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: $40.308 billion– FY ending March 2015
SWOT & PESTLE Analysis
|1. Global network of businesses|
2. Strong brand
3. Skilled workforce
4. Backed by sound financials
6. Emphasis on sustainability
|1. Fluctuating margins
2. Rising logistics cost
3. Trade bottle necks
|1. Strategic partnerships and acquisitions|
2. Expansion to other means of transportation
3. Focus on SMEs
4. More inroads in sustainability
|1. Unpredictable global economic conditions
2. Prolonged drop in oil prices
3. Major accidents or oil spills
4. Cyber attacks
5. Downturn in container market
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1) Global network of businesses: Maersk has operations in 130 countries. 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.
2) Strong brand: 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 .
3) Skilled workforce: 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 eg: for Maersk Drilling, all crew in 2014 and 2015 were hired 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.
4) Backed by sound financials: 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 and USD 2.4bn in 4th quarter of 2015, despite a significant decline in container freight rates and oil prices.
5) Innovation: Maersk Line invested in data analytics and digital capabilities to optimise and modernise 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 Driling 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
6) Emphasis on sustainability: Maersk has integrated sustainability in internal training programmes, 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 programmes aimed at the safety of employees, climate & environment, waste management, biodiversity, human rights, anti-corruption and whistleblowing, responsible procurement and taxation.
1) Fluctuating margin: Maersk has often missed earnings forecast and lost market share due to uncertainity in the industry and fluctuating demand. But inspite all this, it has managed to the most profitable operator amongst other players in the industry.
2) Rising logistics cost.: 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.
3) Trade bottle necks: Maersk has also suffered challenges due to the changing trade patterns existing.
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.
2) Expansion to other means of transportation : Maersk currently relies on road and water means for transportation. It can also look at alternate means for its logistics business.
3) Focus on SMEs: Research findings indicate that SMEs employ 70% of the global workforce and represent 95% of all firms. But SMEs lag behind larger firms in terms of productivity and efficiency. This segment provides huge potential for Maersk to help SMEs realise their potential.
4) 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.
1) Unpredictable global economic conditions:Unpredictable conditions can significantly impact the business and long term assets due to large short term volatility. Forceasting the value and future cash flows wil be difficult in such situations.
2) Prolonged drop in oil prices: The declined and persistently subdued oil price observed since end 2014 has led to reduced cash flows and revised forecasts from oil and oil related businesses. The market developments and the duration of the downturn exert pressure on securing commercially viable contracts for Maersk Drilling, Maersk Supply Service and the oil production pipeline in Maersk Oil. Ultimately this could impact their ability to meet financial targets.
3) Major accidents or oil spills: It is an inherent risk in the Group’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.
4) Cyber attacks : A major cyber-attack could prove detrimental to the ability to operate and deliver on their commitments, as the Group is involved in complex and wide ranging global services, making it highly dependent on well-functioning IT systems.
5) Downturn in container market : 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, leave the Group vulnerable to substantial fluctuations in freight rates and the risk of sustaining commercial losses.Maesrk SWOT analysis has been conducted by Chithira Sajeev and reviewed by senior analysts from Barakaat Consulting.
1.Maersk Annual Report 2015: http://www.maersk.com/en/the-maersk-group/press-room/press-release-archive/2016/2/annual-report-2015-20160210t074946
2. Maersk website: http://www.maersk.com/
3.Sustainability Report 2015: http://www.maersk.com/~/media/the%20maersk%20group/sustainability/files/publications/2016/files/maersk_group_sustainability_report_2015_a3_final.pdf
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