Even in our days that consolidation effects are experienced in bulk shipping markets, one basic feature of these markets remains: quite a few shipping companies of different sizes and types of ships coexist and compete with each other in the global freight markets, a fact that makes competition more intense. One should also take into account that although shipping is a global industry that is regulated by a relatively strict institutional framework, players that avoid conforming to this framework still exist. This characteristic distorts competition within the industry. In this context, for companies that compete with their ships in the major trade routes, competitiveness continues to be a matter of cost, even if they succeeded in differentiating their services in terms of quality and value creation to the customer (Theotokas and Katarelos 2001). Thus, shipping companies show great effort in reducing operational cost and especially manning expenses, which represent a great part of it. The global character of shipping industry allows shipping companies to plan and implement a global sourcing strategy, that is to design their sourcing decisions on the basis of the interplay between their competitive advantage and the advantages of various locations for long-term gains (Kotabe and Murray 2004). Flagging out and employment of seafarers from the low cost countries are the primal example of this strategy. This however demands the possession of specific information regarding the advantages that could be gained in various locations. Leggate and McConville (2002) state that the existence of separate markets for seafarers makes possible to distinguish between groups in the seafaring labour force and to give them differing income. To succeed in this, shipping companies should be able not only to locate those markets, but also to recruit seafarers of the best possible quality, in terms of education, knowledge, etc. In case that the company’s decision makers do not possess this information, and the cost of acquiring it surpasses the benefits, then, contracting out the activity to organisations that possess it becomes a strategic choice. The strategic decision to contract out, either crew management or any other activity, could take various forms that depend on the specific characteristics of each company. Crew management for example, can be fully or partially outsourced to third party management or crew agents respectively. The range of decisions assigned to third organisations defines the level of control that the shipping company retains for 2
has intentionally blurred sections.
Sign up to view the full version.