The Battle of transhipment Hubs :PAS vs. PTP - Case Study Example

The effective and brilliant operation of this port lifted it to world’s second busiest port in 2002. This great achievement can be attributed to its early application of information technology that intended operational efficiency. The most competitive advantage of PSA is that it has an ideal geographic location. At the same time, it struggles with small size, limited labor pool, and high cost of living. As a result of these adverse situations, PSA’s costs would probably be higher than that of neighboring countries.

Leong (2004) points out that this port features efficient modern technologies such as “remote-operated yard cranes and automated flow-through gate systems”. Wide network connectivity is another competitive strength of PSA as it enables the port to connect across the globe within least possible time. In addition, PSA has undertaken some large scale container handling activities. As Boile, Theofanis, and Strauss-Wieder (2008) report, the Keppel Distripark is a distributional facility offered by PSA and it consists of 41 warehouses outside the port.

The capitalization process of PSA in 1996 has greatly contributed to its entry into the international market. However, high quality services at premium rates are reflected as the most prominent feature of PSA. The intense competition from a new container terminal at Port Klang has produced some difficulties to PSA. It seems that PSA does not focus domestic competitors adequately and it would weaken their operations in future. Since the PSA faces the issues of higher labor and land costs, it would not be able to initiate further price reduction so as to vie with the competitors.

PSA opposes the shipping companies to operate dedicated terminals as it aims to cater the needs of more customers. However, it would adversely affect the firm’s market reputation. II PTP: strengths and weaknesses Ali (2010) says that Port of Tanjung Pelepas (PTP) was established in 1999 in Malaysian state of Johor. It was located near the Straits of Malacca; therefore, it was able to capture transshipment trade volumes. PTP was well designed to process 4 million to 5 million containers a year and it added to their operational viability.

This port has ease accessibility to lower labor costs and land leases; these features of PTP are very helpful to meet their objective of dominating East Asia. While compared to PSA, PTP’s estimated costs are 30% to 40% lower than that of Port of Singapore. Similarly, PTP has strong support from financial institutions like ample land bank, and therefore, it can easily deal with credits during the times of contingencies. A well designed structure of information technology is one of the most competitive strengths of PTP.

At the same time, they do not have adequate operational experience and proprietary technologies. The case study indicates that the Danish container giant Maersk Sealand purchased 30% shares of PTP. The operational involvement of the experienced operator Maersk, boosts the organizational activities and strategic management of PTP. Although, the arrival of Maersk has increased the efficacy of PTP, it is seen that an inexperienced management team weakens the expansional activities of this port. Since the PSA is a well established industry, PTP faces difficulties in attracting other main line shippers from the port of Singapore.

In the case of PTP, it has the capacity to operate its own terminal and this feature attracts more