A Risk Analysis Model of Partnerships between Port Operators and Container Carriers

In order to gain competitive advantage, container port operators have begun to apply partnering strategies to the integration of the resources of their vertical allies, especially the container carriers. Intelligent management of the involved risk is the core issue in determining an effective partnering strategy. This paper aims to establish a risk analysis model to examine the potential partnership paradigms between a port operator and container carriers. This study explores three types of possible partnerships, identified by the resource allocation and ownership methodology of each, and concludes four risk factors. The partnering risk is defined as the difference between presetting and expected revenue for the port operator. The quantitative model is designated to be a two phase stochastic process, and is measured through Monte Carlo simulations using the computer software program @RISK. The study finds that higher risks occur in ‘cross-involved resources’ partnering than with other partnership scenarios. Empirically, the variation of risk incurred to small-scale partnered carriers, whose market share is less than 20%, was found to be smaller than that to the large-scale carriers, whose market share is greater than 40%. Finally risk mitigation measures are recommended for future partnership decisions.