Ocean Shipping Blog

Business in an Age of Creative Destruction

Nelson Cabrera — Wed, 01 Feb 2012 01:33:47 +0000

Today’s corporations are struggling to survive for very long. Technological advances can take such sharp turns so quickly, that huge companies are often behind the times before they can figure out what happened. Very few corporations actually make it to 40 years old anymore, according to a study of over six million firms by management professors Charles I. Stubbart and Michael B. Knight.

“Despite their size, their vast financial and human resources, average large firms do not ‘live’ as long as ordinary Americans.” They use the examples of large companies such as Eastman Kodak Co., Blockbuster Inc., and Barnes & Noble Inc. These companies and more are finding themselves unequipped to catch up once they notice that their greatest money-makers are trending in another direction.

Experts say that the companies surviving are the ones that are “ruthless about change”. They are “not afraid to cannibalize their big revenue generators to build new business”. Companies are finding it necessary to take all kinds of new risks in order to keep from “missing the boat”. They are trying to bring in new technologies by making multiple, smaller acquisitions that open them up to new markets. Things for large corporations are a lot less predictable than they were 15 years ago.

Take IBM, for example. They have survived for over 100 years. They have always been passionate about embracing new technologies. That’s how they’ve come from selling meat and cheese slicers in the early 1900’s to their more recent “aggressive acquisitions of dozens of small companies that expanded IBM’s high-margin software and consulting businesses.”

Not only were they buying into new technological areas, but they were also selling off the company’s “vaunted personal computer business” way back in 2004, “before PCs had been largely commoditized”.

Former CEO Samuel J. Palmisano said in an interview last year that “We’ve lasted 100 years, because we never limited ourselves to a view of a particular product.”

Other companies, like Hewlett Packard, were slow to jump in when business software was emerging, and have been spending a lot of money trying to catch up. Harvard Business School professor Rosabeth Kanter said that “HP has been trying to do everything IBM is doing but five years late.”

Apple is a shining example of a company not eaten up by “creative destruction”. According to a recent article in The Wall Street Journal, in the early 1990’s, Apple’s innovative CEO Steve Jobs “refreshed their PC line and carved out a dominating position in digital music with the iPod. But he readily put both of those businesses at risk the new products several years later.” He “cannibalized the iPod with the iPhone”. He did the same to the PC and notebook businesses by launching the iPad tablet computer.

A lot of big companies will tell you that there is a lot of luck involved, but the difference in being successful long-term or not seems to depend on a company’s ability to innovate.

Sources: http://online.wsj.com/article/SB10001424052970204331304577144980247499346.html

About the Author: Nelson R. Cabrera is the Business Development Manager of Lilly & Associates International, a transportation and logistics company specializing in ocean freight and ocean shipping services. For more information, please visit http://www.shiplilly.com/.

Rules of Personal Achievement

Nelson Cabrera — Sat, 28 Jan 2012 01:35:47 +0000

“Consider whether the objects you own service you or enslave you. Over the years, collections accumulate and the joy in acquiring can quickly turn into the task of care giving. Somewhere in the transition the freedom of body and mind are abdicated for a choice freely made.” Powerful words from a powerful source of motivation, Judy Williamson, a writer for The Napoleon Hill Foundation.

Freeing yourself to be successful is a huge part of Napoleon Hill’s philosophy of success. Williamson’s views on revenge and hate mirror those of the highly respected Napoleon Hill. She points out that the spirit can be transformed from its lowest to our highest selves simply by realigning our thought. Hill, famously quoted, dictates that “The only people you should get even with are those who have helped you.”

In Napoleon Hill’s “The Commandments of Success”, he primarily emphasizes ways of bettering yourself and your life, as opposed to concentrating on the modern “advertise here, invest there” strategies that we are so often bombarded with. The “Commandments” are more of his “Philosophy of Personal Achievement”, which should not only help you to become a success on paper, but a success in your own mind; perhaps the most difficult task in life to achieve.

Take your time as you read the following “The Commandments of Success” and think about how they relate to you and your own personal endeavors. “If followed, in a spirit of sincerity, these ten rules will help you to occupy all the space in the world which your talents, education and experience entitle you to enjoy, and they will bring you that sort of peace of mind which surpasseth understanding.” -Napoleon Hill

1. Set your head and heart upon a DEFINITE MAJOR PURPOSE and go to work, right where you stand, to attain it; and begin NOW.

2. Adopt and follow the habit of GOING THE EXTRA MILE by rendering more service and better service than you are paid for, thus enlarging the space you may occupy in the world.

3. Control your MENTAL ATTITUDE and keep it always positive and free from the spirit of defeatism.

4. Apply the GOLDEN RULE in all your human-relationships, no matter what others may do.

5. Learn all that others have discovered in connection with your occupation, job or business, and profit by their experience, thus saving yourself both grief and loss of time.

6. Eat sparingly, of the right combination of foods, and make sure that your "system" is always free from toxic poisoning.

7. Keep your dominating thoughts upon the things you desire and demand of life, and off the things you do not desire.

8. Learn to transmute your sex emotion into the attainment of your DEFINITE MAJOR PURPOSE, at will, remembering that this is a creative force of unknown, unlimited possibilities.

9. If you work for another person, do your work HIS WAY, not yours, and do it in a gracious, pleasing manner.

10. Instead of criticizing others (no matter how much they may deserve it) devote your time to the discovery of traits of your own which should be corrected lest they provide the basis of just criticism against you.

Sources:

http://www.naphill.org/about/latest-ezine/

http://www.naphill.org/

China Leads in Luxury Brands

Nelson Cabrera — Wed, 25 Jan 2012 01:41:35 +0000

In an article by Barbara Demick, we’ve found out that China has become more of a consumer of luxury goods while other countries have shied away. She points out that only a decade ago, inhabitants of Beijing could be seen pedaling bicycles down “alleys lined with courtyard houses that had no indoor toilets. Now, the alleys have been replaced by a wide avenue lined with Lamborghini, Ferrari, Bugatti and Rolls-Royce dealerships.”

China is quickly becoming the leader in the world’s consumers of luxury goods. High-end luxury brands are increasing their presence in China and taking notice that their sales have dramatically increased there. Until now, Japan has been the leader of consuming these luxuries, but consultants at McKinsey & Co. expect that “China will bump Japan out of first place by 2015 as the leading market for pricey goods.” Some analysts feel that the Chinese already own the luxury sector, despite their “softening real estate market”.

Demick reports that the numbers depicting the spending of Chinese on luxury items is actually abbreviated, due to the fact that many Chinese do their shopping abroad to avoid the steep taxes placed on their luxury items, such as designer clothing, high-end car brands, and electronics. She also points out that we may not see some of the extravagance that is going on because Chinese culture is “rich with proverbs about the terrible things that can befall you for showing off”.

In contrast, Klaus Paur, an auto industry analyst and managing director in the Shanghai office of Synovate Motoresearch says that “People are more extroverted. They have no problem showing off their wealth.” According to the article written by Barbara Demick, he recalls that when he visited China in 2003, the wealthy were driving “large Mercedeses and Audis, invariably in black”.

China’s taxes on luxury goods are arguably the highest in the world, often reaching around 60% sales tax. This is why the wealthy people in China that want to purchase these goods often, will be inclined to travel overseas to do their shopping.

Another note in the article states that Ouyang Kun, who runs the World Luxury Association in Beijing, said that “The government feels luxury items are only affordable for a few people. They don’t want to create unharmonious feelings among the people.” This statement was made in response to the ban of the word “shechi”, meaning luxury, in advertisements and company names in China.

Sources:

http://en.wikipedia.org/wiki/Barbara_Demick

http://www.thoughtfulchina.com/en/klaus-paur.html

http://www.bloomberg.com/news/2011-12-20/bmw-audi-battle-hinges-on-china-luxury-market.html

Learning to Use Your Hidden Assets

Nelson Cabrera — Sun, 22 Jan 2012 01:44:48 +0000

Everyone has the potential to be a success. Napoleon Hill, the father of “self-help” books, feels that we merely need to learn how to tap into our hidden assets in order to cash in on them. He’s famous for many, many quotes on personal success, but one that he’s possibly most famous for is, “"What the mind of man can conceive and believe, it can achieve.”

Napoleon Hill is a brilliant writer and motivator of thousands, if not millions of people. He pushes people to search their mental and creative banks for finding their hidden assets. This is only part of his “formula for success”, but perhaps one of the most important parts of it. Figuring out what you have to offer the world is something that no one can take from you. We all have individual strengths and circumstances that lead us to the possibility of success.

Hill considered “freedom, democracy, capitalism, and harmony” to be the foundation on which to build success. Words like fear, selfishness, doubt, etc. were considered to be the “source of failure for unsuccessful people”. The bottom line is to free your mind, open yourself up to the possibilities that may be out there for you, and then tackle them with abandon and positivity.

Finding hidden resources is important once you are ready to run with your ideas. Use the people that you know or have access to. You may unveil a “friend of a friend” who could help you turn your ideas into success. Sometimes taking the fear out of beating down the door of a powerful person in charge could be all the you need to impress them with your positively focused endeavor.

With an idea in place, the secret may be to make the idea available to the masses. Napoleon Hill uses the example of F.W. Woolworth in his example of this. “Woolworth didn’t create anything new. He merely took something old and gave it a new method of sales and distribution.” Woolworth was well known for his insight into how to become successful and wealthy. He is noted as saying, “Get some useful item that will bring repeat sales. Then, put everything you have into taking it to the millions of people who need it.”

One simple idea could be all that it takes for you to become the independently wealthy success that you’ve always dreamed of being. Think hard about what you have to offer the world and then get out there and offer it in every possible way.

Sources:

http://en.wikipedia.org/wiki/Napoleon_Hill

http://en.wikipedia.org/wiki/F._W._Woolworth_Company

http://www.naphill.org/

China Passes Low-Cost Production to US and Mexico

Nelson Cabrera — Fri, 20 Jan 2012 01:47:12 +0000

China’s manufacturing and production rates are no longer leading the world for cost advantage as it relates to US imports. In 2011, Mexico proved to have the lowest costs for US importers. Other countries, including Russia, Vietnam, and India also beat out China for being among the lowest-cost producers for the United States last year.

A report produced by AlixPartners, a professional-services firm concentrating in global transportation and manufacturing industries, said that low-cost manufacturing locations in Asia will no longer have the cost advantage over the United States and Mexico in 2012. The 2011 US Manufacturing-Outsourcing Cost Index expects that China could lose its cost advantage over the United States in four years if freight rates rise around 5 percent annually. However, they do point out that there are a “large number of factors that drive a manufacturing cost, three will be critical in the coming years for China: wage inflation, exchange rates, and freight fees”.

An article on The Journal of Commerce website says that “While the U.S. regained some cost advantage relative to the major low-cost countries in 2011 due largely to the weak dollar, AlixPartners said the major LCCs maintained a cost advantage over U.S. domestic suppliers, with savings potential similar to that seen in 2005-2006.”

China has been dominating the manufacturing market for years, but increasing wages and decreasing quality have brought them to the point of needing to pull back. In South China, they expect wage increases to be around 20 percent a year. They also report that their work force is “aging” and “generally does not work as fast as younger workers in other regions”. The JOC also reports that exchange-rate pressures and higher ocean freight rates could contribute to China’s loss of advantage over US production.

“Since 2007, Mexico, some locations in Europe and locations in Asia other than China have gained a competitive advantage for offshore manufacturing. In addition to Mexico, emerging LCCs, including India, Vietnam, Russia and Romania, had lower landed cost for their exports to the US” according to The Journal of Commerce.

It is expected that the United States will need to make changes in their manufacturing and production procedures to adjust to the shift. The JOC reports that “China may not lose its cost advantages over the US”. However, the report by AlixPartners says that US manufacturing could find themselves in trouble if they continue relying on China for their supply base. United States manufacturing will need to be flexible over the next few years to “adopt a flexible sourcing strategy”.

Sources:

http://www.joc.com/supply-chain-management/china-asia-cost-advantages-erode-mexico-gains-report-says

http://www.alixpartners.com/en/WhoWeAre/WhyAlixPartners.aspx

http://www.joc.com/supply-chain-management/shoe-makers-looking-beyond-china

http://www.alixpartners.com/en/WhatWeThink/Manufacturing/2011USManufacturingOutsourcingIndex.aspx

Guerrilla Marketing: What is Holding You Back?

Nelson Cabrera — Tue, 17 Jan 2012 01:49:40 +0000

Jay Conrad Levinson, the foremost respected business marketing expert in the world, is well known for his advice on how to make your business a success. He recently wrote an article on how to accomplish huge tasks with grace and success. “Guerrillas” are renowned for their patience in business, but Levinson points out that they “never wait too long” for the right opportunity to happen. He quotes General George Patton’s words, “A good plan implemented today is better than a perfect plan implemented tomorrow.” Meaning, don’t sit around forever just waiting for perfection to happen. Levinson advises to “perfect activities as they attack” rather than “beginning with perfection”.

Levinson believes in the power of the written words. In his article, he says that they have enormous power. Egyptians thought that words were magic and if you wrote them down, then they surely would happen. Levinson uses this example as a cornerstone in the business strategy of making things happen. He calls it a “guerrilla marketing attack”.

In this “attack”, you get yourself into a mindset to put your plans into words. You write down the plan. Don’t leave success up to chance and luck. Make it happen by writing it down, planning out your attack, and then getting the ball rolling. Once you write it down and truly believe it, you will exude the confidence in the plan to make it work. Everyone you work with, pitch to, and even come in contact with should feel the energy that you are sending out into the world.

This energy comes from carefully selecting the words that you are going to write and then using them as the starting point to make your dreams a reality. It may be a lifelong journey to accomplish the goals that you set forth for yourself. Using your inspirational plan as a starting point will ensure that “someday” starts happening now.

You don’t have to be a perfectionist to come up with the perfect plan. Staying in that mindset will actually hold you back from success because you’ll never be willing to make a mistake, and therefore, you will never learn from them. Getting started with the expectation that you will run into bumps in the road will at least get you started. With each challenge that is presented to you, you will learn how to handle it with grace and precision. This will lead you to the perfection that you crave in conquering your endeavors.

Sources:

http://www.guerrillamarketingassociation.com/

Ocean Shipping Lines May Have Lost $5.2 Billion in 2011

Nelson Cabrera — Mon, 16 Jan 2012 01:52:11 +0000

In 2010, ocean shipping lines earned somewhere around $20 billion. However, third-quarter losses in the sector combined with “industry fundamentals” have led Drewry to predict in its latest quarterly Container Forecaster that ocean shipping lines could have lost around $5.2 billion in 2011. This is “despite a projected growth in global demand of 6.5 percent”.

“Vessel overcapacity, poor headhaul growth on the major east-west routes and the continued fight for market share among the largest carriers caused spot rates to fall by more than 50 percent on the key headhaul routes by the end of 2011,” according to an article on The Journal of Commerce website.

Ocean freight carriers tried to manipulate capacities through the fourth-quarter, but were not very successful in raising spot rates. They did come up some in January of 2012, but the rise is currently credited to the yearly spike before the Chinese New Year.

Capacity issues continue to loom on the horizon as many ocean shipping companies await the delivery of ships that they ordered last year. The Journal of Commerce expects that “the New Year will be another challenging year for liner operators as delivery of big ships will continue to be a problem and carriers’ future lay-up strategies will dictate if they make money or not.” Neil Dekker, Drewry’s Head of Container Research says, “We believe that at the current burn rate, carriers’ cash reserves will run out during the second half of 2012. If they do not put a substantial amount of tonnage into lay-up by this time, the consequences could be dire.”

The container shipping industry continues to adapt as they’ve learned to do in the last couple of years. They realize that consolidations need to take place to make it through the difficult times. Neil Dekker of Drewry doesn’t expect that consolidations will come from “company acquisitions”. “Consolidation is more likely to happen through the disappearance of small players,” he said.

Drewry also reports that they do not believe that the “current supply/demand fundamentals on the key east-west trades” are strong enough for ocean carriers to “push through any sustained revenue increases”, according to The Journal of Commerce. They say that some ocean shipping contracts signed on the Asia-Europe trade are at levels that are “below break-even”. They are reportedly “around $1,100 per 40-foot equivalent container unit including all surcharges”.

Drewry estimated in the report that “idling could reach as much as 8 percent of the global fleet during the second half of 2012, which would be equal to about 1.3 to 1.4 million 20-foot equivalent units”.

“Carriers will at some stage in 2012 be forced to idle tonnage, even if the lead players are showing no inclination to do so at the moment,” Dekker said. “This will enable a partial recovery in spot rates during the second half of this year.”

Sources:

http://www.joc.com/container-shipping/drewry-says-container-lines-lost-52-billion-2011

American Jobs and Manufacturing on the Rise?

Nelson Cabrera — Tue, 22 Nov 2011 02:40:59 +0000

It seems to be the consensus in the news that the United States does not manufacture anything anymore. It seems that a lot of manufacturing has moved overseas and factories have done nothing but shut down. However, this isn’t exactly true. The United States is actually a global manufacturing powerhouse, accounting for one-fifth of the world’s manufacturing output in real terms.” In 2010, United States manufacturers exported “$1.3 trillion in goods”. This is “a sum about equal to the size of Australia’s economy”. 2011 is expected to be an even better year if the current trends continue.

So if manufacturing has actually been increasing, why does the general consensus seem to be that the United States isn’t producing anything anymore? It’s actually because manufacturers are producing more goods with less employees. United States manufacturing output has grown by “2.5 times since 1970, “even as employment shrank by 30 percent. Manufacturing jobs were decimated during the Great Recession and the anemic recovery that followed, plunging by 2 million positions, to 11.7 million jobs, from December 2007 to August 2011. (Manufacturing employment is up 2.5 percent, or 285,000, from its 2009 nadir; in keeping with the productivity story, however, manufacturing production has risen 13.2 percent from its 2009 low.)”

Manufacturing jobs, however, are still expected to come to the United States. This is because operational costs and labor costs overseas have been increasing. Additionally, logistics costs and the risks of having a long supply chain have increased. “Taken altogether, the global manufacturing strategy is shifting to more of a regional strategy to sell to local markets,” says David Simchi-Levi, professor of civil and environmental engineering at the Massachusetts Institute of Technology.

Many companies in the United States have moved their production overseas in the past few years because of cheap labor offered abroad. It used to be true that it was a lot cheaper to have things produced overseas and then have them shipped to the United States. However, labor costs are on the rise. Now, the cost of producing goods in the United States is almost the same as producing overseas. Plus, many companies believe that the shortened supply chain holds fewer risks and they are more assured of production quality.

Still, many people believe that production will always chase the “lowest-cost location”. Some expect production to move away from China and towards other areas, such as Vietnam, Mexico, and Africa. So, it may not be as simple as it sounds to move production from overseas and bring jobs back to America. “Simple or not, for the first time in decades, it seems that a number of underlying economic trends favor American manufacturers keeping more production business at home. That could be a relatively bright spot in a gloomy U.S. jobs picture.”

Sources:

http://www.businessweek.com/finance/hope-for-american-manufacturingmdashand-maybe-jobs-10142011_page_2.html

http://www.businessweek.com/finance/hope-for-american-manufacturingmdashand-maybe-jobs-10142011.html

Supply Chain Tax Considerations for Latin America

Nelson Cabrera — Sun, 20 Nov 2011 02:32:47 +0000

Lately, we have seen a decrease in international trade and foreign direct investment throughout the world. This was in response to the recent global economic crisis. Now, companies are looking to restructure and adjust their supply chain operations to improve their tax positions.

“According to the World Bank, foreign direct investment in Latin America fell to approximately $77bn, down 42 percent from record highs in 2008. South America declined by about 40 percent to $54bn, and Mexico and the Caribbean saw declines of about 46 percent to $22bn. Despite these drops, foreign direct investment for the region in 2009 was still the fifth-largest amount ever, and Latin America’s growth outlook is expected to exceed that of Europe and the U.S. through 2012.”

Now we are seeing an increase in new investments and other signs that the economy is beginning to recover. Latin America seems to be in line for recovery, falling only shortly behind Asia with “sufficient levels of growth to bring foreign direct investment back above $100bn in 2011, an increase between 40 percent to 50 percent. Brazil in particular is expecting significant growth in foreign investment and infrastructure development as it prepares for the 2014 World Cup and the 2016 Summer Olympic Games.”

Companies are looking to move some business to different jurisdictions. They have to consider legal differences, different currencies, and different customers. Things can get a little complex. The countries in the region are also competing with each other for foreign investment, so this in itself can make things more complicated. The region of Latin American countries has been excluded in the past because of small revenue levels or because of the complexity that arises from special tax laws. Companies have just found it easier to limit themselves to the Asian and European regions.

Now Latin America is proving itself to be more beneficial. The growth potential there is resulting in a “greater focus on supply chain structures in the region”. Companies looking to optimize their supply chain logistics are now looking at Latin American hubs.

Panama has an effective rate of less than 0.75 percent, only 3 percent of the net income earned from foreign operations. Panama is strategically located to be a regional hub. It is in a “favorable tax jurisdiction” with free trade zones and a territorial tax system, and also has a capable infrastructure.

According to an article on Supply Chain Brain’s website, companies should be cautioned that “although territorial jurisdictions offer some significant benefits, they are often perceived as tax havens by other countries in the region, such as Mexico, Brazil and Ecuador, with many countries penalizing certain transactions with low-tax jurisdictions.”

Sources:

http://www.supplychainbrain.com/content/nc/general-scm/business-strategy-alignment/single-article-page/article/protecting-yourself-with-a-tax-effective-supply-chain-in-latin-america/

Guerrilla Marketing for the Internet

Nelson Cabrera — Sat, 19 Nov 2011 02:23:01 +0000

Jay Conrad Levinson, author of the extremely successful book “Guerrilla Marketing”, is considered a marketing industry genius. Levinson is an expert at using unconventional marketing tools to create success for businesses, big and small, that have limited resources. His marketing concepts have been so influential that his books have been published in sixty-two languages and are required reading for many MBA (Master of Business Administration) programs worldwide.

Levinson is a creative marketing master, creating marketing materials for all forms of media for many, many years. He spent many years of his life working with and heading up creative teams that developed such notable name brand campaigns including The Marlboro Man, The Pillsbury Doughboy, Allstate’s Good Hands, United’s Friendly Skies, The Sears Diehard battery, Morris the Cat, Tony the Tiger, and the Jolly Green Giant.

“It is a body of unconventional ways of pursuing conventional goals. It is a proven method of achieving profits with minimum money. The need for guerrilla marketing can be seen in the light of three facts:

1. Because of big business downsizing, decentralization, relaxation of government regulations, affordable technology, and a revolution in consciousness, people around the world are gravitating to small business in record numbers.

2. Small business failures are also establishing record numbers and one of the main reasons for the failures is a failure to understand marketing.

3. Guerrilla marketing has been proven in action to work for small businesses around the world. It works because it's simple to understand, easy to implement and outrageously inexpensive.

Guerrilla marketing is needed because it gives small businesses a delightfully unfair advantage: certainty in an uncertain world, economy in a high-priced world, simplicity in a complicated world, marketing awareness in a clueless world."

Times have changed over the last few decades and so have the “Guerrilla Marketing” strategies developed by Levinson. According to Levinson, “The newest, biggest, most mysterious, most misunderstood and most promising marketing opportunity in history is the one offered by the advent of the internet.”

However, he points out that “there are at least 100 marketing weapons and that online marketing is only one of them”. Online marketing can’t be your only plan for success. But, it should be a part of your marketing mix, combined with “time-honored” methods such as TV, radio, mailing lists, and magazines. Time and space in the media that you choose should point people towards your website. “No media offers you the comprehensiveness of the web.” People are slowly but surely learning that they can find the most information about you online.

Sources:

http://www.gmarketing.com/articles/4-what-is-guerrilla-marketing

http://ginternetmarketing.com/

http://en.wikipedia.org/wiki/Jay_Conrad_Levinson