(a)

The corporate objectives of Apex Shipping Ltd could be contained in a mission statement which would comprise the company’s organizational aims. These aims as set in the question indicate that the company is concerned with an expansion of its international business to improve long-term profitability, the provision of the necessary capital to achieve that development and the continued development and training of the company’s employees.

In addition to the above the company also has an environmental policy which may well be converted into a corporate objective. As expressed in the question the environmental policy appears to be designed to safeguard the company’s operations in respect of roll-on roll-off ferries rather than a broader outward looking concern for the environment itself. However, the company also seeks to establish best practice and to that extent its policy may truly be said to be outward looking.

The environmental policy should be converted into a corporate objective and included in the mission statement.

(b)

In order to quantify the objectives, the company would need to establish some financial indicators as follows:
(i) A rate of return on capital for the company as a whole and quite probably for each division to the extent that they face different operating conditions.
(ii) A rate of growth for each division. This again needs to be divisionalised as each division does appear to be facing significantly different prospects and in some circumstances the targets must be specific for each division.
(iii) An attempt should possibly also be made to quantify the capital investment in environmental factors such as the safety on roll-on roll-off ferries but also the other health and safety and general environmental issues that may be facing the different divisions within the company.

The company does appear to have a fairly rigid structure as expressed in the introduction to this scenario. The four divisions of the shipping activities are described as carrying certain types of freight or passengers with no apparent crossover between them. As described, the categories are entirely logical, but one aspect of flexibility will be to keep these activities under constant review as the market develops to see whether cost savings and synergy might be achieved by perhaps merging the activities of certain of the divisions together. Thus, for example, it may be that containers and bulk shipping might be merged into one division at some time in the future which may well result in significant management and marketing economies.
In order to achieve this, Apex Shipping Ltd should have a strategic planning team who are in constant touch with the markets and operations of the divisions so that they can anticipate and respond to market and technological changes as relevant.
Apex Shipping Ltd will therefore need a trained management structure whose members are able to cope with such changes. Such managers should be trained not only in technological changes that may affect the operation of the ferries or bulk or container shipping but should also be aware of demographic and social changes that may change the way the customers wish to use their services. The instance cited in the question of shorter cruises will not be the only example where demographic and social changes affect customer preference.
The availability of capital will also be a key area where the company needs flexibility. The question does not provide any precise details about the company’s gearing or constraints on borrowing or raising fresh equity funds, but clearly the company must not only plan its capital requirements well in advance but must also be flexible in this respect should it need to react quickly to a change in the marketplace. It needs to be in close contact with its bankers and stockbrokers in order to ensure that it can move swiftly to raise either equity or debt finance as appropriate.
The environmental policy should also be costed, and the company should be flexible in this area. However, not only should the company be responding to environmental problems as they arise, but it should anticipate such problems. In today’s climate, whilst companies may be forgiven if their financial performance may slip below par, the weight of public pressure is very firmly against companies that are seen to contribute to environmental damage of any sort and the bad press associated with such occurrences can do lasting reputational damage.
The company may choose to use such standard techniques as SWOT analysis in order to anticipate likely changes in its marketplace and make flexible responses as required.                                                                                                                                                                                                                                                                                                                                                                                            (c)

Total revenue of Apex Shipping Ltd increased from GH¢2,524m to GH¢2,910m – an increase of 15.3%.
Profit increased from GH¢205m to GH¢223m – an increase of 8.8%.
When adjusted for inflation, the growth of turnover is 9.7% and the growth of operating profit is 3.4%.
For the company as a whole, the return on sales may be calculated as follows:
2017 – GH¢205m ÷ GH¢2,524m = 8.1%.
2018 – GH¢223m ÷ GH¢2,910m = 7.7%.
Returning to the individual divisions, the following table expresses the various key financial measures:

As regards the Chairman’s statement, it is not quite accurate to say that the cruise division had “encouraging results” unless there had been some particularly difficult market conditions that had meant that a one percentage point reduction in the return on sales could be considered as a good performance.
Additional reinvestment in this area might therefore be questioned, although, once again, without further information on the precise market conditions and the needs of this division as regards new shipping or other facilities, it is difficult to make any firm judgements.
The Ferries division shows an improvement of one percentage point on its return on sales and overall, it almost doubled its percentage operating profit on a very modest increase in revenue. This is encouraging but once again, without details of market conditions it is not possible to comment in much detail.
In both containers and bulk shipping, the Chairman’s statement is fairly accurate in his pointing to disappointing results in this area.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    (d)

Porter’s model identifies five competitive forces that affect performance these are considered below with particular reference to the cruise and ferries divisions:

(i) The threat of new entrants:

In both cruises and ferries, the threat of new entrants is restricted by the cost of entry, namely the acquisition of the shipping and failed by the cost of entry, namely the acquisition of the shipping and failed by required to operate these very substantial vessels. If one consistent consistent, However, outright purchase then this will be a significant deterrent. However, one must also consider that such vessels might be rented, however, makes access to the capital required more available. One might consider that such vessels do exist all over the world and there is a possibility that competing companies might divert vessels that are currently competing on Apex Shipping Ltd routes to directly compete on Apex Shipping Ltd routes. It is important to consider in this context the extent to which a new entrant would gain access to the market. Unless such a new entrant has an existing name and reputation that is associated with this sort of marketplace then it is more difficult for them to attract customers to their services.

(ii) The degree and character of the present competition:

Cruise liners and ferries are a high fixed cost operation. As such, one can only make profits if a company exceeds the breakeven volumes. All competitors in this marketplace will therefore be seeking to maximize their capacity, obviously without reducing prices to an extent that makes break-even capacity more and more difficult to achieve.

There are no details in the question as to how the marketplace operates, but one would expect a certain amount of price competition and, more importantly, significant non-price competition as well. Such non-price competition would include newer and higher quality vessels; improved port facilities to speed passenger and car throughput; customer loyalty schemes which may include links with other types of suppliers, such as hotels and car hire, similar to established air miles schemes.

(iii) The bargaining strength of buyers:

The buyers in this case are the passengers that use the ferries or cruise liners. Given that this is a very competitive market, then buyers do have significant power given that they can transfer to other suppliers if they do not like the price or the quality of the facilities offered by a particular company. Such power is effectively limited by the differences that exist between the companies and to the extent that companies cannot differentiate themselves by price or non-price competition then buyers are put in a weaker position. This market is probably better described as an oligopoly rather than a perfectly competitive market as for any particular route there will be a limit on the number of suppliers. To the extent that these companies do have unofficial albeit illegal agreements regarding price and facilities offered, then the power of the buyers will be diminished.

(iv) The bargaining strength of suppliers:

Many suppliers will have little bargaining strength as they are themselves subject to very competitive markets.                                                                                                                                                                                                                                                                                    (e)

Main Concern Regarding Roll-On Roll-Off Ferries and Safety

The primary concern for GS regarding its roll-on roll-off (ro-ro) ferries is safety, as these vessels have design features that some claim make them inherently unsafe under certain conditions. While the design is largely outside GS’s control, the company can mitigate risks through proactive measures. Key considerations include:

1. Staff Training and Safety Procedures:
   • GS must ensure that its staff are thoroughly trained in the safe operation of ro-ro ferries. This includes comprehensive training on safety procedures, such as providing clear safety information to passengers, implementing proper evacuation protocols, and maintaining rigorous operational standards.
   • Regular drills and simulations should be conducted to prepare crew members for emergency scenarios, ensuring they can respond effectively under pressure.
2. Contribution to Vessel Design:
   • Although GS does not control the design of the ferries, it can leverage its operational experience and expertise to influence design improvements. By collaborating with shipbuilders and designers, GS can advocate for modifications that enhance safety, such as improved stability features or enhanced emergency access points.
3. Compliance with Safety Regulations:
   • GS must adhere strictly to maritime safety regulations and industry standards. This includes regular maintenance and inspections to ensure vessels meet safety requirements, as well as staying updated on any new regulatory changes that could impact operations.
4. Risk Mitigation Strategies:
   • GS should implement robust risk assessment processes to identify and address potential safety vulnerabilities specific to ro-ro ferries. This could involve investing in advanced safety technologies, such as improved fire suppression systems or real-time monitoring of vessel stability.

By prioritizing staff training, contributing to safer vessel designs, ensuring regulatory compliance, and adopting proactive risk mitigation strategies, GS can address safety concerns and enhance the reliability and reputation of its ro-ro ferry operations.