The top liner shipping carriers have already established alliances in the shipping industry and are investigating new business connections with customers, suppliers, competitors, consultants, and other companies. Several studies have attempted to explain this phenomenon using a variety of conceptual and theoretical frameworks. This paper focuses on liner shipping strategic alliances and their establishment and transformation within the framework of noncooperative game theory, which is considered an effective tool to analyze motivations, competitive structures, strategies, and potential payoffs in a number of industries, including the turbulent liner shipping industry. Not only can a liner shipping company be seen as a player in a shipping alliance, but a liner shipping strategic alliance itself can be viewed as a player when it competes with other alliances. In this paper, more attention is paid to the former situation by assuming that those liner companies are unable to make enforceable contracts through outside parties. This paper aims to (a) indicate the motivations for short-term cooperation among several liner carriers, (b) analyze the pros and cons of being a member of a liner shipping strategic alliance, (c) explain a player's deviation or departure behavior when it faces turbulence and unpredictable shipping circumstances, and (d) recommend ways to enhance long-term alliance stability by increasing benefits while decreasing drawbacks. Of those four main points, the differences between short-term cooperation and long-term alliance are the number of subgames and the potential future payoff. Specific models based on the assumption of noncooperative behavior are set up as iterated games to give those differences clear explanations. The outcome of this paper will be helpful for liner shipping carriers attempting to succeed in the shipping industry with greater efficiency, better customer service, and lower cost.
Get full access to this article
View all access options for this article.
References
1.
SuykensF., and Van de VoordeE.A Quarter Century of Port Management in Europe: Objectives and Tools. Maritime Policy & Management, Vol. 25, No. 3, 1998, pp. 251–261.
2.
HeaverT. D.Canada and the Evolving System of International Shipping Conferences. In Canada and International Economic Regimes (ZacherM. and CutlerC. eds.), U.B.C. Press, Vancouver, British Columbia, Canada, 1992, pp. 215–237.
3.
HeaverT. D.The Opportunities and Challenges for Shipping Lines in International Logistics. Paper presented at 1st World Logistics Conference, London, 1996.
4.
HeaverT. D.Vertical Integration in Liner Shipping: Strategy and Status. Proc., Canadian Transportation Research Forum, 2001, pp. 292–308.
5.
HeaverT. D., MeersmanH., and Van de VoordeE.Co-operation and Competition in International Container Transport: Strategies for Ports. Maritime Policy and Management, Vol. 28, No. 3, 2001, pp. 293–305.
6.
HeaverT. D., MeersmanH., MogliaF., and Van de VoordeE.Do Mergers and Alliances Influence European Shipping and Port Competition?Maritime Policy and Management, Vol. 27, 2000, pp. 363–373.
7.
MeersmanH., MogliaF., and Van de VoordeE.Mergers and Alliances in Liner Shipping. What Do European Port Authorities Have to Fear? Liner Shipping: What's Next?Proc., International Association of Maritime Economists Annual Conference (BrooksM. R., ed.), Halifax, Nova Scotia, Canada, 1999, pp. 204–220.
8.
MolenaarH. J., and Van de VoordeE.Competition Policy in Liner Shipping. Proc., International Association of Maritime Economists Annual Conference, Antwerp, Belgium, 1994.
9.
SlackB., ComtoisC., and SletmoG.Shipping Lines as Agents of Change in the Port Industry. Maritime Policy and Management, Vol. 23, No. 3, 1996, pp. 289–300.
10.
HoffmannW. H.How to Manage a Portfolio of Alliances. Long Range Planning, Vol. 38, 2005, pp. 121–143.
11.
SpekmanE., IsabellaL. A., and MacAvoyT. C.Alliance Competence: Maximizing the Value of Your Partnerships.John Wiley & Sons, Inc., New York, 2000.
12.
FagerholtK.Designing Optimal Routes in a Liner Shipping Problem. Maritime Policy and Management, Vol. 31, 2004, pp. 259–268.
13.
GilmanS.The Size Economies and Network Efficiency of Large Containerships. International Journal of Maritime Economics, Vol. 1, 1999, pp. 5–18.
14.
LimS-M.Economies of Scale in Container Shipping. Maritime Policy and Management, Vol. 25, 1998, pp. 361–373.
15.
NotteboomT.A Carrier's Perspective on Container Network Configuration at Sea and on Land. Journal of International Logistics and Trade, Vol. 1, 2004, pp. 65–87.
16.
HaralambidesH. E., CheungC., and TsolakisS.The Future of the Hub and Spokes System in Liner Shipping. World Conference on Transport Research (WCTR), Pre-WCTR Workshop, Genoa, Italy, 2000.
17.
MoweryD. C., OxleyJ. E., and SilvermanB. S.Strategic Alliances and Interfirm Knowledge Transfer. Strategic Management Journal, Vol. 17, Special Issue: Knowledge and the Firm, 1996, pp. 77–91.
18.
BrooksM. R.Determinants of Shipper's Choice of Container Carriers: A Study of Eastern Canadian Exporters.PhD diss. Department of Maritime Studies and International Transport, University of Wales, College of Cardiff, United Kingdom, 1983.
19.
BrooksM. R.International Competitiveness—Assessing and Exploring Competitive Advantage by Ocean Container Carriers. Logistics and Transportation Review, Vol. 29, No. 3, 1993, pp. 275–293.
20.
BrooksM. R., BlundelR. G., and BidgoodC. I.Strategic Alliances in the Global Container Transport Industry. In Multinational Strategic Alliances (RefickR., ed.), International Business Press, London, 1993.
21.
BrooksM. R.Sea Changes in Liner Shipping.Elsevier Science, Oxford, United Kingdom, 2000.
22.
BairdA. J., and LindsayA. J.Strategic Choice in the Global Container Shipping Industry: A Resource-Based Approach. Proc., International Association of Maritime Economists Annual Conference, Vancouver, British Columbia, Canada, 1996.
23.
NotteboomT.The Time Factor in Liner Shipping Services. Maritime Economics and Logistics, Vol. 8, 2006, pp. 19–39.
24.
DodgsonM.The Strategic Management of R&D Collaboration. Technology Analysis and Strategic Management, Vol. 4, No. 3, 1992, pp. 227–244.
25.
CullinaneK. P. B., KhannaM., and SongD.-W.How Big Is Beautiful: Economies of Scale and the Optimal Size of Containership. Proc., International Association of Maritime Economists Annual Conference, Halifax, Nova Scotia, Canada, 1999, pp. 108–140.
26.
SongD. W., and PanayidesM.A Conceptual Application of Cooperative Game Theory to Liner Shipping Strategic Alliances. Maritime Policy and Management, Vol. 29, No. 3, 2002, pp. 285–301.
27.
YoshidaS., YangJ. H., and KimK. H.The Network Economy of the Alliance in Liner Shipping. Proc., International Association of Maritime Economics Conference, Naples, Italy, 2001, pp. 333–343.
28.
BranchA. E.Economics of Shipping Practice and Management. Chapman and Hall, London and New York, 1982.
29.
BrooksM. R., BlunderR. G., and BidgoodC. I.Strategic Alliances in the Global Container Transport Industry. In Multinational Strategic Alliances (CulpanR., ed.), 1993, pp. 221–250.
30.
Araujo de SouzaG.Jr., BeresfordA., and PettitS.Liner Shipping Companies and Terminal Operators: Internationalisation or Globalisation?Maritime Economics and Logistics, Vol. 5, 2003, pp. 393–412.
31.
HeaverT.The Evolving Roles of Shipping Lines in International Logistics. International Journal of Maritime Economics, Vol. 4, 2002, pp. 210–230.
32.
HeaverT.Supply Chain and Logistics Management: Implications for Liner Shipping. In The Handbook of Maritime Economics and Business (GrammenosC. T., ed.), 2002.
33.
HeaneyS.Top 20 Container Shipping Lines in the World. American Shipper, Vol. 44, No. 10, 2002, pp. 33–36.
34.
MidoroR., and PittoA.A Critical Evaluation of Strategic Alliances in Liner Shipping. Maritime Policy and Management, Vol. 27, 2000, pp. 31–40.
35.
LorangeP.Strategic Re-thinking in Shipping Companies. Maritime Policy and Management, Vol. 28, No. 1, 2001, pp. 23–32.
36.
ClarkeR. L.An Analysis of the International Ocean Shipping Conference System. Transportation Journal, Vol. 38, 1997, pp. 17–29.
37.
ShiX. and VoßS.Container Terminal Operations Under the Influence of Shipping Alliances. In Risk Management in Port Operations, Logistics and Supply Chain Security (BichouK., BellM. G. H., and EvansA., eds.), Informa, London, 2007, pp. 135–164.
38.
EvangelistaP., and MorvilloA.Alliances in Liner Shipping: An Instrument to Gain Operational Efficiency or Supply Chain Integration?International Journal of Logistics: Research and Applications, Vol. 2, No. 1, 1999, pp. 21–38.
39.
BrooksM. R.Sea Change in Liner Shipping: Regulation and Managerial Decision-Making in a Global Industry.Pergamon, Oxford, England, 2000.
40.
SlackB., ComtoisC., and McCallaR. J.Strategic Alliances in the Container Shipping Industry: A Global Perspective. Maritime Policy and Management, Vol. 29, 2002, pp. 65–75.
41.
FusilloM.Excess Capacity and Entry Deterrence: The Case of Ocean Liner Shipping Markets. Maritime Economics and Logistics, Vol. 5, 2003, pp. 100–115.
42.
KleymannB., and SeristoH.Levels of Airline Alliance Membership: Balancing Risks and Benefits. Journal of Air Transport Management, Vol. 7, 2001, pp. 303–310.
43.
Announcement of Maersk and P&O Nedlloyd. events.simplywebcast. com/maersk/may_2005/index.html. Accessed May 12, 2006.
NohriaN., and Garcia-PontC.Global Strategic Linkages and Industry Structure. Strategic Management Journal, Vol. 12, 1991, pp. 105–124.
46.
BittlingmayerG.Did Antitrust Policy Cause the Great Merger Wave?Journal of Law and Economics, Vol. 73, 1985, pp. 77–118.
47.
ClydeP. S., and ReitzesJ. D.The Effectiveness of Collusion Under Antitrust Immunity, The Case of Liner Shipping Conferences. Federal Trade Commission, Dec. 1995, p. 56.
48.
GardnerB., MarlowP., and NairR.The Economic Regulation of Liner Shipping: The Impact of US and EU Regulation in US Trades. In The Handbook of Maritime Economics and Business (GrammenosC. T., ed.), 2002.
49.
GrahamM. G.Stability and Competition in Intermodal Container Shipping: Finding a Balance. Maritime Policy and Management, Vol. 25, 1998, pp. 129–147.
50.
RimmerP. J.Transport and Communications in the Pacific Economic Zone During the Early 21st Century. In Pacific Asia in the 21st Century: Geographical and Developmental Perspectives (YeungY.-M., ed.), Chinese University Press, Hong Kong, 1993.
51.
RimmerP. J.Shipping Patterns in the Western Pacific: The China Factor. Maritime Studies, Vol. 94, 1997, pp. 1–27.
52.
RimmerP. J.Impact of Global Strategic Alliances on Pacific Rim Seaports. Maritime Studies, Vol. 98, 1998, pp. 1–29.
53.
RimmerP. J.Ocean Liner Shipping Services: Corporate Restructuring and Port Selection/Competition. Asia Pacific Viewpoint, Vol. 39, No. 2, 1998, pp. 193–208.
54.
BendallH., and StentA.Longhaul Feeder Services in an Era of Changing Technology: An Asia–Pacific Perspective. Maritime Policy and Management, Vol. 26, 1999, pp. 145–159.
55.
FoxN.An Oligopoly Model of Ocean Liner Shipping. Review of Industrial Organization, Vol. 9, No. 4, 1994, pp. 343–357.
56.
GilbertR. J., and VivesX.Entry Deterrence and the Free Rider Problem. Review of Economic Studies, Vol. 53, 1986, pp. 71–83.
TsangW. K.Motives for Strategic Alliances: A Resource-Based Perspective. Journal of Management, Vol. 14, No. 3, 1998, pp. 207–221.
59.
DingJ.-F., LiangG.-S., YehC.-H., and YehY.-C.A Fuzzy Multi-Criteria Decision-Making Model for the Selection of Courier Service Providers: An Empirical Study from Shippers’ Perspective in Taiwan. Maritime Economics and Logistics, Vol. 7, 2005, pp. 250–261.
60.
DingJ.-F., and LiangG.-S.Using Fuzzy MCDM to Select Partners of Strategic Alliances for Liner Shipping. Information Sciences, Vol. 173, 2005, pp. 197–225.
61.
GeringerJ. M.Strategic Determinants of Partner Selection Criteria in International Joint Ventures. Journal of International Business Studies, Vol. 22, No. 1, 1991, pp. 41–62.
62.
TangS. M., and LinS.-J.Creating and Verify the Correlation Model of Strategy Alliance Management and Performance. Journal of Management and Systems, Vol. 8, No. 1, 2001, pp. 37–60.
63.
KleymannB., and SeristoH.Levels of Airline Alliance Membership: Balancing Risks and Benefits. Journal of Air Transport Management, Vol. 7, No. 5, 2001, pp. 303–310.
64.
KlopackT. G.Strategic Outsourcing: Balancing the Risks and the Benefits. Drug Discovery Today, Vol. 5, No. 4, 2000, pp. 157–160.
65.
TijsS. H., and DriessenT. S. H.Game Theory and Cost Allocation Problems. Management Science, Vol. 32, No. 8, 1986, pp. 1015–1028.
66.
ShapleyL. S.A Value of n-Person Games. Annals of Mathematics Studies, Vol. 28, 1953, pp. 307–317.
67.
ShapleyL. S.Cores of Convex Games. International Journal of Game Theory, Vol. 1, 1971, pp. 11–26.
68.
Skorin-KapovD.On the Core of the Minimum Cost Steiner Tree Game in Networks. Annals of Operations Research, Vol. 57, 1995, pp. 233–249.
69.
Skorin-KapovD.On Cost Allocation in Steiner Tree Networks. In Steiner Trees in Industries (DuD.-Z. and ChengX., eds.), Kluwer, Boston, Mass., 2001.
70.
SjostromW.Collusion in Ocean Shipping: A Test of Monopoly and Empty Core Models. Journal of Political Economy, Vol. 97, No. 5, 1989, pp. 1160–1179.
71.
PirrongS.An Application of Core Theory to the Analysis of Ocean Shipping Markets. Journal of Law and Economics, Vol. 35, 1992, pp. 89–131.
72.
WaldmanM.Non-cooperative Entry Deterrence, Uncertainty and the Free Rider Problem. Journal of Economic Studies, Vol. LIV, 1987, pp. 301–310.
73.
DasT. K., and TengB.-S.Between Trust and Control: Developing Confidence in Partner Cooperation in Alliances. Academy of Management Review, Vol. 23, No. 3, 1998, pp. 491–512.
74.
HarriganK. R.Strategic Alliances and Partner Asymmetries. In Cooperative Strategies in International Business (ContractorF. and LorangeP., eds.), Lexington Books, Lexington, Mass., 1988, pp. 205–226.
75.
RyooD. K., and ThanopoulouH. A.Liner Alliances in the Globalization Era: A Strategic Tool for Asian Container Carriers. Maritime Policy and Management, Vol. 26, No. 4, 1999, pp. 349–367.
76.
LeachP. T.Shipping Service Slips. Traffic World, May 2005, p. 1.
77.
McConvilleJ.Running Rings Around the Liner Industry. Maritime Policy and Management, Vol. 31, No. 1, 2004, pp. 1–2.
78.
GibbonsR.Game Theory for Applied Economics. Princeton University Press, Princeton, N.J., 1992.
79.
FusilloM.Is Liner Shipping Supply Fixed?Maritime Economics and Logistics, Vol. 5, 2004, pp. 220–235.
80.
HaralambidesH. E.Determinants of Price and Price Stability in Liner Shipping.Workshop on the Industrial Organization of Shipping and Ports, National University of Singapore, Singapore, 2004.
81.
HaralambidesH. E., and VeenstraA. W.Modelling Performance in Liner Shipping. In Handbook of Transport Modelling (ButtonK. J. and HensherD. A., eds.), Pergamon-Elsevier Science, New York, 2000.
82.
KnorrA., and ArndtA.Alliance Strategy and the Fall of Swissair: A Comment. Journal of Air Transport Management, Vol. 10, 2004, pp. 119–123.
83.
MorrishS. C., and HamiltonR. T.Airline Alliances—Who Benefits?Journal of Air Transport Management, Vol. 8, 2002, pp. 401–407.
84.
EvangelistaP., and MorvilloA.Logistical Integration and Cooperative Strategies in Liner Shipping: Some Empirical Evidence. International Journal of Maritime Economics, Vol. 2, No. 1, 2000, pp. 1–16.
85.
HeaverT.Restructuring Carriers to Logistics Suppliers: The Challenge for International Liner Shipping. Canadian Transportation Research Forum, Victoria, Canada, 1994.
