Case Study

Strategic risk management at Titan Shipping Company: Lessons from Metallgesellschaft

10 pages
May 2010
Reference: IMD-1-0271

Having finished his MBA earlier in the summer, Peter returned, as planned, to take over the helm of the family business. The past three months had been devoted to a close examination of the financial picture of both his family and the family business. During this time, he reacquainted himself with the current state of the shipping industry and Titan’s recent performance. Shipping tonnage had become a commodity business with shrinking margins and highly volatile prices. Companies which needed to ship could not depend on having an accurate figure for how much shipping tonnage would cost in the medium and long term. Such volatility was partly due to changes in oil markets, but, regardless of its source, it was hurting the business of Titan and its customers. Historically, Titan’s revenues came mostly from its long-term, loyal customers, but customer loyalty was declining. And Peter empathized with their position: Their business cycles were becoming increasingly short and their own margins thin – they had to ship at the lowest possible cost. Yet, in spite of being an extremely competitive and efficient shipping company, Titan just could not match those rates, since so many of its costs were fixed ahead of time. All of these events and findings were leading him toward a definite conclusion: Titan’s business model needed to be changed. Titan had to offer an innovative value proposition if it were to expand, or even hold on to, its customer base – it needed something to get them locked in. And whatever that turned out to be, it would also have to reduce Titan’s exposure to volatile freight prices so that it could get an improved valuation.

Keywords
Shipping, Price Volatility, Risk Management
Settings
World/global
Metallgesellschaft
n/a
Type
Generalized Experience
Copyright
© 2010
Available Languages
English
Case clearing houses
IMD case studies are distributed through case clearing houses. In order to browse the collection and purchase copies please visit the links below.

The Case Centre

Cranfield University

Wharley End Beds MK43 0JR, UK
Tel +44 (0)1234 750903
Email [email protected]

Harvard Business School Publishing

60 Harvard Way, Boston MA 02163, USA
Tel (800) 545-7685 Tel (617)-783-7600
Fax (617) 783-7666
Email [email protected]

Asia Pacific Case Center

NUCB Business School

1-3-1 Nishiki Naka
Nagoya Aichi, Japan 460-0003
Tel +81 52 20 38 111
Email [email protected]

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Discover our latest research
IMD's faculty and research teams publish articles, case studies, books and reports on a wide range of topics