The Routledge Handbook of Maritime Management

Photis M. Panayides, Photis M. Panayides

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781317207030
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This handbook provides a wide-ranging, coherent, and systematic analysis of maritime management, policy, and strategy development. It undertakes a comprehensive examination of the fields of management and policy-making in shipping by bringing together chapters on key topics of seminal scientific and practical importance.

Within 21 original chapters, authoritative experts describe and analyze concepts at the cutting edge of knowledge in shipping. Themes include maritime management and policy, ship finance, port and maritime economics, and maritime logistics. A study examines the determinants of ship management fees. Aspects of corporate governance in the shipping industry are reviewed and there is a critical review of the ship investment literature. Other topics featured include the organization and management of tanker and dry bulk shipping companies, environmental management in shipping with reference to energy-efficient ship operation, a study of the BIMCO Shipping KPI standard, utilizing the Bunker Adjustment Factor as a strategic decision-making instrument, and slow steaming in the maritime industry. All chapters are written to provide implications for further advancement in professional practice and research.

The Routledge Handbook of Maritime Management will be of great interest to relevant students, researchers, academics, and professionals alike. It provides abundant opportunities to guide further research in the areas covered but will also initiate and inspire effective maritime management.

1

Principles of maritime
business management

Photis M. Panayides

1.1 Introduction

Although management is more of an art rather than a science and management achievements may depend to a large extent on individual managerial characteristics and traits (e.g. Malmendier et al., 2011), managerial decision-making and other management practices can benefit from the knowledge created through scientific inquiry. Management in the shipping industry is even more challenging, bearing in mind the specific external environmental circumstances that maritime companies face in the pursuit of their short-term and long-term strategic goals. Shipping is a highly capital-intensive industry and financing and other management decisions are made within a highly risky economic, physical and financial environment. The highly volatile freight rates (see Kavussanos, 1996) dictate, to a large extent, various managerial decisions in operational ship deployment (e.g. time vs spot market decisions), whereas the consequent impact on ship prices influences ship sale, purchasing, newbuilding and scrapping decisions. At the same time, the volatile market environment may present shipowners and other maritime decision makers with an array of opportunities that effective managers and entrepreneurs may be able to spot and take advantage of (see Harlaftis and Theotokas, 2013). For example, in the late 90s, low freight-rate levels forced Norwegian investors to sell off their K/S shares at distress prices allowing a quick-thinking entrepreneur to establish majority shareholdings in K/S companies and later on force the sale of assets at higher prices. Based on this business acumen, the entrepreneur went on to establish one of the biggest and most successful maritime enterprises, General Maritime Corporation. It is also part of the shipping folklore literature how Aristotle Onassis, John Fredriksen, Stavros Niarchos and other shipping entrepreneurs managed, through shipping business acumen and shrewd managerial decisions, to establish successful enterprises and amassed fortunes in a highly competitive business environment.

The aim of this chapter is to provide readers with a comprehensive overview of management concepts with relevant applications to the business of shipping. After the introduction, Section 1.2 defines management indicating the key management goals and associated functions of management. Management takes place at different levels within the organization including at higher strategic level and at a lower operational level. Section 1.3 discusses the relation between management and strategy, highlighting the distinction between corporate strategy and business strategy. The key functions of management, such as planning, organizing, staffing, leading, coordinating, and controlling are discussed in Section 1.4, which also explains the significant role of delegation and decentralization in management. One of the key management functions is to develop effective organizational structures that will facilitate efficient organizational processes. Organizational structures and departmentalization in shipping companies are discussed in Section 1.5, whereas Section 1.6 describes the key organizational processes that take place in a shipping company. Section 1.7 focuses on the management aspect of control by discussing key concepts in the measurement and management of performance in shipping. Particular reference is given to the analysis of key performance indicators that can be used to measure shipping company performance in the context of financial, customer, and internal processes and innovation and growth objectives. The chapter considers how advances in information technology and shipping-related innovations can have a significant impact on the shipping industry and in using data to make more informed decisions. The chapter concludes by highlighting areas where further research will potentially provide significant contributions to the maritime management literature.

1.2 Management defined

One of the leading gurus of management, Peter Drucker, once said that every achievement of management is the achievement of a manager, and every failure is the failure of a manager. The vision, dedication and integrity of managers determine whether there is management or mismanagement (Drucker, 2004).

Management is the process of reaching organizational goals through the deployment of organizational resources (human, technological, etc.) and development of internal and external inter-organizational relationships. Management is a never-ending process or series of continuing and related activities. Management is a continuous process that evolves over time and entails activities that are fundamental to the operation of the business. Hence, even if goals are achieved, it is the task of management to develop new goals and plans for achieving them (Lussier, 2018).

On this basis, management focuses on the achievement of organizational goals within specified timeframes. The ultimate responsibility and accountability for achieving the organization’s goals lies with the managers. One of the fundamental tasks of managers is to accumulate a resource base for the organization that will be allocated efficiently among competing internal users. One of the major resources is people and managers need to work with people, organizing them into departments and teams, or through people via delegation and decentralization to achieve earmarked organizational objectives that relate to customer and business performance. With respect to the external activities, one of the main tasks of managers is the development of business value propositions to which the market place will respond in accordance to a pre-defined strategy. Managers in the shipping industry should then seek to determine what really creates value for customers. For instance, customers in liner shipping may value freight cost, shipping punctuality and reliability. In ship operations, oil majors may focus on safety, the environment, image and reputation. Shipowners may be looking for asset preservation, maximization of earning period and operational reliability from their ship managers. Time chartering is about punctuality in delivery and re-delivery and minimization of off-hires.

Management entails the performance of certain management tasks and functions. However, integral in the performance of functions such as planning, organizing, leading, staffing, coordination, and controlling is that these functions need to be undertaken by managers in the context of achieving corporate and business strategy goals.

1.3 Management and strategy

Strategy entails an assessment of where the company is, a statement of where it plans to be at a finite point in the future, and a plan of how to get there. Companies in the shipping industry have various strategies at both corporate and business level.

Corporate level strategy involves decisions at a higher managerial level that affect the organization’s corporate direction and existence (Puranam and Vanneste, 2016). One critical corporate strategy decision is the identification of the business or set of businesses that the company should be in. If the decision is to invest in a number of strategic business units, then corporate strategists need to decide how to coordinate effectively and efficiently resource flows across the corporate portfolio. Typical corporate level strategies in shipping are decisions of merger and acquisition (Alexandridis and Singh, 2016; Fusillo, 2009), strategic alliance or joint venture formation (Panayides and Wiedmer, 2011; Rau and Spinler, 2017), diversification and divestiture, and mode of exit (Lorange, 2005).

Business strategy on the other hand involves strategic decisions and strategies that aim at achieving and maintaining a competitive advantage in product-market domains. It entails decisions pertaining to which markets to serve and which customer segments to target, the adoption of a positioning strategy that will differentiate the company from competitors, the distribution channels to reach customers as well as the communication channels to reach the markets, and the scope and scale of the activities to be performed (Brooks, 1993; Casaca and Marlow, 2005).

Setting strategy requires companies to develop a vision and mission statement and strategic intent in the context of internal and external strategic challenges (environmental, regulatory), and to define the areas of competitive advantage.

Vision does not entail any measurable goals or timeframes and merely represents a general future aspiration. A mission statement is more focused and addresses the perspective of who the organization serves (e.g. a tanker owner will be focusing on oil majors), what value the company is willing to deliver to the customer (e.g. quality, safe transportation of oil), and how the organization plans to deliver that (e.g. by harnessing employee competencies). In this context a mission is specific yet succinct and can be refined and changed based on changing economic or environmental circumstances.

1.4 Management functions

The primary challenge for managers is to be able to tackle daily problems in a creative manner. To address the challenge, management has been classified into the undertaking of major functions, namely planning, organizing, staffing, leading coordinating, and controlling (Lamond, 2004; Mintzberg, 1973). The functions are highly integrated when carried out in the day-to-day realities of running an organization.

According to Koontz and O’Donell (1968), planning is deciding in advance what to do, how to do it and who is to do it, and bridges the gap between where we are and where we want to go. Planning is concerned with the success of the organization in the short term as well as in the long term. Typically, planning involves flexibility, as the planner must coordinate with all levels of management and leadership in the organization. Planning also involves knowledge of the company’s resources and the future objectives of the business. In the shipping business there are several areas where planning is of the essence, not least finding the best adaptation and deployment of the fleet (short-term versus long-term charters) (e.g. Panayides, 2018) relative to the volatile market conditions, or planning for liner ship deployment under chartering-in options (Meng et al., 2012). In this context, one of the most critical areas that requires careful planning is the fleet renewal decision, which consists of deciding how many and which types of ships to add to the fleet and which available ships to dispose of (Alvarez et al., 2011; Pantuso et al., 2014). Planning permeates many other areas of maritime business management. Maritime business managers need to plan for the sourcing of seafarers amidst supply constraints (Mitroussi, 2008). Human resources then need to be appropriately deployed, which requires careful planning from the crewing department (Anastasiou, 2017). Planning is of the essence for the maintenance programme of the ships and for dry docking, for ship inspections (Furnival and Crispe, 2017), for the purchasing of spare parts and consumables, and for the training and development of the workforce.

Organizing is used to create a mechanism to put plans into action and for that reason managers need to develop an appropriate organizational structure, the chain of command within the company, and relevant job descriptions. The organizing function of leadership controls the overall organizational structure of the company. The structure is usually represented by an organization chart, which provides a graphic representation of the chain of command, and delineates lines of communication, authority, responsibility, and accountability. Organizing involves designating tasks and responsibilities to subordinates that have the specific set of skills to undertake and complete the tasks. People within the organization are given work assignments that contribute to the company’s goals. Tasks are organized so that the output of each individual contributes to the success of departments, which, in turn, contributes to the success of divisions, which ultimately contributes to the success of the organization (see also Pastra et al., 2017).

The staffing function of management controls all recruitment and personnel needs of the organization. It is especially important in shipping, since it deals with the recruitment and management of shore-based staff as well as personnel on board ships. Staffing involves more than just recruitment; it also encompasses training and development, performance appraisals, promotions and transfers. In the context of crew recruitment, the relevant manager needs to und...