In the ever-evolving world of maritime logistics, a fresh study is stirring up conversations about how shipping companies and freight forwarders can best navigate China’s new coastal shipping policies. Led by Naimeng Liu from the University of Shanghai for Science and Technology, the research, published in the journal Systems, delves into the intricacies of coastal piggybacking and its implications for market entry and outsourcing strategies.
So, what’s all the fuss about? Well, China’s recent liberalization of coastal shipping rights has opened up new avenues for ocean shipping (OS) companies. They now have two main tactics to consider: coastal transition and coastal piggybacking (CPB). The latter involves OS companies leveraging freight forwarders’ cargo canvassing capabilities to enter the coastal shipping market. But here’s the kicker: not all OS companies qualify for the CPB policy. This sets the stage for a complex game of strategy and competition.
Liu’s study, which employs game theory to analyze the interactions between freight forwarders and two competing OS companies, sheds light on some intriguing findings. For instance, when a freight forwarder’s cargo canvassing capability is particularly strong, CPB might not be the best move for an OS company that qualifies for the policy. As Liu puts it, “CPB may represent a myopic equilibrium.” However, if the forwarder’s capability is relatively low, both OS companies could potentially benefit from CPB.
The research also highlights how market entry strategies hinge on entry costs. When costs are low, OS companies are more likely to enter the market. But when costs are high, they tend to steer clear. In cases where costs are moderate, their strategy depends on what the other OS company is up to.
Now, let’s talk commercial impacts. For freight forwarders, enhancing cargo canvassing capabilities and adjusting outsourcing tactics could deter market entry by OS companies. Interestingly, the study suggests that OS companies’ market entry could actually boost the forwarder’s payoffs in a horizontally competitive supply chain. This is a significant finding, as it challenges conventional wisdom and opens up new strategic possibilities.
For OS companies, the study underscores the importance of understanding the competitive landscape and the capabilities of freight forwarders. It also highlights the need to consider entry costs carefully. As Liu notes, “OS companies enter the market when entry costs are low and avoid it when costs are high.”
The economic sustainability of the coastal piggyback policy is another crucial aspect explored in the study. By analyzing its impacts on the profitability of all supply chain members, the research provides valuable insights into the policy’s long-term viability.
So, what does all this mean for the maritime sector? Well, it’s clear that the landscape is shifting, and companies need to be strategic in their approach. Whether you’re a freight forwarder or an OS company, understanding these dynamics can help you make informed decisions and stay ahead of the competition. As the study published in Systems shows, the devil is in the details, and a nuanced understanding of the game can pay off big time.