A conceptual application of cooperative game theory to liner shipping strategic alliances

Since its advent, the liner shipping industry has been characterized by fierce competition and cooperation amongst the member carriers. In recent years, almost all the liners have sought extensive cooperation with others, as reflected mainly by the formation of strategic shipping alliances. Despite this, there are still some liners who prefer the ‘go-it-alone’ policy and have achieved relative success. It seems that cooperation is not always necessary for a liner company's success. It follows that a study that aims to find the rationale behind liner cooperation (or non-cooperation) is of great significance. Over many years of development, game theory has proved to be a useful tool in the study of economics. It is analytically applicable in this market. With these arguments in mind, this paper aims to apply cooperative game theory to analyse co-operation among members of liner shipping strategic alliances. This will involve: (i) presenting a detailed and systematic analysis of liner shipping strategic alliances: (ii) a concise overview of the development of game theory with specific focus on cooperative game theory, and (iii) deducing a conceptual framework through the application of cooperative game theory to liner shipping strategic alliances. The accomplishment of the aforementioned objectives will enhance understanding of inter-organizational relationships and decision-making behaviour in the liner shipping sector.     

Verifying liner Shipping Alliance’s stability by applying core theory

The core is a vital concept in cooperative game theory and has been widely used in analyzing alliance’s stability. It is especially interesting to apply core theory in liner shipping market due to the latter’s exceptional characteristic of non-homogeneous cost curves as well as divisible and fluctuant demand. Having observed some new phenomena and trends in the industry, this paper studies the economic performance and stability of liner shipping alliance by applying core theory where business cooperation is partly realized by delivering joint-service with mega container ships. To demonstrate the core situation in liner shipping alliance, a cost function is first identified on the basis of two assumptions regarding cooperation: 1) sharing or pooling vessels and 2) deploying mega container ships if needed. Taking cost functions as basis, two conditions of approaching core may be groomed, i.e., collective rationality and individual rationality. The first condition is discussed from the perspective of market, while the second condition is studied within the alliance. Stability of liner shipping alliance is then observed based on these two conditions. An illustrative case study is conducted in order to show some implications and explicitly clarify the theory.     

Analysis of container port policy by the reaction of an equilibrium shipping market

In the competitive container cargo transportation market, shipping companies are drastically changing their strategy vis-a-vis routing and port choice by the formation of global alliances. In such a situation, the effectiveness of port management policy in persuading container liners to use the port is most important. The paper discusses port management policy in an equilibrium shipping market. A model is proposed to simulate the flow of foreign trade container cargo using game theory. It is used to explain the interaction of port management policy, shipping companies and shippers.     

Evaluating economic and environmental value of liner vessel sharing along the maritime silk road

The Belt and Road initiative is a novel exploration of China towards strategic collaboration with Eurasia countries to an extent of a larger scale with higher and deeper level of cooperation. To meet the growing global demand of transportation, increasing numbers of liner shipping companies collaborate and form alliances to share vessel capacity and reduce capital costs. Effective liner shipping vessel sharing is essential for the Belt and Road initiative in terms of building efficient maritime transport networks. In promoting environmental development, shipping companies are required to attain higher environmental standards. However, limited literature relates vessel sharing to environmental performance. This paper studies the impacts of liner vessel sharing from the economic and environmental perspectives. Two container allocation models are developed for the two scenarios: with and without vessel sharing. The carbon emissions in transportation are calculated under both scenarios. Numerical studies are carried out using services along the China-Indochina Peninsula Economic (CIPE) Corridor. Liner shipping companies could benefit from vessel sharing in terms of significant profit improvement. Vessel sharing could also benefit the environment by reducing the CO₂ emissions dramatically.     

Strategic alliances in container liner shipping

The economic crisis in the years between 2008 and 2010 has demonstrated the necessity for substantial adjustments on behalf of container lines. Capacities were shifted quickly to emerging and less affected markets allowing a faster recovery of globally organized companies. This paper illustrates the dynamics in the container shipping market. Alongside the main characteristics of the Top 20 ocean shipping companies, liner services are described. These services are classified by geographic coverage and vessel deployment. In addition, this paper provides a better understanding of the collaboration among service providers. Starting from a general framework of co-operative liner services, in-depth analyses of the global alliances in liner shipping are obtained. These formations - Grand Alliance, New World Alliance and CKYH Alliance - are compared with alternative forms of collaboration in the liner shipping industry. The analysis of alliance announcements which are related to operational and strategic changes indicates that the “global alliances” cannot be regarded as closed corporate-like entities. In effect, service agreements are not only negotiated with the focal members of the specific alliance. Instead, every service is arranged individually and under specific conditions. By understanding the dynamics within alliances, we are able to develop an assessment relating to the stability of collaborations. Ultimately, these insights direct us to several paths for future research.     

A critical evaluation of strategic alliances in liner shipping

During the last few years, the liner industry has endured a period of radical change, largely due to the formation of the so-called global strategic alliances amongst leading container carriers. However, not even after a full year of operations, a series of cross-alliance mergers and acquisitions has forced three out of the four newly formed alliances to restructure and/or modify their partner base. While this recent development does not put an end to such kind of agreements, as the merged companies are still committed in a second generation of strategic alliances, it highlights the fact that, despite the intentions of their respective partners, such alliances are actually characterized by a high level of instability. This paper, after considering the key profiles of strategic alliances in liner shipping, argues that their current structure may prove inherently inadequate to deliver an acceptable level of stability. The main factors driving such instability can be found in the increased organizational complexity of the alliance as well as in the establishment of a certain degree of intra-alliance competition, whose effects are likely to undermine the level of mutual trust between partner companies. Causes and effects of such factors are investigated and some measures aimed at controlling alliance instability are also suggested.     

赢得客户满意──全球化环境下的班轮运输及其对策

总结了目前国际班轮运输企业在全球经济一体化条件下的发展趋势,针对中国国有运输企业的特点,指出了中国班轮运输行业中存在的一些固有问题,并提出了相应的应对办法.     

Liner alliances in the globalization era: a strategic tool for Asian container carriers

There has been an increased interest recently in alliances as successors of the large consortia that used to operate in the context of the conference system. Today, having become a common means and term of co-operation in a variety of other industries, alliances are posited as the response of the supply side of liner shipping to important changes on the demand side; alliances have, thus, become predominant in the most important routes for container cargoes. In recent years, however, the list of major container traffic generators and the list of major carriers of containerized cargoes have begun to contain more common entries, generally originating from the Asian region. Asia is, however, a large continent and the entrance of Asian carriers into liner shipping has not been simultaneous; the position, strategies and co-operation strategies of Asian companies have more differences than they share common features. Nevertheless, this paper suggests that alliances are a distinct form of co-operation in liner shipping and the empirical evidence based on a survey in the region supports this hypothesis. The similarity of attitudes of the major Asian container carriers vis a vis alliances is in this way revealing in terms of the range of motivations for participating in the alliance system in a globalized transport environment.     

Market structures and competitive strategies: the carrier-stevedore arm-wrestling in northern European ports

Over the last few years, liner and stevedoring markets have been facing new challenges. The progressive concentration on the demand side (carriers) and the emergence of global alliances in the mid-1990s have triggered a similar process of consolidation on the supply side (stevedores). In turn, more recently, the strategic choices of pure terminal operators have led to the progressive involvement of carriers in port operations, both from a financial and a managerial point of view. This paper aims at analysing the current contest in northern Europe between customers and suppliers of port services. Substantial concentration in the stevedoring market and the emergence of dedicated facilities in that area, make this arm-wrestling stronger and stronger.

At present, the liner market is following a number of strategic directions including the pursuit of economies of scale (larger vessels) and the supply of services using faster vessels (deployment of 'fewer' assets) in order to offer either new services or additional loops (scope). By exploring the strategic behaviours of the top carriers ('bigger' or 'more effective'), the paper attempts to outline the future evolution of the two industries in a 2015 vision, highlighting in particular scenarios for north European ports. Global alliances are weakening and a new era of M&As is probably approaching: how will the bargaining power change between port users and port customers? Which competitive paradigm will dominate?     

Market structures and competitive strategies: the carrier–stevedore arm-wrestling in northern European ports

Over the last few years, liner and stevedoring markets have been facing new challenges. The progressive concentration on the demand side (carriers) and the emergence of global alliances in the mid-1990s have triggered a similar process of consolidation on the supply side (stevedores). In turn, more recently, the strategic choices of pure terminal operators have led to the progressive involvement of carriers in port operations, both from a financial and a managerial point of view. This paper aims at analysing the current contest in northern Europe between customers and suppliers of port services. Substantial concentration in the stevedoring market and the emergence of dedicated facilities in that area, make this arm-wrestling stronger and stronger.

At present, the liner market is following a number of strategic directions including the pursuit of economies of scale (larger vessels) and the supply of services using faster vessels (deployment of ‘fewer’ assets) in order to offer either new services or additional loops (scope). By exploring the strategic behaviours of the top carriers (‘bigger’ or ‘more effective’), the paper attempts to outline the future evolution of the two industries in a 2015 vision, highlighting in particular scenarios for north European ports. Global alliances are weakening and a new era of M&As is probably approaching: how will the bargaining power change between port users and port customers? Which competitive paradigm will dominate?     

Analysis of the development potential of bulk shipping network on the Yangtze River

In the past decades, a multilayer transshipment network of bulk shipping has been formed along the Yangtze River so as to support the fast development of Chinese iron and steel industry. Yet with the decrease of iron ore trade in China since 2014, the bulk port system on Yangtze River probably will be subject to change in the future. Under this background, this paper aims to analyze the development potential of Yangtze River bulk ports system with a focus on iron ore transshipment. To realize this objective, we firstly sort out the main transshipment patterns of bulk shipping, and optimize the bulk-shipping network with an optimization model. Several scenarios are then proposed and examined in the model by changing corresponding parameters. Cooperation among ports as one scenario is analyzed by applying core theory in cooperative game. Based on the changes of transshipment plans observed under the various scenarios, we finally ascertain the different development potentials of the system, and provide suggestions to the port operators and local maritime authorities.     

Scenario analysis for supply chain integration in container shipping

Competition in the business world nowadays is largely between supply chains, rather than individual players only. The same situation exists in container shipping. The study looks into container shipping from an integrated perspective and investigates the nature and level of supply chain integration in container shipping. Based on empirical examinations of the world's top 30 container shipping lines, a scenario analysis is conducted. The paper aims to present the scenario analysis for examining supply chain integration in container shipping. It also aims to formulate strategic recommendations for liners to create and sustain competitive advantage. The scenario analysis is designed to allow more complete consideration of alternative possible outcomes and their implications on the research topic. It involves an evaluation of past and present events and provides a plausible discussion of what might occur in the future. It depicts four scenarios of supply chain integration in container shipping, namely, low integration, partner-focused integration, activity-focused integration and high integration. On the whole, research findings suggest that market situations favour those scenarios representing higher level of supply chain integration. Importantly, with reference to the scenario analysis, shipping lines should position themselves in an appropriate scenario and formulate strategic plans accordingly.     

Korean liner shipping in the era of global alliances

In the course of the last two decades Korean shipping has emerged as a major player in the liner market. In 1970 there was not a single container ship in the Korean fleet; yet, within the next two decades, shipping companies from Korea have become included among the top 10 liner operators in the world, in the context of a spectacular ascent of Asian companies in international container shipping. During the same period the organization of liner shipping itself underwent major changes. In the 1970s and 1980s, pools and powerful consortia prevailed, maximizing frequency and optimizing fleet deployment under pressure from the high investment entailed by containerization. The era of consortia, however, came to a close in the early 1990s; intermodalism and the expansion of the major liner companies into forward and backward segments of the transport chain rendered them inflexible for pursuing individual strategies of product diversification with a view to larger market shares. Global alliances were finally born as a result of a major reshuffling of co-operation agreements and of the globalization of the production process on the demand side. The aim of this paper is to follow and assess the options available to an aggressive low-cost national fleet in its journey to competitive maturity through a period of changing organization of liner shipping, focusing on the course of the leading Korean container company, and one of the largest in the world today, Hanjin. It highlights at the same time both the deep structural changes which liner shipping has undergone in the last two decades and the effects of current changes, such as the recent wave of mergers in this sector.     

The effects of slow steaming on the environmental performance in liner shipping

The environment issue is one of the significant challenges that the liner shipping industry has to face. The International Maritime Organization (IMO) has set a goal to reduce greenhouse gas (GHG) emissions from existing vessels by 20–50% by 2050 and develop the Energy Efficiency Operational Indicator (EEOI) as a measure for energy efficiency. To achieve this goal, IMO has suggested three basic approaches: the enlargement of vessel size, the reduction of voyage speed, and the application of new technologies. In recent times, liners have adopted slow steaming and decelerated the voyage speed to 15–18 knots on major routes. This is because slow steaming is helpful in reducing operating costs and GHG emissions. However, it also creates negative effects that influence the operating costs and the amount of GHG emissions at the same time.

This study started with the basic question: Is it true that as voyage speed reduces, the operating costs and CO₂ emissions can be reduced at the same time? If this is true, liners will definitely decelerate their voyage speed themselves as much as possible so that they can increase their profits and improve the level of environmental performance. However, if this is not true, then liners will concentrate just on increasing their profits by not considering environmental factors. This led the authors to set out three objectives: (1) to analyze the relationship between voyage speed and the amount of CO₂ emissions and to estimate the changes by slow steaming in liner shipping; (2) to analyze the relationship between voyage speed and the operating costs on a loop; and (3) to find the optimal voyage speed as a solution to maximize the reduction of CO₂ emissions at the lowest operating cost, thus satisfying the reduction target of IMO.     

Strategic fleet size planning for maritime refrigerated containers

In the present economic climate, it is often the case that profits can only be improved, or for that matter maintained, by improving efficiency and cutting costs. This is particularly notorious in the shipping business, where it has been seen that the competition is getting tougher among carriers, thus alliances and partnerships are resulting for cost effective services in recent years. In this scenario, effective planning methods are important not only for strategic but also operating tasks, covering their entire transportation systems. Container fleet size planning is an important part of the strategy of any shipping line. This paper addresses the problem of fleet size planning for refrigerated containers, to achieve cost-effective services in a competitive maritime shipping market. An analytical model is first discussed to determine the optimal size of an own dry container fleet. Then, this is extended for an own refrigerated container fleet, which is the case when an extremely unbalanced trade represents one of the major investment decisions to be taken by liner operators. Next, a simulation model is developed for fleet sizing in a more practical situation and, by using this, various scenarios are analysed to determine the most convenient composition of refrigerated fleet between own and leased containers for the transpacific cargo trade.     

Strategic alliances in the container shipping industry: a global perspective

This paper examines developments in container shipping in light of the formation of strategic alliances by many of the leading companies. It focuses on three features: the transformation of services, the evolution of the fleet, and the adjustments made to the ports of call. These elements are analysed on a global basis for 3 years: 1989, 1994 and 1999. Some of the changes wrought by the alliances are identified, including the spread and intensification of services, and the deployment of the largest vessels on alliance routes. While the individual companies that have come together in alliances are serving many more ports than before, it is also demonstrated that the total number of ports served by the industry has remained constant. The results are interpreted in the context of globalization that is tending to impose greater standardization on the container shipping industry.     

Strategic alliances in the container shipping industry: a global perspective

This paper examines developments in container shipping in light of the formation of strategic alliances by many of the leading companies. It focuses on three features: the transformation of services, the evolution of the fleet, and the adjustments made to the ports of call. These elements are analysed on a global basis for 3 years: 1989, 1994 and 1999. Some of the changes wrought by the alliances are identified, including the spread and intensification of services, and the deployment of the largest vessels on alliance routes. While the individual companies that have come together in alliances are serving many more ports than before, it is also demonstrated that the total number of ports served by the industry has remained constant. The results are interpreted in the context of globalization that is tending to impose greater standardization on the container shipping industry.     

基于Shapley值法的班轮联盟利益分配问题研究

利益分配是班轮运输战略联盟中关键而又矛盾最突出的一个问题,它对合作关系的持续稳定发展起着决定作用。本文介绍用Shapley值法来解决班轮联盟利益分配的问题,Shapley值法有助于联盟成员间利益的合理分配,使联盟合作持续和稳定。     

Editorial: Young maritime researchers—a note of respect

Globalization, liberalization, competition and spatial interaction are significant factors affecting the transformation of manufacturing industries worldwide. In the transportation and logistics industry, however, cooperation is becoming even more critical than competition in determining firms' efficiency. Cooperation has always characterized the liner sector in which strategic alliances, mergers and acquisitions have generated twin effects: notable increases in ship size and falls in freight rates. Meanwhile, the stevedoring industry is undergoing privatization-driven consolidation and the emergence of global pure terminal operators. This article focuses on vertical integration between global carriers and terminal operators. We address the following key current issues: 1. dedicated terminals as a strategy for cutting costs and controlling integrated transport chains;

2. the struggle for supply chain control, involving global carriers versus global terminal operators, driven by financial power and technical and managerial capability.

We close analysing one of the core problems of the market, namely the evolving role of the dedicated terminals. For the pure stevedores they represent an opportunity to secure a cargo, while in the hands of the liners they enable cost stability and the possibility to put pressure on pure terminal operators.     

A reactive container rerouting model for container flow recovery in a hub-and-spoke liner shipping network

This paper focuses on the container rerouting due to a disruption, aims at making the optimal container flow recovery plan for the affected liner shipping company. First, we make the initial effort to bring up with a basic framework of disruption management for liner shipping. Second, we present a compact integer linear programming model for addressing the container rerouting problem under the proposed framework in a hub-and-spoke liner shipping network, based on a given recovery vessel schedule that determines to omit a port of call. Other shipping companies’ services and other modes (roadway, railway, and airline) as candidate alternative means to transport the miss-connected containers are also incorporated in the proposed model. The container flow recovery plan would select the optimal alternative paths for the miss-connected containers balancing the trade-off between container transport costs and delivery delay penalty costs. Finally, a case study from a global liner shipping company is investigated and the computational results indicate the model can be solved effectively and efficiently for the real-scale problem. Thus, the proposed approach in this paper can supply real-time decision support tool for the liner shipping operators on handling the process of container flow recovery.