business perspectives on finnish maritime industry antti salovaara, markku tinnilä, virpi tuunainen...
TRANSCRIPT
Business perspectives on Finnish maritime industryAntti Salovaara, Markku Tinnilä, Virpi Tuunainen (Aalto BIZ)
CONFIDENTIAL: for use only for IFCO and AaltoBraRus project partners
This presentation + an extended version can be downloaded from: bit.ly/SdSvDi
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Starting points of the analysis
• Finnish maritime cluster:– wants to enter the offshore markets in Brazil and Russia– has competence in e.g.:
• Technologies (azipod, cranes, fire protection, engines,…)• Planning• Software• Arctic conditions
– is considering forming alliances
• Goal of the analysis:– Identify issues of strategic competitive power
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Strategy’s goal: put company to powerful positions in value chains
Top-of-chain positionsIndependence from
suppliers (e.g., many alternatives)
Strategic assets (e.g., capability to self-manufacture)
Competitors
Suppliers(engine manufacturer)
Buyers(oil field contractor)(FPSO builder)
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Finding powerful positions:
strategic group maps
High
Low-speed main engines
Auxiliary engines
Engine type
Wärtsilä
MAN Diesel
MitsubishiLow
Medium-speed main
engines
Hi speed manufacturers
MAN Diesel
HiMSEN
Com
petit
ion
base
d on
pric
e
Choice of axes is important here for useful insight: specialization, technological leadership, price policy, relationship to home and host government, …
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Three generic competitive strategies
Industry-wide
Particular segment
only
DIFFERENTIATIONOVERALL COST
LEADERSHIP
FOCUS
Uniqueness perceived by the customer
Low cost position
Strategic advantage
Strategic target
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Why alliances are formed
Market entry and position:
Access to new markets (Brazil,
Russia)Circumvent barriers
(NOC politics)Defend/enhance market position
(e.g. through scaling up)
Product:Gaps in product line
DifferentiationAdding value to
product
Market structure:Reduce potential for future competition
Raise entry barriers for competitorsAlter technology
basis
Timing:Accelerate entry
to market
Resource use:Manufacturing costs
Marketing costs
Skills:Learn from partners
Enhance present skills
Different alliance models suggested by Kimmo Juurmaa
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Criteria for good alliances
RARE among a firm’s competitors
NO EQUIVALENT SUBSTITUTES
= will not be replaced with other solutions/resources
VALUABLEimproved cost efficiency
IMPERFECTLY IMITABLE= cannot be copied
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Long-term vs ad hoc alliances
Ad hoc:
+ Flexibility and opportunism- No joint marketing or brand- Unclear leadership- Probably not in line with strategy- Transaction costs: on every new
project deal, partner agreements need to be re-negotiated
Long term:
+ Better in line with previous slide’s criteria (valuable, rare, imperfectly imitable, no equivalent substitutes)
+ Joint management, marketing and brand
+ Easier to leverage partners’ strategic complementarities
+ Partner commitment- No short-term opportunistic
benefit
Are the current Finnish alliance models ad hoc or long-term?
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Risk of opportunistic behavior
• One partner’s actions may erode the alliance:
– Economic reasons (e.g., a new profitable deal with a third party)– When partner does not find the alliance important– When partner expects only short-term benefit from the alliance– When partner beliefs that an evitable future situation cancels
the alliance’s long-term benefits (e.g., Euro crisis, rise of Korean shipbuilding)
– Feeling of imbalance in partnership
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What are services
• 4 criteria (aka IHIP):– Intangible: are not physical– Heterogeneous:
customizable– Inseparable from production
and consumption: are consumed immediately
– Perishable: cannot be stored for later use
• Examples in marine business– Maintenance, repair,
provision of spare parts– Design, consulting, project
management, training– Financing– Software– Expert analyses,
simulations
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Why services?
• Continuous cash flow in cyclical market• Helps the customer offload non-core tasks (e.g.,
maintenance)• Decreases 3rd party threat:
Supplier
Supplier
Customer
Customer
Customer’scustomer
Customer’scustomer
Contractor
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Strategic partnership with customer
Physical product
Spares and wares
Reactive services (on
request)
Preventive mainte-nance
Predictive availability
Perfor-mance
Life cost ensurance (leasing)
Shared business outcome
Spare parts on
customer’s request
Repair, technical
help
Mainte-nance,
upgrades
Guaranteed availability
Measurable improvement in customer’s
processes
Promise of increased profit over lifecycle,
leaser takes also risk
Shared operations
with joint risk
Aker Arctic
Arctia Offshore
Deltamarin
Elomatic
Ilmatieteen laitos
Kvaerner Finland
Napa
OTC
Sweco Industry
ABB AzipodCargotec
Halikko WorksHollming Works
Marioff CorporationNurmi Cylinders
Pemamek
PlastilonRolls-Royce
Ruukki EngineeringSteerprop
STX FinlandWellquip?
Wärtsilä Finland
Need for long-term commitment in alliance-based business
Low High
Pureservice
