Maritime Services Become More Globalized
Shipping is the premise for international trade and has always been an international industry. A central driver for the global shift has been the operational and technological development of the shipping industry, which has lowered transportation costs dramatically, says a report from Menon Business Economics.
With the emergence of standardized bulk carriers, oil and other raw materials could be traded globally. Today most shipping markets, not just raw materials carried in bulk, but also specialized segments like cruise, offshore and car carriers, are globalized.
Maritime services, however, have, until recently, been relatively national or regional, often located around the ship owning companies. Ship finance was among the first to globalize, while legal services, due to national jurisdictions, have been the most national of the maritime services.
English law firms have been the exception. They have branches in shipping hubs all over the world since English law is commonly chosen as the jurisdiction in contracts of trade and chartering.
Today, most maritime services are globalized. For example, the five leading classification societies class 78% of the world’s ships, and the two largest book runners for ship finance cover one sixth of the global market.
Even port operations are globalizing. One of these companies is the Singapore Port Authority (PSA) that was corporatized in 1997. PSA is now one of the world’s largest port operators with operations in many key markets.
Partly due to, and partly as an effect of global markets, maritime companies have also become globalized. For example, the Danish group AP Moller-Maersk has a worldwide presence in several shipping markets, and a market value of $49 billion (March, 2015).
Recent mergers also include Oslo-based classification and technology consultants DNV with Hamburg-based Germanischer Lloyd. The new merged entity, DNV GL, is the largest classification society in the world.
The structure of the companies varies greatly, but the dominant trend is to build corporations around specialized business units with a global reach. The Fredriksen group is a good example of this. The group consists of companies specialized in segments like rigs (Seadrill), crude carriers (Frontline) and dry bulk (Golden Ocean).
The location of companies has also been globalized. Value chains are often split up, with headquarters located in financial centers, operating units close to markets and R&D units in knowledge hubs.
Urbanization is one of the strongest global megatrends of this century, with a clear shift in importance from nations to cities (Moretti, 2012; Quartz, 2015).
Strong agglomeration forces induce firms, talents and investors to locate in the large global knowledge hubs. This trend works in favor of city-states, like Singapore, Hong Kong and Dubai, but cities in large countries, like New York, Rio and Hamburg may also retain their attractiveness.
Companies have become more willing to move activity to the most attractive locations, with strong competition among cities to draw and retain them. The attracting factors, the glue that makes companies stay, have changed in recent years. Access to talent and knowledge based clusters has become increasingly important in the competition.
