Strategic Development of Liner Shipping Companies and Terminal Operators: Regionalization or Globalization?

This paper describes how global changes in markets, production trade, and investment have increased the permeability of traditional boundaries, including physical barriers, national borders, and economics, industries, and organizations. The container transport industry, with long-term annual growth of six percent to eight percent, has helped the globalization process by facilitating trade flows from areas where production costs are low to the big consumer markets. Globalization drivers in the container transport industry include global customers, economies of scale and scope through increased scale of operations, trade policies and labor regulations, and the threat of global competitors. The relative importance of these drivers differs between the major players and leads to the adoption of different strategies. However, these strategies, based on overall cost leadership and product differentiation, are in line with Porter’s competitive advantage theories where a firm achieving and sustaining a competitive advantage will be able to achieve profits and defend itself against competitors. The corporate strategies of liner shipping companies (LSCs) and international container terminal operators (ICTOs) are examined in the paper. It focuses on the emergence of major international groups, and on their prominence in terms of geographical coverage and market share. Existing literature generally investigates either the strategic development of liner shipping companies or regional strategic orientation of container terminals in the context of the port environment. This paper focuses on dominant liner shipping companies and on container terminals in ports on the main container routes, in particular North America, Asia and Europe. Recent developments within liner shipping companies and ports are reviewed first, as these are often the drivers behind corporate strategies with respect to container terminals. The underlying reasons for terminal development, the associated risks, and the possible consequences on the market structure are then analyzed.