Strategies to Help TradeLens Spread the Adoption of Its Blockchain Shipping Solution

Introduction

It requires high level of supply chain integration for firms in shipping industry to improve performance and be successful. Big line companies have made great efforts to develop the best solution for achieving this goal, leading to the growth of inter-firm cooperation, accompanying with the challenge resulted from alliances (Yuen & Thai, 2017). TradeLens, the Maersk-IBM joint venture, confronts the dilemma to keep the blockchain platform developing sustainably since it encounters difficulty of maximizing industry adoption from Maersk Line’s competitors of its industry-wide supply chain platform (Allison, 2018). Up till now, only one carrier, Pacific International Lines (PIL), has signed partners to adopt the blockchain solution.

Next part will present and discuss three strategies for TradeLens to better gain traction with other carriers in order to achieve the sustainable development.

Discussion

Turn to an N-player Venture

It’s advisable for TradeLens to adopt a more decentralized approach which involves n-player ownership since it will become more neutral than the originally 2-player venture and thus obtain an increase of competitive advantages (Allison, 2018). The major concern for other carriers lies in the absolute control of Maersk over the 2-player joint venture and they reckon that it makes no sense to adopt a platform that will enrich their biggest rival and make it more profitable (Tinianow, 2018). Besides, according to Hapag-Lloyd CEO Rolf Habben and Peter Wolf, general manager of CMA CGM Group, TradeLens needs joint forces to convert itself into a true industry platform rather than under the single control of Maersk. (Andersen, O., & Vogdrup-Schmidt, L., 2018). In this case, getting another three to five carriers to work together is conducive to dispelling misgivings within industry (Tinianow, 2018). Moreover, according to resource-based theory, n-player joint venture can generate bundles of strategic and social resources, such as capital, human resources, technology, contributing to the increase of competitive advantage and superior performance (Deitz et al., 2010; Robson et al., 2002; Talman, 2009) (See Appendix 1). On the basis of inter-firm valuable resource complementarity and the resource interface in multiplayer joint venture, TradeLens is expected to consolidate its position in market and attract more collaborators in the future.

However, there are major disadvantages of entering into a n-player joint venture. Maersk and IBM faces risks of giving control of their technology to other partners since the current intellectual property (IP) is shared equally by them. Though holding the majority ownership of the independent firm can minimize this risk, it is difficult to find a partner who is willing to accept the fact that Maersk and IBM will pose greater control over the blockchain innovation (Hill & Hult, 2017). What’s more, n-player ownership arrangement is likely to incur conflicts between the investing forces if they change their targets and have different voices about the new venture’s development strategy (Inkpen & Beamish, 1997). Such conflicts will be greater if the partners are from various nationalities. Maersk will have multiple rivals and their lawyers all asking questions and it will take long time to reach consensus (Hill & Hult, 2017; Park & Ungson, 1997).

Forming Strategic Alliances

IBM and Maersk can conduct a collaboration model through the extension of their pre-existing collaboration agreement and creating new alliances agreement with other rivals in order to maximize industry adoption (Rau & Spinler, 2017). Maersk’s previous alliance 2M with Mediterranean Shipping Company (MSC) has taken up nearly 28% of market share (See Appendix 2). Through 2M, both firms have established trust and stable relationship. As a result, gaining an extension of such relationship further into the new blockchain platform can boost the confidence of the rest rivals toward TradeLens. Besides, in line with the resource- based view and the cooperative approach developed on basis of Von Neuman and Morgenstern’s (1944) game theory which is concerned with a situation in which a group of decision-makers decide to undertake a project together, building new agreement with other rivals could help a TradeLens optimize resource allocation and develop a more effective process (Curiel, 1997; Das & Teng, 2000; Song & Panayides, 2002). Furthermore, strategic collaboration agreement can contribute to the formation of technological standards for the industry that will benefit all partners (Hill & Hult, 2017). In this situation, an industry advisory board can also be set to further promote equality on the platform so that other Maersk Line’s rivals are likely to increase their interest in joining the huge blockchain project.

According to transaction cost theory, one of the drawbacks of forming alliances is the increase of coordination costs because Maersk has to coordinate, negotiate and divide tasks with all partners. Moreover, there is potential instability of an alliance due to a lack of mutual trust and commitment, especially the alliances with Maersk’s other rivals apart from MSC, which can further lead to the failure to contain opportunism and the risk of termination when partners within alliance overlook the original purpose of the alliance (Das & Teng, 2000; Panayides & Wiedmer, 2011).

Acquiring Competitors

TradeLens can acquire the existing competitor to obtain their network so that its industry adoption could be maximized. A new blockchain-based platform for digitalizing global trade called the Global Shipping Business Network (GSBN) has been launched. It is formed by Cosco, CMA CGM, OOCL and other line companies and terminal operators (Wass, 2018). By acquiring this emerging consortium, TradeLens can obtain new company’s network with shipping lines, terminals and ports as well as customs authorities, etc. in order to mitigate the difficulty of building more client base. In addition, making acquisitions is one of the most time-efficient growth strategies to spread the fame and establish a sizable presence in international market (Hill & Hult, 2017; Park et al., 2018). TradeLens can broaden its presence in industry insiders through acquiring GSBN and thus make it looks more neutral, further broadening the market and attracting more collaborators to use its digitalization platform. Thirdly, acquiring GSBN which is in the same can strengthen TradeLens’s competencies and achieve quick increases in revenues to enhance long-term financial outlook, thus making it easier to raise capital for other growth strategies (Das, 2011; Nead, 2017). In this way, TradeLens could be competitive enough to persuade more line companies to adopt its innovation platform.

Nevertheless, acquiring a business could result in financial fallout since it requires hefty costs. The price of the GSBN may be higher than expectation and the acquisition process can take long time. Hence, the acquisition can bring financial challenges to TradeLens. Another advantage is the integration issue. There could be cultural clash on corporate and employee level which can interrupt business activities and result in high management turnover (Hill & Hult, 2017). Consequently, it brings few synergies. Besides, acquisition can cause distraction from operations (Nead, 2017). If TradeLens can not conduct the acquisition smoothly and spends longer time on the completion, its managerial focus can be diverted away from internal development and daily operations.

Conclusion & Recommendations

Comparing the above-mentioned strategies, it’s more feasible for Maersk and IBM to apply the collaboration model which means utilizing the pre-existing alliances and creating new ones since it minimize the risks and costs. Though inviting other competitors to jointly venture the business can mitigate industry complain and obtain new capital, it put Maersk and IBM in a dilemma of whether they should share IP and will spend longer time on decision- making in the future. Acquiring TradeLens’s competitor can also bring Maersk and IBM financial problems which may result in huge uncertainty of their future development. To sum up, taking full advantage of alliances not only help to save integration costs but also reduces financial and technological risks. Hence, the collaboration model of making strategic alliances will be the optimal choice for Maersk and IBM to maximize their industry adoption.

References

Allison, I. (2018). IBM and Maersk struggle to sign partners to shipping blockchain.

Retrieved from https://www.coindesk.com/ibm-blockchain-maersk-shipping-struggling

Andersen, O., & Vogdrup-Schmidt, L. (2018). Rivals reject blockchain solution from Maersk and IBM. Retrieved

from https://shippingwatch.com/carriers/Container/article10602520.ece

Curiel, I. (1997). Co-operative Game Theory and Applications: Co-operative Games

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Das, S. S. (2011). To partner or to acquire? A longitudinal study of alliances in the shipping industry. Maritime Policy & Management, 38(2), 111-128.

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Das, T. K., & Teng[] B. S. (2000). A Resource-Based Theory of Strategic Alliances. Journal of Management, 26(1), 31-62.

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Deitz, G. D., Tokman, M., Richey, R. G., & Morgan, R. M. (2010). Joint venture stability and cooperation: Direct, indirect and contingent effects of resource complementarity and trust. Industrial Marketing Management, 39, 862-873. https://doi-org.ezproxy.massey.ac.nz/10.1016/j.indmarman.2010.01.003

Hill, C. W. L., & Hult, G. T. M. (2017). International business: Competing in the global

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