Shanghai Port is located in the front edge of the Yangtze River Delta and it becomes the first busiest container port in the world whereas Busan Port which is located in the southern part of the Korean peninsula ranked the fifth. Both ports handle approximately 90% of the total container throughput, and they are also the major hubs of the seaborne transportation in the world (World Port Source 2013a, World Port Source 2013b). This essay will discuss the level of competition between Busan Port and Shanghai Port, and identify the external factors that should be considered by both ports’ management in developing their strategic development plans. Level of competition
The late growth of China on a global scale in recent years has affected on both Busan Port and Shanghai Port in several levels of competition. There are three key competitions between them which are geographical positioning, transshipment capabilities and low comparative costs. In terms of geographical positioning, Busan Port has become an appropriate choice due to its location between Japan and China. It has 15m water depth and planning to increase up to 17m in 2020, and its world class infrastructure allows the calling of mega large vessels. Furthermore, Busan Port has 41 container berths and systematic connections for global logistics corporations to help save costs and time, so it can act as a feeder hub aiming for small ports for a majority of North-East Asian transshipment carriers. For example, inland transport in Northern China will be expensive and inconvenient, thus exporters or importers choose to transport their shipments to Busan Port first then Shanghai Port (BPA 2013). On the other hand, China created Shanghai as a finance shipping hub because Shanghai is a port city. It became an international maritime capital because it focused on economic instead of political logic (BPA 2013). Similarly, both Shanghai Port and Busan Port are part of the main trunk line functioning as hub port for relative countries, but Shanghai Port has the ambition to challenge Busan Port as the main hub port of Northeast Asia. This is because the growth of container volume in China ports has been fuelled by the decision of many multinational companies to relocate production of a whole range of consumer goods from their domestic plants, mainly in USA and Europe, to China where production costs are much cheaper (Park, Anderson & Choi 2006). However, the inconsistent weather of China has benefited South Korea. For instance, ports in China are forced to close for up to two weeks of each calendar year due to fog and stormy weather. Moreover, Shanghai Port could not compete with Busan Port deep water harbour, causing it failed to attract mega huge vessels from big corporation to call (Shepherd 2011). Regarding to transshipment capabilities, Shepherd (2011) stated that the newly extended feeder network of Busan Port connects with over sixty others ports in China, five in Russia, and thirty in Japan, making its as the chosen destination for huge vessels and to transshipment cargo. Conversely, the development of Yangshan New Port which is near to Shanghai Port gave the port a competitive advantage on more control on port traffic and establishing transhipment capabilities comparing to its old Waigaoqiao container terminal. Moreover, Shanghai Port is improving its customs clearance procedure and cargo handling system to attract more transshipment cargo (McKinnon 2011). Consequently, both ports have similar transshipment capabilities which are also the main competitiveness between them. Towards low comparative costs, in order to attract more transshipment cargo, Busan Port promoted ‘Free Trade Zone’, reducing port tariffs, and exempting 100% of Transshipment Entrance Fee since 2003 as the marketing strategies to attract foreign investment and compete with Shanghai Port (Park, Anderson and Choi 2006). For example, the exemption of the $2.20 for 1 TEU entrance fee could...
References: Lee, S. O., Lee, K. W., Kang, H. J. & Lee, M. B. 2011, ‘The strategy of Busan Port for Northeast Asia hub port’, African Journal of Business Management, vol. 5, no. 26, pp. 10492-10498, accessed 17 September 2013.
McKinnon, A. 2011, HONG KONG AND SHANGHAI PORTS: Challenges, Opportunities and Global Competitiveness, City University of Hong Kong, http://www.cityu.edu.hk/slw/HKCMT/Doc/Working_Paper_4_-_Shanghai_- _Final_(v4).pdf, accessed 16 September 2013.
Park, Y. A., Anderson, C. M. & Choi, Y. S. 2006, A Strategic Model of Competition among Container Ports in Northeast Asia, http://www.kmi.re.kr/data/PUB/bib_101071.pdf, accessed 16 September 2013.
Sharma, D. C. 2006, Ports in a Storm, NCBI, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1440801/, accessed 18 September 2013.
Shepherd, R. 2011, The struggle for ports, http://temi.repubblica.it/limes-heartland/the- struggle-for-ports/1708, accessed 16 September 2013.
Xu, P. X. 2007, Opportunities and challenges of Shanghai Port in the economic globalization, China Ports, http://english.chinaports.org/info/200710/000029_2.html, accessed 17 September 2013.
Please join StudyMode to read the full document