FONASBAYOUNGSHIPAGENTORSHIPBROKEROFTHEYEARAWARD2017Author:KatyAldrickTitle:ThreatsandopportunitiesfacingsmallindependentshippingagentsinEastAfricaContents1. TheroleofshipagentsinEastAfrica

1.1 TheRoleofashipagent1.2 Typesofshipagents1.3 Whatdrivesdemandforshipagents1.4 TheBusinesscontextofEastAfrica2. ThreatsfacingsmallindependentshipagentsinEastAfrica

2.1 Largecorporateagencies2.2 FailuretokeepuptodatewithIT/moderncommunications2.3 Highlevelsofcompetition2.4 Portimprovements2.5 Higherinsurancecosts2.6 BusinesscontextofEastAfrica

3. OpportunitiesfacingsmallindependentshipagentsinEastAfrica

3.1 Diversify/provideaddedvalueservices3.2 ExploitLocalKnowledge3.3 Specialization3.4 Sellthebusiness

4. Conclusions4.1 Summaryofthreatsandopportunities4.2 Whatlikelyrolewillsmallindependentshipagentsplayinthefuture?4.3 Adviceforsmallindependentshipagentsonhowtheyshouldplanforthefuture

Abbreviations:ETA:EstimatedTimeofArrivalICT:InformationandCommunicationsTechnologyC&F:ClearingandForwardingP&I:Protection&IndemnityReferences:Variousprominentindividualsworkinginbusinessandacademiawereinterviewedwiththe questions indicated below. Many asked that their names and answers be keptanonymous. However those listed below agreed to have their names printed butpreferred not to have their name against a direct quote. Much of what has beenresearched andwritten about in this paper is based on insight from these interviewscoupledwithmyownthoughtsonthesubject.

• RichardCockett,Editor,TheEconomistMagazine,UK• PhilipAldrick,EconomicEditor,TheTimesNewspaper,UK• JamesKnight,BusinessOwner,SeaforthShippingKenya,Kenya• SimonFogarty,LegalManager,Comarco,Kenya• TerriNedritu,EducationConsultant&Networker,Kenya• DavidJones,BusinessConsultant,USA

Interviewquestions:

• Whatdoyouconsidertobethebiggestthreatsfacingsmallindependent

businessesglobally?

• DoyouthinkthesamethreatsapplytosmallindependentbusinessesinAfrica?Ifnot,whatdifferentthreatsdoyouseeinAfricaandwhy?

• Whatdoyouconsidertobethebiggestopportunitiesfacingsmallindependent

businessesglobally?

• DoyouthinkthesameopportunitiesapplytosmallindependentbusinessesinAfrica?Ifnot,whatdifferentopportunitiesdoyouseeinAfricaandwhy?

• Howwould youadvise small independentbusinesses inAfrica toexploit these

opportunities?

Web sources: 1. www.economicshelp.org/blog/glossary/derived-demand 2. http://uk.reuters.com/article/britain-airports-ba-cruz-idUKL9N1HZ00T3 3. http://www.emeraldinsight.com/doi/abs/10.1108/07378830710754992 4.http://smallbusiness.chron.com/negative-effects-computers-workplace-22023.html5.http://www.bbc.com/news/health-398996466.http://www.telegraph.co.uk/news/2017/05/12/nhs-hit-major-cyber-attack-hackers-demanding-ransom/7. http://smallbusiness.chron.com/added-value-business-concept-65341.html8. http://www.investopedia.com/terms/v/valueadded.asp9.https://www.google.co.uk/?gws_rd=ssl#q=human+capital)10. https://www.forbes.com/sites/blakemorgan/2015/03/04/happy-employees-equals-happy-customers/#5e26af3f57d211.https://en.wikipedia.org/wiki/Wilkinson_SwordInadditiontotheinterviewsandwebsites,variousarticlesfromCityofLondonbusinessLibrary were read for general business information but have not been referencedspecifically.Annex 1 – Attached Immigration Procedures (company letterhead removed forconfidentialitypurposes)

1. TheroleofshipagentsinEastAfrica1.1Theroleofship’sagent:InEastAfrica,Ship’sagentsstillplayavitalroleinthesupplychainofallseabornecargomovements. There are twomain types of ship’s agents – a Liner agent and a Trampagent.Belowisalistofaship’sagent’smainresponsibilities:

1. ProvidePre-arrivalinformationregardingtheportrestrictionsandtariff2. InformallpartiesofthevesselETAbasedontheMaster’sadviceandcoordinate

pre-arrivaloperationsplanningmeetings.Thishelpsallpartiesprepare.3. Secure a berth for the vessel with the port, arrange pilots, tugs, linesmen to

moorthevessel,book&arrangeportstevedoregangsandoverseethedischargeoperation, ensure Immigration, Customs, Port Health board the vessel – thelatter must grant the vessel ‘free pratique’ in order for cargo dischargeoperationstobegin.

4. Informallpartiesofthevesselberthingandsendoutdailyactivityreportstoall–this includes preparation of the Statement of Facts and daily updates on howmuchcargohasbeendischarged.

5. Lodge thecargomanifestwith theportand revenueauthoritiesonwhichportdues(e.g.wharfage,storageetc)andtaxeswillbecalculated.

6. Pay port authority invoices on behalf of principals and arrange outwardclearanceofthevesselwiththeportauthority

7. SecurereleaseofcargotoreceiversbyissuanceofDeliveryOrders8. Coordinatingallpartiesconcernedwiththevesselandcargotoensuresmooth

discharge / loading of cargo, i.e. vessel owners, cargo receivers, truckingcompanies,C&Fagents,portauthority,andotherthirdpartycontractorssuchassurveyors,techniciansattendingtothevesselandbaggingoperatorsetc,

9. Husbandryservices:crewhanding,sparesandfreshwaterdelivery,bunkers,localprocurementsandweaponstoportarmourytransfers

10. Paymenttoothergovernmentauthoritiesand3rdpartycontractorsonbehalfofthevesselowner,vesseltimechartererandcargoreceiver

11. Providerelevantportstatisticsandcountryinformation1.2Typesofship’sagents:InadditiontotheaboveaLineragentwillalsoprovideacommercialserviceandtakebookings for import/export cargo on behalf of their principal and control theirequipment (container tracking). This is particularly common in the case of containerlinershipping,whereannualcontractsaresignedbetweentheShippingLineandagent,orasisoftenthecase,theagentisasubsidiaryoftheShippingLine.

Trampagentsareappointedonapervoyagebasisbythevesselowner/timecharterer.This is a very important difference to recognize as it is a system that makes trampshippinghighlycompetitive.Anothernotablepointtomake,isthatalthoughthevoyageappointment comes from the vessel time charterer (or vessel owner), it is the vesselvoyage charterer / cargo owner that typically nominates / recommends the agent.Therefore a Tramp agent’s client, otherwise known as their principal, is usually thevesselvoyagecharterer.ThemainpointisthatinTrampshipping,therearemanymoreplayers involvedwitheachshipmentandthereforemoreplayers toplease inorder towin and keep the business. And in the case of tanker vessels carrying petroleumproductsthatarecontinuouslytraded,workingoutwhothevesselvoyagechartereris(i.e.yourpotentialclient)canbeverydifficult.There is also a difference between a small independent ship’s agent and a globalcorporate ship’s agent – regardless of whether it is a tramp of liner agent. For thepurposeof this research small independent shipagents canbedefinedashaving lessthan 50 staff per country and covering no more than 6 ports in a maximum of 2countries. Small independentagentswilltypicallybeprivatelyownedenterprisesandareoftenunderthedirectmanagementoftheirshareholders. BycomparisonaglobalcorporateagentwillhaveaglobalbrandwithaHeadOfficeinonecountryandbranchofficesworldwideoftenwithaheadcountinthethousands.Typicallyincorporatedasapubliclimitedcompanyoraprivatecorporation.1.3Whatdrivesdemandforship’sagents?Shippingisaderiveddemand. Thismeansthatunlikemanybusinessmodelswherebythereisdemandfortheproductbeingsoldbyabusiness,thereisnodirectdemandforshipping but rather it is the demand for the products that are being shipped. Forexample:‘’Demandfortransporttendstobedeterminedbydemandforanotherservice/ activity. If people need to get to work, they will demand more bus journeys. Fewpeopletakeabusfortheintrinsicpleasureofabusjourney’’(source1)This mechanism of derived demand has a big impact on the shipping industry, forexamplefreightratesarenotdeterminedbytheserviceoffered(i.e.‘theproduct’)butratherbythedemandandsupplyofshippingtonnage.Shippingtonnageisthespace/capacity available on vessels globally and/or on a particular route. If the distancebetweentradelanesincreases,butthenumberofvesselremainsequal,thenclearlythevesselcapacity/shippingtonnageavailablereduces.Example:suddenlycoalisshippedfromSouthAmericatoChinainsteadofSouthAmericatoNorthAmerica;becausethejourneytoChinatakeslonger,thevesselisfullofcargoforagreaternumberofdaysperyearallelsebeingequal–i.e.availablesupplyofvesselcapacityreduces.Thisreductionissupplywillleadtoanincreaseinfreightrate(inlinewithsupply/demanddynamics),regardless of the quality of service (‘product’) offered. The point is that the shippingindustrydoesnothavecontroloverthedemandfortheirproduct,henceitisaderived

demand,andbyvirtueofthistheshippingindustrydoesnotcontrolthepricingoftheirproduct, in the sameway a company selling a product like toysorwashingmachinesdoes.Ship agents provide a necessary service to the shipping industry and are thereforesubjected to the same difficulties of working in a business context based on deriveddemand. Demand for ship agents is determined by the demand for shipping and theproductsbeingshipped(nottheship’sagencyserviceitself).Thereforeaship’sagents’prosperityreliesontheirbeingdemandfortheirprincipals’business,ratherthantheirown service. An agent could provide the best service at the best price but lose acustomer simply because trade in one location declined reducing the need for theshippinglinetocallortradertosellcargointhatlocation.AlsoashipagentcouldchosetoworkwithCompanyAthatsubsequentlylosesmarketsharetoCompanyBresultingin the Agent losing business that was essentially out of their control. Thereforechoosingtherightclientbaseiscriticaltoriskmanagementandashipagent’ssuccess.Unlessofcourseanagentwishestotakeagambleandhopetheyget‘lucky’.

Itfollowsthattheimpactofoperatinginabusinesscontextbasedonaderiveddemandwillcreateadifferentsetofthreatsandopportunitiesthatwouldexistinotherbusinesssystems.1.4TheBusinesscontextofEastAfricaHavingbrieflydescribedtheroleofaship’sagent,thedifferenttypesandwhatdrivesdemandfor theirservices, it’salso important toestablishthebusinesscontextofEastAfrica, as this context is very different to that of North Europe for example. The keyaspectsoftheEastAfricabusinessenvironmentarelistedbelow:

a) Poorinfrastructure–road,rail,electricity,water,telecommunicationsb) Lowpercapitaincomeandinadequatesocialsupportsystemsc) LowlevelofICTcapabilitiesd) ComplicatedGovernmentprocedurese) Poorsecurityf) Corruptiong) Inadequateorantiquatedlegislativeregimes

Allof theabovecontribute tocreating the, sometimesdifficult,businessenvironmentthatexists inEastAfrica.Togiveaquick insight intothedifficultieseachof theaboveposes for business when operating in East Africa a summary of examples has beenprovidedbelow:

a) Poorinfrastructure

The issue of poor infrastructure in regions like East Africa iswell documentedandthereforethissectionsimplyhighlightsafewexamplesonhowitimpactsonbusiness.The inconsistent power supply and power outages has a huge cost impact onbusiness,bothintermsofhardwaresuchasbatteries,generatorsanddamagedIT equipment, but also in terms of downtime especially when working withonline cloud or web based systems that require uninterrupted high speedInternet capabilities,which are powerdependent. To site an exampleof howpower supply can affect ITC systems, on May 28th 2017 British Airways wasforced to cancel all flights from London Heathrow and Gatwick due a poweroutage. According to Reuters BA CEO Alex Cruz said the ‘power supply issuecausedglobalITfailure’’(source2).Lackofwatersupplyisanothermajorissueandbusinesseswillhavetheaddedcostofsupplyingfreshsafedrinkingwatertoemployees.Anotherexampleofahidden cost that companies in Europe would not need to consider. Poortelecommunications networks affect Internet speed and reliability, and mostcompanies now rely onmobile lines rather than landlines. Then of course thepoor road and rail networks make travel, distribution and communication allmoredifficultandcostly.MostcompaniesinEastAfricaemployafewTuk-Tuksormotorbikeswithmessengerstocompensateforthis.

b) Lowpercapitaincome&InadequatesocialsupportsystemsCountries with low per capita income and inadequate social support systemscreateamyriadofissuesforbusinesses.Togivesomeexamples;a)duetopooreducation systems there is a less well educated society fromwhich to sourceskilledlabourwhichhasamajorimpactonbusinessbeingabletofindqualifiedstaff;b)Ahigherthanexpectednumberof‘sickdays’takenbyemployeesduetoinadequatefreehealthservicescostsbusinessesmoneythroughlossoftimeandprovision of health insurance (whichwill often cover families too); c) In lowerincomecountries,peopleoftenhavelargerfamilies(withthehopeofprovidingsecurity inoldage).Thisrequiresemployerstogivemorecompassionate leaveandmorematernity/paternity leave. In countries where polygamy is commoncompaniesmayhavetostatepaternalleaveisforthefirst2childrenofthefirstwife inorder to limit theirexposure;d) in lower incomecountrieswith limitedsocial support systems businessesmay bemore prone to theft of small itemslikestoiletpaper,sugar,stationary,petrol,etc.Businessconfidentialityisalsoatrisk as employeesmay also bemore inclined to sell company information forpersonal gain. As a consequence companies have to place sometimeprohibitivelystrictsystemstopreventthisorlossescanbehuge.

c) LowlevelofICTcapabilitiesThere is often inadequate training onGovernment ICT systems (port, revenue

authority etc),whichmeans they are both under-utilized and breakdownwithsurprising frequency. Any company that is reliant onGovernment ICT systemswillsufferfromthefailingthedelays/costsassociatedaswellasthepotentiallossof international clientswhooftenblame theagent for causing thedelay /error. In addition keeping up to date with the ever-changing ICT world isparticularlydifficultwhenthere isageneralshortageofbasic ICTskillscoupledwith poor education levels and low-income families who mostly do not haveaccesstocomputersoutsideoftheirjobs.

d) ComplicatedGovernmentproceduresMany Government procedures are highly complicated and require thoroughknowledge of an often undocumented procedure. Failure to follow the exactprocedurewillleadtohugedelaysaspaperworkisshuffledbetweenpeopleanddepartments. Knowing the mobile phone numbers of the various individualsinvolvedintheprocessiscriticaltonavigatingthemaze.ForexampleinKenyaall foreigners working in Kenya require ‘temporary work permits’. Annex 1providestheproceduresaswayofexample.TheproceduresandtimetakencanfrustrateclientsandrequiretheAgenttoconstantlyfollowupwiththevariousGovernmentDepartments,whichofcoursehasatimeandcostassociated.

e) PoorSecurityThis adds to the cost of running a business for example; all offices requiresecurity guards, any cash moved is done using an expensive armed escort,vehicles parked without a driver risk losing wing mirrors etc. The securitysituation will also have a major effect on the type of business operating, forinstancecruisevesselswillstopcallinginpreferenceforaport/countrythattheirpassengers will be safer in and therefore more likely to book trips for.ConverselyNavycallsmayincreasecreatingnewopportunitiesforshipsagentsabletohandlethecall.OnenewbusinessstreamborneoutofpoorsecurityinEastAfricahasbeentheriseofcargovesselscarryingarmedsecurityteams.AllarmedsecurityteamshavetohavetheirweaponstransferredbyCustomsescorttoaportarmoryandthisisaservicemanyshipsagentswillprovide.Perhapsthebiggestnegativeeffectofpoorsecurityisondiscouraginginternationalbusinessinvestment.

f) Corruption

Corruption is well documented as having hugely detrimental effects on thedevelopmentofbusinessglobally,butparticularly inAfrica. AndalthoughEastAfricamaynotbeconsideredtobeasasbadlyaffectedassomeothercountriesitisadefiniteissuethatcannotbeignored.Thisfollowingexampleshowshowabusiness operating in East Africa can be affected: a clientmay be dissatisfiedwithaserviceprovidedbyCompanyA,whencomparedtoCompanyB,wheninfact CompanyA has followed strictGovernment procedures,which iswhy theproceduremayhavetakenlongertocompleteforthemthanitdidforCompany

Bwhopaidafacilitationfeetoshortcutthesystem. Thenewcompliancelawslike UK Bribery Act make it easier for companies like Company A to operatecompetitively.

g) InadequateorantiquatedlegislativeregimesLegislationeffectingshipagencyandlogisticsacrossthecontinentisinconsistentand at varying degrees of evolution. As such sudden and dramatic changes inlegislationcan,anddo,occurofteneffectingmultinationalbusinessmore thanindependents (i.e. local content requirements, minimum local shareholdingrequirements, banning or amendment of local charges etc.) An unclearlegislative environment creates a significant ‘unknowm’ risk for businessesmaking it hard for companies to operate and plan strategically. Such ‘hazy’legislativeenvironmentswillalsodiscourageinternationalinvestors.AsexamplestheTanzanianGovernmentliberalizedtheshipagencysectorintheearly1990sto encourage inward investment, they subsequently tried to re-nationalize thesector some years later and eventually settled on a minimum 51% localshareholding requirement. This caused significantuncertainty for thoseagencycompaniesthathadinvestedinTanzaniaandalsoledtoalong-termreluctanceto increase investment in order to limit exposure to future political decisions.Equally,Kenyainthe2011gazettedregulationsthatsoughttoenforce51%localshareholding and to seriously curtail the operations of companies in themaritimesector.Ithastakensixyearsofcourtproceedingsforindustryplayerstoeventuallyhavetheseregulationsoverturned.Obviouslysuchuncertaintywilllead to a decline in inward investment, a consequent slow-down in domesticskillsdevelopmentandanunnecessarystagnationwiththemaritimesectorasawhole for those countries that fail to establish strong and clear legislativeenvironments.Uncleartaxregulationsoften leavecompaniesexposedtosignificantadditionalandunexpectedtaxbills.Significanttimeandmoneycanbeexpendeddisputingunwarranted tax bills and, on occasion, companies will simply acceptunwarranted taxes as they are unwilling to meet the costs associated indisputingthesebills.Onerous licensing requirements are not just costly and time consuming toimplement,butalsorequirebusinessestoallocatemanpowertoensuretheyarekeptcontinuouslyuptodatewiththecontinuouslychangingrequirements. Asoneintervieweesaid‘smallbusinesseswillneedtopayexactlythesameforthevariouslicensesaslargebusinesses,sotheyrepresentamuchhigherproportionoftheircosts’.

Thisdifficultbusinessenvironmentcreatesauniquebusinessculturethatunsurprisinglyplaceshugeemphasis on the importanceof long-termexperience, relationships, localexpertise,localconnections,andlocalknowledgeofthemarketandprocedures.Agood

localreputationbuiltontrustovertimeiskeyinthistypeofbusinesscontext.It’s important tonote thedifferentbusiness contextof EastAfricaas itwill create itsownopportunitiesand threats thatdonotexists inotherpartsof theWorldwhereadifferentbusinesscontextexists.2. ThreatsfacingsmallindependentshipagentsinEastAfrica

Section1theroleofsmallindependentship’sagentsinthecontextofEastAfrica.Thispaperwillnowlookatthekeythreatsfacingthem.Theresultsof interviewingvariousprominent figures in the business and academic realmhave highlighted the followingareasasthegreatestthreats:

• Largecorporateagencies• FailuretokeepuptodatewithIT/moderncommunications• Highlevelsofcompetition• Portimprovements• Higherinsurancecosts• BusinesscontextofEastAfrica

2.1LargeCorporateagenciesArguablythelargest,oratleast,mostobviousthreattosmallindependentshipagenciesis being ‘outmuscled by bigger businesses’, as one interviewee said; ‘that can be incompeting for contracts or even in signing supply or service agreements with biggerbusinesses,withtheirdeeperpocketsandabilitytosqueezesuppliersandpartnersrightdown’.Thisisverytrueinthecaseofshipagencies,wherethemultinationalplayersareabletocapitalize on the development of ICT systems linking their global branches together.Thusenabling them toofferglobalor regional contracts to their clientswitha simpleclickofabutton.Foreaseofadministrationand/orcompliancerequirements,thereisagrowing preference for clients to contractwithmultinational agentswho are able toofferglobal/regionalagencyservices.Another intervieweesaid ‘multinationalagencycompaniesarebetterable to leveragetheir brands, standardise and minimise rates across regions, provide centralisedaccountsandhavemoredevelopedmarketingstructures.Possibly thebiggest threat isthe continuing ‘price war’ between the multinationals where they continually driveagency fees down in an attempt to secure regional contracts – this is a factor acrossmostsectorsoftheindustry(cruise,navy,liner,tankeretc)’

Multinationalagentswillofcoursebenefitfromeconomiesofscaleonalevelthatisnotachievableforsmallindependentagents.Intheory,andallelsebeingequal,thisshouldenable them to offer lower rates for the same service, which gives them a hugeadvantage.Inaddition,multinationalagentscanuseoneoftheircountrybranchesasa‘hub’tomanageregionalorglobalcontracts.Indoingsotheyareabletoprovideaonepointsourceforcommunication,agreeonasingletariffforaregion,manageanysub-agents (e.g. by keeping themup to datewith their client’s compliance requirements,financial procedures etc), and depending on the agreement signed, they may alsomanage all the invoicing related to ships agency services andoftenprovide favorablecredit terms too. Small independent ship’s agents can easily lose a client if suchcontractsaresignedthroughno faultof theirown. Essentially thismakes itanunfairplaying field for smaller ship agents.However, itmustbe remembered, they canalsowincontractsasaresultofthistoo.Attimesitcanfeellikeasmalleragentsbusinessisinthehandsoffate.Thegrowthofmultinationalagencyregionalcontractscanalsoresultinincomestreamsfromtraditionalvesselappointmentsbeingreduced.Inthepastifanagentweretobeappointedbythevesselownerbasedonacharterernominationtheagentwouldexpecttohandleallhusbandrybusiness (crewchanges, spares supplyetc)aswell,but this isnotthecasenowadays.Rathervesselownerslooktovesselmanagementcompaniestorun their business and vessel management companies in turn look to sign regionalcontracts.Thereforeacharterernominationdoesnotsecureahusbandrycontract.Thegrowthinthis‘regionalcontract’culturehascontributedtoachangeinorganizationculture;withlargerorganizationsthereisastrongerrequirementforwrittenproceduresandpolicies(e.g.ISO9001).Supplierstothesecompaniesmustmeetstrictcompliancerequirementsbeforeevenbeingabletotenderforanybusiness.ForsomeO&Gmajorsittakes6monthstopasscomplianceandbeaddedtotheir‘approvedsupplier’list.Andbeingon an ‘approved supplier’ list doesnot guaranteework. It simply allows you totenderforthebusiness.Somesmalleragentssimplydonothavethecapacity(availablestaff time) to pass these compliance tests unless there is guaranteed business at theend.Anothermajorissueforsmallerindependentagenciesworkingwithlargercompaniesisthe huge size of the contracts being signed.Andbecauseof the size of the contractsbeing signed bigger business expects larger credit facilities to be offered in return.Againmanysmallship’sagentssimplydonothavethecashflowtomeetthesefinancialterms.Forsomesmallagenciestheserequirementswillclosedoorstobusinessestheyare infact capable of handling and may even be better at handling than some of theirmultinationalcompetitors. Theironyofthis isthat insomecasesaclientmayendup

witha‘worse’servicebeingprovidedtothem.Multinational ship agents are able to gain a skills advantage by pooling on a globalresource.Anindependentship’sagentinEastAfricawillhaveamuchmoredifficulttimekeepinguptodateandfindingskilledpeople–especiallythosebasedinlessdevelopedregionslikeEastAfrica.Oftentopmanagerswillneedtobeofferedsharestoencouragethemtoworkforasmallagencycompany.Multinational ship agents can reduce their exposure to financial risk more easily byhavingdifferentbusinesssectors thatcanoffer financial support toeachotherasandwhen required. This flexibility for ‘business units’ (often split by country) to supporteachotherisamajoradvantage.Forinstancecountrymarketsfluctuateduetochangesintradedynamicsorpoliticsandbecausethesechangescanbeshortlivedtheabilitytooutridea‘badpatch’canbehugelybeneficial.Smallindependentagentswillhavelesscapacitytoreducetheirfinancialriskandmustsimplycovertheircoststosurvive.Infactsomemultinationalagent’scountrybrancheswillneveractuallybeabletocovertheiroperatingcosts(sointheoryshouldhavecloseddown). However,thesecountryofficesaresupportedbytheirregional/globalHeadQuartersbecausetheyarerequiredinorder for themultinationalcompany tooffera ‘global reach’ to theirclients,whichwill be part of their marketing campaign. To a small independent ship agency, theexistenceofthesetypesofagenciescreatesanunfairplayingfield.To summarise,multinational ship agentshavea global reach,makehuge cost savings(through tax loopholes and better economies of scale), have reduced exposure tofinancialriskandcanusuallyofferbettercreditfacilitiestoclients.Itisnowondertheyareconsideredthebiggestthreattosmallindependentshipagents.Whatcanbedonetoreducetheimpact?

a. Small agents should seek to work with larger corporate agents as their subagentswhereverpossible.InEastAfricatherearestillmanylargeragenciesthatdonothaveapresenceinEastAfricaandoperateviaasubagent.ThisisbecausetheEastAfricanmarketcanbeconsideredtooriskywithtoosmallprofitmarginsforbiggerplayers.

b. Smaller agents may need to diversify in order to have less reliance on one‘businessstream’inordertoreduceriskexposure.

c. Smalleragentsmayneedtolookforlocalnicheservicesthattheycanofferthatmultinationalsmaybeunwillingorunableto.

d. Smalleragentsmayneedtoconsiderloweringprofitmarginsbyarrangingbankloansinordertooffercompetitivecreditfacilities,perhapsthroughafinancingsystemknownas‘discountinvoicing’.

2.2FailuretokeepuptodatewithIT/Moderncommunications ‘ICT, particularly the internet, is having a significant impact on the operations ofbusiness enterprises and is claimed to be essential for the survival and growth ofnations'economies.’(Source3)ThereisageneralshortageofITCskillsinEastAfricaandthereforekeepinguptodatewitheverchangingtechnologiescanbebothcostlyandintellectuallydifficultforsmallindependentshipagents.Ashipagent’skey‘raisond'etre’istoenablecommunicationsbetweenthetrader,shipowner,portandrevenueauthorities,cargoreceiversandallotherpartiesinvolvedinashipment.Thereforeefficientcommunicationiscriticalanditisessentialtostayabreastof the changing methods of communications. For example, email, and therefore thewrittenword, is themain form of communication in today’s world. However ‘manyemployeeslackcomprehensivewritingskillsandcanthereforestrugglewithsuccessfullycommunicatingmessages.Yet,even themost-skilledwritercanstillhave troublewithconveyingtoneinelectronicmessages’(source4).ThisisaparticularlyhardareaforasmallshipagentinEastAfrica,whereoftenpeoplewith operational capabilities lack written skills. Again small companies will lack thecapacitytoseparatejobroles;ratherstaffwillberequiredtohaveabroaderskillbasethanwouldbeexpectedinamoredevelopedregion.AlthoughICTimprovementshavemadecommunicationsquicker,theyhavealsocreatedacultureof24/7. Thisputshugepressureonallbusinessesandtheiremployees,butagain is possibly felt by smaller agents more as they may lack the capacity (staffnumbers)thatlargerorganizationscouldachievethrougheconomiesofscale.Diplomacy is key forall agents (bigand small) andwith thearrivalof immediateand,often‘facetoface’,communicationplatformssuchasSkypeandWhatsAppagentsareoften not given enough time to think of the best response – this expectation forimmediateanswerscanleadtomistakeswheninthepastsuchanimmediateresponsewouldnothavebeennecessaryandthemistakenotmade.Social media and online platforms such as Facebook, Twitter, Linkedin, Youtube canprovideanexcellent‘free’marketingplatformforbusinesses.Howevertheyneedtobeused correctly or they can also just as easily damage a company or employee’sreputation. For example, once a company has decided to create a Social Mediapresence the sites have to be constantly updated with relevant information as thecompanywillhave‘followers’–i.e.peopleinterestedinthemandwatchingthem.Thesitesmustbeconstantlymonitoredtocheckcustomerfeedbackcomments–especiallywhen ‘response rates’ to customersarepublishedand low response rateswill impactnegativelyonacompanyreputation.Anynegativecommentswillhavetoberepliedto

instantlybutalsodiplomatically.Infactthisissoimportantandsodifficulttomanagethat many companies will out source the management of Social Media sites tocompanieswithprofessionalmarketingandcustomercareexpertise.Thistransparencyof published information provides an immediate credibility/reliability check forcustomers wishing to get a quick snap shot image of a company. This ability forpotential customers to judge a companybasedon existing customer’ opinions,whichare by virtue the most up to date company references, is an excellent tool. Forbusinesses, however, while the rewards can be great, the use of Social Media alsocarriessignificantrisks,especiallyifmanagedincorrectly.‘Afterallnothinginlifeisfree’.Socialmediademandscanalsocauseconstantdistractionsintheworkplacebecauseoftheoverlapbetweensocialandworklivesusingthesamemobiledevices.Butperhapsthe most distressing factor of ITC developments is that work is now constantlymonitored via computer andmobile screens. This encourages an unhealthywork lifebalancethatforcesemployeestobegluedtotheirdevices.Notonlycanthiseffectanemployee’slong-termmotivation(somemay‘burnout’),itcanalsoresultinemployeeshavinglesstimetothinkofhowtosolveproblemsandinnovate.Theeaseofmoderncommunicationscanironicallytakeawayresponsibilityfromjuniormanagers as they can always get holdof a seniormanager. Thismakes it harder forthemtogainvaluablelessonsandexperienceandmayalsodemotivateotherwisegoodemployees.InfrastructurecostsofICTwillincludethephysicalinfrastructurerequired–computers,Microsoft packages, email and anti-virus software etc, but also implementation costs,and ongoing training fees. In fact these daysmany ICT systems are so complex thatcompanies outsource their ICT departments and all-inclusive fees are levied on a perusermonthlybasis(e.g.Microsoft’sOffice365emailsystem).EssentiallyICTcostsarehigh. Especiallywhen considering that in thepast receiving informationwas ‘free’ forthe receiver– i.e.a letter. Now itcostsa relative fortune to receiveemailsand theirattachments. The risk of an email system and IT software failure is huge and notkeepingsoftwareuptodatecanleadtoemailsbeingrejectedbyclientemailsystems,or they may be unable to read attachments (if created on outdated / unsupportedsoftware)andofcourseoutdatedsystemswillbemorevulnerabletocyberattacks.In fact themostwidely published threat to business at themoment is cybercrime (aword that would not have existed 20 years ago). The most recently documentedexample is that of the UK’s NHS email systems cyber attack using ‘WannaCryrandsomware’onMay13th2017(source5).AccordingtocyberexpertsthereasontheNHSsystemwasattackedwas‘becausemany[NHS]trustswereusingobsoletesystems,whileothers[had]failedtoapplyrecentsecurityupdateswhichwouldhaveprotectedthem’(Source6).IntodaysworldnearlyallbusinessesrelyontheInternet,computingtechnologiesandemailsystemsallofwhicharesubjecttocyberattacksthatcancrash

company networks, leak vital information or even cleverly divert cash by trickingcompaniestosendcashtothewrongbankaccounts.Someemailsystemswillnowblockallusers(inordertoreducethechanceofacyberattackcrashingtheirsystems,aswellasreducejunkmail).Andinorderforanemailtobeacceptedaphone call between ITdepartmentsmustbemade toopenup linesofcommunications.Thismakesithardertoreachouttonewclients,butconverselymayalsoprotectyourbusinessfromcompetition.Theriskofattackishighandsoallbusinesseshavetohavesystemsinplacetoprotectthemselves,usuallybybuyinginsurance,anti-virussoftwarepackagesandtrainingstaff.Thiscanplaceahugecostonsmallbusinessesthatareunabletoreapthebenefitsofeconomiesofscale.ItisalsohardertokeepuptodatewhenthereisalimitedpoolofITexpertiseinEastAfricaandthegeneralpopulationdoesnothaveaccesstoacomputerathomesoallICTskillsarelearntattheoffice.The introductionofemailhasalso changedorganizational cultureand theelementoftrusthasbeenerodedbothinternallyandexternallywithclient.Inthepast‘mywordismybond’wasthefoundationoftheglobalshippingindustry.Butthesedayseveryonerequires an email as ‘back up’ and this can lead to overwhelming large numbers ofemailsbeingsent/received.Theironyisthatwhensomanyemailsaresentsometimesthemostimportantcanbemissedthroughhumanerror.Newcloudbasedemail systems (e.g.Office365) are inplaceandpeople cannotonlyaccess emails out of work but also company documents. Remote working clearlyrequires companies to implement strict access criteria into their cloudbased systemsbut at the same time to make it worth implementing a high level of trust withemployeesisalsorequired.ThisisevenmoresoinaregionlikeEastAfrica,wheretheofferofverysmallamountsofmoneytosellcompanydatacanbehighlytempting.Manyofthethreatsrelatingtomoderncommunicationsystemswillaffectbigandsmallbusinesses alike. As indicated above in many ways it will be harder for smallindependentshipagenciesinEastAfricatohandletheeverchangingICTdevelopments,but to someextent larger companiesmay find it harder to control someaspects, liketrustingemployeestousecloudbasedsystemsorsocialmediacorrectly,simplybecausetheyhavesomanyemployees.Perhapsbeingbiginthisinstanceisnotalwaysbetter.Whatcanbedonetoreducetheimpact?

a) PlacemoreimportanceontheroleofICTmanagersb) PrioritiseICTtrainingc) ContinuouslykeepICTsystemsuptodatesoasnottofallbehindinsoftware

developmentsorskillcapabilitiesd) Createacultureoftrustandrespectwithinthecompany

e) UtilizeICTforimprovingcommunicationssystemsanddatamanagement

2.3HighlevelsofcompetitionWorldwidecompetitionhasincreased,therehasbeenaglobalpowershiftfromsellertobuyerspartlybecauseof ICT improvementsandproductpriceand information isnowjustamouseclickawayforanyone.Therearefewerbarrierstoentryinthevirtualworldandthisleadstohigherlevelsofcompetitionasthenumbersofcompaniesofferingthesame service increase. It also leads to higher levels of uncertainty andmistrust (toomuchchoicecoupledwithweakrelationships).InfactonecouldarguetheemergenceofSocialMediahasbeendrivenbythisgrowthinuncertaintyandmistrustandasoneinterviewee said ‘people like to listen to friends, not brands because people trustfriends’.Inrelationtoshipagencies, there isa lowcostofentryeven inthephysicalworld,asthey do not tend to own any major assets (other than equipment to enablecommunications). As a result there are many ‘one man bands’ operating as shipsagents,especiallyinEastAfricawherethereisalmostnovettingprocessinqualifyingforashipsagencylicense.Whatcanbedonetoreducetheimpact?

a) Monitorcompetitionb) Aimtoreapthebenefitsof‘free’advertisingfromusingSocialMediac) Maintaincloserelationshipswithexistingclientsd) Usethethreatofcompetitiontoencourageinnovation

2.4 Higherinsurancecosts

Theworldhasbecomemorelitigiousandthereforetheneedforinsurancehasbecomeessentialanormalpartofriskstrategyformostbusinesses.Companieswillneedtobeinsuredagainstcybercrime,professionalliability,personalliability(Directors),andinthecaseofEastAfricaemployeesrequiremedicalinsuranceandcompanieswillneedtoget‘cash in transit’ insurance. Other types of insurance required include buildingsinsurance,carinsuranceandICTinsurance(forlaptopsandsmartphonesetc).Thisalladds to the costofdoingbusinessandwill representahigherproportionof costs forsmallerbusinesses,particularly those inEastAfricawhere insurancepremiumswillbehigher.Whatcanbedonetoreducetheimpact?

a) Ensureinsurancepremiumsarepaidandkeptuptodate

b) Outsourcemanagementofinsurancec) Tenderforupdatedrates&serviceseachyeartoensureuseofthebestsuppliers

2.5PortimprovementsinEastAfrica There is always the possibility that as the ports improve the role of ship’s agentsbecomeslessimportantandthenumberofservicestheyneedtoprovidereduces.For-instancetheportthemselvescouldbookpilots,tugsandarrangeefficientstevedoring.Thisismoreofariskifportsorterminalsprivatize.With the improvement of communications technology, vessels could conceivably paybillsdirectlytotheportauthorityinthefuture,perhapsportsystemswillbecomecloudbasedandanagentbased in London could lodgea voyagemanifest for aport call inMombasa.InEuropetherehavebeenhuge improvementstoport facilities/operationalsystemsandagentshavealreadydiversifiedandmovedawayfromthetraditionalroleofpurelyactingasanagentforavessel.ForexampleAssociatedBritishPortsinUKhastheirownin-houseagentbasedatvariousports.TheJohnGoodGroup,hascombinedwithothercompanies like Dan shipping and together they offer port agency, logistics, transportwarehousing,distribution,chartering,laytimecalculations,etc.ThistrendcoupledwithICTdevelopmentswouldsuggestthetraditionalroleoftheindependentshipagenthasatimelimit,eveninEastAfrica,andastheport improves,agentswillneedtotakeonnewrolestosurvive.Whatcanbedonetoreducetheimpact?

a) Focusonofferingaddedvalueservicestothecargoreceiverthataportisunlikelytoprovide,e.g.providebespokemarketreports.

b) Considerpartneringwithaprivateterminalasan‘inhouse’ship’sagentfortheterminal.

2.6BusinesscontextofEastAfricaThedifficultbusinessenvironmentinEastAfricacanbeseenasathreattoindependentshipagents,asdescribedinSection1.4above.ThecontextofEastAfricawilladdtothecostofrunningabusiness,e.g.thepoorroadsaddtothecostofvehiclemaintenance,therewillbeincreasedsecuritycosts,andthecostsofpoweroutagesdamagingICTandair conditioning equipment. Inadequate support systems add to the cost ofemploymentandmakeithardtofindqualifiedskilledpeoplewithintheregion.Andofcoursecorruptioncreatesanunfairplaying field inwhich tooperate.Butperhaps themost important point to note is that the context of East Africa makes it harder for

businessestoattractinvestmentthatmaybeneededtohelpitexpand.ManypotentialinvestorswouldconsideranindependentshipagencyinAfricatooriskytoinvestinorattheveryleastrequireunrealisticallyhighreturnstomitigatethatrisk.Whatcanbedonetoreducetheimpact?

a) Lookat the threats thebusiness environmentposes to clientsand see themasopportunitiesforbusinessestosolve

b) Diversifythebusinesstoreduceriskc) Specializethebusinessbyexploitinganichemarketd) LookforlocalinvestorsthatdonotseethecontextofEastAfricaasquitesorisky

Many of the threats can also be viewed as opportunities, high competition canencourage companies to improve and innovate thereby creating a more successfulenterprise. Also simply knowing and monitoring the threats facing a business willencouragestrategiestobebuiltthatwillhelpmitigatetheirnegativeimpact.Howeverrather than focus on how to reduce the impact of threats, it’s perhaps better for abusiness strategy to focus on opportunities and how these can be exploited. Thischange of mindset could encourage the development of new ideas that wouldotherwisebeoverlooked.3. OpportunitiesfacingsmallindependentshipagentsThis section will now look at the main opportunities facing small independent shipagents inEastAfrica.By interviewing the sameprominent figures in thebusinessandacademicrealmthispaperhas identifiedfouropportunitiesas indicatedbelow.Pleasenotethelastopportunity‘sell’willleadtothedemiseofsmallindependentshipagents,so, although it may be seen as an opportunity for an individual business, it is notconsideredanopportunityforthebusinesssectorasawhole.

• Diversify/ProvideAddedValue• ExploitLocalKnowledge• Specialization• Sellthebusiness

3.1Diversify/ProvideAddedValueAswehaveseenfromthethreatssectionabovediversificationiskeytomitigatingriskparticularly inthebusinesscontextofEastAfrica.This issomethingsmall independentships agents need to place more emphasis on, as their risk exposure is greater.However,offeringtoomanyservicescandiluteanyeconomiesofscalethatdoexistandcandilute thequalityof serviceprovisionorconfuse thebrand/image. Therefore the

processofdiversificationissensitiveandneedstobetreatedwithcare.C&F, transport and warehousing are often considered three classic areas for ship’sagents to diversify into. These tend to require large amounts of investment and aretherefore perhaps less well suited to small independent ship agents. Other areas ofdiversification often considered include; Stevedoring, Bagging, Husbandry, Bunkering,Brokering,Manning&Recruitment andP&I correspondence.Although thesebusinessstreamsmayrequirelesscapitalinvestment,theywillusuallyrequireseparatebusinesslicensesandofcoursesettingthesebusinessesupandrunningthemcancostmorethananticipated.Butthere isnothingwrongwithadditionalcostsforacompanyas longasthere is an associated increase in expected revenue. With this inmind, perhaps theeasiestwayforacompanytodiversifyisthroughlookingatwhat‘addedvalue’servicescanbeofferedtoexistingclients.‘The term “added value” means just what it implies: When a customer purchases aproductor service fromyou,hegetsanextrabenefit.Addedvalue isnot the sameasofferingafreeproductoradiscountbecausethecustomergetssomethingdifferentthanwhatshe’sbuyingorsomethingthatshecan’tbuy.Forexample,ifyougiveacustomerafree belt with the purchase of slacks, that’s a straight freebie. If you offer freealterations,that’saddedvalue.’(Source7)‘Addedvalue’servicesofteninvolveprovisionofanextraserviceatnoextracosttotheclient, but they can also be a way ofmaking extramoney from an existing client byprovidingadditionalservices.Thekeytounderstandingtheconceptof‘addedvalue’isknowingwhatcustomersvalueandwhatserviceswillactuallybenefitthem.

‘Companies are learning that consumers are less focused on the product and morefocused on what the product will do for them. Finding out what the customer trulyvalues is critical to how the company produces, packages, markets and delivers itsproducts. For example, Bose Corporation has successfully changed its focus from acompany that produces speakers to a company that delivers an ‘uncommon soundexperience’(Source8).

Added value services can be adding additional free services to the current businessstream,likeprovidingfreetrainingorfreemonthlystatistics.Buttheycanalsorequiresettingupnewbusinessstreamsforacustomeraslongastheyarealignedtothecoreservice, like investing in a timber treatment plant at a port for a timber importer. Atimbertreatmentplantallowsthetimberimportertoaddvaluetotheirtimberenablingthemtosellitatapremiumtotheirclients.Theseserviceswouldofcoursebechargedfor but they are still ‘added value’ services as they offer something additional to thecore service. By providing free ‘added value’ services a business’ image/brandwill beenhanced and in some cases enable them to justify higher prices for their services(ironically the ‘free’ servicesare thenpaid forby theclient). Foraddedvalueservicesthat require investment in new business streams, the risk exposure is reduced

dramatically when compared to straightforward diversification. This is especially thecase when the ‘added value’ service is being provided to an existing client andpresumablythedecisiontoprovidetheservicehasbeenincollaborationwiththeclient,at which point the revenue stream is already accounted for. Selling this newlydeveloped ‘added value’ service to a new client will then of course be easier as thesystemisinplaceandclientfeedbackalreadyavailableasareference.When lookingat ‘addedvalue’services,shipagentswillneedto lookatwhatserviceswillmakelifeeasierfortheirexistingcustomersandwhatdotheyreallyvalue.Intermsof free services these may include, training packages and local market information.Whilstrevenuegenerating ‘addedvalue’servicesmay include:settingupaspecializedstevedoring service or bagging operation for cargo importers as theywill value quickship turnaround and careful handling of their cargo. These services can help reducetheirexposuretodemurrageandreducetheirexposuretocargodamageclaims–bothcansavemoney,timeandadministrativehasslefortheclient.Tocomeupwith‘addedvalue’ideastheshipagentwillneedtodialoguewiththeirclientsonaregularbasisandunderstandwhat they valuemost andwork out how a ship agent can increase theirvaluetothem.An idea that canbeproposed anddeveloped in partnershipwith an existing client inordertocreateabespokepackageismorelikelytosucceed.Abespoke‘addedvalue’servicecanbecomeastrong‘hook’andincreasetheinterdependencebetweenthetwoparties. Andthiswillofcoursemakeitharderforthecustomertoswitchagents, inasimilarwaythatsigningacontractdoes(infactthistypeof‘hook’canbestrongerthanalegalcontractasitisbasedonarelationship).Howcanthisopportunitybeexploited?

a) Attendinternationalbusinessconferencestoencourageideasandstayaheadoffuturebusinesstrendsglobally

b) Encouragefeedbackfromcustomerstofindoutwhattheyvaluemostc) Dialoguewithcustomerstounderstandwhatchallengestheyfaced) Propose‘addedvalue’servicestocustomersandevaluatetheirresponsee) Activelylearnmoreaboutpotentialnewbusinessstreamsf) Suggestpartneringwithcustomerstodevelopanewbusinessstream

3.2ExploitLocalknowledgeStrong local knowledge and local relationships are good assets for small independentshipsagenttohave,butinthebusinesscontextofEastAfrica(describedundersection1.4),theyareevenmorecritical.Asoneintervieweesaid,“ConnectingwithpeopleinEastAfricaissoimportant.Peopleherefeelcomfortablewith

people that they can relate to and trust. Being part of the same social or religiouscommunitiesmatters.Speakingthesamelanguage,beingfromthesametribe,orgoingto the same school, or same bars or sports clubs, are all very important factors inbuildingrelationshipsanddoingbusinessinEastAfrica’.EssentiallythebusinessenvironmentofEastAfricacanbeconsideredanopportunityforsmall independentagentswhoare capableandalreadyestablished. They canexploitthefacttheyhavetheagilitytorespondtochangequicklyandcantakerisks(whenthemoneyallows)inwayslargeragentscannotastheyareconstrainedbybureaucracyandshareholder’sdirectives.Butperhapsmore importantly,small independentagentscantakeadvantageof the fact that customers inEastAfricaplaceahigher valueon trustandpersonalrelationships.Forlargercorporateagencies,staffturnoverwilltendtobehigher,particularlyatmanagementlevel(e.g.anexpatriatecontractistypically2years).This actually results in these companies losing local knowledge and weakens localrelationships.Thiscreatesanadvantageforsmallindependentshipagentswhoneedtocapitalize on what they are skilled at and realize their local knowledge and localrelationships,oftenbuiltoverdecades,arehugeassets.Thisassetisknownas‘humancapital’ and is described as; ‘the skills, knowledge, and experience possessed by anindividual or population, viewed in terms of their value or cost to an organization orcountry’(Source9).Small independent ships agents need to consider ways of creating value from theirhuman capital asset. For-instance one way of doing this is to advertise their localknowledgeandcoherentlyexplaintobothexistingandpotentialcustomerswhyitissocriticalinthecontextofEastAfrica.Itisanassetoftenundervaluedbycompanies,andasoneintervieweesaid: ‘IndependentbusinessesinAfricacouldtakeadvantageoftheirexpertiseontheground.MosteconomistsandbusinessleadersIspeaktothinkthatAfricaisgoingtobecomeanincreasingly importantmarketplace for theWestand theEastover thecomingyears.Theywillbe lookingforcompaniesthatcannavigatethroughtheunfamiliarandoftendifficultterrainofAfricanpoliticsandbureaucracy.ThisskillcouldbeeffectivelyaserviceformultinationalbusinesseswantingtoinvestinAfrica.’ByvirtueoftheroleundertakenbyShipagents,theyareverywellconnectedwithmostgovernment departments, and are usually well connected to all others in the supplychainfromsellertobuyer.Thiswillincludeawidevarietyofindustryplayersincludinginternationalcommoditytraders,shippingcompanies,cruiselines,O&Gmajors,miningcompanies, transporters, ship chandlers, diving companies, hotels, restaurants and arange of cargo receivers (from fertiliser plants to steel importers). A tramp agenthandlingavarietyofcargoeswillbeverywellconnectedandwillprobablyhaveaccesstoamorevariednetworkthanacontainershippinglineagent.ThereforeaTrampagentis uniquely placed to connect people and businesses. This can provide a businessopportunity itself where ‘face to face’ introductions can be ‘sold’ or a commission

returnedifadealmaterializes.Shipagentshaveaccesstoalotoflocaldataanditisimportanttolookintonewwaysofmanagingthisdataandextractingvaluefromit.DatamanagementwillbeakeyroleofICTdepartmentandworkingoutwaytosimplifydataandextractusefulpatternsthatwillbeofusetoexistingclients,potentialclients,andinvestorswillbekeytocreatingvaluefromtheirhumancapital.Howcanthisopportunitybeexploited?

a) Focusonenhancingcompanywidenetworkingcapacityb) Providemarketreports&statisticstopotentialandexistingclients.c) Setupsystemsforcollectinglocalmarketinformationd) ProvidebusinessconsultancyservicestonewinvestorsinEastAfrica–aniche

serviceforaglobalmarkete) Inordertomakethemostofconsultancyopportunitiesrelationshipswiththe

localembassiesofforeigncountries(e.g.Britishcouncil)couldbeestablished.Thisshouldhelpgauge,whichcompaniesmaybeconsideringinvestinginEastAfricaandwhattypesofserviceanindependentbusinesscouldoffer.

3.3SpecializationWorldwide people are inundated with information through email, TV, newspapers,WhatsApp, social media, mobile phones etc. Unsurprisingly this has led to peoplebecoming increasinglybusywithaconsequentneedtosavetime.Thesameapplies, ifnotmoreso,topeopleinbusiness.Itisclearlytimeconsumingtohavetosiftthroughemailsandinformation,anditcanalsobeconfusingandfrustratingformanagersthatneed to make a quick decision. It is therefore no surprise that customers cravesimplification. Communicating a clear simple service, a clear simple price and clearsimple brand will help provide a simplified message that consumer’s want to hear.Specializingisonewayabusinessisabletoprovidethisclaritytocustomers.The main reason customers like a simplified product / service offering is because itmakes their job - the decisionmaking process - easier for them. Everyone’s time isvaluable,soifaproductorservicecansaveyoutimeandmakeiteasiertomakegooddecisionsquicklythenitwillsell.Consumerswantaproductthatwilldosomethingforthem(refertosource8). It’snotjustaboutprice,clientsneedproducts/servicesthathelpthemdotheir jobsbetter,makethemlookgood in frontof theiremployersand,eventually,helpthemgetapromotion.A ship agent’s key role is communication and in order to make life easier for theirclients, they need to ‘simplify’ how they communicate and also offer clearly definedservices.Theprocessofspecializationhelpsdefineaproduct/service.

Below is a fictitious example of two companies offering vessel agency services to aprospective client. The comparison is provided to showwhy a consumer is likely tochooseCompanyBoverCompanyA,wheninfactCompanyAislikelytobecheaperandhasmoreexperienceinhandlingtheircargo.Italsoillustrateswhymanagersmaymakeunexpecteddecisionsandwhatcanbelearntfromthis.--------------------------------------------------------------------------------------------------------------------CompanyA:well respectedagentwithmoreexperience inbreakbulkcargoquotesasfollows.Agencyfee: $1,000first3days,$250perdaythereafterCommunications: $100perdayTransport: $50perdayTheclientreceivesthisquoteandhastothenworkoutwhatthetotalfeeforusingtheirserviceswillbeandthistakesthemtimetocalculate.TheCustomerknowstheyusuallystayinport4days,rarely3days,andoccasionally5days,buttodatenevermorethan7andwillcomputethefollowing:3daysportstay:$1,000+($50*3)+($50*3)=$13004daysportstay:$1,000+($100*3)+($50*3)+$200=$15005daysportstay:$1,000+($100*3)+($50*3)+($200*2)=$1,700Theclienthastomakeadecisionontherisktheyarewillingtotake,andinthiscase,the clientwill beunsure about the total cost of the agency service and is left feelingslightlynegativeasaresult.--------------------------------------------------------------------------------------------------------------------CompanyB:well respectedagentwith someexperience inbreakbulkcargoquotesasfollows.Agencyfeeallin:$1,600(NB.Beyond7daysstayafeeof$250adayischarged)Theclientreceivesthisquoteknowingtheyusuallystayinport4days,rarely3days,andoccasionally 5 days, but to date never more than 7. The flat rate given is simple tounderstandandtheycaneasilybudgetforit.Thisleavestheclientknowingthecostoftheagencyserviceandfeelingpositiveasaresult.--------------------------------------------------------------------------------------------------------------------

Essentially when a customer receives a quote from Company B, the decisionmakingprocesshasbeensimplified.Cantheyafford$1,600ornot?WhenacustomerreceivesaquotefromCompanyA,theyhavetotaketimetocalculatewhatthecostofagencywillbe.Thisislikelytofrustratethem,astheirtimeisvaluable.Oncethecustomercalculatesthecosts,theywillnoticethatthereisaconsiderablecostfluctuationdependingonhowlongthevesselstaysinport.Thismakesthisoptionfeelmoreriskyforthecustomer,astheymaymakeasavingbutitmayalsocostthemmore.This puts more pressure on their decision being correct and the potential costfluctuationmakesisharderforthemanagertobudgettheirexpenses.Essentiallythisover complicationmay dissuade amanager from choosing Company A. After all themanagerwillhavetoreporttohisemployeranddoesnotwanttogiveawronganswerorbeforcedintogivingatimeconsumingconvolutedexplanation.He/Shesimplywantstosay‘itwillcost“$xxx”,isthatok?’Theproblemisthat it isnotalwayseasyforacompanytosimplifyandthis isperhapswhythereissomuchvalueinitandwhyspecializationofthebusinesscanhelp.Usingthe example above, in order to simplify a tariff an agent needs to understand theirclient’sbusinessandunderstandtherisksinvolved.Itiseasiertounderstandaclient’sbusinesswhentheagentspecializesinit.For-instancewhenCompanyBoffersan‘allinfee’itsuggeststheyknowthatitishighlyunlikelythevesselwillexceed4daysstay,andthereforetheyarewillingtotakeariskofhavingtooffertheirservicefor‘free’betweendays4-7.Thisiswhyspecializationandsimplificationfitsowell.Ifanagentiswillingtotake a risk it will indicate they have more control and more understanding of thebusiness. This removal of risk will clearly help speed up a client’s decision makingprocessandmakelifeeasierforthem.Theaboveillustratestheneedforshipagentstothinkofwaystosimplifytheirbusinessmodel in order tomake their client’s life easier. Specialization is an opportunity forsmall independent ship agents as this can help them; simplify their communication,simplifytheirservice,simplifytheirtariff,andsimplifytheirbranding.Thiswillalsomakelifeeasierfortheagency’semployees,asproceduresbecomemoresystematic,easiertolearn, followandrememberhelping thembebetterat their jobs,moreconfidentandhappier. Takingthisconceptfullcircle, ‘happyemployeesequalhappyclients’(source10).TherearevariousexamplesinEastAfricaofagentsspecializing,forinstancewithsteel,grainorcementcargoes.They tend tobe ‘oneclient’ shipagents, thatprovideaddedvalueservices to theirclient, like financingor specialist stevedoringservices. There isclearlyahugeriskassociatedwithsuchasetupunlesstheshipagentcanexpandtheirclientbaseunderthesamenicheserviceofferingorunlesstheagenthasavery‘solid’client. However, usuallywhen a client is that ‘solid’ the risk of setting up their ownagency is low and many will invest in an in-house agent, e.g. container line / agent

relationships.Howcanthisopportunitybeexploited?

a) Simplifycompanyprocedures&processes(perhapsbecomeISO9001certified)b) Provideregulartrainingonsimplifiedproceduresc) Simplifycommunicationchannelsd) Specializeinonetypeofcargooronetypeofservicee) Providetrainingonthespecializedbusinesssectorf) Simplifydataandmarketinformationsothatitwillbringvaluetomanagers

3.5SellthebusinessThereisalwaysanopportunityforownersofsmallindependentshipagentstosell.Butsellingtoacorporateshipagent,themostlikelybuyer,wouldleadtothedemiseofthesmall independent ship agent! Regardless a small independent agent should alwayshavetheirsalespitchandavaluationoftheircompanytohand.Ifnothingelseitkeepspeopleinterestedinyourcompany,whichisarathersubtlewayofmarketing. 4. Conclusions4.1 Summaryofthreatsandopportunities

This research has identified the main threats facing small independent ship agentsoperatinginEastAfricaas:

• Largecorporateagencies• FailuretokeepuptodatewithIT/moderncommunications• Highlevelsofcompetition• Portimprovements• Highinsurancecosts• BusinesscontextofEastAfrica

Andthemajoropportunitieshavebeenidentifiedas:

• Diversify/ProvideAddedValue• ExploitLocalKnowledge• Specialization• Sellthebusiness

Innovationgenerallyoccurs throughsolvingproblems indifficult circumstancesand in

response to increased competition and, interestingly, many of the opportunities forsmallindependentshipagentsoperatinginEastAfricaappeartohavearisenoutofthethreats identified. Businesses should seek to focus on the future opportunities andevolveinanewdirectionthattakesadvantageofthem.

4.2 Whatrolewillsmallindependentshipsagentsplayinthefuture?Thetraditionalroleofashipagentmaystillexistin20years,butitislikelythiswillbejustoneminorpart to the servicesoffered. In the future lodgingmanifests,berthingvessels and paying port billsmaywell be done through automated processes as portimprovementsdevelop,asaresult,thetraditionalroleofclearingvesselswiththeportauthoritiesmaybecomeobsoleteor,morelikelyinthemidtermfuturebecontrolledbymultinational agents and theirhubbranches. This servicewill bedrivenbypriceandregionalcontracts.Smallindependentagentswillsimplynotbeabletocompeteinthiscommoditizedserviceofferingandsomemaybeabsorbedasaresult.Those small independentagents that surviveare likely tohave focused theirbusinessstrategyontheircoreadvantages–localknowledge,localrelationships,andagility.Itislikely they will become local specialists serving higher risk niche markets whetherregionallyorglobally.For-instancetheymaychoosetoprovideabespokeallinagency,financing, consultancy, management package to one carefully chosen client or justconsultancytoonebusinesssectororinvestgroup(e.g.Britishbusinesses).Smallagentsthat survivewill embrace ICT improvements to gain strategic advantages that enablethem to innovate quickly within a growing digitized and automated businessenvironment, allowing them to capitalize on their agility and also gain access tospecializedmarketsthatmayotherwisebehardertoreach(globallyorregionally).Lookingintothedistantfuture,smallindependentshipagentsarelikelytoevolvefromtheir chosen specialist sectors into completely new but connected markets. For-instance ships agentswith good husbandry contractsmightmove into 3D printing ofvesselsparepartsanddeliverviadronestovesselsatsea -andtheymayceasetobeinvolvedinshipagencyatallin20years.Similartohowotherbusinesseshaveevolved(albeit more slowly), e.g. Wilkinson Swordused to manufacture swords, but laterswitched to razors and then included other personal care products as well as theirmarketchanged(Source11).Theynolongermakeswords!4.3 AdviceforsmallindependentshipagentsonhowtheyshouldplanforthefutureSo,whatadvicecanbegiventosmallindependentshipagentsonhowtoplanfortheirfuture?

• Smallindependentshipagentsoperateinahighlycompetitivesystembasedon

thedynamicsofderiveddemand.Togainmorecontroloftheirbusinesstheywillneedtochoosetheirclientsandmarketsverycarefully,astheirbusinesswillbedependentonthesuccessandgrowthoftheirclient’sbusiness.

• Inordertotakebackcontroloftheirbusinessandnotbesubjecttotheimpact

ofregionalcontractsofmultinationalagentstheywillneedtostopcompetinginthe same field as them. Todo this theywill need to findnewniches inwhichthey can specialize or provide added value services either in a local or globalmarketplace. Theywill need toexploit theirhumancapital - local knowledgeandexperience,asthiswillbetheiruniquesellingpoint.Theywillneedtofocuson enhancing their human capital by continually seeking to improve theirsourcesandqualityof information.Theywillneed to focusonbuildingdeepertrustwithintheirlocalcommunitiessoastostrengthenlocalrelationships.

• Understandingtheneedtosimplifyprocessbothinternallyandexternallywillbe

critical to a businesses success in the future. There is huge value placed onsummarizing and simplifying information, as people want simple and quickanswers in today’s chaotic world. Simplifying the business processes willimprove employee understanding and communication capabilities, whilstspecializingwillprovideaclearbrandandserviceofferingtoclients.

• A focus on ICTwill assist inmanaging data and communicatingwith clients in

simplermoreuser-friendlyplatforms. Itwillalsoenablethebusinesstoevolveandinnovate,whichwillbeessentialforsurvivalinthefuture.

• Shipagentswillneedto focusonservices thatwillmaketheircustomer’s lives

easier.Theywillneed todialogue frequentlyandopenlywithclientsandworkoutwhatmotivates themand,morespecifically,onwhatwilladdvalue to theclient’sbusinessandtothepersonaldevelopmentoftheindividualsinvolved.

As a final word, I hope small independent ship agents are able to innovate and willcontinuetoplayavitalroleinglobaltradeformanyyearstocome.