Post on 23-Feb-2016
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COMPETITION IN THE SHIPBUILDING INDUSTRY
Can the Korean shipbuilding giants sustain their
competitive advantage?
PRESENTED BYJianyang Ren, Mami Hirai, Min Chen, Min Ji Seok, Mohammed Hanane, Naima Samuel, Zhong Shanna, Olga Son, Peyanard Mahasuwan, Polawat Pupipat, Thotsapit Kamolvisit, & Uttam Mallick
FACILITATOR
Anh Nam Sung
1. Global Shipbuilding Industry Structure
2. Competitor’s Analysis
3. Shipbuilding Macro-environmental Analysis
4. Korean Shipbuilding SWOT Analysis
5. Korea’s Competitive Advan-tage
6. Summary
Introduction
Desired ShippingCapacity
World Economy GAP
Current ShippingCapacity
ShipbuildingOrder Rate
Shipbuilding
++
+
+-+
-
B
B
Ship Building Industry has a Close Relationship with Shipping Industry, which depends on World Economy
Shipbuilding Industry History
USA
UK
W. Europe
Japan
Korea
China
Source: KOSHIPA
~ mid 19C
Mid 19C ~ WW2
WW2 ~ 1950s
1950s ~ mid 1990s
Mid 1990s ~ present
From 2000s
First iron and steel hulls
Welded steel ships
block construction
Modular design
Open-type and Double hull VLCC
Korean Shipbuilding Industry History
1960s
Export ships – Hanjin Heavy Industries
1970s
Very Large Crude Carriers – HHI, SHI,
DSME
1980s
#2 in World ranking, shipyards
1990s
#1 in World ranking, new orders
2000s
#1 in World ranking, STX, SHI, DSME, HHI
High-value added ships
Source: KOSHIPA
20052006
2008
0%
20%
40%
60%
80%
100%
31% 38% 51%
20%30%
34%21%11%
6%22% 14%4%
6% 7% 6%
Korea China Europe Japan Others
Korea 1,240 GT
1. Hyundai Heavy Industries (HHI)2. Samsung Heavy Industries (SHI)3. Daewoo Shipbuilding & Marine Engineering (DSME)
China 840 GT
1. Dalian Shipbuilding Industries2. Shanghai Waigaoqiao Shipbuilding Industries
Japan 90 GT
1. Mitsubishi Heavy Industries2. Tsuneishi Corporation
www.clarksons.com
2,694 GT 3,060 GT 2,450 GT
World shipbuilding production by countries
INDUSTRY STRUCTURE
Industry Rivalry
Barriers to Entry
Bargaining Power of Buyer
Threat of Substitute
s
Bargaining Power of Supplier
• High barriers to entry• Huge capital investments
• Low bargaining power of suppliers• Price of raw materials• Vertical Integration (HHI, STX)
• High bargaining power of buyers•Demand vs Supply
• Very low threat of substitutes
• Intense rivalry
World shipbuilding production by Top10 shipyard
Sungdong Shipbuilding
Univesal Shipbuilding
Dalian Shipbuilding
Hyundai Mipo shipbuilding
Samsung Heavy Industries
0 5000000 10000000 15000000 20000000
244192226039603013563
30795913380429
46683994877129
8965768
10726338
17285660
Top10 shipyard CGT
Date by Dec 31th, 2007
INDUSTRY RIVALRY: CHINA
Competitive advantage in China Industry
• Low labor costs• Adequate supply of steel plate for ship, and lower prices• Supported by the Chinese government industry policy• Fast-growing demand from domestic market
Korea China Japan
0.00
5000.00
10000.00
15000.00
20000.00
25000.00
30000.00
35000.00
40000.00
Per Labor Cost USD/Per person per year
Challenges of China Shipbuilding Industry
•Structural design and technology•Insufficient capacity for producing high-value added ships•Exchange rate fluctuations and raw materials cost•Low productivity and quality of labor
Korea
China
Japan
0 20 40 60 80 100 120 140 160 180 200
Productivity dwt/Per person per year
MACRO-ENVIRONMENTAL ANALYSIS
POLITICAL/REGULATORY
• Government support• International Maritime Organization (IMO)
ECONOMIC
• Significant influence of exchange rate on profit• Growth influenced by economic growth
SOCIAL •Green technology requirement (anti-pollution rule by IMO)
TECHNOLOGY
• Technology innovation• Design• Process Improvement
INDUSTRY
Comparing Competitiveness of Technology
Item Compared Japan Korea China
Design Technique
Basic Design 100 95 80Detailed Design 100 105 60Production Design 100 105 60
Manufacturing Technique
Cut 100 95 70Jointing 100 90 70Fitting 100 90 60Hoisting 100 95 60
Management Technique
Cost Management 100 85 40Equipment Management 100 85 50
Production Management 100 90 40
HRM 100 85 60
http://www.istis.sh.cn/list/list.aspx?id=3426
Note: Japan-based index 100
SWOT ANALYSIS
WEAKNESS•High labor costs relative to competitors•Excess capacities
STRENGTHS• High technology• Reasonable price• On-time delivery• Economies of scale due to large scale production• Quality• Shorter cycle time• Brand power• Highly skilled HR
THREATS•High competition (China, Vietnam, India)•Rapid decrease in shipbuilding orders
OPPORTUNITY•M&A•Enter emerging technology markets
SWOT
Prod
uct D
iffer
entia
tion
Cost Leadership
VALUE CREATION FRONTIER CURVE
Carrier Builders Ocean Developers
COMPETITIVE ADVANTAGES
1.Technological Innovations
Offline welding robots (HHI)Multidirectional oil tanker (SHI)Eco-Friendly LNG-powered passenger boat (SHI)
•Decreased ship construction time and raised production efficiency
T-shaped dry-dock (HHI) Megablog (SHI)
COMPETITIVE ADVANTAGES
2. Efficiency
On-land Ship ConstructionSource : KOSHIPA
DAM Method
•Off-shoring to increase productivity
Source: KOSHIPA
•Human Resources development•Employment Structure & Shortage of Workforce
2008 2009 2010
Demand 14,214 14,370 15,130
Supply 12,167 12,172 12,179
Disparity -2,047 -2,198 -2,951
2. Efficiency
COMPETITIVE ADVANTAGES
Quality of Employees and New Product in Korean Industry are the main causes
to outperform competitors including China, while maintaining high efficiency
•Human Resources development
Revenue
SalesTalents in Industry
Quality of Product
New Product andNew Features
IT Infrastructure
Investment inR&D
+
++
+
+
++
+
R
R
• HHI – wind-facility plant, solar energy• SHI – green energy, wind-turbine• STX – offshore plants, and alternative energy• DSME – acquired DeWind Turbine
Alternative Energy
COMPETITIVE ADVANTAGES
3. Entry Into Emerging Markets
DYNAMICS (SUMMARY)
RevenueCost
Profit
Market Share
Price+ -
+
Investment inR&D
+
NewFunction/Product
Sales
+
+
Investment in ProcessImprovement
Design Technique/ProductFeature
Attractiveness ofProduct
+
+
+
+
+
-
New Entrants+
-
Total Market Size +
EconomicCondition
-
Investment inEmerging Technology
++
R
R
R
B
Time toMarket
Price Premium
-+
+ B
Economies ofScale/Learning Effect+
-
Referencewww.clarksons.com
www.researchandmarkets.com
nippon.zaidan.info
www.nacks.com.cn
www.istis.sh.cn
www.krs.co.kr/kor/file/Evolution%20of%20Korean%20Shipbuilding%20Industries-Technology%20Development%20and%20Innovation.PDF
www.koreaherald.co.kr/NEWKHSITE/data/html_dir/2009/11/26/200911260061.asp