Chapter 7: The Logistics Functions of Shipping Lines: Perceptions of International Shippers in South Korea and the UK
7 The logistics functions of shipping lines: perceptions of international shippers in South Korea and the UK Ki-Soon Hwang, Richard Gray and Kevin Cullinane 1 Introduction Depressed demand and low freight rates resulted in relatively low profit margins for the container (liner) shipping sector during the 1990s. On average, the return on equity was only about 2 per cent from 1993 through 1997 (Amand, 1999) and, apart from a temporary respite from poor profitability in 2000 (Power, 2003a), this situation only really improved from the start of 2003 until the current malaise emerged towards the end of 2007/beginning of 2008 (UNCTAD, 2008). In order to lighten the burden of financial woes experienced by the shipping industry, it became popular in the 1990s to pursue what amounted to cost-cutting measures, through global alliances and mergers (Kadar and Proost, 1997). More recently, however, shipping lines have tended to diversify into other business areas, in particular the wider logistics market beyond that of simply providing transportation in ships, where they perceive that sufficient customer demand exists to yield greater levels of profitability (Beddow, 2001; Evangelista, 2004). There is also an element of this strategy which relates to the desire on the part of shipping companies to capture the container trade further back along the supply chain or, even more preferably, at source (Cullinane et al., 2004). Considering its potential influence and importance, there has been little research analysing the perspective of international shippers on this diversification of liner shipping companies into the provision...
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