Sunday, August 14, 2016

The lesson from Neptune Orient Lines

Neptune Orient Lines was an icon of Singapore. It was our national shipping line. It was important to Singapore because maritime trade is an important part of our economy. The port of Singapore is one of the busiest in the world.

It is an extremely sad episode for Singapore when NOL had to be sold to a French shipping group. It had sustained large losses in recent years and the shareholders could not bear the loss or see the light at the end of the tunnel.

The CEO of NOL said that the downturn was sudden and could not be foreseen. Was it really the case?

It might be unforseen for someone who is relatively inexperienced in the shipping line, but is should not come to a surprise to someone who has been in the industry for a few decades and had seen the ups and downs of the business cycle.

Unfortunately, the CEO was previously a military person and did not have any experience in this shipping industry. It is a mistake on the part of the major shareholder, namely Temasek Holdings, to put a relatively inexperienced person to run this large company.

The business cycle will affect all industry, not only the shipping business. It will affect airlines, hotels, tourism, manufacturing, retail, property and just about any industry. That is the nature of the free market and competitive economy.

Apart from gaining experience, insight and the feel with decades of experience, there is another way to understand the nature of the business cycle.

If the CEO of NOL and his top management had practised on this business simulation game, they would have known about the market cycle and how they should adjust their pricing, capacity and marketing expenditures under various market conditions and economic cycles.

Watch the Video Guide in the home page. It shows you how to play the simulation game and gain the experience that comes from many years of operating experience. Maybe, you can avoid the fate that brought down NOL.

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