A FOCUS GROUP RESEARCH ON COMPETITIVE POWER OF DRY BULK FLEET OF TURKEY

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A FOCUS GROUP RESEARCH ON COMPETITIVE POWER OF
DRY BULK FLEET OF TURKEY

• Gül DENKTAS, A. Güldem CERIT
• Dokuz Eylul University
• School of Maritime Business and
  Management,Izmir/TURKEY

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A GENERAL OVERVIEW WORLD DRY BULK SHIPPING

• Demand for shipping services is one derived from
  the demand for international trade (Stopford
  1997) and dry bulk shipping takes an important
  share from demand for shipping industry.
• The raw materials that play an important role in
  the economies of industrialized countries are
  hardly found in the places where they are mostly
  needed (Stopford 1997), so there has always been
  an important demand for dry bulk shipping
  services.

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A GENERAL OVERVIEW WORLD DRY BULK SHIPPING

• Dry bulk shipping was developed as a result of
  the need to reduce transportation costs when
  cargo sizes became large enough to be carried in
  shiploads, and economies of scale were apparent.
• Nowadays, the number of commodities carried on a
  one ship, one cargo basis has increased, thanks
  to increasing demand for raw materials and energy
  commodities, liberalisation in international
  trade, trans-nationalisation of industrial
  processes as well as technological advances in
  shipbuilding and design (Alizadeh and Nomikos
  2002 227).

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World Seaborne Dry Bulk Trade

• International seaborne trade of major dry bulk
  commodities increased from 448 million tonnes to
  1.587 million tonnes in years between 1970-2004.
  The five dry-bulk trades iron ore, coal,
  grains, bauxita/alumina and rock phosphate
  recorded 7.6 , reaching 1.59 billion tons
  (UNCTAD 2005).
• The share of dry cargo shipments in world
  seaborne trade was 65.7 of total goods loaded
  during the year (UNCTAD 2005).
• Whilst world trade has grown, the relative
  importance of the Asia Pacific region as a key
  driver of that growth has increased
  significantly, in part reflecting the
  globalisation of trade and the industrialisation
  of China. In major bulk commodities, total cargo
  growth between 1989 and 2003 was approximately
  470 million tonnes (Clarksons Research 2004).

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World Dry Bulk Fleet (1994-2004)
Figure 1 World Dry Bulk Fleet (Source Platou
Report 2004)
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DRY BULK SHIPPING POTENTIAL OF TURKEY

• Iron and steel industry plays an important role
  in the industrialization and development of
  Turkey. In 2004 Turkey had a steel production
  capacity totaling 22.5 million tons (IGEME 2005).
• In 2004, steel exports reached about US 7.5
  billion with 75 growth.
• Among the markets that Turkish steel products are
  exported the EU is the major export market,
  Middle East is the second and the Far East is the
  third biggest export market (IGEME 2005).

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DRY BULK SHIPPING POTENTIAL OF TURKEY

• As for grain, until 1980, Turkey was the net
  exporter for all grain commodities, but then
  Turkey remained net exporter only in barley and
  net importer in rice and maize. As for wheat,
  Turkey faced some fluctuations and became both
  exporter and importer (IGEME 2005).
• Turkey has a low potential in coal reserves and
  production and so Turkey to become a main
  importer of coal. Turkeys coal imports started
  to increase since 1995 and the highest import
  value of coal was 12.9 million tonnes in 2000
  (Anac 2003).

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Dry Bulk Fleet of Turkey
Deadweight shares of different ship types in
Turkish merchant fleet can be stated as follows
58 dry bulk, 17 general cargo, 10 oil
tanker, 4 container, 3 chemical tankers, 2
Ro-Ro ships and 6 other ship types. Dry bulk
ships cover the largest part of the fleet in dwt
and they are in the second row in numbers after
general cargo ships. (COS, 2004).
Figure 2 Turkish Dry Bulk Fleet in Years Between
1994-2003 in DWT (Source COS 2004)
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Dry Bulk Fleet of Turkey
Figure 3 Turkish Dry Bulk Fleet According to Age
and Tonnage Groups (Dwt) (Source COS 2004)
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COMPETITION, COMPETITIVE ENVIRONMENT AND DRY BULK
SHIPPING

• Competitive strategy aims to establish a
  profitable and sustainable position against the
  forces that determine industry competition
  (Porter 1985 Porter 1996).
• Global strategies contribute to the competitive
  advantage of the firms competing in international
  markets (Porter 1990a Porter 1990b).
• Porter groups the activities performed in
  competing in a particular industry in two
  categories Primary activities and support
  activities. Value chain consists of inbound
  logistics and outbound logistics as primary
  activities of a firm and transportation plays an
  important role in both of these activities (Cerit
  2000).

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COMPETITION, COMPETITIVE ENVIRONMENT AND DRY BULK
SHIPPING

• Maritime transportation activities, and among
  them dry bulk shipping makes use of the support
  activities to create value for the shippers.
• Dry bulk shipping systems are part of the whole
  shipping system and are affected by all the
  external and internal factors surrounding the
  system. Moreover, the dry bulk shipping system
  itself is subject to competitive forces the
  positioning of the dry bulk shipping service with
  respect to competitive strategies affects the
  outcomes of the service (Cerit 2000).

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Aim of the Study

• To determine the competitive forces around
  Turkish dry bulk fleet which constitutes 58 of
  Turkish merchant fleet.
• To collect the approaches of the related parties
  of Turkish dry bulk shipping in order to explore
  the competitiveness of Turkish dry bulk fleet.

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METHODOLOGY

• Focus group research is used as a metholodogy.
• Focus group can be defined as a loosely
  structured interactive discussion conducted by a
  trained moderator among a small group of
  respondents simultaneously (Kinnear and Taylor
  1996 308).

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METHODOLOGY

• As for the main advantages of focus group
  researchs
• They give the researcher the opportunity of
  understanding the participants ideas and
  opinions by their own sentences.
• A focus group enables the researcher to gain a
  larger amount of information in a shorter period
  of time, help to explore or generate hypotheses
  and develop questions or concepts for
  questionnaires and interview guides (Gibbs 1997
  Sim 1998).

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1.Determination of the Aim of the Study
2.Constitution of Focus Group Research Profile
Questions

• 3.Preparation of Discussion Guide
• Opening Question
• Introductory Questions
• Transition Questions
• Key Questions
• Ending Questions
• Summary

Figure 4 Focus group discussion
procedures (Source Cerit 2002b, Nakip 2003,
Kinnear and Taylor 1996)
4. Group Composition and Recruitment
5 . Moderator Selection
6. Interview Protocol and Logistics
7. Implementing the Focus Group Discussion
8.Data Analysis
9.Summary of Findings and Suggestions
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Data Collection Forms and Questions

• Two separate forms were used.
• The first form aimed to collect information on
  the demographic profile of the participants and
  the second one was the moderators discussion
  guide with blanks under each question to record
  key ideas.
• The form about the demographic profile of the
  participants contained two main parts.
• First part was asked to all participants
  including questions about age, education, work
  experience.
• The second part including questions about the
  number of ships, their dwt and their main voyage
  routes (Black Sea, Mediterranean, North Europe,
  etc.) were asked to only participants who were
  dry bulk ship operators.

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Data Collection Forms and Questions

• When developing the questions, certain guides of
  previous focus group discussions were considered
  (Cerit 2002b, Kinnear and Taylor 1996) and also
  related with the subject of the focus group the
  comments and the ideas of experts on dry bulk
  shipping and Turkish merchant fleet were taken
  into account.
• The questions in the discussion guide included
  general competitiveness variables related with
• the position of Turkish dry bulk fleet,
• condition of the fleet from the view point of
  national and international macro and micro
  environmental factors.

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Group Composition and Recruitment
Table 1. Profile of the Focus Group Participants
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• Interview Protocol and Logistics
• The participants were contacted 15 days before
  the session, the structure of the study was
  explained and they were invited to the meeting at
  the specified day and hour.
• The focus group discussion was recorded by audio
  taping, videotaping and also by written notes.
• Implementing the Focus Group Discussion
• Before the discussion the objective of the
  meeting is briefly explained to the participants
  and the questionnaires related to the
  participants demographic profile are
  distributed. Afterwards every question in focus
  group discussion is asked to each participant
  orally.
• After the completion of the structured questions
  a period of 15 minutes was maintained for free
  discussion among the participants.
• Completion of the participants questionnaires,
  the discussion guide and the free discussion
  period lasted in a total of 2 hours and 45
  minutes.

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Data Analysis

• After the discussion the moderator and the
  assistant moderators met to analyze the
  discussion briefly and to find out the common and
  conflicting points reached by the participants.
• Afterwards the data collected by the videotapes,
  audiotapes and as written notes are transcribed,
  coded and analyzed.
• Thus the moderator and the assistants have
  identified the major outcomes of the discussion.

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Results of the Focus Group Research

• Current competitive power of Turkish dry bulk
  fleet
• Participants declared that the Turkish dry bulk
  fleets competitive power is directly related
  with the fleets share in world shipping which is
  very low in percentage because of the ships with
  low tonnages and high age averages.
• Also the participants pointed out that the fleet
  has almost no competitive advantage in Panamax
  and over-Panamax tonnages, comparatively more
  advantage in Handysize and Handymax tonnages.
• Apart from these comments, all the participants
  agreed that potential for Turkish dry bulk fleet
  lies in the coaster market by mentioning the
  strong position of the fleet in Black Sea and the
  Mediterranean region in 1980s and the early
  1990s. However this superiority has been lost as
  a result of increasing number of substandard
  ships not meeting the needs of the customers.

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Results of the Focus Group Research

• Effects of the recent changes in the world trade
  and shipping on competitive power of Turkish dry
  bulk fleet
• In general the effects of the changes of the
  world trade and the shipping on competitive power
  of the fleet were seen positive because high
  increases were recorded in the freight rates, as
  a result of these increases the dry bulk
  operators gained high profits.
• But this gain from the freight rate increases
  occured only in accordance with the amount that
  the operators took share from the world dry bulk
  shipping which is quite low in percentage.
• The reason behind this low tonnage fleet problem
  is the investment of all capital earned from
  shipping operations to land-based operations
  (tourism, in-land carriage...etc.) by Turkish
  ship operators.

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Results of the Focus Group Research

• Effects of macro external environmental factors
  on competitive power of Turkish dry bulk fleet
• In recent years, some regulations such as ISM,
  ISPS and port state controls seem to have some
  destructive influences on dry bulk ship operators
  since these regulations have increased the costs
  commonly.
• Also Turkish dry bulk ship operators have a great
  effort for taking place in the white list.
• By giving importance to technological
  developments in the ship design and latest
  regulatory practices, most of the important
  Turkish dry bulk ship operators have started to
  order double hull dry bulk ships.

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Results of the Focus Group Research

• Effects of suppliers on competitive power of
  Turkish dry bulk fleet
• Main headings for fleets suppliers can be listed
  as finance, labor, shipbuilding, port services,
  bunker supply, ship supply and ship management
  companies.
• Finance Turkish dry bulk ship operators have
  always demanded incentives and loans from the
  state authorities.
• Since Turkish banking system hasnt been
  specialized in shipping finance, Turkish dry bulk
  ship operators have started to look for ways of
  finding credit from foreign banks but this time
  operators have faced some difficulties such as
  country risk problem and higher interest rates.

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• Finance Turkish banking systems negative
  approach to ship mortgages and foreign shipping
  banks great expertise in ship mortgages were
  seen as important differences in ship finance.
• From positive side, participants pointed out the
  increasing number of Turkish shipping companies
  taking place in capital markets and getting
  stocks.
• Labor There has been a lack of qualified
  officers in Turkish dry bulk fleet and when
  considered together with the increasing volume of
  world dry bulk trade, this deficiency will cause
  important problems in the coming years.
• In order to overcome this possible problem, a
  great importance should be given to other
  suppliers of the fleet such as educational
  institutions and manning firms.

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• Labor Another point to be considered about the
  labor is the competency of the personnel in the
  companys land based operations because in
  organizing the commercial side of the operations,
  negotiating with brokers and charterers and
  fixing the dry bulk ships, any mistake done by
  the personnel may cause great losses and wrong
  commercial decisions which can decrease the
  competitive power of the company.
• Shipbuilding In dry bulk ship building,
  Turkey-related cost items such as cheap labor,
  electricity and some materials used in ship
  building such as sheet iron etc., only constitute
  25-30 in the total cost of dry bulk ships.
• Other cost factors represent relatively a higher
  portion and they are supplied from foreign
  sources.
• As a result of these cost-related factors and low
  capacity problems in Turkish shipyards, number of
  dry bulk ships built in Turkey is very low.

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• Shipbuilding Since Turkish shipyards have
  specialized in chemical tanker and mega yacht
  building, no importance has been given to dry
  bulk ship building.
• Many foreign and Turkish ship owners have ordered
  dry bulk ships to shipyards in Far East
• It is believed that shipyards in Far East cant
  meet the existing demand in the near future which
  will lead to the emergence of new ship building
  countries specializing in dry bulk ships such as
  Turkey.

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• Ports The steps to be taken for improving the
  quality of port services in Turkey can be stated
  as
• lowering the influence of state authorities on
  port services,
• decreasing the level of bureaucracy,
• increasing the involvement of private sector in
  ports,
• improving the productivity in ports,
• employing qualified staff in port management and
  cargo handling.

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• Bunker suppliers Turkish bunkering firms arent
  involved mainly in the supply of dry bulk ships
  and important share has been obtained by foreign
  bunkering companies. Turkish bunkering firms only
  conduct the brokering part of the operation.
• Ship management companies Ship management
  companies arent so active in negotiations with
  Turkish dry bulk ship operators but it is
  believed that these companies provide cost
  minimization and improved service quality.

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Results of the Focus Group Research

• The effects of the regulations and practices of
  the state on competitive power of Turkish dry
  bulk fleet
• Representative of the state declared that many
  qualified personnel have been employed as port
  state officer in Turkey and with the help of
  effective flag state surveys and port state
  inspections the number of detained dry bulk ships
  have been decreased in European ports.
• It was emphasized that in order to reduce the
  bureaucracy in the governmental bodies about
  shipping, authority of signature has been given
  to technical staff.
• In addition to these, bringing Turkish
  International Ship Registry into force and
  foundation of maritime courts were mentioned as
  important steps taken.

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Results of the Focus Group Research

• Effects of the costs on competitive power of
  Turkish dry bulk fleet
• Almost all participants believed that the costs
  have directly no effects on the competitive power
  of the fleet because Turkish dry bulk ship
  operators face the same costs with the foreign
  operators and this wouldnt be a differentiating
  factor.
• On the other hand, the participants declared that
  with the help of effective purchases of stores
  etc, administrative costs may be minimalized but
  there would be no change in the voyage expenses.

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Results of the Focus Group Research

• Effects of the service quality on competitive
  power of Turkish dry bulk fleet
• Two main concepts related with the service
  quality were mentioned.
• These were quality of the crew and finance
  matters.
• In order to increase the competitive power of
  the fleet
• A great importance must be given to the
  education of the crew and personnel in the
  company because some wrong commercial decisions
  of the personnel and high detention rates can be
  overcome by this way.

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Results of the Focus Group Research

• Main markets that the Turkish dry bulk fleet is
  highly competitive
• Some of the participants stated that competitive
  advantage is obtained in Black Sea and
  Mediterranean and partly in North Europe.
• Also it was mentioned that Turkish dry bulk
  coasters were contented with the share they had
  been offered and this caused loss of prestige in
  the market and loss of competitive power.
• Apart from coaster market, condition of the fleet
  in Handysize and Handymax tonnage in Far East,
  Mediterranean and Europe market were stated as
  developing
• but the same couldnt be said for Panamax and
  over-Panamax tonnage.

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Results of the Focus Group Research

• Measures to be taken in order to increase the
  competitiveness of Turkish dry bulk fleet
• Turkish dry bulk fleets share in the world dry
  bulk shipping must be increased by investing new
  ships,technological developments and decreasing
  the number of substandard dry bulk ships in the
  fleet.
• Education and finance are two terms for
  increasing the competitive power and the service
  quality.
• Turkish exporters and importers must be
  encouraged to carry their cargoes by Turkish
  flagged dry bulk ships.
• Importance must be given to the focus strategy
  that the operators should only focus on the type
  of sea transportation in which they are highly
  experienced which is mainly dry bulk shipping.
• Projects of building bigger dry bulk ships with
  foreign partners in larger shipyards must be
  conducted.

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Conclusion

• The focus group discussion completed at the case
  of competitive power of Turkish dry bulk fleet,
  has proved the importance of service quality for
  increasing the competitive power of Turkish dry
  bulk fleet.
• In order to provide high quality service for
  increasing competitive power of the fleet,
  finance and labor matters were mentioned.

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Conclusion

• Also the competitive advantage gained in coaster
  fleet in early 1980s must be taken back again by
  ordering new coasters and giving importance to
  certain markets that coasters are highly
  competitive.
• In the overall evaluation of the focus group, the
  need for employing dry bulk ships in cross-trade
  and for being open to international dry bulk
  shipping market was highlighted.

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Conclusion

• The research has made important contributions for
  generating sub-hypothesis of the main hypothesis
  obtained before.
• Repeating this study in separate focus groups and
  eventually reaching quantitative results may
  provide helpful outcomes in reaching
  competitiveness variables for Turkish dry bulk
  fleet.

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THANKS