Demand of Korea shipbuilding Company’s major product (container ship and LNG ship) is sharply increased in recent years and they have been received orders for next decade. Also, increase of demand in FPSO (Floating Production Storage & Offloading Unit – 10 billion dollars for each unit) brings huge profit to those companies. However, they are going to move their product focus to cruise-ship building industry. There is several reasons they want to change their major industry part but the main reason why they want to start cruise shipbuilding industry is simple. It makes a lot of profit. As an example, oil tanker’s price for 1GT* is 800dollars but cruise ship’s price for 1GT is 5500dollars and it’s about five times bigger.
It also because of extending of cruise tourism market. They have approximate 9.5 percent of market growth rate every year and in northern America market’s cruise ship providing rate could not follow the growth of number of tourist. It means this market has a lot of room for share with high profit.
When we apply with *BCG matrix, the business they are doing is ‘money cow’. - There are several competitors in industry like Chinese company but there’s a technological gap and they are losing their credit as long as they break dead-line for the product. - So it is a reasonable investment in cruise ship building industry as a wild cat( question mark ) which has high potential to become a star product because they have a stable profit model which can supply money to investment.
Right now, STX is most closely approached to cruise shipbuilding industry with M&A with AKEYARDS which is second world biggest cruise ship building Company last year.
Also, there are expectable supports from government not only financial support for R&D but also legal support. Because Korea’s shipbuilding is one of most important ‘STAR’ industry and they don’t want lose their star by struggle for supremacy with other country. Right now, it seems stable but if we consider of growing speed of Chinese Shipbuilding Company with low labor cost, the government also feel sympathy with diversification of profit model.
* GT – Gross tonnage is a calculated representation of a ship's internal volume. It is expressed in "tons," a unit of volume defined as 100 cubic feet (which is about 2.83 cubic meters). Gross tonnage is not a measure of the ship's weight or displacement and should not be confused with terms such as deadweight tonnage, net tonnage, or displacement. - Wikipedia
Also, there are expectable supports from government not only financial support for R&D but also legal support. Because Korea’s shipbuilding is one of most important ‘STAR’ industry and they don’t want lose their star by struggle for supremacy with other country. Right now, it seems stable but if we consider of growing speed of Chinese Shipbuilding Company with low labor cost, the government also feel sympathy with diversification of profit model.
* GT – Gross tonnage is a calculated representation of a ship's internal volume. It is expressed in "tons," a unit of volume defined as 100 cubic feet (which is about 2.83 cubic meters). Gross tonnage is not a measure of the ship's weight or displacement and should not be confused with terms such as deadweight tonnage, net tonnage, or displacement. - Wikipedia
* BCG growth-share matrix
a simple chart to assist large corporations in deciding how to allocate cash among their business units. The corporation would categorize its business units as "Stars", "Cash Cows", "Question Marks(also called problem child or wild cat)", and "Dogs", and then allocate cash accordingly, moving money from "cash cows" toward "stars" and "question marks" that had higher market growth rates, and hence higher upside potential. - Wikipedia
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http://newsmaker.khan.co.kr/khnm.html?mode=view&code=114&artid=16501 http://cafe.naver.com/defenceworld.cafe?iframe_url=/ArticleRead.nhn%3Farticleid=264
1 comment:
I agree that BCG supports diversified opinion and in its strategies. I checked The BCG Growth-Share Matrix on http://www.coursework4you.co.uk/bcg.htm and it gave me a lot of information.
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