The Maritime Economist Magazine Spring 2015 | Page 24

THEMARITIME Economist

Profession & Practice

Recent Strategic
Developments for
Shipping Companies
Prof. Dr. Dr. hc (mult.) Peter Lorange
Chairman, The Lorange Institute of Business Zurich

ME Mag

It is known that many businesses differ when it
comes to degrees of capital intensity – but traditional
shipping is typically very capital! It is also known that
many businesses tend to differ when it comes to how
close they are to customers – here again, traditional
shipping tends to operate in markets that are more
or less open, often with little in-depth customer
contact. The owner with the lowest costs secures the
business! Atomistic! This has been discussed
extensively by several scholars, including Stopford
(1997), Lorange (2009) and Korakitsos and
Varnavides (2014). Further discussion of recent key
issues can be found in Talley (2012) and in Winter,
Henning and Gerhard (2013).
The Classical Shipping Company: Relatively
high capital intensity and relatively low
customer closeness

For this shipping firm, which is what we classically tend
to find, the way to compete would be on price. What
24 drives a particular shipping business segment would

be the supply/demand (in)balance cycles. Thus the
freight rate (and, its derivative) the ship second-hand
market, are having various sorts of wave-like-shapes.
Timing is the key determinant to business success here;
In/out, long/ “The theory of shipping cycles so far has
been shaped primarily by two models, the Tinbergen –
Koopmans model and the Beenstock – Vergottis model”
(Karakitsos and Varnavides, p. 209) “The former’s
primary contribution is that shipping cycles arise
event if demand for shipping services is not cyclical”
Karakitsos and Varnavides, p. 209). The latter model is
the first systematic approach to explain the interaction
of the freight, time charter, secondhand, newbuilding
and scrap markets under the twin assumption(s) of
rational expectations and market efficiency (Varakitsos
and Varnavides, p. 209). A good summary article has
been written by Glen (2006).