‘Caro handling Activity’ comprise sub-activities such as cargo handling, warehousing and storage, mobile cranes etc. VAT Registration No: 842417633. This work was supported by the National Natural Science Foundation of China [grant 71471101], the Natural Science Foundation of Shandong Province [grant ZR2015GZ008], and the Social Science Planning Fund Program of Shandong Province [grant 13CGLJ11]. 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. 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! Capital employed for each activity, return on capital employed (Annexure X) and cash flow statement (Annexure XI) are placed only for 2004-05. 4. If you need assistance with writing your essay, our professional essay writing service is here to help! Rates of the pilotage charges of the nearby ports which were 82% higher than the Kandla Port’s rate justified 15% hike. Porter's Generic Strategies with examples 1. Recommended articles lists articles that we recommend and is powered by our AI driven recommendation engine. For income projections, traffic projections and present tariff rates are considered. Thus, special pricing for transhipment seems worthwhile. Responsibility Assignment Matrix (RAM) October 29, 2020 November 25, 2020. Port Pricing and Concession Strategies December 1 - 3, 2014 Mérida, Yucatán, México. Port faces severe competition from nearby State owned 20 minor ports and private ports which handled 205.98 millions metric tons during 2009-10. 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. December 29, 2020 December 29, 2020. Capital Employed comprises Net Fixed Assets (Gross Block minus Depreciation minus Works in Progress) plus Working Capital. It is one of the determining factors to fetch the traffic at the port. The Herfindahl Index (H) calculated comes out 1 and clearly shows the monopoly pattern of these ports. Kandla Port has less competition with the major ports as each major port has distinct hinterland without muchoverlap. The diverse nature of a port, with a wide variety of companies and ecosystems, the functioning of the world economy and effective competition in ports and port services plays an important role in the final prices of many products. port pricing is to ensure that port facilities are used in the most efficient manner. An independent review into Victorian ports has commenced and is being led by Independent Reviewer Mark Curry, engaged by Freight Victoria. Pricing – depends on the forces of supply & demand. Indeed, various port authorities have such special prices for transhipment. This paper analyses the optimization of the pricing strategies between container terminals under deregulation. Michael Porter has argued that a firms strengths ultimately fall into one of two headings: cost advantage and differentiation. Cost based and investment based tariff aim at achieving the financial objectives whereas comparative and flexible and promotional tariff are suitable for achieving the market needs” (Cariou Handout 2010 p-16). Comparison of tariff is important particularly so when the port compete for the same hinterland. Johari Window Model. 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. 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. 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. Hence Port decided to recover only the short recovery/deficit of 286.40 millions (Annexure IX p-17). Based on these cost centres the ‘Direct Cost’ of each activity is booked/allocated under that sub-activity. The review will assess the function and performance of the current port system and recommend reforms to ensure that Victorian ports are well positioned to meet future needs. Many (perhaps all) market segments in the industry are supplied with the emphasis placed on minimising costs. Where facihties are more than adequate for needs, the proper utilization of assets Port can also take up the value adding services and ‘door-to-door solutions’ tobuild -up captive customer/clientele base. • Conduct a competitive analysis • Understand your competitive position: Allows for more effective marketing and negotiating Efforts are required to be concentrated in the areas where the potential savings are likely to bemaximum. Odd-even. While doing so, however, port has considered various factors such as (i) severe competition by the nearby state owned and private ports on account of better facilities such as deeper drafts, speedy cargo handling systems (impacting ship’s turn around time which was the main reasons for getting diverted the Kandla Port’s traffic) (ii) heavy capital expenditure incurred by the ports by addition of infrastructure such as quay, heavy duty cranes, godowns, road-rail network etc. 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. These activities and sub-activities are again divided into various cost centres where in the cost is booked. When demand for a service is inelastic, other measures, … of gangs justified the hike of 50% in the berth hire charges. of India (Location at Annexure I). “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”. Geography. The merger (integrated port) can select either the price discrimination or uniform pricing strategy after integration. If the achieved selling price can at least equal (o… A not-for-profit can use a Cost Leadership strategy to minimize the cost of getting donations and achieving more for its income, while one pursuing a Differentiation strategy will be committed to the very best outcomes, even if the volume of work it does, as a result, is smaller. Stay up to date with the latest practical scientific articles. To achieve a green and sustainable development of the port industry, various regulations have been adopted for the control of emissions. Generic strategies include ‘overall cost leadership’, ‘differentiation’, and ‘focus’. By applying … Kotler Pricing Strategies. Furthermore, transhipment flows generate 'double' port dues because they move in and out by ship. Port has also considered cross subsidization in other the surplus activities while deciding to go for recovery of only the deficit. For the purpose of fixation of the tariff, it is necessary to know the operating cost of the port. Marketing strategy helps companies achieve business goals & objectives, and marketing mix (4Ps) is the widely used framework to define the strategies. Pricing Strategy; In This Section. 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. moderate concentration of competition with the Index of 0.09868. The ‘Indirect Cost’/overheads such as Departmental overheads, management and general administration overheads(such as store keeping expenses, labour welfare and medical expenses, engineering expenses, work shop overheads, insurance etc), security expenses, social welfare expenses, fire fighting expenses et. Generic strategies apply to not-for-profit organizations too. (Rate of return is calculated on the basis of CAPM). In the case of facilities in short supply, this can be done by applying charges which encourage port users to minimize the use they make of the assets. Based on the above, the Scale of Rates of KPT (KPT website) has been divided into 4 Chapters. 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. Pricing plays a prominent role in any organization. which was getting diverted. We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.co.uk. 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. We use cookies to improve your website experience. (Generally ports in India are in oligopoly market and coefficient of elasticity of tariff on traffic is less than one). Study for free with our range of university lectures! As a reference, most airports also have lower prices for transit passengers. 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. Herfindahl Index (H) for these ports shows pattern of equality in the market share i.e. These studies have all concluded that the port adopts appropriate cooperative pricing strategy in competition, which is conducive to the improvement of total profits. Implementation of the cost effective systems will definitely help the port to overcome the redundant costs. ... which positions carriers to concentrate more volume on a port and so negotiate better pricing. This paper analyzes the effects of integration between two neighbor ports with a third port sharing the same overlapping hinterland. Promotional Pricing: Promotional pricing refers to a pricing strategy that helps in promoting the product. Developing ‘satellite’ ports at new location with slimstrength of man-power and cost-effective systems can also be thought of by the port. These layers combine to form a strategic pricing pyramid. Introduction… Michael Porter is a professor at Harward Business School. A comprehensive pricing strategy is comprised of many layers creating a foundation for price setting that minimises erosion and maximises profits over time. Generally firms pursue only one of the above generic strategies. No plagiarism, guaranteed! III. We present a detailed overview of pricing criteria, who sets prices and who ultimately foots the bill for port-of-call charges, cargo-handling fees and congestion charges. It stands to reason that ports are faced with a myriad of issues both technical and strategic. 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. It provides the consciousness that the inefficiencies are not passed on to the users. Title Size Type; Pricing Strategy Process: 50 KB : NPA Proposed Pricing Strategy: 1.01 MB : TNPA Responses to Pricing Strategy Questions: (MAP of hinterland and location of other major ports is placed at Annexure V). All work is written to order. 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. Leave this field empty if you're human: This will give a strict control over inefficiencies and thus will help to reduce the tariff. Do you have a 2:1 degree or higher? This finding provides strong support for the ongoing port integration in China. Kandla Port expected additional revenue generation of approx. EUR 39.00 are summarized and analyzed. For port dues, port considered the huge expenditure on account of maintenance dredging. 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. In KPT, traffic projections made are in line with the projections in the five year / annual plans and the current / expected growth. of India and applied to the traffic projections to arrive at the expenditure projections. The present tariff structure of Kandla Port Trust had undergone its last revision in 2005 which is taken as a base for presenting the pricing system for this paper. Otherwise, the price discrimination strategy generates the best result for the region. Restore content access for purchases made as guest. Accordingly the data presented is related to the year from 2002-03 to 2004-05 and projections from 2005-06 to 2007-08. When port pollution is considered and has a relatively large impact, the integration of the two ports improves green social welfare for the region. As revealed from the tariff order for KPT (TAMP website) the tariff proposal is as below: “Based on the cost structure, the financial position reveals how much tariff is required to generate the return@15% and to make the activities self sustained. 48 hours to view or download: Also there are 187 minor ports under the control of various State Maritime Boards. Port Dues on the vessels entering the port. (which are called Finance and Miscellaneous expenditure) is added to arrive at the Total Cost. (Annexure III) These projections are made after taking into consideration the various factors such as trend of cargo handled during previous years, capacity increase, economic growth, traffic handled by the nearby competiting ports, market survey based on the indications given by the port users, reports of the various associations such as Agricultural Product Export Development Authority (APEDA), Timber Association, Indian Farmers Fertilizer Co-Operative Ltd. (IFFCO), Oil Coordination Committee’s report (OCC), reports from the important importers and exporters, Expert opinions, governments policies etc. However, Kandla Port puts lot of efforts to attract cargo from the nearby major ports such as Mumbai Port and Jawaharlal Nehru Port by providing the competitive rates. and ‘Port and Dock facilities Activity’ comprise sub-activities such as Cranes, berth hire, port dues, pilotage, water supply, dry docking, dredging, flotilla etc. There are no less than 14 possible pricing strategies depending on your industry, product and situation. Thus based on the Direct and Indirect Cost, Total Operating Cost has been arrived at. However, port further gives specific justification as below for the upward revision of tariff. Value creation forms the foundation of the pyramid. To learn about our use of cookies and how you can manage your cookie settings, please see our Cookie Policy. 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