AME Exam Notes PDF

Assignment 1: Designing a case study on shipping company performance 1. Please design a multiple case study on the topic of shipping company performance. 2. You should formulate a research question and describe what research philosophy and theories can guide the study. 3. You shou...

Assignment 1: Designing a case study on shipping company performance 1. Please design a multiple case study on the topic of shipping company performance. 2. You should formulate a research question and describe what research philosophy and theories can guide the study. 3. You should refer to at least two out of the course’s three dimensions of firm performance (financial, environmental, and/or social) and clarify how you define and measure performance. 4. You should also outline relevant methods for data collection and analysis. 5. In your assignment, you should integrate relevant concepts from the course regarding research quality The Effect of Market Dynamics on Shipping Firm Strategies: A Comparative Case Study of NORDEN and MB Shipbrokers Limitation: o Not chartering o NORDEN; from operations perspective o MBShipbrokers; From brokerage perspective – newbuild and S&P o Confidential intel – restricted data use o Generalizability of findings – distinct business models. Might not be fully generalizable to other shipping companies with different structures o Examines the impact of market dynamics during a specific timeframe. Cyclical nature of the shipping industry meands that findings may be heavily influences by the conditions present during the period of study. Financial performance Shipping industry being volatile o Freight rates ▪ NORDEN receives freight rates from charterers – but if there is a higher payment to vessel owners is around the same, it is hard make a profit – the only places where they are able to save some money is in laytime or demurrage or underwater cleaning so the vessel performs better and doesn’t use up as much oil, protective surveyors for bunkering (e.g. being cheated or not), repairs on vessels Interest rates What impacts interest rates; o Economic conditions - When global economies are growing, central banks may raise interest rates to control inflation, making borrowing more expensive for shipping companies. Conversely, during economic downturns or recessions, central banks might lower interest rates to stimulate borrowing and investment, making it cheaper for shipping companies to finance operations and new projects. o Geopolitical risks ▪ Geopolitical tensions (e.g., sanctions, trade wars, or conflict) increase uncertainty in global trade flows and shipping lanes. These risks can result in higher financing costs due to the increased potential for shipping market disruptions, leading to higher interest rates for loans. ▪ Shipping is closely linked to the energy sector, particularly through fuel costs. Geopolitical instability in oil-producing regions can lead to price volatility, impacting the overall risk profile of shipping firms and raising interest rates. o Environmental regulations  ▪ The International Maritime Organization (IMO) and other regulatory bodies have introduced stricter environmental regulations aimed at reducing emissions (e.g., IMO 2020 sulfur cap, IMO 2050 CO2 targets). Complying with these regulations often requires significant investment in new technology, retrofitting, and greener vessels. The need for additional financing, coupled with the uncertainty of future regulations, can impact interest rates. ▪ In contrast, shipping companies that align with environmental goals may have access to green financing, often at lower interest rates. Banks are increasingly offering preferential loan terms for companies investing in environmentally friendly vessels or sustainable operations, driven by environmental, social, and governance (ESG) considerations. o Demand for newbuilds & fleet expansion ▪ During periods of high demand for newbuilds (e.g., due to aging fleets, technological advancements, or regulatory requirements), interest rates may rise due to increased competition for financing. ▪ Interest rates may also reflect market sentiment regarding the overall future of the shipping industry. Optimism about long-term growth in global trade, combined with high demand for modern, fuel-efficient vessels, can result in favorable financing terms. Conversely, a pessimistic outlook can lead to higher rates. o Shipping market cycles ▪ The cyclical nature of the shipping market (e.g., boom periods when demand exceeds supply and bust periods when oversupply leads to lower demand) affects the availability of financing. Interest rates tend to be lower during boom periods, as lenders are more willing to finance expansion, and higher during bust periods, when risk is perceived to be greater. o Rising interest rates increase the cost of financing maintenance, repairs, and upgrades for vessels, impacting overall operational budgets. How does NORDEN respond to higher interest rates, such as deferring costly upgrades or optimizing maintenance schedules to control cash flow? o NORDEN may consider capital expenditure (CAPEX) on retrofits and new technologies (e.g., energy-saving devices) less favorable in high-interest-rate environments, affecting their long-term financial strategy. o High interest rates can decrease the demand for newbuilds as buyers are less likely to secure favorable financing terms for new vessels. How does MB Shipbrokers adapt to lower deal volumes or push for sales of second-hand vessels in these conditions? o When interest rates are low, MB Shipbrokers might see increased demand for newbuild contracts. How do they capitalize on favorable financial environments to facilitate vessel orders and S&P transactions? Shipyard (port) capacity & Lead time o How does shipyard congestion affect NORDEN’s vessel maintenance schedules, dry- docking, and repairs? Do longer lead times impact their ability to maintain operational efficiency? o How does limited shipyard capacity influence MB Shipbrokers’ ability to secure newbuild contracts for clients? Do longer lead times increase the demand for second- hand vessels? Environmental performance Environmental Regulations o How do tightening environmental regulations (e.g., IMO’s decarbonization goals, ballast water management requirements) influence NORDEN’s operational strategies?  What adjustments are made in vessel maintenance, retrofits, and fuel management to comply with these regulations? o How do environmental standards affect the sale and purchase of vessels, particularly older tonnage? Do regulations increase the demand for eco-friendly newbuilds, and how does MB Shipbrokers navigate this? Technological advancement/ regulatory changes & environmental performance o How does NORDEN incorporate cutting-edge technologies such as predictive maintenance, IoT, and fuel optimization systems to improve environmental performance by reducing emissions, optimizing fuel usage, and minimizing downtime? o Adoption of green technologies (e.g., scrubbers, wind-assisted propulsion) to comply with environmental regulations, including IMO’s decarbonization targets. What strategies are in place to retrofit vessels with green technologies, and how does this impact environmental and operational performance? o How does NORDEN adjust its ship operations to meet increasingly stringent environmental regulations, such as the IMO 2023 and 2050 decarbonization targets, which require substantial reductions in CO2 emissions? o As clients increasingly demand more fuel-efficient, eco-friendly vessels, how does MB Shipbrokers adjust its S&P and newbuild strategy to focus on vessels with modern green technologies? o How do advancements in autonomous shipping, hybrid propulsion, or LNG-powered vessels influence the types of vessels MB Shipbrokers promotes in S&P transactions and newbuild contracts? o Does MB Shipbrokers see an increase in demand for newbuilds that are compliant with future regulations (e.g., dual-fuel LNG-powered vessels)? How does this shift impact the volume and value of S&P and newbuild deals? Social performance Geopolitical tension and its influence on shipping (Suez Canal, Lebanon – Iran – Israel – Gaza, Russia vs. Ukraine and other countries influence e.g. USA, Germany, Denmark..) o How do geopolitical risks, such as sanctions or trade route disruptions, influence NORDEN’s operational strategies (e.g., rerouting, ensuring compliance with sanctions)? o How do geopolitical events affect the demand for specific vessel types or regions? Are certain vessel markets (e.g., offshore, LNG) more sensitive to political instability, and how does MB Shipbrokers guide clients through these uncertainties? o Social performance; ▪ How does NORDEN’s operations team manage geopolitical risks, such as trade sanctions, regional conflicts, and shifting trade routes, to ensure the safety of crew members and onshore staff? What operational strategies are in place to reroute vessels or avoid high-risk areas? ▪ How does NORDEN ensure that its onshore staff, including technical superintendents and crew managers, maintain a high level of operational efficiency while supporting a safe and socially responsible working environment for seafarers? ▪ Geopolitical tensions may lead to a shift in vessel demand (e.g., oil tankers during sanctions on oil-producing nations or LNG carriers during energy shortages). How does MB Shipbrokers adapt its S&P strategy to meet changing client needs under such conditions? ▪ How does MB Shipbrokers maintain its reputation and social responsibility in terms of client relationships and ethical business practices, ensuring transparency and fair negotiations during vessel transactions? 1. Introduction a. Background of the study  b. Research problem & significance c. Research question d. Study objectives e. Study limitations & boundaries f. Why we are using a multi-case study, definition, what it can help us do (e.g. Flyvbjerg maximum variation case study) 2. Literature review a. Theoretical frameworks (e.g. stakeholder theory, Organisational theory..) b. Research philosophy of science – which one & why c. Data collection methodology i. Primary data (e.g. interviews with key stakeholders, surveys) ii. Secondary data (e.g. company reports, financial statements, databases…) iii. Qualitative & quantitative methods – which ones, how and why? d. Performance dimensions i. Financial performance definition – profitability, revenue growth..) – identification of key literature on how shipping 3. Case description a. Company profiles (e.g. Company A vs Company B) i. Financial performance ii. Environmental practices iii. Social responsibility initiatives b. Comparison and contrast 4. Analysis and Findings Identify patterns across the cases. For instance, do companies with stronger financial performance tend to underperform environmentally, or vice versa? Analyze how companies balance or trade-off between financial and environmental performance. Discuss the impact of external factors like regulations (IMO, CSI) or market conditions on performance dimensions. 5. Discussion Reflect on the findings, relating them to the literature and theoretical frameworks discussed in your literature review. Address the implications for shipping companies, regulators, and other stakeholders. Highlight the role of research quality (validity, reliability, generalizability) and any potential limitations in your study design. 6. Conclusion and Recommendations Summarize key findings and their implications for future performance management in shipping companies. Provide recommendations for companies on how to improve their financial and environmental/social performance. Suggest directions for future research, such as longitudinal studies or a focus on other dimensions like technological performance. Philosophies of Science: Positivism: o Focuses on objective, observable, and measurable phenomena. This is relevant when analyzing financial performance, freight rates, and environmental impacts based on quantifiable data. o You would use this approach to gather and analyze financial metrics, shipping cycle data, and interest rate fluctuations.  o Challenge: Can the complex market dynamics and geopolitical influences truly be reduced to measurable factors? Does this neglect the subjective decision-making processes of the companies? o Improvement: Complement the quantitative data with interviews or case studies to capture the subjective experiences and decision-making rationales of NORDEN and MB Shipbrokers. Critical Realism: o Acknowledges that reality exists independently of our perceptions but emphasizes that our understanding of it is shaped by deeper, underlying structures (e.g., market forces, shipping cycles). o You would use this to analyze how deeper geopolitical, economic, and environmental forces influence company strategies. o Challenge: To what extent are company strategies shaped by broader structural forces, and how can we distinguish these from the companies’ agency? o Improvement: Investigate both the observable outcomes (e.g., financial performance, fleet expansions) and the underlying causal mechanisms (e.g., geopolitical risks, market sentiment). Constructivism: o Focuses on the subjective creation of meaning through interactions and interpretations. This is relevant to how NORDEN and MB Shipbrokers interpret geopolitical tensions or environmental regulations. o Challenge: Are their strategies merely a reflection of subjective interpretations of global events? How can you generalize findings if each company’s approach is unique? o Improvement: Incorporate interviews and qualitative data to explore how managers within NORDEN and MB Shipbrokers interpret and react to market dynamics.  1. Introduction Background of the study Research problem & significance Why we are using a multi-case study, definition, what it can help us do (e.g. Flyvbjerg maximum variation case study) o Which companies we are looking at The maritime industry plays an important role in the global economy, transporting approximately 90% of the world’s trade goods across the sea and continents. 2. Research question Research question Study objectives Study limitations & boundaries The shipping industry is highly volatile and sensitive to external market dynamics such as freight rates, interest rates, and environmental regulations. However, firms within the industry (e.g., NORDEN and MB Shipbrokers) adopt distinct operational strategies based on their roles (operations vs. brokerage). Understanding how these companies navigate these complex market dynamics, particularly in periods of high volatility, is crucial to explaining their long-term financial and operational sustainability. Research Problem Example: ‘‘How do shipping companies with different business models (operations vs. brokerage) adapt their financial, operational, and environmental strategies to volatile market dynamics?’’ ‘‘How do shipping companies with different business models, such as NORDEN (operations) and MB Shipbrokers (brokerage), adapt their financial, operational, and environmental strategies to navigate the challenges posed by volatile market dynamics, including freight rate volatility, shipyard capacity constraints, and environmental regulations, and how do these factors influence their financial, environmental, and social performance?’’ 3. Literature review Theoretical frameworks we are going to use (e.g. stakeholder theory, Organisational theory..) Research philosophy of science – which ones & why o Positivism & Data collection methodology o Primary data (e.g. interviews with key stakeholders, surveys) o Secondary data (e.g. company reports, financial statements, databases…) o Qualitative & quantitative methods – which ones, how and why? Performance dimensions o Financial performance definition – profitability, revenue growth..) – identification of key literature on how shipping 4. Multi-Case study Company backgrounds Company profiles (e.g. Company A vs Company B) o Financial performance o Environmental practices o Social responsibility initiatives Comparison and contrast