CHAPTER 1 NMIT

INTERNATIONAL SHIPPING BUSINESSMRI 2304

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WHAT IS INTERNATIONAL BUSINESS?

International business consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, individuals companies, group of companies or government agencies and organizations.”

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KEY ECONOMIC AND BUSINESS TERMS IN BRIEF

Gross domestic product (GDP)

General Agreement on Tariffs and Trade (GATT)

Just-in-time production

(JIT)

North American Free Trade Agreement (NAFTA)

Organisation for Economic Co-operation

and Development (OECD)

Offshoring

Outsourcing

United Nations Conference on

Trade and Development (UNCTAD)

World Trade Organization

(WTO)

Economies of scale

European Conference of Ministers of Transport (ECMT)

Globalization

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THE GLOBALIZATION OF THE WORLD ECONOMY

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Free Flow Of Goods• The result of the treaty known as the General Agreement on Tariffs and Trade (GATT)

• The Uruguay Rounds (rounds of negotiation) of member states formed after WW ll further reduced trade barriers and established the World Trade Organization

• The decreased then enabled firms to view the world as their market

• Also enable firms to base individual production activities at the optimal location for that activity while serving the world market from that location

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Development Of Communication Information And Transportation• Development of the microprocessors has enabled the growth of high powered, low-cost computers

• Global communication have also been enhanced by developments of satellite, optical fibre, wireless technology and now the internet and World Wide Web

• Negotiation can also be conducted via video conferencing. Money and all documents required can be transmitted over the web

• Also development in the transportation technology. commercial jet aircraft, super freighters and containerization that have simplified greatly shipment of cargoes of products worldwide

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What is shipping?MOST

IMPORTANT TRANSPORTCARRY

BILLIONS OF TONNES OF GOODS

CONTAINERIZATION

• TANKERS • BULK CARRIERS

• CONTAINER SHIPS

• Trade Routes

• Global Cargo Shipping

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What is shipping management?

Shipping management means providing a complete range of integrated marine services required by the

clients for managing their vessels.

Integrated Marine Services

• Commercial Management• Technical Ship Management• Crew Management• Port and Terminal Management• Naval Architecture and Marine Engineering• Bunker Services

Shipping And Climate Change

The growth of the global merchant fleet according to type of vessel

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Shipping And Climate Change•Of all modes of transportation, ships are unbeatable in terms of efficiency.

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MODERN SHIPS - Large, Fast And Highly Specialized

SIZE

SPEED

DESIGN

SPECIALIZATION

AUTOMATION

• Marine innovations are:

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General Cargo Ships• A shipping specialists.

• A large proportion of the goods they transport are awkwardly-

shaped and bulky, and do not fit into standard containers.

• Their cargo includes heavy goods and project cargo for major

building projects such as power stations, offshore installations and mining. Some pieces of cargo weigh more than 1000 tonnes.

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Cargo Vessel/Ship

Oil Tanker• The capacity of the global oil

tanker fleet is huge• This makes oil tankers the most

important cargo ships in the global fleet next to bulk

carriers. • Interestingly pollution from tanker accidents has reduced considerably in past decades,

despite the increased volumes of oil transported.

• This can mainly be traced back to improvements in shipping

technology. 

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Oil Tankers

Cruise Liner• The total capacity of passenger

ships and cruise ships, accounting for only one per cent

of the global fleet, is relatively small.

• Nonetheless the sector is booming and has become a

lucrative and growing business for tour companies.

• Despite the economic crisis the major shipyards are continuing to build bigger and increasingly

elaborate ships. 

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Bulk Carriers• Bulk carriers, like oil tankers

(huge capacity)• These ships transport goods such

as ores, coal and cereals. • The principal routes for ore shipments are from South America to Europe and Japan as well as

from Australia to Japan. • The major shipping routes for

coal are from the major exporters of Australia and South Africa to Western Europe and

Japan.

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Container Ship• The container shipping industry

has grown considerably in importance over past decades.

• Standard container sizes have led to significant savings of time spent on unloading and

transferring cargo to trucks and rail.

• In terms of capacity per ship, container ships left general cargo ships behind long ago.

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Container Vessel/Ship

A cargo is instructed to carry containers for

20 or 40 footers, and the delivery involved

is part of International Business

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WHAT SHIPS CARRY?Oil, Containers, and Dry Cargo

OCEAN SHIPPIN

G

LIQUID CARGO

CRUDE OIL

CARGO

DRY CARGO

BULK GOODSBULK

MATERIALSGENERAL

CARGO VESSELS

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Advantages of shipping• Shipping is the most efficient, secure and safe

means of transporting more than 90 percent of global trade.

• For vast majority of cargoes like fuel, food, component parts, commodities and finished goods

there is simply no viable alternative other than shipping.

• Shipping is the least environmentally damaging form of commercial transport while taking into consideration the productive value of the activity.

•Any form of transport other than shipping to move some 90 percent of global trade would be unthinkably high while taking into consideration both the economic and environmental costs.

• Shipping is a very positive force for sustainable development. The imports and exports that generate global trade are all carried by sea and developing countries like Bangladesh can, and do, become major participants in the industry itself, generating income and creating wealth in the process.

Advantages of shipping

Disadvantages of shipping

•Ships can create serious environmental issues such as oil pollution or marine pollution either through accidents or poor operating practices by dumping wastes at sea or using harmful paints or coatings

on ships’ hulls.

•Even though ships produce less CO2 emissions compared to airfreight or other transports, still

regulations and capacity-building measures need to be developed and implemented to reduce the

emission. Otherwise shipping might pose threats to the global environment.

• Leakages of oil, noxious liquid substances or garbage thrown to the sea water might become a threat to several aquatic life forms if not properly

regulated.

THE KEY SHIPPING ROUTES• There is a relatively small number of principal transport routes:

JapanShanghaiSingaporeHong KongUnited States

Europe and East Asia

East Coast of the United States fb

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THE KEY SHIPPING ROUTES

Bottlenecks

Straits of Dover, Gibraltar, Malacca, Lombok and Hormuz, and the Cape of Good Hope at the southern tip of Africa.

• Traffic builds up in these areas, making ships vulnerable to attack by pirates.

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Implications For The Globalization Of Production And Markets

• Technological innovations had made possible for firms to manage a globally dispersed production system

• Communication technologies have enabled Hewlett Packard to increase integration of its globally dispersed operations and to reduce the time needed for developing new products

• Internet and WWW has created global electronic market places for diverse products

• Transportation technologies – has reduced the cultural distance between countries and has brought about the converge of consumer taste and preferences

• At the same time, global communication and global media are creating a worldwide culture

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ConclusionShipping has begun a new revolution from the

late 16th century. At the beginning people used to deliver goods by roads, using horse carts or trailers

pulled by tractors. Then gradually people started building ships/vessels for transporting goods across the world and later on built airplanes. Now shipping

has become a very positive force making a major contribution to global prosperity in a way that has

relatively small negative impact on the global environment while comparing to other forms of transportation of global trade. The imports and

exports that generate global trade are all carried by sea and even the poor and rich countries can

benefit from seaborne trade by generating income and creating wealth in the process.

QUESTION1.Defines International Business and describe why it is important to learn?

2.Describe what makes sea shipping is the safest shipping mode?

3.State two (2) reasons why shipping is a global business today?

4.Describe briefly three (3) characteristics of international shipping.

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