• Md Washim Akram• Md Iftekhar(118)

Presented By:

Strategic Entrepreneurship in Emerging Market Multinationals: Marco Polo Marine

Introduction:

Sean Lee (Chinese name: Lee Yun Feng) was the youngest CEO of Marco Polo Marine (MPM) Ltd.

He was born in 1977 in the Chinese-Indonesian Lee family.

Marco Polo Marine (MPM) Ltd was first established by an Indonesian business group and led by his father.

MPM was initially engaged in the mining and quarrying operations.

Introduction:

Initially he had taken over a very small shipping company and managed to grow it significantly by making some bold strategic move.

His goal was clear – to become an international player in the offshore marine services sector.

Environmental Analysis:

The mining operations were on a large island in Indonesia, while the customer were in Singapore or in other islands. But there was no way to transport the materials other than by ship.

Lee figured that the company’s shipping business offered good opportunities to expand in this area because of insufficiency of available resources for transportation.

Stages of growth of MPM:

Initially, the shipping operations focused on transporting the group’s granite and sand to clients in the Singapore construction industry.

Later to expand this business MP Shipyard was created in 2005 in Batam (an Indonesian island close to Singapore).

In July 2006, Marco Polo Marine Pvt. Ltd. Was incorporated in Singapore, privately owned by the Lee family.

Stages of growth of MPM(Cont):

In September 2007, the company was started floating on the Singapore Stock Exchange.

In 2008, the MPM shipyard began to build ships of higher level of sophistication, such as anchor handling tug supply (AHTS) vessels, which were used in oil and gas sector.

In 2010 in compare to 2005, Turn over increased from S$6.6 million to S$64.3 million and Profit grew from S$2.6 million to S$19.1 million.

Competitive advantage:

Lee liked to say that MPM offered Singapore-Level quality for Indonesian price levels.

Competitive cost structure of MPM was the competitive strength.

To achieve further synergies and cost efficiency Cost Structure involved:1) Operating newer vessels and

2) Integrating the ship-building, ship-repair and ship- chartering activities.

Competitive advantage (Cont):

Both Shipping and Ship-building were highly volatile and capital-intensive industries.

Vessels were typically financed with 20-30 per cent equity and 70-80 per cent loans.

In 2010, the net gearing ratio was 32 per cent where as its peers and local market leader Otto Marine and Ezra Holdings had net gearing ratios of 94 per cent and 79 per cent respectively.

Competitive advantage (Cont):

Financial stability and less leveraged had allowed the MPM to stretch its equity capital to grow and to move into new segment while keeping overall gearing ratio acceptable.

Lee always focus to stable sources of revenue, implementing cost-control measures and maintaining a focus on young, high-quality vessels.

To keep full control on MPM, Lee family held 55 per cent after the share placement in October 2010.

The Offshore Marine Services Industry:

The offshore oil and gas sector was broadly divided into four stages: exploration, drilling, production and decommissioning.

To supply this offshore oil and gas industry, a variety of vessels was used, collectively referred to as offshore supply vessels (OSVs).

Most of the oil companies did not own and operate their own OSV.

Strategic Option

Lee convinced Eng Boon Chua(born 1950) to join MPM and set up the activities.

Increasing the number of boats: Only a couple of boats was not enough.

Chua wanted to start with 6 vessels and 10 vessels in following 3 years.

Question was to fix the type of vessels and the place to deploy these vessels.

Strategic Option (contd.)

Owning and Operating Vessels: Four option available:

New Building Charters Sale and Purchase Scrap

Vessels Categories: Smaller Version Advanced Version General Utility Boats

Strategic Option (contd.)

Smaller Version(Cost:<$24M,bhp:3000-8000) Suitable for shallow/mid-depth waters. E.g. coast of

Thailand or Indonesia.

Advanced Version(Cost:$50-60M,bhp: >15000) Required for deep water operation. E.g. North sea. Required more trained crew

General Utility Boats Smaller, Simpler ,All Purpose Boats

Strategic Option (contd.)

Regional Problems with MPM: Entry Barriers in foreign country Govt. demand

Entry mode: Build Vessel Buying Vessel Acquiring a company