‘ * RETURNING MATERIALS: IV1£31_J Piace in book drop to LJBRARJES remove this checkout from “ your record. FINES wm , - be charged if book is returned after the date stamped below. THE ROLE OF MARKETING IN SHIPPING LINE SERVICE IN THE PACIFIC NORTHWEST - CENTRAL ALASKA MARINE TRADE By Fredrick Martin Collison A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Marketing and Transportation Administration 1982 Copyright by FREDRICK MARTIN COLLISON 1982 ABSTRACT THE ROLE OF MARKETING IN SHIPPING LINE SERVICE IN THE PACIFIC NORTHWEST-CENTRAL ALASKA MARINE TRADE BY Fredrick Martin Collison The use of marketing by shipping lines engaged in liner service in the Pacific Northwest-Central Alaska marine trade was examined from the perspective of the marketing concept. The basic components evaluated were determination of customer needs by the lines, resultant customer perception of shipping line service, use of integrated marketing and profitability measures by the lines, and the operational and financial success of the lines. Data was collected from the shipping lines by personal interviews and secondary data and from the customers of the lines by written questionaire. The customers evaluated twenty-five service attributes for two shipping lines, and also provided an evaluation of the line closest to their needs on each attribute and the impor- tance of these attributes. Of the three lines evaluated by the research, Totem Ocean Trailer Express (TOTE) was found to be the most highly developed in the areas of the determination of customer needs and the use of integrated marketing. ‘The Alaska Service of Sea-Land was somewhat less developed in these same areas and Alaska Hydro-Train was the least developed from a marketing perspective. Customer perception of Fredrick Martin Collison shipping line service, however, indicated that Sea-Land and Alaska Hydro-Train were most favorably rated, followed by TOTE, although the sample size for Alaska Hydro-Train was quite small. Within their respective target markets each line was perceived by customers as having competitive advan— tages. Sea-Land and Alaska Hydro—Train were found to have the strongest competitive advantages ‘within these» market segments. TOTE and Sea-Land used segmental profitability measures to a higher degree than Alaska Hydro-Train. TOTE achieved the most favorable growth in market share while Alaska Hydro-Train appeared to be the most profitable. These results lend some support to a firm's use of the marketing concept, but the major’ anomaly found. was that TOTE, although using the marketing concept to the greatest degree, did not achieve the highest level of either profita- bility or customer evaluation of service. Further research into the use of the marketing concept by firms appears to be required. I dedicate this work to my wife, Jeanne, who provided support and assistance throughout and who delayed the completion of her dissertation while I completed mine. I also dedicate this work to my daughter, Beth, who had a part-time father during too much of the research and writing. ii ACKNOWLEDGEMENTS I would like to thank my chairman, Dr. John L. Hazard, for his guidance and encouragement throughout the writing of this dissertation and my entire doctoral program. I also appreciate the help of my other committee members, Dr. M. Bixby Cooper and Dr. Forrest S. Carter, for their helpful comments and suggestions. The marketing executives interviewed in Seattle served as an invaluable source of information; without them, this research would not have been possible. These individuals were: Don Claussen of Alaska Hydro-Train, Marvin R. Buchanan of Sea-Land, and Everett W. Trout of Totem Ocean Trailer Express. (TOTE). Other personnel of these lines who provided assistance were Gary Geiser of Sea-Land, and Renata Benett and Jenny Hefferon, both of TOTE. I deeply appre- ciate the help I received from these individuals. Theodore McCulloch of Foss Alaska Line, Milt Griffiths of the Alaska Marine Highway, Jube Howe of the Port of Seattle, Patrick Stocklin cu? Washington-Oregon Shippers Cooperative Association, Jackie Landry of United Lumber> Co., Robert Brown of Alaska Marine Trucking, and Lillian Green of Convoy Company provided additional insights. I wish to thank these individuals for their contributions to this research. I iii would also like to thank all shippers who took time to complete the customer questionnaire. Ron Poulsen, Robert Christensen, Robert Christie, and William Miller, all of the Maritime Administration, provided initial guidance tuui pertinent information. Albert Fitzgerald graciously arranged for access to public docu- ments in the rate hearing files of the Interstate Commerce Commission. Robert Bulach provided assistance in the early stages of this research. Additionally, a number of Detroit freight forwarders provided assistance in the pretesting of the customer questionnaire. The help of all of these indi- viduals is greatfully acknowledged. I would like to thank my wife, Jeanne, for her constructive comments and typing assistance, and my brother, Dr. Gary L. Collison, for his editorial assistance. Thanks are also due for the support provided by Dean David Vose, Dr. Jerrold Peterson, and Dr. John Newstrom of the University of Minnesota, Duluth, and the financial support provided by my parents. Brenda Mahai did an excellent job of typing the manuscript. To Frank, Sylvia, Lyle, Mike, and Steve, your hospitality and Christian environment were very much appreciated during my stay in Seattle. iv TABLE OF CONTENTS LIST OF TABLES O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O I Viii LIST OF FIGURES O O I O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O I O O O O O O x CHAPTER I O INTRODUCT I ON C O O O O O O O O O O O O I O O O O O O O O O O O O O O O O O O 1 Purpose of the Study ............................. 1 Brief Review of the History of the Competitive Position of the U.S. Merchant Marine: Pre-1900 Period ............................... 1 Post-1900 Period-~Foreign...................... 5 Post-1900 Period--Domestic..................... 9 Definition of the Marketing Concept .............. 16 Implications of the Marketing Concept for the U.S. Merchant Marine ......................... 18 Research Questions ............................... 20 Methodology ...................................... 20 Scope of Study ................................... 23 Limitations of the Study ......................... 25 Potential Contributions .......................... 25 Overview of Subsequent Chapters .................. 26 Footnotes ........................................ 28 CHAPTER II. A REVIEW OF THE LITERATURE ................. 30 Introduction ..................................... 30 Characteristics of Liner Trades .................. 30 Alaskan Marine Trade Characteristics ............. 37 Pacific Northwest - Central Alaska Marine Trade Characteristics .................................. 46 Evolution of the Marketing Concept ............... 49 Research on Adoption and Implementation of the Marketing Concept ................................ 52 Summary—~Status of The Marketing Concept ......... 59 Research Relating the Marketing Concept and the U.S. MGrChant marine 0.0.0.0....OOOOOOOOOOOOOOOOOO 60 summary COO0.0..OOOOOOOOOOOOOOOO0.00.00.000.000... 72 Footnotes ........................................ 73 TABLE OF CONTENTS (cont'd) CHAPTER III. RESEARCH DESIGN ........................... 77 Basic Design ..................................... 77 The Measurement Process .......................... 77 Sample Selection Procedures ...................... 80 Shipping Line Survey Procedures .................. 83 Customer Survey Procedures ....................... 83 Shipping Line Data Collection Format ............. 85 The Customer Questionnaire ....................... 86 Shipper Survey Data Analysis ..................... 90 Marketing Performance of the Lines ............... 97 Summary .......................................... 99 Footnotes ........................................101 CHAPTER IV. MARKETING CASE HISTORIES - CENTRAL ALASKA LINER COMPAPIIES C00.0.00...0.00.00.00.00... 105 Introduction .................................... 105 Alaska Hydro-Train .............................. 106 Company Description .......................... 106 Basic Marketing Strategy ..................... 107 Marketing Activities ......................... 109 Sea-Land Service ................................ 117 ‘Company Description .......................... 117 Basic Marketing Strategy ..................... 118 Marketing Activities ......................... 120 Totem Ocean Trailer Express ..................... 130 Company Description .......................... 130 Basic Marketing Strategy ..................... 131 Marketing Activities ......................... 134 Summary ......................................... 142 Footnotes ....................................... 144 CHAPTER V. SHIPPER SURVEY DATA ANALYSIS ................ 145 Introduction .................................... 145 Survey Response Rate ............................ 145 Shipper Characteristics ......................... 148 Individual Characteristic Analysis ........... 148 Overall Analysis ............................. 151 Shipping Channels ............................ 153 Shipping Line Service Attributes ................ 154 Overall Shipping Line Service Comparisons .... 154 Shipping Line Service Attribute Ratings ...... 155 Shipping Line Service Closeness to Customer Needs ............................... 164 Overall Respondent Attitude .................. 165 Importance of Attributes ..................... 166 Prediction of Shipping Line Usage ............ 172 Vi TABLE OF CONTENTS (cont'd) summary 00............OOCOOOOOOOOOO......00...... Footnotes 0.00.0.0.........OOIOOOOOOOOOOOOOOO.... CHAPTER VI. MARKETING PERFORMANCE OF THE LINES ......... Introduction .................................... Evaluation of Customer Needs .................... Customer Evaluation of Shipping Line Service Attributes .............................. Evaluation of Integrated Marketing .............. Use of Profitability Measures in Evaluating Cargoes ......................................... Evaluation of Overall Success ................... Market Share ................................. Profitability ................................ Explanation of Success Results ............... summary .......00..........OOOOOOOOOOOOIOOOOOOOO. Footnotes 0.0.0..........OOIOOOOOOOOI0.00.0000... CHAPTER VII. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS . IntrOduCtion .....OOOOIOOOOOOOOOOIOOO0.00.0000... Summary of Findings ............................. Customer Closeness to Needs .................. Customer Ratings by Cargo Segment ............ Customer Evaluation of Attribute Importance .. Prediction.of Customer Use of Shipping Lines . Elements of the Marketing Mix ................ Conc1uSions 0....OOOOOOOOOOOOOOOOOOOOOO00.00.0000 Customer Perception of Service Differences ... Use of the Marketing Concept and Shipping Line Success ............................. Recommendations for Use of the Research ......... Recommendations for Future Research ............. Footnotes ....................................... APPENDICES: A. DATA COLLECTION INSTRUMENTS .............. B. SHIPPER DATA AND CHARACTERISTICS- STATISTICS AND ANALYSIS .................. BIBLIOGRAPHY ..........OOOOOOOOOOOIOOOOOO......OOOOOOOOO General References Vii 174 175 178 178 178 180 189 192 194 195 197 200 202 203 205 205 205 207 207 208 209 210 212 212 214 218 220 223 225 234 249 254 LIST OF TABLES Table 1 Value of U.S. Foreign Trade 1790-1900 ....... 3 Table 2 Vessel Tonnage of Coastwise Shipping 1790-1900 00.0.0.0......OO'OOOOOOOOOOOOOOOOOOI 4 Table 3 U.S. Waterborne Trade Segments 1963—1978 .... 15 Table 4 U.S. Domestic Ocean Trade Segments 1969-1977. 15 Table 5 U.S. Noncontiguous Trade by Tonnage (1000's) and Type of Vessel, 1977 .................... 16 Table 6 Alaskan Trade-Domestic Dry Cargo Imports 1967 to 1977 ................................ 42 Table 7 Alaskan Trade-Domestic Dry Cargo Exports 1967t01977 0....OOOOOOOOOOOIOOOO0.0.0.0..O. 42 Table 8 Alaskan Dry Cargo Vessel Trade with Pacific NorthweSt 1967-1977 coo00000000000000.0000... 44 Table 9 Comparative Distribution of Waterborne Commodity Tonnages for Southeast and Central Alaska, 1978 ................................ 45 Table 10 Percentage Distribution of Commodity Tonnage for Central Alaska Ports - 1970, 1975, and 1978 ........................................ 50 Table 11 Comparisons of U.S. Flag and Foreign Flag Carriers By User Category ................... 62 Table 12 Ranking of American Flag Carrier Services In Comparison To Foreign Flag Carrier Services By User Category ............................ 64 Table 13 U.S. East Coast to Europe: Comparison of Selected U.S. Flag and Foreign Flag Shipping Lines ....................................... 68 Table 14 U.S. West Coast to Far East: Comparison of Selected U.S. Flag and Foreign Flag Shipping Lines O00.000.000.000...OOOOOOOOOOOOOOOOOOOOO 69 Table 15 Tonnages Reported By Survey Respondents Versus Tonnage for Central Alaska For 1978 .. 146 Table 16 Respondent Cargo Volumes--Summary ........... 150 Table 17 Percent of Cargo Routed by Percent of Cargo Routed in Retrospect, Alaska Hydro-Train .... 187 Table 18 Percent of Cargo Routed by Percent of Cargo Routed in Retrospect, Sea-Land .............. 188 Table 19 Percent of Cargo Routed by Percent of Cargo Routed in Retrospect, Totem Ocean Trailer Express ..................................... 188 viii Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table 20 21 22 23 24 B1 B2 B3 B4 B5 B6 B7 B8 B9 810 B11 LIST OF TABLES (cont'd) Market Shares for Lines in the Central Alaska Marine Trade for 1976-1979 ........... Available Capacity by Shipping Line for central Ala-Ska ..........OOOOOOOOOOOCOOO...O. Alaska Hydro-Train; Operating Costs, Alaska Service of Sea-Land Service, Alaskan Operating Results Summary--Domestic 1979 ... Inc.; Traffic 0.0.0.0000.........OOOOOOOOOOOOOOOOOI Totem Ocean Trailer Express, Results Summary Shipper Classification by Percent of Cargo Routed; Alaska Hydro-Train Shipper Classification by Percent of Cargo Routed; Sea-Land Shipper Classification by Percent of Cargo Routed; Totem Ocean Trailer Express Mean Attribute Ratings For Each Shipping Line ....OOOOOOOOOOOOOOOOOOOO......OOOOOOOOOO Mean Attribute Ratings for Each Shipping Line Subdivided by Cargo Perishability Inc.; Operating Mean Attribute Ratings for Each Shipping Line Subdivided by Cargo Emergency Rating . Mean Attribute Ratings for Each Shipping Line Subdivided by Basic Commodity ClaSSification 000.00.000.00.0000000000000000 Mean Attribute Closeness for Each Shipping Line ..........OOOOOOOOOOOOIOOO...0.0.0.0.... Mean Values for Importance of Attributes..... Mean Importance of Attributes, by Cargo Perishability, Cargo Emergency Subdivided Rating, and Basic Commodity Classification Discriminant Analysis Printout, Rating Variables as Independent Variables .......... ix 196 198 198 199 201 234 235 236 237 238 240 241 242 LIST OF FIGURES Figure 1 U.S. Flag Proportion of Value of Foreign Waterborne Commerce 1900-1975 ............... 6 Figure 2 Major U.S. Maritime Legislation Since 1900 .. 8 Figure 3a U.S. Flag Proportion of Value of Foreign Waterborne Commerce 1962-1977 ............... 10 Figure 3b U.S. Flag Proportion of Tonnage of Foreign Waterborne Commerce 1962-1977 ............... 10 Figure 4 Domestic Waterborne Commerce 1925-1978 ...... 12 Figure 5 Alaskan Marine Trade Regions ................ 39 Figure 6 Central Alaska Inland Transportation Routes . 48 Figure 7 Abbreviated Organization Chart, Alaska Hydro-Train ................................. 111 Figure 8 Personal Sales Force Distribution, Alaska HYdrO-Train coo0000000000oooooooooooooooooooo 115 Figure 9 Abbreviated Organization Chart, Alaska Service, Sea-Land Service, Inc. ............. 122 Figure 10 Personal Sales Force Distribution, Alaska Service, Sea-Land Service, Inc. ............. 127 Figure 11 Abbreviated Organization Chart, Totem Ocean Train Express, Inc. ......................... 136 Figure 12 Personal Sales Force Distribution, Totem Ocean Trailer Express, Inc. ................. 139 Figure 13 Mean Ratings by Attribute for Each Shipping Line ..........OOOOOOO.....OOOOOOOOOOOOOOOOOO 156 Figure 14 Mean Ratings by Attribute for Each Shipping Line, High Perishability Cargo .............. 158 Figure 15 Mean Ratings by Attribute for Each Shipping Line, High Emergency Rating Cargo ........... 159 Figure 16 Mean Ratings by Attribute for Each Shipping Line, Industrial Cargo Classification ....... 161 Figure 17 Mean Ratings by Attribute for Each Shipping Line, Consumer Cargo Classification ......... 163 Figure 18 Mean Importance by Attribute ................ 167 Figure 19 Mean Importance by Attribute, High Perishability vs. Non-Perishable Cargo ...... 169 Figure 20 Mean Importance by Attribute, High Emergency Rating vs. Non-Emergency Rating Cargo ....... 170 Figure 21 Mean Importance by Attribute, Industrial vs. Consumer Classification Cargo ........... 171 LIST OF FIGURES (cont'd) Figure 22 Summary of Respondent Perception of Competitive Advantages--Shipping Line Service Rating variables 00......IOOOOOOOOOOOOOOOO0.0 182 Figure 23 Summary of Respondent Perception of Competitive Advantages--Shipping Line Service Closeness to Needs Variables ................ 185 Figure A1 Shipping Line Interview-Basic Questions ChGCkliSt 0.0.0....OOOOOOOOOOOOOIOOOOOOOOOOO. 225 Figure A2 NMRC Study-Shipping Line Attributes and Adverb Anchors .............................. 228 Figure A3 Shipper Survey Questionnaire ................ 229 xi CHAPTER I INTRODUCTION Purpose of the Study Since the founding of the United States in 1789, the U.S. merchant marine has had an interesting, but greatly varied history. {Una history of the last century records a significant decline in the competitive position of the U.S. merchant marine. For the most part, this is true of both the foreign and domestic sectors of the merchant marine.1 Many factors have been cited to explain this decline, and it is the intent of this research to focus on only one of these factors: the role of marketing (concept and strategy) within individual shipping lines, and its influence on shipping line performance. Brief Review of the History of the Competitive Position of the U.S. Merchant Marine Pre-1900 Period The segment of the U.S. merchant marine engaged in foreign commerce showed a significant period of growth from the founding of 1flu3'United States until the second half of the nineteenth century.2 The last half of that century revealed a dramatic decline from which the U.S. flag fleet has never really recovered. During the first period, the percentage of value of foreign trade carried by U.S. flag vessels climbed rapidly to about 90 percent and remained 1 2 above 65-70 percent until the period of the Civil War (1861-1865). This decline of the mid-nineteenth century continued throughout the rest of the century is shown in Table 14 'The excellent performance of the foreign segment of the U.S. merchant marine can be traced to a number of factors including: availability of coastal timber and labor, favorable Federal legislation3, and American innovations such as packet ship service, clipper ships, and the fore- and-aft rig (schooner). By 1850, however, black clouds had appeared on the hori- zon and they ultimately proved disasterous for the foreign segment of the U.S. merchant marine. The major factors contributing to the decline of the foreign segment include: depletion of coastal timber, lack of technological innova- tion in converting to steam propulsion and to iron hulls,4 erratic and inconsistent government policy, and the American Civil War5 (including the events leading up to it). By 1900 only a very small percentage of U.S. foreign trade was carried in U.S. flag vessels. The domestic segment of the U.S. merchant marine has shown, on the other hand, a more positive pattern of growth through the beginning of the twentieth century. In terms of tonnage of the domestic fleet, the pattern has been one of continual growth, as seen in Table 2. The figures in the table indicate, for the most part, a growth pattern for the domestic segment of the U.S. merchant marine‘through the mid-1800's. During the Civil War period and beyond, however, Table 1 Value of U.S. Foreign Trade 1790-1900 Total Foreigna Proportion Carried in U.S. Shipsb Year Commerce ($,mm1 Imports Exports Total 1790 43 39.1 40.0 39.5 1795 118 91.4 87.5 89.8 1800 162 91.2 87.3 89.5 1805 217 92.6 88.5 90.8 1810 152 92.9 89.6 91.4 1815 166 77.0 69.8 74.7 1820 144 90.5 88.6 89.6 1825 196 95.8 89.0 92.4 1830 145 93.0 86.5 89.7 1835 272 90.0 77.0 84.2 1840 239 86.9 80.3 83.3 1845 232 87.2 75.6 81.5 1850 330 78.6 65.8 72.7 1855 536 77.4 73.8 75.6 1860 762 63.0 69.8 66.5 1865 605 29.7 26.1 27.6 1870 992 33.1 37.7 35.6 1875 1,199 29.2 23.7 26.2 1880 1,473 22.8 13.1 17.4 1885 1,274 20.3 11.4 15.3 1890 1,574 16.7 9.4 12.9 1895 1,457 15.4 8.2 11.7 1900 2,090 12.9 7.2 9.3 aFor years ended September 30, 1790-1842; June 30, 1843-1900. Includes gold and silver coin and bullion to 1879; imports and exports by land prior to 1871; and all waterborne foreign commerce of ports on the Great Lakes. bThese figures are only approximate due to the rounding of the value of foreign commerce figures. Bureau of the Census, U.S. Department of Commerce, HistoricalgStatistichofgthe United States- Qolonial Times to 1970, Part 2, (Washington, D.C.: Government Printing Office, 1975), p. 761. Source: 4 Table 2 Vessel Tonnage of Coastwise Shipping 1790-1900 Total Total Year Tonnage Year Tonnage 1790 103,775 1850 1,755,797 1795 164,796 1855 2,491,108 1800 245,295 1860 2,599,319 1805 301,366 1865 3,353,657 1810 371,114 1870 2,595,328 1815 435,067 1875 3,169,687 1820 539,080 1880 2,584,418 1825 587,273 1885 2,822,598 1830 496,640 1890 3,330,337 1835 769,795 1895 3,644,276 1840 1,114,664 1900 4,195,875 1845 1,190,898 Source: Winthrop L. Marvin, The American Merchant Marine, (New York: Charles Scribner's Sons, 1902), p. 380 the domestic segment continued to generally exhibit a pat- tern of growth when the foreign segment was declining, possibly suggesting some shift from foreign to domestic operations. There seem to be two major factors that contributed to the increasing development of the domestic shipping fleet. First, and perhaps foremost, the domestic shipping industry was effectively protected from foreign competition through various cabotage laws since the founding of the United States. An Act of Congress of 1789 provided protection to the U.S. merchant marine in two ways.6 Tonnage duties were imposed on foreign vessels of fifty cents per ton and on U.S. vessels of six cents per ton. Secondly, in the coasting trade, U.S. vessels would have to pay this duty once per year while foreign vessels would have to pay the duty every time they entered a port. Although this act did 5 not absolutely prohibit foreign vessels in the U.S. domestic trades, the economic penalty was such that it rarely occurred. In the early 1800's, legislative action resulted in the total eliminaticn of foreign vessels from U.S. domestic waterborne commerce.7 The American Navigation Act of 1817 prevented foreign vessels, by law, from par- ticipating in the U.S. domestic trades. This prohibition remained in force throughout the rest of the 19th century. Epst-IQOO Period--Foreign For the foreign segment of the U.S. merchant marine, the twentieth century has not represented a return to past glory. Since 1900 when slightly over 9% by value of U.S. waterborne foreign was carried by U.S. flag vessels, there has intermittently been improvement in the share of U.S. foreign commerce carried by U.S. flag vessels. There have been some particularly bright spots, but only during periods of a wartime economy. Figure 1 shows the trend in the U.S. flag share of value of foreign waterborne commerce since 1900. As can be seen, the two major peaks occurred at the end of W.W.I and W.W.II. Unlike the Civil War of the pre- vious century, these two wars resulted in a significant expansion of the U.S. foreign merchant fleet. Many factors served to limit the ability of the foreign segment of the U.S. merchant marine to gain a larger share of U.S. foreign trade. Up until W.W.I, very little was done to jpromote' and develop the foreign segment of the ‘U.S. merchant marine. Indirect aid in the form of ocean-mail .mm .a .Awsmfi saasanmm .Hfloqsoo maapaaas Haqohpaz u.o.n .nopmaaamasv assumee< pomm< HanoHpmz < I mamas: pqmnonos mopmum uopflcb one .oqwmm .2 :HBuH “Hos .a .Amsmfl.moauwo unapaaam puma Inso>oo ”.0.Q .:0pmaflmmdsv ouma 0p moawe Hmflquoo I mopspm season one we moflpmwpmpm HROHHOpmHm .mosoaaoo Ho pqmapndqmn .m.D .msmsoo map Ho swonsm Q< l .wafififiow on» song empaau< mbmHlOOmH .OUHOESOU OQHOQHmde SMHOHOW wo ®=Hd> HO GOHPHOQOHQ wddh .m.D Ham» . owma osmfl ommfl .ommH ovma omma ommH oama oomH . _ _ _ _ _ _ .7 _ 4 _ _ _ a _ _ . \./.\. ”moonsom H mammam o OH om h Q. om m B 3 ca M _ 0 d m on 1 to O .u om q” es ow 7 subsidies was available, but it never proved to be a suc- cess. By law, U.S. ships built of foreign materials, in whole, or in ;part, were prevented from {operating in the domestic trades for more than two months a year, resulting in a reluctance by shippers to construct vessels in foreign shipyards. Also, McDowell and Gibbs discuss the continuing reliance on outdated (as late as 1910) technology and vessel types by the U.S. merchant marine: Honors were heaped upon the shipbuilders who pro- duced sailing ships--vessels that were commer- cially obsolete practically as soon as they left the ways, while the men who worked with iron were considered ironmasters and ironmongers. It takes a well-established iron and steel industry and good shipbuilding industry to turn such men into skilled workmen, and at the time the United States had neither.9 A brief description of some of the major U.S. maritime legislation of the twentieth century is given in Figure 2.8 With the advent of both W.W.I and W.W.II, a vast expan- sion of the U.S. merchant marine took place, but its effect was temporary. After each war, many vessels were sold by the government to foreign flag Operators, and the U.S. flag share of foreign commerce declined to 30 percent or below. Although a number of legislative initiatives were instituted after each war, none were effective in restoring the U.S. flag competitive position. The current competitive situation of the U.S. merchant marine has not improved. For the 16 year period 1962-1977, the volume of U.S. foreign trade carried by U.S. flag vessels fluctuated between 4.5 and 10 percent by tonnage and Shipping Act of 1916--Pirst comprehensive program for the development of the U.S. merchant urine: provided for regulation of steamship liners and conferences engaged in foreign commerce; collective rate-axing exempted from antitrust action. Merchant Marine Act of 1920--lnitiated the sale of govern- ment vessels for the establishment of fleet operations; provided assistance to private operators through insurance and construction aid; cabotage provisions extended to the noncontiguous trades. Merchant Marine Act of 1928-Assistance provided to the 0.8. merchant marine through an indirect subsidy of Imil contracts (which had been used previously); expansion of construction aid. Intercoastal Shipping Act of 1933-Bequired that common carriers in intercoastal trade publicize rates and charges; 30 day notice require to change rates. Public Resolution 17 (1934)--Bstahlished a policy of ship- ment in 0.8. flag vessels of agricultural and other products that were the result of government loans to foreign countries. Merchant Marine Act of 1936-Abolished the' mail subsidies established in 1928; established direct subsidy of the 'U.S. merchant marine through construction and operating contracts: became the basic act for the maintenance of the 0.8. merchant marine. Transportation Act of 1940-—Transferred the regulation of coastwise and intercoastal shipping to the Interstate Commerce Commission (ICC). Merchant Ship Sales Act of 1946-Provided for the disposal of the large merchant fleet constructed during WWII; a significant number of vessels were transfered to foreign registry. Public Law 480 (1954)--Provided for the shipment of 0.8. surplus agricultural commodities to foreign countries. Public Law 664 (1954; amended 1961) - Provided for at least 50 percent of certain government generated cargoes to be carried in 0.8. flag vessels. Merchant Marine Act of 1970-Represented a major change in 0.8. maritime policy: extended and expanded the construction differential subsidy (CDS) program beyond the foreign liner trades: provided for construction and loan guarantees for segments of the domestic trades; set a goal of building 300 CD8 vessels over the following ten years. Figure 2 Major Maritime Legislation since 1900 9 between 16.4 and 25.8 percent by value of cargo carried.10 Figures 3a and 3b show the respective percentages for the liner segment and for all other segments combined. As can be seen, both by percent of tonnage and percent of value, the liner segment makes a substantial contribution to the U.S. flag portion of foreign trade (compared with all other segments). The firms in the liner segment provide a regu- larly scheduled service on fixed trade routes and provide service to all shippers who desire to use their services. Even for this segment, however, the picture could be much ,brighter. Although the relative tonnage has been increasing for the liner segment, the relative value of the tonnage carried has remained nearly constant. This indica- tes that the liner segment is losing some of the highest value cargo that they have been carrying. The lower value cargo tends to be carried at lower rates, generally resulting in a loss of revenue to the shipping line.11 Despite this, the liner segment has been more suc- cessful than other segments and appears worthy of further study. Post-1900 Period--Domestic For the domestic segment of the U.S. merchant marine, a somewhat different picture emerges. Domestic waterborne trade has been growing rapidly just as has U.S. foreign trade. Domestic waterborne trade includes inland waterway transportation, the- coastal and offshore trades, and domestic shipments on the Great Lakes. Since 1925, the 10 ,/° Liner Segment , 5Q 30 r- ./o \ K. /.’ ——-\. g“ ./ \’\./.\'\./. o ...—q _ .p ‘5 a. 20 - o a 94 w P s H 7‘ 10 -’ «q. All Other Segments as ‘ .\.\ D I- .‘0\.\.’.\./e—g‘.§.-. OLALIAAAILLAILAALJ 1960 1965 1970 1975 Year Figure 3a U.S. Flag Proportion of Value of Foreign Waterborne Commerce, 1962-1977 8Q 30 - ./"—-.\e “ «—' Liner Segment :5 -/ / E F °'—’\./.\“'“°\,/ cm 20 _ o H p‘ h w s ":2 10 _. . All Other Segments a: '\q_“‘“ D '— \.\O’.\.""’"O/.—.\°—e—o OLLLLI4AIA‘LA1LLA__A 1960 1965 1970 1975 Year Figure 3b U.S. Flag Proportion of Tonnage of Foreign Waterborne Commerce, 1962-1977 Sources: Adapted from the following; U.S. Department of Commerce, Maritime Administra- tion, MARAD 78 (Washington, D.C.: U.S. Government Printing Office, May 1979), p. 33; Idem, MARAD 76 (Washington, D.C.: U.S. Government Printing Office, 1977). 11 tonnage of waterborne domestic trade has nearly tripled (See Figure 4 for the trend in tonnages). A major dif- ference that affects this segment of the U.S. merchant marine, as discussed previously, is the protection, through cabotage laws, from foreign competition. Thus, U.S. shipping lines have been able to participate fully in the modest increases in the deep-sea segments of domestic water- borne commerce. Although domestic waterborne commerce has been growing, its rate is less than might have obtained. One of the major reasons for this restrained growth is the increase of inter- modal competition from railroads and truck lines. In the foreign segment, the competition for an individual shipping line is almost exclusively other shipping lines. Air represents a competitive threat only for a very small per- centage of total foreign trade. For the domestic segment of the U.S. merchant marine, the competive situation is quite different. Two of the three domestic ocean segments12 face significant intermodal competition. These two segments are coastwise and intercoastal; for the noncontiguous segment (the offshore marine trade), the competive situation more closely resembles the foreign segment of the U.S. merchant marine, but without foreign competitors. The impact of intermodal competition, then, has been somewhat different for the three segments introduced above. At the beginning of the twentieth century, the only major intermodal competition faced tnr domestic ocean 12 .mIm .QQ .A.Q.z .mnoosfimsm no mmmoo >8m< .m.D nsfimfimnfi> .n«o>aom anomv wofissassm ascofipsz m when I whoa meow Hmosoaso I mopspw woman: one mo monoaeoo oquonmopwa .mmoossmnm Ho mguoo .zas< can no uncapssmon ”mmsumms .aa .Amsma .moammo mumpqfiam unmanam>oo .m.D u.o.a .soumsflnmsav ouma 0p moawe HsHsoHoo I momspm woman: on“ no mofipmfipspm HsOHHOpmHm .oohoaaoo Mo uncapmsmon .m.D .msmsoo on» no ssohmm mwsHBOHHoH map Bonn oopmso¢ ”moonnom wbmHIDNmH «OOHGSOU OGHOQHOPdB OHHmmaOQ ¢ whfiwflw use» ome ObmH ommfl ommH ova ommH ONmH OHmH oomH 1 . _ i _ a . 1w _ . _ _ _ . m . _ o \a/e\sle|||ll||e L \\uIII.\\\. . swooo ospmoaon m \e/e\o I. e/s I. m \ i \\\. monophopsa oepmoaon Hence I O'. 13 transportation was rail, and for the most part this com- petition was not particularly intense. Since that time, however, rail took a greater share of cargo once destined to be carried by domestic ocean shipping. Additionally, the trucking segment of highway transportation developed, and was able to also capture a share of tonnage that would have been carried by domestic ocean shipping. Gorter examined the relative decline in the coastwise and intercoastal segments of the U.S. merchant marine prior to W.W.II and found the following factors: e rail and truck competition; e sharply rising operating and cargo-handling costs; e intermittent labor troubles.13 World War II accelerated the trend when much of the domestic fleet was taken over by the federal government for use in the war effort. During the war, the railroads and trucking carried much of the cargo that would have otherwise been handled by the domestic ocean segment of the U.S. merchant marine. With the end of the war, much of this cargo did not return to domestic shipping lines. In a study on the Atlantic Coast--Gulf Coast trade, Hazard examined these trends that resulted in the elimination of a number of shipping lines in the intercoastal trade.14 Particularly affected were the liner segments of the coastwise and inter- coastal trades; to this day these liner trades have not recovered. The noncontiguous segment of the domestic ocean trades was much less affected. This seems to be primarily a 14 result of the lack of intermodal competition faced by the shipping lines in those trades. The more recent history of the domestic segment of the U.S. merchant marine reveals some interesting charac- teristics. Table 3 presents summary statistics for the period 1963-1978. The domestic ocean segment shows a rela- tive decline when compared with both the foreign segment and the total domestic segment. The last two of those years show an improvement, although it is difficult to judge whether this will continue. For the domestic ocean trades, Table 4 presents recent statistics for the coastwise, inter- coastal, and noncontiguous segments for the years 1967-1977. The data indicate that intercoastal trade plays a very small role in domestic waterborne commerce. Major changes have occurred in both the coastwise and noncontiguous trades, with the coastwise trade showing a continuing decline for the relative amount of domestic ocean tonnage carried. The noncontiguous trades, however, have exhibited a significant increase in both tonnage and share of domestic ocean tonnage over this same period, increasing approximately threefold. Table 5 presents the breakdown of the noncontiguous trade by type of vessel. The domestic noncontiguous trade consists primarily of the bulk trades, as witnessed by the last three categories of Table 5, and much of this consists of petroleum and petroleum products. A similar situation for type of cargo exists in the domestic coastwise and intercoastal 15 Table 3 U.S. Waterborne Trade Segments 1963-1978 Tonnage (in 1000's) ota otal Domestic Ocean as a S of Domestic ota otal Year Total‘ Foreign Domestic Ocean Total Foreign Domestic 1963 1,173,767 385,659 788,108 213,853 18.2 55.4 27.1 1964 1,238,094 421,925 816,168 205,688 16.6 48.8 25.2 1965 1,272,896 443,727 829,169 201,508 15.8 45.4 24.3 1966 1,334,116 471,391 862,725 208,375 15.6 44.2 24.2 1967 1,336,606 465,962 870,634 214,646 16.1 46.1 24.6 1968 1,395,839 507,950 887,889 214,250 15.4 42.2 24.1 1969 1,448,711 521,312 927,399 216,708 15.0 41.6 23.4 1970 1,531,696 580,969 950,727 238,440 15.6 41.0 25.1 1971 1,512,584 565,986 946,598 242,916 16.1 42.9 25.7 1972 1,616,793 629,981 986,812 242,660 15.0 38.5 24.6 1973 1,761,552 767,394 994,158 236,795 13.4 30.9 23.8 1974 1,746,788 764,089 982,700 233,358 13.4 30.5 23.8 1975 1,695,034 748,707 946,327 231,932 13.6 30,9 24.4 1976 1,835,007 855,964 979,043 236,279 12.9 27.6 24.1 1977 1,908,234 935,257 972,967 248,083 13.0 26.5 25.5 1978 2,021,350 946,058 1,075,292 305,343 15.1 32.3 28.4 ‘Minor discrepancies may appear due to errors in rounding Source: Waterborne Commerce of the United States -Ca1endar Year 1978 - Pgrt 5 Nations Summaries (Fort Belvoir, ngineers, n. . 0 pp. 5-6 s irginia: . Table 4 U.S. Domestic Ocean Trade Segments 1967-1977 Tonnage (in 1000's) . Army Corps of Domestic Year Ocean Coastwise Intercoastal Noncontiguous 1967 216,513 189,126(87.5) 4,424(2.0) 22,603(10.5) 1968 215,802 182,873(84.7) 4,233(2.0) 28,696(13.3) 1969 216,507 182,539(84.3) 3,194(1.5) 30,774(14.2) 1970 240,070 193,241(80.5) 2,800(1.2) 44,029(18.3) 1971 241,465 191,296(79.2) 2,966(1.2) 47,203(19.6) 1972 244.383 182,631(74.7) 3,243(l.3) 58,509(23.9) 1973 241,395 174,496(72.3) 3,837(1.6) 63,062(26.1) 1974 238,147 170,408(71.6) 4,439(1.9) 63,300(26.6) 1975 234,455 170,492(72.7) 3,831(1.6) 60,132(25.6) 1976 232,507 172,606(74.2) 4,606(2.0) 55,295(23.8) 1977 248,774 178,657(71.8) 3,274(1.3) 66,843(26.9) "0‘93 Numbers in parentheses represent percentages of domestic ocean tonnage. Total percentages may not add to 100 due to rounding. Sources: U.S. Department of Commerce. Maritime Administration, Domestic Waterborne Trade of the United States 1973- ( ashington, D.C.: U. . Government Printing Office. n.d.) p. 11 Idem, Domestic Waterborne Trade of the United tates -1L__ ashington. .C.: . . vernment r nting Office,n.d.). pp. 13, 17, 19, 21. 16 Table 5 U.S. Noncontiguous Trade by Tonnage (1000's) and Type of Vessel, 1977 Percent Vessel Type Tonnage of Total Self-Propelled Dry Cargo Vessel 9,403 14 Self-Propelled Tanker Vessel 47,732 71 Non-Self-Propelled Dry Cargo Barge 4,410 7 Non-Self-Propelled Tank Barge 5,298 8 Total 66,843 Source: Maritime Administration, U.S. Department of Commerce, Domestic Waterborne Trade of the United §tates 1973-1977 (Washington, D.C.: U.S. Government Printing Office, n.d.) , p. 18. trades as well. The role of the self-propelled dry cargo segment is particularly important in the noncontiguous trades. First, its tonnage is large and the cargo values tend to be much higher per ton. Second, it consists, to a significant degree, of liner operations, making this segment in some ways similar to the environment found on foreign trade routes. For both the foreign and domestic segments of the U.S. merchant marine, the current situation could be much brighter. In order to improve the future competitive posit- ion of the U.S. merchant marine, changes would appear to be in order» The next section will discuss one potential change-~the adoption of an integrated marketing strategy through the use of the marketing concept. Definition of the Marketing:Concept The marketing concept represents a basic approach to how a firm conducts its business. The marketing concept is 17 defined as a philosophy of business that states that the key to a firm's success is the satisfaction of its customers through an integrated program of action. The entire opera- tion of the firm is influenced by this philosophy, and not just the marketing or sales department. The basic underlying elements of the marketing concept are: e a customer orientation; e an integrated company effort; e profit, rather than just sales volume, as a goal.15 Each of these elements is closely related and is necessary for successful adoption and implementation of the marketing concept. The first element, that of a customer orientation, is concerned with the focusing of a firm's resources on the needs of its customers. This requires that the firm actively identify its potential customers. The firm must also eval- uate each segment of customers, or individual customers, in order to determine which ones represent the best market opportunities for the firm to meet corporate goals. The final step in this part of the process is to develop a suitable combination of product, place, price and promotion to attract and satisfy the customers that have been pre- viously specified.16 The second element, that of an integrated company effort, is necessary in order to effectively and efficiently put a customer orientation to use. This requires that not only marketing is concerned with satisfying the firm's 18 customers, but also the other functional areas such as accounting, operations, finance, etc. The final element implies that adoption and implementation of the marketing concept will lead to a profitable sales volume, not just an increase in sales volume. This result should increase the likelihood of the long-run survival and success of the firm. The marketing concept provides a framework for not only a phiIOSOphy of business, but also a basis for management of the firm. In management, however, the marketing concept only provides guidance for the structure and Operation of the firm; it does not contain a detailed blueprint of changes required by the marketing concept. Although adoption and implementation are difficult, the result may be critical. In the end, "the satisfaction of the customer-buyer is the eco- nomic and social justification for the existence of the firm."17 Implications of the Marketing_Concept for the U.S. Merchant Marine One area that appears to need examination is the role that marketing plays for the U.S. merchant marine. The problem of the competitive position of the U.S. merchant marine has been recognized by various governmental agencies and industry organizations. A number of research studies have been conducted to examine this problem, but many of them have been directed primarily at government 19 policy-making.18 The basic focus of these studies was on policy alternatives and their effect on the competitive position of the U.S. merchant marine in place of competitive market forces. A recent study by the Maritime Transportation Research Board (MTRB) developed conclusions which could have a major impact on shipping line policy.19 The MTRB study examined problem areas of the liner segment of the U.S. merchant marine in comparison to its foreign competitors. This study examined the U.S. merchant marine with respect to the following factors: s government; e management; e labor-management; e users. 0f the four basic factors discussed, three of these deal with shipping line policy. The last of these, user factors, deals with the role of the adoption of the marketing concept by liner companies. Particularly striking in the MTRB research was the weakness of U.S. flag liner companies with regard to adoption of the marketing concept. The foreign shipping lines were perceived as being more oriented toward, and understanding of, customers and their needs than were the U.S. flag shipping lines. Although marketing is cer- tainly not the only factor that affects the success of the U.S. flag liner companies, it is certainly a critical one. Without some degree of customer satisfation, a firm cannot 20 expect to maintain a viable position in the marketplace over the long—run. Research Questions Two major questions are addressed by this research; the first of these pertains to the ability of shipping line customers to recognize differences in the results of marketing strategy developed by the shipping lines. The second, and related, question is that of whether the use of the marketing concept can lead to financial and operational success for a shipping line. The major emphasis of this second question is (NJ the functional development of marketing within the shipping lines, the understanding of customer needs by the shipping lines, the levels of customer evaluation of shipping line service (as an indirect measure of customer satisfaction), and the success obtained by the shipping lines. In developing answers to these questions, the three basic elements of the marketing concept were eval- uated for each of the shipping lines participating in the study. Methodology The major portion of the data required for this study was gathered from two very distinct populations. The first population was that of U.S. liner companies operating on the trade route selected, while the second population consisted of customers of liner companies on that trade route. For the liner companies, the basic method of data collection 21 chosen was that of a case history analysis. The major source for this information consisted of personal, in-depth, interviews with marketing personnel in the liner companies analyzed. Internal shipping line data, publications, public relations materials, and other sources of secondary data also provided information about the liner companies and their respective marketing strategies. For the shipping line customers, a different method of data collection was developed. For this portion of the research, a mail survey was utilized for data collection. The intent was to survey only a sample of the total popula- tion, and an effort was made to concentrate on the customers of the major shipping lines on the trade route selected. The deveIOpment of the measuring instruments for the two populations evolved from one basic research design. For the shipping lines, data was gathered in the following areas: e measures of customer orientation on the part of the individual shipping lines; e measures of integrated marketing effort of the indi- vidual shipping lines; e measures of the use of cargo segmental profitability analysis by the individual shipping lines; e measures of individual shipping line success, par- ticularly as measured by profitability and market share. These areas have been included to assess the three basic elements of the marketing concept. Individual case histories were used for the shipping line portion of the research. The intent here was to develop a detailed profile of each line's marketing strategy and 22 activities, much of which could not be expressed in quan- tifiable terms. The personal, in-depth, interviews of marketing personnel served as the major source of data for the first two areas of customer orientation and integrated marketing effort. Corporate performance and profitability data were obtained from shipping line and public records. The details of the data gathering instruments for the shipping lines will be discussed more fully in Chapter III. For the customers of the shipping lines, the primary data gathering instrument was a written questionnaire. The basic question areas consisted of four major sections: e a rating section, where the respondent was asked to rate two shipping lines on a number of service attri- butes; s a customer needs section, where the respondent indi- cated the shipping line closest to his needs, and the degree of closeness, for the same attributes; e an attribute importance section, where the respondent was asked to rate the importance of the previous attributes in selecting a shipping line; e a demographic section, where the respondent supplied information to be used in classifying the data obtained in the previous sections. The respondents were employees of major shippers using the shipping lines being evaluated. These individuals were responsible for deciding which shipping line would transport the firm's cargo. For the customer data collected, instru- ments were designed to provide interval level data, which facilitated the calculation of statistical measures such as the mean and standard deviation.20 Moreover, the range of statistical techniques available for data analysis is much 23 wider for interval level data. The customer demographic data contains variables of a number of different levels of measurement (ordinal to ratio» and continuous), and appropriate statistical procedures have been used. Scope of Study The major decision on scope of the study concerned the selection of a segment of the U.S. merchant marine for the study. The liner segment was selected because it offers the most promise for the U.S. merchant marine and because it is faced with the necessity of marketing its services to attract shippers. Within this segment, a number of trade routes were available. With respect to foreign trade, the Maritime Administration has identified a number of important trade routes on which the maintenance of liner services is considered critical.21 These trade routes represent service between each of the four coasts of the United States and various areas throughout the world. Within the domestic trade routes of the United States, three trade routes con- tain some liner services. These are the West Coast--Hawaii, Pacific Northwest--Alaska, and Atlantic and Gulf Coasts-- Puerto Rico trade routes. An initial decision was made to restrict the two populations (liner companies and their customers) to U.S. firms only. This was done in order to provide better access to internal company data and their marketing strategy. Many foreign shipping lines are reluctant to provide this type of information, and some lines are prohibited by their 24 nations from providing such information. The next decision, then, was to determine which trade route, or trade routes, to select. Based on discussions with a number of indivi- duals within the marine field, it was decided to choose one of the domestic trade routes for study. A domestic trade route allowed for access to shippers at both ends of the trade route, which was not practical with any of the foreign trade routes evaluated. Unfortunately, this type of analy- sis had not previously been done for domestic trade routes. Some comparison can be made, however, with previous research done on foreign trade routes, and this permits a tentative extension of some of the results and conclusions to another important segment of the U.S. merchant marine. Another decision entailed the selection of a specific domestic trade route. For the West Coast--Hawaii trade route, one carrier (Matson) has a very large market share when compared to all other competitors combined. Primarily because of the absence of competition and competitors, this trade route was rejected for study. For the Puerto Rican domestic trade route, the major competitor is the Puerto Rico Maritime Shipping Authority (PRMSA), and they again tend to dominate the other competitors in the trade. The process of elimination left the Pacific Northwest--Alaska trade route as most eligible for consideration. The Pacific Northwest--Alaska trade route has a number of desirable characteristics from the perspective of the study. The major characteristics include: 25 A number of liner companies of varying size operate in the trade. There were not too many companies, however, as to ;prevent in-depth analysis of marketing strategy. Modal competition on this trade route was similar to what would be found on foreign trade routes. Although freight movement can be made overland bet- ween Alaska and the 48 contiguous states, rail lines don't exist and highway transportation is infre- quently used. The competitive market characteristics are more similar to those of foreign trade routes, than for either of the other potential domestic trade routes. Limitations of the Study As in any research study, there are limitations that must be recognized when evaluating the results of the research. In particular, the following cautions should be noted: the measuring instruments developed for perception of marketing orientation need further development, par- ticularly for the measurement of differing types of liner operations, such as rail barge, container, and trailership operations; the study focuses on one particular type of service industry--the domestic liner segment of the U.S. merchant marine, and generalization to other trade routes, to other types of transportation industries, or to vastly different industries should be done with caution; the interaction of the marketing function with other managerial functions has not been directly con- sidered, and these interactions may have some impact on the firm's adoption and implementation of the marketing concept and its actual performance. Potential Contributions The research conducted in this dissertation attempts to make some contributions to marketing and transportation 26 theory zuui practice. Among the potential contributions are: e constructing of an overall research design to eva- luate simultaneously the components of the marketing concept from both the firm's and the customer's perspectives; e developing further an instrument for determination and measurement of a firm's customer orientation, involving the measurement of customer perceptions of shipping line service attributes; e developing a methodology for evaluating a shipping line's implementation (and adoption) of the marketing concept and the line's development of integrated marketing effort; e attempting to determine whether the implementation of the marketing concept leads to greater financial and operational success in a specific liner trade, lending further support to the marketing concept as a valid philosophy of business; e extending to a domestic trade route previous marketing strategy studies done exclusively on foreign trade routes. Overview of Subsequent Chapters Chapter II of the study, "A Review of the Literature", contains brief evaluations of writings and research rele- vant to the research topic chosen. Areas covered include marine trade characteristics, both general and for the trade route chosen, the marketing concept, and application of the marketing concept to the U.S. merchant marine. Chapter III, "Research Design," contains £1 detailed discussion of the methodology and research techniques used in this study. Included in this chapter are the development of the research instruments, the methods used in sampling the customer popu- lation, and the methods of data analysis used. 27 Chapter IV, "Case Histories - Central Alaska Liner Companies," describes the 'basic structure, marketing strategies, and various marketing activities for the liner companies studied. Chapter V, "Shipper Survey Data Analysis," describes time data analysis used (Hi the infor- mation provided by the shipping line customers. The results of the analysis are summarized for the univariate, bivariate, and multivariate analysis procedures used. Chapter VI, "Marketing Performance of the Lines," integrates the results from the previous two chapters by evaluating, for each line, the determination of customer needs, the level of customer satisfaction. achieved, the degree of integrated marketing achieved. The extent of use of cargo profitability measures and success measures for each line are also introduced and evaluated. Chapter VII, "Summary, Conclusions, and Recommendations," answers the research questions raised in an earlier section of this chapter and provides for an assessment of what the research has shown and what future directions may be indicated. 4. 7. 8. 9. 10. 11. 12. 28 Footnotes The domestic portion of U.S. waterborne shipments con- sists of marine trades on the U.S. portion of the Great Lakes, inland waterways, and domestic ocean shipments, as described in: U.S. Department of Commerce, Maritime Administration, MARAD 78, (Washington, D.C.: U.S. Government Printing Office, May 1979), p. 43. David Bess, Marine Transportation (Dansville, Illinois: The Interstate Printers and Publishers, Inc., 1976), pps 50-590 Bess, p. 51. This may have been partly due to the fact that much U.S. effort and innovation was devoted to the development of internal resources, as discussed in John L. Hazard, Crisis in Coastal Shipping (Austin, Texas: Bureau of Business Research, The University of Texas, 1955), p. 2. During the Civil War, Confederate commerce raiders played havoc with Union merchant shipping, resulting in the sinking of some vessels and, more importantly, the sale of many U.S. flag vessels to foreign owners, which permanently took these vessels out of the U.S. fleet. Winthrop L. Marvin, The American Merchant Marine (New York: Charles Schribner's Sons, 1902), pp. 358-359. Marvin, p. 359. For additional information on legislation, see: Bess, Chapters 3 and 4; Irwin M. Heine, The United States Merchant Marine: A National Asset (Washington, D.C.: National Maritime Council, July 1976), Chapter 1; and Carl E. McDowell and Helen M. Gibbs, Ocean Transpor- tation (New York: McGraw-Hill Book Company, Inc., 1954), Ch. 13. McDowell and Gibbs, p. 252 For information on the actual values, see U.S. Department of Commerce, Maritime Administration MARAD 78, p. 33. Harold Katz, "Steamship Conferences and Ocean Rate Making," Columbia Journal of World Business, Spring 1976, pp. 25-26. The three domestic ocean segments can be identified as: Coastwise-~voyages along a single coast of the United States (such as the West Coast) or between two or more 13. 14. 15. 16. 17. 18. 19. 20. 21. 29 coasts of the United States (such as between the Atlantic and Gulf Coasts); Intercoastal voyages between the East and West Coasts of the United States through the Pananm. Canal; Noncontiguous--domestic voyages to and from Puerto Rico, Virgin Islands, Alaska, Hawaii, and U.S. Pacific islands. Wytze Gorter, United States Shipping Policy (New York: Harper 8 Brothers, 1956), pp. 133-134. Hazard, Crisis in Coastal Shippingy pp. 12—15 These elements are described in, among others: E. Jerome McCarthy, Basic Marketing: A Managerial Approach, 6th ed. (Homewood, Illinois: Richard D. Irwin, Inc., 1978) and William J. Stanton, Fundamentals 9; Marketing, 5th ed., (New York: McGraw-Hill Book Company, 1978) For transportation service provided by shipping lines, it becomes somewhat difficult to make a distinction be- tween the product and place elements of the marketing mix. Leonard L. Berry, "The Marketing Concept: Some Preach It: Others Practice It," in Marketing Conceptsyylssues and Viewpoints, edited by David L. Kurtz (Morristown, N.J.: General Learning Corporation, 1972), p. 31. For example, see: The U.S. Merchant Marine and the International Conference System (Boston: Harbridge House, Inc., 1978); Gerald R. Jantscher, Bread Uppn the Waters: Federal Aids to the Maritime Industries (Washington, D.C.: The Brookings Institution, 1975); Kilgour, John G. The U.S. Merchant Marine: National Policy and Industrial Relations. (New York: Praeger Publishers, 1975). Maritime Transportation Research Board, Toward an Improved Merghant Marine: A Recommended Program of Studies (Washington, D.C.: National Academy of Sciences, 1976). Interval level data consists of scale values where the values are not only ranked but the distances between scale values are meaningful. See, S.S. Stevens, "On the Theory of Scales of Measurement," Science 103 (1946): 678. U.S. Department of Commerce, Maritime Administration, United States Oceanborne Foreign Trade Routes 1975-1976 (Washington, D.C.: U.S. Government Printing Office, March 1978). CHAPTER II A REVIEW OF THE LITERATURE Introduction The intent of this chapter is to provide a foundation for the research questions that were posed in Chapter I. Initially, a brief review is conducted of the literature relevant to the characteristics of liner trades, domestic and foreign. This section is followed by a review of the Alaskan marine trade in general, and the Pacific Northwest—Central Alaska marine trade in particular. Next, a review of literature is undertaken on the evolution of the marketing concept and research on its adoption and implemen- tation, particularly in the U.S. merchant marine. Characteristics of Liner Trades As in other modes of transportation, one method of classification of transportation companies is by legal form of operation. in“; traditional form that has been used in this regard is: e Common carrier--a transportation firm that offers to transport cargo for revenue for any customer within the scope of its operating authority. e Contract carrier--a transportation firm that offers to transport cargo for revenue based on an agreement between the firm and a shipper; the agreement speci- fies the terms of service and cost, thus allowing discrimination among customers. 30 31 e Exempt carrier--a transportation firm that offers to transport cargo for revenue without legal restriction on operating authority or rates; exemptions can be granted by commodity, geographic operating area, or to shipper associations. e Private carrier--a firm that provides its own transportation service for cargo moved between operating elements of the firm, which now includes subsidary companies. Each of these legal forms involves different operating restrictions and characteristics; the first three represent for-hire carriers available to individual shippers. In the foreign and noncontiguous trades, the first two legal forms predominate in the for-hire segments, although the terminology is somewhat different. Common carriage by ocean is typically known as liner service. A liner vessel is one that offers regularly scheduled service on a generally fixed route. In addition, the liner operator must publish rates and price discrimination is not allowed (at least in theory) among shippers that require the same level of transportation service. Contract carriage in the marine shipping industry is typically known as tramp service. This service tends to be irregular with respect to both ports and schedules. The rates and terms of service are negotiated between the indi- vidual shipper and the individual vessel operator, unlike the liner service mentioned previously. From an opera— tional standpoint, tramp operators have a greater degree of flexibility in seeking cargoes. These differences in characteristics reflect "a marketing strategy which suggests that liner service is 32 different in quality as well as price from tramp service."2 From the standpoint of quality, a number of characteristics of liner service become apparent. These include: e a regular schedule of sailings; e a more predictable schedule; e a more complete service, including tracing and expe- diting of cargo, more extensive connections with inland modes of transportation, a higher level of sales representation, greater' availability' of spe— cialized equipment, and others. These higher service levels provided by liner service can include sailing with only a partial cargo. Tramp service is able to concentrate on volume shipments of one commodity, or a limited number of commodities. These factors can lead to liner service that, in some cases, is higher in price than tramp service. From an economic theory standpoint, it is possible that a liner service could underprice a tramp service, although these two types of service rarely compete in the same markets. When the short-run situation is considered, the liner service is characterized by a relatively high level of fixed costs. The major variable cost is that of cargo handling, with a small contribution from fuel, crew wages, and maintenance and repair. For a tramp vessel, short-run fixed costs tend to be somewhat lower, primarily because the tramp vessel does not utilize a fixed schedule, unlike the liner operator. With this cost structure, the basically inelastic demand for transportation service, and some 33 overcapacity in a trade, there is temptation for the liner operator to use differential pricing. However, the actual cost structure and service offered are such that the prices offered by the liner operator and the tramp operator under differential pricing could be quite similar. The long-run implications of differential pricing could mean the inability of a liner operator to cover the high fixed costs that result from this type of service. As each liner operator would lower rates in order to generate more cargo, the overall revenues would be reduced and each opera- tor would cover less of its actual fixed costs. Ultimately, some of the liner operators would be forced out of business because of the losses incurred. Because of this possibility of "rate wars," many of the liner trades throughout the world are protected to some degree by conference agreements. These conferences are voluntary agreements among a group of liner operators to engage in collective ratemaking. Basically, the conference members collectively agree, within certain limits, to charge the same rates for a particular kind of service. The conference system began to develop in the latter part of the 19th century and has grown rapidly since then. Currently there are a large number of conferences world- wide, with approximately 100 serving the U.S. foreign trades.3 The most important characteristics of shipping conferences appear to be (according to Bess)4: 1. Membership is international in scope; they are not national in character. 34 2. Membership can range from a low of two carriers to as many members as the conference decides to admit. The current high is over 40 members. 3. Conferences pertain only to the liner trades; non-liner companies are not members. 4. Each conference pertains to one specific trade route, and may limit itself to only one direc- tion of the trade (outbound or inbound). 5. The conference rate agreements may deal with one, a few, or all of the commodities carried in a particular trade. Those commodities not covered by the conference rates are normally those susceptible to tramp competition and they are said to have "open rates." Conference arrangements will not always cover all com- modities moving on a trade route, but for those that are included, the rates are alleged to ‘be higher, but more stable. Conferences are legislatively exempted by the Ship- ping Act of 1916 and by FMC authority from anti-trust laws. Conference agreements generally are intended for the control of rates, but other areas of control can also be found. The conference members may also agree among them- selves as to sailing schedules, ports utilized, and routing for each of the individual members. For some conferences, there may be additional agreements among the carriers with regard to the pooling of cargoes, revenues and, in some instances, profits as well; these agreements are less typi- cal than agreements on rates. Another type of control the conference may exert concerns membership in the conference. In some cases conferences are "closed," or not open to mem- bership by liner operators outside the conference. The opposite situation is what are known as "open" conferences, 35 where liner operators outside the conference are permitted to join the agreement. In the U.S. foreign trades, con- ference agreements are required to be of the "open" type. In order to gain customer loyalty to the conference, shippers who agree to move all, or a minimum amount, of their cargo on conference vessels are granted reduced rates. These reduced rates can take one of two forms: e Deferred rebates--where the shipper pays full rate initially; if the shipper complies with the terms of agreement with the conference, it receives a rebate. e Dual rates--where the shipper pays a reduced rate; if the shipper does not comply with the terms of agreement with the conference, it is billed for the difference between the reduced rate and the regular rate. In the U.S. foreign trades, the only reduced rate system of the above two allowed is the dual rate system. With respect to reduced rates, conference membership, and the like, the major legislation governing conferences in the U.S. foreign trades is the Shipping Act of 1916. In the domestic trades, shipping conferences are banned by anti-trust legislation. This means that each liner operator is free, within the constraints of the regulatory process, to set its own level of rates. Liner operators in these trades must, however, publish their rates and are subject to protests by competitors when rate changes are filed. Additionally, the liner operators will have a somewhat greater degree of operational flexibility, since schedule and routing decisions are not a joint shipping line decision. As with rates, however, the regulatory process 36 does impose a certain level of constraint on the individual shipping line. Domestic liner operations are effectively shielded from foreign competition, both liner and tramp. Thus, the pri- mary method of competition for domestic liner trade routes would be expected to be on price, whereas the foreign liner competition would seem to be much more on non-price attribu- tes of service. Despite this, the shipping conferences do exhibit some degree of price competition, both from non- conference liner operators and tramp service on the same trade route. For domestic liner trades, the mode of com- petition seems to be similar to the conference operations on the more competitive foreign trade routes. That is, there is an element of service competition, but the domestic trade routes provide more opportunity for price competition. For the trade route being studied, Pacific Northwest- Central Alaska, the major liner operators appear to offer similar rates on most commodities.5 In this trade there are no tariff or rate bureaus, although a limited number of shipper associations (which negotiate rates for their members) can be found. The liner operators compete more on service attributes such as reliability, delivery time, level of customer service, and other non-price attributes. There does, however, appear to be one major difference. On foreign trade routes where liner conferences operate, the rates seem to be dictated by the high cost operators in the trade.6 In the domestic liner trades without conference 37 operation, it appears that the rates are set by the low cost operators in the trade. From this standpoint of price, domestic liner operations are more similar to many U.S. industries than are foreign liner operations. Alaskan Marine Trade Characteristics The State of Alaska, although a part of the North American continent, is effectively cut off from land transportation with the "lower forty-eight" states. There are currently no rail or pipeline connections between Alaska and other states. The major highway connection, the Alaska Highway, is still only a gravel road throughout much of Canada's provinces of British Columbia and the Yukon. Water transportation, as it has throughout Alaska's history, plays the primary role in the state's transpor- tation system for both passengers and freight. It was not until approximately 1890, spurred on by development resulting from gold strikes in the state, that bi-monthly steamship service was established with Southeast Alaska.7 By at the end of the 19th century, a number of steamship companies were operating regularly in the marine trades of Alaska. Despite many improvements since that time to both the land and water transportation systems, Alaskan transpor- tation is still under-developed compared to other states. In fact, according to one report, "An integrated surface transportation system is definitely the key to industrial development in Alaska, and the present system falls far 38 short of the‘mark."8 This means that water transportation connecting Alaska with the "lower forty-eight" still enjoys a primary role. In the last twenty years, competition has increased dra- matically in the Pacific Northwest-Alaska marine trade. In 1960, the major scheduled water carrier to Alaska was Alaska Steamship Company, which served a large number of coastal and interior ports.9 Competition increased, particularly with the entrance of Sea-Land in 1964, serving the Port of Anchorage. At the same time (1964), Alaska Hydro-Train initiated rail-barge service to the Alaskan port of Whittier, connected by the Alaska Railroad to Anchorage. In 1970, Alaska Steamship ceased operations and the property was purchased by Foss Launch & Tug.10 As a result of this purchase» Foss entered the trade, serving some of the Alaskan ports previously served by Alaska Steamship. Alaskan marine trade consists of a number of distinct routes and services. One way of defining these routes is by geographic distribution. The geographic distribution of the major waterborne trade regions of Alaska is shown in Figure 5, along with the major ports and roads. The first of these geographic areas is Southeast Alaska, including ports such as Sitka, Juneau, Petersburg, Ketchikan, Skagway, Haines, and Wrangell. This region is the second largest with respect to tonnage (and population) of the basic geographic marine service areas. The major liner operator in this trade is Foss Alaska, with scheduled tug-barge service to 39 msofiwom posse ceases sstsH< m ossmfim r a? , . .Lfir_9&~ Ufa \ . . . . K606 '0‘ MI. 0..., . b ' . 2:. ...-e assess. aspen: 22.0 53 ”floss-ii s a . 4,‘ misc: Iva hOU’IPA-O. . . . . v. . fl see”. ssoeem _ x. 55250. .. ... I \\ .0 .0 V news/sun es..\esx./ es s sesss # s o . .I... ..... .v. ( sale a 1.. I--| ... .. I. modem- hu\vu,s . ”I O 80.063: I... so: .....sl sees . I , . es ...... -.w... i I ,1! ... es 4 / u . . e -C ’III - b ‘“.‘ C o... .. .... . o. \ ..... ”yum I ceases .92. r’ g . . O. .7 . . a... . .. . . s I! - .4 0 pl . . O . or III 1.49.4. 0. w Q .23.? fl w. as ... .' O ...:o , . es .... v 1.1.1.9 3.....- .. . o .3333: ........ sees .25.. a .. ... .. .3:- s seem eessa m w I A sees A? es sees e m.sesssl ss.mem , , . . ...... so I so..s..esess.b estel, I . J as. g . e I IIIII I Seesess, J‘s—.880 ...x ess . 3:32:23 /)\l\.J ..x n J m .a ... K. .. , ozuand ... ONOOOOOOO . _. . ... possesses . /P m ... \ e 4 e O 40 major ports in the Southeast. Another liner service is pro- vided by the Alaska Marine Highway System, the Alaska state ferry system. Although the major emphasis is on passengers and their cars, a limited number of over-the-road trailers are also carried. Other scheduled service tends to be less frequent and smaller in volume. The second geographic area to be discussed here is Central Alaska, also known as the "railbelt." This region contains the largest cities in Alaska, Anchorage and Fairbanks, and the majority of Alaska's residents. The major ports for this geographic area are Anchorage, Whittier, Seward, Valdez, and Homer. Three major liner operators provide service to this area: e Alaska Hydro-Train, a rail barge operator serving the ports of Seattle and Whittier; e Sea-Land Service, a containership operator serving the ports of Seattle and Anchorage (with a south- bound stop at Kodiak); e Totem Ocean Trailer Express, a trailership operator serving the ports of Tacoma and Anchorage. Other competitors exist in this trade, but together' the above three account for over 90% of the liner cargoes in this region.11 The cargoes shipped to the railbelt are destined not only for the ports and cities mentioned, but also for the oil exploration and production industries on the North Slope and in Cook Inlet. The next major geographic shipping region is the Southwest, which consists of Kodiak Island, the Alaska Peninsula, and the Aleutian Islands. Major ports in this 41 region include Kodiak, Dutch Harbor/Unalaska, Iliuliuk, and Adak. The major liner operator in this trade is Foss Alaska (as in the Southeast), which provides service every three weeks to Dutch Harbor and Adak. Service to this region is on a year-round basis. The fourth geographic region is that of Northwest Alaska. Major ports in this region include Dillingham, Bethel, Unalakleet, Nome, Kotzebue, and Barrow. The major liner operator in this trade is Foss Alaska, serving the ports of Dillingham, Bethel, and Nome. Further north, con- tract carriers provide service in the movement of cargo. The shipping season in this region is relatively short, with the length varying from year-to-year, depending on the ice conditions. In terms of overall Alaskan marine trade, the recent history is one of growth, although it has not always been Steady. The dry cargo vessel trade,12 in particular, has shown an erratic pattern. Tables 6 and 7 provide data on tonnage moved in the Alaska trade by dry cargo vessels (both self-propelled and non self-propelled). In terms of imports from other states, the trade has grown from 871,000 tons in 1967 to 1,603,000 tons in 1977. Nearly all of this tonnage was shipped from the Pacific Northwest, with very small amounts shipped from California and the Gulf Coast. In terms of exports to other states from Alaska, the tonnage has grown from 141,000 tons in 1967 to 487,000 tons in 1977. Again, the Pacific Northwest is the primary shipping region ‘12 Table 6 Alaskan Trade-Domestic Dry Cargo Imports 1967 to 1977 Tonnage (in 1000's of short tons) Source Area Pacific Year Gulf Calif NW Subtotal Alaska‘ Totalb 1967 4 8 859 871 880 1,751 1968 - 5 895 900 623 1,524 1969 - 5 837 942 430 1,273 1970 11 - 904 915 738 1,652 1971 5 - 886 891 285 1,176 1972 - - 1,100 1,100 1,120 2,221 1973 - - 965 965 353 1,318 1974 - 19 1,501 1,520 77 1,596 1975 4 46 1,744 1,794 197 1,991 1976 - 15 1,723 1,738 141 1,879 1977 - 11 1.592 1,603 212 1,816 a. Includes all marine intrastate trade. b. Individual figures may not add up to the totals due to rounding. Sources: Adapted from the following: U.S. Department of Commerce, Maritime Administration, Domestic Waterborne Trade of the United States 1973-1977 (Washington,D. .: . . vernment r at ng ce, n. . , pp. Idem, Domestic Waterborne Trade of the United States 1967-1974 (Washington, . .' . . vernment r nting . . pp. 94-109. Table 7 Alaskan Trade-Domestic Dry Cargo Exports 1967 to 1977 Tonnage (in 1000's of short tgns) Recei t Area Pacific Year Gulf Calif nv Subtotal Alaska‘ Totalb 1967 - - 141 141 880 1,022 1968 96 - 297 393 623 1,016 1969 36 184 205 425 430 855 1970 11 - 201 212 738 950 1971 54 - 230 284 285 568 1972 94 16 223 333 1,120 1,453 1973 49 18 457 524 353 877 1974 20 19 363 402 77 526 1975 - 37 422 459 197 657 1976 - 12 499 511 141 653 1977 - 36 487 523 212 736 'a. Includes all marine intrastate traffic. b. Individual figures may not add up to the totals due to rounding. Sources: Adapted from the following: U.S. Department of Commerce. Maritime Administration. Domestic Waterborne Trade of the United States 1973-1977 (Washington,D. .: . . vernment rinting ice, n. . , pp. Idem. Domestic Waterborne Trade of the United States 1967- , pp. 94-109. (Washington. 43 involved, although California and the Gulf Coast account for an increased share of the exports. The directional imbalance of the Alaskan dry cargo (and liner) trades is evident in the waterborne statistics. Although the ratio of northbound to southbound tonnage has been reduced in the period discussed, it varies from over 6:1 (1967) to 1.8:1 (1973), with the figure for 1977 being 3.1:1. This one-way trade is not unlike the situation faced by some U.S. liner operators in the U.S. foreign trades. Because of the nature of the Alaska economy, the situation is likely to remain for the liner trades in the foreseeable future.13 Additionally, these statistics indicate that the intrastate marine traffic has decreased in volume during this period. The focus for this analysis of the dry cargo trades is on the trade between the Pacific Northwest and Alaska. Table 8 presents a breakdown of the dry cargo tonnages by type of vessel. For the northbound trade, the predominant type of vessel is the self-propelled carrier, although there was a significant decline in their share during the early seventies. For the southbound dry cargo trade, non self- propelled vessels have accounted for most of the tonnage. Self-propelled vessels have gained in terms of tonnage share, however, since 1973. The imbalance of cargoes available to self-propelled vessels is accentuated by the large number of barges in the southbound lumber trade. 44 Table 8 Alaskan Dry Cargo Vessel Trade with Pacific Northwest 1967-1977 Tonnage (in 1000's of short tons) Impprts To Alaska Exports from Alaska Self-9 Non Self-a Self-9 Non Self-‘ Propelled Propelled Sub Propelled Propelled Year Vessels Vessels Total Vessels Vessels Total 1967 500(58%) 359(425) 859 107(76%) 34(24%) 141 1968 415(46)% 480(54%) 895 104(535) 193(475) 297 1969 406(48%) 431(52%) 837 75(375) 130(635) 205 1970 506(56%) 397(34%) 904 151(751) 50(255) 201 1971 307(35%) 578(65%) 886 74(325) 155(685) 230 1972 410(37%) 690(635) 1,100 119(535) 104(475) 223 1973 486(501) 479(505) 965 104(235) 354(775) 457 1974 615(41%) 886(595) 1,501 117(321) 294(685) 363 1975 830(485) 913(525) 1,744 136(325) 286(685) 422 1976 1.020(595) 703(415) 1,723 208(425) 291(585) 499 1977 1.012(645) 590(365) 1,592 209(435) 278(575) 487 a. Figure in parentheses represent percentages of the subtotals for each trade segment. Sources: Adapted from the following: U.S. Department of Commerce, Maritime Administration, Domestic Waterborne Trade of the United States 1973-197 ( ash ngton, . .: U.S. Government Printing Office, n.d.), pp. 22-31 , Domestic Waterborne Trade of theU United States 1967-1974 (Washington. D. C.: U.S. Government PrintingO Office, n.d .), pp. 94-109. The distribution of Alaskan waterborne trade by com- modity groupings also provides a useful method for examining the characteristics of the trade. In classifying com- modities, the system used in this study, as much as possible, is that reported by the U.S. Army Corps of Engineers.14 Table 9 presents a percentage of tonnage breakdown for a number of different segments of U.S. water- borne trade. For the unique Southeast Alaska trade, lumber and wood products comprise the major commodity group in terms of tonnage. For Central Alaska, the percentages have been reported with and without the crude oil shipments from 45 "mews—«cu .5 l9: scams: ”seemscm .msIom one .massom .mso—sm £0.33..- .s shone-d «a match I: Isuzu..— .n .lumon sumsnd .n.u menace use .Iumashoasa .suneme—usi .mmssmn .e‘uun .mOfimlfl unsmmsmm .memumoasu «6 some“ sad move—emu .s ".000: Goo." duo noun.» a: es e.— se Chan .smsend an... B So. a new. .8 «an. .3. . 8e. eve I I I I e... ..o v; ... e... ..e .6 To .6 .. . u. 1: l . _ . .. o. . I . . . . _. v.6 . . . o. e... . . . a. e... . . . . s. a... . . . 1. To . . . a; a... i . . . - I .. . . 6.. a... _. . . ... 22 . a . n . . 1 eé . . . e. I . . . e. ..n . . . e. To . . . v. 93 . . . o. - . . . o. a... . . . . e. - . . . v. ..." _. . . e. I ... ... . . e. a... ... ._ m . e. a I ...u E s . 3 o... e... ... «.2 e... a o... ...- eé a... e... a; o... - e... e... ..e e... v... a... duo IUUMUD\I alfi‘ II08 EON-I. I-dOHOL I. It I Oddlg 0‘00! ACOOF ~33. 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The major relative dif- ferences between the Central Alaskan trades and the other segments listed can be seen in: food and kindred; lumber & wood products; petroleum and coal products; stone, clay and glass products; and miscellaneous freight shipments. These seem to indicate some major differences in the Alaskan marine trades, compared to other marine trade segments. The northbound dry cargo trade to Central Alaska will be discussed more fully in a later section. Pacific Northwest - Central Alaska Marine Trade Characteristics The marine trade system encompassing Central Alaska constitutes a distinct and very important segment of the overall Alaskan transportation system and is the focus of this study. For the purposes of this study, the major characteristics of this region are: e by far the largest population of the four geographic regions; e ‘the relatively intense competition found in the liner service offered to and from this region; e the year-round operation of the marine trade; e the high degree of economic development in Central Alaska; e the isolation of Central Alaska, from a transpor- tation standpoint, from the other regions of Alaska and the "lower forty-eight." 47 Much of the population growth and economic development has occurred in the last decade, spurred on to a large degree by the oil finds at Prudhoe Bay, and the subsequent construction of the Trans-Alaska Pipeline. Figure 6 shows the major cities of the Central Alaska region, along with the principal highway and rail connec- tions. From Homer to Anchorage to Fairbanks there is a well-developed highway system, as well as to Valdez and the Alaska-Canada border. The Alaska Railroad provides regu- larly scheduled service from Seward to Anchorage and Fairbanks. The only other well developed land transpor- tation system is the Trans-Alaska Pipeline from Prudhoe Bay to Valdez. For the Southwest and NOrthwest regions of Alaska, no overland transportation systems exist. The only connection to Southeast Alaska is by way of the Haines Cutoff from the Alaska Highway, a gravel road serving as a highway connec- tion to Skagway. The major highway connection to the "lower forty-eight" is the Alaska Highway, which connects Fairbanks with Whitehorse in Canada, and ultimately the Pacific Northwest. Since most of the Alaska Highway within Canada is unpaved, truck transportation is highly suscep- tible to weather delays of varying severity and duration.15 Presently, only small amounts of freight reach Central Alaska by this route. Because of these characteristics, the majority of freight moving to or from Central Alaska still moves by 48 VUKO“ Feubsnks Anchorage Valdez A Figure 6 Central Alaska Inland Transportation Routes 49 water. Table 10 presents summary statistics for the period 1970-1978. The basic character of the trade shows a number of trends. One of these is the higher tonnage for 1975, which reflects the shipments in support of the pipeline construction. Petroleum and coal products tonnage has decreased relatively, and miscellaneous freight shipments have increased. Otherwise, the relative commodity volumes have been stable.16 Evolution of the Marketing Concept The marketing concept is a philosophy of business that is relatively new. Although its elements existed separately at a much earlier period, the concept was not formalized until the early 1950's. What can be seen is a progression of philosophies from the production orientation to the selling orientation to the marketing orientation or concept.17 The evolution of the marketing concept can be examined from two basic viewpoints, a macro perspective, which eval— uates the general marketing environment, and a micro perspective, which evaluates the role of marketing for the individual firm. Weeks and Marks have discussed the evolu- tion from the macro perspective in some detail, although with a slightly different set of terminology.18 They note that certain environmental trends during the middle part of this century help to explain the evolution of the marketing concept. According to Weeks and Marks, rapid growth in 50 Table 10 Percentage Distribution of Commodity Tonnage for Central Alaska Ports - 1970, 1975 and 1978 1970 1975 1978 01 Farm Products 0.6 0.5 1.3 08 Forest Products 0.0 0.0 0.0 09 Fresh Fish 8 Other Marine Prod. 1.1 0.1 0.5 10 Metallic Ores 0.0 - 0.0 11 Coal 0.0 0.8 0.6 13 Crude Petroleum, Natl. Gas, 8 Natural Gasoline - - 4.0 14 Nonmetallic Minerals 7.8 1.1 1.0 19 Ordnance 8 Accessories 0.0 0.0 0.0 20 Food 8 Kindred 8.8 7.4 8.9 21 Tobacco Products 0.0 0.0 0.0 22 Basic Textiles 0.0 0.0 0.0 23 Apparel 8 Other Finished Textiles - 0.0 0.0 24 Lumber 8 Wood Products 2.1 5.9 8.6 25 Furniture 8 Furnishings 0.7 0.1 0.7 26 Pulp, Paper, 8 Allied 0.2 0.8 0.7 27 Printed Matter 0.1 0.0 0.0 28 Chemicals 8 Allied Prod. 1.0 2.0 2.5 29 Petroleum 8 Coal Products 60.4 54.0 36.6 30 Rubber 8 Misc. Prods. 0.1 0.4 0.6 31 Leather 8 Associated Prod. 0.0 0.0 - 32 Stone, Clay, 8 Glass Prod. 2.1 5.3 5.4 33 Primary Metal Products 1.5 6.8 1.9 34 Fabricated Metal Products 0.9 2.1 1.3 35 Machinery 0.7 2.8 3.4 36 Electrical Machinery 0.1 0.2 0.1 37 Transportation Equipment 1.4 1.6 2.2 38 Instruments 0.0 0.0 0.0 39 Misc. Prods. Manufactured 1.4 2.1 1.2 40 Waste 8 Scrap Materials 0.3 0.1 1.2 41 Misc. Freight Shipments 8.5 5.8 17.0 42 Containers Ret. Empty - - - 44 Freight Forward. Traffic — - - 45 Shipper Assoc. - - - 46 Misc. Mixed Shipments - - - 47 Small Pkg'd Freight Shipm'ts. - - - Total Tonnage (1000's) 2,241 3,785 2,659 Notes: a. Includes the ports of Anchorage, Whittier, Valdez, Seward, and Homer. b. Crude oil Shipments from Valdez are not included for 1978. Sources: Adapted from: Waterborne Commerce of the United States-Calendar Years 1970, 1975 and 1978- Parts 4 and 5 (Fort Belvoir, Virginia: U.S. Army Corps of Engineers, n.d.) 51 population, in discretionary purchasing power, and in technological change, resulted in significant changes in the way individual firms (as well as industries) do business.19 It became necessary for firms to understand the marketplace in order to be successful; doing things the way they always had was no longer an effective strategy. Although the main impact of these changes concerned consumer products, the same basic environment affects transportation, including marine transportation. The changes in demand for consumer products have changed the demand for marine transportation of freight, since the demand for transportation is a deriva- tive demand which stems from the demand for consumer and industrial products.20 This may mean that a general need exists for the marine industry to develop a higher level of sophistication in marketing strategy. The micro perspective concerns the development of the marketing concept within an individual firm. One of the pioneering firms in the adoption and implementation of the marketing concept was the General Electric Company. In 1950, GE elevated the marketing managers to significant decision-making roles in GE's affiliated companies and departments.21 Operationally, the marketing manager was now responsible for marketing research, product planning, sales, advertising, merchandising, and other functions as ‘well. This represents, for one of the first times within a com- pany, a formal recognition of the marketing concept as we know it today. 52 Keith (1960), in a discussion of the evolution of the marketing concept at Pillsbury, cited four stages through which the company progressed.22 Pillsbury was a production- oriented company from its founding in 1869 until approxima- tely 1930. This philosophy prevailed because of the importance of the availability of raw materials, not because of market considerations. With the 1930's, Pillsbury deve- loped a sales orientation, including rudimentary marketing research, since it was felt a significant sales effort was required in order to ensure high levels of sales for the firm's products. The third period in this evolution was the introduction of the marketing concept. Marketing was now viewed as the key link in the organization that would coordinate sales, advertising, and production. A fourth period in the devel- opment of marketing strategy is what Keith called the "4th Era-Marketing Control"23 In this phase, marketing was per- ceived as being concerned not only with short-run tactics but also with long-range planning that establishes the future direction of the company. Research on Adoption and Implementation of the Marketing Concept Since the development of the marketing concept in the early 1950's, a number of research studies further clarified and analyzed the topic. In one of the early research studies, King (1960) completed an extensive literature 53 review in order to identify the components of the marketing concept.24 Also included in King's research were interviews with. key executives of firms that had, to some degree, implemented the marketing concept. The research noted the three basic elements of the marketing concept--customer orientation, profit orientation, and integrated marketing management, with particular emphasis in this study on the last element. At about the same time, Felton (1959) discussed the nature of the marketing concept with respect to how it might be implemented and the problems that would be faced.25 Felton's research indicated that a firm must accomplish the following tasks in order to adopt and implement the marketing concept: e The proper state of mind, particularly for the presi- dent and the board of directors. e The proper organization, including a specific and clear assignment of marketing responsibilities. e The proper balance of professional talent. e Adequate direct and indirect controls, including the use of long-range plans, a regrouping of corporate divisions where necessary, the use of a uniform control system throughout the corporation, and the establishment of a corporate character. The first task (achieving a proper state of mind) is directly concerned with the adoption of the marketing con- cept while the remaining three deal directly with the imple- mentation of the marketing concept. A survey of 273 medium and large manufacturing firms by Hise (1965) supported the contention that 13m; marketing 54 concept has been adopted to a great degree.27 A series of questions focused on three areas of the marketing concept: customer orientation, profitability analysis and the organi- zational structure of the marketing department. The customer orientation element, measured with a series of questions about the uses of marketing research, marketing responsibility for new product development, and test marketing, indicated a high degree of usage by firms of these three nmrketing activities, and the author concludes that the firm's "are well customer-oriented."28 The questions that measured the extent to which the firms ana- lyzed profitability by different criteria such as by product or by customer indicate that segmental profitability did not receive a high level of usage in the firms studied. To measure the organizational structure, the organizational characteristics of chief marketing executives and the orga- nizational status of specific marketing functions were exam- ined, which indicated some degree of marketing integration. The research seems to lend support to the idea that the marketing concept is being adopted and implemented. The results were particularly strong with regard to customer orientation, with an average percentage of adoption of 85-90 percent for the firms surveyed. Other studies of firms do not reveal this level of adoption. The study seems to focus on the firm's structure to a significant degree, and not as much on the performance of the functions necessary to adopt and implement the marketing concept. 55 On the other hand, research conducted by Vizza, Chambers, and Cook (1967) for the Sales Executives Club of New York indicated a lack of adoption and implementation of the marketing concept.29 In a survey of 464 sales execu- tives and in-depth interviews with executives in 14 firms, the authors concluded that very few firms had adopted and implemented the marketing concept; "only nine companies out of four hundred and sixty-four, or two percent, have fully implemented the concept."30 ‘The results, however, also indicated that a large number of firms had partially adopted and implemented the marketing concept. In order to implement the marketing concept, the authors felt that what was required for the firm was: s A MANAGEMENT ATTITUDE that places consumer needs and wants first in decision making. e A STRUCTURE that places all marketing activities under one supervision, and places the chief marketing officer on an organizational level with the officers in charge of production, finance, accounting and per- sonnel, so as to enable him to integrate marketing with these other organic functions. e A PROCEDURE which always begins with a consideration of market requirements and proceeds with a coor- dinated approach.31 This research was unique and noteworthy because it attempted, in some detail with particular cases, to analyze the steps necessary to implement the marketing concept. Barksdale and Darden (1971), in a survey of business executives and marketing educators, found that the marketing orientation represented a philosophical ideal which few, if 56 any, firms were able to attain.32 "Likert-type" statements were used to collect data in the areas of concept dimensions and adequacy, influence on management, consumer benefits, and the marketing concept and consumerism. For the most part, the 142 educators and the 224 business executives who responded agreed with the basic marketing concept objectives of a customer orientation and a profit motivation. Both groups agreed on the influence of the marketing concept in management, but iflma'business executives were more positive in their beliefs. The research indicated a continuing belief in the marketing concept and its basic elements. The focus seemed to be cm the adoption aspect of the marketing concept; implementation was not really examined. McNamara (1972), in a survey of both consumer and industrial goods 'manufacturers, found a trend towards greater use of the marketing concept.33 The study utilized a mail questionnaire addressed to a sample of small-, medium-, and large—sized companies. The response rate achieved was 43%, with 640 firms responding; most surveys were completed by high-level executives. The questionnaire allowed calculation of a marketing concept "score" for both adoption and implementation. McNamara's adoption score calculated from measures on the use of orientation programs, committee memberships of the top marketing executive, busi- ness backgrounds of key individuals and groups, and major departmental emphasis. The implementation score included numerical measures for title of the top marketing executive, 57 integration of the marketing department, integration of marketing with other functions, and patterns of com- munication within the marketing department. McNamara found greater adoption by consumer goods com- panies and greater adoption and implementation by large firms. In conclusion, McNamara felt that although there was movement toward adoption and implementation of the marketing concept, total marketing control did not currently exist in all sizes of consumer and industrial firms.34 Berry (1972) also examined the marketing concept, using the three basic elements previously defined.35 What the author found was that firms had to make significant changes in four areas when implementing the marketing concept. These were: 1. Product strategy--the need for system selling; that is, selling a solution to a customer's problem and not the product itself. This includes both the pro- duct itself and the promotion used to sell it. 2. Marketing research--the 'use ou EH :d audios .cuuom condone: coHuuuuoamcaua oeHuHuaa ”monsom .hohum ucHocaoaa .uo>o>usm whom: no mucosa: vooouo mHauOH was» uuoHuaao uaHu :mHouOH ho :doHqu< one can» whoa :th mooaoHuoauo on ucHuuouoh >Hm=oH>no .auououdo 0:0 case 0908 ooxoozo muoaaoano oEOmd "mouoz nmmw mm ummw mm numb mm nmmw mm abe umm «Ink awl N H I H v H I ¢ I I I I swims< 02 I I I I v H 5H m I I I I 30:: 9.:09 I I b N v H m H n H m N goon NH v an oH NH v NN v NH v an NH qum Hb NN mm @H vo «H on oH Ob ”N Na GH 0000 NH v 6 N v H I I 0H m n H acoHHooxm mwmmmm um mmmmmm In mmmmmm In mmmmmm In MHmmmm Im mmmmmm In no a no u «o m «o a no a no n mHommo> ude mHommo> Mde wHommo> muHm mHommo> ude MHcmmo> uaHm mHommo> uaHm :uHouom :30Huoad :uHouom adoHuoa< :uHoaom :doHuosd 332:8 232.. molumdmmm g anomoado you: an muoHuado ude :uHouom and uaHm .m.= no mnomthnEoo HH oHnde 63 with the results of this study described previously. A tabulation of these results is shown in Table 12. Shippers felt that U.S. flag carriers could improve their service by providing: 0 more reliable service; 0 better problem solving; 0 improved rate negotiations support; 0 better knowledge of business needs; 0 lower rates; 0 increased aggressiveness to compete.43 Many of these suggestions are either directly or indirectly related to a marketing function. Because this study was exploratory in nature, no attempt was made to analyze the data statistically. Verbal comments given by shippers also indicated problems with the marketing functionIWithin U.S. flag liner companies. Overall the study suggests that the U.S. flag merchant marine is not very responsive to customer needs. A study on attitudes of Great Lakes shippers by Simat, Helliesen, and Eichner lends support to the findings of the MTRB study.44 As part of their study of Great Lakes foreign commerce, interviews were conducted with a number of ship- pers concerning U.S. flag and foreign flag service. Some of the major decision criteria that shippers use, in rank order of importance, for the first six most important categories, were I (i4 .ao unused-v uoHvsun no mmuuou cacao-locum d an vac-Oh .uudon aouuonou :oHuauu Incuh olHuHuda "nausea abound-hon unuHouh I an Iuouuoan I H ououuonuu I a “son mh sun on man Hmh uh HHH can up now emu mu an mm a cH « pH a a o «H o an «H o v « n-HaHu uaHu-oooum H «H a pH oH I a pH 6 on s a a H uuHouua H .H H Ha oH H «H HH a HH a a u « .Hoouo> uaHaouHua H «H a «H e I a «a a «H o c H H «nonnHau uuaaa H oH a oH s H s H« o aH o a o H oaoHaauoao H oH a an «H H «H oH a ”H cH a o « aoHacnuoHaH was uaoHunoHaaa-oo H «H a eu oH I a a a on o a H I aoHanaaonsoon H a H an a « oH oH a «H «H o a a neon: ouoaH-aa Ho o-eoH-oau « oH H on «H a «H «H v vH «H v o n oaHpHoa uoHaoun H «H H on Hm n «H s a HH o a a a «homage aoHuaHuouo. can: H a H vH o H s Ha s aH «H a o v aoHuanuoHuH opus H a H oH a H a oH e oH «« o a s noHunaaououaon uoHaa Immmmummmoun Human numm-H nI, up IImwmmInIIIIIIHuwmpIImmmmumnIIIn ooHpumm unoccuao you: um nooHpuoa uoHuudo udHn nuaouou on nonHuaaloo aH nooHpuou uoHuuuo uaHu adoHVOId no uaHaaun NH oHnaH 65 1. Port-to-port transit time 2. Port-to-port rates 3. Schedule reliability 4. Schedule frequency 5. Container availability 6. Through rates45 When asked to list the major strengths of U.S. flag carriers, shippers named newer technology for ships and equipment and national allegiance. Major weaknesses included sales representation (ranked as the number one weakness), support in rate negotiations, service, and union rules and wages. When shippers were asked to suggest improvements for the U.S. flag carriers, they were, in order of importance, 1. Lower rates 2. Greater use of intermodalism, including door-to-door rates and through bills of lading 3. Better sales representation 4. Improved service, including breakbulk ships 5. Better container availability, including container interchangeability 6. Reductions in conference overregulation 7. Improved scheduling 8. Better cargo handling 9. Improved routing46 A significant finding was a lack of understanding of the individual shipper's needs by the U.S. flag shipping lines. The foreign flag shipping companies, and in particular their 66 sales representatives, were perceived to be more sensitive/ responsive to customer's needs. This finding is very simi- lar to what was found in the study previously discussed. Both of these studies seem to argue for an increased use of the marketing concept by the U.S. flag liner companies with a consequent improvement in customer orientation. Neither of these studies attempted to quantify the relationships that were investigated, other than through the use of tabu- lar presentations. A third study in this same year, undertaken for the National Maritime Research Center, did go further in exa- mining the role of customer orientation and marketing strategy.47 IA large sample of U.S. shippers were asked to evaluate the service characteristics of individual U.S. flag and foreign flag liner companies. Personal interviews were conducted with a total of 740 shippers, and data was collected on service characteristics with a questionnaire that utilized a series of statements with a bi-polar adjec- tive scale. Shippers were asked what level of service they expected and what level of service they received from both a U.S. flag shipping line and a foreign flag shipping line. In this research, two ‘basic trade routes ‘were investigated: the U.S. East Coast to Europe and the U.S. West Coast to the Far East. The basic questionnaire areas used.‘were: image, personnel, performance, facilities, and cost considerations. For the U.S. East Coast to Europe trade route, the fOreign flag carriers were perceived, on 67 average, to provide superior service on 20 of the 22 attri- butes. The differences were strikingly in favor of foreign flag lines for the following attributes: carrier interest in shipper; schedule change information; processing of documents; ability to make special service arrangements; claim settlement; flexibility of rates and charges. The results of the research for the European trade route are found in Table 13. For these reported data, the scale values were from 1 to 7, with 7 representing the highest possible rating on each service attribute. The results of the research on the U.S. West Coast to Far East trade route show a very different picture. It is of particular interest here that on 18 of the 22 attributes, U.S. flag shipping lines were, on average, rated more favorably than foreign flag shipping lines. For the following attributes, large differences were found: sales representatives; quality of containers; flexibility of rates and charges. On the first two of these, U.S. flag shipping lines were rated higher than their competition. For the attribute of flexibility of rates and changes, the foreign flag shipping lines were rated higher, which agreed with the European trade route results. The complete results for the U.S. West Coast to Far East trade route are found in Table 14. Although the research did not explore the reasons for the differences on the two trade routes, a number of explanations are conceivable. First, with the exception of 68 .00 . .000 00100 .0.0 .00000000000'0‘ 0.00000I .000000 .00—..00u0000000 0000H00I H000000000000 00000000 olHuHudl H0noHu0: 0.0.0 .uaH00 000000 "loan 9000000 .000H0000 00H0 00H0000 000 00000000 00H0 .0.0 000 00000 00» 0000000 00H00>o .000 00 .0HuaHH 00 00000 .0 .00000H000 00000000 000 000 000000 0000 000 no 000H00 0000000 000 0000000000 H0>~0u00 0000 .0 00.0I00.0 00.0 H0.0 00.0 H0.0I0H.0 H0.0 00.0 00.0 00000000 000 00000 00 00HH00H00H0 00.0I00.0 H0.0 00.0 00.0 0H.0I00.0 00.0 0H.0 00.0 00000Hau00 IH0H0 00.0I00.0 00.0 00.0 00.0 H0.0IH0.0 00.0 00.0 00.0 “mmw 0mm: 0m 0mmm 0000000 00.0I00.0 00.0 00.0 00.0 00.0I00.0 00.0 00.0 00.0 00000H=00 0000H000000 0000000 00 uuHHHa0 00.0I00.0 00.0 00.0 00.0 00.0I00.0 00.0 00.0 00.0 0000000000000 00H0000 H000000 0000 00 uuHHHa0 00.0I00.0 00.0 0H.0 00.0 00.0Ip0.0 00.0 00.0 00.0 0000000000 «0 uuHHHanHH0>0 H0.0I00.0 H0.0 00.0 00.0 00.0I00.0 00.0 00.0 00.0 0000:0000 0H000000 0H.0I00.0 H0.0 00.0 H0.0 00.0I00.0 00.0 00.0 00.0 0000000000 00 uuHHcao H0.0I00.0 00.0 00.0 00.0 0H.0I00.0 00.0 00.0 00.0 000>HH00 0000 u . 000000000 0H.0uop.0 00.0 00.0 0H.0 00.0I00.0 00.0 00.0 0H.0 0000000000 00 0000000000 00.0I00.0 00.“ 00.0 H0.0 00.0I00.0 H0.0 00.0 00.0 unnHuuluouuH 000000 0H=00000 00.0I00.0 00. 00.0 00.0 00.0I00.0 00.0 H0I0 00.0 00000000H 0000 0000HH0000 00.0I00.0 00.0 00.0 00.0 00.0I00.0 00.0 00.0 00.0 uuHH000HH00 0H=00000 00.0I00.0 00.0 00.0 00.0 00.0IH0.0 00.0 00.0 H0.0 «000000 «0 00H0000000 00.0I00.0 00.0 00.0 00.0 0H.0I00.0 00.0 00.0 00.0 000000 wmuImmmuIII 00200000000 p0.0I00.0 0H.0 00.0 00.0 00.0I00.0 00.0 HH.0 00.0 osHunaaouoaaoa uoHuuuo 00H. 0Hgo=oH00Hoa 00.0I00.0 00.0 00.0 00.0 00.0I00.0 00.0 00.0 00.0 00000000 00 0000000H uoHuuno 00.0I00.0 00.0 00.0 00.0 0H.0I00.0 00.0 00.0 00.0 H00000u00 000000 0000000 HH.0I00.0 00.0 00.0 00.0 00.0I00.0 00.0 00.0 00.0 00000000000000: 00m0m 00 0 00.0I00.0 0H.0 00.0 H0.0 HH.0I00.0 00.0 00.0 H0.0 0000000 HHuuopo 00.0I00.0 00.0 00.0 00.0 00.0I00.0 00.0 00.0 00.0 0000000000 0000000 00.0I00.0 00.0 00.0 00.0 00.0I0H.0 00.0 00.0 00.0 H0H00u00 soHuolohm 00H0 mummH 2.8.. 300.20 a a 00000 «H0354 Human. a o 000 o 00H0000 .n.a unllllluullummuwmw0*ummu 0...... 03.3.00 00H. .383 03 0.: .0... 08°38 00 03:09.8 .88.... on :08 an... .0... 0H 03.... (5E) 00000000 0l000000 0000000: 0.0.: .00000 000000 000000000 0 00.0!0«.0 ~0.0|00.0 00.0100.0 00.0100.0 00.0!00.0 00.0100.0 00.0I0~.0 00.0I00.0 00.0000.0 00.0Ibh.0 00.v|00.0 00.0I00.0 00.0Ivo.n ~0.0I00.0 00.0I00.0 00.0!bc.n 00.0I00.0 00.0100.0 00.0tva.n 00.0100.0 00.0100.0 00.0I00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 0000000 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00009 00000000 0000000 0000 0. 0 «col 00000 .0.0 .00000000000Ifid 0.00000: .000000 00 0 0I0 0000000 000 000 00000 .000 .0000000000 00000000 0000000000000 "I000 900000< .00000000 0000 0000000 000 00000000 0000 .0.0 000 00000 000 0000000 0000000 .000 00 .000000 00 00009 .0 .000080000 00000000 000 000 000000 0000 000 00 00:00» 0000000 000 0000000000 00>00000 00:0 .0 ~0.0I00.0 00.0000.0 00.0!00.0 00.0I00.0 00.0!00.0 00.0I00.0 00.0:00.0 00.0100.0 00.0I00.0 00.0I00.0 00.0:00.0 00.0100.0 00.0I00.0 «0.0-00.0 00.0Iah.v 00.0I00.0 00.0nho.0 00.0100.0 00.0100.0 00.0I00.v 00.0I0h.v 00.0!00.0 00.0. «0.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0.00“ 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 00.0 «0.0 00.0 00.0 00.0 00.0 «0.0 «0.0 00.0 00.0 00.0 00.0 00.0 «0.0 00.0 00.0 00.0 unuch VOumNmnu .n.0 00.00.00 0:. 0.0.0 0o ...—.00.... ago-6....» ...—0 000m 0mwn 0w umwn filo-#000000200 F000 000000000 0000000oo00 000.900 0. 000.000 000000000000 0000000 0000000 0000 00 0000000 0000000000 00 0000000000>< 000000000 00:00:00 00000000000 00 0000050 00000000 0000 0w umwn 0000000000 0000-0000 00 0000000090 00000000000 000000 00:00:00 “0000000000— 0000 0000000160 00000000000 00000000 0000000 00 0000000000 000000 ~00 000m 00200000000 00000000000000 0000000 0000 000000000000 0000000 00 00000000 0000000 000000000 000000 0000000 000,000000000000 00—0m 000200000 0000000 00000>0 0000000000 0000000 0000000. 00000-600 0000M 00000 00004 00000080 0000 0000000 900 0000 .0.0 00000000 0° 0000006I00 "aldfl 000 or 00000 0000 .0.0 00 annuh 70 two U.S. flag lines, all of the shipping lines are different between the two trade routes. Second, the competitive structure was very different on the two trade routes, with the European route being much more competitive. Third, the trade routes differ on many characteristics--customers, voyage length, weather, and commodities shipped, to name a few. Fourth, the differences found may be related in some way to the measurement process employed even though the method of data gathering was the same for both trade routes. Additionally, the research attempted to determine the importance of the attributes that the shippers evaluated. Multiple regression was used to predict the overall service level of the individual shipping lines as well as the impor- tance of each attribute. The attribute accounting for the most variance was considered to be the most important, and so forth. However, using variance accounted for to deter- mine the importance of an attribute is a tenuous procedure because statistical relationships among variables do not always indicate actual relationships.48 At the same time, the previous research was further ana- lyzed for the Maritime Administration to aid shipping lines in developing marketing strategies.49 The model, derived from experimental models developed for other industries, was intended to show how a shipping line might increase its market share. The respondent data from the previous study was also used in formulating and developing the model. 71 The shipping line attributes examined by this marketing strategy model were: 1. Total door-to-door transportation cost 2. Sailing schedule reliability 3. Sailing frequency 4. Total door-to-door transit time 5. Provision of service between inland and ocean ports 6. Minimum tonnage requirements, if any 7. Bills of lading issuance 8. Special equipment 9. Cargo outturn (loss or damage) 10. Storage unit availability 11. Terminal turn—around time for pickup or delivery 12. Interpretation terms of carriage in the tariff 13. Type of (sales) office 14. Level of sales servicing.5o Product specification analysis was used to determine the best combinations of service levels.51 After development of the model, a series of simulations were conducted to illustrate the 'use of the model for improving market share.52 The development of this model represented a significant effort by the Maritime Administration to promote the use of marketing strategy by U.S. shipping lines. The model, however, seems to put more emphasis on the results of marketing strategy (i.e., particular levels of marketing mix elements) rather than (Hi the strategy itself. This could 72 cause a shipping line to focus more on the elements of the marketing mix, and focus less on the nature of the target markets for the shipping line's service. Nevertheless, this model represented a major step in the development of marketing strategy for U.S. shipping lines. To date, the model has not been used to any degree by U.S. shipping lines in planning their marketing strategy. Summary The researcht discussed. previously indicates that the marketing concept is being used by firms as a business orientation. Adoption, and particularly implementation, of the concept appear difficult, especially for industrial firms (shipping lines would be so classified). The research has not, however, firmly established the link between use of the marketing concept, customer satisfaction, and success of the firm. The research does indicate, however, that not only can the marketing concept be useful for U.S. liner operators, but that it may be necessary for the survival of the industry. Given the relatively conservative nature of the U.S. shipping industry, it will be difficult to achieve adoption and implementation of the nmrketing concept. The research has shown that it can be done and what is required to achieve it. 6. 7. 10. 11. 12. 73 Footnotes These definitions have been adapted from a discussion found in Donald J. Bowersox, Logistical Management, 2nd ed. (New York: Macmillan Publishing Co., Inc., 1978), pp. 122-123. James R. Barker and Robert Brandwein, The United States Merchant Marine in National Perspective (Lexington, Massachusetts: Heath Lexington Books, 1970), p. 19. Samuel A. Lawrence, United States Merchant Shipping Policies and Politics (Washington, D.C.: The Brookings Institution, 1966), p. 13. David Bess, Marine Transportation (Danville, Illinois: The Interstate Printers & Publishers, Inc., 1976), p. 117. The nature of competition on the Pacific Northwest-Central Alaska marine trade route will be discussed in more detail in later chapters. Lawrence, p. 15. Ernest Greuning, The State of Alaska (New York: Random House, 1968), p. 57. Tom Foster, "North to the Future," Distribution florldwide, August 1975, p. 23. "Freighting to the Top of the World," Traffic Manager, July 1967, p. 30. "Alaska's Pipeline Boom has Quieted, But the Melody of Trade Lingers On," American Shipper, June 1980, p. 65. Based on information collected during personal inter- views with marketing executives of a number of shipping lines in the Pacific Northwest-Alaska trade and personal interviews with a limited number of major shippers. This trade is examined in some detail because it is pri- marily this type of cargo that is carried by liner operators in the Alaskan marine trades. The other basic category analyzed by the Maritime Administration is tank vessels, which carry primarily bulk liquid cargoes. See: U.S. Department of Commerce, Maritime Administra- tion, Domestic Waterborne Trade of the United States 1967-1974. (Washington, D.C.: U.S. Government Printing Office, n.d.), p. 9. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 74 It should be noted that an examination of the tank vessel trade would produce a very different tonnage flow, particularly since the TTans-Alaska Pipeline was opened. See, Waterborne Commerce of the United States - Calendar Year 1978 - Part 5 National Summaries (Fort Belvoir, Virginia: U.S. Army Corps of Engineers, n.d.), pp. VI I—Xo See Foster, p. 23. For calendar year 1978, crude oil shipments from Valdez were not included because of their large tonnage which does not represent tonnage carried by liner operators. William J. Stanton, Fundamentals of Marketing, 5th ed. (New York: McGraw-Hill Book Company, 1978), pp. 11-13. Richard R. Weeks and William J. Marks, "The Marketing Concept in Historical Perspective," in Marketing Qpncepts, Issues and Viewpoints, ed. David L. Kurtz (Morristown, N.J.: General Learning Corporation, 1972), pp. 3-14. Ibid, pp. 8-13. A derivative demand is the demand for a product or ser- vice that occurs as a result of the demand for other products or services. Here, the demand for marine transportation is the result of a demand for consumer and industrial products. See, for example, John L. Hazard, Transportation: Management, Economics and Policy (Cambridge, Md: Cornell Maritime Press, 1977), p. 34, and Donald V. Harper, Transportation in America: Users; Carriersi Government (Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1978), p. 47. See, for example, "Management: Marketing Men Take Over in GE Units," Business Week (June 24, 1950), pp. 30—36. Robert J. Keith, "The Marketing Revolution," Journal of Marketing 24 (January 1960): 35-38. Ibid, p. 38. Robert Leroy King, "An Inquiry into the Relevance of 'The Marketing Concept' as a Management Guide to the Mobilization of Corporate Effort," (Ph.D. dissertation, Michigan State University, 1960). Arthur P. Felton, "Making the Marketing Concept Work," Harvard Business Review 37 (July-August 1959): 55-65. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 75 Ibid, pp. 59-64. Richard T. Hise, "Have Manufacturing Firms Adopted the Marketing Concept?," Journal of Marketing 29 (July, 1965): 9-12. Ibid, p. 11. Robert F. Vizza, Thomas E. Chambers, and Edward J. Cook, Adoption of the Marketing Concept: Fact or Fiction? (New ‘York: 'The Sales Executives Club of INew ‘York, 1967). Ibid, p. 2. Ibid, pp. 1.1-120 Hiram C. Barksdale and Bill Darden, "Marketers' Attitudes Toward the Marketing Concept," Journal of Marketing 35 (October, 1971): 29-36. Carlton P. McNamara, "The Present Status of the Marketing Concept," Journal of Marketing 36 (January 1972): 50-57. Ibid, p. 57. Leonard L. Berry, "The Marketing Concept: Some Preach It; Others Practice It," in Marketing Concepts, Issues and Viewpoints, ed. by David L. Kurtz (Morristown, NJ: General Learning Corporation, 1972), pp. 30-45. Ibid, pp. 32-43. Ibid, p. 43. Gene R. Lazniak, Robert F. Lusch, and Jon G. Udell, "Marketing in 1985: A View from the Ivory Tower," qurnal of Marketing 41 (October, 1977): 47—56. Gordon McAleer, "Do Industrial Advertisers Understand What Influences Their Markets?" Journal of Marketing 38 (January, 1974): 15-23. Philip Kotler, Marketinnganagement: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1980), pp. 31-32. Maritime Transportation Research Board, Toward an Improved Merchant Marine: A Recommended Program of Studies (Washington, D.C.: National Academy of Sciences, 1976) 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 76 The two basic components of marketing strategy, as defined previously are the selection of a target market(s) and the development of a marketing mix(es) to satisfy that market(s). Ibid, p. 83. Great Lakes - Overseas Marine Transportation Market Assessment (Boston: Simat, Helliesen and Eichner, 1977). Ibid, p. 128. Ibid, p. 136. International Maritime Associates, Inc., Ocean Carrier §§rvice Image and Marketing Practices (Kings Point, New York: National Maritime Research Center, Maritime Administration, U.S. Department of Commerce, 1976). It is possible for two variables to have a high degree of correlation without their being related in fact. Not only must the correlation be present but there must be a theoretical basis for that correlation. Maritime Marketing Strategy; Model--A Final Report To: Maritime Administration, U.S. Department of Commerce (Chicago, Illinois: Market Facts, Inc., December 1975). Ibid, pp. 9-11. This technique involved the use of sensitivity analysis (three service levels were set for each attribute) taking two attributes at a time. The respondents rank ordered the service level combinations on each pair of attributes. See, for example: Maritimep Administration Marketing Strategy Model Case Study - The Eagle Shipping Company (Chicago, Illinois: Market Facts, Inc., n.d.) CHAPTER III RESEARCH DESIGN Basic Design This study employs a combination of exploratory and descriptive research.1 The research instruments employed in this study required further development. Two basic methods of data collection were used; data was collected from the customers of liner operators by the use of a mail survey, while data was collected from liner operators in the form of in-depth questioning leading to a written case analysis for each company. Because (H? the different methods used, different types of data were obtained from the two sets of respondents. The structured questions of the customer survey permitted numerical analysis of the data. For the shipping lines, the semi-structured, open-ended questions were not amenable, for the most part, to numerical analysis. The two sets of data and analysis were brought together in order to provide a comprehensive analysis of the marketing concept as applied by each firm. The details on methods of data collection and types of data analysis used are found in subsequent sections of this chapter. The Measurement Process The basic intent of the research was to evaluate the use of the marketing concept by shipping lines in the trade 77 78 chosen. Four areas of measurement appeared to be necessary in order to answer the research questions posed previously.2 The four measurement areas developed were: 0 customer orientation, including determination of cus- tomer needs by the shipping lines and indirect esti- mates of the level of customer satisfaction obtained; 0 use of integrated marketing by the individual shipping lines; 0 use of profitability measures by the individual shipping lines; 0 success achieved by the individual shipping lines. For the shipping lines, it was necessary to develop measures in each of the above areas. For the shipping line custo- mers, measures were required only for the customer orien- tation area. The research described previously in Chapter II provided a starting point in formulating the areas of measurement required for this study and provided guidance in formulating individual sections of the data gathering questionnaires. For the four measurement areas relevant to the shipping lines, measures were developed for each component. The customer orientation component was concerned with a line's view of its customers and their needs, the selection of target markets, the use of marketing research in defining markets and, to some extent, the line's view of why they entered the trade and why they were continuing in the trade. The integrated marketing component received a sflgnifi- cant amount of attention since it was this area in which much (u? the functional development (implementation) of the 79 marketing concept occurred for the shipping lines. Measurement areas developed here included: marketing responsibility and its level in the shipping line, the role and use of marketing research, the integration of marketing within its own functions and with other functions, the development of marketing mix elements, the use of training programs, and the line's vieW' of its environment--past, present, and future. Because of the nature of the data collection (discussed in a subsequent section of this chapter), these measures and the customer orientation measures were primarily of a qualitative nature. The number of ways in which the lines evaluated types of cargo served as a measure of the degree to which segmental profitability analysis was employed. For shipping line suc- cess, the measures were of a quantitative nature. Although the marketing concept seems to suggest long-run profitabil- ity as a primary corporate objective, it was necessary to use surrogates for this measure. Short-run profitability was used along with market share, which provided a measure of how each line succeeded in the marketplace in comparison to competition. For the assessment of customer satisfaction, indirect measures in the form of customer evaluation of shipping line service were developed. The primary area that was used con- sisted of rating attributes of shipping line service, including elements of the marketing mix and the relationship between the respondent and the shipping line. The closeness 80 of shipping line service to customer needs and the impor- tance of shipping line service attributes to the respondents constituted additional areas of measurement not used in pre— vious studies. To validate these analyses of the customer survey, customer routing decisions (both actual and reconsidered) were examined. These areas of measurement will be discussed futher in subsequent portions of this chapter» The actual data. gathering instruments ‘will ‘be discusSed in some depth, including details of their develop— ment and the actual forms used in this research. Sample Selection Procedures The two populations previously specified (liner opera- tors and their customers) used similar sample selection pro- cedures. For both populations, judgement sampling was used in selecting the population elements to be included. For the shipping lines engaged. in Iliner trades, the first step was to narrow the choice down to one trade route. As discussed in Chapter I, the first selection decision was to choose the Pacific Northwest-Alaska marine trade. Within this trade, four major routes were identified: between the Pacific Northwest and the areas of Southeast Alaska, Central Alaska, Southwestern Alaska, and Northwestern Alaska. The first two of these trade routes account for a large share of tonnage in the overall Alaskan trade and these two were selected for preliminary analysis. 81 The final selection of a single trade route was made after questionnaires were received from individual shippers. Based on the responses, the Pacific Northwest-Central Alaska marine trade was evaluated.3 Too few responses were received from shippers evaluating liner operators serving Southeast Alaska and this trade route was not feasible for further study; IA limited number of shipping lines engaged in the Central Alaska trade were evaluated. The following criteria were used to select the shipping lines for study: 0 the shipping line should provide a regularly sched- uled liner service; 0 the shipping line should be a major factor in the Pacific Northwest-Central Alaska marine trade; 0 as far as possible, the service provided should be confined to the final trade route selected. In the Central Alaska trade, the shipping lines that met these criteria were: Alaska Hydro-Train, the Alaska Service of Sea-Land Service, and Totem Ocean Trailer Express. Sea—Land also provides service southbound to Kodiak (a port in Southwestern Alaska), but this volume was not large enough to create serious difficulties. The three shipping lines chosen account for over 90% of the tonnage moved into Central Alaska by liner operations.4 Other shipping lines, however, are engaged in dry cargo operations to Central Alaska. The Canadian National Railway provides a rail-barge service from Prince Rupert, British Columbia,5 but its volume is small compared to that of the competitors mentioned previously. A number of barge lines 82 also operate in the trade, but their service is seasonal, and is often a contract service. Because of these com- petitive characteristics, the sample of shipping lines was limited to the three major liner operators discussed above. For the actual and potential customers of liner opera- tors, a major problem was encountered which prevented the use of a probability sample. From a practical standpoint, it was impossible to identify all population elements-—those shippers utilizing liner service from the Pacific Northwest to Central Alaska. Because of this, a sampling frame could not be accurately specified and judgment sampling was chosen since in the Central Alaska liner trade a small percentage of the shippers accounts for a major portion of the tonnage. A comprehensive list of major shippers was obtained, and all population members in this group (approximately 50 firms) were included in the sample. For the smaller ship- pers engaged in Alaskan trade, a comprehensive list of popu- lation members could not be developed. Thus, all small shippers identified as being engaged in Alaskan trade were also included in the actual customer survey. Each potential respondent (102 in total) was contacted by phone in advance of being sent a questionnaire. This served three basic purposes: to verify that the company was involved in Alaskan marine trade, to identify the individual within each firm responsible for shipping line selection, and to improve the survey response rate.6 83 Shipping Line Survey Procedures For the three shipping lines chosen, personal, in-depth, interviews with a high-level marketing executive offered the greatest opportunity to develop an analysis of the role of marketing within each firm. For the three shipping line evaluated, discussions were held with: 0 Mr. Don Claussen, General Sales Manager, Alaska Hydro-Train. 0 Mr. Marvin R. Buchanan, then Marketing Manager- Continental U.S. for the Alaska Service of Sea—Land Service, Inc. 0 Mr. Everett W. Trout, Vice President-Operations for Totem Ocean Trailer Express, Inc. The major focus of each discussion was on the marketing strategy employed by the shipping line, along with the line's marketing activities, and its marketing mix. Where appropriate, additional discussions were held with other shipping line personnel involved in marketing activities. These interviews took place over a two-week period in March, 1980, at the offices of each of the shipping lines involved. Follow-up interviews were conducted by phone in order to complete the survey form or to clarify previous discussion areas. Customer Survey Procedures For the shipping line customers, all respondents were first notified by phone before being sent a written questionnaire in the mail within 2-3 weeks thereafter. The 84 respondents completed the questionnaire and returned it in a pre-stamped, self-addressed envelope. A pre-stamped, self- addressed postcard was returned by the respondents in order to monitor survey response, since the respondents were not identified on the questionnaire. For a limited number of shipping line customers, per- sonal interviews were also conducted. These personal inter- views served two major purposes: . the interviews allowed further insights into the Alaskan marine trades and into the marketing strate- gies employed by the major liner operators; and, o the interviews allowed for final corrections to the mail questionnaire before it was sent to the entire sample of shippers. These interviews were conducted during the same time period as the interviews with the shipping line executives. The questionnaires were sent to respondents over a three month period, from mid-April until mid-July, 1980. The majority of the questionnaires were sent to shippers in the Seattle—Tacoma metropolitan area, with a limited number going to Portland-area shippers. Questionnaires were sent to some shippers or consignees in the Anchorage area in order to include in the sample respondents at both ends of the marine transportation system. A limited number of questionnaires were also sent to firms engaged in Alaskan trade who were outside the geographic areas previously spe- cified.7 85 Shipping Line Data Collection Format The major focus of the interviews with the marketing executives was on the use of marketing strategy by the shipping line, and its two basic components--selection of target markets and development of a marketing mix.8 The same basic topic areas were covered in each interview, with in-depth probing used in order to develop a full picture of each shipping line's marketing strategy and activities. The interview format was divided into four primary sec- tions. The first section was concerned with the deter- mination of the firm's competitive position in the marketplace, its recognition of target markets, and its development of a nmxketing mix. A second section was con- cerned with the overall coordination of marketing activi- ties, the types of marketing research employed, and detailed descriptions of each element of the marketing mix. A third section was concerned with the input of the marketing staff on various functional areas, the role of the chief marketing executive, and the impact of marketing on budgeting decisions. Finally, a fourth section served as a "catch-all" for information not listed elsewhere. The detailed discussion areas for the shipping line interviews are listed in Figure A1. Other sources of data were also examined for information on the marketing strategy of each shipping line. These sources included typical adver- tisements, brochures and manuals describing the service and 86 equipment offered, other sales promotional material, examples of publicity, and periodical articles. For one shipping line, additional discussions were held with other marketing personnel below the level of the marketing execu- tive interviewed. In order to analyze financial results and market shares, rate filing information at the Interstate Commerce Commission was examined. In the case of two of the shipping lines, detailed publicly available financial information could be used in the analysis. For the third shipping line, limited financial information was available. Since all of the shipping lines are wholly-owned subsidiaries, and their financial results are not separately reported in company annual reports, this additional data search was required. In a number of the rate filings, market share data was also reported. The Customer Questionnaire The development of the customer questionnaire repre- sented a multi-stage process. The starting point for the questionnaire was the research instrument used in the 1976 study for the National Maritime Research Center.9 That study used twenty-two rating attributes and employed a semantic differential scale. The list of attributes and their adverb anchors10 can be found in Figure A2. Respondents in that survey were asked to rate a U.S. flag shipping line and, then separately, a foreign flag shipping line. 87 A number of substantive changes were made to the type of research instrument employed in the NMRC study. First, the scaling procedure was revised. In the NMRC study, the dif- ferent set of adverb anchors used for each attribute can lead to three problems: the distances along the scale may not be the same for each attribute, the scale values them- selves may not approximate an interval scale,11 and there may be inconsistencies in the respondent evaluation of each set of anchors. The method chosen for this study was that all attributes used one set of anchors which approximated an equal interval scale. Numbers were assigned to each scale position in order to further improve the interval nature of the scale. A seven point scale was used,12 with the anchors being "Very Good" and "Very Bad", and the midpoint being "Average". A study by Burgoon and Burgoon indicates that these adverbs will yield a scale that approximates an equal interval scale.13 The actual questions and scale used are found on the first two pages of Figure A3. A second substantive change was in the actual attributes for rating shipping line service. In some cases, the wording of the attributes was modified in order to accom- modate the new scaling procedure and better ascertain market performance of the lines. A set of questions related to port facilities was added. Finally, the attributes were rearranged and broken down into: 88 0 Time Aspects of Service; 0 Facilities and Equipment; 0 Services; 0 Pricing and Rates; 0 Marketing Services. The first three of these dealt with the product, place, and service elements of the marketing mix, the next with the pricing element, and the last area with promotion and overall management and service. Additionally, respondents rated the two shipping lines selected simultaneously, unlike the NMRC study. Two additional shipping line evaluation sections were added to the questionnaire. The first of these dealt with the perception by customers of how close the services of one or the other of the shipping lines being rated were adjusted to the customer's actual needs. For each of the attributes discussed previously, the respondent was asked to choose which shipping line's service more closely approximated his/her shipping needs, and how close that shipping line was to the shipper's needs.14 A five point scale was used, with the anchors being "Very Close To Your Needs" and "Very Far From Your Needs." The scale positions were also num- bered from one to five in a manner similar to the previous section of the questionnaire. This portion of the question- naire is found on the third page of Figure A3. A third section of the questionnaire asked the respon- dent to evaluate the importance of the attributes used in 89 the previous two sections. In the research studies discussed previously,15 the importance of shipping line attributes was not measured directly. For this section of the questionnaire, a five point scale was used, with the adverb anchors being "0f Greatest Importance" and "0f Least Importance," and the midpoint being "Of Average Importance." As in the previous questionnaire sections, numbers were placed on each scale position. This part of the question- naire is found on the fourth page of Figure A3. The last section of the questionnaire dealt with demographic characteristics of the respondents. The major demographic characteristics included. in 11K; questionnaire were: 0 type of firm and nature of Alaskan trade activity; 0 the utilization by the respondents of each line being rated; 0 the cargo volume and ocean freight bill for the respondent's Alaskan trade; 0 the geographic characteristics of the respondent firm and its major commodity shipped in the Alaskan trade; 0 other characteristics of the respondent's major commodity; o the use of intermediaries in the Alaskan trade; 0 the characteristics of the shipping line selection process used by the respondent. This section of the questionnaire is found on the fifth page of Figure A3. In developing the final form of the questionnaire, two pretests were used. Initially, the questionnaire was 90 administered to a limited sample of freight forwarders in the Detroit area. This pretest was used to evaluate the adequacy of the questionnaire in the areas of shipping line service attribute rating, shipping line service closeness to customer needs, and shipping line service attribute impor- tance. A number of minor revisions were necessary, and the basic content of the questionnaire was judged to be suitable for the actual study. The second pretest occurred during the personal inter- views with a limited sample of shippers in the Seattle, area. After these interviews, principal changes were a categorization of the shipping lines into the Central Alaska and Southeast Alaska trades, modifications to two of the service attributes, and minor modifications to the demographic section to reflect more closely the organization and makeup of the Alaskan trade. All subsequent respondents received the same questionnaire by mail, except that the demographic question on trading activity reversed the terms "exporting" and "importing" when the respondent had an Alaskan mailing address. Shipper Survey Data Analysis In the initial data analysis, each variable was examined independently. For the shipping line rating and shipping line closeness to customer needs variables, the analysis was done separately for each shipping line. The mean and 91 standard deviation of each variable were used as the primary descriptors of each variable, since the scales were deve- loped to be of interval level.16 Only descriptive sta- tistics were used in the study because of sampling frame limitations and the nature of the research.17 The mean and standard deviation were also used as descriptors of the shipping line service closeness to customer needs variables, the importance attributes, and some of the demographic variables. For data that was not of an interval level, appropriate statistics have also been used. All of the sta- tistics for the shipper survey data were calculated by a Statistical Package for the Social Sciences (SPSS) program,18 which was available on a Cyber 141 computer at the University of Minnesota, Duluth. In addition to the variables used in the questionnaire, a number of new variables were created to aid the analysis of the data. Respondents were asked to report their major commodity shipped in the Alaskan trade. This variable was kept open-ended in order to minimize any inaccuracy in respondent answers created by pre-set categories of com- modities. The responses were then categorized using the waterborne commodity classification system of the U.S. Army Corps of Engineers.19 Where appropriate categories could not be found in the classification system, new ones were created. Volume of cargo shipped in the Alaskan trade also required the development of new variables. Four alternative 92 categories were presented for the respondents: tonnage, containers, trailers, and railcars. Each volume category was used by some of the respondents, necessitating the development of equivalency measures, which were as follows: 1 container 1 trailer 17 short tons20 1 trailer 1 railcar = 2.5 containers or 45 short ton321 These conversion factors permitted the calculation of total respondent tonnages, containers, trailers, and railcars.22 Respondents were also asked to indicate what percentage of the time they made the actual shipping line selection. To create measures of the amount of cargo actually routed by a respondent, this percentage was transformed into a decimal fraction and multiplied by each of the cargo volume measures. This calculation produced the variables of controllable tonnage, controllable containers, controllable trailers, and controllable railcars. The controllable vol- umes can be considered to be a measure of who controls the cargo moved. Frequently, intermediaries are used in the Alaskan trade and they, rather than the shippers, control shipping line selection. To facilitate some of the later analysis, two of the demographic variables were dicotomized. These two were the percentage of shipments that were considered by the respon- dent to be perishable and the percentage of shipments con- sidered to be rush (or emergency).23 The breakpoint for both the dicotomies was chosen as the arithmetic mean for 93 each of the variables. Another variable was created to exa- mine the type of goods controlled by the respondent. Each commodity classification was categorized as either consumer goods or industrial (intermediate) goods, although a number of the Corps of Engineers classification categories probably contain some of both types of goods. In order to examine the value of the trade, a measure of ocean freight revenue per ton was developed. This figure was calculated by dividing the annual ocean transportation freight bill as reported by the respondent by the reported total tonnage of the respondent. This calculation provides an estimate of the actual revenue per ton that the shipping lines receive. The final set of variables created from the basic shipper survey data were intended to reflect the attitude of the respondent toward the shipping line being rated. The basic model of attitude towards a shipping line is based on a formula developed by Fishbein.24 For the variables used in this study the construction of a respondent's attitude toward a particular shipping line encompassed two steps. First, the respondent's scale value: on 'the :first .rating attribute was multiplied by the respondent's scale value on the importance of the first attribute; this process was repeated for each attribute. Second, values were then summed across the 25 shipping line attributes to give an overall attitude towards the particular shipping line. This calculation was done for all respondents rating each 94 shipping line, with an average attitude value being calcu- lated for each line. Once the univariate analysis of the data was completed, bivariate procedures were used to analyze the relationships between variables. Bivariate analysis was undertaken for both the three sets of shipping line attribute variables and the demographic variables. The shipping line service rating variables and the shipping line closeness to customer needs variables were graphically compared in order to examine the differences in customer perception of the service provided by the three lines under study.25 The Spearman correlation coefficient was used to examine the relationship between the overall attitude towards a shipping line and the amount of cargo shipped on that particular shipping line.26 A number of bivariate tabulations were used to examine important characteristics of the respondents to the survey. Respondent tonnage, respondent controlled tonnage, shipper classification, percentage of emergency/rush and perishable shipments, and, handling by a shipper association or consolidator were evaluated for the major commodity cate- gories of the respondents. All but the tonnage variables were further evaluated for each shipping line. Cross- tabulations were used where all variables were categorical; where one of the variables was continuous (tonnage, for example), the breakdown procedure was used.27 The results of the tonnage and controlled tonnage analyses were compared against the 1978 U.S. Army Corps of Engineers tonnage 95 figures for the principal Central Alaskan trade ports. This comparison served as a method of evaluating the represen- tativeness of 13m; respondents who actually participated in the survey. The bivariate procedures described previously served two major purposes. With the demographic variables, a more detailed description of the respondents was possible than if only univariate descriptions had utilized. The bivariate analysis also paved the way for a number of multivariate tests that were to follow. A number of types of multivariate procedures have been used for this study, although only the last of these might normally be considered multivariate. For the ratings of the shipping line service, mean values for each shipping line on each attribute were compared in order to detect differing perceptions of the three shipping lines by customers. These comparisons were done both numerically and graphi- cally. Not only were the overall ratings compared but also the ratings broken down by high cargo perishability rating, by high cargo emergency rating, and by consumer and industrial goods classification. The major reason for these breakdowns was to detect differences in how specific shipper groups evaluated the service of each of the shipping lines. The mean values on the closeness of shipping line ser- vice to customer needs for each shipping line were also compared. For these variables, only an overall comparison among the three shipping lines was used. For the importance 96 of shipping line service attribute variables, the mean value for each importance variable was compared, both numerically and graphically, with the values for the other importance attributes. Additionally, the mean values for these variables were broken down by perishability and emergency ratings as well as the goods classification. A last multivariate procedure that was used in this research was discriminant analysis. One consideration in this study was whether the ratings on the shipping line ser- vice attributes predicted the volume of cargo routed by a respondent on a particular shipping line. If this analysis could predict shipping line usage, then the shipping line service attributes can be used with some confidence in eva- luating the customer perceptions of service offered by each shipping line.28 The dependent variable in this analysis was the percent of cargo routed on a shipping line, which was an ordinal variable. The criterion, or predictor, variables used were the shipping line service~ attribute variables, which were of an interval level. The scale of measurement for these variables permitted the selection of discriminant analysis as an appropriate procedure for analysis.29 In evaluating the discriminant functions, the eigenvalue, percent of variance accounted for, and the cano- nical correlation were examined as measures of the success of the discriminant analysis.30 The percentage of the cases correctly classified by the analysis served as a further 97 measure of the success of the procedure in predicting shipping line usage.31 Marketing Performance of the Lines This section of the data analysis was, of necessity, less rigorous quantitatively than the shipper survey data analysis described previously. The intent of this analysis was to evaluate the adoption and implementation of the marketing concept by the shipping lines and the impact it had on their success. In particular, attention was focused on the implementation component which dealt with the organization of, and functional development of, marketing within the shipping lines. The three basic elements of the implementation phase of the marketing concept were: the degree of customer satisfaction (as measured by customer evaluation of shipping line service), the development of an integrated marketing function, and the use of profitability measures in marketing decision-making. For the customer evaluation of shipping line service component, four basic areas were examined. First, the efforts toward and processes of understanding customer needs were evaluated for each of the smipping lines. Two areas that were also evaluated were* the shipping .line service rating variables and the shipping line closeness to customer needs variables. For both of these, the perceived com- petitive advantages (from the respondents' standpoints) for 98 each shipping line were analyzed. The method of analysis for the shipping line closeness to needs variables was to examine the average for each shipping line on each attribute and the number of times the other shipping line was chosen as being closer to the respondent's needs. As a final area, the amount of cargo routed on a shipping line by the respon- dent was compared with the cargo volume that would have been routed after the fact. If a number of customers indicated that they would, in retrospect, use a shipping line less, some level of customer dissatisfaction would appear to be present. For the area of the shipping line's integration of marketing, a number of items were evaluated. The integra- tion of marketing with the other functional areas was eval— uated for each shipping line, along with the role of the marketing department in developing marketing strategy and in decision-making. The commitment to, and effort involved in, identifying target markets and selecting marketing mixes by each shipping line was also examined. The final element of adoption of the marketing concept examined was the use of profitability measures by each of the shipping lines. The degree to which the shipping lines examined customers by a segmental profit analysis served as the primary measure for this element. Success in adoption and implementation of the marketing concept should lead to long—run profitability for a shipping line, but these profitability figures were unavailable. As 99 substitutes for this measure of success, the following measures were employed: 0 market share (both current level and trend of growth); 0 short-run profitability. Much of the evaluation of these measures, as with the other areas of the marketing concept, was somewhat incomplete due to the type of data available. Summary The subsequent chapters are intended to discuss and eva- luate a number of specific areas. First, the examination of the marketing strategy employed by each of the shipping lines studied should improve understanding of the components of the marketing concept. A detailed description of these marketing strategies is found in Chapter IV. Next, customer perceptions of the services offered by each shipping line is presented, which includes an analysis of shipping line ser- vice rating attributes, shipping line service closeness to customer needs attributes, and the importance of shipping line service attributes. These areas are examined in order to determine how customers perceive each shipping line, which indicates the success of the shipping line marketing strategy. This area of analysis is found in Chapter V. The elements of the implementation of the marketing concept are evaluated in cmapter VI, including the determination of customer needs by the shipping lines, the 100 evaluation of shipping line service by customers, the usage of integrated marketing, and the use of profitability measures. An evaluation of the use of the marketing concept and shipping line success is found in Chapter VII, along with recommendations for use of the research and for future research. 101 Footnotes Exploratory research is concerned with the development of insights into a situation or problem, while descrip- tive research is concerned with evaluating the frequency with which certain events occur; based on Gilbert A. Churchill, Jr., Marketing Research: Methodological Foundations, 2nd ed. (Hinsdale, Illinois: The Dryden Press, 1979), p. 47. The basic research questions addressed by this research are found in Chapter I. The specific characteristics of the Pacific Northwest-Central Alaska marine trade and its isolation from other trade routes is described in detail in Chapter II. Based on personal interviews with marketing executives of several shipping lines engaged in the Pacific Northwest—Central Alaska marine trades and interviews with a limited number of major shippers. John J. Wheatley and Guy G. Gordon, Economic and ,Epansport Developments in Alaska's Future (Seattle, Washington: Graduate School of Business Administration, University of Washington, 1969), p. 161. Although the literature is not conclusive on the effect of prenotification on response rate, one study did find a significant difference in response rates when prenoti- fication by either postcard or letter was used. See Bruce J. Walker and Richard K. Burdick, "Advance Correspondence and Error in Mail Surveys," Journal of Marketing Research 14 (August 1977) : 379-382 . More recently, a study found a significant increase in response rate for a mail survey when telephone prenoti- fication was used. See, Chris T. Allen, Charles D. Schewe, and Gasta Wijk, "More on Self-Perception Theory's Foot in the Door Technique in the Pre-Call/Mail Survey Setting," Journal of Marketing Research 17 (November 1980): 498-502. The reason for this geographic concentration is that the Seattle-Tacoma metropolitan area has developed over a long period of time as the major source for north-bound transportation to Alaska. In Alaska, Anchorage is the major population center and has developed as the major trade center for Central Alaska. 10. 11. 12. 13. 14. 15. 16. 17. 18. 102 These two elements, which are controllable elements for a firm, can be considered the basic components of marketing strategy. See E. Jerome McCarthy, Basic Marketing: A Managerial Approach, 6th ed. (Homewood, Illinois: Richard D. Irwin, Inc., 1978), pp. 35—36. See International Maritime Associates, Inc., Ocean Carrier Service Image and Marketing Practices (Kings Point, New York: National Maritime Research Center, Maritime Administration, U.S. Department of Commerce, 1976). The adverb anchors are phrases and serve to provide the end points, or anchors, to a measurement scale. The actual anchors used are discussed in the subsequent por- tions of this section. For a more detailed discussion of anchors, see Warren S. Torgerson, Theory and Methods pf_§§aling (New York: John Wiley & Sons, Inc., 1958), pp. 78-82. Judee K. Burgoon and Michael Burgoon, "The Construction of More Precise and Efficient Verbal Rating Scales," (East Lansing, Michigan, n.d.), p.1. A seven point scale appears to be the most widely used number of points per scale item for marketing research studies. Five and nine point scales also appear to have been used to some degree, as reported in J. Paul Peter, "Reliability: A Review of Psychometric Basics and Recent Marketing Practices," Journal of Marketing Research 16 (February 1979): 13-14. Burgoon and Burgoon, p. 13. This method of paired comparisons is discussed in Torgerson, Ch. 9. See Chapter II for a detailed discussion of these research studies. The issue of an interval level scale is discussed in some detail in the previous section. Inferential statistics allow testing of hypotheses about the population from which the sample came. These types of statistics require that a probability sampling proce- dure be used. Because a complete sampling frame could not be developed for this research, the calculation of inferential statistics was not attempted. See, Norman H. Nie, C. Hadlai Hull, Jean G. Jenkins, Karin Steinbrenner, and Dale H. Bent, Statistical Packagefifor the Social Sciences, 2nd ed. (New York: McGraw-Hill Book Company, 1975). 19. 20. 21. 22. 23. 24. 25. 26. 27. 103 For a detailed description of these categories, see Waterborne Commerce of the United States - Calendar Year 1978- Part 5 National Summaries (Fort. Belvoir, Virginia: U.S. Army Corps of Engineers, n.d.), pp. VII-X. Based on information provided by Mr. Tom Russell, Duluth Terminal Manager, Pacific Intermountain Express. Based on information supplied by Mr. Don Claussen, General Sales Manager, Alaska Hydro-Train. These figures provided a summary of respondent cargo in terms of the four measures, regardless of how the cargo volume was reported by the respondent. The conversion factors are averages which may not hold for any specific shipment. These two shipment descriptions were used because of discussions held with a number of individuals involved in the Alaskan trade who indicated that these variables were important in categorizing shippers. Ab = 2 W1 Bib! where Ab = attitude towards a particular alternative b W1 = weight or importance of evaluative criterion 1 Bib = evaluative aspect or belief with respect to utility of alternative b to satisfy eva- luative criterion For the source of this model formulation and addi- tional discussion, see James F. Engel, David T. Kollat, and Roger D. Blackwell, Consumer Behavior, 2nd ed. (Hinsdale, Illinois: Dryden Press, 1973), pp. 274-278. ' Each respondent provided information on the service pro- vided by two shipping lines. It was necessary to use the Spearman, or rank-order, correlation coefficient here because the second variable, percent of cargo routed, was only of an ordi- nal nature. The Pearson correlation coefficient is only appropriate for two variables that are at least of an interval level. The breakdown procedure is similar to the crosstabula- tion procedure, except that with the former one of the variables is of a continuous nature. For the cross- tabulation procedure, all variables must be categorical. See, Nie, Hull, Jenkins, Steinbrennerg and .Bent, ;pp. 249-264. 28. 29. 30. 31. 104 If the shipping line service attributes were unable to predict shipping line usage with some accuracy, then further analysis of shipping service based. on these attributes would be meaningless. For a description of discriminant analysis, see Fred N. Kerlinger and Elazar J. Pedhazur, Multiple Regression in Behavioral Research (New York: Holt, Rinehart and Winston, Inc., 1973), pp. 336-341, and Cmurchill, pp. 543-557. The eigenvalue and the percent of variance accounted for are measures of how much of the variation in the depen- dent variable (percent of cargo routed) is accounted for by variation in a specific discriminant function (which is a linear composite of the independent variables, the rating variables). The criteria to be used here are: eigenvalue > 1.0; percent of variance accounted for > 10%; canonical correlation > .33. The criterion for this measure was: number of cases correctly classified > 50%. CHAPTER IV CASE HISTORIES - CENTRAL ALASKA LINER COMPANIES Introduction The purpose of this chapter is to describe, in detail, the makeup of the marketing strategy and marketing activi- ties of the major liner operators in the Pacific Northwest-Central Alaska marine trade. The three liner com- panies that were investigated as part of this study are: 0 Alaska Hydro—Train (an operating unit of Crowley Maritime Corporation); 0 Sea-Land Service (a subsidiary' of R. J. Reynolds Company); 0 Totem Ocean Trailer Express (a subsidiary of the Sun Company). These three companies represent the only year-round, scheduled liner operators on this particular trade route. Although other shipping lines are engaged in this trade, they are relatively small, seasonal in nature, and are often of the contract form of carriage. In total, the three liner operators represent a market share of over 90% for the liner segment of the Pacific Northwest-Central Alaska marine trade.1 For each of the liner operators, a brief description will be given of the company, followed by a detailed 105 106 discussion of various elements of the firm's marketing strategy and marketing activities. In each case, much of the discussion and analysis is based on an in-depth series of interviews with a high-level marketing executive in the shipping line. Additional sources of information have also been used in the discussion of each shipping line's marketing strategy. Each of the shipping lines will be discussed in alphabetical order. Alaska Hydro-Train Company Description Alaska Hydro-Train is an operating unit of Crowley Maritime Corporation of San Francisco, a group of approxima- tely 270 operating companies. Many of these companies are involved directly in marine transportation, providing either common carrier or contract carrier services. Crowley Maritime is divided into five major operating divisions.2 Alaska Hydro-Train operates as part of the Northwest and Alaska Division; the division headquarters are located in Seattle, Washington. The major method of water transportation used by Crowley is that of tug and barge operations. This varies from trailers on barges (Trailer Marine Transport, in the Caribbean) to containers on barges (Hawaiian Marine Lines) to railcars on barges (Alaska Hydro-Train). The type of service provided by Alaska Hydro-Train thus fits the basic pattern of operation of various Crowley operating units. 107 Basic MarketingaStrategy The service provided by Alaska Hydro-Train predates the establishment of the company itself.3 Prior to the founding of Alaska Hydro-Train, Puget Sound Tug and Barge, another Crowley subsidiary, provided a modest form of scheduled ser- vice to Central Alaska (known as the railbelt). The current service appears to be based on the need for the shipment of heavy or bulky cargo, which Alaska Hydro-Train, with its joint rail-water service, was in.eu1 ideal position to pro— vide. Secondly, problems with the Teamsters Union in Alaska had created major labor problems for Alaska freight movement, and the Hydro-Train service represented a way to overcome this, bypassing the need for longshoring and over- the-road movement. Finally, the major operator in the trade, Alaska Steamship, was unable to provide the type of service required by the growing trade. Alaska Hydro-Train initiated service in 1963, with Alaska Steamship ceasing operations in 1970. Since: its initial. entry, Alaska. Hydro-Train. has increased the size of its operations in the trade by over two-fold. The basic mode of operation from the start has consisted of transporting railcars by barge and transferring them to the Alaska Railroad for shipment inland. Because of the continued demand for rail movement of cargo between Alaska and the "lower forty-eight," it is felt that Alaska Hydro-Train will continue to be a viable operator in the railbelt marine trade. 108 Within this trade, Alaska Hydro-Train has a number of competitive advantages (as well as disadvantages). The main advantages are: c oversized and heavy cargoes may be carried relatively easily in railcars; 0 cost per unit is the lowest of the three carriers; 0 the rail-water mode represents the most suitable intermodal alternative for low-value commodities, because of its ability to handle railcars in which these commodities often move. The main competitive disadvantages are: 0 relatively slow transit time, coupled with a greater susceptibility to weather delays; 0 additional transit time to Anchorage by rail from the dock facilities at Whittier; o difficulty in handling small shipment sizes, since the basic container of cargo is the railcar; 0 service primarily confined to the reach of railroad tracks and siding. The nature of these advantages and disadvantages has dictated to some degree the potential target markets for Alaska Hydro-Train. The major types of commodities that are cOnducive to this type of service are primarily industrial products such as building supplies, construction equipment, chemicals, liquLd and dry bulk products, staple groceries, and various types of military supplies. Recently, the type of service offered by Alaska Hydro-Train to its customers has been changing. To equal the service provided by competition, it has been necessary to provide rubber-tired pickup and delivery without addi- tional charge. This change in service has become even more 109 necessary with the recent expansion of the Alaskan economy, particularly in areas not directly served by the Alaska Railroad. Another important factor in the changes in service offering relates to the changed role of marketing strategy. Up until approximately three years ago, Alaska Hydro-Train's strategy fell somewhere between a product concept and a selling concept.4 Since that time, changes in personnel and corporate structure have moved Alaska Hydro-Train towards the marketing concept. The marketing function at Alaska Hydro-Train appears to be integrated to some degree with other corporate functions. Marketing provides input to the operations department by notifying them of cargoes to be received and the type of equipment required. The customer service department handles the actual job of booking, tracing, and documentation, but does coordinate its activities with the marketing function. Marketing also coordinates activities with the pricing and accounting departments. MarketiagaActivities The basic service provided by Alaska Hydro-Train is that of a rail—barge service between Seattle and the Alaskan port of Whittier. At Whittier, connection is made with the Alaska Railroad for shipments to inland points such as Anchorage and Fairbanks. In Seattle, Alaska Hydro-Train receives delivery from a number of connecting railroads. Currently, rubber—tired pickup is now provided at both ends 110 of this overall transportation system. As discussed in the previous section, this is a recent development due to com- petitive pressure and customer requests. Alaska Hydro—Train uses three sets of two barges each. An individual barge can accommodate up to 50 railcars, and each voyage consists of two barges towed by a 9,000 horse- power tug. Both the tugs and barges of Alaska Hydro-Train are operated by Puget Sound Tug and Barge (another Crowley subsidiary) and a weekly schedule is provided. The barges are dedicated to this service, but there is some flexibility in the use of tugs, particularly in the winter months. The voyage typically takes 5 1/2 days between the two ports with additional transit time needed for rail shipment to Anchorage (n? Fairbanks. If the customer requires rubber- tired delivery, additional time is consumed in stripping the railcar and loading the cargo into highway trailers. The coordination of marketing activities for Alaska Hydro-Train occurs at the level of the marketing manager (Figure 7 shows a condensed organization chart). In the organizational structure, the pricing function and the customer service function (rating and billing) are not under direct control of the marketing manager. This organiza- tional structure was put in place at the beginning of 1981; previously, many of the marketing functions of Alaska Hydro- Train and Hawaiian Marine Lines were handled by the same personnel (particularly in the sales area). Both the continental U.S. sales personnel and. the Sales iManager, 111 :HwnBIOHezz dxmda¢ ”wonzom aHduBIouehm dxmdfi¢ .uhdno :oHudNHGdMHO empda>wnnn< b whswfih quaomhom moasm Hoqqomumm mmadm adamafi< .m.= Hapqmcfipaoo H. dxmda< I powwow: wmadm F :flsnBIOpfi m sxmda< Mommas: moadm Hdumcoo mocfiq onwhdz cdHHdem w sadnelonehm cxmdfi< umwwcdz weapoxndz noflhhdo :08800 I pcoowmonm mofi> mappawm u qofimfl>flo sxwda< new uwmsnunoz paooawmam wow> _ oowaOCdnm :dm Q 0 uncappdaoo pcmaphdawo moa>pmm umEoumso mcoflpdummo whoppmzuedom hmfiaon 112 Alaska, report to the General Sales Manager, Alaska Hydro- Train. Until approximately three years ago, Alaska Hydro-Train did not really have any degree of integrated marketing effort. Prior to that time, the basic marketing effort con- sisted of a sales department which was informally organized. Since that time, marketing has been upgraded, various orga- nizational changes have been made, and new marketing person- nel have been aquired. Although marketing has been upgraded, the roles of advertising, sales promotion, and public relations are still not completely developed at Alaska Hydro-Train's level, which top management feels are not necessary. Although no formal marketing research department exists, Alaska Hydro-Train does receive marketing information through other means. Major sources of information include corporate headquarters research (especially on Alaskan charter barge operations), information generated by the sales department, and outside sources such as economic fore- casts by Alaskan banks, interviews with major shippers and consignees, and others. For the yearly budget, a forecast is developed for each major commodity in the trade. A long- range, five- to six-year budget is also developed, prin- cipally from the economic forecasts. This long-range forecast is updated on a yearly basis. Alaska Hydro-Train, as a result of the strategy change discussed previously, has begun to change the way customers 113 are evaluated. This change has occurred because of changes in customer needs and a more intense level of competition in the trade. Now, an attempt is made to identify a customer's needs, and then build a service around those needs. An example of this would be the rubber-tired pickup and deli- very now offered by Alaska Hydro-Train. Also, customers are now broken down by commodity or industry groupings, where the needs may be similar. This breakdown is also useful in assigning of sales representatives to accounts. Some difficulties are encountered in maintaining Alaska Hydro-Train service reliability. In bad weather, the tug and barges may have to seek shelter until the weather clears. This represents a real disadvantage compared to its major competitors, but represents a typical situation for tug and barge operations. Efforts are made to maintain a steady flow of empty railcars south, since delays result in increased per diem charges on cars5 and/or unavailability of equipment for shippers. In terms of ports served, the only flexibility appears to be that Seward could be used as a port, rather than Whittier. Alaska Hydro-Train attempts to maintain a weekly sailing schedule from Seattle on Saturdays, or more frequent service during the summer months when cargo volume increases. Sales promotion, public relations, and advertising are all minor components of Alaska Hydro-Train's promotional element of the marketing mix. However, there is no orga- nized, company—wide program. All promotional. materials, 114 such as typed sailing schedules, are developed by individual members of the sales force. Public relations also appears to be low-key as an element of the promotional mix. Personnel are sponsored when joining organizations such as trade or traffic clubs. In: terms of overall public rela- tions, almost all press releases and other types of material originate from either Crowley headquarters or the Northwest and Alaska Division offices. Alaska Hydro-Train does no advertising itself, although occasionally Alaska Hydro-Train is mentioned in the advertisements of Crowley or its other subsidiaries. Alaska Hydro-Train receives some carryover from the corporate advertising, but the impact is probably minimal. The major promotional emphasis at Alaska Hydro-Train is on personal selling. The current makeup of the sales force is given in Figure 8. The two senior account executives in Seattle are responsible for the Seattle metropolitan area while the two national account executives (Seattle and San Francisco) are responsible for the rest of the contiguous 48 states. The basic method used for assigning accounts to members of the sales force is by industry for the Seattle area. Accounts are generally not assigned by geographic territory (except as noted previously), although in the Seattle area various industries tend to be grouped geographically. At the present time, size of the account is not a factor in assignment. Preplanned sales call 115 Marketing Managar (Seattle) Alaska Hydro-Train and Hawaiian Marine Lines General Sales Manager (Seattle) Alaska Hydro—Train Continental U.S. Alaska Sales Manager Seattle Anchorage Senior Account Executive(2) Senior Account Executive National Account Executive Sales Representative San Francisco Fairbanks National Account Executive Senior Account Executive Figure 8 Personal Sales Force Distribution, Alaska Hydro-Train Source: Alaska Hydro—Train 116 itineraries are used by the sales force in developing and maintaining customer contacts. Alaska Hydro—Train has no formal training program for new sales personnel. Where a vacancy exists, it will be filled, when possible, by a person knowledgeable in the par- ticular industries to be covered. If it is necessary to hire an inexperienced person, that individual is normally put into a less productive area, in order to gain experience. During this period, some informal in-house training is used. Currently, there is no requirement that a sales representative must have a college degree. A major effort has been undertaken at Alaska Hydro-Train to gain a better understanding of customer needs, par- ticularly by the sales force. Until recently, Alaska Hydro-Train only considered cargo on a rail siding as poten- tial freight and did not approach other shippers. Now, with the competitive pressures in the market, other shippers have been approached by the sales force. Since many of these shippers were not on a rail siding, it became necessary to consider the customer's needs to a much greater degree. Although the major interface between Alaska Hydro-Train and its customers is the sales force, contact does occur directly through the pricing department when a customer only needs a rate for a given cargo movement. As can be seen from Figure 7, the pricing department is not under the direct control of marketing. Despite this organizational structure, marketing still has an impact on 117 pricing by initiating proposed rate changes. Alaska Hydro-Train is regulated with respect to rates by the Interstate Commerce Commission (ICC). Generally, through rail rates are jointly quoted by Alaska Hydro-Train and the Alaska Railroad. Although originally only rail tariffs were quoted, membership is now held in a number of trucking tariffs. In terms of rate filings, the filing officer of the Alaska Railroad presents rate requests to the ICC, but maintains close coordination with Alaska Hydro-Train. The main pricing policy of Alaska Hydro-Train seems to be that they will offer competitive prices (n1 those commodities where a profit can be earned. Because of their low unit cost structure, Alaska Hydro-Train has more rate flexibi- lity than competition, although this must be balanced against the service disadvantages of their rail-barge opera- tion. Sea-Land Service Company Description Sea-Land Service, Inc., is a subsidiary of R.J. Reynolds Industries, Inc., a large and diversified U.S. corporation with sales of $8.9 billion in 1979.6 Among its major busi- ness interests are tobacco products, food processing, oil production, and shipping.7 In 1969, R. J. Reynolds acquired Sea-Land and the marine operations of the subsidiary have expanded since that time. 118 Sea-Land, a non-subsidized liner operator, provides con- tainerized operations in both the domestic and foreign segments of the U.S. merchant marine. Sea-Land was one of the pioneers in the development of containerized shipping, and today provides service between the U.S. East and West Coasts to the Far East and Europe. In the domestic trades, Sea-Land provides liner service to the Caribbean and Alaska, the latter being performed by the Alaska Service division, which operates out of Seattle, Washington. Although the overall operations of Sea-Land have not been highly profitable, they have been one of the .most effective U.S. flag shipping lines. In 1979, Sea-Land pro- vided revenue to R.J. Reynolds of $1.2 billion, which repre- sented 13.7% of total revenue.8 The Alaska Service represented but one part of the total Sea-Land revenue. Basic Marketing Strategy The Alaska Service was established and shipping between Seattle and Alaska began in the spring of 1964.9 Sea-Land entered the trade because of the potential growth of the trade and the ability of Sea-Land to gain a competitive advantage. Up until 1964, the railbelt trade was not heavily containerized and 11m; sailing schedules were mostly seaso- nal. Sea-Land established a year-round, scheduled, con— tainerized operation that was very quickly successful. Although the competitive structure of the trade has changed significantly, Sea-Land continues to play a major role in the railbelt trade. 119 The past two to three years have not been profitable ones for Sea—Land, but the expectation is that, as trade picks up, profitability will return. The basic philosophy with respect to containerization and the development of Alaska has not changed. The basic goal appears to be a continuation in the trade as the Alaskan economy continues to grow. Within the Central Alaska trade, certain competitive advantages are apparent, which have been recognized by Sea-Land. When compared with Alaska Hydro-Train, the major competitive advantages appear to be: 0 less time in transit; o ease of providing door-to-door truck delivery; 0 closer customer relations. The major competitive disadvantages appear to be: 0 inability to handle large or heavy loads; 0 higher capital costs per unit; 0 higher inland access costs over distance. When compared with Totem.¢0cean Trailer Express, the major competitive advantages appear to be: 0 higher level of overall service; 0 closer customer relations; 0 length of time in the trade. The major competitive disadvantages are found in the following areas: 0 inability to handle oversized cargo; o difficulty in handling cargo in a permanently attached trailer and odd size containers; 0 older and somewhat slower vessels. 120 The major target markets for Sea-Land appear to be in the consumer goods areas. These include products such as food and grocery items, clothing, household goods, and, to some extent, building materials. Thus, industries and firms characterized by bulky or heavy commodities do not repre- sent productive target markets for Sea-Land. Ftu' these basic commodity groupings, efforts are made to know the customer and his problems, enabling Sea-Land to react effi- ciently' to his ‘needs. ‘Within the Alaska 'Service, com- munications between the various functional areas appear to be well maintained, leading to communication of customer needs throughout the firm. Marketing Activities At the present time, Sea-Land's Alaska Service has its major emphasis on the Central Alaska portion of the Alaskan marine trade. Three Sea-Land vessels provide twice weekly service between Seattle and Anchorage. On the return voyage from Anchorage, the ships also call at Kodiak, offshore from the Alaska Peninsula. The schedule has sailings from Seattle on Wednesday and Saturday. Additionally, a fourth vessel is used which provides feeder service to the Aleutian Islands. Previously, four ships were used in the trade during the summer months, providing for three sailings per week. For the 1980 year, the additional ship was not being used due to the downturn in the market for cargo. Thus, two sailings per week were being used year-round between Seattle and Anchorage. 121 The vessels used by Sea-Land in the railbelt trade are full containerships having a capacity of approximately 360 containers (35 feet in length), although the vessels are able to carry some forty foot containers. The vessels used require shore-based cranes for loading and discharge of the containers. Sea-Land has developed a large fleet of con— tainers and equipment that are available for shipper use, including various types of dry cargo containers, flat beds, liquid and dry bulk containers, insulated containers, car- carrying containers, and chassis. Pickup and delivery of containers in this time period was provided by Sea-Land Freight Service, Inc., a subsidiary of Sea-Land Service, Inc. The overall coordination of marketing activities for the Alaska Service occurs at the general manager level in the organization. There are two general managers, one in Alaska (Anchorage) and one in Seattle; these two individuals work together in defining strategy under the direction of the Executive Vice-President at Sea-Land in Seattle (see Figure 9). This arrangement has worked well to date, but is somewhat dependent on the individuals involved. Over the past two to three years the overall marketing effort has been reduced due to the downturn in the trade after completion of the Trans-Alaska Pipeline. Research, advertising, and public relations have been eliminated as separate activities. As a result of the lessening in these activities, a position responsible for research and one 122 mucuudhono uuaxoaus .oau .oo«>uow unuAInon .oo«>uom nun-u< “cannon can .ou«>u¢a candida» .oo«>uoa canddd .auuao acuuuuuacuuo couau>ouan< a ouauum conunouaqdi— _m:o«auuon dance E a Anna hone:- acnondv I ~nuonou Aouuuuomv banana: unhonoo h Aoauuaomv succum0um oou> o>uu=ucum _uuouuu=auuo= ounuonuoo undaluoma 123 responsible for advertising and public relations were elimi- nated. Currently, the full-time marketing activities of the Alaska Service are performed by the sales representatives, customer service representatives, and sales managers. Even though also reduced in scope, marketing research continues to be done on commodity flows and on individual customers, providing an input to the sales force and upper management. Forecasting is also done, but this activity has been signi— ficantly reduced with the downturn in 11K; total traffic since the mid 1970's. The forecasts developed by marketing are used in two basic ways. First, the projections of the total market and the market share achievable by Sea-Land are direct inputs into each one—year plan. This is done in the form of a budget which is updated quarterly. Additionally, market forecasting is also used in the development of a five-year plan by upper management. For the five-year plan, marketing is only one of many inputs; other inputs such as state records, census data, and other forecasts are used in making projections. This plan is updated on a yearly basis. Sea-Land uses a classification system for its customer accounts to aid in identifying the size and potential accounts. The main classification categories are containers per year and potential containers per year. The classifica- tions range from AAA for the largest volume shippers to C for the very low volume shippers. At the present time, the concentration is on volume since the total trade is 124 depressed; with an upturn in cargo volume, more attention would be paid to the revenue per container. This classifi— cation system is used as an input in the development of the personal sales force activities and the sales call plans used by the individual sales representatives. The Alaska Service uses ongoing performance analysis of the marketing elements of product and place discussed pre- viously. As part of this analysis, items such as the number of containers per sailing and the share of the available market are examined in order to evaluate the actual service performance of Sea—Land. The basic sailing schedule is not changed very often since it is felt that it currently reflects market requirements with respect to the days and times of sailing. The main change typically explored, although not considered for 1980, is that of adding a fourth ship, yielding Tuesday, Thursday, and Saturday sailings. The use of full containerships carrying 35 foot and 40 foot containers is consistent with the overall Sea-Land strategy of containerization. Additionally, with the vessels and equipment used, interchange with other Sea-Land vessels presents no significant problems. The ships now being used by the Alaska Service are some of the older ones belonging to Sea-Land, and replacement decisions will be required at some point in the medium-term future. The promotional element of the marketing mix is impor- tant for the Alaska Service, although the resources devoted to this area have been reduced over the past two to three 125 years. Essentially, the promotional resources are increased when business is up and decreased when business is down. This situation seems to be most pronounced for advertising and public relations. Currently, advertising is used on a selective basis. Print advertising consists of ads in key issues of Milepost, Alaska Construction and Oil, and other Alaskan magazines that enjoy wide circulation. Weekly half-page adver- tisements are placed in Marine Digest, listing ports served, Alaska Service offices, and phone numbers. Additionally, the Alaska Service publishes a half-page sailing schedule (within a six-page advertisement of sailing schedules for various Sea—Land trade routes) weekly in Pacific Shipper. Newspaper advertising is not used to any significant degree. Some television advertising has been used in the Anchorage area, particularly two years ago when Sea—Land was trying to allay fears that they were pulling out of the Alaskan trade. Public relations, although not a major promotion func- tion, is used to some degree by the Alaska Division, which donates to the opera, the arts, and other civic activities. The company also sponsors various employees in traffic clubs and other civic organizations. Publicity articles, for the most part, originate from corporate headquarters for the entire Sea—Land organization. Publicity articles originated by the Alaska Service are cleared through the legal depart- ment to provide a consistent corporate statement on the many issues facing the firm. 126 Sales promotion is also used by the Alaska Service, but it is run:zi major part of the division's promotional mix. One element of sales promotion that is used are premiums-— pens, calendars, scratch pads, etc., which include the Sea-Land corporate name and logo. The use of premiums is based on the judgement of the individual sales represen- tatives. Many brochures are available for shippers which give information on the types of Sea-Land equipment available, the proper stowage of cargo within individual containers, and particulars of the service provided by Sea—Land, both for the Alaska Service and for other trade routes. The Alaska Service of Sea-Land places a great degree of emphasis on personal selling in the promotional mix. In terms of ,personnel, this emphasis far outweighs other promotional elements, as might be expected in this type of industry. The current make-up of the sales force is given in Figure lit. The sales representatives shown handle pri- mary contact with customers and potential customers, while the customer service representatives are responsible for administrative details, arrangements for interline carriers, actual bookings, tracing, and follow-up as required. Not all offices, however, have customer service representatives. Of the three offices employed in Alaska, only the Fairbanks office has a customer service representative. Where possible, accounts are assigned to sales repre- sentatives by geography and by industry. Thus, sales 127 Seattle General Manager Sales Manager Continental U.S. (Seattle) Seattle Sales Coordinator Sales Representatives (5) Customer Service Represen- tatives (3) Portland, OaklandL Long Beachy Dallas (each office) Sales Manager (also has own accts.) Sales Representative (1) Customer Service Represen- tative/Secretary (1) Chicago Sales Representatives (2) Customer Service Represen- tative /Secretary(1) Alaska General Manager Sales Manager - Anchorage Anchorage Sales Representatives (5) Fairbanks Sales Manager Customer Service Dept. (l) Kenai Area Manager with sales and operations responsibility Figure 10 Personal Sales Force Distribution, Alaska Service, Sea-Land Service, Inc. Source: Alaska Service, Sea-Land Service, Inc. 128 representatives can become familiar with a particular industry and can acquire a better knowledge of that industry. Presently, this breakdown of accounts is done only by the Anchorage and Seattle offices. Some exceptions to this rule arer made when. a sales representative gets transferred to other industry or geographic accounts. If an individual becomes familiar with a particular account, he/she will stay with that account. Although assignment is by industry, the geographic concentration of many industries (particularly in the Seattle area), such as lumber and building materials, result in indirect assignment by geographic territory. The Alaska Service uses a number of sales representative training programs. The informal training program for inex- perienced employees lasts four to six months, with time spent in each department. At this point, they start work as a sales representative. For individuals with experience, an abbreviated training program of two to three weeks is used. Additionally, two or three sales courses purchased from out- side firms are presented throughout the year for the sales force. OccasionalLy, a Sea-Land corporate training program is available, but this was not being run currently. As part of their job, the sales representatives develop and execute a pre-planned sales call program. This plan takes into account the customer classification system discussed previously. The sales representatives are eva- luated on criteria such as number of overall calls, percent 129 of completion on sales preplan, etc. It is the expertise and ability of the sales representatives (and customer service representatives) that Sea-Land feels are major strengths. With respect to pricing, the Alaska Service has one basic philosophy--that is, to be rate competitive. What this means is that Sea-Land will match rate cuts of direct com- petitors on those commodities for which Sea-Land can effec— tively compete. Generally, rates are constant unless sales requests a change, a customer requests a change, or com- petition initiates a rate change. Over the 1976 to 1979 period, the general trend of rates had been downward due to the overtonnaging in the railbelt trade. However, during 1980 Sea-Land requested, and received approval from the ICC for, a general 9¥Q% increase in rates due to cost increases and negative profitability for the previous year. The Alaska Service is under both ICC and FMC tariff authority, but the ICC tariff authority is used primarily. The FMC tariff provides a port-to-port rate while the ICC tariff provides an lorigin-to-destination rate. Since Sea-Land provides the latter type of service to a very significant degree, the ICC tariff is the rate structure used most frequently. The ICC tariff requires 30-day publi- cation notice and the effective date of the new rates may be longer if the ICC receives shipper or competitor protests or the ICC suspends of its own volition. Rate changes are usually commodity by commodity and based on competitive con- ditions. 130 Within the Alaska Service, the pricing department and the sales department perform separate functions and report to different individuals (see Figure 9). It is one of the pricing department's functions to initiate rate changes with input from the sales department. Once rate changes are ini- titated, they are then transmitted to Sea-Land corporate headquarters for processing and presentation to the appropriate regulatory body. Although corporate headquarters processes the rate changes, it is the Alaska Service that determines the actual rate changes to request. Customers may receive rate quotes in two ways--either through the sales representative or through the pricing department directly; Regardless of the situation, contact is maintained between the sales department and the pricing department. Totem Ocean Trailer Express Company Description Totem Ocean Trailer Express (to be identified as TOTE) is a wholly owned subsidiary of the Sun Company, although it started out as a joint venture with Sun Ship, Inc., another Sun Company subsidiary. The Sun Company is a diversified industrial firm, with major interests in petroleum develop- ment, refining, and marketing. Sun is divided into six main operating units and TOTE is a part of the Commercial Group-10 TOTE is headquarted in Seattle while Sun corporate headquarters are in Radnor, Pa. TOTE utilizes two 131 trailerships in the trade which were designed and built by Sun Ship. Sun Company's revenue for 1979 was $10.8 billion, with a net income of $494 million.11 Basic Marketing Strategy Liner service from the Pacific Northwest. to Central Alaska was established by TOTE in September of 1975. Intitially, one vessel was placed in service with a second one added in May 1977.12 There appear to be two basic reasons for the establishment of TOTE in the Alaskan railbelt trade.13 First, Sun Company was embarking on a program of diversification and this opportunity represented a chance to increase that diversification. Second, this represented an extension of Sun Ship's trailership experience in the coastal trades (Puerto Rico and Hawaii). Of the different domestic trade routes analyzed for possible entry, Alaska appeared to offer the best chance for success. The major problem encountered in the entry to the trade was the downturn in trade as the Trans-Alaska Pipeline was being completed. Because of this downturn, and resultant overtonnaging, TOTE encountered stiff competitive resistance. Even though in the short-run Sun Company knew the prospects were less than optimum, it was felt that the long- run situation was favorable for Alaskan trade. This view continues to be held by Sun Company and TOTE management and the upturn in the trade from late 1980 through the first half of 1981 seems to bear out their judgement. 132 The service established by TOTE has certain advantages and disadvantages when compared with its major competitors. With regard to Alaska Hydro—Train, TOTE's major competitive advantages are: less transit time; reliability of the schedule; better service provided for perishable and service- sensitive cargo; off rail service more direct. The major competitive disadvantages for TOTE are: high capital cost structure; no service advantage for staple goods and dry cargo where time is not a factor; less flexibility in operations, since TOTE has only two vessels; space loss on ships due to carriage of trailers. When compared with Sea-Land, the competitive advantages and disadvantages are somewhat different. The major com- petitive advantages for TOTE are: less transit time (faster vessels; no call made at Kodiak, where Sea-Land stops); ability to handle a wider range of cargo, rather than being limited to 35' and 40' containers; newer, modern vessels and equipment with faster loading/discharge time. The major competitive disadvantages for TOTE appear to be: Sea-Land's higher level of customer familiarity due to established, world-wide organization; relatively new to the Alaskan trade; higher capital cost structure; 133 o Sea-Land's ability to put additional vessels in the trade, providing greater frequency and flexibility of service; 0 greater difficulty in achieving efficient space uti- lization aboard ship. The major impact of these advantages and disadvantages is that, for much of its cargo, TOTE is competing directly against Sea—Land and Alaska Hydro-Train, which have been major forces in the trade since their entry in 1964. TOTE has identified a number of target markets which include ser- vice sensitive and perishable goods, building :materials, drilling project related cargo, consolidators, and depart- ment store merchandise (particularly advertised specials). For the most part, these markets reflect either cargoes where time in transit is a critical factor, where cargoes are oversize or irregular in shape, or where shippers have their own trailers. TOTE seems to understand the needs of customers to a significant degree. Very often, the customer will be in contact with functional areas other than marketing; com— munications are maintained between the functional areas, particularly when the customer has a problem. After ini- tially entering the trade, it became apparent to TOTE that two sailings per week were required to provide the necessary level of service, and the second vessel was added. With the two vessels, some adjustments were tried in sailing schedu- les in order to find a pattern that best suited TOTE's customers. 134 Marketing Activities The TOTE service consists of a roll-on/roll-off trailership operation between Tacoma, Washington (where the pier facilities are located), and Anchorage, Alaska. At both ports, connections are available by highway (or rail) to inland points in both Alaska and the "lower 48." For the most part, anything that can be driven over the highway can be carried by the TOTE operation. Cargo is driven on and off the vessel via a series of shore-based ramps at both ports. TOTE currently has in service two trailerships, the gneat Land and the Westward Venture. Sailings are provided twice weekly, with sailings on Thursday and Saturday from Tacoma and arrivals in Anchorage on Sunday and Tuesday. The voyage typically takes 3 days,14 which is less time than either of its major competitors or the overland route from Seattle can offer. Each vessel has a capacity of 410 40' trailer equivalents, with some of the cargo space devoted to automobiles and other vehicles. Pickup and delivery of trailers is provided by over-the-road trucking firms. TOTE has less flexibility in the trade than competition, since these are the only two vessels currently available to the company. It might be possible in the future for TOTE to add a third vessel but this would result in a 50% increase in their capacity, which would be cost prohibitive in a depressed market. 135 The coordination of nmrketing activities occurs at the level of vice president in the TOTE organization (see Figure 11 for an organization chart). For the contiguous forty- eight states, the Vice President-Operations has respon- sibility for most elements of the marketing mix with the exception of pricing. In Alaska, the same function is per- formed by the General Manager-Alaska except that the general manager has: 0 ‘no responsibility for public relations; 0 direct responsibility for pricing; 0 no responsibility for marketing policy decisions, which come from the General Sales Manager. TOTE does have a nmrketing research department (in its Seattle offices), comprised of a supervisor and two ana— lysts, which evaluates current and potential markets. Specific segments of the market are examined and the basic needs of each segment are identified when possible. New accounts are projected on a somewhat informal basis by using data from industry publications. Forecasting is also done by the research group, although this process was not computerized (as of mid-1980). Three types of forecasts are used: for each month, for each year, and for a five-year period. The monthly forecast is pri- marily concerned with volume of movement, while the other two also project revenues, commodities to be carried, and origins and destinations for those commodities. The fore- casts have a major impact on the budgeting process, pri- marily on the revenue side of the budget. As part of this 136 .o:~ .nnounum houdunh :uooo Inaoa "cannon .ouu .uwwunnm unuuduh adooo Emacs .uuuao nodauuuauuho vouuu>ounn< uu ouauum afiommo>|:0uv "muaoauua on Lounge: modem flamenco nondnu: woman unawaauo o lunouanoum oo«> udafid d oouuuqh luuvuuuoum ooa> damuu< homacu: «duonoc _ _ 137 process, the expected market share is developed, as well as load factors (which are projected on a monthly basis using seasonal adjustments). The goals for market share and load factor are typically set higher than the forecast values. In evaluating the service that is provided, formal ser- vice performance audits have not been used. During the initial phases of service, many problems were encountered in the pickup and delivery of trailers for customers, but these appear to have been overcome. Currently, very few calls are received from customers with service problems. The operation of the service is judged more on the costs incurred-—items such as costs per load, freight damage costs, and similar figures are used. TOTE has done some analysis of changes in sailing schedules. Initially, flexible departure times were used to ensure a fixed arrival time in Anchorage, but this created problems in the delivery of shipments to the vessel in Seattle (and later Tacoma). Eventually, fixed departure times were set for the vessels. The current schedule of Thursday and Saturday departures from Seattle appear to pro- vide the best competitive advantage in terms of the arrival times in Anchorage, allowing for first-of—the-week and mid- week deliveries to customers. Promotion receives a significant degree of marketing attention at TOTE. The public relations function is respon- sible for both advertising and publicity. They use a full- page advertisement every-other week in Pacific Shipper, 138 including a sailing schedule as well as a listing of TOTE's sales offices. Other advertisements appear in Container Mg and Shipping News (a daily newspaper in Seattle and Portland, Oregon). The main impact of advertising is felt to be on the shippers outside the Seattle-Tacoma area, since most of the local shippers are in contact with TOTE person- nel on a regular basis. Sales promotion is also an important promotional element of TOTE. Currently, items such as calendars, pictures, cof- fee mugs, and "TOTE" bags are provided for customers. Publicity is provided in the form of brochures on the ser- vice and type of equipment, reprints of articles about TOTE, shipper manuals, and a movie about the service provided by TOTE. The movie is shown to new shippers, project shippers, sporadic shippers, and various transportation organizations. A large degree of the promotional effort of TOTE is put into the personal selling element of the promotional mix. The distribution of the sales force is shown in Figure 12. TOTE has sales representation in a number of major U.S. metropolitan areas and three sales offices in Alaska. Although the sales representatives have primary respons- ibility for customer contact, the pricing and equipment control (which performs the booking function) departments also maintain contact with the customer when cargo is offered to TOTE. TOTE has no formal sales training program for new sales people. This is partly because the current sales people 139 General Sales Manager- -------- General Manager- Seattle Anchorage Seattle Anchorage Sales Manager Sales Manager Sales Representatives (5) Sales Representatives (4) Chicago, Houston, Fairbanks San FranciscoL Long Beach, Portland Sales Representative (1 each) Terminal Manager (1) - primarily sales Vancouver, B.C. Kenai Full Time Agency Representative Terminal Manager (1) - primarily sales ------ Communication of Policy Decisions Figure 12 Personal Sales Force Distribution, Totem Ocean Trailer Express, Inc. Source: Totem Ocean Trailer Express, Inc. 140 have come from within the transportation field, particularly for the highway, air, and water modes, or from firms engaged in Alaskan trade. New people receive a short orientation period and some on-the-job training. In: 1978, the entire sales force completed the Xerox Professional Selling Skills Program. This was done in two separate sessions, with an in-house sales seminar between the two. Another program of this type was planned for 1980. The assignment of sales representatives to accounts is done in a two-step fashion for the Seattle and Anchorage offices. First, major accounts are assigned by commodity or industry; each sales representative is responsible for a number of commodity groupings. Additionally, each represen- tative is assigned to one major consolidator. Second, each sales representative is responsible, on a geographic basis, for the small shippers--these include the seasonal sporadic shippers and the less-than-truckload shippers. For the off- line sales offices, the sales representatives are respon- sible for all customers within the geographic area covered. Due to their distance from the on-line operating locations, off-line sales representatives are often called upon to pro- vide advice and assistance in the booking and pricing areas as well as to inform shippers of the overall service offered by TOTE. Another responsibility of time sales representatives is that of being aware of the customer's needs and of making TOTE's service responsive to those needs. The first-line 141 clerical staff provide support in this area, although no real attempt has been made to develop this support. The sales representatives try to keep» customers informed of items such as schedule changes and delays, and competitive changes and TOTE's response to them. Additionally, custo- mers are provided. with seals, placards, etc., for their cargo as may be necessary to meet their requirements. The pricing department has responsibility for shipping rates with input from the sales department. In setting the actual rate levels, TOTE has tended to follow the pricing levels used by Sea-Land. The general trend on rates from 1976 through 1979 was that of rate reductions, due to the overcapacity in the trade. The basic philosophy of TOTE was previously to sell the service that they provide, rather than the rates themselves. Currently, TOTE is now playing an expanded role in rate leadership by offering fair rates on what is considered to be a superior service. Since entry into the trade, TOTE has continually increased the use of through rates, particularly with motor carriers that serve off-line points. Additionally, com- binations of rates (where an inbound carrier's rate is simply added to TOTE's rate) are also used for some custo- mers. In the latter case, knowledge of the inbound carrier's tariff and confirmation of individual rates are required of the pricing department. As with Sea-Land, a general rate increase of 9 1/2% for TOTE was approved by the ICC in 1980. 142 Summary The material in this chapter has described the marketing strategy and marketing mix of each of the liner companies evaluated. In general, the information indicates a dif- fering role for marketing in each of the shipping lines. Additionally, each of the shipping lines appears to have adopted and implemented the marketing concept to a varying degree. In terms of a preliminary evaluation, TOTE and Sea-Land appear to have reached a high level of adoption of the marketing concept. Both shipping lines appear to believe strongly in the marketing concept, with its emphasis on satisfying customer needs through the use of integrated marketing. Alaska Hydro-Train is not as far advanced toward adoption of the marketing concept. Preliminary evaluation of the implementation of the marketing concept, which indicates the functional role and organization of marketing, yields a somewhat different result. TOTE appears to enjoy the highest degree of imple- mentation of the marketing concept. Marketing research, short-range and long-range planning, and market segmentation all play a role in the development of TOTE's marketing stra- tegy and activities. An integrated promotional mix is used and the chief marketing executive is found at a high level in the corporation. Sea-Land shows a lesser degree of adoption of the marketing concept than does TOTE. Short-range and long-range 143 forecasting as well as market segmentation are used, but the role of marketing research has been downgraded since the mid—1970's. The promotional mix of Sea—Land does not show the degree of integration exhibited by TOTE. Alaska Hydro-Train exhibits the least degree of ‘development of integrated marketing. Short-range and long-range planning along with a limited degree of market segmentation are used. The role of marketing within Alaska Hydro-Train has been recently upgraded. Despite this, advertising and public relations receive little emphasis and marketing research has not been developed as a functional area. Thus, the three lines do appear to exhibit varying degrees of usage of the nmrketing concept. This issue of adoption and implementation (particularly) of the marketing concept will be addressed in more detail in Chapter VI. 8. 9. 10. 11. 12. 13. 14. 144 Footnotes Based on discussions with marketing executives of the three major liner operators previously mentioned. Hauls of Fame San Francisco: Crowley Maritime Corporation, February 1979, p. 23. A large share of the information in this section and the next is based on discussions held with Don Claussen, currently General Sales Manager for Alaska Hydro-Train. Before this time period, there was not a great amount of concern with identifying customer needs. Additionally, the marketing function was not well coordinated and the personal selling function was very loosely organized. Alaska Hydro-Train must pay per diem changes on railcars that are not owned or leased by itself or the Alaskan Railroad. As of 1980, these charges were approximately $6-7 per day. Moody's Industrial Manual 1980, 2 vols. (New York: Moody's Investment Service, Inc., 1980), 2:3941. "When Marketing Takes Over at R.J. Reynolds," Business Week, November 13, 1978, p. 82. Moody's Industrial Manual 1980, 2:3940. A large share of the information in this section and the next is based on discussions held with Marvin R. Buchanan, who was Sales Manager-Continental U.S. for the Alaska Service of Sea-Land. Moody's Industrial Manual 1980, 2:4108. Moody's Industrial Manual 1980, 2:4112. "Another Link to the Last Frontier," Distribution Worldwide, December 1975, p. 32. A large share of information in this section and the next is based on discussions held with Everett W. Trout, Vice President-Operations for Totem Ocean Trailer Express. Mark Felice, "Roll-on/Roll-off Service Starts to Alaska," Intermodal World, October, 1975, p. 14. CHAPTER V SHIPPER SURVEY DATA ANALYSIS Introduction This chapter describes the results of a statistical ana- lysis of the data provided by a sample of shippers engaged in Central Alaskan trade. Initially, the characteristics of the shippers are examined in order to describe and evaluate the representativeness of the sample. Then, the results of univariate, bivariate and multivariate analyses performed on shipper responses to the marketing questionnaire are described. The final component of analysis includes an eva- luation by the customers of the service and marketing per- formance of the three shipping lines under study. Survey Response Rate Some 102 questionnaires were sent out and 52 usable forms were returned. Three additional respondents returned the forms indicating that they did not have enough experience with the shipping lines to complete the question- naire. Discounting these three respondents, a response rate of 52.5% was achieved. The response rate can also be eval- uated by comparing the respondent tonnage and respondent controllable tonnage against Central Alaska waterborne ton- nage figures for 1978, the latest year for which statistics were available. This comparison is shown in Table 15, with 145 146 .0000 000000000 00 00000 0000 .0.= 00 00000 .00000000000004 0000000. 000 00 0.00.0 0.00.00 0.. 00000000 .0 00.090 00 000.0000 gouge-0°00. 000. 0000.0. 000— uou 0.00000 .0000 00000000 00» 00000~00 0000 0000 000 00 0000000000 000 000000 000 000 00000000000 0000 «000000000 00 .0 .000000000 00000 000000 000 000 0000000000 ~000«u«000 000 000 0000000 000000 00000 000000 000 000 00000000000 00% .0 .000000000 0000 00000.00 ~00000 000 000000 00000000 «000000000 000 0000 000 00 0000000 000 00000 000000» 0000000000 .0 .A00u00000 000 0000000 000000 0000000 00000 0000000 «000000000 00. 0000000 00 000000 00000 000000 00000000 0000000000 00000000 .0 .00000000< 000 000000 0000000 0000000 ~0000> 00000 000 00n~00000t0~00 000 000008000 000 0000000 0000000 000000» 000000 00000 000 000-00000I0000 000 000 00a~0000030~00 00000000 .0 ”0000: 000 000 0.00 «00000 «.00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.00 00000 0.00 0 0 0 0 0 0 0 0 0 0.0 0000 0.00 0 0 0 0.0 «an 0.0 0 o 0 0.000 00000 0.60— o.nn 00000 0.00. | a II 0 0 0 0.00 00000 0.00 0 0 0 0 0 0 0.00 «000 0.00 0 0 0 «.00 00000 «.00 0 0 0 0 0 0 0 0 0.000 «.00 000000 0.00 I- a .I 0 0 0 I o I. 0 0 0 0 0 0 0 0 0 0 0 0 0.0 0000 0.00 000— 00 w 0m00h 00000 000— 00 N .0000000 .0000000 .0000000 00-000000 0000000000 0000000000 000000000: 000000000- 0 g N 0 bkflOu gummm w0mmm .0000000 «000000000 00000.0-00009 00000 00: 000000 "000000 00000000 00000000000 00 00000: 00000 000000000 0000000 0.000 00000 000000000 00000 .0000 .0000< 00000000 0000000 0000000 0000000 00000 .000 0000000000 00.000000 0000.00 .0000 0~0000u0x 00000 0 0000. 000000000008 .00000 .0001 0000000000— 00000—000 00000000000009 00000000! 0000000000 00000000- 00000000 00008 0000000000 00000000 0000: 0000000 .0000 00000 0 .0000 .00000 .0000 0000000000 0 0000003 .00000 .000: 0 000000 00000000 0000 0 000000000 .0000 000000 0 000000000 00000: 0000000 00¢u~< 0 .0000: .0000 00000000000 0 000000000 00000000 000- 0 000004 00000009 00000000 00000 0 0000000 00—00000 00000 00000000 0000009 0000000 0 0000 00000000000 0 00000000 0000000: 0000000000: 00000000 «00000: 0 .000 .0002 .000000000 00000 0000 0000 000—000- .0000 00000. 00000 0 0000 00000 00000000 000000 00000000 0000 u0m-ummm 000— 000 000000 0000000 000 0000000 0:000> 00000000008 000000 00 0000000: 00000000 00 00000 "000000 147 both the tonnages and percentage of Central Alaska tonnages being reported. The 1978 tonnage figures in the table represent secon- dary data that comprised all dry cargo tonnage moved between Seattle and Anchorage and all dry cargo tonnage moved by self-propelled vessels between Tacoma and Anchorage. These tonnages overestimate the cargo available to the three liner operators since the figures also include an undeterminable amount of dry bulk cargo. This dry bulk cargo would be carried by specialized operators and would not be available to the liner operators. Overall, the shipper reported tonnages1 accounted for 45% of the 1978 tonnage figures described above. The respondent controlled tonnage2 represented 33% of the 1978 tonnage figures. Most major commodity categories were represented among the survey' respondents, although three cautions should be noted. Some of the commodities (coal for example) would not be shipped by liner service, as discussed above. Also, respondents reported only their major com— modity shipped in the Alaskan trade. Since some respondents ship various types of commodities, some categories are unre- ported while others may be over- or under-represented. Thus, for one commodity, primary metal products, the percen— tage of 1978 trade is greater than 100. Since more recent Alaskan trade figures were not available, a direct com- parison between respondent tonnage and the comparable trade tonnage for 1979 could not be made. 148 Shipper Characteristics Individual Characteristic Analysis A number of variables were used to categorize the ship- pers who participated in the survey.3 In terms of number of firms, most respondents were classified as shippers (54%) or consolidators (27%), or as either consignees or shipper- consignees (a firm with offices in both Alaska and the "lower 48"). Exporting to Alaska (71%) was the principal trading activity reported, while an additional 28% indicated that their firm was involved in both importing to and exporting from Alaska. The respondent's major commodity was distributed across a number of categories, with the primary ones being food products (20% of the respondents) and house— hold goods (16% of the respondents). Primary metal pro— ducts, transportation equipment, department store merchandise, and building materials were each reported as the major commodity by 8% of the respondents. A number of other commodities in the Corps of Engineers classification system4 were represented by some of the respondents. These commodities appear to represent a cross-section of those types of commodities carried in liner service. The office of the majority of the respondents in the survey was located in the Seattle metropolitan area (75%), with the Anchorage area (21%) and the Portland, Oregon, area (4%) also represented. Seattle represented the principal port of origin for 61% of the respondents, with Seattle- Tacoma reported by another 12% and Tacoma reported by an 149 additional 6%; no other port or combination of two ports was designated as home base by a large number of respondents. For the principal destination port Anchorage was named by a large number of respondents (82% of those completing this item). Both the origin and destination port data give further indication of the primarily northbound nature of the trade. The origin and destination of the shipper's major commodity exhibits at broader geographic dispersion than is shown by the previous locational variables. For the most part, the West Coast predominated as the origin point, with the Seattle area being named most frequently (29% of the respondents). The primary destination of the major com- modity was Anchorage (60% of the respondents) followed by Anchorage-Fairbanks (14%). The annual cargo volumes give further insight into the characteristics of the respondents to the survey. The sta- tistics (as reported in Table 16) indicate that the respon— dents varied widely' by cargo ‘volume. Ftu' example, the smallest respondent tonnage was 68 tons per year while the largest reported tonnage was 85,000 tons per year. Many of the shippers were quite small, but a number shipped large volumes in the trade. The average annual ocean transpor- tation freight bill reported by the respondents was just over $997,000 with the total being just under $39.9 million (for 39 of the 52 respondents). The largest annual ocean transportation freight bill reported was $5.7 million, which 150 Table 16 Respondent Cargo Volumes--Summary Volume Measurea Mean Sam Range Tonnage, Short Tons 12,655 632,766 68 - 85,000 Controlled Tonnageb 9,960 458,192 0 - 68,000 Trailer Equivalents 742 37,079 4 - 5,000 Containers Equivalents 742 37,079 4 - 5,000 Railcars Equivalents 291 14,550 2 - 2,000 a. Each of the volume measures represents the total cargo volume reported by all respondents; the volume figures are for 50 (out of 52) respondents who reported cargo volume figures. b. Respondent tonnage times the percent of the time the respondent reported making the actual shipping line selection; the controllable tonnage figures are for 46 (out of 52) respondents. further indicated that there were a number of small shippers and a few large ones. Shippers were also asked to report specific character- istics of their major commodity being shipped. On average, respondents indicated that of their total cargo, 15% of their shipments were emergency-rush, 14% were perishable, and 5% were hazardous.5 A relatively few shippers reported cargo with these characteristics--a result that. was ‘not unexpected. Of the respondents that were classified as shippers or consignees, a shipper association was used on average for 9% of the cargo shipped and a consolidator was used on average for approximately 28% of the cargo shipped. No respondent reported using an intermediary other than the two previously mentioned. On average, the respondent firms made the actual selection of a shipping line 74% of the time. This number further indicates the somewhat limited use of intermediaries in the shipment of goods to Central 151 Alaska. Lower and middle management were designated as being responsible for the actual shipping line selection by 57% of the respondents. In nearly all cases (94%), there was no written policy for shipping line selection. When the major commodity classification was broken down by shipper classification, some important results were found. For a number of the commodities such as farm pro- ducts, pulp-paper, petroleum products, department store merchandise, and building materials, the respondents were entirely or primarily shippers. However, consolidators played a major role in the movement of transportation equip- ment, household goods, and miscellaneous shipments. When these results were broken down by shipping line, it was found that 11K; few respondents who evaluated Alaska Hydro-Train could be characterized as shippers of high volume/weight commodities. For the other two shipping lines, a much greater balance of commodities was found. Overall Analysis For each shipping line, a crosstabulation was used to examine the relationship between shipper classification and percent of cargo routed on that line. The results vary somewhat among the three lines evaluated. For Alaska Hydro-Train, no pattern of responses was found among the categories of either shipper classification or percent of cargo routed.6 Sea-Land exhibited a much broader range of responses on these variables. In particular, the shipper category indicated that they used Sea-Land for most of their 152 cargoes, With.£l similar, although less strong, result for consolidators. The shipper and consolidator categories accounted for 34 of the 41 respondents rating Sea-Land. For the respondents rating TOTE (many of whom many also rated Sea—Land), there was a tendency to report using TOTE to a lesser degree. Two-thirds of these respondents reported shipping 40% or less of their cargo on TOTE, and this situation was particularly striking for the shippers, the largest respondent category. ‘This analysis indicates that the respondents tend to ship smaller volumes of their total cargo on TOTE than on the competing lines, particularly Sea—Land (the detailed cross-tabulation tables are found in Tables B1 to B3 of Appendix B). The type of shipment strongly influenced the respondent's choice of a shipping line and the concentration of shipments on that line. For emergency-rush shipments, Alaska Hydro-Train was used the least, with those respon- dents reporting only an average of 7.5 of their cargo as emergency-rush, ‘Respondents rating Sea—Land reported that an average of 15.7% of their cargo was emergency while those rating TOTE reported an average emergency rating of 13.7. Commodity categories with the highest average values lof emergency shipments were primary metal, transportation equipment, and household goods. Respondents rating Alaska Hydro—Train reported no perishable shipments, while the respondents rating Sea-Land and TOTE were nearly identical with approximately 13.6% of cargo being reported as 153 perishable. As expected, the commodity categories with the highest average perishability values were farm products and food products, with all other categories reported as essen- tially non-perishable. Shipping Channels One of the distinctive findings of this research was that many non-intermediary respondents use a shipper asso- ciation to consolidate shipments and negotiate rates. This practice varied by major commodity and shipping line being rated. The respondents rating Alaska Hydro-Train reported using a shipper association to handle cargo 33% of the time. Respondents rating TOTE reported using a shipper association for 10% of their cargo, while those rating Sea-Land reported using a shipper association for 7% of their cargo. Shippers of food products, farm products, lumber-wood products, pulp- paper, and primary metal were found to be the most intensive users of a shipper association. Overall, the non-intermediary respondents reported using a consolidator to a greater degree than a shipper asso- ciation. On average, a consolidator was used for 25% of respondent cargo as opposed to only 10% of cargo for a shipper association- ‘Respondents rating Sea-Land reported the highest usage of consolidators (28% of cargo) followed by the respondents of TOTE (24% of cargo) and Alaska Hydro-Train (17% of cargo). A number of commodity cate- gories showed high usage of consolidators, particularly farm products, food products, lumber—wood, primary metal, 154 and machinery. These results tend to confirm the idea that intermediaries do play a role in the Central Alaska marine trade. Overall, non—intermediary respondents reported using an intermediary approximately 36% of the time, on average. The product categories for these respondents were similar for both types of intermediary usage reported. In terms of revenue per ton (ocean transportation freight bill divided by tonnage equivalent), the overall average was between $101 and 102 for the total sample of respondents. However, a great deal of variability was noted when this figure was broken down by commodity groupings. A similar pattern of variability was found when the revenue per ton was broken down by shipper classification. This may be partially due to inaccuracies by respondents in esti- mating either the freight bill or the volume of shipment, or in the conversion factors used. to create tonnage equivalents.7 Shipping:Line Service Attributes Overall Shipping Line Service Comparisons For the customer rating of shipping line service attri- butes, four sets of variables were used for analysis--the rating of shipping line service variables, the closeness of shipping line service to customer needs variables, the shipping line service attitude variables, and the importance of shipping line service variables. The evaluation of each 155 of these will be discussed in turn. The mean ratings for each shipping line for each attribute are found in Table B4 and are plotted in Figure 13. For the overall ratings, Sea-Land was perceived to provide the best service (average rating of 2.58). Alaska Hydro—Train had an average rating of 2.74 followed by TOTE with 2.77. These numerical aver- ages indicate that Sea-Land appeared to be superior to both Alaska Hydro-Train and TOTE.8 Figure 13 also shows that Sea-Land enjoyed the most consistent rating across the attributes. Shipping Line Service Attribute Ratings The attribute ratings were also analyzed on an indivi- dual basis, with the analysis consisting of graphical com— parisons of ratings on the attributes. A shipping line was considered to have a competitive advantage when its average rating on a particular attribute was at least 0.25 less than its competitors' average ratings.9 anal; numerical dif- ference provided a way to evaluate customer perceptions of shipping line service as it differed among the lines. Sea-Land exhibited the greatest number of advantages among the three competitors. Alaska Hydro-Train, although slightly superior to TOTE on overall average rating, exhi— bited a great deal of variability among the individual ratings when compared to TOTE. The individual attribute ratings indicate the following: 0 Alaska Hydro-Train had perceived advantages of follow-up/tracinglexpediting, port-to-port rates, sales representative manner, and compliance with spe- cific instructions; 156 RATING VERY VERY GOOD AVG BAD 1. 2 3 4 5 6 7 Overall Avg. Transit Time : 4 *4 Frequency of Sailing “ f a Schedule Reliability 44 l a Port Facilities Access . a ,4 Specialized Equip./Service . . ‘6i i 44 Condition of Contrs./Equip.a 4 Na ; Handling Equipment . . .$\. 44 4 Storage Facilities : : léxfr ; 4 i Completeness of Service r ‘7 yg/fi . j ; :: Outbound/Inbound Ports f, ; a 4 Absence of Loss/Damage , 44j¥§y~ , 4 4 Speed of Settlement 04* 4 1" 4 4 Follow-up, Tracing, Exped. .___,<:"},/' 4 4 Door-to-Door Rates ,_ , {$4 . 4 444 Flex. of Rates & Charges 44 4 1!; 4 4 Lowest Thru Rates ' 4 4 4 Lowest Port-to-Port Rates 44 Sales Promotional Material , 4 4 Technical Assistance 4 4 Schedule Change Info. 4 Process. of Freight/Docum. 4 44 Sales Rep. Manner , 4 4 Shipping Reqmt. Understdg. ; : Responsiveness of Mgmt. e . : t . .4 Compl. with Specif. Instr. _____¢r"4{ ; : : Key: --- Alaska Hydro-Train (AH) Sea-Land Service (SL) ---- Totem Ocean Trailer Express (T) Note: See Table B4 for the actual numerical values. Line Figure 13 Mean Ratings by Attribute for Each Shipping 157 0 Sea-Land had perceived advantages of condition of containers/equipment, handling equipment, outbound and inbound ports, sales promotional material, and responsiveness of management; 0 Sea-Land and TOTE had perceived equal advantages of frequency of sailing and schedule reliability; 0 TOTE had perceived advantages of transit time and provision of schedule change information. The mean attribute ratings were then subdivided by cate- gories of cmstomers--high perishability vs. non—perishable cargo, high emergency rating vs. non-emergency rating cargo, and consumer goods vs. industrial goods. As with the ratings for all respondents, the criterion for a perceived competitive advantage for a line was an average rating of at least 0.25 less than competition. For high perishability cargo (only Sea-Land and TOTE had respondents in this category), the results are shown graphically in Figure 14. The resulting patterns of ratings were quite similar for the two shipping lines, with Sea-Land having perceived advantages of frequency of sailing, storage facilities, and technical assistance. TOTE had perceived advantages of spe- cialized equipment/service, flexibility of rates and charges, and thru rates. The non-perishable cargo segment was not evaluated here since it represents the residual of the previous two breakdowns (Figures 13 and 14). For the high emergency rating respondents, the results are plotted and shown in Figure 15, with Alaska Hydro-Train not included since only one respondent; in. this category 158 VERY VERY GOOD AVG BAD 1. 2 3 4 5 6 7 Overall Avg. Transit Time _ : A : - _ y 44 Frequency of Sailing 4 )fi - . 444 . : Schedule Reliability f : A - A Port Facilities Access . Specialized Equip./Service ; Condition of Contrs./Equip. Handling Equipment Storage Facilities Completeness of Service Outbound/Inbound Ports . Absence of Loss/Damage 4 . l - - Speed of Settlement - . , . l 4 Follow-up, Tracing, Exped. 4 , - - 4 Door-to-Door Rates - - 44 4 Flex. of Rates & Charges {’ 4 4 4 Lowest Thru Rates , 4; 4 4 4 4: Lowest Port-to-Port Rates 4 44‘ 4 4 4 4 4: Sales Promotional Material 44 4 /:>; 4 4. 4 A: Technical Assistance 4 4 14 44 4 4 v ’7' Schedule Change Info. 4<¥/§' Process. of Freight/Docum. 4 ‘4 Sales Rep. Manner '44 4 4 - 4 Shipping Reqmt. Understdg. . § : : 4 . Responsiveness of Mgmt. ————fi( . ; 44 . Compl. with Specif. Instr. - Sea-Land Service (SL) Key: —-— Totem Ocean Trailer Express (T) Note: See Table B5 for the actual numerical values. Figure 14 Mean Ratings by Attribute for Each Shipping Line, High Perishability Cargo 159 VERY VERY GOOD AVG BAD Overall Avg. Transit Time y A : f - : 4; Frequency of Sailing - 'Euz/H - : : - Schedule Reliability ' Port Facilities Access '_7 i \?jt '7 n 4: 4 Specialized Equip./Service a ; €Lf 4 44 : ; Condition of Contrs./Equip.4 4. ‘hk e4 4 4 Handling Equipment . . \\‘\_ . . Storage Facilities 77 l [C E III T I 4: Completeness of Service ;_ ; jCé”/r; ; : V Outbound/Inbound Ports a 4 J 44 - 44 Absence of Loss/Damage ‘\ Speed of Settlement Follow-up, Tracing, Exped. a_ 4 A//7},/ 44 - - Door-to-Door Rates . . (I; 4 4 4 .4 Flex. of Rates & Charges ‘ Lowest Thru Rates \ Lowest Port-to-Port Rates 44 4 2K .4 4, 4 44 Sales Promotional Material 4 4 3*“\44 4 4 4 Technical Assistance 4 44 [Z ,r;? 4 4 4 Schedule Change Info. 4 45' ' 4 Process. of Freight/Docum. 4 4 454 4 4 Sales Rep. Manner 4 44 1 - 4 4 L ‘ / - : . fl 0 l . - _. 7 \ Shipping Reqmt. Understdg. . 4i‘\\ Responsiveness of Mgmt. :4 : Compl. with Specif. Instr. r ' A v C v 0 Key: Sea-Land Service (SL) —-- Totem Ocean Trailer Express .(T) Note: See Table B6 for the actual numerical values. Figure 15 Mean Ratings by Attribute for Each Shipping Line, High Emergency Rating Cargo 160 rated this Ijlmh These results indicate that Sea-Land is perceived to have advantages of port facilities access, handling equipment, storage facilities, completeness of service, follow-up/tracing/expediting, sales promotional material, technical assistance, processing of freight and documentation, and sales representative manner. TOTE is perceived to have competitive advantages of transit time, outbound/inbound ports, port-to-port rates, provision of schedule change information, and responsiveness of manage- ment. TOTE exhibits a greater variability of attribute ratings, and seems to be at a competitive disadvantage to Sea-Land, when compared with the high perishability cargo segment. The non-emergency rating cargo segment was not evaluated for the same reason as for the non-perishable cargo segment. The respondents were also subdivided by industrial and consumer good categories. For respondents whose major com- modity was classified as an industrial good (see Figure 16), Alaska Hydro-Train enjoyed a perceived advantage on ‘the attributes of port facilities access, storage facilities, completeness of service, speed. of settlement, follow-up/ tracing/expediting, rates, and 4 out of the 8 marketing ser- vices attributes. Again, caution should be noted here because of the limited number of respondents rating Alaska Hydro-Train. Sea-Land had perceived advantages of absence of loss or damage, provision of door-to-door rates, and sales promotional material. TOTE had perceived competitive 161 VERY VERY GOOD AVG BAD 1. 2 3 4 5 6 7 Overall Avg. Transit Time Frequency of Sailing Schedule Reliability Port Facilities Access _ Specialized Equip./Service; Condition of Contrs./Equip. Handling Equipment Storage Facilities Completeness of Service Outbound/Inbound Ports Absence of Loss/Damage Speed of Settlement Follow-up, Tracing, Exped. DoOr-to-Door Rates Flex. of Rates & Charges Lowest Thru Rates Lowest Port-to-Port Rates Sales Promotional Material 4 4 ‘Ih705, 4 4 —4 Technical Assistance 4 4 '(7': a 4 1 Schedule Change Info. 44 444<’4t> 4 4 44 4 Process. of Freight/Docum. 444 4 4} 4, 4 l Completeness of Service ; 4 /.g: 4 4 4 Outbound/Inbound Ports 4 4 5/74 4 4 4 44 Absence of Loss/Damage 44 4Vt 4 ¢ . ; Speed of Settlement - Follow-up, Tracing, Exped. gg4 4 4 4 . l Door-to-Door Rates Flex. of Rates & Charges Lowest Thru Rates Lowest Port-to-Port Rates Sales Promotional Material ; Technical Assistance - 4 r Schedule Change Info. 4 Process. of Freight/Docum. 4 44 Sales Rep. Manner :4 - {; 4 - , - Shipping Reqmt. Understdg. : ; <5; a. 4; a a Responsiveness of Mgmt. e— :j/,§, : : . #fi Compl. with Specif. Instr. re :- 5 #4 s 4e 1 Key: Sea-Land Service (SL) -—-- Totem Ocean Trailer Express (T) Note: See Table B7 for the actual numerical values. Figure 17 Mean Ratings by Attribute for Each Shipping Line, Consumer Cargo Classification 164 segment. For the breakdown by basic commodity, Alaska Hydro-Train exhibited a perceived advantage in the industrial goods segment while Sea-Land enjoyed £1 large advantage over TOTE in the consumer goods segment. The major areas of competitive advantage for Alaska Hydro-Train were found in the services and marketing ser- vices areas of the shipping line service attributes. The areas of competitive advantage for Sea-Land were con- centrated in the facilities and equipment area and the marketing services area. The major competitive advantages for TOTE were the time aspects of service and the provision of schedule change information. As discussed previously, these competitive advantages did vary to some extent by breakdown of the respondents. Shipping Line Service Closeness to Customer Needs The next set of variables examined for shipping line service were the shipping line service closeness to customer needs variables. The results of this analysis are tabulated in Table B8, where the results are shown by attribute for each shipping line. Two factors were considered here: the mean valwe on a specific attribute and the number of times another shipping line was rated.11 As an example, for overall average transit time TOTE (1.69 average closeness and 8 respondents rating another line) was closer to respondents' needs than was Sea-Land (2.00 average closeness and 23 respondents rating another line). This analysis was, of necessity, much more subjective than the one previously 165 described. Alaska Hydro-Train, for the closeness variables, enjoyed perceived advantages of outbound and inbound ports, speed of settlement, follow-up/tracing/expediting, rates, processing of freight and documentation, and compliance with specific instructions. Sea-Land has perceived advantages of specialized equipment and service, handling equipment, absence of loss or damage, and sales promotional material. TOTE has perceived advantages of transit time and frequency of sailing. The results of the analysis of these closeness to needs variables give further insight into the service provided by the three shipping lines. Overall, Alaska Hydro-Train seems to provide service closest to customer needs. The number of respondents rating Alaska Hydro-Train, however, was small and they may represent a group of customers quite satisfied with the service provided. Sea—Land's main competitive advantages are related to facilities and equipment, while TOTE's main competitive advantages grow out of the speed of service. Overall Respondent Attitude The average attitude of the respondents toward each shipping line was calculated to give further insight into the service provided by the shipping lines.12 As in the shipping rating attributes, Sea-Land was perceived to offer the best service with an average attitude value of 5.11. A major change was found for Alaska Hydro-Train and TOTE, however. Based on these average attitudes, TOTE was ranked 166 second with an average attitude value of 5.52 followed by Alaska Hydro-Train with an average attitude value of 6.30. Sea-Land, was ranked first on both the overall average shipping line service rating and on the overall attitude scale. TOTE, however, showed a much improved performance on the overall attitude scale (ranked second) than compared to the overall average shipping line rating (ranked third, just below Alaska Hydro-Train). This improved performance can be attributed to the fact that TOTE rates better on a number of the attributes considered to be of major importance by the respondents. Importance of Attributes Another set of evaluations made by the respondents were for the importance of the shipping line attributes. These evaluations 4provided further information (n1 hOW’ shippers evaluated shipping line service; attributes of major impor- tance were identified and attitude toward a shipping line was calculated.13 Figure 18 gives the overall means for the importance of each attribute. These results indicate that the most important attributes14 to the respondents were the timeliness of service attributes (such as transit time) a number of the marketing services attributes (completeness of service, outbound/inbound ports, absence of loss/damage, and follow-up/tracing/expediting), and three of the five services attributes (shipping requirement understanding, responsiveness of nmnagement, and compliance with specific instructions). The least important attributes 167 IMPORTANCE GREST AVG 1 2 3 4 Overall Avg. Transit Time Frequency of Sailing LEAST Schedule Reliability 4 / 4 4 4 Port Facilities Access 4 j\\4 4 4 Specialized Equip./Service 4 Condition of Contrs./Equip.4 A . Handling Equipment Storage Facilities Completeness of Service Outbound/Inbound Ports Absence of Loss/Damage Speed of Settlement Follow-up, Tracing, Exped. Door-to-Door Bates Flex. of Rates & Charges Lowest Thru Rates Lowest Port-to-Port Rates Sales PrOmotional Material Technical Assistance Schedule Change Info. Process. of Freight/Docum. : : Sales Rep. Manner ; e 4 : Shipping Reqmt. Understdg. ;4 : ~ 4 Responsiveness of Mgmt. : - : a; Compl. with Specif. Instr. : 4/ : ; : Note: See Table B9 for the actual numerical Figure 18 Mean Importance by Attribute values. 168 were considered to be storage facilities and sales promo- tional material. The ratings of importance were also broken down by cargo classifications,15 as was done for the shipping line rating variables. For the breakdown of high perishability versus non- perishable cargo, the patterns that emerged were similar to the overall pattern, with some striking differences (see Figure 19). For the high perishability cargo respondents, the following attributes were considered particularly impor- tant (compared to non-perishable cargo respondents)--all of the timeliness of service attributes, all of the facilities and equipment attributes, absence of loss or damage, flexi- bility of rates and charges, thru rates, and most (5 out of 8) of the marketing services attributes. When the same data were broken down by emergency versus non-emergency cargo rating (see Figure 20), similar patterns emerged in the two emergency rating categories, but the dif- ferences were not as striking as those found for perishabi- lity. In particular, the following attributes were perceived to be more important for the high emergency rating cargo respondents-~transit time, frequency of sailing, port facilities access, handling equipment, most of the services attributes, port-to-port rates, shipping requirement understanding, and compliance with specific instructions. A final breakdown of industrial versus consumer goods (Figure 21) produced a very similar pattern of mean impor- tance for both groups. Only a few major differences were 169 IMPORTANCE GRTST AVG LEAST 1. 2 3 4 5 Overall Avg. Transit Time Frequency of Sailing" 4‘\A 4 4 4 44 Schedule Reliability 4//Z4 4 4 4 Port Facilities Access 4\\:‘§_ 4 4 4 Specialized Equip./Service 4sz 4i 4 4 4 Condition of Contrs./Equip.4 4k 44 Handling Equipment Storage Facilities Completeness of Service Outbound/Inbound Ports Absence of Loss/Damage Speed of Settlement Follow-up, Tracing, Exped. Door-to-Door Rates Flex. of Rates & Charges Lowest Thru Rates Lowest Port-to-Port Rates Sales Promotional Material Technical Assistance Schedule Change Info. Process. of Freight/Docum. Sales Rep. Hanner Shipping Reqmm. Understdg. Responsiveness of Mgmt. Compl. with Specif. Instr. :- 1 ; ~ : e 'F Key: High Perishability --—--NOn-Perishable Note: See Table B10 for the actual numerical values. Figure 19 Mean Importance by Attribute, High Perishability vs. Non-Perishable Cargo 170 IMPORTANCE ‘ GRTST AVG LEAST 1. 2 3 4 5 Overall Avg. Transit Time 5, ; Frequency of Sailing [4", r : : Schedule Reliability ‘ Port Facilities Access . . Specialized Equip./Service : - - Condition of Contrs./Equip.: .1 Handling Equipment - Storage Facilities \- Completeness of Service , Outbound/Inbound Ports Absence of Loss/Damage Speed of Settlement Follow-up, Tracing, Exped. Door-to-Door Rates Flex. of Rates & Charges Lowest Thru Rates Lowest Port-to-Port Rates Sales Promotional Material Technical Assistance Schedule Change Info. Process. of Freight/Docum. Sales Rep. Manner Shipping Reqmt. Understdg. Responsiveness of Mgmt. Compl. with Specif. Instr. Key: ---- High Emergency Rating - - - -- Non-Emergency Rating Note: See Table 310 for the actual numerical values. Figure 20 Mean Importance by Attribute, High Emergency Rating vs. Non-Emergency Rating Cargo 171 IMPORTANCE GRTST AVG LEAST 1. 2 3 4 5 Overall Avg. Transit Time Frequency of Sailing 111 : : Schedule Reliability 1 : 1 Port Facilities Access Specialized Equip./Service - A Condition of Contrs./Equip.: l‘7 : 1 Handling Equipment Storage Facilities Completeness of Service Outbound/Inbound Ports ’: Absence of Loss/Damage Speed of Settlement A : Followbup, Tracing, Exped. - - { Door-to-Door Rates A Flex. of Rates & Charges ; - - ; e Lowest Thru Rates , :1 . A Lowest Port-to-Port Rates ; , ; Sales Promotional Material : : 4 Technical Assistance " g A; Schedule Change Info. ' c A: 4 Process. of Freight/Docum. re 4, g Sales Rep. Manner ‘§\- 4 ; Shipping Reqmt. Understdg. ~——1 Responsiveness or Mgmt. : Compl. with Specif. Instr. : ; s : 4; Key: ----Industrial Cargo Classification Consumer Cargo Classification Note: See Table B10 for the actual numerical values. Figure 21 Mean Importance by Attribute, Industrial vs. Consumer Cargo Classification 172 found: condition of containers/equipment, completeness of service, and responsiveness of management. The breakdown of importance of attributes by cargo perishability provided the greatest differential in the mean importances of the various attributes. Overall, the major differences found in each breakdown were concentrated in the time aspects of service, facilities and equipment, and marketing services. The other two sets of attributes (services and rates) showed some dif- ferences in the breakdowns, but the differences were not as striking. Prediction of ShippinggLine Usage Discriminant analysis was used to examine the value of the service attributes in prediction of shipping line usage. In this analysis the dependent variable selected was "Percent of Cargo Routed," a categorical variable that indi— cated the extent to which a respondent used a shipping line being rated.16 Fbr example, one respondent reported using Alaska Hydro-Train for between 41 and 60 percent of its cargo. The shipping line service rating variables served as the independent (predictor) variables in this analysis. A discriminant analysis was run on SPSS with the shipping line service rating variables as predictors using a stepwise discriminant procedure.17 Selected results of this analysis are found in Table B11. The initial analysis eli- minated all cases with missing data, while the classifica- tion results included additional cases where there was non- missing data for the variables used in the derived 173 discriminant functions. The initial analysis yielded four discriminant functions, of which only three met the criteria of variance accounted for > 0.1, eigenvalue > 1.0 and canonical correlation > .33.18 These discriminant functions contained 14 variables from the original set of 25 shipping line service attributes. These fourteen variables were con- centrated in the areas of services, rates, marketing services, and to some extent, time aspects of service.19 The classification of respondents into categories based on the derived discriminant functions produced correct classi— fication in 70% of the cases (see Table Bll). The original analysis used 28 cases, while the classification procedure used an additional 22 cases.20 With these cases, the classification procedure more than met the criterion of cases correctly classified > 50%. This indicates that some of the shipping line service attributes are related to the amount of cargo routed by the respondents on the shipping lines under study. Another analysis was performed using the attitude variables created from the shipping line rating variables and the importance of attribute variables. The relationship between overall attitude and percent of cargo routed was examined. Using the Spearman correlation coefficient, a correlation of r=-.49 was obtained, indicating that approxi- mately 25% of the variation in percent of cargo routed could be explained by variation in overall attitude. 174 Summary This chapter has presented a description of the respon- dents and an analysis of their perceptions of shipping line service attributes. These attributes were used to differen- titate among the services provided by Alaska Hydro-Train, Sea-Land, and Totem Ocean Trailer Express. The analysis has shown that the three shipping lines do possess competitive advantages which vary by shipping line and by market segment. Discriminant analysis using the shipping line rating variables was able to predict with some success the percent of cargo routed by the respondents. The next chapter will combine the analysis from this chapter with the marketing strategy analysis from Chapter IV. 175 Footnotes The figures reported in the table represent actual ton— nages reported by resondents or equivalent tonnages where the respondent reported cargo volume in terms of containers, trailers, or railcars. The respondent controlled tonnage was calculated by multiplying the respondent tonnage (or equivalent tonnage) by the percent of the time the respondent reported making the actual shipping line selection. For the tabulations of shipper characteristics, respon- dents who did not reply to a particular question were eliminated from the calculations of percentages; the number of respondents not reporting was small for each classification variable. For a detailed description of the categories, see Waterborne Commerce of the United States - Calendar Year 1978- Part 5 National Summaries (Fort Belvoir, Virginia: U.S. Army Corps of Engineers, n.d.), pp. VII-X. There was some overlap in these classifications, with some respondents reporting cargo as having two or three of these characteristics. This result is due to the small sample size of those respondents evaluating Alaska Hydro-Train. The conversion factors used in the calculation repre— sented only average values. See Chapter III for further discussion of this issue. It should be noted that the differences were not tested for statistical significance. The main reasons for not using inferential statistics here were the lack of a sampling frame that encompassed all Pacific Northwest-Central Alaska marine shippers, the somewhat exploratory nature of the research, and the small sample size for Alaska Hydro-Train. The value of 0.25 for the difference in shipping line ratings was chosen beause it appeared to provide a good degree of discrimination among the service provided by the three shipping lines. A lower average rating indi- cated that a shipping line's service was perceived to be better by the respondent. Further, statistical calcula- tions on this portion of the analysis were not attempted (see footnote 8). 10. 11. 12. 13. 14. 15. 16. 17. 18. 176 See footnote 9 for the reasons for this criterion. For the shipping line service closeness to customer needs attributes, a line was considered to provide superior service if its average value for closeness on an attribute was less than competition and only a few respondents indicated that another line provided superior service. The average attitude of all respondents on each attri- bute for: each shipping line was lcalculated. ‘by multiplying the average rating (n12; shipping line ser- vice attribute by the average importance of the attri- bute. These values were then summed for all attributes and an overall attitude value was calculated. See the previous section for the calculation of attitu- des toward the shipping lines. Previous research had only established the importance of the attributes through statistical analysis, rather than through respondent reporting. Based on the distribution of the mean importance of attributes, an attribute was considered of most impor- tance to respondents when its mean value was less than or equal to 2.0; as with the other variables, inferen- tial statistics were not used in the analysis. Differences in the importance of each attribute were considered major when the mean difference in attribute importance was at least 0.25 and the mean importance for one of the segments was less than or equal to 2.0. The "Percent of Cargo Routed" variable was constructed as a fixed category variable with six possible respon— ses. The alternative of using an open-ended variable here, by allowing respondents to report a percentage, would probably have inflated the actual accuracy of the variable. ’ For a description of the stepwise discriminant analysis procedure, see: Norman H. Nie, C. Hadlai Hull, Jean G. Jenkins, Karin Steinbrenner, and Dale H. Bent, Statistical Package for the Social Sciences, 2nd ed. (New York: McGraw-Hill Book Company, 1975), Ch. 23. The basic intent of these criteria was to ensure that the derived discriminant functions explained some degree of variation in the criterion variable, the "Percent of Cargo Routed" on a pmmticular shipping line. The cri— teria were established to delineate discriminant func- tions that would account for at least 10% of the variation in the criterion variable. It should be noted that some of the standardized discriminant coefficients 19. 20. 177 were negative, indicating these predictor variables were negatively related to the "Percent of Cargo Routed." For each discriminant function, however, most of the coef- ficients were positive. See Figure A3 for the actual attributes used in the areas listed. The additional 22 cases provide a test of the ability of the discriminant analysis to correctly predict shipping line usage. If the initial derivation of the discrimi- nant functions had been 100% correct, and the classifi- cation of the additional 22 cases was totally incorrect, (an unlikely result) only 56% of the cases in total would have been correctly classified. CHAPTER VI MARKETING PERFORMANCE OF THE LINES Introduction This chapter is intended to provide an overview of the use of the marketing concept by the three shipping lines previously described. In doing so, the information and analyses from the previous two chapters are utilized. The first section of the chapter deals with evaluation of customer needs by each shipping line and the level of eval- uation of service attributes by each shipping line's customers.1 The next major section of the chapter examines the degree to which each shipping line uses integrated marketing in the development and implementation of marketing strategy. Thug last two major sections of the chapter are concerned with how the lines assess the profitability of various types of cargo and with the degree of success of each line as measured by market share and profitability. Evaluation of Customer Needs The first area examined under this subject was the apparent degree of understanding of customer needs by each of the shipping lines and the actual processes that were used to gain that understanding. Alaska Hydro-Train was least active from this standpoint. Only within the last 178 179 three years has any formal marketing organization been developed. Although without any formal research on market segments and individual customers, the sales force does pro- vide information to management on customer needs by market segment. As a result, Alaska Hydro-Train has made revisions to the type of service offered. Unlike in the years pre- ceding this change, Alaska Hydro-Train now solicits custo- mers that are not directly on rail spurs and now provides rubber-tired pickup and delivery. Additionally, members of the sales force have become more active in developing their relationships with actual and potential customers. Sea-Land, on the other hand, shows a high degree of customer orientation. Specific target markets have been defined, particularly in the area of consumer goods. A pri- mary objective of the Sea-Land marketing organization is understanding customer needs and problems, and reacting to those needs better than competition. Although no formal marketing research organization is used by the Alaska Service, sales and marketing personnel do provide input into the development of marketing plans and the marketing mix. TOTE's marketing strategy reveals a high degree of customer orientation. Target markets have been defined, with the primary ones being shippers of perishable and service sensitive commodities, consolidators, and shippers of building materials and project cargo. Marketing research is used to identify market segments, customers, and the needs of potential and actual customers; the sales force also 180 provides information on customer needs. As an example of a marketing strategy change, after initial entry in the trade, TOTE added a second vessel and revised their sailing sche- dule in order to better meet customer needs. Customer Evaluation of Shipping Line Service Attributes The shipper survey examined three aspects of shipping line performance: 0 shipping line service, where respondents rated a line on a number of service attributes; 0 shipping line service closeness to customer needs, where respondents evaluated how close a line's ser- vice was to their own needs, using the same attribu- tes as above; 0 shipping line service attitude, where the respondent ratings of smipping line service were combined with the importance of the attributes to the respondents to produce an overall attitude towards a shipping line. In terms of overall service rating and overall service atti- tude, Sea-Land enjoyed it perceived. competitive advantage over the other two competitors. Although Sea-Land seemed at a competitive disadvantage with Alaska Hydro-Train on the closeness to customer needs attributes, the small sample size for Alaska Hydro-Train made this comparison less rigorous than a comparison of Sea-Land and TOTE. Alaska Hydro-Train was second on overall service rating, just ahead of TOTE, but placed third on overall service attitude, well behind both Sea-Land and TOTE. TOTE was second in terms of overall service attitude, although last in terms of overall 181 service rating and closeness to customer needs. TOTE seemed to perform better than Alaska Hydro-Train, on average, on those attributes of importance to the shippers. TOTE was able to make up some of the perceived difference between themselves and Sea-Land when the importance of the attri- butes was considered, but the difference was still rela— tively large. The combined results indicate that Sea-Land is perceived as providing good service on most attributes and on the more important attributes. In terms of different cargo market segments, certain competitive advantages for the lines were evident in each segment (see Figure 22). Both the average rating on each attribute and the importance of the attribute were con- sidered in this analysis. Attributes with an average impor- tance i 2.0 were designated as being of major importance.1 Alaska Hydro—Train enjoyed a major perceived competitive advantage in the industrial goods category and had a number of perceived advantages in the summary ratings by all respondents. Of the competitive advantages listed for Alaska Hydro-Train, five of the nine attributes were deter- mined to be of major importance for respondents shipping industrial goods. The perceived advantages in the industrial goods category are important since it is this segment that is designated by Alaska Hydro-Train as its pri- mary target market. The limited number of respondents rating Alaska Hydro-Train, however, makes it difficult to draw firm conclusions about this result. 1132 memosuud> menus: ooq>aom ecu: ueuoodsm nu conducc>o< o>uauuoaaoo no casuaoouom unopooooom «o aeolian «a ousuum .o.N A oonsuaoalu unnamed can been. .oosaauoolu seamen no bones no poucpuocoo use ousnuuuuc one abusedvod Anv.0ucu ousdzo Omzvoaoa Ascoasa «unease .u>< usauo>o “accede «sweats .u>< ssauoso any .aamas .«sooea \. .saaoo Anv.uaua no mooso>umc0duom Auv.ueumuoee= .usaom massages navuoncda .oom modem AHV.I:ooo\u:u«oum no .ooum Aavoocauuumo< aneucnooa Auvousaen\mmoa no couched Auvoo«>uom «o consensunaoo Anymouuuuuoem ouauoum Aavaswuouul adoo«uoaoum semen Aavooacz uoonlouluoon Auvousadn\mmoa no ooooun< A_V.uuuns .usooaa \. .sq-oo Asc.ueuuuoe:= .uauos masseuse Aavuoscsx .ooz modem Anv.n=ooo\ususonm no .ooum Aacaouas sac-on A~V.oonun .unuoeua .oslao-ou aacuaosoHuuoa «a sauna auvoo«>uom «o neocouounaoo Aacoaoooa anon hossmcou Heuauusucu mosanosasannso mmooo cacao noddoduau any Auv.alu: no mooso>uoc0doom A~V.o«c~ omcsso onsposom Auvuoudm uaomnOHquoa «mono; Assessed eeaoneuxecaonuao anyonua aqueous .u>< nueuo>o aavuocsea .oom modem Aucaeooo\uausoum no .ooud Aacooaauasua< secsagooa Amvueauoudl uncouuoaoud nondm AHVoEOQNM .UEAOGEB .QQIBOHdOh A=Vo0«a«~«osm cassava Aavunoadusdu unsaved: Aavhmoood whom ocoz unaudu nocouuolm ouueu and: cogndqhs> Baud: Quad :« «an ho“ no duad>fi< Obuunu BOO .0.“ W oocdauonan ousuo>s ecu chess .ooosuaoalu Auv .oucoo=0dooh ow coconu0dI« caeoupsq consensus-d ea menace; "oaoz Auv.oua~ cognac essences Assesses easoaa~\ea=onu=o Ascoospuom\.n«=au eoussusooam mace Aavooceumuunc nounsgooa anymouuunuoem oucuoam Amvucuuusm no aocosaoum ucsAueom oooz casualouvhz exudad nasssnmmMAan ouuno was; and: assesses 183 Because of its favorable overall rating, Sea—Land was also found to enjoy perceived competitive advantages in some of the respondent segments. For the high emergency rating cargo, Sea-Land had the most perceived advantages, although only two of these eight advantages were determined to be of major importance for these respondents. The major com- petitive advantages for Sea-Land appeared in the consumer goods segment, where a large number (10) of perceived advan- tages were apparent; more than half of these attributes were considered of major importance by the respondents shipping consumer goods. This last segment is particularly impor- tant, since it was designated by Sea-Land as their primary target market. TOTE seemed to enjoy fewer competitive advantages in most of the cargo segments examined. In the high cargo perishability segment, TOTE enjoyed a perceived competitive advantage on as many attributes (3) as Sea-Land and, in addition, all three of TOTE's advantages were determined to be important for that group of respondents. In the high emergency rating cargo segment, TOTE had fewer overall com- petitive advantages (5), but all of the attributes for TOTE were determined to be important (as opposed to only two being determined important for respondents for the Sea-Land competitive advantages). In the consumer goods segment, TOTE seems to be at a decided disadvantage. More importantly, however, the high perishability cargo and high emergency 184 rating cargo segments were designated. as ;primary target markets by TOTE. All three lines exhibited an ability to gain competitive advantages in the cargo segments that were designated as their principal target markets. This was particularly true for Alaska Hydro—Train in the industrial goods segment and Sea-Land in the consumer goods segment. TOTE had a com- petitive advantage in the high cargo perishability segment and in the high emergency rating cargo segment if the impor- tance of the attributes was considered. Alaska Hydro-Train and Sea-Land exhibited more competitive advantages in their target markets than did TOTE, but all of TOTE's competitive advantages, unlike these of its competitors, appeared to be of major importance to the respondents. The individual closeness of shipping line service to customer needs variables, although not broken down by segment,2 also provided insight into the customer eva- luation of service attributes (see Figure 23 for a summary of perceived advantages). The listing of attributes for competitive advantages was based on the average closeness and the number of times another shipping line was perceived as providing better service.3 The importance of these attributes was also considered, with an average importance 5 2.0 designated as being of major importance. Of the three lines, Alaska Hydro-Train's service was perceived by respondents to be closer to their needs, with over half of the attributes determined to be of major importance. Because moansans> moooz 0p mmocoono moa>som mafia wsaaqfinm Ilmmwspcs>p< o>HuHquaoo mo woofipooonom pneumonwmm mo messssm mm opswfim .mosHs> asowsoass Hespos one How am wands mom .N .o.m A mocspnonaa owsno>s when; .ooospnomefl hemmed mo mopsoHcsfl ADV .o.m W_oosspuoqafi owsno>s muons .psspsooafl cosocamcoo we? opsnflnups on» mousOHpcfl AHV .mpcmpoonmon on» ow moospnOQEa madcapca mommauconsm ca museum; .H ”mopoz AHV.0eaH measno ossemsom AHVmsHe psmasne .w>< Hasso>o fivaeHe newness .w>< Hasno>o mace Aavnocssz .Qom mmasm Aavasahopsz HemoHpoaoum moflsm AHv.omQNm .wcfiosne .QslkoHHom fivaoH>smm Ho mmosmpoadaoo Asvmmspsssosm mwsnopm 185 Asvecosafisum mafiacssm AHvo0H>Amm\.QH:dm ooNHHsfiooqm Apvpameassum masseuse AHV.>nmm\.ossum coassssomam AHV.mnpmaH .esomam \3 .Hdsoo AHV.e:ooa\psmsmnm Ho .oonm Apvmmpsm Ammaoq AHv.pqum .mofiosye .inaoHHom Asvpaoamsppmm so women Avapnoa casonaH\ea=onpso Apvmmspsflsosm omenoum consmsoo mace nos pcsqlsom cousmaoo wooed momma HH< moansfins> moooz ow mmosomoHo sow wowspcs>m< 0>prpmoaoo ocsqlsmm :HsHBIOvam dxmsa< OGHA wcfinnfinm 186 of the small sample size (4), a second comparison examined only TOTE and Sea-Land. In this situation, Sea-Land's ser- vice was perceived to be closer to customer needs than was TOTE's service. Of Sea-Land's seven competitive advantages, three determined to be of major importance for the respon— dents. This compares favorably with only two competitive advantages for TOTE, although both of TOTE's were determined to be of major importance. As the previous analysis of the shipping line service rating attributes showed, Alaska Hydro-Train and Sea-Land appeared to possess competitive advantages over TOTE. TOTE's main competitive advantages were related to time aspects of service; a similar result was found for the shipping line service attribute ratings. This indicated a possible inability by TOTE to expand their competitive advantages in the trade beyond the physical characteristics of their service. This situation did not appear to be the case for either Alaska Hydro-Train or Sea-Land. To validate the customer evaluation of shipping line service, a crosstabulation of two cargo volume variables was used. The respondents were asked how much cargo they routed on a particular line and how much cargo they would have routed if they could, in retrospect, reconsider their deci— sion.4 The results of this analysis are shown in Tables 17- 19. For the limited sample for Alaska. Hydro-Train (Table 17), all of the respondents indicated that after reconsideration they would ship approximately the same 187 Table 17 Percent of Cargo looted by Percent of Cargo Routed in Retrospect. Alaska Hydro-Train 5' E F3 Home 1401 21-405 4140! 81401 Il-lOO‘ OIOOOOOOE r- I o H o o o o H u I .- o H o o o ' b I H H H o H O c: I o o o o o o ' Column Totals Kendall's Tau h - .548 Notes: 1. The numbers in the table represent the number of respondents fitting into each cross-tabulation category. 2. The results indicate that if routing decisions were reconsidered: 3 respondents mould route more than actually done; 1 respondent Iould route the same amount; 0 respondents would route less than actually done. amount of cargo or a greater amount of cargo on Alaska Hydro-Train. For Sea-Land (Table 18), the responses were as follows: 64% of the respondents indicated they would ship approximately the same amount on Sea-Land while 18% indi- cated that they would ship more and 18% indicated that they would ship less. For TOTE (Table 19), the results were as follows: 64% indicated they would ship approximately the same amount of cargo on TOTE, 10% indicated that they would ship more cargo while 26% indicated that they would ship less cargo. For the crosstabulations on all three lines, there is a strong relationship between the two variables as measured by Kendall's Tau statistic.5 The overall results of these crosstabulations allow certain conclusions to be drawn about customer preference or (satisfaction),6 which are supported 188 Table 18 Percent of Cargo Routed by Percent of Cargo Routed in Retrospect, Sea-Land Percent of Percent of Car 0 Routed in Retros ect Row Cargo Routed None I-EOI 2I-453 41-60% 3I-§0% 51-100% Totals None 1 O 0 0 0 0 1 1-20% 0 3 0 3 0 0 6 21-40% 3 0 6 1 O O 10 41-603 1 1 0 5 0 0 7 61-80% 1 O O O 3 3 7 81-100$ O 0 O 0 1 7 8 Column Totals 6 4 6 9 4 10 89 Kendall's Tau b - 0.630 Notes: 1. The numbers in the table represent the number of respondents fitting into each cross-tabulation category. 2. The results indicate that if routing decisions were reconsidered: 7 (18%) respondents would route more cargo than actually done; 25 (64%) respondents would route the same amount of cargo; ll (16%) respondents would route less cargo than actually done. Table 19 Percent of Cargo Routed by Percent of Cargo Routed in Retrospect, Totem Ocean Trailer Express Percent of Percent of o Routed in tro ct Row W m: _-__ _- % _rom- None 0 O 0 O 0 0 0 1-20% 0 l 0 0 0 0 1 21—40% 0 0 0 0 0 O 0 41-605 0 o o o o 1 . 1 61-80$ 0 0 O O 1 0 1 81-100% 0 0 O 0 O l 1 Column Totals 0 l O 0 1 2 4 Kendall's Tau b - 0.554 Notes: 1. The numbers in the table represent the number of respondents fitting into each cross-tabulation category. 2. The results indicate that if routing decisions were reconsidered: 4 (10%) respondents would route more cargo than actually done; 27 (64%) respondent would route the same amount of cargo; ll (16%) respondents would route less cargo than acutally done. 189 by the analysis of the shiping line service rating attri— butes and closeness to customer needs variables. The greatest level of customer preference for a line appeared to be found for Alaska Hydro-Train and Sea-Land. Both of these shipping lines appeared favorably on both the shipping line service attributes and the shipping line service closeness to needs variables, although some of these service attri- butes were not determined to be of major importance for respondents. Additionally, the crosstabulations of percent of cargo routed versus percent of cargo that would be routed in retrospect showed respondents to be fairly satisfied with the service provided. TOTE seemed to enjoy fewer perceived competitive advantages for the service attributes and close— ness to customer needs variables, although all of TOTE's competitive advantages appeared to be of major importance. A somewhat greater proportion of respondents indicated that they would have shipped less cargo on TOTE, in retrospect, than they actually shipped. Evaluation of Integrated Marketing This section evaluates the degree of integrated marketing practiced by each of the shipping lines being eva- luated. For Alaska Hydro-Train, overall responsibility for and coordination of marketing occurred at the level of Marketing Manager for Alaska Hydro-Train and Hawaiian Marine Lines. Coordination did occur between the various func- tional areas of the shipping line, but pricing was a 190 separate function beyond the direct control of marketing.7 Within the marketing function itself, some degree of coor- dination was found. Alaska Hydro-Train had begun (within the last three years) to identify target markets and to break down the market by commodity and industry groupings. There was 1K) separate individual or group responsible for marketing research, but the sales group did provide some input for the long-range planning process. Promotion was very limited: no advertising was used and public relations and sales promotion received little emphasis. The role of personal selling had been upgraded in terms of identifying and meeting customer needs, but there was still little effort in training the sales force. Although operations (product and place) were not under the direct control of marketing, coordination appeared to be maintained. Overall, however, Alaska Hydro-Train exhibited only a limited degree of integrated marketing. Overall coordination of marketing for Sea-Land occured at the level of General Manager, in both the .Seattle and Anchorage offices. Coordination and communication was main- tained at a high degree among the various functional areas, with pricing not being under the direct control of marketing. Within the marketing function, a relatively high degree of integration was found. Although marketing research had been eliminated as a separate organization within marketing, the function did continue at a reduced level utilizing other marketing personnel. Target marketing 191 was used, with specific customer segments being identified. Marketing provided on important source of input for Sea—Land's short—range and long-range planning. The promo- tional mix revealed a modest degree of coordination; the resources devoted to public relations and advertising had been reduced over the last two years covered by this study due to the downturn in the market. Sea-Land used a formal training program for its sales force. Marketing was controlled by using audits of the actual service performance and of the performance of the sales force. Overall, Sea-Land appeared to have a more highly integrated marketing functions than Alaska Hydro-Train, although complete integration had not been achieved. TOTE's overall coordination of marketing occured at the vice-presidential level, with the Vice President for Operations being responsible for the marketing effort. Coordination of the various functional areas did occur, par- ticularly between marketing and operations. Pricing, as for the other two lines, was a separate functional area which was coordinated with other areas of marketing. Within the marketing area, a fairly high level of coordination was found. TOTE was actively engaged in defining both existing and potential customers by market segment. A marketing research group provided information on market segments and competitive conditions and also provided input into the total planning process used by"TOTE. A. high. level of integration was realized within the promotional area, with 192 an individual responsible for advertising, public relations, and sales promotion. No fermal sales training program was in place, but the personal sales force did participate in a training program on an intermittent basis. Marketing control existed to some extent, particularly for evaluation of the sales force, and service performance was evaluated on the basis of cost incurred. Overall, TOTE's marketing functions appeared to be the most highly integrated of the three shipping lines studied. TOTE exhibited a higher degree of development of marketing, particularly for the marketing research and promotional areas. Sea-Land also exhibited a relatively high degree of integrated marketing, but did not show the same level of integration as TOTE in the areas of marketing research and promotion. Alaska Hydro-Train was seen to be the least highly developed from an integrated marketing standpoint. Use of Profitability Measures in Evaluating Cargoes Another element of importance in the marketing concept is the use of profitability measures by the lines for eval- uating cargo segments. For the three shipping lines studied, varying degrees of the use of profitability measures were found.8 Alaska Hydro-Train appears to use a limited number of breakdowns in analyzing actual and potential profitability of various cargoes. The main cri- teria in this analysis are volume of movement and 193 seasonality of movement. In general, Alaska Hydro-Train has found that larger volume and steady year-round shipments are the most profitable types of cargo to carry. In some cases, due to competitive circumstances, the rate can not be set high enough to produce a profit. In these instances, contribution to revenue of the movement is considered. Sea-Land makes more extensive use of profitability measures in evaluating their actual and potential cargo performance than does Alaska Hydro-Train. Profitability is calculated on a per container basis with the primary breakdowns being by commodity, size of account, and pay-out cost. The pay-out cost is based on the following incremen— tal cost elements: destination of the cargo, special handling, stop-off charges, and warehouse handling. Pay-out costs represent additional expenses which tend to reduce the net revenue. The general objective of Sea-Land is to raise the revenue per container to provide a reasonable rate of return to Sea-Land without creating a rate that diverts cargo to competition. TOTE also makes extensive use of profitability measures. The principle types of analysis of segmental profitability that are used are breakdowns by size of account, type of commodity (such as building materials, project cargo, department store advertised specials, etc.), equipment type (such as flat bed trailer, refrigerated trailer, etc.), and origin/destination of the shipment. For the last item, destination is the gudncipal component examined since most 194 origin to port distances in the Seattle-Tacoma area are relatively short. The four criteria provide a method for TOTE to assess the profitability of their service. Profitability analysis is also used as an input to the fore- casting procedures of TOTE, including the long-run fore- casts. All of the lines evaluated in this research use profita- bility measures as part of their marketing effort. There were, however, some differences among the three lines in the extent to which these measures are used. Sea-Land and TOTE seem to make much more use of measures of profitability than does Alaska Hydro-Train. Additionally, all three lines (in the time period studied) showed evidence of a commitment to a volume orientation, rather than a strict profitability orientation. The main reasons for this situation appear to be the excess shipping capacity in the trade, the high level of committed service, and the resultant high fixed costs incurred. Evaluation of Overall Success All three of the shipping lines evaluated in this research reveal varying degrees of success in the marketplace. The ideal measure for corporate success would be long-run profitability. This measure of success could not be used here because only limited profitability data was available. Additionally, one of the shipping lines (TOTE) 195 was a recent entrant to the trade. As a substitute for long-run profitability, market share and short—run profita- bility, when available, were used as indicators of shipping line success. Market Share Market share does serve as one indicator of shipping line success since it indicates how successfully the shipping lines reach the market. For the 1976-1979 time period, the market shares for the Central Alaska marine trade are found in Table 20. The interviews ‘with the shipping line executives yielded similar results. The pooled estimates, which were quite close, gave market shares of approximately 16% for Alaska Hydro-Train, 41% for Sea-Land, and 42% for TOTE.9 Current estimates indicate that the relative market shares shown for 1979 continued through 1980 as well. These market share figures indicate that, since entering the trade (mid 1975), TOTE has grown at the expense of Sea—Land, whose market share has shrunk. Based on addi- tional information, Alaska Hydro-Train was seen to lose market share throughout the decade of the 1970's; their market share of dry cargo tonnage declined from 25% in 1970 to 21% in 197510 to 16% in 1979. This would seem to indi— cate that both Sea—Land and TOTE have taken market share away from Alaska Hydro-Train. In order to interpret the above market shares, the available capacity of each shipping line was calculated. 196 Table 20 Market Shares for Lines in the Central Alaska Marine Trade for 1976-1979 Market Share (in percent) Percentage First First Point Quarter Quarter Change Shipping Line 1976 1978 1979 From 1976 Alaska Hydro- Train N/A (15) 13.6 (15) 15.6 (16) +1 Sea-Land N/A (50—55) 41.3 (46) 38.9 (40) -10,—15 Totem Ocean Trailer Express N/A (35-30) 35.2 (39) 41.5 (43) +8,+13 Notes: a. The numbers in parentheses indicate the market share comparing only the three major lines. b. Includes all Sea-Land domestic traffic moving through the port of Anchorage, with about 10% of the cargo being transshipped for Kodiak and Western Alaska. 0. TOTE used two sailings per week for only 4-5 months of 1976. Source: 1976; figures are estimates. 1978 and 1979; Interstate Commerce Commission, Suspension and Fourth Section Board Case No. 69540, Thomas D. Jones statement dated October 2, 1979. 197 Based on the information discussed in Chapter IV, the esti- mated available capacities are found in Table 21. For 1979, Sea-Land employed three sailings per week for the summer months and two sailings per month for the winter months. For the first quarter of 1979, with Sea-Land using three sailings per week, the following equipment utilization factors (based on relative available capacity) obtain: Alaska Hydro-Train (1.33), Sea-Land (0.85), and TOTE (1.05). These figures indicate that Alaska Hydro-Train and TOTE enjoyed a market share larger than their actual capacity share while the reverse was true for Sea-Land. These results. must be interpreted cautiously since the actual number of sailings by each line was not available and a full complement of voyages was assumed. Profitability The other major measure of shipping line success used in this study was short-run profitability. Very limited data was available for Alaska Hydro-Train for this measure; for 1979 only the operating costs were available, which are listed in Table 22. Although no revenue or profit figures were given, it was estimated that Alaska Hydro-Train showed a "modest profit."11 Both Sea-Land and TOTE have Shown poor performances from a profitability standpoint. Sea-Land's operating results are given in Table 23; for the three years covered, Sea-Land has shown an operating loss in one year and a very small 198 Table 21 Available Capacity by Shipping Line for Central Alaska 40-Foot Container Equivalentleeeka Shipping Line Sea-Land--2 Sailings Sea-Land--3 Sailings Alaska Hydro-Train 250 (15%) 250 (12%) Sea-Land 630 (37%) 945 (47%) Totem Ocean Trailer Express __§gg (48%) __§gg (41%) Total 1,199 2,915 aThe numbers in parentheses represent percent of the available total capacity. Table 22 Alaska Hydro-Train; Operating Costs, 1979 Item Cost (1,000's) Vessel Operating Costs $ 5,136 Non-Vessel Operating Costs 2,640 Direct Administrative Costs 1,074 Capital Costs 1,598 Total $ 10,448 Source: Interstate Commerce Commission, Suspension and Fourth Section Board Case No. 69947, Alaska Railroad and Alaska Hydro-Train Reply, p. 9. 199 Table 23 Alaska Service of Sea-Land Service, Inc.; Alaskan Operating Results Summary—-Domestic Traffic Dollars (1,000's)a Item Operating Revenue 1978 $ 69,444 1979 $ 65,974 1980b $ 83,053 Expenses: Vessel Expense 13,999 18,582 22,455 Vessel Amortization 2,485 2,391 2,391 Port & Cargo Handling 9,064 10,167 11,368 Terminalc 29,056 20,609 33,750 Overhead 10,480 7,785 8,486 Amortization & Depreciation 3,464 3,423 3,423 Total Expenses § 68,548 § 71,956 § 81,873 Operating Income (before interest and taxes) § 896 §7(5,982) § 1,180 aIncludes Kodiak trade southbound from Anchorage. bProforma, including requested rate increase cIncludes actual pickup and delivery of cargo to customers performed by Sea-Land Freight, Inc. Sources: 1978-~Interstate Commerce Commission, Suspension and Fourth Section Board Case No. 69074-—Statement of John R. Bagieleo of March 30, 1979; 1979 and 1980--Interstate Commerce Commission, Suspension and Fourth Section Board Case No. 69982--Statement of Nicholas J. Zito, dated 1980. 200 operating income in the other two. These profitability figures are well below the 15% after-tax return on assets that R. J} Reynolds has set as an objective for Sea-Land.12 The results for TOTE are also rather poor, with large operating losses in two of the three years listed (see Table 24). Explanation of Success Results The success measures of market share and profitability are, to some extent, related. The market share figures indicated a large growth for TOTE, a modest decline for Sea-Land, and a relatively large decline for Alaska Hydro-Train. TOTE's growth in market share since entering the trade appeared to have been a function of the higher service level offered. But, in order to gain that market share, TOTE appeared to have sacrificed short-run profitabi- lity. Additionally, the downturn in the trade and the resulting highly competitive market depressed the overall rate structures. This also reduced the profitability of TOTE as well as of the other two lines. Unit costs of operation permitted Alaska Hydro-Train to operate at a pro- fit, while Sea-Land achieved a marginal level of profitabi— lity and TOTE reported large losses in two of the three years analyzed. The figures showed that Sea-Land achieved a marginal level of operating income in both 1978 and 1980 while TOTE achieved modest operating income in 1979 only. Table 24 Totem Ocean Trailer Express, 201 Operating Results Summary Item Operating Revenue Expenses: Vessel Expense Vessel Amortization Port & Cargo Handling Terminal Overhead Amortization & Depreciation Total Expenses Operating Income (before interest and taxes) aThe numbers may not add to totals due to rounding. 1978b $ 48,585 $ 15,356 2,737 19,131 7,435 4,612 2,004 § 51,275 $g 2,691) Inc.; 19790 $ 59,870 $ 13,892 3,682 21,575 8,654 5,191 2,050 § 55,044 $ 4,825 Dollars (1,000's)a 1980 $ 54,832 $ 18,274 3,834 22,758 8,054 5,315 2,072 $ 60,307 $ (5.475) bFor period July 1, 1977, to June 30, 1978, with actual figures through May 31, 1978. cActual figures used for revenue, proforma figures used for expenses. Sources: 1978 and 1979--Interstate Commerce Commission, 1), John T. Owens 1979-~Interstate I & S Docket No. statement dated June 22, Commerce Commission, Board Case No. D. Jones statement dated October 4, 9189 (Sub-No. 1978; Suspension and Fourth Section 69503, Jacob P. Billig and Terrence 1979; Suspension l980--Interstate Commerce Commission, and Fourth Section Board Case No. Billig and Mark J. 1980. 69982, Jacob P. Fritz statement dated May 23, 202 Summary The discussion in this chapter evaluated the elements of the marketing concept for the three shipping lines in the Central Alaska trade. For the element of customer satisfac— tion, TOTE appeared to have the most highly developed system for evaluating customer needs, but the other two shipping lines apparently produce a more positive evaluation of shipping line service attributes by customers. TOTE, although having fewer competitive advantages, was judged to have an advantage on attributes that were all. of major importance to respondents. Some of the competitive advan- tages of Alaska Hydro-Train and Sea-Land were not found to be of major importance to respondents. TOTE, followed by Sea-Land, showed a higher degree of development of an integrated marketing system. All three lines useed profita- bility measures to some degree, with Sea—Land and TOTE being the most highly developed, followed by Alaska Hydro-Train. TOTE seemed to have performed best from the standpoint of growth in market share, with Alaska Hydro-Train and Sea-Land losing market share. Alaska Hydro-Train and TOTE appeared to perform somewhat better from a capacity utilization standpoint, at least for the 1979 market share figures. Alaska Hydro-Train performed better from a profitability standpoint than either of its competitors. The overall ana~ lysis of these results in relation to the use of the marketing concept will be discussed in the next chapter. 203 Footnotes The comparisons of shipping line service were determined by inspection (H? the data; inferential statistics were not calculated. For a description of the actual analy- sis of the advantages for each line, see Chapter V. The reasons for this lack of breakdown were discussed previously in Chapter V. Respondents compared the service of two lines in this section. Where one line was listed by a number of respondents as providing service closer to their needs, this indicates a level of dissatisfaction with the second line. For the percent of cargo routed in retrospect, the respondents indicated what percent of their cargo they would have routed on a given shipping line if they could reconsider their previous routing decisions. Kendall's Tau statistic measures the degree of asso- ciation between two ordinal level variables. In this situation, Tau b was used since both variables had the same number of categories, resulting in square cross- tabulation tables. The values reported in the tables indicate a relatively high degree of association between percent of cargo routed and percent of cargo routed in retrospect for each of the three shipping lines eval- uated, a result that could be expected. Although customer satisfaction is not measured directly, this analysis does give an indication of degree of satisfaction. If a respondent indicated a preference to ship even more cargo on a shipping line than was actually done, this could indicate a relatively high degree of satisfaction with that line's service. In the Pacific Northwest - Central Alaska marine trade, no collective ratemaking (such as a rate bureau) is allowed by law. Thus, the pricing function for Alaska Hydro—Train, as well as for the other two lines, opera— tes in a different manner than for many other domestic transportation companies. The information in this section is based on information provided by Mr. Don Claussen, General Sales Manager, Alaska Hydro-Train; Mr. Gary Geiser, current Sales Manager-Continental U.S. for the Alaska Service of Sea-Land; and Mr. Everett W. Trout, Vice President-Operations for Totem Ocean Trailer Express. 10. 11. 12. 204 Based on discussions held with Mr. Don Claussen, General Sales Manager, Alaska Hydro-Train; Mr. Marvin Buchanan, past Sales Manager-Continental U.S. for the Alaska Service of Sea-Land; and Mr. Everett W. Trout, Vice President-Operations for Totem Ocean Trailer Express. Interstate Commerce Commission, Suspension Board Case No. 67819, statement of F. W. Hoeffler, p. 3. Based on information supplied by Mr. Don Claussen, General Sales Manager, Alaska Hydro-Train. For a discussion of this objective, see "When Marketing Takes Over at R. J. Reynolds," Business Week, November 13, 1978, p. 88. CHAPTER VII SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS Introduction This research examined the role of marketing in shipping line service for the U.S. domestic trade route between the Pacific Northwest and Central Alaska. 1k) evaluate this role, data was collected from two basic sources--the custom- ers of the shipping lines and marketing personnel of the lines. A written questionnaire was used to collect the data from the customers while in-depth interviews served as the primary source of data from the shipping lines. Secondary data provided further information on the shipping lines and their market performance. Each set of data was initially evaluated separately; the two analyses were then brought together for each of the shipping lines. This chapter sum- marizes the findings, evaluates the research questions posed in the first chapter, and makes recommendations concerning uses of this research and possible future research that is indicated. Summary of Findings The customer questionnaire administered to the survey respondents provided a number of insights into shipping line performance. The responses of the shippers on the 25 ser- vice attributes showed that customers could differentiate 205 206 among the service offerings of the three shipping lines studied. This differentiation was found to occur for both the total sample of respondents and the sample broken down by high perishability cargo, high emergency rating cargo, and basic commodity type.1 Respondents provided information on three sets of attributes: shipping line service ratings, shipping line service closeness to customer needs, and importance of the service attributes. For the entire sample, Sea-Land enjoyed the best overall rating and exhibited the lowest variability across ratings on the 25 shipping line service attributes. Alaska Hydro—Train and TOTE had nearly the same overall rating with Alaska Hydro-Train exhibiting the highest degree of variability on the ratings among the individual attrib— utes. For the overall attitude, which combined the ratings on the shipping line service attributes with the importance of the attributes,2 Sea-Land still enjoyed a competitive advantage over competition, with TOTE now showing a distinct competitive advantage over Alaska Hydro-Train. Thus, Sea—Land and TOTE were perceived to be superior on some of the attributes of importance to the respondents. Sea-Land remained superior to TOTE because of their overall perfor- mance on the shipping line service attributes and on those attributes determined to In; of major importance to respondents.3 207 Customer Closeness to Needs The results of the shipping line service closeness to customer needs variables showed competitive advantages similar to those found for the shipping line service attrib- utes.‘4 For this analysis, however, the service of Alaska Hydro-Train was perceived to be closer to customer needs than was competition. The small number of respondents rating Alaska Hydro-Train makes this conclusion quite ten- tative. When only Sea-Land and TOTE were compared, Sea-Land was found to enjoy a major competitive advantage over TOTE. Customer Ratings by Cargo Segment When the ratings on the 25 shipping line attributes for the cargo segments were examined, varying results were obtained.5 For 11m; highly perishable cargo segment, TOTE and Sea-Land were relatively even on the service ratings where each enjoyed three perceived competitive advantages. TOTE enjoyed.zi modest competitive advantage when attribute importance was considered; all of TOTE's advantages were determined to be of major importance to respondents, com- pared to only one for Sea-Land. The service ratings for the high emergency rating cargo revealed a slight competitive advantage for Sea-Land (perceived advantages on eight att- ributes compared to five for TOTE). As in the previous segment, however, TOTE enjoyed a competitive advantage when 208 attribute importance was considered. All five of TOTE's advantages were determined to be of major importance com- pared to only two of the eight for Sea-Land. For these two cargo segments, TOTE performed better on attributes of major importance to respondents when compared with Sea—Land. For the two basic goods categories, _different lines enjoyed a competitive advantage in each segment. Alaska Hydro-Train, with perceived advantages on nine service attributes, enjoyed a major competitive advantage over both Sea-Land and TOTE (three and two advantages, respectively). When attribute importance was considered, Alaska Hydro-Train still possessed a large competitive advantage. In the con- sumer goods category, Sea-Land enjoyed a large competitive advantage over TOTE on service attribute ratings (nine per— ceived advantages for Sea—Land compared to one for TOTE). This competitive advantage for Sea-Land also continued when the importance of the attributes was considered. Customer Evaluation of Attribute Importance The importance of these attributes was also separately examined, with the mean values of importance varying by attribute. 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"a. men A... . mm m 1.. was m, a. mum .... .. mm. . a F..-- -..--..- ...---- u. u .n . .... ---...m- --mw ..mm- as. . ”is .....-a 2...-.. .....-a emu sen. .- a e assume. a «as a o a“ . . . gs a a m . u e ..- . m_ as» mxmuwz - a .o a» exams. -mu :6 can ..- u «xx.» 3.26%..6266 ”Mm .- u u a» mu samzux .- u a a. 33. ans ::»m nonhuman czaaaauoz: mmmm~.ax so“amuco scams—amuza and“ s w «Hutthw «out: mw . a .w «muzzsme. «cases - pzmmo an on suzuozsazoo «can. u , msuuzauu as»....s a seesaw ~26 see .~c a. a» a . x: s o ... W n..« ; ... a : auzso u s a .u. u” ”.6“ e a annexes-«43m 0““ w . . «opeoasomzou n M o ..m A s...a . comm. «mannzm a J n '0 m.ua MW m.oo A u mozoamzou ------I- W. s..~ r 5.»: a m. n A . euaaazm .. .. : ...... _i ...-e. A.» a no u ween e s s s s s e s s “HmHs one s sanuaduxs s e e s s s s s s e s s e s s mamasUflnuawzw s s s an» s s wand usuaanzn 8° ouHaou Guano no quccma s s s s e s s e s e e s s s s s s s u o rm we‘d .meosaonu .:e\oo\um u 8 on >0 0 u H e a a a c H m a o c o ZOHHmoHuuwmmao cuaau: mom cluammmHzoo ......OOOOOOOOOOOO ..ooso.\qo s UHmo ZOHchcu. utczoz wank «Hem muaanzm zexneae so m~m>4 one .v I omeno>< .« I oooc hao> .e Anv.sCoo.n Ass.mce«.n “as.cnn.« Ace-VAN." Ams.coa.a Aeo.oso.n no.6coc.a no.6Voo.v Ame-mooc.« Asa-noon.“ Ace-moos.n Ame.mcoo.n son-moss.— Ana-nose.n Asa.cse.« xe«.sooa.a Acn.moeu.« Ann-mose.« Ans-veo.n Ace-noes.” Ans-scco.n sea-non«.u Ace.ou«.n Ann-moon.” Aou.ces.n cuenanuon smmsam sameness use: muoooconmom no booms: moouuoomamcu caudoonm sous ooceuunsoo amusemecem no omoco>uocommom moaoceumuooca ucoaomdmoom meadows» noose: o>uueacomomoom mousm scaacucoasoon a ummuonm no mcummooomn sodasILOHcH omccmo oflsoomom consumumm< Aeoscmooa Housman: couaoaoan modem nous: unonIoqunoa «mono; mouem mama umosoq message a mouse no auassnnnoma nous: nooaIOHImoom no codmu>oun mcuuuoonnm a .mouoeua .mslsoHuom unmeasuuom «a noose omsacn no moo: no ooeomom mason cocoon“ a ocsoousc oou>mom «o mmocououomoo mouuunaoem omsLOHm uooanmom mcufiocsm «coanusom a mmocueosoo no coaouoooo oon>uom a unoadssom oouaacuoonm mnoooe mouadmwoem anon haunuoennom oasoomom mcnnuem no hocosooam saws uumcsna .m>< Haemo>o oumndmau< one; meanness goes too census: ouannnbue use: «a canes 238 Appendix B on Aen.ncom.n Ans.~coo.n Ans-aces.“ Ave-nose.“ Ava-noun.» men-mooc.« Ame-mona.n Aun.nons.n Ann-none." .mn.~ove.« Ame.~ces.« son-mons.« men-moon.n Asa-monm.e Ame-mcsc.n mos-scn¢.« Ase-moan.“ Ame.noeo.n Anv.moso.n men-mesa." Asa-noes.« Ann.moeo.« Ana.one.~ Ans-noe«.« :5;ch DOA an sum-nooo.« mom.sooc.u Aom.ncoo.« Ane.oes.~ Ave-veo.~ Ana-oev.s Ace.sces.n ses-mooo.a A—v.monn.n Aen.sc«n.« Ase-moon." Ace-moon.“ mos-moeo.n Ass-sceo.n moo-soon.“ Ana-coo.m mom-noes.“ Aan.noon.« Len-noma.m Ava-noee.« Ame-nooe.n moo-nooo.« Ann-cos." Asa-scoe.a Aac.oo~.« Anna: MHOH amomocuooa ouoemmqmon on o» unaccuonu mes cause one «o and «soon as «emu moueouocu can: .o en es Ase-noso.u nan-moon.— Aan.nvso.n aeo.nooe.u Aan.~cvv.« Ana-moon.“ Ace-some.n Ans-ope.n Ame-son¢.« Aes.ooo.n Ame-moss.“ Ass-ose.m Aen.soss.« Ace-«con.« A««.scs«.n Asv.none.n “an.mcvo.n Aso.svoo.u Aen.mcne.u Aao.soen.« Rev-moon.“ nan-moon.n Ame-scan.« Ao«.~oou.« Ane.moeo.~ Adv-noes.“ Ann-noee.n “ae.ncoe.v Ass-nose.“ Aao.mooo.« Avm.mcsv.n Ase-cos.n men-nose.“ moo-com.“ moo-sono.« mom-coo.“ men-sceo.u Amn.~coe.a Ana-nous." A«~.~cnn.n sen-nous." Ana-mcnn.« awn-moen.« An«.~oo«.« Rae.~co~.« Ace.oos.n .«s.~.~«.« som.mco~.« Ana.cuo.« Ann.oon.« DOA nnudm ease-ace ea cu ocosoeu>om b I men v asv.noeo.« Ans.svo«.n mo.mco«.a moo.co«.n Ans.coa.« Ace-cse.a no.6ooo.n .o.ocoo.v Ame-«coo.« Aa«.~coo.a Ae«.~oas.n Amv.nooo.a mos-mose.~ Ana.~cse.n Ace-opo.« Ao«.~ooe.a Ace-«cou.« Ann.nose.« xes.coo.n aeo.sCoo.n Ans-socc.n xc«.aca«.« Ace.co«.n xa«.s.ea.n moo-cos.n DOA O Dana: hmoH one .v I omsuopm .u I oooo Hao> .s oucooconmom no moons: occuvosnumsu cauuoonm nude oocsuunsoo economenem no mmocosumconmom monoeeuoaooca acoaoudsmom mcsnnanm noose: endueucomounom modem codususomsoon m ammuoum «o mcumnoooma souaemm0ucn omcemo oasoocom eoceuounme “couscous anemone: noduoSOmd nonem spasm unoAIOaIunon «meson sous: some umesoa someone a mouse no auamansuoma some: noooIOquoom no no«n«>oan mcuuuoonnm a .mcsoeah .nmusoauom aeoaomnuom no cause omsmsa so moon «0 oocomoe mason oosoocm a oncoouno oou>aom «o moocouonnsoo mouuuawoem omeuoum acoanasom madness: ucoanasom a succueucoo no cofiuuocoo ooanuom a unosnssom oosumseoonm omoooe mouuuuuoem anon Roundhouse: onsoocom mounuem no Hooosooun onus «amoeba .mp4 uueuono maenanaomm-exmeme Uhsomsuau deluded: use: Oumnuhua< asasnnsnuanen condo an coea>acn=e cans assesses none too menses: oosnanuse use: an ounce 233£9 Appendix B an man-moms.“ Avo.~css.n .en.ncve.n Ann-scon.« Ana-nose.“ Ann-mosn.« Ame-moan.» ion-sooe.n Asa-noes.“ Asa-«ouo.n Ava-mooe.« Ava-scco.« Aen.mooo.n Ana-soos.v Amv.moss.n Ame-none.“ Ann-mose.n man-sos«.a Ase.~ono.n Aa«.mcsu.n Ava-sooe.a Ans.movv.« Ama.cos.~ Ae~.noen.« Ace.~oco.u ran Nu Ane.s.nn.n ses.—con.” Ana-none.“ Ace-«cos.a Asa-noon.” Ann-mouv.« Lee-moon.“ .oe.mo«a.n noe.~coo.« Ase-noon.n Ace-«coo.n Asa.~ove.« Ane.~ooe.n Ace-moss.v Ave-aoso.« Rev.no«e.« .vo.~cus.« son-«cue.n Ame.mooo.n Ace-acme.“ Ana-nova.“ Ao«.ncvo.n xeo.ceo.« Ana-moan.“ Ase-one." Baud: MHOH accommoao\:m=a on On . an «a Ann-noen.« men-«ouo.n Aeo.ncsn.a Ave.n.ee.n Ann-move.“ mus-mono.“ Ame-nose.“ Aea.noo«.a Ava-cov.« Ae«.~coc.n men-nose.“ Ase.ncoo.n Aen.mcoe.a ses.—cno.« Ase-scv«.n Ana-none.» Asa-moas.« Ave-noun.» Ann-moaa.« moo-«coo.a Ace.o«n.a moo-«cee.a ses.".sm.u Ace.mcon.« Ame.nooe.« Ave-moao.n Ava-mome.n ses.—can.v moo-scan.« Ace.~cns.« Aaa.ccm.a Lav-nons.n x««.sVa«.« Ann-nooa.« Ave.m.«o.n Avo.~.as.« A««.~con.a “ae.~coe.n Ass-moeo.« “on.mcve.n .«n.sCen.« Aa~.~ove.a xam.~com.u Aen.mcns.a Ame-noes.“ Aoo.cee.« Aac.monm.a Amn.~ouv.« moo.soav.a mas-one.“ mmm anus: 2.31.8 ooueouocu one cause on» no and «menu as use» moueouocu and: .o n Ann.aCnn.a Ana-nose.“ Ame-nose.« Ana-can.— no.6.oo.n Ass-coo." no.6coo.n Ao.eooo.e Ano.~cnn.« Ann-mcnn.« .ee.onn.n nea.ose.n som.ncse.n Ase-acoo.n Ams.coe.« Ace-mooo.n Ane.scse.« Ass.oou.n no.6coo.v A—v.moco.n no.6coe.v Ao~.aCso.a Aeo.moeo.n moo-mo co.» Aoo.vbo.n no; sueahlouo m encode sounded: seem mcuuem accomuomm omueo Hm ooou>aoosm new; mounnanm moon ecu mmcuucm H I oem use» one .v I omeuo>< .n I oooo >uo> .e musooconmom no booms: becauosnuocn ouuuoonm sous conequnsoo acosomecem no mooco>umconmom monoceummooca «somoudsoom mcsnnamm noses: oouasucomomnom mouem ocuueucomsoom a «madman no mcummoooaa ocuusmeoucn omccno oasoocom ooceumumoe ueodcmooh deepens: codaosoan modem nous: «moaIOquuon omosoa nous: some phonon montage a mouse «o auamananosa mousm moonIouInoom «o conomsoun mcuuqooonm a .mcuoeah .osIsOHHom «consensus no coon» omens: mo mmoq no cocomo< mason ossoocn a oesoouso oo«>uom no mmocoaonmaoo moauuaaoem omcaOum uooanusom mounocsm ascendsom a muonqsucoo no ocuuuoooo somehow a «somnusom oosuneaooom mmoooe commandosm anon Huuuuoeuuom oasoomom mounuem no accommomm clue panacea .m>< Haemo>o channnuae Oumnqhuud use! on munch 254() Appendix B on as Ano.soee.« Ann.nceo.n Ame-Hcso.n Ace-nosn.n Ana-Hoes.“ Ase-scco.u Ace-scaa.« Ane.sooa.a Aoa.noos.m mos-some.“ Asa-sona.« Aen.moon.n Ans-Honn.n Ace-none.n Ava-scon.n Ace.meeo.n Ame-moon.“ Aco.mcea.« Ame-nema.m A¢~.~oae.« Ame-acea.a Ave-scso.« Ana-mone.m Av«.moss.« Ann-mcma.u Aev.mcvo.n Aom.mcao.a Anv.sooa.e Ave-mons.m Anv.mcee.u Ao«.ncmn.n Ace-Hone.“ Asa-sons.« asv.mooe.n ism-Honm.n Awe-ncn«.n A~_.~ceo.n Ave-moeo.e Ace-soon.« Ame-moms.m man-noeo.« An~.~onn.« ion-sees.« A««.noso.« Ame-one.~ Ama.csa.m Avs.nonn.« Ass-sonn.« Ans-oss.~ Aen.sos«.« LOESOBOO HMHHHSQUBH nosusoncnunemo auacoaaoo cause an ooes>aen=m can; assesses none too unease: ”HOP an «a sov.~cnn.a Aoo.«oea.n Ann-«ces.n Ace-nose.» Ase-acme.« mom.ncae.a son-noon.a Aue.scoa.« Ace.scoe.« Aue.cev.n ses.—cae.« Ace-none." Anc.noov.« nee-some." An~.«c~v.n .oo.scoo.n Ann-none.a mun-Heoo.n see.~cee.« sea-soon.“ Avn.noue.« Ame-«cvv.« Anv.noue.a ao—.~cs«.n Ame-mono.“ Ace-«ooa.« Ano.noms.o moo-novm.v ses.—coo." Ame-nose.“ Asn.ncn«.« .oo.~v«v.« Ann.scme.n flea-cn~.« Ao~.sceo.« Ane.vvo.« sea-move.“ Ana.ncaa.« Ava-soos.u An~.scoe.« Ann-noun.“ Ans.so«e.n Ae«.~can.m moo-scen.u Aca.oac.« moo-cea.s Aeo.mcem.m Ae«.scna.« Aeo.osv.« Ace-one.“ hoadmmoo Hemhumflvmn onus-eon a Rousseau n men-cnn.~ moo.«coo.n mos-nose.” Ase-can.n Ans.oon.m Ams.cou.m Ac.oooo.n .o.oooe.v Ace-cnn.n Ace-soon." Ace-onn.a Ana-«osc.« Ase-sooo.u Ann-soso.n Ana-osc.u Aoo.~ceo.« Aom.soso.s Ame.sooo.u so.ocoo.n nus-con.« A«~.«ooe.« Ana-ope.n Aco.sCee.n Ann-moan.» Ame-oso.n euhumsocn ensue-oewum «amuse mucooconmom no noose: mooduosmamcu oaumoonm suds ooceaunaoo «coaomscsm «o omono>umconmom mononsumuooca economusmom meadows» noose: ennueucomomnom mouem oouueuoommoom a emu—ohm no meanooooun coauemaouou emceco ousoozom ooceumuom< neosccooa usumouem ocuuoaoun mouem nous: anonIOqunon «bosom sous: some compo; momneoo a spasm «0 huuuuounoua mouem noomIOuIaoon no coqou>oan msuuuoodum a .mcqoese .nsIIOHHOH seasonsuom so 566nm omessm so soon «o coconod mason ossooc— a ocsooaso oo«>aom no mmocouonnaoo newuunuosn omcmoum «coanusam mcuaocsm acomnusom a mnocueucoo no ecuuuocoo oounaom a acosnenom oouaueqoonm mmoooc mouuumsocm anon maunuoeuaom ousoocom mcquuem no hocosooum ease oneness onosuue> osansnua< use: so canes {L41 Appendix B .mooom m.acooooomoa ecu ow momomo mes oouea modem nose” nonuo one scene no season one mucomomnou bv n«.A~H.Hven.m su.xem.~cem.n o«.A~m.~cus.« on.aso.ncoe.n om.xmo.~css.n m.aom.vmm.n an.noo.~ooc.« on.xes.~.eo.« em.xae.cvn.« os.xec.osa.s «~.A«s.oos.~ on.aoc.vvo.fl as.ame.ooe.n em.amo.noas.m on.xss.vec.n es.xmmycoa.m «N.Ano.oeo.u mm.asv.cau.m sm.xao.cmm.m em.aeo.cau.a cm.xma.cmn.« nm.aas.cno.s s.ame.coa.s o.xoa.c«a.n e.ans.oeo.s mach co «s.xun.ncan.~ «H.Ao~.mcna.m «H.Aao.nvce.a «S.Aoc.soeo.~ as.xna.cm«.« am.xao.coc.n cm.Aoo.onm.n 6.xoo.sona.a Hm.asa.ceo.« o~.Ass.ooe.s as.xus.vms.m e.mme.coe.m 6.xom.ona.m 6.xon.sovs.« 6.xns.ona.s an.aom.oee.m an.nes.oem.s 6.xnm.oeo.~ «m.xao.cae.m -.Ams.ooa.s vs.xno.oea.— vs.xns.ooo.s sn.xos.vom.s os.xos.coo.« nu.xoe.ooo.m ommqlsom v on.cnm.m v.nooo.m .vso.n .OVOO.N {octet—“Nudeswunsnotcndce—uctactohflvduufl sauna-one»: sesame floomomuconen on emcewflm>om oneocsumu concave: sec: commonsense one Loans noose: on» “moooz snow moan hem hao> I m .moooz snow 09 omouo hmo> I u .e macooconmom «o moons: coauuosaumcu cauuooam muse ooceunnaoo acoaomecsm no mmooo>umconmom mcaooeumnooca «abscesses: undocumm moose: o>uueacomoanom moacm ecsucucos=oom a «museum «0 mceomoooud codummmoucm oncomo ousoomom ooceumsmme Heoaccooa weapons: noduoaoan modem moacm «nonloulunon umosoa moucm mama «mono; momnsoo a spasm no haauuosnonm nous: mooanquoon no ocumunona ucuuaoonnm a .moqoeaa .mslpomnom aeosomuuom «6 cocoa omessn no moo: no someone mason ocsooom a oesooumo ocunuom no mmocououmaoo moauauqosm panacea unoaoasam mcaaocsa acosnusom a mucoueucoo no cOHHLocoo ooa>aom m «mommasom oosqaeaoonm mmoooe mouuuuuoem anon Huuauoeauom oasoomom moundem no hocosooum cane «amoeba .m>< Hucno>o oumndhuu< ecu; mesonscm soon now omomomoHo ousoamao< coo: mm oases 242 Appendix B Table B9 Mean Values for Importance of Attributes Attribute Mean Importancea Transit Time l.58(.78) Frequency of Sailing 1.67(.71) Schedule Reliability 1.49(.70) Port Facilities Access 2.10(.98) Specialized Equipment & Service 1.98(1.12) Condition of Containers & Equipment 2.14(.94) Handling Equipment 2.3l(1.27) Storage Facilities 3.44(1.32) Completeness of Service 1.78(.86) Outbound & Inbound Ports 1.57(.74) Absence of Loss or Damage 1.63(.93) Speed of Settlement 2.21(1.14) Follow-up, Tracing, & Expediting 1.68(.93) Provision of Door-to—Door Rates 2.57(1.27) Flexibility of Rates & Charges 2.29(1.22) Lowest Thru Rates 2.16(1.20) Lowest Port-to-Port Rates 2.04(1.14) Sales Promotion Material 3.34(1.12) Technical Assistance 2.21(1.05) Schedule Change Information 2.00(.99) Processing of Freight & Documentation 1.94(.78) Sales Representative Manner 2.34(1.02) Shipping Requirement Understanding l.65(.80) Responsiveness of Management 1.71(.76) Compliance with Specific Instructions l.42(.64) a. 1 Of Greatest Importance, 3 = Of Average Importance, 01 II II Of Least Importance aocomuomoxmssa on o« ooaooumnoo mes cause one no new mason as «one noueoaocu one: .o encompass: on On oouoouocoo ses omaeo on» no man among us Home mousouocu sun: .A ooseuuonlu uses: no I a .oossuuoman omeuoee no I n .ooceuuonau uncusoao no I u .e 243 Appendix B «a as on a" an on senescence: no tones: Auo.oan.m Ans-oua.m Aos.omo.~ Avv.on«.~ Ace-one.m Aun.com.m enonuosnuunm anaconda nua- coaunsnaoo Ace-cve.~ Ane.ova.m Ace-cvs.m Ase.~osc.s «as.ooe.n Anv.ce«.m “assesses: no auoso>aueonaoe Ame-cue." Ass-oeo.~ Aae.o«s.~ moo.oev.~ Ave.css.~ Ame-co«.~ seneasunuoena «concusseoe assesses Ane.ose.« Ao~.~oam.a Ace.oe«.« Ao«.~ooe.a Ame-moon.“ Acc.ncoo.u nouns: osnssesononnoe mouse Ans-ose.s Ase..oo.« Ace.ove.m xvp.oec.« Aes.ooo.n Ace-coo.” eoaacunoaeooo a anemone no nanosecond Ano.coe.« Ac~.~coo.« Aae.cse.s Ann.moeo.« .oe.—vmo.a Ano.oes.~ soauaauoenm mousse osseogom moo-moe«.« Ane.ceo.« Aso.mcn«.u soc-mono.“ Ace-cvs.« Ase.~onn.« consensus. suoaanooa Ann-acoe.n Asm.sce~.n Aeo.~oos.n Ao~.moas.n Aoo.scon.n .mv.—coc.n Hanson‘s nonaoaonn sense Asn.scno.« A«~.~ooo.« Asu.~oa..« Ano.move.~ A«~.moeo.u Anm.~coo.« mouse stomach-anon season .ou.scns.« Aoa.~ova.n A«~._o-.u nan.soeo.« .em.~oo~.« Ao«.~coc.m nouns suns sconce Ana-mvcm.n Asn.mo—v.« Anm.~ocn.« Ace-Hone.“ mus-coe.« mun-mcsc.m massage a cause no shamansuosa mmm.~cou.a Asa-«cav.« mos.mooe.« Ame.ncva.« man.momo.a Amu.~oou.« noses soon-ou-noon so coanssoua Ann-cos." Ana-mons.n aoo.~o~e.a Anv.vo«._ Aue.vos.s Ace-coo." ennuacocuu a .essosua .nsuaossoa Awe-soen.« “on.~oe«.« moo.mov«.« A««.nc~c.m Ae~.~ca«.n Ace.~oeo.« seasosunom no noose moo.~cos.m Aus.onu.m Ave.cno.~ Ase.ooe.s Ana-coo." Avv.o««.m unease no each so essence Ame-cse.n Ane.oue._ Ass-one." Ase.coo.m A«8.c«e.m Ana-coo." canon essence a enaonuso Ace-oao.~ Ase-coo.“ Ace.cee.m xes.cev.n Ame-coo." Ace-oec.n ooapuoe no ouoaouosnsoo Ann-scao.n Asc.ooa.n son-soon.” Ae«.soev.n xs«.sCev.n Aee.~.«~.a eonsssaosa oneness An«.ncon.u Amv.~can.« Aen.~can.n Ana-mooo.« Ama.moov.« Ave.cco.m «accesses summons: Aao.coo.a Ace.vsv.« Aae.csm.« Aoo.moae.u Ave.oon.« Ave.ceo.m «accesses a senescence no aoasneeco Asa-soon.“ Ase-coo.« Ana-Vsm.« .oe.sceo.« Ao~.~on«.« Ann.o-.n coasnom a «accesses eouasanoono non-cve.« moo-scoa.« A««.~oo—.n Ass.c«o.n Ace.ce~.u Ass-cso.n mucous soaussaoae anon Aes.ona.~ Ase.oen.m ses.".eo.u xes.oee.« Ans-coo.s Ame-vo«.m shamanASAos announce Aes.oca.~ Ace.oes.s Aes.o~e.~ Ave-one." Ans.c«s.« Ass-con.~ enasaam «a successes Ass.caa.~ Ase.ceu.~ Ace-cos.” Ame.oen.s Ace-ooe.a Anv.oen.~ ease ascents nonsense sustenance mum onus: ”mm been: anaooseco no case oases Indus: nosouuomfl ouneo e mononuconea cu occuueueon oueoseum Ouflflnhuu< coducouuumueno Huaoomsoo onmcm oce menus: Hoeomaoam omueo .huunuoecmumom cameo no oooanqoosm .mousoenuue no consumonmn seem cum bunch 244 Appendix B 11111 1 Hummus” a“ On. mason-H 111111 moanmfins> pmoooomoomH we moansflhc> wcmpsm nousnou 111111. snesHoH n O O ... Deane.“ 111111. a wait 111111 neHunou .11 O 111 Ha) :HHQOoH 111111. annoneoau Huang. H 111111 a H n H a m 8 c oeH\n-\H. capo-on 111111 Hump-so 11111. 111111. Hausa.» casuo.u u Heap-on 1111111. «aIw mm 11a um sun-eon HHHONoH ncHun.u 1.11111 11~ Haida BUmemmau so umfiumuumza Hem ..0H\n-\H. 1.111.1- 1.51.. a...“ .anbactm uxH 8H Bun: u- aaHm uunmo no 4* Hmuam u 111111.111 mea oxHaaHza 80 BUHSOI 008.0 59 HIUGKUR H 8 m 8 H 8 H 8 0 n H . H0.HO.~ u 0 __”~.~m I O neuunou O O I oeuonou 111111 oHHonsu 111111. 1 JHHOH Hum HCHOH H.) adHcH do. acHoH H.) aeHOH 0 69089 H. ”unto no amass: .. 1 2” H.) H. 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