the Tung Private Group were held by Henry Fok, who also
bought 12 new vessels from OOIL for an additional US$20M.
‘Ii’
‘F
Adding to the company’s problems, the whole industry went through a period of low
profitability in the first half of the ‘$Os with new capacity entering the market (for example,
during 1983 North Pacific container capacity increased by 20%). Fuel prices were volatile,
favoring at one point cheap, slow and efficient vessels and a few months later faster, hungrier
ships. How a particular company fared depended on its fleet composition. Many competitors
went bankrupt, including in 1986 United States Lines, which at the time was the largest
bankruptcy in US history)°
However, in the latte years of the decade, OO(H)L found its way again. Between 1987 and
1990, it sold off non-core assets such as the Tung Centre, offshore operations, some tankers,
some interests in’Hongkong International Terminals (“HIT”), the UK insurance and
underwriting services and gas carriers. The cash generated from these sales, plus suspending
dividends, let OO(H)L increase its holding in OOCL to 75% by 1990, and still reduce its net
debt to equity to 1.9 times (1989) from 4.9 times at the worst point.
A summary of the companies, the amounts owing and the loan rate is given in the notes to the accounts in the 1985 annual
report
6 Since October 1983, the value
of the Hong Kong dollar has been pegged at HK$7.8 = US$1 through the currency board
system. However, the market rate exchange to the US dollar fluctuates marginally.
Letter to shareholders, Tung C H, 10 Nov 1986
Journal of Commerce. 2 Sept 1986.2 Sltip ftrrns in Asia Gain Fiscal Relief. [Online] Available at: littp:’/www.Ioc.com/2-shipfirins-asia-itain-lscal-relief 19$60902.html; Webb, D., 2004. D-graded PERL of the Orient. [Online] Available at: http:/!webb
site. corn art des/P ERLdecision asp
OOIL, Annual Report 2007.
Levinson, M., 2006 “The Box”. Princedon University Press.
4
This document is authorized for educator review use only by SATYA SAHOO, HE OTHER until Mar 2019. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or
617.783.7860
Orient Overseas Container Line (OOCL): Sailing Through ChoppyWaters
14/545C
Return to profitability
In 1992 the company was again relisted with its present name, “0011”. Debts (preferred shares
and loan notes) were paid back at between 70% and 75% of their face value. In 1993, the
company said it would “progressively increase investments in the PRC during the 1990s”,
possibly through the influence of Henry Fok, and was looking to join the Trans-Pacific
Conference, an industry group.” Payments of dividends to ordinary shareholders resumed. In
1994, the bulk of the 16-page long Chairman’s Letter consisted of objectives for the coming
year rather than a review of the previous year’s operations, a sign ot’ optimistic forward
planning.’2 The discussion was around trade alliances and optimizing efficiency of operations,
with strategy in the PRC being brought to the fore. Mr Tung described his policy towards
investing in the PRC:
Over the )‘ears we have created value by acquiring im’estments in a variety of
businesses, holding them until they are ma/use, disposing them at a profit and
reinvesting the proceeds in new businesses.
4r
Our strate… is based on our confidence that… the FRC will become one of
the largest econo,nies in the world by the turn of the century.
OOIL was looking into new industries, some unrelated to shipping: property development (as
a minority shareholder with partners from the PRC), including the prestigious Beijing Oriental
Plaza project in the heart of the Chinese capital; a food and beverage business in Shanghai;
scrap steel. In 1995, Tung reported the company had acquired 80% of a container terminal in
New York, and in 1996, that the company vas involved in three more real estate developments
in the PRC.’3
Tung C H resigned in late 1996 to stand for the post of Chief Executive of Hong Kong, to which
he was appointed at the handover back to Chinese rule in July 1997.’ On his departure, his
brother Tung Chee Chen, previously 1ice Chairman, took the helm.
In his first Chairman’s letter Tung C C stated that in the international transportation business,
“Our company has been a leader in the containment of costs and operational efficiencies.”5
Despite the damage done by the start of the Asian Financial Crisis, he confidently predicted
that 0011 “has weathered worse storms and the Group is firmly on course to meet its goals for
the
216t
century”.’’
The start of the 21’ century looked promising; but the transition of the global economy into
another recession at the start of 2001 led to a disappointing year. The start of 2002 was the
worst business environment for many years, with the terrorist attacks in September 2001 adding
to fears of a steep recession in the US, and a stock market slump following the popping of the
internet bubble. Surprisingly though, the second half of 2002 provided a turnaround, with
volumes exceeding expectations and new vessel deliveries being lower than expected. This
point turned out to be the start of a multi-year period of high profitability that lasted until 2008.
During 2003, volumes and rates increased, leading to an “Exceptional year”. The rise in both
volumes and rates charged to customers continued through 2003. One …
Purchase answer to see full
attachment