PHILIPPINE MERCHANT MARINE ACADEMY

Graduate School, Manila

Business Strategy of Strong Wave Shipbuilding and Shiprepair Inc.

Using Porter’s Framework

Marketing Management

Prof. Maria Gemma Valladolid-Mayo, MSM

Franco T. Ladica
Francis Pagtolon-an
Karen Rose P. Ladica

January 25, 2021

 Fig 1.0
Strong Wave Porter’s Framework

Michael E. Porter developed the Five Competitive Forces model and

is mentioned in his book "Competitive Strategy: Strategies to Evaluate

Markets and Rivals". It was released in 1980. Since then, the "five forces

instrument" has become a powerful tool for evaluating the market structure

of an enterprise in strategic processes.

The strength of market competition was defined by Porter (1980) as

inversely related to its profitability. Therefore, by attempting to reduce the

magnitude of competition, a significant market strategy, the Porter’s

Framework, can be constructed for Strong Wave shipbuilders.

 PHILIPPINE MERCHANT MARINE ACADEMY
Graduate School, Manila

 Threat of New Entrants

The threat of new entrants is inversely proportional to the level of

entry barriers. There are numerous aspects that control the level of entry

barriers: economies of scale, economies of scope, product differentiation,

brand development, capital requirement, and cost advantages. (Porter

1980).

Strong Wave Shipbuilding and Ship-repair Inc. have been contructing

ships for 10 major years already. For the last decade, it stood tall against its

competitors when it comes to brand development. It is costly to build a

strong brand in the industry. A lot of medium recent shipbuilding businesses

lack the resources to create a strong brand to match the Strong Wave’s

brand.

Furthermore, there are two specific barriers that are identified as

weak: the high labour costs and financial subsidies from government. These

two barriers are proportional with the high position of investment that

characterized the industry and lead to plummeting its desirability for

possible investors. Therefore, the threat of new shipbuilding and shiprepair

yards entering the industry has been evaluated as weak.

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Graduate School, Manila

 Bargaining Power of Suppliers

Understandably, the bargaining power of suppliers or market of inputs

is proportional to the condition of the shipbuilding market. It is known in

maritime sector that supplies for shipbuilding and shiprepairing are

constructed limitably making it few and are concentrated. Saying this so, it

makes the the supplier dominant in some ways. However, the Strong Wave

Shipbuilding and Shiprepair holds an agreement with its supplier that the

components needed by the company will always be delivered on time. This

will avoid a situation of stopping the process or activity from progressing.

Moreover, our company does not have to rely much more with the

market of inputs in terms of design capabilities. The SBSR industry have its

own rudimentary design competence giving more bargaining power for the

company than the suppliers. The presence of basic design capability will not

necessitate many modifications in illustration. Consequently, the lead time

for procurement will not be abridged.

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 PHILIPPINE MERCHANT MARINE ACADEMY
Graduate School, Manila

 Bargaining Power of Buyers

Since the SBSR built ships that are highly-sophisticated, the

bargaining power of customers are reduced for the reason that, only a few

of shipbuilding companies can construct these kind of ships.

Furthermore, low switching cost is a weak force for the buyers giving

the company more bargaining power. Since it’s been known that our

company is the best shipbuilding and shiprepair in the industry for 5

consecutive years, it will be a problem to think for the clients to join the

service of our competitors because they already instilled our loyalty to us.

The shipbuilding industry is not saturated, giving no choice for the

consumer to choose only our company.

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Graduate School, Manila

 Competitive Rivalry

By using the expertise and resources of international players, the

Philippines is fast becoming a global shipbuilding centre. The country

surpassed its European rivals in 2010 and, after China, South Korea and

Japan, has since become the fourth largest shipbuilding nation.

One of the foreign companies constructing ships in the Philippines is

Tsuneishi Heavy Industries, a subsidiary of Japan's Tsuneishi Holdings in

Fukuyama, Hiroshima Prefecture. THI currently operates a large dockyard

on Cebu Island's west coast, approximately two hours' drive from the east

coast and its airport and resort hotels. Around 70 Japanese workers

currently work there. The organization has sent a total of 1,400 local

workers to Japan, not just for training but also for transferring technology

and know-how.

The Philippines-based operation has been one of the main production

bases for Tsuneishi. This year, THI expects to build a total of 20 ships,

primarily bulk carriers for iron ore. This implies that THI produces nearly 40

percent of the ships constructed at the production bases of the Tsuneishi

company, including those in Japan and in Zhoushan, Zhejiang Province,

China.

The aim of THI is to become a "mother factory." In Asia, the firm is

also looking to build more shipyards. In 2013, Filipino shipbuilders

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constructed a total of around 1.33 million tons of ships, 50.8 percent of

which were designed by THI, according to the U.S. research company IHS.

Only ships with gross tonnages of 100 or greater were covered by the

figure.

The drive to expand operations in the Philippines by overseas

shipbuilders is also in line with Manila's strategy to become a major

shipbuilding country, which is part of a larger plan to establish a domestic

manufacturing industry.

In the Philippines, which is comprised of around 7,100 islands,

logistics operations are largely based on maritime transport. Most coastal

vessels used by the carriers of the country, however, are vintage, second-

hand ships bought from overseas companies. For domestic maritime

shipping, demand for smaller vessels is expected to rise. In addition,

many of the around 100 shipyards operated by Filipino companies

repair or refit vessels which is good for the country’s shipbuilding and

shiprepair business.

 Threat of Substitute

Depending on the nature of the shipbuilding business, the threat of

substitutes is not new anymore. Since there are a number of shipbuilding

businesses in our country, there is a tendency of a change of heart or

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Graduate School, Manila

choosing other shipbuilding company than the one chooses before. One

reason why it happens is that the cost of the services being offered is

cheaper compared to the company an individual chosed before. Options are

always present so there is a need for a shipbuilding company to always

make their catered services an apple of the eye for customers so that they

will remain the choice of their previous customers. Therefore, threat here is

from competitors who may offer better rewards, better prices or a better

service. There is also somewhat of a switching cost.