Cost statement also shows future projections. Generic strategies can help the organization to cope with the five competitive forces in the industry and do better than other organization in the industry. The fees for the services such as pilotage, berth hire, hauling, mooring and other services rendered to the vessels and. 304.30 millions p.a. Efforts are required to be concentrated in the areas where the potential savings are likely to bemaximum. Our study reveals that port integration is always beneficial to the merger and the third port, but results in the reduction of consumer surplus and social welfare, regardless of the type of pricing strategy implemented. Pricing strategy is based on the objective that a port aims at: may it be the profit maximization, throughput maximization, trade promotion or minimization of the ships’ time in the port The Kandla Port has adopted a ‘cost plus return on capital employed’ approach while fixing the tariff to achieve the financial objective of the port. Otherwise, the price discrimination strategy generates the best result for the region. The merger (integrated port) can select either the price discrimination or uniform pricing strategy after integration. Thus, tariff has been fixed considering the emerging competition by the private ports in the near vicinity in terms of traffic, tariff rates and the likelihood of losing of cargo. Company Registration No: 4964706. In KPT, traffic projections made are in line with the projections in the five year / annual plans and the current / expected growth. This paper analyses the optimization of the pricing strategies between container terminals under deregulation. It is one of the determining factors to fetch the traffic at the port. Herfindahl Index (H) for these ports shows pattern of equality in the market share i.e. People also read lists articles that other readers of this article have read. Study for free with our range of university lectures! Furthermore, transhipment flows generate 'double' port dues because they move in and out by ship. VAT Registration No: 842417633. 3099067 Pricing – depends on the forces of supply & demand. Kandla Port Trust handles almost 80 million tons of cargo and has a sprawling hinterland of 1 million square kilometers right from the state of Gujarat to the Jammu and Kashmir. of India and applied to the traffic projections to arrive at the expenditure projections. are summarized and analyzed. It is observed from the comparison that all charges are abysmally low at Kandla Port Trust except the port dues, pilotage and berth hire charges which are little higher than the GMB Ports (GMB website), due to the huge expenditure of dredging cost. for speedy handling of the cargo. Traffic comparison of Kandla Port and 20 minor ports of Gujarat and Herfindahl Index is placed at Annexure VI. Free resources to assist you with your university studies! October 7, 2020 December 18, 2020. Published: 12th May 2017 in Add to cart. However, determining which technologies, how to implement them and the way in which they can support the overall digital strategy of the port remains the main challenge. This will increase traffic at the port and thus through the economies of scale the price at the port gets reduced. Increase in the capacity of the port is urgently required as the berth occupancy at the port is 89% (Ministry of Shipping, India website) which is much on the higher side impacting the turn around time of the ship which is almost 3.09 days (KPT website). 5 Howick Place | London | SW1P 1WG. Port can also take up the value adding services and ‘door-to-door solutions’ tobuild -up captive customer/clientele base. There is also an acute competition faced by KPT from the Port of Mundra, a private port which is in the vicinity and handled almost 40 million tons of cargo during 2009-2010. Michael Porter has argued that a firms strengths ultimately fall into one of two headings: cost advantage and differentiation. The Kandla Port has adopted a ‘cost plus return on capital employed’ approach while fixing the tariff to achieve the financial objective of the port. ... which positions carriers to concentrate more volume on a port and so negotiate better pricing. (Rate of return is calculated on the basis of CAPM). Register to receive personalised research and resources by email, The flagship journal of international shipping and port research, Pricing strategies for port competition and cooperation, School of Management, Qufu Normal University, Shandong, China, Faculty of Business Administration, Hamburg University, Hamburg, Germany, /doi/full/10.1080/03088839.2017.1405290?needAccess=true. Port, by taking up various productivity measures and specifically adding infrastructure, can reduce the turn around time of the ships and get benefitted by accommodation of the large no. The pricing system can influence the utilization of assets particularly when the demand for the services is price elastic. To this operating cost, as stated above, the cost such as retirement benefits/ex-gratia payment, writing off losses etc. which was getting diverted. As a reference, most airports also have lower prices for transit passengers. (Such calculations are done for 2002-03 and 2003-04 also). Pricing and Charges for Road and Urban Transport 69 Pricing for Road Infrastructure 69 Public Transport Pricing 87. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. These studies have all concluded that the port adopts appropriate cooperative pricing strategy in competition, which is conducive to the improvement of total profits. Current port pricing practice is based on a rather linear structure and fails to incorporate modern We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.co.uk. Traffic of all other major ports of India along with Herfindahl Index is placed at Annexure VII. Copyright © 2003 - 2021 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. of India (Location at Annexure I). and ‘Port and Dock facilities Activity’ comprise sub-activities such as Cranes, berth hire, port dues, pilotage, water supply, dry docking, dredging, flotilla etc. Container Port Strategy Summary and Conclusions This report examines how ports can accommodate changes in maritime transport (such as the arrival of mega-ships) while adapting to developments in the hinterland (notably in their host cities). PORTER’S GENERIC STRATEGIES 2. Emerging growth of the GMB ports during thelast decade in terms of capacity creation and speedy cargo handling has posed a severe competition to Kandla Port. All work is written to order. Implement Port Pricing Strategies and learn about the situation applications of such strategies; Understand Cost Elements in Port Operations, and their constraints in the allocation of costs and port costing models; Learn about port dues and charges, who they are applied to and the purpose of various tariffs; Learn about various port administrative structures and their impact on your port pricing design … Such is the viewpoint of a sampling of stakeholders approached by Port Strategy specifically in response to a recent comment of AP Moeller Maersk group chief executive Soren Skou on the subject. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! Port. Port tariff 1. al are also booked under different cost centres and then they are apportioned to all the sub-activities. For this purpose, the operations of the Kandla Port are classified into five main activities such as Cargo handling, Port and dock facilities, Railway working, Estate Rental and Township. after the tariff revision.”(Annexure XII). No plagiarism, guaranteed! Therefore, correct traffic forecasting is crucial in any port pricing system. Port should think ofworkingon the ‘normative costing’ principlewhere by standard costs and standard tariffscan be derived which could be bench-marked for pitchingthe right actual tariffs for each sub-activity and principal activity. For pilotage, port dues and berth hire the GRT slab of 10001-30000 is focused more as 56%of the vessels visiting port falls in this category. Economic Regulation; NPA Tariff Applications; Benchmarking and Research; Port Tariff Incentive Programme PTIP; Tariff Methodology; Tariff Strategy; Pricing Strategy. To the Total Cost arrived at, Return on capital employed (ROCE) calculated @ 15% is added to get the Price/Tariff of that activity. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com. Why is cost leadership potentially so important? These activities and sub-activities are again divided into various cost centres where in the cost is booked. Specimen of the Cost Statement of Cargo handling sub-activity is placed at Annexure VIII which gives an idea as how the costs are booked under different heads. Leave this field empty if you're human: (Generally ports in India are in oligopoly market and coefficient of elasticity of tariff on traffic is less than one). Value creation forms the foundation of the pyramid. Based on these cost centres the ‘Direct Cost’ of each activity is booked/allocated under that sub-activity. It gives thebasis to decide whether the tariffs fixed are enough to cover the cost and the investment. We're here to answer any questions you have about our services. Further, tariff of the State owned ports are not subject to approval of any Tariff Regulatory Authority like Major Ports and hence very flexible and attractive. port pricing is to ensure that port facilities are used in the most efficient manner. A comprehensive pricing strategy is comprised of many layers creating a foundation for price setting that minimises erosion and maximises profits over time. By applying … Port Pricing and Concession Strategies December 1 - 3, 2014 Mérida, Yucatán, México. Tariff rates are also made concessional and promotional if ashipper commits major volumes. For the storage activity also likely investment in the open storage area justified 15% hike. As it is said that price makes and price makes, Port has to take into considerations holistic view before taking any pricing decision. This finding provides strong support for the ongoing port integration in China. Recommended articles lists articles that we recommend and is powered by our AI driven recommendation engine. Article Purchase Pricing plays a prominent role in any organization. The Herfindahl Index (H) calculated comes out 1 and clearly shows the monopoly pattern of these ports. The latest port reform was to improve the port tariff formation mechanism by speeding up the implementation of detailed list and public notice on port pricing. Further analysis shows that when the inland transportation cost to the ports is relatively low or sufficiently high, a better option is for the merger to adopt the price discrimination strategy. Geography. This will give a strict control over inefficiencies and thus will help to reduce the tariff. However, port further gives specific justification as below for the upward revision of tariff. With this backdrop, thefollowing recommendations are made to increase the attractiveness as well asprofit of the port by the cost control and cost reduction measures: For cost reduction and adding infrastructure, Kandla Port has to work on the various areas such as massive mechanization through high capacity cranes, marine unloaders, transfer mobile equipments and commissioning ofspecialized terminals such as coal terminal, car terminal, container terminal etc. Generic strategies apply to not-for-profit organizations too. For the cargo handling activity however, it is observed that Port instead of giving flat 15% hike to the existing rates, used the proactive pricing by increasing the rate of those commodities in which port has monopoly in handling such as food grains, scrap, timber, salt and sugar and reducing the rates of the cargo such as ores & minerals, metals, oil cakes etc. For income projections, traffic projections and present tariff rates are considered. To learn about our use of cookies and how you can manage your cookie settings, please see our Cookie Policy. Storage pricing strategies for import container terminals under stochastic conditions. For new product, the pricing strategy will be based on a penetration price policy looking to establish long-term growth and return through building the brand. Psychological pricing creates an illusion for customers. INTRODUCTION Port Tariff : is the reward / payment payable to the port authority for the rendering of a service. Info: 2752 words (11 pages) Essay December 29, 2020 December 29, 2020. of gangs justified the hike of 50% in the berth hire charges. Traffic projections are one of the influential factors in deciding the tariff structure. Kandla Port Trust (KPT) is one of the 12 major ports of India under the Ministry of Shipping, Govt. Kandla Port faces severe competition from 20 such minor ports (Gujarat Maritime Board Ports) and private ports around it on the 1600 kms coastline of Gujarat (Annexure II) whose total traffic during 2009-10 is 2.59 times of Kandla Port’s traffic and 36.73% of the total traffic handled by all the major ports of India. Generic strategies include ‘overall cost leadership’, ‘differentiation’, and ‘focus’. “Pricing is a managerial task that involves establishing pricing objectives, identifying the factors governing the price, ascertaining their relevance and significance, determining the product value in monetary terms and formulation of price policies and the strategies, implementing them and controlling them for the best results”. • Conduct a competitive analysis • Understand your competitive position: Allows for more effective marketing and negotiating Best solutions in terms of making a port cost-effective and attracting traffic is to develop the terminals under public-private participationmodel wherein the risks are optimally shared/distributed and costs are brought down witha right blend of public management and private management. Another use of the port-pricing mechanism is to promote the better utilization of the port’s assets. Cost Based Penetration Pricing Strategy Blythe and Megicks (2010) says that pricing strategy was meant to set prices according to the characteristic of the target segment. Accordingly the data presented is related to the year from 2002-03 to 2004-05 and projections from 2005-06 to 2007-08. Wherever the rates are mentioned in the dollar terms, the effect of foreign exchange fluctuation is given. Port has also considered cross subsidization in other the surplus activities while deciding to go for recovery of only the deficit. The review will cover topics such as governance arrangements for state-owned ports, regulation of key port services, pricing and access arrangements at the Port of Melbourne and the devel… Figure-8 shows the types of promotional pricing: Now, let us discuss the types of promotional pricing (as shown in Figure-8) in brief: i. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. the pricing literature and consider opportunities for improvement. Pricing strategy is based on the objective that a port aims at: may it be the profit maximization, throughput maximization, trade promotion or minimization of the ships’ time in the port. Port Dues on the vessels entering the port. However, Port finds that such recovery of return will not be possible as it demands almost 38% hike and traffic can not bear such huge hike. The roundtable discussion focussed on market definition, regulatory reforms and antitrust enforcement in ports and port services. (which are called Finance and Miscellaneous expenditure) is added to arrive at the Total Cost. EUR 39.00 Generally firms pursue only one of the above generic strategies. Cited by lists all citing articles based on Crossref citations.Articles with the Crossref icon will open in a new tab. To achieve a green and sustainable development of the port industry, various regulations have been adopted for the control of emissions. Attempts are made in Kandla Port Trust to evaluatecost of each component of port operations. Also there are 187 minor ports under the control of various State Maritime Boards. For expenditure projection, latest expenditure is adjusted to the Wholesale Price Index for All Commodities announced by the Ministry of Finance, Govt. Over the current rates, Tariff Revision considered a hike of 15% in cargo handling & storage, pilotage, port dues and miscellaneous charges and 50% in the berth hire charges. However, congestion pricing (for the priority berthing and ousting priority for berthing) and the other strategies such as comparative tariff and flexible and promotional tariff has also been adopted for certain commodities to attract the cargo. (iv) increase in the operating cost by 23.68% etc. When port pollution is considered and has a relatively large impact, the integration of the two ports improves green social welfare for the region. It influences port competition, investment decisions, development strategy etc. Johari Window Model. Stay up to date with the latest practical scientific articles. Do you have a 2:1 degree or higher? As your company’s presence in an export market matures, you may revise pricing strategies for existing and new services. It is therefore in your best interest to call on an expert in these different strategies, whether it be cost-based pricing, dynamic pricing, pricing to conquer a market, pricing … Effected by direct competition between carriers, port authority, commodity & alternative transport (inland & air transport).