RMIT International University Vietnam

OMGT 2321 Global Trade Operations

A1

Subject Code: OMGT 2321

Subject Name: Global Trade Operations

Location & Campus RMIT Vietnam , HCMC / Hanoi

Class Group Number: Group 02

Student Name: Tran Phuong Anh

Student Number: S3752611

Your Teacher: Philip Smith

1970
Word Count:

Table of Contents
I. Executive Summary............................................................................................................................3

II. Introduction........................................................................................................................................3

III. Rotterdam In-depth Analysis..........................................................................................................3

1. Historical Evolution........................................................................................................................3

2. Comparative and competitive advantages......................................................................................4

3. Spatial dynamics.............................................................................................................................6

4. Operational Challenges...................................................................................................................6

IV. Recommendation – Business Strategy............................................................................................7

1
 1. Smart partner in logistics chains.....................................................................................................7

2. Accelerator of sustainability in the port..........................................................................................7

V. Conclusion..........................................................................................................................................8

VI. References.......................................................................................................................................8

VII. Appendices......................................................................................................................................9

2
 The Pioneer - The Port of Rotterdam

I. Executive Summary
This report is performed to have better knowledge of the port of Rotterdam. The port has existed for a
long time and till today has become the biggest and busiest container port of Europe. This report using
the comparative advantage theory by David Ricardo (1817) as well as the Diamond Porter Model to
analyse its success. Due to the favourable geological location, as well as good amount of investment in
infrastructure, the port has faced quite lot of challenges coming from rivals, authority, and regulation.
However, thank to the harmonic cooperation between the government, and port authority, they have
seemed to find the sustainable and futuristic solutions. Even it is still a long way to go in order to
achieve their vision, they still have a wide future prospect ahead.

II. Introduction
The port of Rotterdam is the biggest port of Europe with the history of over 700 years existence and
development. In this report, the evolution of the port and its comparative advantage as well as
comparative advantage will be thoroughly analysed. This paper also states out its challenges, how it
might overcome and the port’s future prospect.

III. Rotterdam In-depth Analysis

1. Historical Evolution
The port of Rotterdam was originated back in the 15th century as a fishing port. Then, in the 19th
century, with the extension of trading by the Dutch colonial empire, it was turned into one of the first
global commercial ports in the word. This was the premise for the port to become the major maritime
getaway of Western Europe. By handling the growing of industrial activity in the hinterland, it was a
necessity to expand the port downriver along the Rhine and toward the North Sea. In the 1920s to
1930s, bulk transshipment and petrochemical facilities was added. This made the port one of Europe’s
major oil transshipment and processing facility. Though, World War II had led the port through some
notable deconstruction, it was re-build later with a more ambitious vision. With this initial thought and
higher in demand of storing oil, the south side of the river was reclaimed and built. This made Port of

3
Rotterdam the largest port in the world in 1962. Container terminal was converted from the old areas of
Waalhaven and Botlek in 1970s due to the containerization. The port then continues to expand down
the North Sea and down to Maasvlatke in the 1980s to build the new distribution facilities making
Rotterdam the hearth of European cargo distribution (Notteboom et. al 2021).

2. Comparative and competitive advantages

a. Comparative advantage

According to David Ricardo in 1817 that comparative advantage is the one factor that make a country
extremely competitive to others on the global trade market. Specially, Ricardo believed that each
country is specialized in a particular industry since they are all different in labor forces, resources, and
capital, etc. Therefore, countries can gain lots of benefits from international trade by having a lower
opportunity cost even when they do not have the absolute advantage in the industry (Sejkora & Sankot
2017).

The Port of Rotterdam (PoR) owns 40km along the Netherlands coast and even with the difficulty of
Covid situation, the total volume transport of the port is still 436.8 million tons of good. This alone has
made the port the heart of Netherland’s economic. The port Authority is also very strategic and provide
the quality infrastructure, security, investment, and visionary strategy to keep pace with the global
trends and demand (Port of Rotterdam, 2021). All because of these factors that the port of Rotterdam
become the biggest seaport and the main gateway of Europe, staying as the biggest industry in
Rotterdam.

The port of Rotterdam is also very favorable in term of geological location with the direct access from
the sea with deep-water way, accessible for giant container ships, connection with the estuary of both
river Rhine and Meuse, freight railways to the hinterland. These make it an excellent transport line to
the rest of Europe (Paalvast et. al 2012).

b. Competitive advantage

Competitive advantage that suggested by Michael Porter (1990) is influenced by four aspects, which
are factor endowments, demand conditions, related and supporting industries, and firm strategy,
structure, and rivalry. These four factors together explain why an industry gain competitive in the
international market more than others within the nation.

4
With the case of Port of Rotterdam, there is also a crucial factor that are consider as both ‘a catalyst and
challenger’ in this model coming from the government. To be as successful as today, the government of
Netherlands has rather being a catalyst than challenger to the Port of Amsterdam Authority, by
privatization the coast of Rotterdam in 2004, to expand the port. In order to stay competitive, the
infrastructure facilities to boost the port’s convenient are also constantly improve and maintain. An
outstanding example would be the Betuweroute freight railway to connect Rotterdam and Germany
(Hutchins, 2016).

To be more specific, as the first attributes to the Diamond Porter Model, the factor endowment comes
from natural, human and capital resources. In this case of PoR, as in the previous discussed, the
geological location of PoR is propitious due to staying close to the coast with deep waterway and open
up to river Rhine and Meuse. As in capital, the infrastructure included road, railway network to connect
the hinterland and all the necessary facilities was setup. To come even further to innovation, Portbase
was invented to manage the port infrastructure and processes digitally, connecting with the global
ecosystem of carriers, ports and terminals and overseas inland providers (Hakirevic 2020). Also, with
Erasmus University Rotterdam and the Shipping and Transport College as based in this port area, these
has become not only the R&D infrastructure of the port, solving the port problems with innovation and
technology but also the reasons why the port has so many highly specialized employees. These strong
endowments ensure that PoR always heighten their competitiveness in the international market.

Secondly, demand condition is actually the reason why Port of Rotterdam was founded. As stated
above in the historical evolution, that it was due to the demand of Dutch colonial empire trading. There
are many lead firms in the world that are the customers of PoR that demand advance services that
nowhere else has provided. PoR would have the driving force to provide this service and satisfy the big
companies and gain big profit. Throughout the years, by satisfying the demand of both international
and domestic enterprises, the Port of Rotterdam has not stop evolving in every aspect to stay as both
the major maritime gateway of Europe and the one of the top ports of the world (Bosch et al., 2011).

Thirdly, related and supporting industries are necessary for the company to depend on in order to create
an additional value to its customers. One example would be the Scenic Valley where all the techgiants
gather, to share ideas and being innovative. Once of PoR most important industries are their supplies.
The more supported you have with other industry, the higher chance the company will gain profit with
the higher level of competitiveness (Bosch et al., 2011).

5
Fourthly, firm strategy, structure, and rivalry are all very important in order to gain competitive
advantage. How the firm is strategized and organized affects a lot about their structure and whether it
will be successful. The firm within itself need to continually go forward, and always strive for the
better, therefore, more competitive. Port of Rotterdam, these recent years, thrive to become the smartest
partner to their logistic customers by collaborate with IBM to develop the ability to host autonomous
ships, building an identical digital port that tracks all the resources and movement, collect all necessary
data to have better prediction of the future (Campfens & Dekker 2018). These vision and strategy
movement make the Port of Rotterdam more competitive than ever. It is also crucial to partner up with
rivalry in order to becoming more efficiency. By partner up together, they can bring more benefits to
customers and together increases in volume. And even it is not always the good gesture when it comes
partnership but rather to put out a standard, and strict costs, in order to compete more fairly. The most
recent collaboration would be the DB Cargo (Railway Company from Germany) connect ports at
Rotterdam and Antwerp with Europe's economic hubs. Even PoR And PoA are the two biggest ports at
Europe with millions of TEU each year, and only 8-11% of the freight arrives by rail. Through this
collaboration, the transport volume is expected to grow by estimated 100,000 containers per year (Port
of Rotterdam News 2020).

3. Spatial dynamics
During the 19th and 20th century, the port and city relationship is described as living-apart-together,
means that due to expansion purpose, the port was staying further away to the North sea, leaving the
abandoned port sites near the city center reurbanized. This resulted a clear division, making the port
completely out of sight from the city. After two wave of waterfront redevelopment by the port and city
authority, they have been co-evolved organically and harmonically. Where there are specific
residentials areas that recall the port in each Rotterdam citizens but also CityPorts areas that are
suitable for the extensive urban function space for the develop of the port. The waterfronts inner city
has found peace with the port, however the further inland urban area where the port mainly functioning,
the space has been squeezed between the north by urban pressure and south by agricultural land use
(Aarts et. al 2012).

4. Operational Challenges
The Port of Rotterdam Authority becomes conscious as its competitors received much more subsidies
that threaten its competitive position in the market. Its rivals in the Le Havre-Hamburg market receives
financial support to compensate for geological and infrastructure disadvantages compared to
6
Rotterdam. The Netherlands is also they only country in the European Union required to pay corporate
tax for its ports as other ports are exempted or compensated. Rotterdam also faces another threat from
the German ports since Berlin government decided to decrease half of the payments for the use of
country’s railway. The Dutch government has revealed that port of Rotterdam loses estimate 1 million
TEU per year to its neighbor competitors, including the second and third biggest ports – Antwerp and
Hamburg due to the foresaid unfair competition (Barnard 2017).

The port of Rotterdam has also experienced many cyber-attacks that results tremendous loss to the port.
When these incidents happen, it makes autonomous cranes and trucks unfunctional and ships could not
unload and load, and total loss could be up to hundreds of millions of euros (Kaaij 2018).

IV. Recommendation – Business Strategy

1. Smart partner in logistics chains
The PoR aims to provide information value to logistics chains to increase the overall margin and cargo
volume, gaining a great reduction in carbon releases in the chains (Port of Rotterdam, 2021). This
business strategy of PoR make themselves a smart partner that clients continue to choose. Therefore,
even facing such unfair competition, PoR is still able to stand out in innovative way and bring more
benefit to logistic clients. This idea is a reality stimulation of a block chain, which is efficient,
systematic and effective to not only better logistic chains but also reduce carbon emission (Wang et. al
2020). However, the problem is addressed here is how secure are theses information, since what if
another cyber attack happened. Therefore, at the same time, trying to be a smart partner, PoR must also
invest more in their cyber risk management. This is also one of the prospects of the port, where it is the
global logistic hubs to connect and bring value to others industry but at the same time develop a
sustainable industrial activity (Port of Rotterdam 2011).

2. Accelerator of sustainability in the port

The Port of Rotterdam has been investing a lot in building infrastructure that fits to the policy of
making hinterland connection more efficient and develop hydrogen cluster like a hydrogen transport
pipeline. The port creates a project called Porthos to capture and store carbon, which help to
immediately reduce the emission of Co2. This project was recognized by the EU and the union
commits to donate €102 million. The port has immediate receive support from many sustainable
companies that then turn into clients. This strategy fits perfectly in the global trend of sustainability,

7
and by being a pioneer, PoR will regain its competitiveness position in the market (Port of Rotterdam
2021).

V. Conclusion
In conclusion, the Port of Rotterdam is full of innovation and improvement, which make it more
competitive than ever and that is why it is the biggest marine gateway of Europe. Even the port need to
face challenges come from the rivals, regulations and hackers, their business strategy and vision all aim
to completely solve the problem in the most sustainable and innovative ways, which help it get closer
to the future prospects.

VI. References
Aartss, M, Daamen, T-A, Huijs, M & De Vries, W 2012, ‘Port-city development in Rotterdam: A true
love story’, < http://resolver.tudelft.nl/uuid:0795dd04-63b0-4fed-a04e-58929818fb23>.

Barnard, B 2017, ‘Rotterdam port asks for support to match rivals’ subsidies’, The Journal of
Commerce Online, 24 July, viewed 19 April 2021, <https://www.joc.com/regulation-
policy/transportation-policy/international-transportation-policy/rotterdam-port-urges-government-
support-match-rivals%E2%80%99-handouts_20170724.html>.

Bosch, F-R-J, Hollen, R, Volberda, H-W & Baaij, M, 2011, The strategic value of the Port of
Rotterdam for the international competitiveness of the Netherlands: a first exploration: research report
for the Port of Rotterdam authority, RSM, Rotterdam.

Campfens, V & Dekker, C 2018, ‘Turning Rotterdam into the “World’s Smartest Port” with IBM
Cloud & IoT’, IBM, 31 January, viewed 19 April 2021,
<https://www.ibm.com/blogs/think/2018/01/smart-port-rotterdam/>.

8
Hakirevic, N 2020, ‘Dutch Portbase connects with TradeLens blockchain platform’, Offshore Energy, 1
September, viewed 19 April 2021, < https://www.offshore-energy.biz/dutch-portbase-connects-with-
tradelens-blockchain-platform/>.
Hutchins, R 2016, ‘Rotterdam port ramping up containerized rail reach to hinterland’, Journal of
Commerce Online, 6 October, viewed 19 April 2021, < https://www.joc.com/port-news/european-
ports/port-rotterdam/rotterdam-port-ramping-containerized-rail-reach-hinterland_20161006.html>.

Kaaij, M 2018, ‘The port of Rotterdam is armed against a new cyber attack’, Trouw, 11 January,
viewed 19 April 20201, < https://www.trouw.nl/nieuws/rotterdamse-haven-wapent-zich-tegen-nieuwe-
cyberaanval~ba40a265/?referrer=https%3A%2F%2Fwww.google.com%2F>.

Notteboom, T, Pallis, A & Rodrigue, J 2021, Port Economics, Management and Policy, Routledge,
New York, U.S.A.

Paalvast, P, Van Wesenbeeck, B, Velde, V & de Vries, M 2012, ‘Pole and pontoon hulas: An effective
way of ecological engineering to increase productivity and biodiversity in the hard-substrate
environment of the port of Rotterdam’, Ecological Engineering, vol.44, p. 199-209.

Port of Rotterdam 2011, Port Vision 2030, organization report, Port of Rotterdam, viewed 19 April
2021,<https://www.portofrotterdam.com/sites/default/files/upload/Port-Vision/Port-Vision-
2030/files/assets/basic-html/index.html#1>.

Port of Rotterdam 2016, ‘Mission, vision and strategy’, Port of Rotterdam Authority, viewed 19 April
2021, < https://www.portofrotterdam.com/en/port-authority/about-the-port-
authority/organisation/mission-vision-and-strategy#:~:text=%22We%20continually%20improve
%20the%20port,Europe%20and%20growth%20markets%20worldwide.>.

9
Port of Rotterdam 2020, ‘DB Cargo to connect ports at Rotterdam and Antwerp with Europe's
economic hubs’, Port of Rotterdam News, 6 October, viewed 19 April 2021,
<https://www.portofrotterdam.com/en/news-and-press-releases/db-cargo-to-connect-ports-at-
rotterdam-and-antwerp-with-europes-economic> .

Port of Rotterdam Authority 2021, Highlights of 2020 Annual Report, organnization report, Port of
Rotterdam, viewed 19 April 2021,
<https://jaarverslag2020.portofrotterdam.com/FbContent.ashx/pub_1000/downloads/v210309100611/A
nnual-report-highlights-Port-of-Rotterdam-2020.pdf>.

Porter, M 1990, The competitive advantage of nations, Free Press, New York, U.S.A.

Sejkora, J & Sankot, O 2017, ‘Comparative advantage, economic structure and growth: The case of
Senegal’, South African Journal of Economic and Management Sciences, vol. 20, no. 1, pp. 1-9.
SWZ Maritime 2020, ‘CEO Port of Rotterdam: There will be opportunities after corona’, SWZ
Maritime, 20 April, viewed 3 August 2020,<https://www.swzmaritime.nl/news/2020/04/20/ceo-port-
of-rotterdam-there-will-be-opportunities-after-corona/?gdpr=accept>.

Wang, M, Wang, B & Abareshi, A 2020, ‘Blockchain Technology and Its Role in Enhancing Supply
Chain Integration Capability and Reducing Carbon Emission: A Conceptual Framework’,
Sustainability 2020, viewed 19 April 2021.

10
 VII. Appendices
Figure 1: Historical development of Port of Rotterdam

Firgure 2: The Porter’s Diamond Model

11