Potential of Export of Good to Gulf Countries Essay Example

Potential of Export of Good to Gulf Countries Essay Dissertation Submitted to the Dr. D. Y. Patil University In partial fulfillment of the requirements for the award of The Degree of MASTERS IN BUSINESS ADMINISTRATION Submitted by: Ankit Sharma [pic] Current Future Potential of Export of Good to Gulf Countries with respect to SCI Ltd. Dissertation Submitted to the Padmashree Dr. D. Y. Patil University In partial fulfillment of the requirements for the award ofThe Degree of MASTERS IN BUSINESS ADMINISTRATION [pic] DECLARATION I hereby declare that the dissertation Current Future Potential of Export of Good to Gulf Countries with respect to SHIPPING CO OPRATION OF INDIA Ltd (SCI). submitted for the MBA Degree at Padmashree Dr. D. Y. Patil University’s Department of Business Management is my original work and the dissertation has not formed the basis for the award of any degree, associate ship, fellowship or any other similar titles. Place: Navi Mumbai Date:ACKNOWLEDGEMENTS A lot of people have contributed in making this project report by giving me the required knowledge and time. I would like to thank all of them. It is because of their continued assistance and competence that I have been able to reach this milestone. for instilling confidence in me to carry out this study and extending his valuable guidance and encouragement from time to time, without which it would not have been possible to undertake and complete this project within the stipulated time.The route of this service is as follows: Colombo/Mundra/JebelAli/Mundra/Pipavav/JNP/Cochin/Tuticorin. 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Through the SMILE service, the SCI has commenced a coastal service on the west coast of India between Mundra, Cochin and Tuticorin from December 2008.The main objective of this study is to ascertain the future exports of goods services to gulf countries in relationship with Shipping Corporation of India (SCI). Focus of the research would be to find out which gulf country’s economy will ascend in the near future its repercussions on the consumption pattern of the gulf countries, what will be the demand condition, market potential in the current economic scenario in the near future in terms of Export Import trade. The recommendations suggestions will focus on which products should be exported to the gulf countries by The Shipping Corporation of India to increase their overall profitability. Comprehensive study on linear service provided by the Shipping Corporation of India the marketing aspects related to it.The study involves in finding out the current players in the container trade to gulf countries, what are the major commodities that are exported, what is the vessel size if it is a weekly service. CHAPTER-1 INTRODUCTION About Shipping Industry About Shipping Industry We live in a global society which is supported by a global economy – and that economy simply could not function if it were not for ships and the shipping industry. Shipping is truly the lynchpin of the global economy: without shipping, intercontinental trade, the bulk transport of raw materials and the import/export of affordable food and manufactured go ods would simply not be possible.Of all the sectors that make up the global transport infrastructure, shipping probably has the lowest public profile and the least representative public image. Its importance is not well known although not a single area of our life remains unaffected by it. In the recent past developing countries have put the pedal on the gas and have raced ahead from the developed countries in case of the international trade. The growth in international trade, removal of trade barriers being the principal reason, has made the developing countries to concentrate more on the improvement of their infrastructure, like roads, airports, seaports, which play a vital role in the development of the economy.Product storage, along with the capacity to move large shipments have placed the shipping industry in a very advantageous position. Containerization, multi-modal transport services, advancement of marine engineering technology, specialized systems, and computerization have contributed towards making sea transport as a prime mode for movement of internationally traded goods. However, the development of shipping industry in a country also depends on its population density, economic advancement and many other inter-related conditions, like port and refueling capacities. CHAPTER-2 OBJECTIVE OF THE PROJECT OBJECTIVE OF THE PROJECT Primary Objective:Objective of the study is to find the current future potential of export of goods to Persian Gulf countries in relationship with Shipping Corporation of India. Secondary Objective: and Gulf countries for the year 2012-13 Secondary objective of the study is as mentioned below:- †¢ Current scenario of the global shipping industry †¢ India’s contribution to the world trade †¢ Total number of commodities exported imported by India †¢ Total number of commodities exported to and imported from Gulf countries in the year 2010-11 †¢ Potential future export of commodities between India a nd Gulf countries †¢ Competitor Analysis †¢ Major commodities exported to Gulf countries †¢ List of documents required by the shipping vessels †¢ Comprehensive study on the liner service Trade study of last 3 years †¢ Projections of the trade between India CHAPTER-3 LITERATURE REVIEW LITERATURE REVIEW International Shipping Industry Benefits from Recent Tax Changes: Certified Public Accountant Lifson, David A; Bentley, Peter E. The CPA Journal[pic]75. 6[pic] (Jun 2005): 48-52. Despite its continuing importance, the shipping industry has lost most of the prestige it held in this country. One reason is that although several U. S. shipping companies are publicly traded, the nation is less well represented in international shipping than in other, comparable global industries. To partially address this complaint, and in an attempt to incentivize the U. S. hipping industry, the American Jobs Creation Act of 2004 includes four measures-the deferral of freight tax r egulations; changes to the controlled foreign corporation rules; changes to the foreign tax credit rules; and the introduction of a tonnage tax for qualified entities-that represent a dramatic change in federal tax policy and will likely make the U. S. environment more attractive to businesses engaged in U. S. -international shipping. The tax changes described in this article will have broad impact and are designed to change the risk-reward assumptions that the industry had come to accept. Over the coming months, ship-owners, operators, and financiers will better understand how these changes apply to them, and how they can profit in the new tax environment. The Greek shipping industry Grammenos, Costas T; Choi, Chong Ju International Studies of Management Organization[pic]29. 1[pic] (Spring 1999): 34-52. A wide range of industries are undergoing changes brought on by globalization.Even the Greek shipping industry, traditionally based in Greece with a wide international network, is being forced to make structural adjustments as changes in the regulatory environment demand different means of financing, and these will, in turn, evitably change the competitive structure of the industry. The study analyzes the competitive advantage of ethnically homogeneous business networks with particular reference to the Greek shipping industry. Ethic homogeneity can provide market signals that can compensate for the contract uncertainty arising from the absence of legal means of contract enforcement. Also considered are the implications for shipping regimes such as those involving shipping cartels and safety and environmental concerns. Measuring Success Factors of Quality Management in the Shipping Industry Cheng, T C Edwin, Choy, Petrus W C. Maritime Economics Logistics[pic]9. 3[pic] (Sep 2007): 234-253.It is generally accepted that quality management is considered a valuable competitive factor for firms that confers them competitive advantages and enables them to achieve su perior performance. Although there have been numerous studies examining general quality management practices and implementation, industry-specific studies on quality management practices and factors that influence their success in the shipping industry are rather few. This study seeks to identify the factors that are critical to successful quality management, and attempts to develop a reliable, empirically tested, and rigorously validated measurement instrument for quality management, for the shipping industry. We conducted a large-scale survey of shipping industry executives and applied a rigorous research methodology to treat the survey data.We identified four success factors of quality management, which are top management commitment and participation, quality information and performance measurement, employee training and empowerment, and customer focus, and developed a functional instrument to measure quality management in the shipping industry. This paper contributes to research by identifying the success factors of quality management, and provides managerial insights on the successful management of quality, in the shipping industry. Helping the Shipping Industry to Bounce Back from the Global Challenge in the Face of the Economic Downturn Anonymous. PR Newswire [New York] 11 Jan 2010. More than 40 brilliant speakers from the Chinese government, marine organizations, shipping corporations, and technology providers from all over the world will speak to over 200 attendees active in the industry on the summit themes of efficiency, security, and the environment. Since its creation in 2007, Shipping Tech has encouraged technological development across the shipping industry and established an international forum for cooperation between governments, shipping corporations, ship manufacturing corporations, technology providers and other related industrial elites for the innovation of shipping technology. Liberalization and Deregulation in the Domestic Shipping Indu stry: Effects on Competition and Market Structure Austria, Myrna S. Philippine Journal of Development[pic]30. 1[pic] (2003): 29-69. The paper is organized as follows. The first section discusses the contestability of markets in the shipping industry, including the arguments for and against regulating the industry.The succeeding section examines the policy reforms made through liberalization and deregulation. The effects of the reforms on market structure and competition, including the impact of competition on efficiency, are then analyzed. This is followed by a discussion on the role of the Maritime Industry Authority in a deregulated and liberalized environment. Areas for competition policy and further reforms are then identified. Shipping industry continues to face difficulties Accord Fintech [Mumbai] 10 Feb 2010. Increase in handling of iron ore, thermal coal, petroleum oil and lubricant products (POL) and container traffic were the main factors pushing the cargo volumes.The Balt ic Dry Index (BDI), the global benchmark for shipping freight rates of dry bulk carriers, started recovering in April last year riding on surging commodity demand from China. Indian shipping industry faces negative outlook in 2011: Fitch Anonymous. Asia Pulse [Rhodes] 28 Jan 2011. Fitch Ratings maintains a negative outlook on the Indian shipping industry in 2011, as freight rates will remain depressed because of the demand-supply imbalance caused by a net increase in capacity exceeding demand, it said in a statement. * The ratings firm said that lower freight rates have affected revenue generation across shipping companies, in line with the global trend and said major players will be under pressure in 2011. During 2011, low freight rates are expected across all segments like dry bulkers, tankers and containers, and few Indian shipping companies are expected to undertake aggressive capex plans, it said. Container Shipping Industry Celebrates National Maritime Day Anonymous. PR Newswi re [New York] 21 May 2008. Atlantic Container Line AB, China Shipping (Group) Company, CMA-CGM Group, COSCO, Crowley Maritime Corporation, CSAV (Compania Sud-Americana de Vapores S. A. ), Hanjin Shipping Co. Ltd. , Hapag-Lloyd AG, Hyundai Merchant Marine Co. , Kawasaki Kisen Kaisha, Maersk Line, Malaysia International Shipping Corporation (MISC), Mediterranean Shipping Co. S. A. (MSC), Mitsui O. S. K.Lines, Neptune Orient Lines Ltd/APL, Nippon Yusen Kabushiki Kaisha (NYK), Orient Overseas Container Line Ltd (OOCL), Pacific International Lines (Pte) Ltd, United Arab Shipping Co (SAG), Wan Hai Lines Ltd, Yang Ming Marine Transport Corp. , Zim Integrated Shipping Service Ltd. Indian Shipping Industry Carrying Capacity Cross 10 Mln Gt Anonymous. Asia Pulse [Rhodes] 20 Sep 2010. The aim was to provide a level playing field to domestic shipping industry against the international shipping companies and facilitate the growth of Indian tonnage. [ ] the Indian tonnage has steadily grown over the last 5 years from 6. 94 million in April 2004 to the present level, the statement said. Research and Markets; Indian Shipping Industry Economics Week (Mar 23, 2012): 548.The Shipping Industry Sailing through turbulent waters The Shipping industry is highly co-related to the developments in global trade, therefore any adversity in the global economic growth adversely affects the prospects of global shipping fraternity thereby explaining the cyclical nature of the industry. CHAPTER-4 RESEARCH METHODOLOGY RESEARCH METHODOLOGY Research refers to a search for knowledge. It is a systematic method of collecting and recording the facts in the form of numerical data relevant to the formulated problem and arriving at certain conclusions over the problem based on collected data. Thus formulation of the problem is the first and oremost step in the research process followed by the collection, recording, tabulation and analysis and drawing the conclusions. The problem formulation starts with defining the problem or number of problems in the functional area. To detect the functional area and locate the exact problem is most important part of any research as the whole research is based on the problem. According to Clifford Woody research comprises defining and redefining problems, formulating hypothesis or suggested solutions: collecting, organizing and evaluating data: making deductions and reaching conclusions: and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis.Research can be defined as the manipulation of things, concepts or symbols for the purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in the practice of an art In short, the search for knowledge through objective and systematic method of finding solution to a problem is research. SOURCES OF DATA: PRIMARY DATA COLLECTION: Primary data are those, which are collected afresh and for the first tim e and thus happen to be original in character, questions and interviews methods were accede to collect primary data by visiting the factory premises and various departments in it. It was collected from the employees working in the factory. By using both the questionnaire method and interview method. I would gather information from the employees. SECONDARY DATA COLLECTIONIt is collected from the internal records of the company such as library records, trade journals, various manuals of the company, various training programs previously conducted and it’s responds etc; It is also conducted from the officials of the pursued department in the factory. Secondary data provides a better view of the problem study many magazines, tools and other references were also mean important in this study. CHAPTER-5 GLOBAL SCENARIO GLOBAL SCENARIO It is generally accepted that more than 90 per cent of global trade is carried by sea. Throughout the last century the shipping industry has seen a gen eral trend of increases in total trade volume.Increasing industrialization and the liberalization of national economies have fuelled free trade and a growing demand for consumer products. Advances in technology have also made shipping an increasingly efficient and swift method of transport. World seaborne trade figures i. e. the amount of goods actually loaded aboard ships have increased considerably since the 70s and in 2008, reached 8. 2 billion tons of goods loaded. As with all industrial sectors, however, shipping is not immune to economic downturns and 2009 witnessed the worst global recession in over seven decades and the sharpest decline in the volume of global merchandise trade.In tandem with the collapse in economic growth and trade, international seaborne trade volumes contracted by 4. 5 per cent and total goods loaded went down to 7. 8 billion tons in 2009. However seaborne trade bounced back in 2010 and grew by an estimated 7 % taking the total of goods loaded to 8. 4 bi llion tons. Developing countries continued to account for the largest share of global seaborne trade (60% of all goods loaded and 56 % of all goods unloaded), reflecting their growing resilience to economic setbacks and an increasingly leading role in driving global trade. Developed economies’ shares of global goods loaded and unloaded were 34 % and 43 % respectively. Transition economies accounted for 6 % of goods loaded and 1 % of goods unloaded. Developing countries are expanding their participation in a range of different maritime businesses. They have growing market shares in more capital-intensive or technologically advanced maritime sectors such as ship construction and ship owning. China and the Republic of Korea between them built 72. 4 per cent of world ship capacity (dwt) in 2010, and 9 of the 20 largest countries in ship owning in January 2011 are developing countries. Dry cargo, including bulk, break bulk, and containerized cargo, accounted for the largest share of goods loaded (66. 3%), while oil made up the balance. Growth in dry bulk trade is estimated at 4. 8% with the five major bulk products, fuelled mainly by the needs of China’s metal industries.In 2010, developed economies recorded positive growth, with their GDP expanding by 2. 5 per cent. The United States and Japan performed better than the European Union, growing respectively by 2. 9 per cent, 4. 0 per cent and 1. 8 per cent. Developing economies and economies in transition continued to drive the global recovery with the rebound being led by large emerging economies, in particular China (10. 3 per cent), India (8. 6 per cent) and Brazil (7. 5 per cent). Almost unburdened by the financial crisis and consequent economic downturn, China, India and other developing countries resumed their expansion by generating their own growth instead of relying on exports to developed economies’ markets.While the Unites States remains the main source of import demand for Asia, Chin a has evolved into an independent engine of regional growth and a larger source of final demand for a number of emerging developing economies, including the Philippines, the Republic of Korea and Taiwan, Province of China. The lead taken by developing countries in powering global growth reflects a shake-up in the world’s economic order which has taken decades to unfold. UNCTAD data show that the share of developing countries in the global economic output rose from about 17 per cent in 1980 to over 28 per cent in 2010, raising the influence of these countries in the world’s economic performance.In 2010, China overtook Japan as the world’s second biggest economy (in nominal terms) and is leading the transformation together with some of the world’s fastest-growing economies such as India and Indonesia. An important economic milestone in 2010 was Brazil’s ranking as the world’s seventh largest economy after surpassing Italy. Goldman Sachs is now predicting that the BRIC countries (Brazil, Russian Federation, India and China) will overtake the G–7 countries in size of their economies by 2018, i. e. much sooner than its original prediction of 2040 made a decade ago. The overall strong performance of developing countries as a group conceals differences between countries and groupings.For example, GDP growth in South Africa (2. 8 per cent) was much lower than the rates recorded by China, India and Brazil. Similarly, the recovery in many of the least developed countries (LDCs) remained below their potential with GDP growth (4. 8 per cent) not returning to its pre-crisis levels. The economic downturn and consequent increase in unemployment, together with the drop in social spending, can cause a serious setback to social equity and poverty alleviation. Although some ground has been gained, between 2007 and the end of 2009, at least 30 million jobs are estimated to have been lost worldwide as a result of the global financia l crisis.The global economy still needs to create at least another 22 million jobs to return to the pre-crisis level of global employment. It is further estimated that 47 million to 84 million more people are falling into or staying in extreme poverty because of the global crisis. While these considerations are not specific to the LDCs, they are nevertheless more detrimental for these countries in view of their inherent vulnerability to any erosion in economic and development gains achieved as part of efforts to attain the Millennium Development Goals (MDGs). In terms of value of trade, USA is the major country engaged in maritime transport generating 10. 68% of world trade in 2008. Other major countries include Germany (8. 22%), China (7. 91%), and Japan (4. 78%).Among the Asian countries, China is the largest trader with large container port traffic and fleet. China International Marine Containers (CIMC) and Singamas are the two largest container manufacturers, which make China do minate in this field also. India is placed at eighteenth position in the world (with a share of 1. 45%), and seventh position amongst Asian countries. Table no. 5. 1 Growth of world output 2005 2013 [pic] [pic] Effects of the Global Slowdown Shipping Industry has been widely impacted given the economic slowdown of 2008 and 2009. Since the demand for ships / vessels is a derived demand of commodities, the slowdown affected the demand for ships / vessels during this period.This has been evident from the movement of Baltic Dry Index (BDI), which is a daily weighted average of prices of shipping raw materials, and is one of the leading indicators of global economic activity. BDI measures the demand to move raw materials, which indicates production, planning and industrial activity worldwide. BDI reflects the freight cost to transport dry bulk cargoes around the world, mainly raw materials such as iron ore, coal, and grains. The index excludes wet cargoes (such as crude oil carried by t ankers) and container business (used mainly to carry manufactured products). As the global trade shrunk by over 10%, many shipping lines found themselves in a situation of excess capacity (many liners ordered new ships during the economic boom period).Some analysts predicted that at least few shipping lines would go out of business to match with the supply demand situation. However, it is believed that shipping lines, in an informal arrangement, collectively reduced the capacity through slow steaming’ (spending more days in sea, which helped them to save on fuel and reduce capacity). It is estimated that slow-steaming could cut a liner’s capacity by around 5%. It is also believed that some shipping lines have teamed up to levy a voluntary surcharge of US $ 400 per container. Both the Federal Maritime Commission (USA) and the European Monitoring Agency are closely monitoring the developments to see any evidence of price fixing by shipping liners. Maritime Transport and Climate Change ChallengeLike other economic sectors, maritime transport, which by volume carries over 80% of global trade, has a role to play in addressing formidable challenge of climate change. International maritime transport is playing a part in contributing to climate change, but more importantly, it is also likely to be directly and indirectly impacted by the various climate change factors, such as rising sea levels, extreme weather events and rising temperatures. The wide-ranging impacts of climate change, including that from maritime transport, and their potential implications for trade, economic growth and development, underscore the need to integrate climate considerations into strategies for transport planning and development.Increasingly, it is being recognized that considered and concerted actions are urgently required to ensure effective control of greenhouse gas emissions and to establish the requisite adaptive capacity in the shipping industry, especially in developi ng countries. Recognizing the importance for the maritime transport sector of contributing to global efforts at reducing emissions of greenhouse gases, IMO’s Marine Environment Protection Committee (MEPC) is considering a number of mitigation measures aimed at reducing emissions of greenhouse gases from international shipping. Integration of Shipping Industry with Global Logistics and Supply Chains Global shipping majors, like other segments of the conventional transport industry, are increasingly getting integrated with the emerging global logistics and supply chain activities, owing to both external and internal dynamics.Many firms are entering into the enhanced canvas of offering logistics solutions, such as door-to-door delivery systems, integrating with rail/road haulage movements of cargo, customs brokerage, cargo consolidation, packaging/ re-packaging, and distribution services, thereby substantially consolidating their market position, and supplementing their ocean fr eight income. The global shipping industry is thus going through a major redefinition by undertaking logistic integration of their cargo operations. Change in Directions in Trade Volume Multi-polarity of trade flows, and the growth in trade volumes of Asian region is expected to impact the world shipping, as profoundly done by liner shipping and containerized cargo some decades ago.The earlier phase of trade volume witnessed shipping growth in Transatlantic and Transpacific routes, and the growing volume of world trade, especially from Asia, is likely to position the Pacific Rim and Indian Ocean Rim routes in the lime light. Common Port to Specialist Port Ports have been conventionally viewed as provider of omnibus solution to all types of cargo on a common basis. However, the global trend is veering into development of freight specialized ports – such as LNG terminals, container terminals that involve high capital costs and intensive deployment of cargo handling equipment. Also, there has been a global trend in the port sector towards growing separation of port authority from port operator.The balance of power in the maritime trade, which was traditionally in favor of shipping lines, has been shifting in favor of shipper, whose cargo is being moved. With such emerging trends in port development in the world, shipping companies are expected to change their strategies and offer solutions to suit such trends. Growth in Establishment of Transshipment Terminals Growth in long distance and containerized trade has led to the growth in establishment of transshipment hubs. It is not possible to establish direct shipping connections between every country because either there may not be enough volume, or the ports may be located distantly from each other. Therefore, a set of direct or transshipment connections are required to link all country pairs by maritime shipping.For this purpose, the transshipment terminals and intermediate hubs have been started. The wor ld’s most important intermediate hub is ingapore, where 92% of its traffic is transshipped. The emergence of major intermediate hubs favored a concentraStion of large vessels along long-distance, high capacity routes, while smaller ports can be serviced with lower capacity ships. Consequently, the emergence of intermediate hubs has permitted liner services that would otherwise be economically unfeasible. Port Regionalization Ports, especially large gateways, are facing a wide array of local constraints that impair their growth and efficiency. Limited availability of land for expansion is among one of the most acute problems.This issue is exacerbated by the deepwater requirements for handling larger ships. Port regionalization is required when the ports are not able to handle additional traffic. Port regionalization refers to integration between maritime and inland transport systems, particularly by using rail and barge transportation, which are less prone to congestion than r oad transportation. Port regionalization and hinterland connectivity has been growing over the years, with the objective of meeting the constraints faced by ports. Port regionalization helps in creating a regional load centre network through joint development of a specific load centre and logistics platform in the hinterland.This has led to the development of corridors leaning on rail or barge services connecting to inland terminal facilities, which act either as satellite terminals, load centers or, less commonly, transmodal facilities. Many port authorities, terminal operators, commercial real estate developers and local/regional governments have been actively involved in the setting of such facilities. †¢ Satellite terminals: These are tend to be close to a port facility, but mainly at the periphery of its metropolitan area (often less than 100 km), since they mainly assume a service function to the seaport facilities. They accommodate additional traffic and undertake servic es that have become too expensive at the port, such as warehousing (e. g. empty containers) and distribution.Satellite terminals can also serve as load centers for local or regional markets, particularly if economic density is high, in which case they form a multi-terminal cluster with the main port they are connected to through regular rail or barge shuttle services. For gateways having a strong import component, a satellite terminal can also undertake transloading function in a significant manner, where the contents of maritime containers are transloaded into domestic containers or truckloads. †¢ Load centers: This refers to a major intermodal facility load center granting access to welldefined regional markets that include production and consumption functions. It commonly corresponds to a metropolitan area where a variety of †¢ Intermodal / transmodal facilities: These link large systems of freight circulation either through the same mode (e. g. ail terminals serve co ncomitantly intermodal, warehousing, distribution and logistics functions. These tend to take place in logistics parks and free trade zones (or foreign trade zones). The inland terminal is thus the point of collection or distribution of a regional market. The more extensive and diversified the market, the more important is the load center. If the load center has a good intermediary location, such as being along a major rail corridor, then freight distribution activities servicing an extended market will be present. -to-rail) or through intermodalism (e. g. rail-to-truck). In the latter case, the inland terminal assumes the role of a load center.The origin or the destination of the freight traffic tends to be elsewhere, particularly for transmodal freight. Current World Trade Situation World trade continued to recover in 2011, albeit at a much slower pace than in 2010. After a strong rebound of more than 14 per cent in 2010, the volume of world exports in goods decelerated visibly, t o 7 per cent, in 2011. The level of total world exports had fully recovered to its pre-crisis peak by the end of 2010, but it is estimated to be still below the long-term trend level by the end of 2011. As has been the case with the recovery of WGP, developing countries, particularly Asian economies with large shares in the trade of manufactured goods, led the recovery.While the level of trade in volume terms has already far surpassed the pre-crisis pe