In particular, customers would continue to use Maersk Line’s services if they were not able to

find a more reliable shipping company. Furthermore, high reliability reduced the operating costs
of customers by eliminating the costs attributed to holding buffer stock.
Consequently, customers were likely to pay premium prices for Maersk’s services, especially, if
the cost savings attributed to high reliability exceeded the additional cost of accessing the
services at a premium price.
For instance, during low demand seasons, the company can terminate its contracts with owners
of the chartered vessels, thereby reducing its operating costs. Conversely, it can increase its
capacity in response to rising demand by acquiring more chartered vessels, which is less
expensive than purchasing new ones. Additionally, Maersk Line allocated only 25% of its
capacity to major clients who have a great bargaining power.
The company had a competitive advantage over firms that were not able to access cheap funding
to expand their operations. Belonging to the group also improved Maersk Line’s bargaining
power. For instance, as the largest purchaser of bunker fuel, the company had the opportunity to
negotiate for low prices, thereby reducing its operating costs.
Finally, the company was successful because of its effective marketing strategy, which included
offering additional value-added services such as door-to-delivery of cargo. Moreover, the firm
offered excellent customer care services, which included timely notifications of delays and
money-back guarantees.
The advantage of the additional value-added services is that they enhanced customers’ shipping
experience, thereby increasing the potential of repeat business for Maersk Line.
Excellent customer care services, on the other hand, are likely to have improved the company’s
customer satisfaction levels. For instance, compensating customers for delays in delivery
eliminated the dissatisfaction, which could have arose due to the losses attributed to late
deliveries.
The success of a business is determined by the extent to which it is able to respond to dynamics
in its internal and external environment, as well as, the market needs. The external environment
of Maersk Line is characterized with challenges such as high fuel prices, high competition, and a
significant reduction in the price of shipping services.
Market surveys indicate that customers are interested in reliable, simple, and sustainable
shipping services. Consequently, Maersk Line’s new business model should work by addressing
the challenges in the external environment and providing solutions to customers’ needs.
The new business model is likely to address the market needs. This is because it focuses on
enhancing sustainability by reducing the company’s ecological footprint, improving reliability
through timely delivery of containers, and enhancing simplicity by digitizing the transfer of
shipping documents.
Focusing on improving reliability, simplicity, and sustainability will also enable the company to
address the challenges in the external environment such as high competition and fuel prices.
For instance, reliability will improve the company’s competitiveness by boosting its customer
satisfaction rate, whereas using fuel-efficient vessels to reduce carbon emissions will also reduce
expenditure on fuel.
By contrast, differentiation will improve the company’s competitiveness by enabling it to
highlight its new value proposition in the differentiated services. Second, differentiation will
enable Maersk Line to ensure brand loyalty through continuous improvement of service quality.
This is because differentiation leads to value addition, which in turn creates the ‘no substitute’
perception among customers.
Since the container shipping industry is entering its maturity stage, brand loyalty will be central
to the firm’s efforts to defend its market share. Finally, differentiation will enable the firm to
serve niche markets. For instance, Maersk Line is likely to be the preferred shipping services
provider among customers who are interested in sustainable transportation.
The company will make profits in the long-run. The second strategic choice is to focus on
differentiating the company’s services. Differentiation will improve the company’s
competitiveness by enhancing its brand loyalty and customer satisfaction.
Maersk has the ability to pursue a cost-leadership strategy. This is because its membership in the
A.P Moller-Maersk Group enables it to access funds for new investments. The company’s
financial strength has enabled it to invest in a number of cost-saving measures. These include
rehabilitating existing vessels, purchasing new cost-effective vessels, conducting research on
alternative (cheap and clean) energy sources.
Maersk should focus on a mixed strategy that involves cost reduction and differentiation of its
services. A mixed strategy leads to failure. For instance, lowering prices may undermine the
company’s ability to maintain high product quality. However, this perspective is not always true
since customer needs are often multi-dimensional.
For instance, customers in the shipping industry are interested in low cost services due to the
tough economic times. Additionally, they are interested in high quality services, especially,
reliability and sustainability in order to improve their competitiveness in their industries. In this
regard, the best way to succeed is to focus on both cost reduction and differentiation.
Maersk Line has the ability to pursue a mixed strategy due to its access to financial capital,
leading scientific research, and a good corporate reputation. These characteristics will enable it
to offer cheap, but high quality services.