Analysis on Marketing Strategy of Hongkong International Terminal HIT in the HK terminal industry

1
Analysis on Marketing Strategy of Hongkong
International Terminal (HIT) in the HK terminal
industry
Master of Marketing Management The Hong Kong
Polytechnic University - Marketing Management
- Dr. Lorett Lau
Presenters Andy Leung (02413883G) Cary Cheung
(02720545G) Christie Cheung (02435421G) Rita
Chung (02435470G) Ryan Chan (02417833G)
8 Nov 2002
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Overview on the Project Flow
Objective Rationale on our project
Introduction - History of HK Terminals

• Situation Analysis
• - Macro and Micro Environment
• PEST
• Porters 5 Forces

• Opportunity
• Competitive Advantage

Company Profile of HIT
Marketing Strategy Identification, Selection
Recommendations

• Analysis on Marketing Strategy
• Market Segmentation
• Target Market
• Positioning Analysis 7P

3
Presentation Objectives

• Analysis on marketing strategy of Hongkong
  International Terminals (HIT)
• Recommendations to HIT on the enhancement of
• Outperforming rivals
• Maintaining market share and leadership

Objective
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History of HK Terminals

• Containerization in 1966
• Kwai Chung was purpose-built container terminal
• With innovative IT application, it led the world
  in space usage and productivity.
• With China's open-door economic policies, it
  expanded significantly
• By 1987, Hong Kong was number one in the world
  container league

Introduction
5
History of HK Terminals

• Today, with over 80 international shipping lines
  providing 460 weekly container services to more
  than 170 ports worldwide.
• The integration of Kwai Chung into the network of
  South China ports, continue to make Hong Kong a
  sea-trade logistics hub.

Introduction
6
Market Overview
Hong Kong Terminals handled gt60 of throughput
in sea platform and HIT with market share about
50

• Sources
• Government Census and Statistics 2001
• Summary statistics of port traffic in HK-July,
  2002

Introduction
7
3 Types of Operation Mode in Sea Platform

• Handling cargo at port
• Containers handling with safe
• Can handle overseas and local cargo

• Handling container cargo at mid stream or tied up
  at buoys in the harbour
• Containers break easily

• Handling cargo at river trade
• Handle cargo of Pearl River Delta

Introduction
8
Sources Hong Kong Port and Maritime Board-Port
traffic trend 2001
Introduction
9
Situation Analysis
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Situation Analysis
PEST
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Economics
Political
PEST
Social / Demographic
Technology
PEST
12
Political Environment

• HK is a free trade port
• Customs procedures in Shenzhen area
• Complicated and time consuming customs procedures
  in China
• C-TPAT issue in HK (Customs Trade Partnership
  Against Terrorism)
• To enhance port security in HK (after 911)
• It adds some uncertainty to HKs customs
  procedure, because there is no CLEAR PICTURE up
  to this moment

PEST
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Economics

• Regional Economy
• Guangdong GDP ?8 in 2000 and ?8 in 2002
• Regional throughput volume ?16 in 2000 and ?15
  in 2002
• Expected GDP continue ?9 in next 5 years
• HK Economy
• Hong Kong GDP ?2.3 in 2000 and ?1.5 in 2002
• Hong Kong Volume ?13 in 2000 and ?4 in 2002
• Expected GDP continue ?3 in next 5 years
• US Economy
• US GDP ?4 in 2000 and ?3 in 2002
• Export to US Volume ?8 in 2000 and ?1 in 2002
• Expected GDP continue ?3 in next 5 years

Sources Guangdong Statistical Year Book
2001 Hong Kong Monthly Digest of Statistics
2002 Economist Intelligence Units report
(Oct 2002) Forecast figures Economist
Intelligence Unit s report (Oct 2002)
PEST
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Social Demographic

• In Pearl River Delta Main focus is
  Manufacturing industries
• Foreign investment grow very fast
• e.g. Japanese investment in Guangdong increased
  by 94 in 2001
• Taiwan investment in Guangdong also
  increased by 30 in 2001
• All this will boost up the size of workforce and
  cargo flow in
• the region.
• Technological
• Fast moving technology in the industry force the
  players to build up new IT systems to meet market
  and customer needs
• e.g. Introduce EDI service to Customers
• Improve their system to increase their
  operation efficiency
• Online services to meet market needs

PEST
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Summary on PEST

• Economic opportunity for the industry which is
  subject to some uncertainties of C-TPAT

PEST
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Porters 5 Forces
Porters 5
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• Threat of New Entry VERY LOW
• Very high barrier of entry
• Huge amount of money have to be invested
• High Land cost in Hong Kong
• High human cost for skill people
• High exit barrier !
• e.g. Modern Terminals needed to raise a
  HK2.6 billions from banks to develop 2 berths
  in Container Terminals 9 (Source MTLs
  web-site)
• Bargaining Power of Supplier LOW
• Including both Hardware and Softwares supplier
• Low concentration gt 5 Suppliers
• Low switching cost

Porters 5
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Threat of Substitutes Medium - Shipping lines
may shift to some other operation modes,
like Mid-stream operation due to lower price
- HOWEVER, brand name and service level will be
affected Bargaining Power of
Customers Very HIGH - High concentration
(Top 10 customers contribute volume gt80) -
Major customers have high bargaining power - Low
switching cost for customers
Porters 5
19

• Competitive Intensity among Current Competitors
• Industry growth is slow
• High fixed cost
• Competitors provides standardized service
• Low switching costs for customers
• ? Customers are very sensitive to price
• ? Need to pay more attention to maintain their
  business and market share

Porters 5
20
VERY LOW
LOW
VERY HIGH
MEDIUM
Porters 5
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Company Profile of HIT
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HIT - Company Profile

• Flagship operation of the Hutchison Port Holdings
  (HPH) Group
• Established in 1969
• Service-focused organization
• state-of-the-art computer systems (management)
• application of leading-edge technologies (IT
  application)

Introduction
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HIT - Company Profile

• Situated in the Kwai Chung container port area
• Existing 6 berths
• By 2004 2 more berths at Terminals 9
• In 2001
• Throughput of 5.4 million TEUs
• About half of Kwai Chung's container port traffic

Introduction
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Corporate Mission

• To be the worlds leading container terminal
  operator through excellence in service, teamwork
  and innovation.
• With goals, value competitive scope!

HIT
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Corporate Vision

• We will forge even closer relationships and
  successfully meet the challenges and
  opportunities which lie ahead
• Eric IpManaging Director - HIT

HIT
HIT
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Business Strategy

• Generic Competitive Strategy
• Cost-Leadership Strategy
• a) Low Level of product differentiation
• b) Concentrated marketing to major customers
• c) Focus on increasing his efficiency and
  lower production cost
• per unit

HIT
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Container Port Performance Benchmarks

• HIT 58
• MTL 44

Source Quarterly report of Drewry Shipping
Consultants Ltd, Individual terminals in HK 2002
HIT
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Analysis on Marketing Strategy
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Market Segmentation

• Segmentation Base Variable
• Geographic
• Trade Destination

Source HIT Sale Department 2001
Segmentation
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• Usage Rate
• Different groups of customer determining by
  contract sales scale
• Top 10 customers contributed 83 of total business

Source Sales people of shipping companies 2001
Segmentation
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Target Market Strategy

• Target Market
• US and Europe Market
• 86 of trade comes from these markets
• Key contractual customer

Target Market
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• Multi-segment Target Strategy
• HIT offers the standard service to wide variety
  of customers, with different price to different
  segments (like geographic and usage-rate)
• a) Terminal Handling Charge in different areas
  are different
• Asian trade 1800 per 20-container
• Europe trade 2075 per 20-container
• US trade 2153 per 20-container
• b) Price is also related to the customers
  size.

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Positioning of HIT

• HIT positions itself as a customer-oriented
  terminal operator

Positioning
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Determining Successful Factor

• 2 major determining factors
• Customer Service
• Efficiency

Successful
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Perceptual Map
Positioning
Remarks CCT Chi Wan Container Terminals
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Pricing

• Price Elastic
• Price is set near competitive levels
• Price Comparison on Competitors

Source Market Information from Shipping lines
2001
Pricing
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Place

• Container Terminal 4, 6, 7 and 8 East
  (joint-venture with COSCO) at the Kwai Chung
  Container Port
• Comprehensive upgrades have increased stacking
  capacity to over 104,000 TEUs within an area of
  122 hectares

Place
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Place

• Geographical Edge of HIT
• With dominant no. of berth 6 berths
• Proportion of HIT to the total

Place
Data source Hong Kong Port and Maritime Board
2001
Place
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Product-BCG Matrix
High
Market Growth
Low
High
Market Share
Low
BCG
CFS Cargo Freight Service
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Product
Source HIT Sale Department - Sep 2002
Product
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Promotion

• Brand Building
• To build up a positive corporate image
• To build up professional image
• (a) Active in various community service
• Youth Education
• Helping the Community
• Road Safety Event
• Government Industry Event
• (b) Active participation in the industry
  competition, E.G.
• Best Container Terminal Operator in the Lloyd's
  ListMaritime Asia Awards 2002
• Hong Kong Occupational Safety and Health
  Enhancement Forum - Gold Award 2001

Promotion
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Promotion

• Below-the-line promotion program
• HKCTOA and HK Government go to other countries to
  promote HK as a transshipment ports
• Go to visit different shipping lines, both
  existing and non-existing, to sell their services
  in order to enhance brand-name

Promotion
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Process

• 50 of total throughput in Kwai Chung Container
  Port
• Operates 6 berths on at its wholly owned
  terminals 4, 6 and 7
• And another 2 berth through its 50-50 joint
  venture with COSCO
• Invested HK1.5billion on its Productivity Plus
  Programme in 1994 in order to raise the
  productivity

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Physical Evidence

• HIT strong historical background and sound
  corporate identity and image
• Excellent reputation in the industry
• Professional experience in handling difficulties
• All facilities achieve at international standard
  and requirement, as well as complied with the
  safety standard
• Innovative premier in the industry
• HIT use internet to share an increasing amount of
  information. Our many interfaces with customers,
  vendors and other partners reflect our
  customer-services focus.

Physical
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People

• HIT is a dynamic, customer-driven business,
  dedicated to enhancing the competitiveness of the
  many shipping lines we serve
• One stop-shop for customer service. The Customer
  Service Team comprises dedicated staff to answer
  customer calls and enquiries
• Staffed by people with a deep knowledge of our
  operations
• Provide sufficient training to their staff,
  included
• enhancing some selected staff knowledge by
  sending them to other HPU ports in different
  areas

People
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Successful Marketing Strategy

• Based on
• Business Performance
• Market Share
• Market Share Comparison
• HIT vs Key Competitor MTL
• Sales volume growth

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• Market Share in 2002

Source MTL Sale Department - Nov 2002
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Market Share ComparisonHIT vs Key Competitor MTL
Source MTL Sale Department Nov 2002
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Trend of Sales Volume of HIT
Source HIT Sale Department 2002
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Competitive Advantage Summary

• Geographic edge
• Reputable brand image
• Innovative
• High efficiency
• Dominant Market Share
• Ways to continue for success?

Advantage
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Recommendations
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Recommendations

• Strategies to overcome competitors
• Encourage international shipping lines to
  increase the frequency of services through Hong
  Kong
• Hong Kong gt 160 ocean-going sailings per week
  
• Shenzhen about 60 ocean-going sailings per week
• (Source HK and Shenzhen Shipping Gazette
  2002)
• Increase IT spending
• Build up the two IT business models (InfoXpress
  and Customer Plus) from Problem Child to
  Stars
• Enhancing the functionality of the systems
• Promotion Events such as staff application
  training or seminars for shipping lines

Recommendation
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Recommendations

• Relationship Marketing
• Select strategic partners, e.g. major shipping
  lines, as investors of the port so that they will
  increase the usage of their services
• e.g MAERSK, PON, MSC, APL, COSCO TOP 5
  shipping
• lines in the world
• Strategic alliances with other HPU ports. Strong
  network and relationship offers competitive
  advantage over others on improved efficiency,
  operating cost and customer services

Source Salomon Smith Barney Containerized
Transport (Nov 2001)
Recommendation
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Recommendations

• Strategy to maintain/Increase market share
• Berth Availability
• Enough Berth provide on-time berthing for vessels
• Have better communication with shipping lines on
  schedules

TO BUILD TOTAL CUSTOMER SATISFACTION AS A
CORPORATE GOAL
Recommendation
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Recommendations

• Strategy to maintain/Increase market share
• Efficiency
• Utilize and enhance equipment efficiency
• Increase the capacity in return
• Existing Efficiency
• HIT 70 containers/ hr
• MTL 65 containers/ hr
• CHIT gt75 containers/ hr
• CSX gt75 containers/ hr

Source MTL Sales Department 2002
Recommendation
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Recommendations

• Strategy to maintain/Increase market share
• Responsiveness to customers request
• Setup dedicated team for major customers (each
  individual shipping lines)
• Complaints handling
• Each complaint will be reviewed by separate
  committee leaded by Senior Director
• Corporate Advertising
• To enhance the Corporate Image in the industry

Recommendation
57
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