Strategic Management Principles in CMA CGM

This report discusses the implementation of strategic management principles in CMA CGM, a French container transportation company. It covers the company profile, current market scenario, future market outlook, and their business strategy. The report provides insights into the acquisitions, fleet development, and alliances of CMA CGM.

Introduction
The implementation of the strategic management principles within the organisation
helps in the development of the proactive nature of the organisation rather than the reactive
nature of the organisation. The implementation of the strategic plan helps the concerned
organisation in foreseeing the future of the organisation and thereafter helps them to
formulate the plans in a better manner in order to deal with the situations that might arise
within the organisation (Dess et al. 2019). The incorporation of the strategic management
principles within the given organisation also helps in the development of the sense of
directions within the given organisation. Hanson et al. (2016) states that the strategic
management of an organisation also helps in the increase of the efficiency of the
organisational workforce in the matters that are related to the operations as well as the
increment in the market share and the profitability of the company.
The implementation of the strategic management principles within the industry leads
to the conditions wherein the company would be able to explore the various ways in which
the concerned business organisations would be benefitted in the matters that are related to the
identification, prioritization as well as the exploration of the various opportunities that are
being presented to the concerned organisation (Thamir & Poulis, 2015). The incorporation of
the strategic management within the organization would also help in the development as well
as the alignment of the concerned organisation to the various trends that are being followed
within the organisation as well. This in turn would help in the development of the competitive
advantage of the company in the given market as well as the industry at large (Morden 2016).
The major issues that might be resolved with the help of the strategic management within the
organisations majorly refer to the issues that stem from the lack of the strategic focus and the
lack of the proper strategic direction in the activities and the actions that are undertaken by
the organisation.

The following report deals with the strategic management principles that are
employed within the organisation in discussion, CMA CGM. The report deals with the
implementation of the various theories of strategic management within the activities that are
undertaken by the organisation in discussion. The report sheds light on the various matters
that are related to the issues in the strategic management that is followed within the
organisation in discussion. The report further proceeds to discuss the various issues that are
presented within the industry on the basis of the market trends that are presented within the
given market as well as provides some major recommendations for the improvement of the
given organisational operations.
Company profile
The CMA CGM is a French Container transportation company which is involved in
shipping operations as well. The business can be considered to be a worldwide leading group
which makes use of 200 shipping routes between 420 ports in around 150 countries (Cma-
cgm 2019). The company ranks fourth in order of the major giants as present in the field of
container and shipping behind the brands like Maersk, MSC and Cosco. The headquarters of
the firm are located in France and the current CEO of the company is Rodolphe Saade. The
company was found by Jacques Saade. The Parent organization of the firm is Merit
Corporation. When measured in capacity the company is third in line with a TEU of
2554264.In the year 2018, the company earned a revenue of $21.1 billion and has more than
750 offices in the global market. There are approximately 30000 employees working for the
company. The name of the company is an acronym for Maritime Freighting Company –
General Maritime Company.

Current market scenario
The current market has been increasing considerably and at present the cargo volumes
are increasing by 4-4.5% as compared to the container fleet which is growing by 3.9% per
annum. Hence, with respect to the container segment, it can be stated that the balance
between the demand and supply can be stated to be particularly stable. However, trends in the
Port Utilization state that, the vessels are getting bigger in size, and this tends to place
additional pressure on the different ports and the remaining terminals (Pearce, Robinson &
Subramanian 2000). In addition to this, it can be mentioned that, the new markets have been
emerging and the importance of China as a market has evolved considerably. In lieu of this,
the company has been making considerate plans to expand its operations into the field of
India in order to ensure success. The current market scenario appears to be good for the
container firms and there will exist a considerable demand for the containers in the future.
Previous market scenario
Previously, it can be stated that the market for the containers was not that good and
the market for the cargo was highly attractive and the vessel market was not performing
considerably well. However, at present it can be mentioned that, the market for container has
improved considerably which was not followed earlier (Wheelen et al. 2017). Additionally,
the use of technology was not present earlier, but currently the technology has made a great
progress and in lieu of this, the overall business scenario has changed considerably as
compared to the previous year’s scenario.
Future Market scenario
In the future, it has been recommended that technology and the digitalization of the
various ports as well as the terminals will have a great role to play and will go a long way in
ensuring that, the different companies will be successfully able to ensure that, they can

successfully be able to engage in the utilization of the digitalized resources and ensure higher
productivity and better shipping procedures (Wheelen et al. 2017).
Market Outlook
Shipping industries are one of the most reputable industries that are operated all
around the world. Among all the reputed organizations, CMA CGM’s reference is eminent to
occur in the lists of successful shipping companies. The former company has more than 750
offices and agencies around the world. According to Alix, Slack and Comtois 2016, CMA
CGM was recorded to be the third largest container shipping industry (globally), and also
topped the charts in the France’s market, offering services including port handling facilities,
shipping and logistics (Notteboom & Merckx 2016). The company has a strong financial
position, gaining net profit of $50 million inside the third quarter of 2016, and also more than
$610 million expansive profit in first nine months of 2017, with a prominent 57% rise in net
profit margin, in a yearly basis (Panayides & Wiedmer 2017). The company has expanded its
presence in Africa and European states, by opening new agencies and ground transport
services too. Also, the group had aimed to offer customers services in a digitalized manner
under visibility improvement requirements and dematerialization, and also company’s
improvement in operational performance. On 22nd of August, 2017, the company further
invested $13 million in the New York Shipping Exchange (NYSHEX), to enter the first
digital marketplace under the category of ocean freight contracts (Lam & Van De Voorde
2018). The digitalization strategy was scoped on the internal, commercial and capital
partnerships and projects, under corporate deals and ventures.
Moreover, the container shipping industry is gaining low volume growth, while the
pressure is observed in the freight rates under multiple lines (for short period). Hence, the
group is continuously varying the capacity of adjustment for maintenance of load rates and

optimization of vessel usage, to secure themselves from the backdrops. The fright rates were
predicted to face low growth for the next 2-3 years, from the third quarter of 2015 (Frémont
2018). However, the company was constantly taking appropriate steps to rebalance the
negative implications. CMA CGM officials also stated with respect to the continuance of
outstanding performance might include the leverage of factors like commercial dynamism,
disciplinary operation and presence in the global market.
Strategy
CMA CGM recorded the best operating result in the container shipping industry in
2017 whereas, the year after, their annual revenue grew by 11.2%, to a record level of $23.48
billion; what made the French group achieve such noteworthy results is their business
strategy model, whose pillars will be discussed in this section. The time period took in
consideration for the analysis is the quinquennium beginning in 2014 and ending in 2018.
Acquisitions
As one of the leading players operating within the container sector, the firm’s
development strategy relies on the acquisition of other businesses, both operating in the
container market and outside of it.
The quinquennium examined started with the merger of the German firm Oldenburg-
Portugiesische Dampfschiffs-Rhederei GmbH & Co. KG (OPDR) with Mac Andrews, a
CMA CGM subsidiary. (2014) This strategic operation allowed CMA CGM to enhance their
offer in North Europe, Canary Islands, the Iberian Peninsula and Morocco. In 2015, when
OPDR volumes surged by 30%, CMA CGM acquired LCL Logistix.
In 2016 CMA CGM accomplished the biggest acquisition in its history with Neptune
Orient Lines (NOL), Southeast Asia’s largest container shipping company, which owns
American President Lines (APL) as their container shipping arm; following APL integration
within CMA CGM, the Singaporean firm carried more than 5 million TEUs and generated

$340 million of operating income in 2017. This acquisition costed to the French group $2.4
billion and together with APL created a total fleet of 563 ships with capacity of about 2.4
million TEUs.
CMA CGM Acquisitions
Company Date Market / Sector Purpose
OPDR 2014 Short-sea shipping and
multimodal transportation.
Consolidating and broadening the
company’s regional network.
LCL Logistix 2015 Indian third-party logistics
leader.
To invest in logistic sector of a fast-
growing market.
NOL 2016 Singapore-based container
shipping company operating
mainly in Asia.
Boost CMA CGM service’s
performance across Asia, North and
South America, Europe, the Middle
East, the Indian subcontinent and
Australia.
SOFRANA
Unilines
2017 Key player in the Pacific
Islands regional maritime
trade.
Reinforce its operations in the south
pacific.
MERCOSUL
Line
2017 Leading player in Brazil
container market and door-
to-door services.
To strengthen inter-regional
connections and service offering in
south America.
Containerships 2018 Leader in short-sea services
in the Baltic and the North
Densifying group regional coverage
and complement MacAndrews’

Sea, and the other intra-
Mediterranean trades.
service offering in Northern Europe
and in the Mediterranean Sea.
CEVA
logistics
2018 Logistics Allow CMA CGM to offer its
customers high added value
solutions throughout the logistics
chain.
Figure No. 1: CMA CGM acquisitions
Source: [Author Note]
The acquisition of CEVA logistics is discussed in a different section as it represents a
whole new approach of the strategy of CMA CGM to their service offering.
Fleet development
Fleet development
Year Type of vessel
2014 Delivery of 9400-class vessels suitable for the expanded Panama Canal
Order placed for three 2,500-TEU ice-class vessels
2015 Delivery of 16 vessels of which six 18,000 TEU containerships
2017 Order placed for nine 22,000 TEU LNG-propelled vessels
2018
Delivery of a 20,600 TEUs, the largest vessel in the world flying the
French flag
Delivery of an LNG-fuelled vessel with a 1,120 TEU
Delivery of an Ice-Class vessel to operate on the Baltic routes

Figure No. 2: CMA CGM alliances
Source: [Author Note]
An efficiently planned fleet management is essential for the profitability of the firm’s
operations. As shown in the table above, CMA CGM keep updating their fleet constantly,
with a close eye to the market demand, the regulations and the environment. In 2014 they
modified ten vessels’ bow bulbs in order to improve their bunker fuel efficiency and reduce
the carbon footprint. Two years later, CMA CGM strategically postponed the delivery of
three vessels expected to be delivered in 2017 due to the delicate balance given by the
oversupply of ships experienced in the market. With the order made in November 2017, the
company attest their leading role in the industry energy’s transition and set their strategy to
tackle the Sulphur Cap 2020; the attempt of reducing emission has already provided CMA
CGM positive results with a drop of CO2 emission by 50% from 2005 to 2015 with an
additional target of 30% reduction by 2025 (2017).
Alliances
CMA CGM alliances
Ocean Three Alliance Ocean Alliance
Signed in September 2014 together with
CSCL and UASC. This alliance has been
implemented in early 2015 aiming to offer
quality service, deploy the right size of ships
and continue to optimise unit costs.
Launched on April the 1st 2017, it replaced
Ocean Three alliance and it included Cosco,
OOCL and Evergreen. Ocean Alliance provides
40 shipping services on the East-West trades
thanks to more than 350 vessels and 3.5 million
TEUs capacity (37% of container trade).
Figure No. 3: CMA CGM alliances
Source: [Author Note]

In the last five years CMA CGM entered two strategic alliance. The first one, Ocean
Three Alliance allowed the three companies to offer a fleet of 139 calling at 87 ports on the
Asia-Europe/Mediterranean and Transpacific routes (2015-2014). The Ocean Alliance
substituted the former one in 2017, becoming the biggest alliance in the container sector as
for fleet capacity and paved the way for the strong momentum experienced through 2017 by
CMA CGM which made the company obtaining the best operating result in the industry
(2016-2017). In the second quarter of 2018 the Ocean Alliance launched the Ocean Alliance
Day 2 Product which demonstrates the customer centric strategy of the Alliance’s members
and provides improved services in key areas such as the US East Coast, Red Sea, Middle East
Gulf and Europe (Cma-cgm 2019).
Cost reduction
Another pillar of CMA CGM strategy is the continuous attempt to adjust the costs for
their services and financing structures in order to offer the best freight rates and preserve their
operating profitability. For instance, in 2014 the group realised a clear reduction in annual net
finance costs that amounted to $222 million from $445 million (2014). The cost reduction
program relies upon a combination of rigorous operational practices, optimal fleet
employment, lessening of energy consumption and strict control of all its spending (2015).
In the second half of 2016, CMA CGM deployed their global operating efficiency plan
named "Agility" targeting a cut in costs of $1 billion over the 18 months through December
2017 (2016), whereas at the end of 2018 they announced the implementation of a new global
plan aimed to save $1.2 billion in operational costs through the optimization of lines and
brands and by rationalising its processes (2018).
End-to-end services
Since Rodolphe Saadè replaced his father as new CEO of the Group, he made
logistics a key pillar of his development strategy for CMA CGM with the purpose to provide

a full “end-to-end” service to customers. A strategic plan has been deployed jointly with
CEVA Logistics, company of which CMA CGM acquired an equity stake of 24.99%
(brought to 33% in October) since the logistics group launched an initial public offer (IPO) in
May 2018. In January 2019, CMA CGM increased its economic exposure to more than 50%
of CEVA’s capital (2018).
The strategic plan includes commercial synergies between the two companies,
integration of CMA CGM logistics activity into CEVA and cost reduction with pooled
operations as well as synergies.
Such acquisition will enable CMA CGM to become a world leading in transport and
logistics and to offer its customers solutions fully comprehensive of these two elements
(CEVA).
This strategic operation is an effective response to a market that is trying to avoid
becoming a commodity service and many competitors are getting ready to offer a full-service
of transportation with integrated logistics as, for instance, when Maersk announced in 2016
that they would have integrated a transport and logistics brands under one company structure
(Lloyd’s list).
Digitalisation
The French group, within its development strategy, particularly focus on
digitalisation. In the last few years CMA CGM accelerated its innovation strategy regarding
the digital space by improving and developing their e-commerce offer and creating
partnerships with start-ups (2016). The final objective of their strategy of innovation and
digital transformation is to reinforce their operational performance and their added value
provided within their service (2017).
In 2018, primarily thanks to new CEO Rodolphe Saadé strategic view, the firm
boosted its digitalisation process to become a leader of shipping 4.0 in the closest future.

Throughout the year CMA CGM developed IoT and Artificial Intelligence and agreed more
partnerships in order to pursue innovation as shown in the table below (2018):
Partnerships and investments in digitalisation and innovation
Product / Service Provider Purpose
Traxens CMA CGM Commercialisation of smart
containers
Reeflex CMA CGM Innovation for the transport
of liquid materials by
temperature-controlled
containers
Climactive CMA CGM Advanced solution to
preserve freshness of fruit
and vegetables until delivery
Artificial Intelligence Shone To support crews’ on-board
decision-making
Blockchain technology BuyCo Secure Electronic B/L
through blockchain
Nyshex Nyshex Digital marketplace for sea
freight contracts to propose
space protection
E-dray ? Software platform designed
to improve container
handling operations in

terminals
Freightos ? Online freight platform
ZeBox CMA CGM 800m² incubator based in
Marseilles to support start-
ups
Figure No. 4: Partnerships and investments in digitalisation and innovation
Source: [Author Note]

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