Detecting Trends and Drivers

The 1st of the 14 steps is to identify the issue that we want to investigate. For this particular case we have chosen “What does the international landscape look like for the shipping industry in 2030?” In step 2 we have determined our horizon to be 15-years forward (until 2030) and chosen the level of analysis to be macro and meso oriented since we are dealing with large scale processes of an industry as well as a global context, which is underlined in the external societal factors to our scenarios. The meso-approach can have two functions; either work as a link between macro and micro or represent the specific shipping company – the organization level.

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Step 3: In our scenario case of the shipping industry we have determined the below mentioned trends and drivers¹ to be relevant. We did this by conducting a PESTLE (Political, Economic, Social, Technological, Legal and Environmental) analysis where we identified the following trends and drivers:

 Globalization: Markets are becoming larger and more global. This trend will be relevant to most international companies – not only those who operate in shipping.

 Dispersed manufacturing: The trend that manufacturing is taking place further and further away from the consumers by moving to countries with low manufacturing costs will have an increased demand on shipping.

 Increased global demand for commodities and consumer goods: As developing nations get richer there is a need for commodities such as steel and energy to support infrastructure. At the same time newfound wealth in these nations will lead to an increase in global demand.

 World trade: The possibility of positive implications from trade agreements will have a positive effect on the shipping industry. Negative implications might be laying up ships, taking capacity out of the market and trimming organizations.

 Demographic shifts: Asia and specifically China and India will hold almost ¼ of the global population. This combined with other South East Asian Countries having high population growth and EU and US having stagnated or negative growth will establish a new consumer base in this region. The African countries are also experiencing high population growth giving the continent increased potential for shipping businesses in the future.

 Uneven economic growth and turbulence: Economic volatility might increase and there will more turbulence within each trading bloc. So far the world has experienced sustainable growth but going forward this might not be the case. This calls for constant care and an ability to look ahead.

 The geopolitical scene: The geopolitical scene is changing and has since the dissolution of the Soviet Union become more turbulent. It is easy to continue to speculate about how the political forces might change but it is clear that is has an impact on business.

 Terrorism: The risk of global terrorism is present and will continue to be a driving cost for security measures. This issue is important for the shipping industry, as e.g. piracy in Somalia is one of the biggest security problems facing shipping companies.

 Technology: Technology is changing fast and the effects of R&D in drive cost-savings. As technology develops there might be a wish from legislators to implement changes i.e. environmental friendly ships.

1This trend section is mainly based on Shipping Strategy by Lorange (2009) and Shipping Strategy 3.0 by Quartz + Co (2010)

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 Environmental factors: Safety concerns are important not least in shipping. Focus will be limiting any spill from ships that can potentially affect the ecosystem and the emission of CO2. This might lead to strengthened regulation by legislators.

 Rebalancing the competitive edge - Developed vs. emerging shipping nations: Competitors might emerge in new markets and challenge the existing order in the international shipping environment.

 More capital-intensive focus: By reducing cost and increasing efficiency an increased focus will be on capital intensity and the ability to invest in new ships.

 Capital abundant – and not so abundant: Financing costs have gone up due to the credit crisis in 2007 and political regulation has been enforced, which leads to a scarcity of capital.

 Financial markets: Due to the crisis there is limited liquidity in the market. This could potentially lead to companies going bankrupt and causing change in the market place.

 Accelerated professionalism: Shipping companies need sharp minds in the future and there appears to be more competition in the industry compared to previous times. The shipping industry is now in need for i.e. financial specialists and is hiring from other industries. Furthermore it appears that these new professionals are very internationally minded.

 Market Capacity: In connection with the development of world trade and the overall economic volatility there is a need for analysing the market capacity and adjusting accordingly in order to secure profitability.

 Energy prices: Energy prices will be one of the determining factors when designing networks and choosing a commercial strategy. The focus on energy will both be from a capital as well as a sustainability perspective.

As shown in the list of trends there are many factors that have an effect on the industry, which leads us to step 4, ranking the above-mentioned trends as follows, based on the impact the trend has on the shipping industry:

1. World trade 2. Globalisation 3. Demographic shifts 4. Dispersed manufacturing 5. Technology

6. Energy prices 7. Financial markets 8. Environmental factors 9. The geopolitical scene

10. Uneven economic growth and turbulence

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12. Terrorism 13. Market capacity

14. More capital intensive focus

15. Capital abundant – and not so abundant 16. Accelerated professionalism

In step 5 we eliminate trends 11-16 because we categorized these as having minor importance. Furthermore some of the trends and drivers are interconnected.

In our analysis we have chosen the predictable variable within the shipping industry to be demographic shifts and movements – step 6. We identify this as an independent variable that will play a considerable role in the time horizon we have chosen for the Scenario Planning exercise. This also applies to the shipping industry that relies heavily on where people buy goods which is important when planning the transport network.