The Oil Tanker Case
The Oil Tanker Case
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Category: Business
Autor: andrey 20 March 2011
Words: 1315 | Pages: 6
Oil Tanker Shipping Industry (Competitors):
Industry Structure: Concentrated
Product Differentiation: Generic
Technological Change: Slow (Long Product Cycle)
Product/Service Technology: High
Location: Global
Product Life Cycle: Growth/Maturity
Size of Oil Tankers: Large Combination Vessels
Length of Voyage for Oil Tanker: Consecutive Voyages
Freight on Oil Tanker: Combination Vessel (dry goods and oil)
Porters Five Forces:
Threat of Entry:
The Oils Tanker Shipping Industry can be seen as having a high threat of entry, particularly in the areas of Economies of Scale, Capital Requirements, and Governments Policies.
Economies of Scale:
Economies of Scale in this industry are not as simple because of unpredictable and volatile shipping sectors. However, there is still room for a competitive advantage in this industry in the dry goods and bulk sector. There has been a large increase in the number of large ore carriers needed for the long-haul transport of ore from Brazil to China, which can be used for alternative employment in times when there is slower demand for oil.
Capital Requirements:
The need for large financial resources creates a barrier to entry in the oil tanker shipping industry. In 2005, the estimated cost of new oil tankers is $18-$22MM for a 32,000-105,000 DWT vessel. Because of the high investments, many of the oil tankers are often sold second-hand.
In addition to the purchasing of a vessel, there are also large tanker operating costs which include wages, repair, maintenance, fuel and insurance (which can go up substantially depending on the age of the vessel. Also, in todays environments, shipping companies have also had to contend with the rise in piracy along the shipping routes of the Suez Canal and also environmental costs for any accidents and spills as we have seen from the BP Accident that occurred last year. Operating Expenses will also begin to increase due to the threat of inflation.
Government Policies:
Because