Analysis of the impacts of Internet-based business activities on the container shipping industry : the system dynamics modeling approach with the framework of technological evolution

Abstract

The internet-based business (e-business) activities have become a new technological challenge to the container shipping industry (CSI) in recent years. Despite the growing importance of e-business in the CSI, little systematic and theoretical research on e-business has been undertaken so far. This research therefore attempts to understand the potential impacts of e-business on the container shipping industry and to provide carriers with the managerial recommendations responding to the impacts of e-business. An integrated system dynamics model is developed to simulate the potential impacts of e-business on the container shipping industry and to explore the successful managerial strategies for carriers with regard to e-business. In order to increase the confidence of the model, the general business dynamics in the CSI are reviewed and the historical impacts of new technologies on the container shipping industry are analyzed using the framework of technological evolution. Furthermore, the technology strategies of six different e-business models in the CSI are evaluated using the proposed three frameworks to identify the most promising e-business model.

The research finds that the profitability of carriers will be improved in the long term if they successfully develop the logistics service offering (LSO) with e-business in a cost efficient way. However, despite the improved profitability from the LSO and e-business, the container shipping service could be commoditized further unless changes are made to the current practice of expanding the containership capacity. In addition, the improved profits from the LSO and e-business will drive the structural changes in the container shipping industry. In order to improve the carriers' profitability over a long period of time, it is recommended that carriers continue to add new services on top of the container shipping service while expanding the containership capacity more wisely and conservatively.