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Applied Economics
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Port choice in a competitive environment: from the

shipping lines' perspective
a a
Jose L. Tongzon & Lavina Sawant
a
Department of Economics , National University of Singapore , Kent Ridge Crescent,
Singapore 119260
Published online: 30 Oct 2009.

To cite this article: Jose L. Tongzon & Lavina Sawant (2007) Port choice in a competitive environment: from the shipping
lines' perspective, Applied Economics, 39:4, 477-492, DOI: 10.1080/00036840500438871

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 Applied Economics, 2007, 39, 477–492

Port choice in a competitive

environment: from the shipping
lines’ perspective
Jose L. Tongzon* and Lavina Sawant
Department of Economics, National University of Singapore, Kent Ridge
Crescent, Singapore 119260
Downloaded by [Oregon State University] at 23:30 08 January 2015

The present era of globalization and regional competition has witnessed

the increasing influence of the global operations of the shipping lines on
port development and the declining monopoly of ports. This warrants the
need for an identification of the port selection criteria from the perspective
of the shipping lines. Hence, an attempt is made to determine the port
choice from the perspective of the shipping lines. Moreover, most port
operators have designed their strategies based on the ‘stated preference’ of
the shipping lines. However, the stated preference approach can have
several shortcomings such as the shipping lines would tend to overstate
their demands for services at the port. This directs for an examination of
the port choice of the shipping lines based on a revealed preference
approach. The ‘revealed preference’ approach aims at judging the port
choice of shipping lines purely from their ‘actions’ rather than what they
actually ‘state’. The empirical study in this article is based on a survey
conducted among major shipping lines operating in Singapore and
Malaysia. The findings have shown port charges and wide range of port
services to be the only significant factors in their port choice. Moreover,
the results show no consistency between the stated and revealed
preferences of shipping lines.

I. Introduction decreasing monopoly of the ports and the major

Ports form an important link in the overall trading
chain and consequently, their level of performance
and efficiency determines to a large extent a nation’s
international competitiveness. However, with globa-
lization and the growing regional competition,1 port
operators are seen to be having less and less control
over their destinies. This is evident from the
influence of the global operations of the shipping
lines on port development. Also, with the mergers
and acquisitions among the shipping lines, the greater
volumes that are now controlled by a single line or
alliance implies that the capacity of a shipping line to
seriously affect the business of a port is much greater
than it has been in the past. This warrants a need for
the port operators to understand the underlying

*Corresponding author. E-mail: josetongzon@yahoo.com

1
Some examples of severe competition between ports are the case of the Port of Singapore and the Malaysian ports such as
Port of Tanjung Pelepas (PTP) and Port Klang, the case of the South China ports and Hong Kong and also the case of
Antwerp and Rotterdam.
Applied Economics ISSN 0003–6846 print/ISSN 1466–4283 online ß 2007 Taylor & Francis 477
http://www.tandf.co.uk/journals
DOI: 10.1080/00036840500438871
 478
factors of port competitiveness from the perspective
of the shipping lines.
Port operators have difficulty quantifying the
weightage given by the shipping lines to the
importance of factors at the port such as efficiency,
strategic location, adequate infrastructure, port
charges, connectivity, cargo size and provision of
wide range of port services. Hence, they have
established a valuation for the importance of these
factors through a ‘stated preference approach’. A
stated preference approach refers to a method of
valuation of the importance of the various factors
involved in determining port choice based on asking
the shipping lines to state their preferences through
some type of survey or questionnaire.2 To date, most
port operators have designed policies based on the
stated preference of the shipping lines. However, the
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stated preference approach tends to generate
responses stating a much higher level of importance
for the factors at the port than actually being
observed by the shipping lines3 i.e. the shipping
lines tend to overstate the demands for the factors at
the port by a large amount (Schaller, 1999). Hence
this creates a need to examine the determinants of
port choice through a ‘revealed preference approach’.
A revealed preference approach refers to a method of
valuation of the importance of the various factors
involved in determining port choice based on observ-
ing the behaviour of the shipping lines and the
choices made by them.4 Perhaps the strategy for the
port operators to succeed in the competitive environ-
ment would be to see if there is a consistency in the
stated preference and revealed preference of the
shipping lines and draw significant policy implica-
tions from the revealed preference.
In this light, the objective of this article is to assess
the various factors of port choice from the shipping
lines’ perspective and to see if there is a consistency
between the stated preference and the revealed
preference of the shipping lines for the factors
influencing their port choice.
Existing literature has attempted to analyse the
fierce competition for market share among ports
located within the same region and serving approxi-
mately the same hinterland, using a wide range of
approaches and key determinants in measuring
port performance and efficiency. According to
Fleming and Hayuth (1994), geographical location
is vital to explaining a port’s competitive success.
2
http://www.schallerconsult.com/pub/enhancef.htm
3
This difference is called hypothetical bias.
4
http://www.schallerconsult.com/pub/enhancef.htm
5
Brooks (1985) found that when asked to rank the importance of the various factors, shippers rated cost more highly. But an
analysis of their actual decisions revealed that service factors were more important to them.
J. L. Tongzon and L. Sawant
Baird (1996) has stated that faster turn around time
within the port is an important factor in port
advancement. Tabernacle (1995) has illustrated the
importance of crane productivity in enhancing port
performance with the help of the learning curve
concept. Fung (2001) has tried to measure the
competition between the Port of Singapore (PSA)
and the Hong Kong Port by looking at factors like the
volume of trade passing through these two terminals,
especially to countries like China and the rest of Asia.
With the help of this, he has confirmed the trade
interdependency between the two countries and its
impact on their port performance. Further, he has also
proven that, when the markets of the two ports
overlap, their market shares will become a function of
the prices they charge and how well they meet the
needs of the shippers and shipping lines. These
publications are, however, focusing on partial pro-
ductivity factors which might not prove to be helpful
to the port authorities/operators for policy making in
the long run. Also most shipping lines are concerned
with the overall productivity of the port rather than
partial productivity.
Tongzon (1994) has come close to determining the
overall port productivity and performance by looking
at such factors as location, frequency of ship calls,
economic activity within the sector, labour and capital
productivity and work practices within a port. Besides
there is an extensive literature on freight transport
choice of shippers centring on modal choice and
carrier selection (see e.g. Jerman et al., 1978; Marr,
1980; McGinnis, 1980; Gray, 1982; Meyrick and
D’este, 1989). These articles have listed the ‘route
factors’ such as frequency, capacity, convenience and
transit time; ‘cost factors’ such as freight rates and
‘service factors’ such as delays, reliability, avoidance
of damage, loss and theft as some of the important
factors influencing the decision of the shippers in their
choice of a carrier. However, no such study has been
conducted investigating the port choice from the
shipping lines’ perspective. Moreover, a study based
on carrier choice by Brooks (1985) has found that
shippers’ actual behaviour may not accord with their
stated preferences.5 But, no such attempt has so far
been made to examine if there is a consistency between
the stated preference and the revealed preference of
the shipping lines.
The rest of the article is structured as follows:
Section II explains briefly the methodology adopted;
 Port choice in a competitive environment: from the shipping lines’ perspective
Sections III and IV present the results followed by
conclusion and recommendations.
II. Methodology
The analysis is based on the results of the survey
conducted by Tongzon (2002) among selected ship-
ping lines comprising a sample size of 31. The study
focuses on South East Asia. But, since the major
concentration of port competition within this region
is between Singapore and Malaysia, the focus is
further narrowed down to determine the port choice
of the shipping lines based in Singapore and
Malaysia. Hence the sample size comprises of the
shipping lines in Singapore and Penang, Malaysia.
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479
The second part of the study identifies the revealed
preferences of the shipping lines based on the
behaviour of the shipping lines and actual choices
made by them. This refers to the key factors observed
to be influencing the port choice of the shipping lines
based on their actions and actual choices made by
them. The revealed preferences of the shipping lines
are derived based on the questions posed to them in the
survey, asking them (1) to state their hub port of call
and (2) rate the chosen factors at their hub port of call.
‘Hub port of call’ is referred to as the most preferred
and most frequently used port by the shipping lines.
This would indirectly reveal the key factors which have
influenced the port choice of the shipping lines when
they selected their own hub ports of call. This is
examined with the application of Binary Logistic
Regression (BLR) and Model selection.

There are two main parts to the study. The first

part examines the stated preferences of the shipping
lines for the factors identified to be important by the
shipping lines in their decision to choose a port. The
stated preferences of the shipping lines are derived
based on the questions posed to them in the survey
about how important they thought were the chosen
factors in their decisions to choose a particular port.
‘Chosen factors’ refers to the factors considered in the
study as determinants of port choice, i.e. efficiency,
location, adequacy of infrastructure, port charges,
connectivity, cargo size and wide range of port
services. They were asked to rate the factors with
7 being the highest rating and 1 being the lowest
rating. These ratings are evaluated with the help of
the Boxplot analysis to determine the most important
factors stated by the shipping lines.
III. Empirical Evidence: Stated Preference
Based on observation and the overview of the
Boxplot given subsequently, we can see that ‘effi-
ciency’ is stated to be of prime importance. We can
see from the Descriptive statistics (Table 1), that the
median of efficiency is 6.00, which indicates that the
median concentration for efficiency is more densely
concentrated in the upper quartile region and is
higher relative to the other factors. Also the whiskers
on the boxplot (which directs the skewness) indicate
that the ratings given to efficiency are skewed to the
left, i.e. they are skewed toward the low ratings which

Table 1. Descriptive statistics for the ratings of stated preference of shipping lines
Variable Factors N Mean Median SD
Ratings Cargo size 31 3.000 2.000 2.280
Connectivity 31 4.581 5.000 1.766
Efficiency 31 5.710 6.000 1.532
Infrastructure 31 4.194 4.000 1.922
Location 31 4.194 4.000 2.072
Port charges 31 4.387 5.000 1.764
Port services 31 3.097 3.000 2.039
Variable Factors SE mean Minimum Maximum Q1 Q3
Ratings Cargo size 0.410 1.000 7.000 1.000 5.000
Connectivity 0.317 1.000 7.000 3.000 6.000
Efficiency 0.275 2.000 7.000 5.000 7.000
Infrastructure 0.345 1.000 7.000 2.000 6.000
Location 0.372 0.000 7.000 3.000 6.000
Port charges 0.317 1.000 7.000 3.000 6.000
Port services 0.366 0.000 7.000 1.000 5.000
Note: This table is the MINITAB output for the Boxplots shown in figure 1. This indicates that their ratings are less variable
and more densely packed around their means relative to the others (except efficiency). Hence we can conclude that port
charges and connectivity are the second most important factors to the shipping lines in their choice of a port.
 480
indicates that the ratings are sparse and more spread
out between the median and the lower quartile. In
addition, the inter-quartile range6 for efficiency is
very small: 7
5 ¼ 2. This shows that the ratings are
condensed around the median and there is not much
variability in the general consensus about the
importance of efficiency. This can also be verified
from the SD of efficiency which is 1.532 and it is the
smallest compared to that of the other factors.
Looking at the Boxplots of port charges and
connectivity, they both look similar since both have
the same median values, same upper and lower
quartile values, same interquartile ranges and same
SD values. Also they both are skewed to the left and
their whiskers are of the same length as they both
have the same minimum and maximum values.
Hence, we can conclude that they both are identical
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and equally important to the shipping lines in making
their decisions about choosing a port. In comparison
to the remaining factors (except efficiency), we see
that port charges and connectivity have a higher
median concentration, lower SD and a lower inter-
quartile range, except that their interquartile range is
on par with that of location.
We now consider the remaining four factors:
infrastructure, location, cargo size and wide range of
port services. Among these, we can clearly see that the
median concentration is higher for infrastructure and
location relative to cargo size and wide range of port
services. Hence, we first compare the boxplots for
infrastructure and location. It can be seen from Fig. 1
and Table 1 that they have the same median value. But
a smaller interquartile range of location (6
3 ¼ 3)
than that of infrastructure (6
2 ¼ 4) indicates the
ratings for location are more concentrated around the
mean than the ratings for infrastructure. The SD of
location is larger than that of infrastructure. However,
we must take note of the fact that the SD of location
has been influenced by the extreme values.7 The range8
for location is 7
0 ¼ 7 while the range for infra-
structure is 7
1 ¼ 6. Based on the formula for SD, i.e.
pP
[(x
x
)/n
1], we can see that the rating of 0
has led the SD of ‘location’ to be slightly higher.
Hence, we can safely conclude that location would be
the third most important factor for the shipping lines
in their choice process.
Considering the remaining three boxplots of
infrastructure, cargo size and wide range of port
services, we see that all three have the same
interquartile range, i.e. all three reflect the same
spread in the data. However, the median value for
6
Interquartile range ¼ Upper quartile
Lower quartile.
7
Location has the lower extreme value of 0 which is the rating given by one of the shipping lines in the sample.
8
Range ¼ Maximum value
Minimum value.
J. L. Tongzon and L. Sawant
Boxplots of ratings by factors
7
6
5
Ratings
4
3
2
1
0
Factors
Cargo size
Connectivity
Efficiency
Infrastructure
Location
Port charges
Wide range
of port
services
Fig. 1. Boxplot of ‘Stated preference’ of the shipping lines.
7 ^ highest rating; 1 ^ lowest rating
infrastructure is the highest and its SD is the lowest
relative to the other two factors which indicates it has
a higher median concentration and lower variability
in its ratings. Also infrastructure is symmetric at the
median value, while cargo size and wide range of port
services are right skewed which implies that the
ratings given to the latter two factors are more
towards the lower side. Hence we can safely conclude
that infrastructure is the fourth most important
factor to the shipping lines in their choice of a port.
Finally, comparing the boxplots of cargo size and
wide range of port services, we can see that wide
range of port services has a higher median concen-
tration and lower SD relative to cargo size, indicating
smaller variability in the ratings of the former. Their
interquartile range is the same and both are right
skewed. But cargo size is more skewed to the right
than wide range of port services which implies that
the ratings given to cargo size are more inclined
towards the lower side than those for wide range of
port services. Hence, we can conclude that wide range
of port services is the fifth most important factor and
cargo size is the sixth important factor as stated by
the shipping lines in their decision to choose a
particular port.
IV. Empirical Evidence: Revealed Preference
The survey sample includes shipping lines based in
Singapore and Malaysia and their ‘hub port of call’
 Port choice in a competitive environment: from the shipping lines’ perspective 481
has been either PSA or a Malaysian port. Hence, the Y^ ¼
1:442 þ 0:3683 Adequate Infrastructure
dependent variable would be binary in nature,
0:4859 Port charges
i.e. whether shipping lines choose PSA or do not
choose PSA as their most preferred port and a test þ 0:4156 Wide range of port services
using BLR is conducted. The response variable at 15% level of significance:11
is defined as:

The result of the final model shows that port charges,
1, if shipping line chooses PSA wide range of port services and adequate infrastruc-
Yi ¼
0, if shipping line does not choose PSA, ture are revealed to be the key factors influencing the
port choice of the shipping lines. Here we see a lack of
where i represents the shipping line. consistency with the results of the ‘stated preference’
The Multiple Logistic Regression is fitted using the of the shipping lines in Section III. This inconsistency
following independent variables: between the stated and the revealed preferences
X1 ¼ Adequate infrastructure, X2 ¼ Location, would be justified in the next section.
X3 ¼ Efficiency, X4 ¼ Port charges,
X5 ¼ Cargo size, X6 ¼ Connectivity and Justification for revealed preference results
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X7 ¼ Wide range of port services
Results of the binary logistic regression
We can see from the Logistic regression table, the
fitted logit is given by:
Y^ i ¼ 0:128 þ 0:4532 Adequate infrastructure

0:0892Location
0:1535Efficiency

0:6762Port charges þ 0:1335Cargo size

0:3344Connectivity
þ 0:5551Wide range of port services:9
Analysis of binary logistic regression
To see whether the factors collectively contribute in
explaining the logit,10 we test the hypothesis that the
coefficients of the independent variables (
1,
2,
3,

4,
5,
6,
7) are all zero. Based on the results, we
conclude that at the 5% level of significance the
variables in the study are significant and thus
collectively contribute to the model.
We further conduct Model selection and the final
model chosen is:
Y^ ¼ 0:031
0:4812 Port charges
þ 0:4326 Wide range of port services at 5%
level ofsignificance and
To identify the underlying reasons for the incon-
sistency between the ‘stated preference’ and the
‘revealed preference’ would require the justification
to be divided into two parts. In Section IV, the
justification for the factors included in the final model
for ‘revealed preference’ of the shipping lines would
be outlined. Followed by this, in Section IV an
elaborate justification would be given with the help of
a statistical and perceptual approach for the factors
which have been deleted out of the final model for the
‘revealed preference’.
Justification for the factors included in the ‘revealed
preference’ of the shipping lines. First, as discussed
previously, it should be highlighted that the world is
moving towards globalization, mergers, alliances and
severe inter-port competition. Hence, the shipping
lines are also diversifying their operations to cater to
the door-to-door philosophy from mere transport
providers to integrated logistics organizations.
Moreover, the perceived improvements in port
performance and the varied choice of ports of call
have resulted in the lines concentrating on the
maritime route that best serve their interest of faster
and cheaper transit rather than a particular
hinterland.(Slack, 1993). At such a juncture with the
fear of overlapping hinterlands and two ports in the
same region being at the threshold level of efficiency

9
In BLR, instead of predicting Yi we fit the model to predict the logits, log [/(1
)] where  represents the probability that
the shipping line chooses PSA i.e. Pr [Yi ¼ 1/Xi] ¼  and (1
) represents the probability that the shipping line does not
choose PSA i.e. Pr [Yi ¼ 0/Xi] ¼ 1
. Thus our fitted regression equation is of the form, Y^ i ¼ =ð1
Þ ¼
e
0 þ
1 X1 þ
2 X2 þ
3 X3 þ
4 X4 þ
5 X5 þ
6 X6 þ
7 X7 . Taking the natural logarithm of both sides we get, log ½=ð1
Þ ¼
0 þ
1 X1 þ

2 X2 þ
3 X3 þ
4 X4 þ
5 X5 þ
6 X6 þ
7 X7 .
10
Logit refers to the port choice of the shipping line. It is the response variable of the BLR equation in this study.
11
Menard (2001) has stated that the usual 5% criterion for the significance level is too low and could result in the exclusion of
some important variable from the model. Hence, he has tested and proven that we could use a criterion of 15–20% level of
significance.
 482 J. L. Tongzon and L. Sawant
Table 2. Binary logistic regression for the ratings of revealed preference of the shipping lines
Link function: logit
Variable Value Count

Response information
Port selection 1 14 (Event)
0 17
Total 31
Odds 95% CI

Predictor Coefficient SE coeff. Z P Ratio Lower Upper

Logistic regression table

Constant 0.128 2.148 0.06 0.953
Infrastructure 0.4532 0.3060 1.48 0.139 1.57 0.86 2.87
Location
0.0892 0.2645
0.34 0.736 0.91 0.54 1.54
Efficiency
0.1535 0.2697
0.57 0.569 0.86 0.51 1.46
Port charges
0.6762 0.3346
2.02 0.043 0.51 0.26 0.98
Cargo size 0.1335 0.2519 0.53 0.596 1.14 0.70 1.87
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Connectivity
0.3344 0.3078
1.09 0.277 0.72 0.39 1.31

R. port services 0.5551 0.3037 1.83 0.068 1.74 0.96 3.16
Log-likelihood ¼
12.965
Test that all slopes are zero: G ¼ 16.754, DF ¼ 7, p-value ¼ 0.019
Note: This results were obtained for the Full Model (FM).

(e.g. PSA vs. PTP), an integrated package of lower
charges, new value added services and adequate
infrastructure at the port would be vital for a port
to gain comparative advantage over the other.
Hence, most ports are now exploiting the oppor-
tunities to provide efficient warehousing and dis-
tribution activities such as inventory control, data
management, packing and processing (Slack, 1993).
In addition, several ports are also facilitating the
concept of ‘one-stop-shopping’ by providing services
like bunkering, repairs and shipyard, customs clear-
ance, inland transport, security, banking facilities and
forwarding agents. With the provision of these
services, the ports can benefit not only from the sale
of these services but also from the additional cargo
that flows through the port.
A telephone interview with a Malaysian port agent
revealed that, although the Malaysian ports and PSA
are at the threshold level of efficiency, PSA still
attracts a substantial amount of transhipment traffic
due to its cutting edge in the provision of wide range
of port services. For example, while PSA remains the
top bunkering port in the world, recent developments
at the port with the introduction of an Accreditation
Scheme for Bunker Suppliers, intensifying bunker
quality checks and adopting the ‘Improved Bunker
Sampling Method’ have further enhanced its produc-
tivity (MPA press release, 30 June 2003). At the same
12
This project has aimed to capture a slice of Singapore’s bunkering business worth over S$5 billion a year. (The Shipping
Times, 26 July 2002).
time, the efforts of PTP to rival PSA cannot be
ignored with the construction of a bunker port and a
petrochemical complex near PTP12 (The Shipping
Times, 26 July 2002). Also, the terrorist attacks in
New York and Washington have led to immediate
actions to improve the global supply chain security at
ports like Singapore which handle more than 20% of
the world’s total transhipment business.
Besides, since the port charges need to be
continuously reduced, the only way to maintain a
higher margin of profits is by complementing the low
charges with more value added services. Also the fact
that the world’s busiest transhipment port and the
second biggest container terminal operator, PSA, is
seen to be conducting a major overhaul of its strategy
in its bid to stay cost competitive clearly indicates
that today port charges might be the one of the
foremost factor influencing port choice.
Likewise, the physical infrastructure at the port
such as cranes, berths, yards, tugs and storage system
have been the traditional forms of physical infra-
structure available at almost all ports. However, the
present era seems to be diversifying its definition of
infrastructure by including services such as (1) inland
transportation system to serve the hinterland, city
surrounding the port and even the neighbouring
countries (2) A ‘free port’ status which can be defined
as a zone in the port where equipment, materials and
 Port choice in a competitive environment: from the shipping lines’ perspective 483
Table 3. Descriptive statistics for the ratings given to factors at PSA and Malaysian ports

Factors Efficiency Location Cargo size Connectivity

Port PSA Malaysia ports PSA Malaysia ports PSA Malaysia ports PSA Malaysia ports
Median 4.0 5.0 5.5 5.0 4.5 4.0 3.0 4.0
SD 2.0 2.317 2.065 2.149 2.326 2.339 2.381 1.654
Q1 2.0 2 2.75 2.0 1 1 1.75 2.5
Q3 5.25 6.5 6.0 6.0 6 6 6.25 5.5

Table 4. Tabulated percentage for ratings given to factors at PSA and Malaysian ports
Efficiency Location Cargo size Connectivity
0 1 0 1 0 1 0 1
1–3 7 5 1–3 6 5 1–3 8 6 1–3 5 8
41.18% 35.71% 35.29% 35.71% 47.06% 42.86% 29.41% 57.14%
4–7 10 9 4–7 11 9 4–7 9 8 4–7 12 6
58.82% 64.29% 64.29% 64.71% 52.94% 57.14% 70.59% 42.86%
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All 17 14 All 17 14 All 17 14 All 17 14

100% 100% 100% 100% 100% 100% 100% 100%

goods are introduced free of duties and taxes, the descriptive statistics (Table 3) calculated for the
goods being then stored (in a commercial free port) or ratings given by the shipping lines to the services
processed (in an industrial free port) and re-exported. provided at these ports. The results of the descriptive
This is evident from the recently announced $461.6m statistics would be further verified with the help of
growth plan of Port Klang to adopt the Dubai model tabulated percentage (Table 4) for the same ratings.
and create a ‘free zone’ distribution centre with Here the ratings are divided into two categories, the
commercial and logistic services to boost its status as first category consisting of ratings ranging from 1 to 3
a transhipment hub (The New paper, 19 February which would signify ratings on the lower side and
2003) and 3) the ‘electronic data interchange’ (EDI) the second category consisting of ratings ranging
system which speeds up communications between the from 4 to 7 which would signify the ratings on the
ports and the shipping lines producing a higher higher side.
service level and gains in efficiency through lower
operational cost. Some shipping experts have stated Efficiency
that the denial of PSA to meet the demands of From Table 3 we can see that the median concentra-
Maersk Sealand for dedicated berths and lower tion for the Malaysian ports is higher than that for
charges led to the move of Maersk Sealand to PTP. PSA. However the interquartile range14 and the SD
for PSA are smaller than that for the Malaysian
Justification for the factors deleted from the ‘revealed ports. This indicates that while the median concen-
preference’ of shipping lines. One evident reason for tration for Malaysian ports is higher, the ratings for
the deletion of the other factors could be that, given PSA are more concentrated around the mean and
the increasing advancements in port facilities, today have a lower variance. Based on this, we can conclude
most ports have achieved the threshold level of that the efficiency levels of PSA and the Malaysian
performance required by the shipping lines. Hence, ports are almost compatible. Also the tabulated
the deleted factors would not be identified as percentage (Table 4) of the ratings for efficiency
prominent factors by the shipping lines. To test this, shows PSA received 64.29% and the Malaysian ports
a comparison would be made between the factors at 58.82%. The 6% of higher ratings for the Malaysian
PSA and the Malaysian ports13 with the help of the ports has been influenced by the high ratings given to
13
Since the ‘hub port of call’ of the shipping lines in the sample has been either PSA or one of the Malaysian ports such as
PTP or Port Klang, a comparison is made between these ports. As this study focuses on determining the factors influencing
the port choice of the shipping lines rather than doing a comparison between two ports, the ratings for PTP and Port Klang
have been included under one identity of ‘Malaysian ports’.
14
Interquartile range ¼ upper quartile
lower quartile, i.e. Q3 – Q1 in Table 3.
 484
the efficiency at PTP. But we must note that the
workload and the operational cost at PTP are much
less compared to that at PSA. This is evident
from the fact that PTP handled around 2.8 million
20-ft-equivalent units (TEUs) in 2002 compared to
PSA’s 16.8 million TEUs local throughput (The
Straits Times, 19 February 2003). Also given the
small clientele base at PTP, it has not been put
through a rigorous test as yet. Thus, based on the
aforementioned statistical evidence, we can say the
efficiency level for the ports of the two countries is
almost on par.
Moreover, there have been growing concerns about
the need for ports to improve their efficiency to
prevent being pushed out of the increasingly compe-
titive market situation. As a result, several ports have
invested heavily to upgrade their facilities by employ-
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ing superior quality cranes, building more berths,
creating more storage capacity and providing better
wage incentives. As Notteboom et al. (2000) have
stated, ‘the industry is dominated by the belief that
the best workable strategy to defeat competitors is
building new and highly efficient terminals’. Such
great amount of pressure has driven the relatively
new and smaller ports to re-think and re-define their
strategies in order to attain compatibility in the
operational environment within which the commer-
cial ports operate. This is evident from the most
recent developments of PTP15 and the South China
ports which are relatively newcomers in the port
industry and yet have proven to be a major threat to
the established providers of port services, i.e. PSA
and the Hong Kong port, respectively. In addition,
the relocation of the operations of two major
shipping lines, Maersk Sealand and Evergreen from
PSA to PTP has been a remarkable evidence of the
growing competency of PTP which came into
existence only in 1999. The expertise acquired by
Port Klang has also been alarming.16 From this, we
can infer that the major ports in South East Asian,
i.e. PSA and Malaysian ports like Port Klang and
PTP, are almost on par in terms of the minimum level
of efficiency required by the shipping lines.
Location
Table 3 reflects that PSA has a higher median
concentration, smaller SD and a smaller interquartile
15
PTP has continuously invested in building larger berths and employing superior quality cranes.
16
Port Klang has two major attractions to the shipping lines: cargo from the industrial hinterland of the Klang Valley and low
rates. It has also been expanding over the last year with the conversion of conventional berths to container handling facilities.
(Lloyd’s List, 28 February 2003)
17
The Malacca strait is approximately 500 miles long and is the longest straits in the world used for international navigation.
It forms the main seaway connecting the Indian Ocean with the China Sea and provides the shortest route for vessels trading
between the Middle and East Asian countries.
J. L. Tongzon and L. Sawant
range, i.e. the ratings for location of PSA are less
variable and more concentrated around the mean
relative to the ratings for location of Malaysian ports.
Based on this, we can say that the location for PSA is
slightly better than that for the Malaysian ports.
However, the tabulated percentage (Table 4) shows
that the ratings given to the location of PSA
constitutes 64.71% while that for Malaysian ports is
64.29%. The ratings seem on par because the values
of the median, SD and interquartile ranges between
them differ very slightly. Hence, we can say that the
location of the Malaysian ports is almost on par with
the location of PSA.
Several researchers have stressed upon the inherent
potential for a port with a sheltered and deep-water
harbour and extensive areas of level land to have an
added advantage in attracting significant amount of
traffic. Although this claim cannot be rejected, it is
important to consider that lately several ports are
artificially building these facilities. While Port Klang
and PSA are deep-water ports, PTP has invested
heavily in building a deep-water port and deeper
drafts to accommodate the large vessels. Besides, the
greater part of the waterway of the Straits of
Malacca17 runs through the territorial waters of
Indonesia and Malaysia with the much shorter
Singapore straits joining it at the southern end.
Also the ‘Traffic Separation Scheme’ (TSS), adopted
by the International Maritime Organization (IMO) to
avoid casualties at the complex pattern of the Straits
comprising of heavy traffic, stretches from Port
Klang through PTP and PSA. Hence, all of these
three major ports bordering the Malacca straits
provide an adequate stopover for the cargo opera-
tions of containerships. Based on the aforementioned
arguments, we can confirm the compatibility of the
location of these ports and hence it thus justifies
the deletion of location from the final model of the
‘revealed preference’ of the shipping lines.
Connectivity
The deletion of connectivity from the final model of
the ‘revealed preference’ shows that although in the
‘stated preference’ of the shipping lines (Section III) it
was rated at exactly the same level as port charges, the
‘revealed preference’ indicates that port charges is
given a higher weightage compared to connectivity.
 Port choice in a competitive environment: from the shipping lines’ perspective
As mentioned earlier, connectivity is not merely a
function of the maritime routes. With globalization it
is becoming more so a function of the port’s
connection through all modes of faster and cheaper
transport to states within the country as well as
neighbouring countries. Based on an interview with
Captain Sawant,18 we confirm that the main reason
for the deletion of connectivity is that it has not been of
primary concern to the shipping lines in their
operations (Interview, 15 January 2003). This is
because the operations of the shipping lines have
prominently consisted of delivery of goods from one
port to the other port. It is mainly the responsibility of
the freight forwarders to pick up the goods from the
port and deliver them to the point of consumption, i.e.
to the various consignees. Based on this, we can say
that good connectivity would be of greater concern to
Downloaded by [Oregon State University] at 23:30 08 January 2015
the freight forwarders than the shipping lines.
From Tables 3 and 4, we can infer that connectivity
at the Malaysian ports is better than that at PSA. The
ratings for the Malaysian ports have a higher median
concentration and smaller SD and interquartile range
than those for PSA. The results are such because
Malaysia is more densely connected by roads and
railway within the country as well as to the
neighbouring countries. This has benefited the freight
forwarders at the Malaysian ports. For example, PTP
is in an advantageous position to offer a fast road
network, a growing selection of short sea feeder
operations and a rail connection to central Malaysia
and southern Thailand. The PTP officials have stated
that, ‘the port has been able to stem the flow of
southern Malaysian produced goods across the
causeway due to its price competitiveness and
increased connectivity’. (Containerisation
International, June 2002). Port Klang also enjoys
good connectivity through its dense network of road
and railways. The importance of connectivity to
freight forwarders is also seen from the comments of
the manager of Kenwood Logistics which set up its
South East Asian distribution hub in PTP. He says,
‘PTP offered us the ability to consolidate, value add
and redistribute all of our cargo within this region’.
Hence it’s the freight forwarders that attach greater
importance to connectivity rather than shipping lines.
Cargo size
Cargo size has been defined as the capacity of the
port to handle the amount of cargo being carried by a
vessel during a particular voyage. The results in
18
Captain Sawant is a Master Mariner by profession who has been in the shipping industry for over 25 years. The interview
was held to discuss the importance of connectivity to the shipping lines in their operations. The interview confirmed the
changing definition of connectivity.
19
Furthermore, carrying empty containers would create an imbalance in box movement and hence the lines settle for lower
freight rates to recover a portion of their cost.
20
It is the largest classification society for containerships.
485
Table 3 show that the cargo size at PSA and at the
Malaysian ports have the same interquartile range
and SD. The median concentration for cargo size at
PSA is slightly higher than that of the Malaysian
ports. Also Table 4 reveals the cargo size for PSA at
57.14% and that of the Malaysian ports 52.14%.
With this, we can deduce that the handling of
cargo size is almost compatible in the Malaysian
ports and PSA.
Although the general consensus has been that
larger vessels generate economies of scale; in the
present era with the economic downturn and
volatility in the level of trade and freight rates, it
has been difficult for the larger vessels to generate
sufficient cargo to fill the large ships and to deal with
the increasing operational cost.19 Most ocean carriers
including Cosco Container Lines had envisaged
the new container vessel deliveries to reduce by the
second half of 2002. Also Hans Payer, member of
the executive board of Germanisher Lloyd,20 said, ‘It
is doubtful that the economies of scale in large ships
can be carried on indefinitely’ (Containerisation
International, June 2002)
Thus, the above analysis justifies the redundancy of
the factors deleted from the ‘revealed preference’ of
the shipping lines. This once again confirms the
validity of the ‘revealed preference’ of the shipping
lines in the present era of regional competition and
globalization. With this, we have also successfully
investigated the inconsistency derived between the
stated and the revealed preference of the shipping
lines in the previous section. The analyses in the two
sub sections thus confirm the inconsistency between
the ‘stated preference’ and the ‘revealed preference’ of
the shipping lines for factors influencing their port
choice. The analyses also clearly reflect the under-
lying reasons for the inconsistency between the two
preferences.
V. Conclusion
This study has provided a valuable insight in
evaluating the determinants of port choice from the
perspective of the shipping lines in the present era of
regional competition. The findings of this study
have clearly shown that the stated preference of
the shipping lines markedly differs from their
 486
revealed preference. Hence, the results have shown no
consistency between the two.
The study involved two parts. The examination of
the stated preferences has shown that efficiency was
of prime importance followed by port charges and
connectivity being on par. Location was the third
most important, infrastructure fourth, wide range of
port services was the fifth most important factor and
cargo size the sixth most important factor in their
choice of a port. The test for the revealed preference
has identified port charges and wide range of port
services to be the significant factors for shipping lines
at 5% level of significance and infrastructure at 15%
level of significance. The remaining factors came out
to be insignificant.
There are several reasons for the revealed prefer-
ences of shipping lines to differ from their stated
Downloaded by [Oregon State University] at 23:30 08 January 2015
preferences. Most importantly, with increasing com-
petition shipping lines are restructuring their opera-
tions to more on the provision of new value added
services to the shippers and also on outsourcing for
logistic operations. This has led them to concentrate
more on the maritime route that best serves their
interest of faster and cheaper transit, rather than a
particular hinterland. Commenting on the uncer-
tainty of transhipment hubs, Maersk Sealand Asia’s
regional chief executive, Mr. Bjarne Hansen, cau-
tioned, ‘One should always bear in mind that if
shipping lines find a better, more efficient and less
expensive place along their route, they’ll shift.
Nothing is given; you have to remain competitive at
all times’ (The Straits Times, 22 February 2003). The
brunt of this is felt by the ports which are seen to
undertake huge investments to meet the increasing
needs of the shipping lines. As a result, most ports are
seen to have achieved the threshold level of efficiency.
Further, the value of a strategic location is disappear-
ing as most ports today have invested heavily in
artificially building a deep-water port and deeper
drafts to accommodate larger vessels. Cargo size is
another factor that has lost its significance as the
current economic downturn has made it difficult for
the shipping lines to generate sufficient cargo to fill
the larger vessels. This has raised fears for the
shipping lines to face diseconomies of scale. Finally,
connectivity has also been insignificant because this is
not really of significance to the shipping lines, but
rather more of significance to the freight forwarders.
Thus, at such a juncture with the fear of overlapping
21
PTP has capacity to handle four million TEUs, with plans to raise that to six million TEUs by 2006 (The Straits Times,
19 February 2003). Port Klang has announced its $461.6m growth plans to adopt the Dubai model and create a ‘free zone’
distribution centre supported by commercial and logistic services to boost its status as a transshipment hub.
22
Although Singapore remains the top bunkering port, the Malaysian plan to build a bunker port and a petrochemical
complex at PTP poses a threat to Singapore in the near future.
J. L. Tongzon and L. Sawant
hinterlands and two ports within the same region
being at the threshold level of efficiency; lower
charges, provision of new value added services and
adequate infrastructure in an integrated package
would be vital for a port to gain a comparative
advantage over the other.
The findings have provided theoretical and empiri-
cal support to justify that the revealed preference of
the shipping lines should be incorporated in policy
formulations. Further, the influence of port charges
relative to other factors in influencing port choice as
inferred in the revealed preference is a clear indication
that, although several studies have shown that quality
always takes precedence over price, there is only a
maximum price that the shipping lines would be
willing to pay. Hence, only as long as the price is
below this maximum limit then the quality of port
services would take precedence over price. While we
consider the relevance of port charges we must,
however, take note that there is still a minimum level
of service and efficiency on which the shipping lines
will not compromise. Hence in the present era it is the
total package that counts.
The above position can be translated to the present
context in the announcement made by PSA to slash
14% of its workforce in its bid to cut operation cost
and be cost competitive with its neighbouring ports,
Port Klang and PTP (The Straits Times, 19 February
2003). Thus, in spite of achieving a higher load factor
by automating the back-end of operations and
offering high level of efficiency, PSA seems to be
facing tough competition due to the rapid develop-
ments and future plans of the neighbouring ports to
increase capacity and maintain handling charges
about 50% lower than that at PSA.21 Moreover, the
dominant contribution of the wide range of port
services in the study justifies the need for the ports to
provide for them to keep a strong hold on their
footloose customers. This involves facilitating the
concept of ‘one-stop-shopping’ by providing services
like bunkering, repairs, shipyard, customs clearance,
inland transport, security, banking facilities, inven-
tory and warehouse management and distribution
and supply chain management.22 Finally, provision
of adequate infrastructure such as efficient inland
transportation, EDI and dedicated berths would add
value to the services at the port in addition to the
available physical infrastructure which is easily
available at any port.
 Port choice in a competitive environment: from the shipping lines’ perspective
Thus in addition to technical and labour efficiency,
special consideration should be given by the port
operator to adopt ‘differentiation’ in their approach
to offer services. ‘Differentiation’ refers to providing
specific port services in market niches distinct from
those provided by other ports, offering greater value
to the port user (Notteboom et al., 2001, p. 83). In
retrospect, this article has highlighted the prevailing
difference between the stated preference and revealed
preference of the shipping lines. These findings are
important because efficient allocation of resources in
the present era of regional competition creates a need
to decipher between the stated preference and
revealed preference of the shipping lines for imple-
menting effective and competitive port policies.
Although the econometric estimation was based on
a small sample, the results have provided some useful
Downloaded by [Oregon State University] at 23:30 08 January 2015
insights into port choice determinants from the
perspective of the shipping lines.
To date several researchers have attempted to
develop statistical models to determine the relevant
factors affecting the port industry. However, it would
be beneficial if some amount of research was devoted
to understanding the behaviour of the shipping lines
and their preferences in the present era of regional
competition. It would be interesting to take this study
further to investigate for a consistency between the
stated preference and the revealed preference on an
international scale. A comparison could be made to
see if the findings derived for the South East Asian
region are similar to those found for another region.
Studies could also be conducted to verify if the
dominance of port charges would continue to be
persistent in the near future.
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 488
Appendix
A1-Overview of the Box Plot
With the help of the Box Plot we get a clear display of
the ‘stated preference’ of the shipping lines. The
Boxplot examines the following areas: (1) the location
of the median of the ratings. The median which is the
middle value in the ordered list indicates the 50th
percentile of the data, i.e. 50% of the data lies below
the median and the other 50% lies above the median.
Based on the location of the median in the range from
7 to 1, we can observe the median concentration of
the ratings. For example, a higher median value
would have a higher median concentration indicating
that 50% of the ratings given to the factor are in
the upper range.23 (2) The direction of skewness of
the data which is indicated by the length of the
Downloaded by [Oregon State University] at 23:30 08 January 2015
J. L. Tongzon and L. Sawant
arbitrary and has no particular meaning. 4) Lastly,
we can detect unusually large or small data values
called outliers. These will be displayed in the
MINITAB output with an ‘’ sign.
A2-Validity of the factors in the study
To see whether the factors collectively contribute in
explaining the logit,26 we test the hypothesis that the
coefficients of the independent variables (
1,
2,
3,

4,
5,
6,
7) are all zero. Hence, we would test the
Full Model (FM) against the Reduced model (RM).
^ ¼ b0 þ b1 Adequate infrastructure
FM: Y
þ b2 Location þ b3 Efficiency
þ b4 Port charges þ b5 Cargo size
þ b6 Connectivity

‘whisker’.24 If the data are left skewed it would imply

that very few shipping lines have given lower ratings
for the factor and vice versa if the data are right
skewed. (3) The spread of the ratings judged by the
‘interquartile range’. Interquartile range ¼ Upper
quartile25
Lower quartile. A small value of the
interquartile range indicates a small amount of
variability in the ratings for the factor which implies
the ratings are more densely packed around the
mean. Since the interquartile range represents the
width of the middle half of the data it is robust
against outliers. The height of the box is usually
þ b7 Wide range of port services
vs:
^ ¼ b0
RM: Y
The hypothesis is tested based on the ‘G’ statistic
which has a chi-square distribution with 7 degrees
of freedom. From Table 2, G ¼ 16.754. A small value
of chi-square implies that the variables are not
significant while a large value of chi-square indicates
the significance of the variables in the model
(Chatterjee et al., 2000). From the chi-square

Table A1. Logistic regression table for fitting the model without wide range of port services

Odds 95% CI

Predictor Coef. SE coef. Z P Ratio Lower Upper

Logistic regression Table
Constant 0.918 2.127 0.43 0.666
Adequate 0.5077 0.2773 1.83 0.067 1.66 0.96 2.86
Location
0.1757 0.2421
0.73 0.468 0.84 0.52 1.35
Efficien
0.1297 0.2310
0.56 0.574 0.88 0.56 1.38
Port cha
0.6757 0.3044
2.22 0.026 0.51 0.28 0.92
Cargo si 0.2359 0.2563 0.92 0.357 1.27 0.77 2.09
Connection
0.0638 0.2333
0.27 0.785 0.94 0.59 1.48
Log-likelihood ¼
14.991
Test that all slopes are zero: G ¼ 12.703, DF ¼ 6, p-value ¼ 0.048

23
The sample median is a better estimation than the sample mean as the median is not sensitive to outliers.
24
‘Whisker’ refers to the tails projecting from the left and right of the boxplot. In Fig. 1, it is to the top and bottom of the
Boxplots.
25
‘Quartiles’ are data values that divide an ordered data set into four quarters: the lower quartile, lower middle quartile, upper
middle quartile and the upper quartile. Upper quartile region represents 75th percentile of the data and lower quartile
represents 25th percentile of the data.
26
Logit refers to the port choice of the shipping line which is the response variable of the BLR equation in this study.
 Port choice in a competitive environment: from the shipping lines’ perspective
distribution table, the 5% critical value of the chi-
square distribution with 7 degrees of freedom is
14.07. As 16.754 > 14.07 we can conclude at the 5%
level of significance that the variables in the study
collectively contribute to the model. Also the p-value
of the test: P [2 (7) > 16.754] ¼ 0.019 is considerable
smaller than 0.05. This indicates that the variables are
significant. Thus we reject the RM that all coefficients
are zero.
A3-Model Selection
Test at 5% level of significance:
Case 1: Test to determine the significance of ‘wide
range of port services’
^ ¼ b0 þ b1 Adequate infrastructure
RM: Y
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489
for the FM and the RM. G ¼ 2  [
12.965

(
14.991)] ¼ 4.052. From the chi square distribution
table, the 5% critical value of the chi-square
distribution with 1 degree of freedom27 is 3.84.
Based on the criteria for ‘G’ statistic28 we can
conclude that since 4.052 > 3.84, the variable wide
range of port services is significant.
Case 2: Test to determine the significance of
‘connectivity’
^ ¼ b0 þ b1 Adequate infrastructure
RM: Y
þ b2 Location þ b3 Efficiency
þ b4 Port charges þ b5 Cargo size
þ b7 Wide range of port services
vs:

þ b2 Location þ b3 Efficiency ^ ¼ b0 þ b1 Adequate infrastructure

þ b4 Port charges þ b5 Cargo size
þ b6 Connectivity
vs:
^ ¼ b0 þ b1 Adequate infrastructure
FM: Y
þ b2 Location þ b3 Efficiency
þ b4 Port charges þ b5 Cargo size
þ b6 Connectivity
þ b7 Wide range of port services
To check the significance of ‘wide range of port
services’ we find the ‘G’ statistic which is obtained
from twice the difference between the Log-Likelihood
FM: Y
þ b2 Location þ b3 Efficiency
þ b4 Port charges þ b5 Cargo size
þ b6 Connectivity
þ b7 Wide range of port services
To check the significance of connectivity we test the
RM against the FM and find the ‘G’ statistic as
mentioned in the earlier case. G ¼ 2  [
12.965

(
13.621)] ¼ 1.312. The 5% critical value of the chi-
square distribution with 1 degree of freedom is 3.84.
Since 1.312 < 3.84, we conclude that the connectivity
is not significant in this model and hence can be
deleted from the model.

Table A2. Logistic regression table for fitting the model without connectivity
Odds 95% CI

Predictor Coef. SE coef. Z P Ratio Lower Upper

Logistic regression Table
Constant
0.500 2.120
0.24 0.814
Adequate 0.5130 0.2876 1.78 0.074 1.67 0.95 2.93
Location
0.1661 0.2488
0.67 0.504 0.85 0.52 1.38
Efficien
0.2164 0.2561
0.84 0.398 0.81 0.49 1.33
Port cha
0.6285 0.3068
2.05 0.040 0.53 0.29 0.97
Cargo si 0.1455 0.2408 0.60 0.546 1.16 0.72 1.85
Wide ran 0.4016 0.2515 1.60 0.110 1.49 0.91 2.45
Log-likelihood ¼
13.621
Test that all slopes are zero: G ¼ 15.443, DF ¼ 6, p-value ¼ 0.017

27

12.965 is the Log-likelihood for the FM with DF ^ 7. For verification, see Table 2. The DF for the RM ¼ 6 (Table A1).
Hence DF to be used to find the chi-square distribution at the 5% level of significance is, DF ¼ DFFM
DFRM, i.e. DF of
FM
DF of RM. Hence DF to be used in the test is 7
6 ¼ 1.
28
A small value of chi-square would imply that the variables do not contribute significantly to the model while a large value of
chi-square would prove the significance of the variables in the model.
 490 J. L. Tongzon and L. Sawant
Table A3. Logistic regression table for fitting the model without cargo size

Odds 95% CI

Predictor Coef. SE coef. Z P Ratio Lower Upper

Constant
0.105 1.978
0.05 0.958
Adequate 0.4866 0.2841 1.71 0.087 1.63 0.93 2.84
Location
0.1521 0.2442
0.62 0.533 0.86 0.53 1.39
Efficien
0.2430 0.2484
0.98 0.328 0.78 0.48 1.28
Port cha
0.5588 0.2651
2.11 0.035 0.57 0.34 0.96
Wide ran 0.4251 0.2466 1.72 0.085 1.53 0.94 2.48
Log-likelihood ¼
13.812
Test that all slopes are zero: G ¼ 15.060, DF ¼ 5, p-value ¼ 0.010

Table A4. Logistic regression table for fitting the model without port charges

Odds 95% CI
Downloaded by [Oregon State University] at 23:30 08 January 2015

Predictor Coef. SE coef. Z P Ratio Lower Upper

Constant
3.026 1.866
1.62 0.105
Adequate 0.4304 0.2493 1.73 0.084 1.54 0.94 2.51
Location
0.0682 0.2306
0.30 0.767 0.93 0.59 1.47
Efficien
0.1020 0.2080
0.49 0.624 0.90 0.60 1.36
Wide ran 0.4521 0.2257 2.00 0.045 1.57 1.01 2.45
Log-likelihood ¼
16.555
Test that all slopes are zero: G ¼ 9.575, DF ¼ 4, p-value ¼ 0.048

Case 3: Test to determine the significance of ‘cargo vs:

size’
^ ¼ b0 þ b1 Adequate infrastructure
RM: Y
þ b2 Location þ b3 Efficiency
þ b4 Port charges
þ b7 Wide range of port services
vs:
^ ¼ b0 þ b1 Adequate infrastructure
FM: Y
þ b2 Location þ b3 Efficiency
þ b4 Port charges þ b5 Cargo size
þ b7 Wide range of port services
We again test the RM against the FM. The ‘G’
statistic is G ¼ 2  [
13.621
(
13.812)] ¼ 0.382. The
5% critical value of the chi-square distribution with 1
degree of freedom is 3.84. Since 0.382 < 3.84 we
conclude that cargo size is not significant in this
model and hence can be deleted from the model.
Case 4: Test to determine the significance of ‘port
charges’
^ ¼ b0 þ b1 Adequate infrastructure
RM: Y
þ b2 Location þ b3 Efficiency
þ b7 Wide range of port services
^ ¼ b0 þ b1 Adequate infrastructure
FM: Y
þ b2 Location þ b3 Efficiency
þ b4 Port charges
þ b7 Wide range of port services
We test the RM against the FM The ‘G’ statistic is
G ¼ 2  [
13.812
(
16.555)] ¼ 5.486. The 5% criti-
cal value of the chi-square distribution with 1 degree
of freedom is 3.84. Since 5.486 > 3.84 we conclude
that port charges is a significant variable influencing
the port choice of the shipping lines and hence it
should be retained in the model.
Case 5: Test to determine the significance of
‘efficiency’
^ ¼ b0 þ b1 Adequate infrastructure
RM: Y
þ b2 Location þ b4 Port charges
þ b7 Wide range of port services
vs:
^ ¼ b0 þ b1 Adequate infrastructure
FM: Y
þ b2 Location þ b3 Efficiency
þ b4 Port charges
þ b7 Wide range of port services
 Port choice in a competitive environment: from the shipping lines’ perspective 491
Table A5. Logistic regression table for fitting the model without efficiency logistic regression table

Odds 95% CI

Predictor Coef. SE coef. Z P Ratio Lower Upper

Constant
0.986 1.858
0.53 0.595
Adequate 0.4109 0.2524 1.63 0.104 1.51 0.92 2.47
Location
0.1284 0.2371
0.54 0.588 0.88 0.55 1.40
Port cha
0.5025 0.2541
1.98 0.048 0.60 0.37 1.00
Wide ran 0.4083 0.2385 1.71 0.087 1.50 0.94 2.40
Log-likelihood ¼
14.336
Test that all slopes are zero: G ¼ 14.012, DF ¼ 4, p-value ¼ 0.007

Table A6. Logistic regression table for fitting the model without location

Odds 95% CI
Downloaded by [Oregon State University] at 23:30 08 January 2015

Predictor Coef. SE coef. Z P Ratio Lower Upper

Constant
1.442 1.710
0.84 0.399
Adequate 0.3683 0.2367 1.56 0.120 1.45 0.91 2.30
Port cha
0.4859 0.2511
1.93 0.053 0.62 0.38 1.01
Wide ran 0.4156 0.2368 1.75 0.079 1.52 0.95 2.41
Log-likelihood ¼
14.485
Test that all slopes are zero: G ¼ 13.715, DF ¼ 3, p-value ¼ 0.003

Table A7. Logistic regression table for fitting the model without adequate infrastructure
Odds 95% CI

Predictor Coef. SE coef. Z P Ratio Lower Upper

Constant 0.031 1.332 0.02 0.982
Port cha
0.4812 0.2323
2.07 0.038 0.62 0.39 0.97
Wide ran 0.4326 0.2342 1.85 0.065 1.54 0.97 2.44
Log-likelihood ¼
15.820
Test that all slopes are zero: G ¼ 11.044, DF ¼ 2, p-value ¼ 0.004

We test the RM against the FM. The ‘G’ statistic is,
G ¼ 2  [
13.812
(
14.336)] ¼ 1.048. The 5% criti-
cal value of the chi-square distribution with 1 degree
of freedom is 3.84. Since 1.048 < 3.84, we conclude
that efficiency is not significant and hence can be
deleted from the model.
Case 6: Test to determine the significance of
‘location’
^ ¼ b0 þ b1 Adequate infrastructure
RM: Y
þ b4 Port charges
þ Cargo size þ b6 Connectivity
vs:
^ ¼ b0 þ b1 Adequate infrastructure
FM: Y
þ b2 Location þ b4 Port charges
þ b7 Wide range of port services
We test the RM against the FM. The ‘G’ statistic is
G ¼ 2  [
14.336
(
14.485)] ¼ 0.298. The 5% criti-
cal value of the chi-square distribution with 1 degree
of freedom is 3.84. Since 0.298 < 3.84, we conclude
that location is not significant and hence can be
deleted from the model.
Case 7: Test to determine the significance of
‘adequate Infrastructure’
 492 J. L. Tongzon and L. Sawant
^ ¼ b0 þ b4 Port charges þ b5 Cargo size
RM: Y To check the significance of adequate infrastructure,
þ b6 Connectivity we test the RM against the FM. The ‘G’ statistic is
G ¼ 2  [
14.485
(
15.820)] ¼ 2.67. The 5% critical
vs:
value of the chi-square distribution with 1 degree of
^ ¼ b0 þ b1 Adequate infrastructure
FM: Y freedom is 3.84. Since 2.67 < 3.84, we can say that
þ b4 Port charges adequate infrastructure is insignificant at the 5% level
þ b7 Wide range of port services of significance.
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