Impact & Expertise

Press Releases

  • October 10, 2012
  • Container Carriers Must Change Course to Restore Profitability

  • The Container-Shipping Industry Must Exercise Greater Discipline in Its Strategic, Commercial, and Operational Practices to Restore Profitability, a BCG Report Explains

COPENHAGEN , October 10, 2012—Container carriers can recover from the losses they suffered in recent price wars by adopting more disciplined business practices, according to a new report by The Boston Consulting Group (BCG). The report, titled Charting a New Course: Restoring Profitability to Container Shipping, is being released today.
 
The report finds that the container-shipping industry’s poor performance in 2011 and its continued struggles in 2012 are primarily the result of a self-inflicted supply-and-demand imbalance, which triggered intense competition and price wars. The report explains how the industry is harming its own economics by following misguided practices—especially those affecting capacity and pricing decisions. The authors also discuss how other factors conspire to make profitability more elusive than in other industries and describe the challenging near-term outlook.

Fortunately, carriers have opportunities to address these challenges and improve their performance. “Carriers should not be willing to accept the volatile financial performance they have experienced in recent years,” said Ulrik Sanders, a BCG senior partner and coauthor of the report. “Although it’s true that carriers are exposed to market forces that make profitability hard to sustain, they can overcome these challenges by bringing the right mix of discipline and diligence to each aspect of the business.” 

The report discusses a wide variety of strategic, commercial, and operational initiatives that each carrier can undertake to chart a new course—for itself and the industry as a whole—and offers ten imperatives for sustaining profitability. Key themes are:

  • Defining an effective strategy aimed at achieving a competitive advantage and built on shoring up key infrastructure assets, establishing stronger alliances, and selectively pursuing M&A

  • Demonstrating the value of offerings (including commodity and premium services), setting prices according to market position and customer relationships, and monetizing all service offerings

  • Rigorously managing and variabilizing costs to enable critical improvements in operational efficiency

  • Enabling informed and data-driven decisions by establishing a robust IT infrastructure, applying business and market intelligence, developing and retaining the right talent, and creating clear metrics to track performance

As the foundation for these moves, carriers must shift their mindset to apply more disciplined practices and compete selectively to ensure a profitable business. “Carriers can no longer rely on a one-size-fits-all approach,” said Dinesh Khanna, a BCG partner and coauthor of the report. “They must decide how and where to compete by analyzing profit pools and the cost to serve specific markets and customers.” “Ultimately, carriers must stop making decisions primarily on the basis of capacity and utilization levels,” added Lars Fæste, a BCG partner and coauthor of the report. “The industry must find ways to make money in periods of excess supply by exercising all options to achieve capacity discipline. These actions include not only slow steaming, idling vessels, and scrapping tonnage but also intelligently pricing services. Additionally, carriers must not hesitate to shut down a business that doesn’t deliver economic results.”


A copy of the report can be downloaded at www.bcgperspectives.com.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

About bcgperspectives.com

Bcgperspectives.com features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management’s agenda. It also provides unprecedented access to BCG’s extensive archive of thought leadership stretching back 50 years to the days of Bruce Henderson, the firm’s founder and one of the architects of modern management consulting. All of our content—including videos, podcasts, commentaries, and reports—can be accessed by PC, mobile, iPad, Facebook, Twitter and LinkedIn.

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries.

Recent Releases

  • August 28, 2014 Consumer Packaged Goods Companies Must Plan for a Digital Future view full release
  • August 25, 2014 The Global Auto Industry’s Recovery Gains Traction view full release
  • August 21, 2014 The Construction Industry’s 2014 Challenge: To Reignite Growth view full release
  • August 19, 2014 Dramatic Shifts in Manufacturing Costs Are Driving Companies to Change Their Global Production Strategies view full release
  • July 22, 2014 Chinese Consumer Sentiment Improving, Driven by MACs in Smaller Cities view full release
  • July 16, 2014 Asset Managers Post Strong Recovery from Crisis, with Record Assets and Near-Peak Profits view full release
  • July 15, 2014 TSR Turnarounds Are Leading Value Creators Since Global Financial Crisis view full release
  • July 14, 2014 BCG Builds Its Global Capital Markets Practice with Two Senior Hires view full release
  • July 14, 2014 The European Automotive Aftermarket Returns to Growth view full release
  • July 10, 2014 BCG Local Dynamos Highlight the Successes of Homegrown Emerging-Market Companies view full release

Accelerating Out of the Great Recession

Accelerating Out of the Great RecessionThis book details what high-performing companies must do to seize advantage in a slow-growth environment. more

BCG Offices

Globe BCG has more than 80 offices around the world. Learn about our global presence.
Go

Social Impact

We are compelled to utilize our expertise to work with humanitarian organizations that impact local communities and the world at large. More