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Maersk SWOT & PESTLE Analysis

Last Updated : 07 Sep, 2017

OVERVIEW

Name of the Company: Maersk

Business Sector: Shipping, Integrated Transport and Logistics

Operating Geography: Europe, Denmark, Global

About the Company: The Maersk Group is an integrated transport & logistics company with multiple brands and is a global leader in container shipping and ports. Including a stand-alone Energy division, the Maersk Group employs roughly 88.000 employees across operations in 130 countries. The two main industries in which they operate in are Transportation & Logistics and Energy.

Revenue: USD 35.46 million (FY16)

SWOT & PESTLE Analysis

The SWOT analysis for Maersk is presented below:
Strengths
Weaknesses
1. Global network of businesses
2. Strong brand with skilled workforce
3. Investment in innovation strengthening competitive advantage
4. Emphasis on sustainability
1. Loss reported due to impairments
2. Fluctuating margin and rising costs
Opportunities
Threats
1. Strategic partnerships and acquisitions
2. Expansion to other related business segments and switching to alternative options
3. More inroads in sustainability
1. Increased trade protectionism policies
2. Major accidents or oil spills
3. Downturn in transportation and logistics market
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Strengths

1. Global network of businesses: Maersk has operations in 130 countries with Maersk Line, the group’s primary transportation & logistics business having 15.8% global market share. Its two main industries are transportation & logistics and energy. Transport & Logistics consists of Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry. The mission of these businesses is to enable and facilitate global supply chains and provide opportunities for customers to trade globally. Energy consists of Maersk Oil, Maersk Drilling, Maersk Supply Service and Maersk Tankers. After the Hamburg Sud acquisition gets completed by FY17, Maersk will further increase its network and market share in East Coast South America trade.

1. Strong brand with skilled workforce: A strong brand presence is essential to the success of any firm. Maersk has the reputation of being a top player in the industry globally. It ranks first in terms of revenue when compared to its competitors. Maersk undertakes some of the most technically complex techniques to unlock new sources of energy. In order to enhance the performance of the employees, frequent competence building exercises takes place for technical, operational and support functions. For e.g. Maersk Drilling hired all crew in 2014 and 2015 well in advance, up to six months prior to operation start, in order to participate in top class training and performance enhancement, establish good teamwork and ensure a safe and efficient operation of the new fleet.

2. Investment in innovation strengthening competitive advantage: Maersk Line invested in data analytics and digital capabilities to optimize and modernize its processes. It has programs in place for improving fuel efficiency, voyage planning and operational efficiency. Maersk Oil has partnered with Danish Underground Consortium and invested in major technology programs like enhanced reservoir modelling, enhanced oil recovery mechanisms and cost effective well completions. Maersk Drilling is planning a test of Big Data analytic tools for two applications: drilling productivity in order to increase drilling efficiency as well as maintenance improvement in order to reduce cost and to increase reliability

3. Emphasis on sustainability: Maersk has integrated sustainability in internal training programs, it has adopted a Human Rights Framework, Sustainability Index in Employee Engagement Survey and it also has sustainability integrated in enterprise risk management. It has strategic interests and has adopted various programs aimed at the safety of employees, climate & environment, waste management, biodiversity, human rights, anti-corruption and whistleblowing, responsible procurement and taxation.

Weaknesses

1. Loss reported due to impairments: Even in difficult times, the Maersk Group delivered a profit of USD 5.2bn and an underlying profit of USD 4.5bn in 2015. The Group delivered a strong cash flow from operating activities of USD 8.8bn in 2015 despite a significant decline in container freight rates and oil prices. However the results were unsatisfactory in 2016 majorly impacted by post-tax impairments of USD 2.8bn which resulted in an overall loss of USD 1.9bn. These impairments were to primarily relating to Maersk Drilling and Maersk Supply Service.

2. Fluctuating margin and rising costs: Maersk has often missed earnings forecast and lost market share due to uncertainty in the industry and fluctuating demand. But in spite all this, it has managed to the most profitable operator amongst other players in the industry. Also, due to the global economic conditions. Logistics cost has increased manifold for the company. But steps are being taken to bring down the cost and safeguard the profitability of the company even in these challenging times.

Opportunities

1. Strategic partnerships and acquisitions: When the industry trend is towards consolidation, Maersk has jumped on the bandwagon and has made some key acquisitions in the past to drive its growth. In 2015, cash flow from operating activities was primarily driven by acquisition. APM terminals has completed acquisition of TCB with an implied enterprise value of USD 1.1 bn. Maersk’s deal to acquire Hamburg Sud which will get completed in 2017 will strengthen its network in Latin American market.

2. Expansion to other related business segments and switching to alternative options: Maersk currently relies on road and water means for transportation. It can also look at alternate means for its logistics business. Self-driving trucks will bring in huge efficiency and reduce costs in the container transport sector. Digitization is set to revolutionize the shipping industry and Maersk can not only implement digitization across its businesses but offer consulting expertise to other players.

3. More inroads in sustainability: Maersk has a new sustainability strategy which has three priority areas which are CO2 reduction, economic growth and skilled workforce. Through this Maersk aims enabling growth and accelerate the positive impacts of business.

Threats

1. Increased trade protectionism policies: Increased protectionism majorly impacts global trade with logistics and transportation sector bearing the brunt. Implementation of trade protectionism policies under President Donald Trump is a major concern for Maersk, the world’s biggest shipping company. Trump has increasingly signaled towards ending existing trade agreements between U.S. and its trade partners. Favoring of domestic trade over international trade will not only impact Maersk’s North American business but also have a ripple effect on operations in Europe and China which are major exporters to the US and may impose retaliatory measures. India another emerging economy is also increasingly favoring “Make in India” initiative which may affect imports and reduce international logistics demand.

2. Major accidents or oil spills: Accidents or oil spills is an inherent risk in the Maersk’s operations, particularly in the oil and gas, offshore and tanker businesses. A high severity incident would first and foremost present a risk to the employees as well as potentially to the marine environment, wildlife and local communities. Additionally it could result in large scale impact on assets, liquidity position and reputation. In 2016, Maersk Ahran was involved in a significant oil spill incident near Turkey, however there was no significant financial or environmental damage from the incident.

3. Downturn in transportation and logistics market: Logistics industry witnessed weak growth in 2016, with lower GDP growth globally and sinking crude oil prices impacting manufacturing and industrial production segments. A structural gap and overcapacity, coupled with the significant exposure that Maersk Line has to the Asia-Europe trade where the larger vessels are increasingly deployed, left the Group vulnerable to substantial fluctuations in freight rates and the risk of sustaining commercial losses.

To get the complete detailed SWOT report on Anthem please mail us at: support@swotandpestle.com. or contact us here.

Maersk SWOT analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.

References

1. Maersk Annual Report 2016: http://files.shareholder.com/downloads/ABEA-3GG91Y/4700791164x0x926927/1313EF10-D845-4BDE-A0B6-BFEC276D0EE5/Maersk_Annual_Report_2016.pdf

2. Maersk Q1 2017 report: http://investor.maersk.com/common/download/download.cfm?companyid=ABEA-3GG91Y&fileid=942439&filekey=74BCF21F-9B4B-4FAC-82E6-7F1B08AC02D1&filename=Maersk_Q1_2017_Presentation.pdf

3. Maersk Annual Magazine 2016: http://investor.maersk.com/common/download/download.cfm?companyid=ABEA-3GG91Y&fileid=926934&filekey=CD22EA2A-BD16-4836-9060-F23597E51CE1&filename=Maersk_Annual_Magazine_2016.pdf

4. Maersk Sustainability: http://www.maersk.com/en/the-maersk-group/sustainability/the-environment

5. CMA CGM acquisition clears path for Maersk-Hamburg Sud deal: http://www.joc.com/maritime-news/container-lines/cma-cgm/cma-cgm-acquisition-clears-path-maersk-hamburg-sud-deal_20170613.html

6. Qatar Begins Shipping Cargo through Oman to Bypass Gulf Rift: https://www.usnews.com/news/business/articles/2017-06-12/qatar-begins-shipping-cargo-through-oman-to-bypass-gulf-rift

7. World’s Biggest Shipping Company Voices Alarm at Trump Trade War: https://www.bloomberg.com/news/articles/2017-02-08/world-s-biggest-shipping-company-voices-alarm-at-trump-trade-war

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The PESTLE analysis for Maersk is presented below:
Political
Economical
1. Terrorism and civil unrest and political uncertainty across Europe, Middle East and African (EMEA) markets may impact Maersk’s business 1. Increased trade protectionist policies of Donald Trump administration
2. Low oil price environment affecting earnings
Social
Technological
1. Business transparency strategy by Maersk showing success1. Usage of data driven analytics to boost vessel productivity
Legal
Environmental
1. Regulatory approvals delay decision making and business growth1. Inherent risk of major accident or oil spill
2. Regulatory developments concerning environment
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Political

1. Terrorism and civil unrest and political uncertainty across Europe, Middle East and African (EMEA) markets may impact Maersk’s business: Europe, Middle East and Africa (EMEA) is a major market for Maersk. Europe has faced political turmoil after exit of Britain from EU and many other states are facing impending elections. Brexit will result in changing of sourcing patterns especially in food segment which will impact shipping companies. Middle East and African countries have also been impacted by civilian unrest and terrorism impacting business. The recent blockade of Qatar by other GCC nations also impacts Maersk’s shipping routes to Doha with closure of UAE ports for consignments bound to Doha.

To get the complete detailed PESTLE report on Maersk please mail us at: support@swotandpestle.com. or contact us here.

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