Alliance and network in maritime shipping industry

ABSTRACT

This paper presents adiscussion of ways of designing atransport network by allied carriers for maritime shipping, specifically examining performance differences between hub–spoke (HS) and multiple-port-call (MPC) models. We explain, theoretically, the mechanisms of changing the liner shipping network configuration and the carrier alliances. The salient results indicate the following: (i) HS is more profitable for allied carriers than MPC is; (ii) allied carriers under HS, even if they deploy smaller ships, can have some margin to gain greater profits than under MPC. These findings imply that switching to HS from MPC can be accomplished not only by deploying mega-ships but also through business combinations such as alliances or mergers and acquisitions.

KEYWORDS:

• Alliance
• container shipping
• fleet sizing
• hub–spoke
• merger
• multiple-port-call

Acknowledgments

This work was partially supported by JSPS KAKENHI [Grant Number 20K13617]. We would like to thank two anonymous reviewers and an Associate Editor for helpful and constructive comments. We would also like to thank FASTEK for English language editing.

Disclosure statement

Ryohei Yamamoto is aVisiting Researcher at Waterfront Vitalization and Environment Research Foundation (WAVE). The authors declare that the funding source (JSPS KAKENHI) and WAVE were not involved in the study design, modeling, analysis, outcomes, interpretation, discussion, conclusion, or writing of the article.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1. For instance, the capacity of the largest container ships was 8,160 TEUs in 1997, but it was 21,100 TEUs in 2017 (OECD 2015). UNCTAD reports that during 2018–2021, 74 vessels of 20,000 TEUs and more were deployed (UNCTAD 2021).

2. We do not explicitly identify alliances and M&A in the following analysis. Both alliances and M&A are categorized as business combinations, although their degrees of relation are different. Generally, we recognize an alliance as amoderate case of business combination because each firm cooperates independently as apartner under astrategic alliance.

3. In their paper, MPC is designated as apoint-to-point service.

4. The result is omitted if the calculation is not convergent. Only the case with the largest profit among valid calculations is reported below.

5. Solutions are omitted for calculations that do not converge. It is noteworthy that our models include no constraints for vessel sizes deployed by the respective carriers. However, we presume that the reasonable upper range is around 20,000 TEUs, considering practical vessels operated in general. Therefore, we also omit equilibrium results indicating vessel sizes larger than 20,000 TEUs.

6. Similarly to the analysis presented in Subsection4.3.1, we generate new representative values of $\bar{f}\mathit{js}$, $\bar{f}\mathit{jl}$, and ${\bar{f}}_{\mathit{j}}$, to calculate the vessel size, each changing by 2.5% increments between −200% and 200% around pre-alliance values.

7. Carriers will consider their practical management of containers and vessels, as elucidated by Imai, Shintani, and Papadimitriou (2009) and Wetzel and Tierney (2020).

Additional information

Funding

This work was supported by JSPS KAKENHI [grant number 20K13617].