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Maersk SWOT & PESTLE Analysis

ID : 5297653 | Dec 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)

Competitive Analysis of maersk

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.

2. 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.

3. 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

4. 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.

The unpublished sections of the entire Maersk SWOT analysis is available in the 'Complete Report' on purchase.

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 / PESTEL 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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Legal

1. Regulatory approvals delay decision making and business growth: Delay and uncertainty in regulatory approvals result in slowing down of growth and business integration. Maersk’s decision to acquire Hamburg Sud faced regulatory hurdles in Brazil, as Hamburg Süd owns Alianca Logistica, which is the dominant carrier in East Coast South America trade with 55% market share. Maersk already owns Brazilian flag carrier Mercosul Line and after Hamburg Süd’s acquisition its share would be between 75-80%. French carrier CMA CGM has entered into a deal with Maersk to acquire Mercosul Line, which will help in clearing regulatory approvals for Maersk’s acquisition of Hamburg Süd in Brazil. This deals are expected to be completed by Q4-FY17 if the approvals are granted as per the timelines.

Environmental

1. Inherent risk of major accident or oil spill: Maersk is involved in the operation of large container vessels which are subject to risks like accidents or technical glitches which may result in environmental disasters such oil spills. These incidents can threaten marine life and also affect the local communities and the overall environment. Moreover these incidents can affect Maersk’s brand value and incur large scale penalties. In 2016, Maersk Ahran was involved in a significant oil spill incident near Turkey, however the damage was largely limited due to the fast response of the local response team. Maersk needs to make appropriate investments in technology and manpower so that these risks are minimized.

2. Regulatory developments concerning environment: New regulations continue to be imposed to reduce the impact of business activities on the environment. These regulations impact Maersk’s business processes and additional measures need to be undertaken to comply with the same. By 2020, a global cap of 0.5% sulphur content in fuel is to be enforced. New ships which are being built after 2016 will need to reduce NOx emissions by 80% particularly in North American and Caribbean waters. There are also anticipated regulatory changes regarding ballast water exchanges in different water bodies which will require installation of ballast water treatment systems on board.

The unpublished sections of the entire Maersk PESTLE / PESTEL analysis is available in the 'Complete Report' on purchase.

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Keppel Corporation SWOT and PESTLE analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.

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