1. Int'l mkting/cu/171100 International Marketing Trend in the 21st Century: A Local Perspective of the Global Shipping Industry by Dr Stephen Ho Vice-Chairman, Education The Chartered Institute of Marketing Hong Kong Branch Hong Kong Branch Hong Kong Branch 英國特許市務學會 ( 香港分會 )

2. Int'l mkting/cu/171100 Key International Marketing Trends The Death of Distance’ - key services can be provided remotely and yet highly effectively‘The Death of Distance’ - key services can be provided remotely and yet highly effectively Location though is more important than everLocation though is more important than ever This results in unprecedented levels of competitionThis results in unprecedented levels of competition

3. Int'l mkting/cu/171100 Why Internationalisation Globalsation of competitionGlobalsation of competition Product HomogeneityProduct Homogeneity Economies of ScaleEconomies of Scale Threat to Home MarketThreat to Home Market Market Growth & DevelopmentMarket Growth & Development

4. Int'l mkting/cu/171100 International Market Entry -Exporting -Licensing -Franchising -Management Contract -Turnkey Contracts -Contract Manufacturing / International Sub-constructing BOT - BOT -Industrial Cooperation Agreement -Contract Joint Venture -Equity Joint Venture -Wholly-owned Subsidiary - E-commerce

5. Int'l mkting/cu/171100 Impact on Hong Kong: Distance Our proximity to China has been seen traditionally as a source of competitive advantageOur proximity to China has been seen traditionally as a source of competitive advantage That may no longer be trueThat may no longer be true - Geographical proximity per se will not confer any advantage Our competitiveness requires the further development of existing and new clustersOur competitiveness requires the further development of existing and new clusters

6. Int'l mkting/cu/171100 Impact on Hong Kong:Location Location is vital and here in Hong Kong businesses can find assets / facilities that are world classLocation is vital and here in Hong Kong businesses can find assets / facilities that are world class To remain competitive we need to ensure that our vital assets continue to be world classTo remain competitive we need to ensure that our vital assets continue to be world class These assets underpin our success in major service industriesThese assets underpin our success in major service industries

7. Int'l mkting/cu/171100 Hong Kong’s World Class Assets Our People Our People Our Infrastructure Our Infrastructure Our Relationships Our Relationships Financial Services Shipping Shipping Other Industries

8. Int'l mkting/cu/171100 Some Key Trends in the Region China and WTOChina and WTO Market liberalisation and privatisationMarket liberalisation and privatisation The consequence is unprecedented levels of competition in the regionThe consequence is unprecedented levels of competition in the region Western global giants now have unprecedented access to key service industries in the regionWestern global giants now have unprecedented access to key service industries in the region Local leading players are being acquired by these western rivals (eg in South Korea)Local leading players are being acquired by these western rivals (eg in South Korea)

9. Int'l mkting/cu/171100 China’s Membership with WTO Impacts: gradual elimination of all import tariff and non-tariff barriersgradual elimination of all import tariff and non-tariff barriers transparency of the import / export trade systemtransparency of the import / export trade system open up of domestic market to US and Euro MNEs:open up of domestic market to US and Euro MNEs: - Banking - Insurance - Telecommunication - Manufacturing and Heavy Industries - Retailing & Consumer Goods - Others Results: more FDI to Chinamore FDI to China more reverse FDI from Chinamore reverse FDI from China

10. Int'l mkting/cu/171100 The Changing Relationship Between Headquarters and the Subsidiary Traditionally, a successful foreign subsidiary implemented effectively the strategy determined at HQTraditionally, a successful foreign subsidiary implemented effectively the strategy determined at HQ More recently, the regional HQ has more say in developing regional strategyMore recently, the regional HQ has more say in developing regional strategy But now much more is requiredBut now much more is required Today we need entrepreneurs in our foreign subsidiaries to secure world mandatesToday we need entrepreneurs in our foreign subsidiaries to secure world mandates

11. Int'l mkting/cu/171100 Internationalisation Strategy of Shipping Companies

12. Int'l mkting/cu/171100 Product / Market Mix Policy Quality of service is an industrial norm: Global coverageGlobal coverage Minimise port calls with designated cargo hub to serve minor portsMinimise port calls with designated cargo hub to serve minor ports Increase Frequency of sailing (e.g. 3 sailings / week - daily)Increase Frequency of sailing (e.g. 3 sailings / week - daily) Fast transit timeFast transit time Fixed date of the week departure / arrivalFixed date of the week departure / arrival

13. Int'l mkting/cu/171100 Single Shipping Line Operations Problems: Limited market coverageLimited market coverage Sporadic service frequencySporadic service frequency Transit time lengthen due to more port callsTransit time lengthen due to more port calls Difficult to fill up ship’s spaceDifficult to fill up ship’s space

14. Int'l mkting/cu/171100 Shipping Industry Towards Size Shipping Industry Towards Size The Mega Carrier PushThe Mega Carrier Push -P & O Nedlloyd -Hanjin Shipping + DSR Senator Line Recent Merger & Acquisition:Recent Merger & Acquisition: -Nepture Orient Line + American President Line -Mearsk Line + Sea Land Economies of Scale + Frequency of Service

15. Int'l mkting/cu/171100 Merger and Acquisition --- Mega Carrier

16. Int'l mkting/cu/171100 Major Shipping Lines’ Strategic Alliance

17. Int'l mkting/cu/171100 Shipping Strategic Alliance Advantages: Large size of shipLarge size of ship Economies of scaleEconomies of scale Control the supply of shipping space amongst consortium shipping linesControl the supply of shipping space amongst consortium shipping lines Increase frequency of sailingIncrease frequency of sailing Increase port callsIncrease port calls Designated cargo hubDesignated cargo hub Enhance market and coverageEnhance market and coverage Reduce the threat of head-on competitionReduce the threat of head-on competition Container Slot Sharing => reducing risk of space under-utilizationContainer Slot Sharing => reducing risk of space under-utilization Possible price maintenancePossible price maintenance Market stablisationMarket stablisation Long term agreement (usually 10 year)Long term agreement (usually 10 year) Disadvantages: Internal competition amongst consortium member lines for the same cargo loaded on the same vesselInternal competition amongst consortium member lines for the same cargo loaded on the same vessel Difficult to change slot sharing / vesselDifficult to change slot sharing / vessel space contribution mix Strategic partners must have same vessel size, capacity and speed compatibleStrategic partners must have same vessel size, capacity and speed compatible

18. Int'l mkting/cu/171100 Cho Yang’s Internationalisation Programme

19. Int'l mkting/cu/171100 Why setting up own subsidiary Market / Products DiversificationMarket / Products Diversification Element of ControlElement of Control CompetitorsCompetitors Other ConsiderationsOther Considerations

20. Int'l mkting/cu/171100 Cho Yang’s Internationalisation Programme 1983 Hong Kong 1992 Guangzhou 1995 Dalian ShanghaiTianjinQingdao 1996Xiamen Shenzhen 2000Yantian Korea 2001IPO

21. Int'l mkting/cu/171100 Cho Yang Line’s FDI in China

22. Int'l mkting/cu/171100 Real-Time Data Exchange through Virtual Private Network in Internet Data = Shipment & Accounting data

23. Int'l mkting/cu/171100 What about the Airline Industry? Joint Promotion (Air Mileage Award i.e. Asia Mile) Flight Connection KLM + Air UK + Northwest Airlines Flight No. Sharing CX + SAA

24. Int'l mkting/cu/171100 Airline Industry STAR ALLIANCESTAR ALLIANCE

25. Int'l mkting/cu/171100 Cathay Pacific Cathay Pacific Cathay Pacific’s Airline Partners Cathay Pacific’s Airline Partners

26. Int'l mkting/cu/171100 Cathay Pacific’s Pending Cooperation Cathay Pacific + American Airline cooperation on 70+ routes - cooperation on 70+ routes - covering North & South America America

27. Int'l mkting/cu/171100 Examples from the Banking Industry HSBC merged with Midland Bank, now operate in 83 countries -HSBC merged with Midland Bank, now operate in 83 countries -Chase took over Robert Flemming before merged with J.P. Morgan

28. Int'l mkting/cu/171100 Standard Chartered Bank Take Over Chase’s Retail BankingChase’s Retail Banking Looking for M & A Opportunities India India Taiwan Taiwan

29. Int'l mkting/cu/171100 What about the Security Industry? Equity Internationalization “B” shares “A” shares “H” shares “S” shares China listed company China’s stock market for local Chinese China’s stock market for foreign investors “L” shares “N” shares Hong Kong’s Stock Market UK’s Stock Market China Hong Kong WorldwideUSA USA’s Stock Market “NASDAQ-AMEX” Stocks (7) in HK - Intel, - Dell, - Microsoft, - Cisco Systems, - Starbucks, - Applied Material - Amgen Singapore’s Stock Market Worldwide investors

30. Int'l mkting/cu/171100 Thank you !