1. COMPETITION IN THE SHIPBUILDING INDUSTRY PRESENTED BY Jianyang Ren, Mami Hirai, Min Chen, Min Ji Seok, Mohammed Hanane, Naima Samuel, Zhong Shanna, Olga Son, Peyanard Mahasuwan, Polawat Pupipat, Thotsapit Kamolvisit, & Uttam Mallick FACILITATOR Anh Nam Sung

2. 1. Global Shipbuilding Industry Structure 2. Competitor’s Analysis 3. Shipbuilding Macro-environmental Analysis 4. Korean Shipbuilding SWOT Analysis5. Korea’s Competitive Advantage 6. Summary

3. Introduction Ship Building Industry has a Close Relationship with Shipping Industry, which depends on World Economy

4. Shipbuilding Industry History USA UK W. Europe Japan Korea China Source: KOSHIPA ~ mid 19C Mid 19C ~ WW2 WW2 ~ 1950s 1950s ~ mid 1990s Mid 1990s ~ present From 2000s First iron and steel hulls Welded steel ships block construction Modular design Open-type and Double hull VLCC

5. Korean Shipbuilding Industry History 1960s Export ships – Hanjin Heavy Industries 1970s Very Large Crude Carriers – HHI, SHI, DSME 1980s #2 in World ranking, shipyards 1990s #1 in World ranking, new orders 2000s #1 in World ranking, STX, SHI, DSME, HHI High-value added ships Source: KOSHIPA

6. Korea 1,240 GT Korea 1,240 GT 1. Hyundai Heavy Industries (HHI) 2. Samsung Heavy Industries (SHI) 3. Daewoo Shipbuilding & Marine Engineering (DSME) China 840 GT China 840 GT 1. Dalian Shipbuilding Industries 2. Shanghai Waigaoqiao Shipbuilding Industries Japan 90 GT Japan 90 GT 1.Mitsubishi Heavy Industries 2.Tsuneishi Corporation www.clarksons.com 2,694 GT 3,060 GT 2,450 GT World shipbuilding production by countries

7. INDUSTRY STRUCTURE Industry Rivalry Barriers to Entry Bargaining Power of Buyer Threat of Substitutes Bargaining Power of Supplier High barriers to entry Huge capital investments Low bargaining power of suppliers Price of raw materials Vertical Integration (HHI, STX) High bargaining power of buyers Demand vs Supply Very low threat of substitutes Intense rivalry

8. World shipbuilding production by Top10 shipyard

9. INDUSTRY RIVALRY: CHINA

10. Competitive advantage in China Industry Low labor costs Adequate supply of steel plate for ship, and lower prices Supported by the Chinese government industry policy Fast-growing demand from domestic market

11. Challenges of China Shipbuilding Industry Structural design and technology Insufficient capacity for producing high-value added ships Exchange rate fluctuations and raw materials cost Low productivity and quality of labor

12. MACRO-ENVIRONMENTAL ANALYSIS POLITICAL/REGULATORY Government support Government support International Maritime Organization (IMO) International Maritime Organization (IMO)POLITICAL/REGULATORY Government support Government support International Maritime Organization (IMO) International Maritime Organization (IMO) ECONOMIC Significant influence of exchange rate on profit Significant influence of exchange rate on profit Growth influenced by economic growth Growth influenced by economic growthECONOMIC Significant influence of exchange rate on profit Significant influence of exchange rate on profit Growth influenced by economic growth Growth influenced by economic growth SOCIAL Green technology requirement (anti- pollution rule by IMO) Green technology requirement (anti- pollution rule by IMO)SOCIAL TECHNOLOGY Technology innovation Technology innovation Design Design Process Improvement Process ImprovementTECHNOLOGY Technology innovation Technology innovation Design Design Process Improvement Process Improvement

13. Comparing Competitiveness of Technology Item Compared JapanKoreaChina Design Technique Basic Design 1009580 Detailed Design 10010560 Production Design 10010560 Manufacturing Technique Cut 1009570 Jointing 1009070 Fitting 1009060 Hoisting 1009560 Management Technique Cost Management 1008540 Equipment Management 1008550 Production Management 1009040 HRM 1008560 http://www.istis.sh.cn/list/list.aspx?id=3426 Note: Japan-based index 100

14. SWOT ANALYSIS WEAKNESS High labor costs relative to High labor costs relative to competitors competitors Excess capacities Excess capacitiesWEAKNESS High labor costs relative to High labor costs relative to competitors competitors Excess capacities Excess capacitiesSTRENGTHS High technology High technology Reasonable price Reasonable price On-time delivery On-time delivery Economies of scale due to Economies of scale due to large scale production large scale production Quality Quality Shorter cycle time Shorter cycle time Brand power Brand power Highly skilled HR Highly skilled HRSTRENGTHS High technology High technology Reasonable price Reasonable price On-time delivery On-time delivery Economies of scale due to Economies of scale due to large scale production large scale production Quality Quality Shorter cycle time Shorter cycle time Brand power Brand power Highly skilled HR Highly skilled HR THREATS High competition (China, Vietnam, India) High competition (China, Vietnam, India) Rapid decrease in shipbuilding orders Rapid decrease in shipbuilding ordersTHREATS High competition (China, Vietnam, India) High competition (China, Vietnam, India) Rapid decrease in shipbuilding orders Rapid decrease in shipbuilding ordersOPPORTUNITY M&A M&A Enter emerging technology markets Enter emerging technology marketsOPPORTUNITY M&A M&A Enter emerging technology markets Enter emerging technology markets SWOT

15. Product Differentiation Cost Leadership VALUE CREATION FRONTIER CURVE Carrier BuildersOcean Developers

16. COMPETITIVE ADVANTAGES 1.Technological Innovations Offline welding robots (HHI) Multidirectional oil tanker (SHI) Eco-Friendly LNG-powered passenger boat (SHI) On-land Ship Construction

17. Decreased ship construction time and raised production efficiency T-shaped dry-dock (HHI) Megablog (SHI) COMPETITIVE ADVANTAGES 2. Efficiency On-land Ship Construction Source : KOSHIPA DAM Method Off-shoring to increase productivity Source: KOSHIPA Human Resources development Employment Structure & Shortage of Workforce 200820092010 Demand14,21414,37015,130 Supply12,16712,17212,179 Disparity-2,047-2,198-2,951

18. 2. Efficiency COMPETITIVE ADVANTAGES Quality of Employees and New Product in Korean Industry are the main causes to outperform competitors including China, while maintaining high efficiency Human Resources development

19. HHI – wind-facility plant, solar energy SHI – green energy, wind-turbine STX – offshore plants, and alternative energy DSME – acquired DeWind Turbine Alternative Energy COMPETITIVE ADVANTAGES 3. Entry Into Emerging Markets

20. DYNAMICS (SUMMARY)

21. Reference