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COMPETITION IN THE SHIPBUILDING INDUSTRY

COMPETITION IN THE SHIPBUILDING INDUSTRY. FACILITATOR Anh Nam Sung. Can the Korean shipbuilding giants sustain their competitive advantage?. PRESENTED BY

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COMPETITION IN THE SHIPBUILDING INDUSTRY

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  1. COMPETITION IN THE SHIPBUILDING INDUSTRY FACILITATOR Anh Nam Sung Can the Korean shipbuilding giants sustain their competitive advantage? PRESENTED BY • JianyangRen, Mami Hirai, Min Chen, Min JiSeok, Mohammed Hanane, Naima Samuel, Zhong Shanna, Olga Son, PeyanardMahasuwan, PolawatPupipat, ThotsapitKamolvisit, & UttamMallick

  2. 3. Shipbuilding Macro-environmental Analysis 2. Competitor’s Analysis 1. Global Shipbuilding Industry Structure 4. Korean Shipbuilding SWOT Analysis 5. Korea’s Competitive Advantage 6. Summary

  3. Introduction Ship Building Industry has a Close Relationship with Shipping Industry, which depends on World Economy

  4. Shipbuilding Industry History Mid 1990s ~ present Korea 1950s ~ mid 1990s Japan WW2 ~ 1950s W. Europe block construction Mid 19C ~ WW2 Open-type and Double hull VLCC UK Modular design From 2000s ~ mid 19C China USA Welded steel ships Source: KOSHIPA First iron and steel hulls

  5. Korean Shipbuilding Industry History 2000s 1990s #1 in World ranking, STX, SHI, DSME, HHI High-value added ships 1980s #1 in World ranking, new orders 1970s #2 in World ranking, shipyards 1960s Very Large Crude Carriers – HHI, SHI, DSME Export ships – Hanjin Heavy Industries Source: KOSHIPA

  6. World shipbuilding production by countries 2,694 GT Japan 90 GT Mitsubishi Heavy Industries Tsuneishi Corporation 3,060 GT 2,450 GT China 840 GT 1. Dalian Shipbuilding Industries 2. Shanghai WaigaoqiaoShipbuilding Industries Korea 1,240 GT 1. Hyundai Heavy Industries (HHI) 2. Samsung Heavy Industries (SHI) 3. Daewoo Shipbuilding & Marine Engineering (DSME) www.clarksons.com

  7. INDUSTRY STRUCTURE • High barriers to entry • Huge capital investments • Intense rivalry • High bargaining power • of buyers • Demand vs Supply • Low bargaining power • of suppliers • Price of raw materials • Vertical Integration (HHI, STX) • Very low threat of substitutes

  8. World shipbuilding production by Top10 shipyard

  9. INDUSTRY RIVALRY: CHINA

  10. Competitive advantage in China Industry • Low labor costs • Adequate supply of steel plate for ship, and lower prices • Supported by the Chinese government industry policy • Fast-growing demand from domestic market

  11. Challenges of China Shipbuilding Industry Structural design and technology Insufficient capacity for producing high-value added ships Exchange rate fluctuations and raw materials cost Low productivity and quality of labor

  12. MACRO-ENVIRONMENTAL ANALYSIS • POLITICAL/REGULATORY • Government support • International Maritime Organization (IMO) • SOCIAL • Green technology requirement (anti-pollution rule by IMO) INDUSTRY • ECONOMIC • Significant influence of exchange rate on profit • Growth influenced by economic growth • TECHNOLOGY • Technology innovation • Design • Process Improvement

  13. Comparing Competitiveness of Technology Note: Japan-based index 100 http://www.istis.sh.cn/list/list.aspx?id=3426

  14. SWOT ANALYSIS • STRENGTHS • High technology • Reasonable price • On-time delivery • Economies of scale due to • large scale production • Quality • Shorter cycle time • Brand power • Highly skilled HR • WEAKNESS • High labor costs relative to • competitors • Excess capacities SWOT • THREATS • High competition (China, Vietnam, India) • Rapid decrease in shipbuilding orders • OPPORTUNITY • M&A • Enter emerging technology markets

  15. VALUE CREATION FRONTIER CURVE Product Differentiation Carrier Builders Ocean Developers Cost Leadership

  16. 1.Technological Innovations COMPETITIVE ADVANTAGES Eco-Friendly LNG-powered passenger boat (SHI) Offline welding robots (HHI) Multidirectional oil tanker (SHI) On-land Ship Construction

  17. 2. Efficiency COMPETITIVE ADVANTAGES • Employment Structure & Shortage of Workforce • Decreased ship construction time and raised production efficiency • Off-shoring to increase productivity • Human Resources development On-land Ship Construction Megablog (SHI) T-shaped dry-dock (HHI) Source: KOSHIPA Source : KOSHIPA DAM Method

  18. 2. Efficiency COMPETITIVE ADVANTAGES • Human Resources development Quality of Employees and New Product in Korean Industry are the main causes to outperform competitors including China, while maintaining high efficiency

  19. COMPETITIVE ADVANTAGES • 3. Entry Into Emerging Markets • HHI – wind-facility plant, solar energy • SHI – green energy, wind-turbine • STX – offshore plants, and alternative energy • DSME – acquired DeWind Turbine Alternative Energy

  20. DYNAMICS (SUMMARY)

  21. Reference www.clarksons.com www.researchandmarkets.com nippon.zaidan.info www.nacks.com.cn www.istis.sh.cn www.krs.co.kr/kor/file/Evolution%20of%20Korean%20Shipbuilding%20Industries-Technology%20Development%20and%20Innovation.PDF www.koreaherald.co.kr/NEWKHSITE/data/html_dir/2009/11/26/200911260061.asp

  22. THANK YOU

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